A Different Economy Than Web Economy

The majority of transactions currently utilize banks.  However, in the future this could change as blockchain technology further develops allowing people to complete peer to peer transactions more often.  Predictions are being made that a blockchain economy could outperform a web economy in years to come.  Learn more about this speculation in the article from Computer Weekly below.

Blockchain economy on the horizon

Blockchain technologies will enable many new and disruptive business models than the internet itself, an expert predicts

The world is moving towards a blockchain-based economy because of its inherent security and lack of third-party involvement, according to William Mougayar, venture advisor and author.

According to Mougayar, money is one area the web has not tackled in a “native” way, with most money transactions still going through banks rather than being peer to peer (P2P) in nature.

“The banks have led us to believe that we still need them, but in reality they are just updating each other’s ledgers,” he said, pointing out that this is what blockchain technology enables, but without the need for a third party such as a bank.

The best-known application of blockchain technology is bitcoin, which Mougayar said “at its core” is really about P2P transmission of value, with cryptology being a critical component that secures both the stored data as well as securing and validating transactions.

Bitcoin and other cryptocurrencies, he believes, will become an increasingly popular way of transferring value, with up to 900 different cryptocurrencies available already.

Blockchain is also about new, emerging P2P infrastructure that is truly decentralised, said Mougayar, in contrast to many web-based applications such as Facebook that have not remained true to the original decentralised concept of the World Wide Web.

Blockchain, he said, provides a clear and quick way of getting transactions settled without involving a third party. “If you were to dumb it down, the blockchain is a just series of API [application program interface] calls to verify something – a settlement, an identity. But because it is immutable and each transaction just adds to what has gone before, transaction history remains intact. It is an excellent record-keeping technology,” he said.

Cryptocurrencies go beyond money use

Cryptocurrencies, said Mougayar, are not just about money. “They can represent a function, work and attention, which means new companies publishing user content could compensate users by enabling them to earn tokens for giving attention to content or attracting attention to content.

“This means users could earn cryptocurrency that can be exchanged for goods and services, which is already being implemented by companies such as Steemit, where everyone gets paid for creating and curating content,” he said.

Most of what has been happening around blockchain has been about the development of the core, which has been a largely “technical story,” said Mougayar.

“A lot of the activity is very technical, about the nuts and bolts of the infrastructure, but we are now going to get more into the app development and the story is going to be more about the applications, which is how the web started. First we had to get the infrastructure and the standards, and then the applications came,” he said.

Developers should prepare for ‘inevitable’ blockchain change

Mougayar urged organisations to encourage their developers to learn blockchain languages in preparation for the changes that he sees as inevitable.

“The fact that there currently around 10 million Java developers in the world and only 30,000 blockchain developers tells you were we are and where we need to be,” he said.

Standards are very important in the era of technology, said Mougayar, and although there are only few blockchain-standards, the ERC20 standard for issuing tokens or cryptocurrency is an important one because it is the main reason so many ICOs and cryptocurrencies exist. “When you put standards in the market, adoption skyrockets,” he said.

However, Mougayar cautioned against trying to regulate the blockchain prematurely for fear of stifling innovation around this technology. “Blockchain is just a baby right now. Let’s wait until it grows to be an adult, and then we can regulate it,” he said.

Going forward, he said, the blockchain is going to disrupt the database, a new type of virtual environment is going to emerge, there will be a new way of proving the identity of people and the ownership of value, and tokens and smart contracts will become the new language.

“We will enter the new blockchain economy in the same way that we entered the web economy 20 years ago,” said Mougayar.

Source: http://www.computerweekly.com/news/450418530/Blockchain-economy-on-the-horizon

The Price of Bitcoin Keeps Going Up

Lately, Bitcoin has been progressing financially but not technologically. Many are debating why this is.  The article below from CoinDesk goes into the speculation and thinks about what the future might be for Bitcoin.  Investors may choose to remain optimistic or become a little more reserved. Read more about this below.

$1,700? Bitcoin’s Price is Up Even as its Tech Progress Stalls

(@AlyssaHertig) | Published on May 15, 2017 at 14:00 BST

“Honey badger don’t give a shit.”

Sometimes referred to as the ‘honey badger of money’ (after a famous viral video), bitcoin enthusiasts may find this comparison particularly apt of late. Since the beginning of the year, the network’s value has nearly doubled – even while the community continues to be mired in debate.

