how to profit from the private money revolution

SPECIAL REPORT

A Brownstone Research Publication

How to Profit From the Private Money Revolution

By Jeff Brown

2The Near Future Report

How to Profit From the Private Money RevolutionBy Jeff Brown, Editor, The Near Future Report

The future of money is unfolding right before us. The days of a government monopoly on currency creation are coming to an end. New innovations are making it possible for “Big Tech” to take on “Big Government” for control over the financial system.

And for investors who can connect the dots, this marks one of the best investing opportunities of a generation. I’ll give you all the details in this special research briefing.

But first, let me welcome you as a subscriber to The Near Future Report. My name is Jeff Brown, your editor. I’ve spent my entire life working with, investing in, and studying high technology. I spent decades working as an executive at technology firms like Qualcomm, NXP Semiconductors, and Juniper Networks.

Today, my mission is to use my years of technology and investing expertise to bring market-beating returns to everyday investors. With The Near Future Report, we identify the technology trends that are right around the corner. Then, we profit by investing in companies powering these trends. These are large, sleep-well-at-night technology companies that are still solidly in “growth mode.”

And in this briefing, I’m going to highlight

a trend that very few see coming: the rise of company-issued currencies. Then I’ll share the three stocks every investor should own in order to profit from this currency revolution.

Now, it may sound crazy to say a private company could issue a currency that would challenge the dollar’s supremacy. But it won’t be the first time a private corporation has printed its own money… and achieved incredible power as a result.

The Age of Discovery

The year is 1602. Europe has entered the “Age of Discovery.” Thanks to new sailing technology, merchants are sailing farther and farther in search of fortune and trade. For the first time, trade routes all along the western and eastern coasts of Africa, India, and China are open.

But longer trade missions took longer than past voyages. And these missions had more opportunities for catastrophe to strike. This made these expeditions a riskier investment than shorter ones…

Often, it took the ships years to make the round trip. And it would take years before backers would see a return on investment… assuming the ships made it back at all.

In 1602, a group of Dutch merchants got together

Special Report 2021


and formed a joint venture. The merchants called this venture Vereenigde Oostindische Compagnie (VOC). In English, it was known as the Dutch East India Company.

The VOC was the first corporation in the history of the world… For the first time ever, investors made a permanent contribution of capital. They had to wait for dividends to cash out. Or they had to find someone to buy their shares in the company. That led to the creation of the world’s first stock exchange a couple of years later in Amsterdam.

The Dutch government also gave the VOC a monopoly on trading in the East Indies, where the lucrative spice trade was. And the VOC received the right to maintain armies, build forts, make treaties with Asian rulers, and even wage wars in the name of the republic.

Through trade treaties and brute force, the VOC quickly established a monopoly in the trading of mace, nutmeg, and cloves. If any competitor attempted to circumvent this monopoly, the VOC would either attack the ship or punish the locals who sold the spices.

This monopoly allowed the Dutch East India Company to grow into an incredibly large, powerful corporation. At its peak, the company had 150 merchant ships and employed nearly 50,000 people. And it had 40 giant warships along with a 10,000-man private army.

It accumulated all that in just 35 years. And in 1637, the Dutch East India Company was valued at $7.9 trillion in today’s dollars. That’s twice as big as Facebook, Amazon, Apple, Microsoft, and Google combined. That makes the Dutch East India Company the largest company the world has ever seen.

But with that power also came one more special privilege…

The Dutch government also gave the VOC the right to coin its own money. The coins the VOC

printed were called “trade coins.”

Soon, trade coins became the preferred medium of exchange in foreign markets. Traders and merchants all over the world used Dutch trade coins to conduct transactions.

These trade coins were backed by the metal they were made from… and had an intrinsic value of their own. But another part of the appeal was that the Bank of Amsterdam set a fixed price for these trade coins. For a small fee, it would convert the coins to Dutch guilders.

The trade coins and the guilder were the world’s reserve currency from 1642–1720.

The Dutch East India Company possessed the power to mint its own currency, a privilege usually reserved for governments.

Today, we are on the verge of witnessing the rise of another privately issued currency. These new currencies won’t be gold and silver coins, though. They will be digital currencies, also known as cryp-tocurrencies. In fact, I predict we will witness sev-eral cryptocurrencies issued by private companies.

But unlike the trade coins of the VOC, these currencies will not be affiliated at all with a government. In fact, they could even compete with state-issued currencies.

Facebook’s Cryptocurrency Plans

“Facebook Plans to Launch ‘GlobalCoin’ Cryptocurrency in 2020.”

The above headline was published in late May 2019 in the UK’s The Guardian. Similar headlines ran in BBC and Business Insider articles.

The mainstream press was reporting on rumors that Facebook’s long-suspected plan of launching a cryptocurrency was slated for 2020.

I knew the mainstream press had it wrong. Here’s what I told my readers on June 10:


I’ve been discussing the topic with some of my contacts in the high-tech industry. And the word on the street is that the mainstream media is wrong.

I am hearing chatter that Facebook’s cryptocurrency will keep its codename ‘Libra’… and that its white paper will be released on June 18.

And I was right. Facebook released the white paper for its digital currency on June 18, 2020.

In the world of blockchain technology, white papers are a formal document that describes the technology and how it works. It represents the point at which a project is publicly announced.

Originally dubbed Libra, Facebook set about finding partners for its new global financial venture.

To support Libra, Facebook created the Libra Association, a collection of companies to operate the Libra network. Each company on the list put up $10 million for the privilege.

Traditional payment companies Mastercard, Visa, Stripe, and eBay were originally on the list. All four have since removed themselves from the association. (More on that below.)

