China is “Cautiously Optimistic”

China’s chief negotiator said that he was “cautiously optimistic” about reaching a phase one trade deal with the US despite tensions over Hong Kong.

Liu made the comment in a speech in Beijing, also highlighting China’s plan to reform state enterprises and enforcing intellectual property rights. His comments come in at a crucial time for trade talks as Trump said China wasn’t “stepping up to the level I want”.

Moreover, there is a ticking clock, for if efforts to reach a phase one deal fail before December 15, Trump has threatened to impose 15% tariffs on some $160 billion in imports from China.

As the news came out equity futures spiked.

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Blockchain Stuff

Canaan Inc., a maker of crypto mining machines, raised $90 million after pricing its U.S. initial public offering at the bottom of its marketed range.

The China-based company sold 10 million shares at $9 a share this morning. The shares were marketed during the IPO between the $9 to $11 range, according to SEC filings.

So what exactly does the firm do? Well, they don’t directly do bitcoin mining themselves, although I imagine they could. The firm is best known for making ASIC – application-specific integrated circuits. Think of them like computer chips (think something like what Intel makes) that are good at intensive computing tasks.

One such intensive computing task is mining for cryptocurrency where you use the problem-solving abilities of a computer to “mine” cryptocurrency. However, mining cryptocurrency isn’t the only application for ASICs, for they can also be used for artificial intelligence-related computing. The firm’s most recent F-1 filing says “AI” 228 times.

Okay, let’s simplify this. The firm makes circuits that can be used to solve problems. One such problem is mining cryptocurrency. I don’t know whether or not cryptocurrencies will take over the world and replace all money, all transactions, and all markets, but I do know that there are some people who believe that it will.

An analogy now works better: Let’s assume I can make a goose that lays a golden egg*. I have the capacity to make more of these geese and get a lot of golden eggs. As a rational business person, I would ideally sell the thing that will get me the most money.

One way to make money would be to sell the eggs. But our firm here isn’t doing that. At least, not yet.

Now let’s say I decided to sell the goose. Why would I do that?

The first explanation is – maybe golden eggs that the goose is laying just aren’t worth as much as I thought they would be. I could make more money selling the goose than selling the eggs it makes. The obvious thing that crosses my mind is – wouldn’t a consumer be sceptical?

Me: Hey man, I’ve got this great goose that lays golden eggs. It can lay more golden eggs than any other goose on the planet, or any other mining facility in BC’s Golden Triangle. I will give it to you for $10.

Buyer: Ummm. If it lays golden eggs, why are you selling it to me?

Me: With the rate cut and phase one trade talks, I think the Dow will cross 50,000.

Buyer: 50,000! You are crazy. The market is overbought and when the recession comes the gold will be worth a lot more.

Me: If you really think so, then buy the goose.

Buyer: Ok, I will buy it.

Me (thinking): what an idiot.

Buyer (thinking): what an idiot.

This is obviously an oversimplification, but I think it points towards an essential conflict between the for-and-against debate in the cryptocurrency world. The IPO of this company is merely reflective of someone capitalising on a trend to make money, but isn’t that any business venture?

Except Canaan isn’t making any money. Hahahahaha. Revenue has fallen about 60 percent to $134.2 million over the first three quarters of the year. Over the same time frame, gross profit fell over 68 percent.

I don’t know, maybe Canaan plans to take early losses and dominate the market to make a monopoly and then become profitable by selling its chips at a premium to everyone who wants to mine cryptocurrencies or solve AI problems. It’s a hardware product, and it’s easy for a tech firm to say the “applications” are endless, but I guess we’ll know for sure what the market thinks when shares start trading.

*(I can’t, I am not a goose)

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EG Answers

We recently asked our readers to ask us some of their most pressing questions, and you can check out the entire story here:

These are the questions we answered:

• Question#1: “TGOD Forecast for 2021?”
• Question#2: “WTF is happening with CROP”?
• Question#3: “What are your thoughts on VitalHub?”
• Question#4: “Can you help a Livewell investor understand how we went from a mini canopy to the shits?”
• Question#5: “Clean commodities? There’s a halt for them, what’s going on? I recall this company was written about previously. CLE.”

As always, this is a conversation, and if you have any questions for us, reply to this email and we will do our best to provide an answer.

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