Market observers so far have offered a wide range of reasons for this uptick, though not all of them are good, with increasing prices causing concerns that the industry as a whole is entering a speculative bubble.

Supply and demand

Still, not everyone believes the boost is due to speculation.

Redwood City Ventures founder Sean Walsh, for example, sent CoinDesk a bullet-pointed email summarizing the various global developments that could be contributing to the bitcoin price surge. He believes developments in South Korea, Japan, Russia and China have all contributed.

The price surge, according to Walsh, is simply supply and demand.

“Bitcoin is dramatically more scarce than most people realize, especially in the context of its total addressable market of nearly 3 billion internet-connected adults,” he continued.

Walsh framed the situation simply as one where the cryptocurrency is seeing increased demand, which looks to only increase in the future:

“Once the global race to own bitcoin commences, the tiny supply of new bitcoins (just 54,000 new coins per month) will be completely overrun by demand,” he said, adding:

“There just aren’t anywhere near enough coins to go around, and pre-existing holders will grasp ever more tightly into this surging market, as perennially dictated by human nature.”

Tensions subsiding

Still, to those following day-to-day technical developments, it might seem odd that the digital currency’s price has seen such an upswing amid its scaling debate and a stalled upgrade known as SegWit.

Kristov Atlas, a security engineer at wallet and data firm Blockchain, for example, wasn’t able to find technical reasons for the uptick in demand.

He told CoinDesk

“I don’t see how the price increase could relate to tech changes; no big changes in long term projects like Lightning lately, and the block size stalemate is still status quo.”

“[It] must be something outside bitcoin that investors have changed their minds about,” he suggested.

While developers, admittedly, might not be experts on economic market conditions, those that have been in the industry for a while are perhaps more aware of how technical developments could contribute to bitcoin’s price.

When asked, some argued the state of the technology could have something to do with the recent increase, though, perhaps in surprising way.

For example, bitcoin’s block size debate took a weird turn a couple of months ago, when discussions about the possibility of forking bitcoin into two networks reappeared. This time around, some miners and developers suggested the idea of destroying the chain that didn’t follow along with the majority of hashing power.

This has yet to happen, though, and worries about such an event happening have since died down. Some wonder if this could have given the price boost.

“I think part of the rally is due to increased confidence that the risk of a contentious hard fork has all but evaporated,” Reddit moderator BashCo said.

Yet some expect to see a ‘correction’, where the price dips to a more reasonable place.

The emotion factor

The idea that raised tensions contribute to price swings fits with bitcoin developer and Nakamoto Institute director of research, Daniel Krawisz’s view that the price has more to do with emotions.

“The price of bitcoin never makes sense and it doesn’t have very much to do with the tech,” he said. “It’s about emotion. It’s about greed.”

Krawisz also sees the price more aligned with bitcoin’s original value proposition of giving users more control, rather than more granular tech additions or debates.

“It’s not the new features of bitcoin that matter. What matters are the old features. People keep moving into bitcoin because it’s a better alternative than their own national currency,” he said, adding:

“Bitcoin doesn’t really need new features, because it’s already better.”

Though, perhaps echoing other developer’s sentiments about a reduction in fear, Krawisz went on to argue that the increase in demand probably has to do with bitcoin’s apparent stability, since it’s been around for a long time compared with many cryptocurrencies.

“It’s the same reason that people always get into bitcoin now as ever,” he concluded.

Balloon image via Shutterstock

Source: http://www.coindesk.com/1700-even-bitcoin-tech-leaders-dont-know-price/

Is Bitcoin Legal Property?

Blockchain and bitcoin technologies are still fairly new and misunderstood by people. When it comes to the use of bitcoin by people around the world one has to wonder if intellectual property or property laws will cover it.  The article from Bitcoin Magazine dives into this question.

Making the Case for Bitcoin as Legal Property

“Interests in bitcoin should be protected by property law,” the Perkins Coie white paper concludes.

 

As Bitcoin is adopted by more users every day, the need to determine how it can integrate into mainstream society becomes even more pressing. One major question continues to be how traditional laws apply to Bitcoin and its use.

Many of those determinations could have major implications for Bitcoin and its holders, and few will play a bigger role in the United States than property laws, which could ultimately govern ownership over the digital currency.