Top digital asset exchanges Coinbase and Xapo appeared as well.

Uber and Lyft also appeared on the list and are still partners with Facebook. These two companies clearly foresaw a day when consumers would pay for rides with Facebook’s currency.

South American e-commerce site MercadoLibre appeared on the list as well. This suggests that Facebook anticipated that Libra would be used for e-commerce in the U.S. and the developing world.

Libra was originally pitched as a “stablecoin” to be backed by a basket of fiat currencies. And it would have been fully fungible. In other words,

users would be able to convert Libra into another digital asset like bitcoin… or convert assets back into U.S. dollars, yen, pounds, euros, and so on.

Given that Libra would have been a stablecoin, its low volatility would have been attractive in countries without a stable currency, like many countries in South America or Africa.

Stablecoins are also attractive for use in daily purchases. After all, who wants to use a currency that might fluctuate 10% a day? It is very difficult to budget for daily necessities when there are high levels of volatility.

That means Libra could have been used for small-value payments and as a store of value in certain markets.

And with Facebook’s global user base of 2.85 billion, it wouldn’t have taken long for the coin to gain adoption.

As a technologist, I had to hand it to Facebook. The company typically has not been an inno-vator. Most of its new features and products in recent years have been blatant copies of competi-tors. Instagram’s Stories feature is almost identi-cal to Snapchat’s Stories, for example.

But Libra was truly innovative. And it could have done a lot of good, especially in developing parts of the world.

But Facebook’s ambitious plans for its original digital dollar ran into regulatory hurdles early on.

Operate in the Shadows

This is indeed a national security issue. We will not allow digital asset service providers to operate in the shadows.

That’s what Treasury Secretary Steven Mnuchin said about Libra in July 2019.


Mnuchin again:

The Treasury Department has expressed very serious concerns that Libra could be misused by money launderers and terrorist financiers.

And Mnuchin wasn’t alone. Federal Reserve Chair Jerome Powell said that Libra “raises serious concerns regarding privacy, money laundering, consumer protection, [and] financial stability.”

Even then president Trump made his feelings about Libra known:

Why were high-profile policy makers, and even the president, taking aim at Libra?

The usual line was that Libra would be used to finance terrorism or other illicit activity. This criticism isn’t unique to Facebook’s project. Bitcoin’s critics have been saying this for years.

But let’s think about that rationally…

In 2019, cryptocurrency users spent over $1 billion worth of bitcoins on the dark web for illicit purposes. That’s going by a report from the blockchain analysis company Chainalysis.

The dark web is a hidden part of the internet that you can’t get to with normal web browsers. You need specific software to find it. And as you might guess, the dark web includes online markets for drugs and other illicit goods.

There was over $2 billion in bitcoin spending on illicit goods last year. That surpassed the previous high of $872 million in 2017… which corresponded with bitcoin’s run-up to $20,000 in price.

But guess what? $1 billion in a year is next to nothing in the big picture. Let me explain…

There’s a widespread perception that users use bitcoin primarily for illicit purposes. But nothing could be further from the truth.

For one, $30 billion worth of bitcoin trades on legal digital asset exchanges every day. And remember, these exchanges verify the identities of all users.

So that’s 30 times more legal bitcoin activity in a single day than illegal bitcoin activity in a year.

But even bigger, a report from Global Financial Integrity estimates that as much as $652 billion is spent on drugs every year. What’s more, up to $1.1 trillion is spent on counterfeit and pirated goods.

Those transactions are in fiat currency… with U.S. dollars making up the biggest portion.

That means bitcoin use makes up just 0.15% of illegal drug transactions each year. And if we include counterfeit goods, bitcoin use makes up less than 0.06% of all illicit transactions. It’s a drop in the bucket.

I suspect we would see a similar pattern with Facebook’s project.

So if the concern over Libra wasn’t about money laundering, what was it?

Facebook Scales Its Ambitions

Like I said, Facebook has a user base of 2.85 billion people. That’s roughly 36% of the global population.

With 2.85 billion people connected to its network, Libra would have certainly gained


immediate adoption. That would have created a multibillion-dollar business for Facebook overnight, thanks to transaction fees.

But regulators didn’t like Facebook’s master plan.

Remember, Facebook originally planned for its stablecoin to convert into other digital assets like bitcoin… or convert assets back into U.S. dollars, yen, pounds, euros, and so on.

Of course, that didn’t go over well with the regulators around the world. In their eyes, Libra looked too much like it was being positioned as a global reserve currency.

It got so bad that the corporate backers of the project, headlined by Visa and MasterCard, quickly resigned from it. They didn’t want to be associated with Libra and bring regulatory scrutiny upon themselves.

So Facebook spent the last two years going through a rebranding effort. It renamed its digital currency to Diem.

And Facebook announced that Diem will be a stablecoin backed by a single fiat currency – the U.S. dollar.

That spurred Facebook’s move to headquarter its crypto operations in the U.S. And Facebook partnered with Silvergate, a digital asset-focused bank, which will hold the dollars in reserve needed to back Diem one-to-one.

And Diem will be governed, at least in theory, by the Diem Association. There’s even some speculation that Diem could become part of the U.S.’s rollout of its own central bank digital currency (CBDC) in the coming years. If Diem does launch before the end of the year, we would be witnessing a historic overhaul of our monetary system.

The U.S. government was wary enough about Libra that Facebook had to redesign its entire

project. Cryptocurrencies could directly threaten the government’s “monopoly” on currency creation.

And though Facebook appears to be buttoned up from a regulatory perspective now, fears over digital currencies are still playing out on the political stage.

