Sometimes the worst plans can make you richer. In this special Investment Guide we highlight strategies that may seem foolish at first, until you dig into them. Buy gold? Trade options? Take a reverse mortgage? All can provide big returns in the right circumstances. To help lead the way is the man behind pretty much every bad idea on HBO’s cult sitcom Silicon Valley – actor and comedian T.J. Miller, whose Erlich Bachman somehow always pulls through.
Written by Janet Novack, FORBES STAFF
Sleazy Image, Smart Play / Reverse mortgages have a low-rent reputation. But they could play a bigger role in affluent Boomers’ retirement plans. If that happens, a 39-year-old neat freak will be a big winner. / By Lauren Gensler
Gold Is for Cranks? Not So Fast / Bad inflation may never return. But if it does, you’ll wish you owned some metal and hogs. / By William Baldwin
Related: Tax Devils
Milking Your Stocks / Trading options is a gambler’s bet, but for a math-minded investor, they can also provide a steady and relatively safe source of income. / By John Dobosz
Divide Your Home / Forfeit part of your “best” long-term investment? It might make sense. / By Samantha Sharf
Shrink Your Salary / Newt Gingrich, John Edwards and (it appears) Donald Trump did it. Maybe you should too. / By Kelly Phillips Erb
Related: Keep The IRS At Bay
When Paper Beats Cash / Sacrificing salary for hard-to-value-options is crazy—unless you can do the math. / By William Baldwin
Rowing Upstream for Alpha / As billions pour out of active management, stockpicking standout T. Rowe Price is hunkering down and quietly setting up a quant shop, just in case. / By Matt Schifrin
Faceless Returns / Jack Bogle and a chorus of indexing champions say active investing is futile. BlackRock thinks Andrew Ang and his computer-driven ETFs are the strategy’s last great hope. / By Nathan Vardi
Web Extra: The Irresistible Math Behind Private Equity Stocks / By Antoine Gara
Nasdaq Is Now Working With 7 Cryptocurrency Exchanges
Cryptocurrency exchanges who want to use Nasdaq’s proprietary surveillance technology need to have more than money.
A team of about 20 people contribute to helping in an elaborate due-diligence process aimed at ensuring that any exchange who wants to use the technology that scans for fraudulent transaction patterns is both technically capable, and morally inclined to use the powerful software wisely.
For exchanges who pass the test (and can foot the bill) they’ll be granted access to the same surveillance technology Nasdaq itself uses to ensure its clients that trading volume is as free from fraud and manipulation as possible.
So far, seven cryptocurrency exchanges have passed Nasdaq’s muster, according to a Nasdaq representative speaking with Forbes, though only two, Gemini and SBI Virtual Currency, have been publicized. As more cryptocurrency exchanges seek to lure new customers, the assurance of Nasdaq’s technology is already being used to attract institutions and traders used to more mainstream venues.
During a briefing with members of media today, Nasdaq’s head of exchange and regulator surveillance team, Tony Sio, who works within the market surveillance division, shared the questions every cryptocurrency exchange must answer as part of a larger presentation on the state of the industry around the world.
“Historically, we don’t do such a large vetting process for our clients because they are much more well-known,” said Sio. “But as we started working with less well-known names, startups, then we realized we needed to do this check process.”
During the briefing at Nasdaq’s offices earlier today, Sio presented a detailed overview of how the company on-boards its crypto exchange clients, broken down in to three categories: Business Model, KYC/AML, and Exchange Governance & Controls.
While the press briefing was for educational purposes, in an interview following, Sio provided Forbes with further context, explaining how his team of legal and technical experts use the criteria to evaluate possible customers for risk. Not everyone makes the cut, he says.
The first section of a document, titled “Key Questions to Ask When Evaluating a Cryptocurrency Exchange,” was called “Business Model.” Of the questions in that section, one jumped out: “How reputable are the products available to trade on the venue?”
What’s interesting about this is that it shows Nasdaq is concerned about who is using crypto assets, and how they are being used. As questions about the importance of how a crypto asset was used in the past (Was it used to buy drugs? Does that matter?) continue to be sorted out, this point will likely only continue to raise in value.
The second section of the document is called “KYC/AML,” which stands for know-your-customer/anti-money laundering. Like the questions about business models, the most interesting question in this section relates to reputation. “What is the organizational structure and what are the founders’ backgrounds (i.e. tech expertise, financial markets expertise, etc.).”
What stands out about this question is the importance that past experience plays. From the early days of cryptocurrency, and now into other crypto-assets, the industry’s biggest value proposition was that it would democratize finance and a wide range of industries by letting retail consumers build and manage their own financial products.
Instead of innovation coming from the top down, crypto would be grassroots. While Nasdaq has shown a willingness to work with some unusual clients in the cryptospace, the ones we know about support what these questions reveal about Nasdaq’s interest in working with proven entities, something other regulated exchanges and technology providers will likely follow.
In the third and final section of the “key questions” document, “Are crypto asset listing standards in place?” is the most insightful. While some of the largest cryptocurrency exchanges, like Circle (which owns the Poloniex exchange) and Coinbase, publicly post their new asset listing process, others are much more opaque, leaving open the door to pay-to-play allegations and other potentially fraudulent activity.