A new white paper, “Treatment of Bitcoin Under U.S. Property Law,” seeks to analyze how the worlds of digital currency and property law should intersect. The report was assembled by Perkins Coie, an international law firm that specializes in blockchain technology and digital currency and has been active in the space since 2013. While detailed and clearly well-researched, the paper’s foremost conclusion is straightforward and transparent.

“We conclude that property interests should exist in bitcoin under such law, and that multiple sources of persuasive authority provide additional support for that conclusion,” the paper’s authors, J. Dax Hansen and Joshua L. Boehm, wrote.

The paper begins with an overview of Bitcoin’s technological attributes and what those mean for how property law can apply to it. Using California state law as a benchmark and Bitcoin transactions as an example, the authors make their case.

“Parties may … enter into contractual arrangements in which one party entrusts partial or complete control of such private key(s) to a third party while still maintaining formal title to the bitcoin value represented in applicable [unspent transaction outputs],” the paper reads. “These kinds of contractual arrangements are commonplace in custodial, trust, and escrow settings, which have generated well-developed legal principles that should generally translate to bitcoin custodial contexts.”

The paper dissects academic articles from some of the country’s foremost law professors, who also, for the most part, support the idea that intangible property rights should apply to Bitcoin:

“Property law scholars who have encountered the bitcoin ownership issues in the context of broader, more theoretical undertakings have reached (or assumed) the same general conclusion … that is, interests in bitcoin should be protected by property law.”

The authors move on to describe how Bitcoin has been treated by other legal divisions, such as commodities and taxation laws, citing the fact that in court opinions and regulatory guidance under these specialties, the digital currency has been treated as property.

“Although the concept of ‘property’ is fundamentally a matter of state law in the United States, it is also important that bitcoin has been widely treated as (or assumed to be) property for purposes of other state and federal statutory regimes,” reads the paper. “These treatments and assumptions have already had substantial consequences for the bitcoin sector. They therefore constitute informal but persuasive legal precedent further indicating that bitcoin can be owned as property.”

In an acknowledgment that much is still to be determined around how U.S. laws govern Bitcoin, the authors also included a section looking at the challenges to treating the digital currency as legal property. These include the multisignature arrangements, pseudoanonymity and potential lack of traceability associated with the Bitcoin platform. However, the authors remain optimistic that these challenges can be overcome as the technology develops.

“To be sure, difficulties in tracing ownership of particular bitcoin units across successive owners could cause some challenges in certain commercial use cases,” they wrote, but “blockchain technology itself has enabled, and will likely continue to enable, solutions to obstacles that do arise.”

It does appear that the worlds of Bitcoin and formal legal precedent are rapidly coming to a head. As the turning point approaches, familiarity with relevant legal precedent will be crucial.

Source: https://bitcoinmagazine.com/articles/making-case-bitcoin-legal-property/

Good News for Blockchain Startups

If you are running a new blockchain startup or are in the beginning steps of creating a company then this article is worth reading. As currency evolves technologically, banks and exchanges will have more ties to the blockchain industry.  Nasdaq has announced they want to become more involved in blockchain technologies by investing in those types of companies.  Read more about this in the article from CoinDesk below.

Nasdaq Wants to Invest in More Blockchain Startups

(@mpmcsweeney) | Published on April 19, 2017 at 19:25 BST

Exchange operator Nasdaq is looking to invest in blockchain startups as part of a new venture initiative. 

Nasdaq Ventures, announced today, has set its sight on investing in companies that work with blockchain, as well as firms focused on artificial intelligence, next-generation data analysis and machine learning. The firm will invest as much as $10m in relevant startups, focusing on both seed-stage and late-stage placements.

The effort is perhaps a natural extension of the exchange operator’s work in the blockchain space. In mid-2015, Nasdaq partnered with blockchain startup Chain in an effort that saw the two jointly develop a distributed ledger market focused on pre-IPO offerings.

Adena Friedman, president and CEO of Nasdaq, said in a statement:

“With the launch of our new venture investment program, we are reinforcing our focus on driving growth and innovation by evaluating, distributing, licensing and integrating disruptive technologies for the long-term benefit of our global clients.”

The operator has been testing blockchain elsewhere as well.

In February 2016, Nasdaq revealed it was testing a blockchain e-voting prototype with Estonia’s sole securities exchange. Further, in January, Nasdaq released a report outlining that, in its view, the trial “successfully demonstrated” why it believes blockchain use cases will extend beyond transaction settlement.