Some politicians are very open about this, too. Congressman Brad Sherman (D-CA) said this about cryptocurrencies in May 2019:

An awful lot of our international power stems from the fact that the dollar is the standard unit of international finance and transactions […] It is the announced purpose of the supporters of cryptocurrencies to take that power away from us.

And here’s what Congressman Juan Vargas (D-CA) had to say to Mark Zuckerberg when the Facebook CEO testified before Congress about Facebook’s digital currency platform back in October 2019:

So when something threatens the dollar, [Congress gets] very nervous, and I think we should be […] It is a delicate space for us.

I have bad news for any crypto skeptics like Congressmen Sherman and Vargas…

Digital assets are here to stay. There’s no putting this genie back in the bottle. The technology has already been released to the public. Some might say it has been unleashed.

And while the first company-backed cryptocurrency might be Facebook’s Diem, it won’t be the last…

Amazon Coin

In December 2017, I made what must have seemed like a crazy prediction. Here’s what I wrote at the time:


Cryptocurrencies are designed to facilitate anonymous (or pseudonymous) transactions. A marketplace that facilitates anonymous transactions… sound familiar? It’s precisely what Jeff Bezos was so passionate about with third-market exchanges. I also believe that there is something even bigger in the works.

I think that Amazon is getting ready to launch its own digital currency.

Like I said, in late 2017, this must have seemed like an “out there” prediction. But for anybody who could connect the dots, it was obvious. For starters, in the weeks leading up to my prediction of an “Amazon coin,” Amazon had registered a series of domains. Look at the image below.

Amazon registered a new website address: www.amazonethereum.com.

And it registered another: www.amazoncryptocurrency.com.

And another: www.amazoncryptocurrencies.com.

And this was on top of the already registered: www.amazonbitcoin.com.

To me, it appeared that Amazon was preparing to launch a marketplace for cryptocurrencies. This was more than a year before Facebook announced its plans for Libra to the world.

And Amazon is in a perfect position to launch its own cryptocurrency. In fact, it already did

something similar years ago. Look at this:

In 2013, Amazon started experimenting with issuing “coins” to be used on its “Fire tablets, Fire TV, and on any Android device through the Amazon Appstore.” These coins are kind of like frequent flyer points. They have a clear value and can be redeemed for Amazon applications or other services, but they cannot be transferred, sold, or converted back into a fiat currency like the U.S. dollar. In other words, they are not fungible.

This was just the first step. For a company whose annual revenues are similar to that of a decent-sized country, it is in the position to issue a real currency, a cryptocurrency, or a digital token that is fully convertible into bitcoin and ether.

And guess what? If a cryptocurrency or token is convertible into bitcoin or ether, it is convertible to U.S. dollars or just about any other form of fiat currency.

And what is the best way to guarantee the con-vertibility of an Amazon cryptocurrency? Simple: create a marketplace to do so. This is precisely why Amazon has locked up the domain names.

I admit that I might have been early predicting an Amazon coin. But I’m not wrong. Once Facebook’s Diem successfully launches, it will only be a matter of time before Amazon follows suit. I wouldn’t be surprised if the company launches its own digital asset this year.

And recent news indicates Amazon may be preparing to launch its own digital currency in Mexico very soon. The platform will enable


customers to convert their cash into digital currency, allowing customers to transact with digital dollars across Amazon’s services. Amazon’s Digital and Emerging Payments (DEP) division is currently hiring software engineers at all levels to support the development of this token.

And once Facebook’s Diem and an Amazon coin are in circulation among the companies’ users, what do you think other corporations will do? That’s right. Every major corporation will launch its own digital asset.

JPMorgan has already launched its JPM Coin and the Onyx blockchain to support it. And Goo-gle is also investigating blockchain applications in its business.

And it won’t just be corporations that launch their own digital assets. Governments will follow suit.

The Digital Dollar

In October 2019, the president of the Federal Reserve Bank of Dallas, Rob Kaplan, made some surprisingly frank comments…

He said that the U.S. Federal Reserve (the Fed) was “actively looking at and debating” the issuance of a digital currency. To be clear, Kaplan was talking about a cryptocurrency-like version of the U.S. dollar. This digital asset wouldn’t be “dollar-backed.” It would be the U.S. dollar.

Up to that point, these were the most direct comments we’d heard from top officials at the Fed on this matter.

And Kaplan’s words came on the back of comments made by former Commodity Futures Trading Commission (CFTC) chairman Christopher Giancarlo.

Giancarlo wrote an op-ed published in The Wall Street Journal calling for the U.S. to create its own digital currency. In it, he said that the U.S. dollar risks losing its world reserve currency

status unless it goes digital.

Right now, the U.S. dollar makes up 59% of central bank foreign exchange reserves. That gives the U.S. dollar an enviable status among world reserve currencies.

It allows the U.S. government the ability to issue large amounts of dollar-denominated debt at low rates. There will always be a willing buyer for it.

But numerous other countries are working on state-backed digital currencies to replace their fiat money systems. One of those countries happens to be China…

Last October, China began field testing its own CBDC called the DCEP (digital currency electronic payments).

The digital currency was issued through China’s central bank, the People’s Bank of China (PBOC). And it functions like a cryptocurrency. But unlike a cryptocurrency, it’s not decentralized. Quite the opposite, in fact… The Chinese government will control it.

Clearly, the goal is to establish dominance in this space.

What’s interesting is that the PBOC gave its first round of digital currency to tech giants Alibaba and Tencent as well as five banking organizations. From there, these entities and the PBOC were able to distribute the DCEP directly to Chinese citizens.

