There's a famous story about how Joe Kennedy (John F.’s father, who was ruthless and manipulative as he was wealthy) avoided the 1929 stock market crash. He said that when his shoeshine boy gave him some stock tips, he knew it was time to get out. I believe Joe had a bit more inside knowledge that instigated his timely exit before the greatest meltdown in stock market history. So, a question before us is, should we pay attention to what ‘certain’ investors or institutions do with their money? I will argue yes, but let’s come back to this in a bit.
Pop quiz. When you hear about financial markets, of all the choices that come to mind, which one is the largest? The stock market? The bond market? Good guesses. The answer is the currency market. It's not only the biggest, but it dwarfs the second-place holder (bonds) by a factor of three.
Now to make the currency market even larger and more dynamic (code word for risky) we have the exploding cryptocurrency craze. I first recommended Bitcoin as a hedging investment in my January 2015 Position Paper. At that time, it was priced at $288 and I suggested buying while under $350. When I gave a cryptocurrency update 10 weeks ago, it had just backed off to $2,709 after going over $3,000 for the first time ever. I then suggested you invest a small amount of money in Bitcoin and two others (Ethereum and Tezos), before it resumed its upward trend.
This past week Bitcoin nearly crossed $5,000 and as of this blog has settled around $4,260. If you had followed my original recommendation, a little over 2 ½ years ago, you would be sitting on a 1,373% return. With that kind of stunning growth, it’s bound to get people’s attention. And attention it’s certainly getting.
Last week I saw an article espousing how in Las Vegas you can tip your stripper with Bitcoin: Vegas strippers are now accepting Bitcoin
Did you hear that sound?
It was the lifeguard whistle, alarming that it’s time to get out of the pool. I’m not being overly dramatic, as I will prove to you with both current events, as well as a repeat of a well-worn playbook. I’ve always said that as a society, we are moving toward a cashless system, ultimately controlled by the central banks in general and the International Monetary Fund specifically. To get there, a platform will be necessary and the cryptocurrency/blockchain concept is the best candidate. I’ve also always said that I didn’t know if Bitcoin would be ‘the’ choice, but that while the smartest people in the room were figuring out which platform to choose, Bitcoin would benefit due to its best in class status.
Do I think $5,000 is the top for Bitcoin? Nope, I actually think it’s much, much higher. But, here’s the thing: there is now a new Initial Coin Offering every single DAY. That’s right, new coins are being launched faster than I can track them. Most are basically worthless. However, I can name six ICO’s in the past 2 months that trade at dizzying heights. One for instance, had a target raise of $10,000,000 and within a couple weeks its value had jumped to over $200,000,000. That’s craziness.
Remember the late 1990’s and the .com bubble? It didn’t matter if your company had any revenue, much less show a profit, because if you had ‘.com’ after your name, investors wanted to buy your stock. And we all know how that turned out. For every Amazon, Google and Facebook that went onto success, there were thousands of failures that lost billions in investor value. The same will happen in the Bitcoin arena.
There’s an interesting corollary to Amazon and Google that I believe is important. These two companies are excellent examples of creating (inventing) an algorithm that has true industry and society changing capabilities. The parallel dynamic is the often ignored brother to cryptocurrency: the blockchain. This is the real engine, but because it’s not sexy, it gets little attention. Here’s a cool article about how the food industry is trying to utilize its efficiencies: Could blockchain initiate a food industry revolution?
Bitcoin has been the dominant topic of comments on my blogs, as well as the subject that investors or friends will bring up in conversation. Those that followed my advice, are giddy. Those that didn’t, give me a hard time that I should have been more convincing. Regardless, moving forward I’m dialing down on my cryptocurrency scrutinizing. It isn’t a repeat of the .com bubble (at least most companies were trying to be something), it’s a repeat of the Tulip Mania.
In 1637 certain tulip bulbs were trading 10 times higher than the average wage of a Dutch worker. That’s right a tulip bulb. The instrument may change, but human nature doesn’t…
For several years I could make sense of the cryptocurrency/blockchain trend. Now, not only is it too challenging to evaluate, but there are other forces at work that we need to turn our attention to.
Regarding our current Federal Reserve, is it our 1st, 2nd, 3rd or 4th institution to 'handle' our monetary balance sheet? If you guessed 4th, you win a cookie.
A follow up question: is a Federal Reserve System sanctioned by our Constitution and Founding Fathers? If you answered yes, I’m taking your cookie back.
Notice that I didn’t call it a National Bank. We tried that with our first several versions and when it was discovered to be a cabal of ruin, the name Reserve was implemented. If this is news to you, I encourage you to watch several videos I produced on this subject...
The common thread between Bitcoin and the Federal Reserve is currency, which is how we started this blog. The reason I’m writing about this now is this particular dynamic:
The U.S. Dollar just had one of its worst weeks and is now down 9.1% for the year (Dollar Deepens Dive as Caution on Currency Grows) I’ve been watching this in the context of what some of the major investors and institutions have been doing with their money the past 6-months and we’re now to the point that we can’t ignore it; especially in light of the natural disasters that are pounding our nation. Now is not the time to have our currency erode like the beaches of Florida.
This chart shows that Lord Rothschild has cut his U.S. Dollar exposure nearly in half. Why do you suppose? He’s also re-allocated significant US stock positions over to foreign energy stocks: This Is Not A Time To Add Risk
Just so you know, all of this information is open to the public. You simply search for the 13F on the SEC website and you can look up holdings of any entity you want. Rockefeller has done basically the same thing as Rothschild, which should make our radar beep a bit.
I don’t believe its conspiratorially minded to follow money and economic chess players like Rothschild, Rockefeller and George Soros, who have made a bulk of their fortunes by being opposite of trends. I produced an interesting video about this exact issue, in case your eyebrow is a bit raised: The Brinkman Academy
The U.S. economy is showing decent signs of strength, but most of the rest of the world is stagnant. Central Banks continue to struggle in creating inflation. Janet Yellen expressed the same frustration in her last committee briefing. Monetary control is becoming more challenging as interest rates around the globe hover at or below zero. So, another lever is necessary and in my opinion it’s taking cash out of our system and replacing it with a blockchain.
So, if you’re interpreting my tone about Bitcoin et al, how do you participate in this trend? Answer = precious metals: gold and silver. You can own them in an ETF, mining stocks or buy the coins themselves. Eventually, regardless of which blockchain is chosen, there will need to be a pricing orientation and the only logical calibration is gold.
If you’re sensing another tone in this blog, you’re right. It’s not the market or economic signals that have me worried, it’s all the periphery that I’ve covered. I’m not the only one. The tactical manager platform that we utilize in managing our client’s assets shows the same sensitivity. Some of our managers are already risk-off, meaning they’ve gone to cash.
We live in interesting times. God has blessed our country immensely. I pray that we can be humble before Him and help our fellow countrymen who are struggling through the recent disasters.
P.S. If you recall from the last blog I provided my YouTube source for all things weather related. BPEarthWatch called Harvey as a Cat 4 nine days before the National Weather Service. He also alerted regarding the Coronal Mass Ejection (CME) from the Sun that caused the 8.2 earthquake in Mexico. Well, another CME just occurred and it was earth facing, meaning it is heading our way. Here's his video on YouTube: BPEarthWatch. If you subscribe to him, you'll get alerts when he releases updates.