Image Credit: Sean Pavone / Shutterstock.com

 

Source: http://www.coindesk.com/nasdaq-wants-invest-blockchain-startups/

Big News for Bloq!

As you know Matthew Roszak is the C0-Founder of Bloq and, as of last week, the company has some big announcements!  BloqLabs has been created and Bloq has joined the Enterprise Ethereum Alliance.  To learn more about these two ventures and what it means for the future of Bloq read the article from Bitcoin Magazine below.

Bloq Invests in Blockchain Innovation With BloqLabs, Joins Enterprise Ethereum Alliance

Two announcements from the DC Blockchain Summit came from Bloq, a pioneer in the development of enterprise-grade blockchain solutions. First, the company announced the creation of BloqLabs to boost its ongoing sponsorship while bringing support to viable open-source projects in the Bitcoin and blockchain space.

Second, Bloq revealed that it will be joining the Enterprise Ethereum Alliance (EEA), an alliance that connects Fortune 500 enterprises, startups, academics and technology vendors with Ethereum thought leaders and experts. Bloq Co-Founder and CEO Jeff Garzik has been appointed to the alliance’s Technical Steering Board.

Introducing BloqLabs

According to Garzik, BloqLabs aspires to set the tone for blockchain technology, ensuring that enterprises are embracing innovations from the community’s robust ecosystem of developers.

As such, BloqLabs will support and help to develop several key projects and platforms. The initial cohort of supported projects will include Drivechain, Qtum, VeriBlock, bitcoinj and the Android Bitcoin Wallet.

“Open source is at the core of Bloq’s DNA, as both a patron and developer,” said Andreas Schildbach, developer at Bloq and the developer of the first bitcoin wallet for Android. He also maintains the bitcoinj repository primarily used in bitcoin wallets and transaction services globally. “I’m grateful for Bloq sponsoring work in open source blockchain software.”

Paul Sztorc, an economist at Bloq and chief architect behind Drivechain, concurred. “The record is clear: open source is the way to go — it’s better, faster and more secure,” he said. “I’m thrilled to have Bloq sponsor the project; few companies are this generous.”

“Businesses have been exploring blockchain technology for years now, but without widespread adoption,” said Patrick Dai, co-founder of the Qtum Project, another early recipient of BloqLabs’ support. “BloqLabs aligns with Qtum’s goal to bridge the gap between the business and technical worlds with open-source solutions that meet the commercial needs for privacy, security and, most importantly, usability.”

“BloqLabs will serve as the platform for deeper engagement between enterprises and the open source community, just like Bell Labs and Xerox Parc did for networks and technologies we use every day,” Garzik said to Bitcoin Magazine. “We’re excited to be kicking off BloqLabs with such a diverse group of projects and established leaders in bitcoin and blockchain [technology].”

Joining Forces With the Enterprise Ethereum Alliance

Further emphasizing Bloq’s commitment to broader blockchain solutions, Bloq has joined the company of Microsoft, J.P. Morgan, BNY Mellon, BG, ING, Thomson Reuters and ConsenSys, as a member of the Enterprise Ethereum Alliance. Garzik has also accepted a position on the Technical Steering Board of the alliance.

Announced on February 28, 2017, the mandate of the Enterprise Ethereum Alliance is to build, promote and broadly support Ethereum-based technology.

“Initiatives like the EEA and BloqLabs will be critical to connecting enterprises with open source blockchain innovation,” said Garzik. “We’re thrilled to contribute our time, energy and insights to this project, and I’m honored to be appointed to the Technical Steering Board.”

“Jeff [Garzik] is a legend of the open source community and has been one of the most prominent advocates for strong technical governance of public blockchains,” said Jeremy Millar, chief of staff of ConsenSys and board member of the EEA. “Combined with his experiences from the Linux Foundation, Red Hat and Bitcoin Core, Jeff is a tremendous addition to our technical leadership.”

Bloq delivers blockchain technology solutions for global enterprises. Its software platform enables companies to build, manage and scale solid blockchain-enabled ecosystems, all backed by enterprise-grade service and support.

Led by a team of world-class blockchain developers, entrepreneurs and investors, the company utilizes open-source technology, providing key linkages for secure interoperability with prevailing business systems. Its technology targets critical business issues surrounding security, provenance, authentication and reconciliation.