Obviously, the banks make sense as a distribution channel. And if we look at the reach of the two Chinese tech giants mentioned, we can see why they were chosen also.

Alibaba has over 811 million active users. And Tencent has more than 400 million active users. That means more than 75% of China’s population is interacting with these two companies regularly. That makes them well-positioned to get China’s digital currency circulating in the economy.


As China expands its own state-backed digital asset, the U.S. dollar could be in danger of losing its status as the world’s reserve currency.

This would directly impact the Fed’s control over monetary policy. Specifically, it would lead to higher interest rates because the demand for U.S. Treasurys would drop.

If that were to happen, Kaplan estimates that interest payments on the U.S. national debt could jump by $200 billion a year almost immediately. That’s a significant jump, especially considering the government’s budget deficit is approaching over $1 trillion per year.

Despite all of this, I can tell you from personal experience that some policy makers in D.C. are dragging their feet on adopting blockchain technology and digital currencies.

A Sense of Urgency

My longtime readers know that I’m a member of the blockchain industry advocacy group The Chamber of Digital Commerce. We advocate for a light regulatory touch for blockchain technology so that adoption can flourish in the United States (for more on my recent efforts with the Chamber, see my field notes near the end of this special report).

In October 2019, I was invited to closed-door ses-sions with senior officials of the Department of Commerce, policy makers, senior executives, mem-bers of the National Institute of Standards and Technology, and the Defense Intelligence Agency.

I had to put one senior staffer in his place. The staffer suggested that it was still way too early to be concerned about foreign competition surpassing the United States in the area of digital assets. He said that developments would happen in the next three to seven years in the blockchain industry and that the risk of flight of capital was that far out…

My response was this:

The Chinese government is working on launching a digital renminbi before the end of the year, and it is working in partnership with the private sector. The Chinese equivalents of Amazon, Google, and Facebook are providing the digital infrastructure to issue this currency, providing the ability to launch in a matter of days or weeks, not years.

We have a lack of urgency in the United States. Capital flight is not three years down the road – it started last year. Billions of dollars have been moving offshore that would have been invested here. We must have a sense of urgency.

My comments set the room on fire. The Department of Commerce officials lit up and agreed with my comments. Pens were firing around the room taking notes.

The shift from fiat to digital is inevitable.

There will come a day when we walk into a store and see a sign: “We accept bitcoin, Diem, or e-dollars.”

The currency revolution isn’t years away. It has already started.

What does this mean for investors?

In the simplest terms, it means all investors will want exposure to quality digital assets and companies that support the underlying technology - blockchain.

To learn more about which digital assets I recommend and discover a truly unique way to invest in them, go here.

And as for investing in blockchain-related technology, I have three companies that belong in every investor’s portfolio.

https://members.brownstoneresearch.com/near-future-report/special-reports/secrets-of-the-cryptocurrency-ira


Read on to see how to easily profit from this revolution.

Three Ways to Profit From the Blockchain Revolution

Before we get to the investment recommendations, it’s important to spend some time to understand what a blockchain is.

At its simplest, a blockchain is a distributed ledger of transactions and information. We can roughly think of it as a database that is widely distributed rather than being kept in a centralized (just one) location.

Because it’s a public ledger and distributed throughout so many locations, blockchain allows for “trustless” transactions. In other words, there is no need for a “trusted” intermediary to confirm a transaction.

Bitcoin is the most popular use of blockchain technology right now. A community of software engineers and cryptographers developed it. The Bitcoin blockchain is software code programmed in a cryptographically secure way. This allows it to operate on thousands of computing systems around the world.

And the Bitcoin blockchain’s monetary policy is preprogrammed. It’s just math… It can’t be ma-nipulated by any one person, government, or cen-tral bank. So we will always know what the sup-ply of bitcoin (the unit of currency) is. And in the case of bitcoin, we know it is a limited supply – there will never be more than 21 million bitcoins.

This transparency makes blockchain-based cryptocurrencies superior to fiat currencies

Cryptocurrencies and digital assets also easily cross borders… If you’ve ever tried to send money to friends or families overseas, you know it’s a timely and costly process.

Sending an international wire can cost upward of $100… even if you’re just sending a couple hundred dollars. Plus, it can take days for the wire to clear.

There’s no need for that in today’s world. The technology is set up for instant transactions, but our financial system doesn’t want this to happen. It receives billions of dollars a year in these “remission fees.” Blockchain technology removes the “rent seekers.” These expensive, “trusted” middlemen are no longer needed in a world of blockchain technology.

As digital assets get easier to use, usage will pick up. And that leads us to our investment thesis.

Mining the Blockchain

Most cryptocurrencies aren’t created out of thin air (like fiat currencies are). Digital assets are “mined.” “Miners” are individuals and companies who “mine” blockchains for economic rewards.

These miners provide a service to the blockchain network by solving cryptographic problems. This “mining” process helps confirm and add new blocks to the blockchain that the miners are supporting.

This is what enables transactions to take place over a blockchain network.

Miners also maintain a copy of the blockchain (the ledger of transactions), as each new block is written to the blockchain. Again, we can think of this as maintaining an immutable database – a perfect record of all transactions that have taken place on that blockchain.

But in order to do this, real-world resources are required. In the case of blockchain technology, hardware is required in the form of specialized computers (servers). There are also labor and energy inputs to build and maintain those computer systems.


For these efforts, miners are paid in the cryptocurrency associated with the respective blockchain. In the case of the Bitcoin blockchain, miners are paid in bitcoin. In the case of the Ethereum blockchain, miners are paid in ether. And so on…

And it’s important to understand that there are many different blockchains. And each blockchain is designed to have its own unique features that are typically targeted at specific market opportunities.