Most recently, in June 2018 SBI Virtual Currencies run by Japanese financial giant SBI Holdings, announced it was using Nasdaq’s matching system. Before that, in April 2018, the heavily licensed Gemini cryptocurrency exchange run by Tyler and Cameron Winklevoss, announced it was using Nasdaq’s SMARTS surveillance system. “Our deployment of Nasdaq’s SMARTS Market Surveillance will help ensure that Gemini is a rules-based marketplace for all market participants,” said Gemini CEO Tyler Winklevoss in a statement at the time.
Beyond providing technical support to these exchanges, Nasdaq’s interest in blockchain has been largely limited to investing in other non-cryptocurrency applications of the technology. In September 2015 Nasdaq joined a $30 million investment round in Chain, a blockchain startup that eventually partnered with Nasdaq to launch Linq, a platform for issuing private equities. Then, last week Nasdaq led a $20 million investment in Symbiont, another blockchain company building services that eliminate middlemen in traditional financial workflows.
While competitors like the New York Stock Exchange have partnered with Microsoft and Starbucks to launch its own cryptocurrency exchange, Bakkt, later this year, Nasdaq’s cryptocurrency exchange guidelines are likely to be limited to providing technical support for now.
“The objective that we’re trying to work with crypto, is we see this as a growing asset class,” says Sio. “So we’re working to help provide our technology, it could be around matching, it could be around surveillance, to help our customers as they grow their marketplaces.”
–Michael del Castillo Forbes Staff
Climate Investment Funds to Issue $500 Million Green Bond This Year or Next
The Climate Investment Funds (CIF) plans to raise $500 million this year or next by issuing a green bond to finance renewable energy projects, the organization’s head said on Sunday.
The $8 billion fund gets most of its money from development banks and donor countries and finances more than 300 environmentally-friendly energy projects in some 72 countries.
“U.S, European and Japanese investors are interested in green bond offerings,” Mafalda Duarte said in a phone interview, without giving further details on where the CIF plans to issue the green bond.
Green bonds are fixed income securities that raise capital for projects with environmental benefits.
The CIF will use the proceeds to fund projects that could range from promoting the transition to renewable energy and improving resilience to climate change to stabilizing power grids amid the growing use of intermittent sources of power.
The CIF also sees opportunities in electrified transport, Mafalda said.
She also stressed the need to cut the cost of concentrated solar power technology, which uses mirrors or lenses to concentrate a large area of sunlight, and to promote the integration of regional energy markets.
Such issues will be examined at a conference on Jan. 28-29 marking the CIF’s tenth anniversary.
The conference will be held in the south-eastern Moroccan city of Ouarzazate, where the CIF contributed $535 million to building a 580 megawatt (MW) solar power plant, the world’s largest. -Reuters
Ugandan Firm Uses Blockchain To Trace Coffee From Farms To Stores
An Ugandan company has started using blockchain, the technology behind virtual currency Bitcoin, to certify shipments of coffee to try to meet growing demand from consumers for more information about where products have come from.
Carico Café Connoisseur said the move could help to boost farmers’ incomes, as consumers are usually prepared to pay more for goods that can been traced back to their origins.
Blockchain works by providing a shared record of data held by a network of individual computers rather than a single party. Its supporters say this makes it hard to tamper with, and so a secure way to track goods along the supply chain
Carico Café Connoisseur CEO Mwambu Wanendeya told Reuters a blockchain-certified shipment of one of its coffee products, Bugisu Blue, arrived in South Africa last month. He declined to give the size of the shipment, but said it was several tonnes.
Uganda is Africa’s largest coffee exporter followed by Ethiopia, according to the International Coffee Organisation, and has some of the world’s highest quality beans. It predominantly cultivates the robusta variety, but also has extensive fields of arabica trees.
Limited domestic processing capacity means the country exports nearly all of its beans in raw form.
The blockchain certification means consumers can trace the coffee’s journey by using their smartphones to scan the product’s QR codes or via the certification site provenance.org.
Every step of the beans’ journey – from when farmers drop them off at collection centers to warehousing, inspection by regulators and shipping – is recorded.
“The idea is to give the consumer an appreciation of what happens on the journey and also to ensure that there’s more linkages with the farmer,” Wanendeya said.
“Traceability is important because people are increasingly concerned that … farmers get rewarded for their work.”
The process will provide consumers with information such as the type of coffee bean, the year it was harvested, and where it was grown.
Founded in 2016, Carico Café is working with two farmer cooperatives with hundreds of members. Wanendeya predicted the innovation could boost farmers’ incomes by 10 percent.
“Consumers are willing to pay more if they can know where exactly the coffee is coming from,” he said.
Just a phone scan away – website reveals ethically sourced food
Uganda is keen to increase coffee exports from the current level of around 4 million 60-kilogramme bags per year.
However, a seedlings distribution program it hoped would boost production has yielded modest results, in part because of a decline in interest in coffee among farmers due to often low and unstable prices. -Reuters
– Elias Biryabarema
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