Over the past five months, Bloq has been in a major expansion mode, having acquired blockchain analytics pioneer Skry as well as co-launching Vulcan Digital Asset Services. The latter is a platform that gives digital assets utility for everyday banking, commerce and assets services, through PwC Australia.

Blockchain and Food Safety

Did you know that blockchain technology is being used in food safety measures across the globe?  A platform was developed after a horse meat scandal and its goal is to transmit information to food suppliers quicker and more accurately to boost consumer confidence in products.  Learn more about this in the article from Bitcoin Magazine below.

Burgers on the Blockchain: How Tech Can Keep Food Safe

The European horsemeat scandal in 2013 sent shockwaves throughout the food industry, putting into question what we are eating and where that food came from. Now, using blockchain technology companies are tackling this issue and attempting to improve consumer confidence in the food industry to ensure authenticity in food traceability.

Exposed in mid-January 2013, Irish food inspectors announced that they had found horsemeat in frozen beef burgers made by companies in the Irish Republic and the U.K. after tests discovered horse DNA within them. It was revealed that these had been sold by several U.K. supermarket chains such as Tesco, Iceland, Aldi and Lidl, growing to include European stores including Findus and Nestle.

Unsurprisingly, the integrity of the food industry has taken a hit. Before the scandal broke, nine in ten people felt confident when purchasing food at the supermarket. Now, though, the number has dropped to seven in ten. A report from the Guardian shows that 38 percent of supermarket foods were found to be mislabeled or fraudulent, which can have long-lasting effects on the retailer’s reputation.

Furthermore, research from the World Health Organization found that 1 in 10 people in the world suffer from foodborne illnesses, 420,000 of whom die each year, many of them young children.

With offices in Edinburgh, Belfast and San Francisco, arc-net was formed following the 2013 horsemeat scandal and the subsequent Elliot government report in 2014.The platform is designed to deliver confidence in a global supply chain where producers have complete control of their brand and business. Through the establishment of stronger relationships with those in the supply chain, organizations can receive the correct information they need, ensuring that food products are 100 percent authentic and traceable.

According to research, following the horsemeat scandal, consumer trust in the food industry dropped by a quarter. Additionally, 30 percent of shoppers are now buying less processed meat, and a further 24 percent are purchasing fewer ready meals with meat in them or are opting for vegetarian dishes instead.

Speaking to Bitcoin Magazine, Sean Crossey, associate digital marketing analyst at arc-net, said that the scandal and the findings of the report brought into focus the gaps in knowledge relating to the food supply.

“As the issue of counterfeit products and fraudulent activity became more and more prevalent in our marketplace, there was a real need to address the gap in information relating to supply chain activity and brand authenticity,” he said.

A study by PwC and Safe and Secure Approaches in Field Environments (SSAFE) found last January that each year, food fraud is estimated to be a $40 billion problem worldwide. In the U.K., fraud costs the food and drink industry up to £11 billion per year ($13.6 billion), according to research by PFK Littlejohn. However, by tackling fraud, the food and drink industry could boost profits by £4.48 billion ($5.45 billion).

Furthermore, a campaign from Oceana has found that food fraud is cheating Americans out of up to $25 billion a year. As such, with the food supply chain expanding its global reach, it is becoming increasingly vulnerable to fraud.

How It Works

Through its immutable data history, the blockchain delivers openness and transparency, from creation through to consumption, for the consumer.

In the case of arc-net, analysis of a DNA sample from an animal can provide key markers, such as country of origin. A digital copy of that DNA is attached to every item or product an organization creates, bringing traceability to the item level, rather than to an entire batch, thereby allowing businesses to track each item throughout every stage of the supply chain.

That digital marker can then be cross-checked with the blockchain record to ensure the product’s authenticity throughout its lifecycle. The process allows producers to create a “chain of custody.”

Once the food lands on a retailer’s shelf, consumers can scan a QR code on the food package with their mobile phones to receive food safety information about the product, including details as to what is in the package and its origination.

“This [process] helps organizations prevent fraud while delivering total traceability, cutting the costs of product recalls and reducing process inefficiencies,” said Crossey. “It ensures that retailers can guarantee the authenticity of the food that reaches their shelves.”

Bloq + Swiss Re

Matthew Roszak’s company, Bloq, recently teamed up with Swiss Re to give a platform to Mr. Roszak’s presentation on Blockchain currency and how money is now technological. Check out a preview of the presentation below and then follow the link to view the rest online.