To gain some perspective, have a look at the table on the following page.

These are just a few examples of different blockchain technologies that are designed to solve specific problems and perform certain transactions or services better and cheaper than how they are performed today.

Examples of Different Cryptocurrencies and Their Utility

Cryptocurrency Utility

Highly secure, peer-to-peer transactions

Decentralized platform capable of running smart

contracts

Distributed network combining digital identity

and smart contracts

Rewards platform for publishers to monetize their

content

Distributed, decentralized, cloud-based storage

platform

This is why blockchain technology will become so pervasive. It can improve just about any transaction between two or more parties. It

can be applied to just about anything. And no single blockchain can support all needs and requirements.

So instead of recommending a single cryptocurrency, I’m going to reveal to you the three companies that will be the dominant players in the future of crypto mining.

These are classic “picks and shovels” plays. We have three publicly traded companies that, for reasons I’ll reveal in a minute, Wall Street and traditional investors vastly undervalue.

The Brains Behind Cryptographic Problem Solving

The history behind cryptocurrency mining is rather short since it started in earnest in 2011. At that time, modern CPUs (central processing units) were used for computational power.

It didn’t take long before the industry figured out that CPUs were not very efficient at solving the complex mathematical problems required to confirm new blocks on the blockchain (and to get paid for the effort). The industry shifted to GPUs (graphics processing units), which were faster and more efficient at performing the necessary iterations required for mining.

In the case of the Bitcoin blockchain, in 2013, the industry evolved to using ASICs (application-specific integrated circuits). These semiconductors were designed specifically for the purpose of mining on the Bitcoin blockchain. They were optimized to do just that one thing.

And that made sense. Back in 2013, bitcoin made up around 95% of the total market capitalization of all cryptocurrencies. But have a look at what’s been happening since then. (See top chart on page 12.)

Fortunately, there is a company that gives us much broader exposure to the future mining market for cryptocurrencies… Advanced Micro Devices (AMD).


A Silicon Valley Veteran

AMD is one of the original “Silicon Valley” companies. It has been just as much of an institution as other Silicon Valley veterans like Fairchild and Intel over the years.

AMD is focused on high-performance computing markets. Its beginnings focused on designing and manufacturing microprocessing units (MPUs) and CPUs.

This led to a decades-long battle against CPU giant Intel. (Intel generated more than $77 billion in revenue in 2020 compared to AMD’s $9.7 billion.)

During the last 10 years, however, AMD has been going through a strategic transition. It has more sharply focused its core processor business on servers for data centers, which is one of the highest-growth markets in the semiconductor industry.

But more importantly, it has become one of only two dominant suppliers of GPUs in the world.

The other one is NVIDIA.

NVIDIA is a fantastic company. In fact, I pounded the table for investors to buy it back in early February 2016 when the stock was trading around $24. Those who took my advice have now made more than 600% gains.

But now, we have the chance to do it again with AMD.

AMD’s Transformation

AMD’s transformation began in July 2006 with the acquisition of ATI Technologies, another semiconductor player focused on GPUs at that time.

The other transformative deal happened in 2008, when AMD announced its plans to spin out its manufacturing operations into a new venture. This venture became known as GlobalFoundries. While this process took many years, it enabled AMD to become a “fabless” semiconductor company.

Being fabless simply means that it outsources all its manufacturing to strategic third-party semiconductor manufacturers. This is a popular model in the industry. It provides higher gross margins. That’s because AMD no longer has to worry about the capital expenditures required to build and maintain massive semiconductor factories (or “fabs”).

I’ll be the first to say that AMD’s transformation has been rocky. It was difficult and took much longer than the original forecast. There were cer-tainly some dark days, as well, but those days are now behind the company for reasons I’ll explain.

Between 2010 and 2018, AMD burned through more than $2 billion in cash in order to transition as a company. This spending was necessary for the company to become competitive again.

The investments it made from 2015 to 2017 resulted in seven major product launches in 2017 and 2018. And you can see in the chart on the next page how the company’s revenues bottomed


out in 2015 just around $4 billion.

In the first quarter of 2021, AMD has already pulled in revenues of $2.1 billion. That’s up from $1.4 billion in Q1 2020. And the current forecasts for 2021 suggest a 50% increase in revenues over the $9.7 billion AMD brought in last year. Better yet, analysts project 2021 will bring free cash flows of more than $1.1 billion.

And as it turns out, one of the drivers behind AMD’s turnaround is the growth in its cryptocurren-cy-related business. While the company doesn’t directly break out its figures on earnings calls, it does specifical-ly mention its blockchain-related business.

And here’s why: AMD’s Radeon line of GPUs delivers the best performance for cryptocurrency mining.

Some reports have put the difference in performance as high as 36% for AMD’s GPU products. Now, if the difference were 3%, I wouldn’t think much of it. But at 36%, AMD’s products are a game changer.

Why? Because cryptocurrency mining is a competitive business. It is all about speed. The faster your mining “rigs” work, the better the chances are that you can solve the mathematical problems before anyone else… and get paid.

And get this. While AMD attributed 10% of its revenue as being blockchain-related in the first quarter of 2018, this figure is likely higher now.

In AMD’s 2020 annual report, the company stated, “Another area of the market for graphics compute is blockchain technology.” It also has multiple blockchain compute solutions on its webpage for several applications.

And in March 2021, the company announced a “set of fixes” to a driver for GPUs originally manufactured exclusively for Apple. Importantly, this fix now makes the GPU drivers perfect for cryptocurrency miners.

GPUs designed specifically for mining cryptocurrency give miners an edge.