 

 

To view the rest of the presentation visit: http://media.swissre.com/documents/Presentation+Matthew+Roszak.pdf

Commodity Markets Council on Matthew Roszak

 

Mr. Roszak was recently featured on the Commodity Markets Council website. Read the feature below to learn more about him and his work.

MATTHEW ROSZAK

Matthew Roszak
Co-Founder & Chairman, Bloq

Matthew Roszak is co-founder and chairman of Bloq, a blockchain enterprise software company. Mr. Roszak is also founding partner of Tally Capital, a private investment firm focused on blockchain-enabled technology with a portfolio of over 20 investments, including BitFury, Blockstream and Factom.

Mr. Roszak is a blockchain investor, entrepreneur and advocate. He has spent over 20 years in private equity and venture capital with Advent International, Keystone Capital Partners, Platinum Venture Partners and SilkRoad Equity, and has invested over $1 billion of capital (from start-up to IPO) in a broad range of industries. Mr. Roszak is a director and beneficial owner of Eboost, MissionMode, Neu Entity, Onramp, SolidSpace and TrueLook.

Mr. Roszak serves as chairman of the Chamber of Digital Commerce, the world’s largest trade association representing the blockchain industry. In addition, Mr. Roszak serves on the board of BitGive, a non-profit foundation targeting public health and the environment. Mr. Roszak is also the founder of the Chicago Bitcoin Center, and was a producer of the documentary, The Rise and Rise of Bitcoin.

Mr. Roszak is a sought after thought leader on blockchain technology, and has testified as an expert before US Congress and spoken at The Brookings Institution. Mr. Roszak has been featured on CNBC and quoted in The Wall Street Journal, Bloomberg and Financial Times. In addition, Mr. Roszak has presented at FinTech conferences worldwide, including Money20/20, CES and American Banker.

Article sourced from: http://www.commoditymkts.org/events/state-of-the-industry-2017/matthew-roszak/

Dow Hits 20K

The Dow hit an average over 20,000 this week and, for some, it is a huge milestone while, for others, it is insignificant.  As you all know, the stock market changes and fluctuates all the time.  Since November, those changes have been especially monitored and noticed because of the election and inauguration of a new President.  This steady growth of Dow Jones is a good sign of economic stability for the time being.  Read more about this milestone in the article from CNBC below.

Dow 20,000: Its insignificance may rival its importance

Jeff Brown, Special to CNBC.com

The Dow Jones industrial average has finally hit 20,000, and if it closes above that mark on Wednesday, it will surely be a market milestone. But if the long wait for Dow 20,000 already tired you out, don’t feel bad.

Dow 20,000 is not quite like running a four-minute mile or breaking the sound barrier. It’s little more than an imaginary line.

As a practical matter, Dow 20,001 will make investors richer than Dow 20,000, but surely won’t get as much attention. Big round numbers are easier to remember and visualize than the ones marking records leading up to them, just as the 20-foot pole vault seems easier to imagine than 19 feet, 11½ inches.

“Hitting 20,000 is significant only in terms of its emotional and psychological impact on us,” said Jeremy Torgerson, CEO of NVest Advisors in Brownsville, Texas. “We humans love round numbers.

“Remember New Year’s Day 2000, as a recent example,” he added. “That new year was somehow more meaningful than January 2, 2001, or January 1, 1999.”

The Dow’s climb up over time can’t make any claim to being a natural law of market evolution. It’s purely a human invention,created by The Wall Street Journal in 1896, and its makeup changes from time to time based on choices by editors at S&P Dow Jones Indices.

“The fact that people even monitor the Dow is an artifact of history,” said Robert Johnson, president of the American College of Financial Services in Bryn Mawr, Pennsylvania.

Joshua Lott | Getty Images – Trader yawning during the market day

It is the only price-weighted market index, a methodology that more heavily emphasizes moves by higher priced stocks than their lower priced counterparts — without sound logic, in Johnson’s opinion.

“People still refer to how many points the Dow is up or down, even though a 100-point move is roughly half a percent today and it was approximately 5 percent at the time of the 1987 crash,” Johnson said.

“The fact that people even monitor the Dow is an artifact of history.” -Robert Johnson, president of the American College of Financial Services

If the Dow were a typical average, prices of the 30 stocks would be added up and divided by 30. But instead the calculation uses a much smaller divisor — currently 0.14602128057775. The divisor has been adjusted over the decades to account for stock splits, spin-offs, mergers and stock dividends, to assure that numbers from before and after yield apples-to-apples comparisons.

What really matters to investors is percentage gains, not the number of points the Dow adds over time. So going from 1,000 to 2,000 doubled investors’ money, as did 5,000 to 10,000 and 10,000 to 20,000.

Up and down Dows

Investors may also be interested in how the Dow behaves after passing a big milestone. Unfortunately, there’s no pattern dependable enough to bet on.

“Back in 1999, we hit 10,000 and the market continued to run another 1,000 points, but in January 2000, the market went from 11,900 down to 9,600,” recalled Michael Darvish, senior financial advisor with Regal Securities in New York. “There is no specific pattern.

“It depends on the economic conditions,” he added. “We are on a Trump high right now. Last January, we had a sell-off, and I would not be surprised if we get another one this year as investors want to take some money off the table.”

Dow doublings

How long do Dow doublings take?

Fifteen years to go from 1,000 to 2,000 (1972–1987)

Four years from 5,000 to 10,000 (1995–1999)

About 17 years from 10,000 to 20,000 (1999–???)

An investor who wanted to bet on gains in the Dow could buy the 30 stocks, buy a fund that holds large-capitalization stocks including those in the Dow or make a pure play with SPDR Dow Jones Industrial Average ETF (DIA), an exchange-traded fund that owns the 30 Dow stocks.

But unless you own DIA, chances are your own results are different from the Dow’s. The other big-name stock index ETF, the Standard & Poor’s 500 (SPY), contains 500 stocks versus the Dow’s 30, but tends to move about the same as the Dow over time, since it also is composed of large-cap issues. But if you own foreign stocks, or small-company stocks, or shares in specific sectors, the Dow 20,000 may not matter much to you.

“What matters is not where the Dow is, or how round that number is, but how one’s own portfolio of investments is doing,” said Michal Strahilevitz, behavioral economist at Duke University’s Center for Advanced Hindsight. “For the wisest of investors, that will include a diverse range of index funds and such and not just a fund that tracks the Dow.”

A real milestone: Debt $20 trillion

Investors may be cheered by a milestone.

“It is significant because, from a momentum perspective, once people see Dow 20,000 then they can be convinced that Dow 25,000 is possible,” said Ted Jenkin, CEO of Oxygen Financial in Alpharetta, Georgia.

But they should not use the Dow milestone as an excuse to alter their long-term plan. “That is the best advice for anyone, no matter what the Dow has done, is doing or will do,” Strahilevitz said. “Timing the market based on anything is a fool’s strategy.

“It fails at least as often as it works.”

Stocks go down as well as up, of course, and the march to a new record is often interrupted by big downturns, such as the dotcom selloff and financial crisis crash that came between Dow 10,000 and 20,000. Smaller sell-offs come when investors decide to nail down profits after a big run and move to cash or some other holding. Deeper declines are often triggered by worries about corporate earnings or the health of the economy.

Erik Davidson, chief investment officer for Wells Fargo Private Bank, worries that the U.S. is quickly approaching another milestone that could dampen market performance: $20 trillion in government debt. He calculates that, while the Dow has produced a total return, including reinvested dividends, of 153 percent since the start of the 21st century, the debt has gone up 253 percent.

“While we will likely be seeing many Dow 20,000 hats, I sincerely doubt that we will see a single Debt $20 Trillion hat,” Davidson said. “That says a lot about where the market is focusing these days.”

By Jeff Brown, special to CNBC.com

(Update: This story has been updated to reflect the Dow opening above 20,000 on Wednesday, Jan. 25.)

Article sourced from: http://www.cnbc.com/2016/12/29/the-truth-about-dow-20000-for-investors-and-the-stock-market.html

Getting Serious About Your Money

It’s not too late to consider a new year’s resolution, and being smarter with your money is a great one.  Saving money and planning out a financial forecast are habits most people adapt easily.  However, to truly be prosperous and successful you need to adapt other habits that might not come as easily.  Those habits are discussed in the article from Entrepreneur Magazine below.  Make note of them and see how great your finances look by the end of 2017.