And miners will gobble up these new GPUs as quickly as they are released. In fact, GPUs for mining both bitcoin and ether experienced price growth of roughly 10% each week over the first few months of 2021.

It’s a shrewd move for AMD to ensure it gets a chunk of the cryptocurrency mining market share.

So this is our opportunity to get in on this explosive trend before Wall Street realizes this new potential…

Action to Take: For our current buy-up-to price for Advanced Micro Devices (AMD), please see our online model portfolio.

If AMD is trading above the buy-up-to price, please be patient and wait for the stock to fall back before buying.

https://members.brownstoneresearch.com/near-future-report/portfolio/


Risk Management: Because we will be holding this stock without a stop loss, I encourage all readers to use rational position sizing. We should remember to never go “all in” on any one investment. Our mission is to build a portfolio of our companies. That’s how we’ll optimize our success.

Our Second Opportunity

AMD isn’t the only way you can profit from blockchain technology. Semiconductors are the way to play this massive trend, and I’ve uncov-ered another recommendation I’d like to share.

Established in 1978, Micron Technology (MU) is one of the longest-running semiconduc-tor firms outside of Silicon Valley. In that time, it has become a global leader in computer memory.

And over the past decade, Micron has gone through a major transformation. In 2010, Mi-cron acquired Numonyx, which specialized in nonvolatile memory technology. Nonvolatile memory simply means data can be stored and recalled even if power is turned off. Solid-state drives are a type of nonvolatile memory storage. This acquisition gave Micron its lead in NAND chips used in solid state drives (SSDs).

And in 2016, it acquired Inotera Memories, a manufacturer of dynamic random-access memo-ry (DRAM) chips. DRAM is a type of RAM (ran-dom-access memory) technology.

These acquisitions have made Micron the go-to company for all memory needs. In fact, it’s the only company that offers DRAM, NAND, and 3D XPoint technology.

Micron has carved out an important position as a global supplier of memory. We can see Micron’s products at work in our smartphones, comput-ers, and even the computer systems in our cars.

And these products have allowed Micron to ben-efit as the entire semiconductor space grows. Having SSD, NAND, and 3D XPoint products gives Micron a strong foothold in the quickly growing NAND industry. Micron estimates that the DRAM market will grow 15% a year for at least the next couple of years… And the NAND market will grow 30% a year.

As Micron benefits from the growth in these in-dustries, it’s also realizing a huge opportunity in the blockchain space.

The company has recognized the need for more memory to power applications on the blockchain. And its huge strides in NAND and DRAM appli-cations make it the perfect fit for growing block-chain’s memory capacity.

After all, the more transactions executed on the blockchain, the more memory is needed. Crypto-currency “miners” authenticate new transactions daily and must work to authenticate and secure the chain. These tasks require huge reserves of memory and computing power.

And Micron’s products are the key to making sure blockchain technology will grow over the next decade. Its strong foothold in the memory market will allow decentralized financial and communica-tions systems to flourish all over the world.

The World Leader in Memory

Micron’s decade of smart investments has placed it in the best position to capitalize on the explo-sion in blockchain technology.

And Micron’s massive R&D spending over the past couple of years has already propelled it to a leadership position in all its memory verticals. Last year, Micron spent over 12% of revenue on R&D. That’s a huge amount for a nearly $90 bil-lion company like Micron.

It now has the first releases of the newest mem-ory chips. And its chips are generally faster,


denser, and more power-efficient than those pro-duced by the competition.

With the rise in smart contracts, cross-border transactions, and Internet of Things (IoT) appli-cations across the blockchain, Micron’s semicon-ductors will play a dominant role in powering the next generation of the decentralized internet.

Simply put, these chips are fueling the massive surge in memory needed for blockchain applica-tions. And Micron’s large array of offerings will ensure that it remains a go-to supplier for the data centers, mining platforms, and other inte-gral applications running on the blockchain.

And with revenues already over $20 billion for the year, Micron is driving huge growth in block-chain technology in 2021 – and beyond.

This is too good of an investment opportunity to pass up.

Action to Take: For our current buy-up-to price for Micron Technology (MU), please see our online model portfolio.

If MU is trading above the buy-up-to price, please be patient and wait for the stock to fall back before buying.


The Perfect Pair

Companies like NVIDIA and AMD compete in some areas related to GPUs – like gaming and artificial intelligence. But these markets, coupled with the cryptocurrency mining market, are so big and are growing so quickly that there’s room for

both companies to rapidly grow their businesses.

Plus, AMD produces other semiconductors primarily focused on large-scale data center applications. AMD has been aggressively stealing market share from Intel, which has been struggling with a long list of poor management problems.

Having shares in both AMD and Micron puts us in a perfect position to profit from one of the most important technology trends of 2021 and beyond… the blockchain revolution.

But before I conclude this research briefing, I want to give you one more blockchain-related recommendation.

Our Third Opportunity

One company makes the semiconductors for NVIDIA, AMD, and other fabless semiconductor companies. The company that makes the most semiconductors in the world is Taiwan Semiconductor Manufacturing Corporation (TSM).

TSM trades on the New York Stock Exchange (NYSE) as an American depositary receipt (ADR) under the ticker TSM. It trades just like any other stock; the ADR just allows investors with access to the U.S. equity markets to easily buy TSM, which also trades on the Taiwan Stock Exchange (TWSE).

TSM is the largest semiconductor foundry in the world. And it plays a critical role throughout the semiconductor industry.

A foundry is a company that manufactures semiconductors on behalf of other companies – basically a contract manufacturer.

Prior to the 1980s, semiconductor companies were vertically integrated. Basically, everything was done in-house. For example, Intel still designs, manufactures, packages, and distributes its own semiconductors.



It was a typical model in the earlier days of the semiconductor indus-try. Companies hadn’t yet moved to contract services, which would eventually serve all the different stages of semiconductor design, manufacturing, and packaging.

In the late ’80s, the concept of a “fabless” semiconductor company began to gain popularity.

It was a natural direction for the industry due to the increasing costs of building these fabrication plants (“fabs”). Only semiconductor companies with massive scale could afford to build their own fabs – it is a multiyear and multibillion-dollar endeavor.

For perspective, TSM’s Fab 15 plant, which broke ground in July 2010, cost more than 300 billion New Taiwan dollars (NT$) – around US$9.4 bil-lion. And with every generation of manufacturing technology comes even higher costs.

In January 2018, TSMC broke ground on its Fab 18 plant, which began manufacturing advanced semiconductors using a 5 nanometer (nm) manufacturing process last year. The price… NT$500 billion (around US$17 billion).

And TSMC hasn’t stopped there. In late 2019, TSMC announced that it had acquired land where it plans to build a 3 nm plant for an estimated NT$600 billion (US$19.6 billion), with a completion date in 2023. And in May 2020, TSMC announced plans to build another $12 billion semiconductor plant right here in the U.S.

While these costs may seem daunting, even inconceivable, for a profitable business… I assure you, it’s quite the opposite.

In fact, these high costs of entry are TSM’s competitive moat. And for reasons that I’ll soon

show you… no one can keep up with TSM right now.

TSM’s entire business model is built on scale. And TSM controls nearly 50% of the semiconductor fabrication market.

Aside from being the very best at what it does, its scale is what empowers TSM to continue to invest at such extraordinary levels.

TSM is expected to generate more than $44 billion in revenue in 2020. How is that possible for a company that doesn’t design or sell its own products? Simple… TSM manufactures the semiconductors for companies like NVIDIA, AMD, Qualcomm, Broadcom – even Apple – among many others.

All these companies want to focus on what they’re best at… Designing some of the best semiconductors in the world. None of these companies know how to manufacture semiconductors, nor is it in their interest to do so.

What does all of this mean for TSM? I’m confident that we’re in for a few fantastic years for this blue-chip semiconductor manufacturing company.

Its competitive moat is one of the largest I’ve


ever seen. And with gross margins over 50% for a manufacturing business, it will continue to rapidly expand its free cash flow generation. This will enable it to keep investing in the next leading-edge technology.

I recommend building a position well before the rest of the market catches on. TSM will not remain at these levels for much longer.

Action to Take: For our current buy-up-to price for Taiwan Semiconductor Manufacturing (TSM), please see our online model portfolio.

If TSM is trading above the buy-up-to price, please be patient and wait for the stock to fall back before buying.




Notes From the Field: Advocating for Blockchain in Washington, D.C.By Jeff Brown, Editor, The Near Future Report

In July 2019, I was in Washington, D.C., for Congressional Blockchain Education Day. This was an initiative supported by the Congressional Blockchain Caucus and driven by the Chamber of Digital Commerce, of which I’m a member.

The purpose of my trip was to meet with individual offices of the House and Senate. I wanted to talk about the merits of blockchain technology and the policy initiatives of the Chamber of Digital Commerce. I hopefully removed some of the common areas of fear, uncertainty, and doubt on Capitol Hill.

Ultimately, we want a light regulatory touch for the industry and clarity on regulations concerning digital assets, token offerings, and taxation.

Overregulation won’t stop innovation with blockchain technology… It will just push it offshore. We would like to encourage innovation and leadership here in the U.S.

I think we made some progress … But we still have a way to go. It’s still early days for blockchain. Advocacy efforts like this are hard work. They require playing the long game and take years of effort.

The industry – and consumers – are lucky to have a group like the Chamber of Digital Commerce. The Chamber works in D.C. day in and day out, advocating for a fair and reasonable environment that will allow the blockchain industry to flourish.

And those efforts will impact all consumers…

After all, cryptocurrencies are money, and eventually, we’ll all be transacting with digital assets.

In this special addendum, I’d like to share my experience in the nation’s capital with you. I’ll reveal what I saw, what I told lawmakers, and where I think progress was made.

And like the numerous conferences I attend, this event in D.C. was invite-only. You won’t find these details in Bloomberg or in The Wall Street Journal. I share them exclusively with my readers…

My Morning Session in the Capitol Hill Auditorium

Our Congressional Blockchain Education Day started in the Congressional Auditorium. The auditorium sits beneath Capitol Hill. It is a highly secured meeting space often used for national security briefings.

Jeff (center of photo) listens to a presentation from Representative Schweikert (R-AZ)


We heard from three of the four cochairs of the Congressional Blockchain Caucus. These are strong advocates for blockchain technology. And they focused on how it can be used to solve real-world problems… and drive efficiencies through outdated legacy processes.

Representative Bill Foster (D-IL) demonstrated the most in-depth understanding of blockchain. Foster is a physicist and therefore an outlier as a congressman. He claims to be the most technical person on Capitol Hill. He’s certainly an asset to our cause.

We also heard from Representatives David Schweikert (R-AZ) and Darren Soto (D-FL). Schweikert started his career in tech. And Soto happens to be one of the youngest members of Congress. He’s certainly from the digital-first generation. Both gentlemen have been great for our advocacy.

These three cochairs briefed us before our meetings with the offices of the House and Senate. They told us that they’ve seen a rising level of awareness of cryptocurrency and blockchain technology.

But at the same time, there is still a large gap in understanding. Some elected officials are coming around… But others just don’t get it.