10 Money Habits That Will Help You Get Serious About Prosperity

Take your financial life to the next level through actions like seeking new income sources, making debts your priority and separating friendship from business.
by Ayodeji Onibalusi | Contributor | Entrepreneur and Online Marketing Expert
January 25, 2017

The power of habit can be quite interesting. Rather than create 2017 resolutions that may not stick, a good alternative is to develop positive habits this year. Especially when the category is financial life.

So, make it your goal to form new habits that will take your financial life to the next level.

From learning a new skill every day to hitting the gym regularly, habit takes away the one singular thing that prevents us from getting things done — resistance. With good habits, we no longer resist. We just do it.

You can quickly attain financial freedom by positively channeling the power of habit toward how you treat money. But, first, let’s look at the steps to developing new habits.

Author James Clear breaks down habit formation into three steps (the three R’s): reminder (what triggers the behavior); routine (the habit itself) and reward (what you get from this behavior). In order for a habit to stick, it must follow the three R’s rule. By practicing some of the following habits, your reward will be a more financially rewarding lifestyle.

1. Be clear about your financial goals.

One habit you need to develop is clarity toward your goals. Your goals can shape your attitude toward whatever you do and put you in the right perspective about your financial life. Lack of clarity is equivalent to having no goals at all.

“Clarity about your money goals is the first step towards getting your finances right,” Yasir Khan, founder and chief editor at  WealthKept.com, told me. “Getting your finances right — being able to prioritize what you do with your money — can only be achieved by clearing the unnecessary obligations out of the way.”

Developing a habit of being clear about your financial goals will also create a sense of focus, which is the psychological effect of setting goals. Let’s assume your aim is to start your own business this year. You’ll outline how much funding is required to do that, and how much you want to raise yourself.

2. Stop associating guilt with money.

One habit which keeps a person from growing financially is how he or she feels about money. A lot of people feel guilty, which is why they often find it difficult to discuss the financial terms of a business relationship before starting one.

Develop a positive attitude toward money this year by overcoming any guilt you feel about money.

3. Seek more income sources.

The best way to improve your financial life this year is to use your free time to earn an extra income. Start by looking at areas where you can fill a need and earn extra money in the process.

And make converting your spare time into income opportunities a habit. You could freelance for businesses or help people with things they can’t do themselves. Khan said he was able to start two small businesses apart from his main job when he noticed he could use his free time to help others. Now that his side businesses are growing, he hires people to help him run the business.

4. Make clearing your debts a priority.

One of the biggest hindrances to financial growth is debt. The problem is that debt keeps compounding, making it your most expensive liability. Start paying off your debt with each paycheck you earn. By forming this habit, you could become debt-free by the end of 2017.

5. Save to secure your future.

Make saving a habit in 2017. The more you save, the more you’ll have when you retire. JPMorgan Chase puts together an annual guide to retirement that provides investment and savings strategies for all stages of life.

6. Separate friendship from business.

Underscore the purpose of your relationship with others, and make it a habit to always separate money from friendship and friendship from business.

A lot of relationships have gone to ruin because of money. In 2017, be careful when forming business relationships. Make sure you know enough about someone before entering into such a relationship. Use background check tools like Check Them or Check People before a first meeting. Entering into a relationship with the wrong person could be costly or devastating to your financial life.

7. See money as a means, not an end.

Many people get the notion of money very wrong. Because we see money as the end goal, it affects our orientation about it. See money as what it is and what it’s meant to be — a tool, a means to an end. What the end is for every one of us may be different. For most, it might be happiness, while for others it’s simply a comfortable lifestyle.

8. Seek advice from money experts.

Develop a habit of seeking advice before making any major financial decision. This will help you avoid making any decision you’ll end up regretting. When you make a habit of seeking financial advice, you’ll be less likely to take financial risks that could hurt your lifestyle.

9. Decide against impulse buying.

Make it a habit to spend only on things you need. Cut back on impulse buying by weighing your options before making any purchase. When you buy on impulse, you only gain a temporary sense of satisfaction. Once this instant gratification has worn off, what you’re left with is a shrunken purse and a tinge of regret, or buyer’s remorse.

10. Live below your means.

Many wealthy individuals mastered the habit of living below their means, even before they became hugely successful. A lot of wealthy individuals prefer to live a frugal lifestyle.

Going frugal can help you create a financial lifestyle that’s easily manageable. It can leave you with enough money and time to invest into your business and relationship. And that’s what good money habits are all about.

Article sourced from: https://www.entrepreneur.com/article/287634