With that, we adjourned, and I made my way to the tunnels that connect Capitol Hill to the Senate and House buildings. It was quite a unique experience.

The tunnels are like a miniature subway system underground. There are cars shuttling policy makers about. And you see well-known politicians walking through the tunnels left and right.

And, of course, they are highly secure. You need a special ID to travel freely. And you must walk through security scanners, just like you do at the airport.

After navigating the tunnels, I emerged inside the House and Senate buildings, where my individual meetings were scheduled.

Meeting With the Offices of the House and Senate

My first meeting was with the office of a senator on the Financial Services Committee. Concerned with monetary policy, that office was quite aware of cryptocurrency and blockchain technology.

The office was also interested in the Facebook hearings that had recently occurred… especially as they pertained to Facebook’s digital currency plans.

As I’ve been showing you in this special research briefing, Libra was viewed as a potential threat. After all, at the time it was positioned as a global reserve currency controlled by a “cabal” (my word) of corporations friendly with Facebook. It’s easy to understand why Washington was tracking Libra and Facebook with such interest.

In that meeting, my task was to separate Libra from the blockchain industry. And my emphasis was on blockchain applications unrelated to mon-ey. I talked about how digital wallets could deliv-er financial services… And I homed in on identity.

I explained that digital wallets could be used to verify identity… and how we can eliminate identity fraud by enabling self-sovereign identity using blockchain technology.

Everybody knows identity theft is a huge problem right now. And frankly, it’s relatively easy to forge ID documents. But blockchain can solve those problems instantly.

The members of the committee that I spoke to had never considered this possibility. I’m optimistic that it better informed their view on this technology.

My second meeting was with a congressional office that was not terribly interested in blockchain.


The members had only a basic understanding. It just wasn’t considered a priority, so awareness levels were very low.

That’s understandable. After all, the U.S. dollar works pretty well, and it is easy to imagine that there are bigger, short-term issues to prioritize for most members of Congress.

My goal was to educate them that blockchain is about much more than just cryptocurrency. By demonstrating some of the applications of blockchain, my hope was to show how the technology could be useful to their constituents.

To that office, I talked about smart contracts. I explained that smart contracts are digital contracts that automatically execute whenever certain conditions are met. Then I gave them an easy example.

Buying a home today is a tedious process. It takes months to close and costs thousands of dollars in fees. That’s because you have several third parties involved to deal with things like escrow, title insurance, and the title transfer.

Well, smart contracts can automate those processes and get rid of the third parties. That would speed up the process and drive down those fees.

With a smart contract, the buyer’s funds would be held in escrow. Once the title search was complete and the two parties signed the final paperwork, the smart contract would initiate the transfer of those funds to the seller’s bank account. This would be seamless. Then, the smart contract would automatically transfer the title from the seller to the buyer.

One day, smart contracts will enable us to buy a home in 24 hours… and pay at least 80% less in transaction fees.

Specifically, I wanted to demonstrate why a state-by-state regulatory framework for smart

contracts would be counterproductive and unnecessary.

The Electronic Signatures in Global and National Commerce Act (ESIGN) of 2000 already provides a comprehensive nationwide regulatory structure for smart contracts. By recognizing smart contracts under the ESIGN legislation, Americans would experience a smart contract renaissance practically overnight.

One of the Chamber of Digital Commerce’s important initiatives has been to push back against new state-led legislation for smart contracts.

In fact, subscribers of The Near Future Report and Exponential Tech Investor already made very meaningful contributions to this initiative by signing an electronic petition led by the Chamber. Thank you again to those who participated and supported this effort.

In my third meeting, the congressperson’s office was not interested in blockchain at all. The opioid crisis was its top priority. It didn’t think blockchain was very relevant.

I talked to that office about how blockchain can aid supply chain management in the pharmaceutical industry. With blockchain, we can track opioids from manufacturing… to containerization… to the distribution center… to the pharmacy… and ultimately to the patient with a doctor’s prescription.

This kind of tracking from the point of manufacture to a patient can ensure that the supply chain is secure. It also allows any permissioned parties to have access to one single source of truth.

And this happens through blockchain technology. Pharmaceutical companies can then demonstrate compliance with a regulated substance like opioid-based painkillers.


That’s only possible with blockchain. I pointed that out, and I believe it sparked some interest.

After my meetings were complete, I made my way back to the tunnels… and the auditorium.

The Evening Reception

A nice reception in the Congressional Auditorium ended the day. That gave us a chance to talk about our progress… as well as our next big initiative.

Jeff during the reception in the Congressional Auditorium

And the fourth cochair of the Congressional Blockchain Caucus, Tom Emmer (R-MN), met us at the reception.

Emmer is a real champion for using blockchain to disrupt incumbent bureaucracies and modernize the way we do things. I had the

pleasure of spending some time with the congressman in D.C. in 2018.

He talked about how we should register our IDs on the blockchain and attach everything to them. Our driver’s license… passport… voter registration… hunting and fishing licenses… They all could be attached to a digital ID on the blockchain. It’s silly we are still issuing pieces of paper for these things.

What’s more, we can link registration for various government services to the digital ID. Think of social security… Medicare… Medicaid… whatever the program happened to be.

In this way, we could eliminate all the fraud and corruption that encircles government services today.

So Emmer is a practical policy maker who sees the real value of blockchain. His work on the caucus has been invaluable.

Those of us at the Chamber will continue this important work. As I’ve shown you in this special research briefing, blockchain technology is the future. And as a new reader of The Near Future Report, you are in the perfect position to profit from this trend. Welcome once more.

Regards,

Jeff Brown Editor, The Near Future Report


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