BALTIMORE – Are you rich yet?

We hope so. Everybody else seems to be.

The U.S. stock market is up more than 20% so far this year.

Our country-specific stock portfolio is up about 30%.

As we explained back in April, it’s a selection of the world’s worst-performing markets.

Here’s how it works: We buy the cheapest stock markets in the world… and wait.

That’s it.

It’s part of our ESP approach to investing… where we try to identify Extremely Simple Patterns.

One of the most reliable patterns is “reversion to the mean.” When things are extraordinary, it’s a good bet they will be more normal in the future.

Otherwise, the word “normal” wouldn’t exist.

Nonsense on Stilts

Normal describes what things usually are… and they wouldn’t be that way if they were abnormal all the time… So it’s a good bet that when a stock market has suffered an extraordinary setback, you should expect it to get back on its feet at some time in the future.

Are you following us?

What’s extraordinary now is that everything is going up.

Even U.S. crude oil is nearly $60 a barrel – more than double what it was two years ago.

And we put some money into the recommendations colleague Chris Mayer has been making at Bonner Private Portfolio starting back in April, 2016. On average, Chris’ picks are already up 21%.

[Editor’s Note: Bill waits 48 hours after Chris’ initial recommendation before investing money from his family trust. This ensures that Bonner Private Portfolio subscribers have the opportunity to take action first.]

Even Grandma Is In

Tellingly, nothing is going up like nothing itself… Bitcoin, that is. It’s up tenfold this year.

Neither animal, vegetable, nor mineral. Neither quick nor dead. Neither saved nor damned. The world’s first cryptocurrency is nearing $12,000 this morning. That’s up from about $2,500 when the family bought it in June.

Let’s see, at this rate, we should make about six times our money by the end of the year.

“You’re not the only one,” said our cautious, sober lawyer. “I put a little money into bitcoin three months ago. I just wanted to see how it worked. And now my investment is up three times. It’s crazy.”

“Even Grandma Is In,” revealed another WSJ headline last week.

Gee, who’s left to get in? we wonder.

Crazy is what it is. But these are wild and crazy times. And of course, this is just the beginning of the craziness.

Internet security guru (and one-time murder suspect) John McAfee says bitcoin will go to $1 million by 2020.

Wow! Then we’ll all be rich.

Nasty, Brutal, Short

In the Diary last week, we wondered if getting rich was such a good idea.

We channeled British art critic, now dead, Clive Bell. Having money was great, he believed… but not if you had to earn it. Making money takes your attention away from more civilized pursuits.

Not so, responded our better half, Elizabeth, yesterday. Unearned money does more harm than good, she suggested… pointing out the window at Greater Downtown Baltimore.

A half-century of fighting poverty in Baltimore – with free money – has not exactly created a paradise of wealth and civilization.

Just the opposite. It is more in line with the life Thomas Hobbes believed prehistoric man lived – “poor, nasty, brutish, and short.”

Judging by the experience of the last few years, if the world improvers really wanted to fight poverty in Baltimore, they’d hand out bitcoin.

It wouldn’t really make the locals any better off… but it would be fun to watch.

But we are not trying to build a better world here at the Diary; we’re just trying to connect the dots.

What could possibly be making so many people so rich? Where is the money coming from? Is it real? Where does it go from here?

We don’t know. We’re in over our heads like everyone else. But it may be a good idea to try to swim to the shore… where at least our feet can touch the ground.

Stimulate, Stimulate, Stimulate

Here’s what we think we know:

Economies, not markets, produce wealth. Wealth must be earned. And you can’t make an economy produce more wealth by giving it fake money. If you could, Zimbabwe and Venezuela would be the richest places on Earth. They’ve got plenty of fake money.

The U.S. economy is growing – at best – at a rate of 2% or 3% a year, after you factor in inflation.

But when you add money and credit – fake or otherwise – to an economy, prices rise. If the money goes to Main Street, consumer prices and wages go up. If it goes to Wall Street, asset prices go up.

Over the last 20 years, central banks worldwide have added about $20 trillion to the world’s money supply, mostly feeding Wall Street and the Deep State by buying government bonds.

Stimulate, stimulate, stimulate… The recent “tax bill” could add another $2 trillion of stimulation. Very extraordinary.

And now, with bitcoin up 1,000% this year, could it be that the world’s markets are overstimulated… sweating profusely and getting the shakes, as if their medication were wearing off?

And watch out. Maybe it is. There’s an ESP at work here, too: Easy come… easy go.

Regards,

Signature

Bill

Further Reading: As Bill said, nobody knows precisely what will happen to bitcoin. But if you’ve ever been interested in the cryptocurrency market, we suggest you start here.

One of the world’s top cryptocurrency experts lays out how you could turn a measly $75 into life-changing gains as high as $3.2 million. You might be skeptical, but see for yourself right here.

MARKET INSIGHT: THE CRYPTO BOOM IS JUST GETTING STARTED

By Jeff Brown, Editor, The Near Future Report

Editor’s Note: Regular readers know that Bill is skeptical of cryptocurrencies. But with bitcoin nearing $12,000 this morning, they remain a popular subject with readers. So today, we asked Bill’s go-to technology expert, Jeff Brown, to show what the future of the crypto market could look like.


bill bonner

We are just at the beginning of a revolution in blockchain-related technologies and cryptocurrencies.

For readers who don’t know, blockchain is the decentralized ledger technology underpinning cryptocurrencies and digital tokens.

This is an intense area of focus for me. But if you want to understand what is really happening, you must be on the inside… and you cannot do that from behind a computer screen.

That’s why I travel as much as I do, meeting with executives, attending conferences, engaging my global network, and participating and contributing when and where I can.

In fact, just last week alone, I attended two major blockchain-related technology conferences in New York and Silicon Valley.

I also attended a much smaller, specific conference supported by Berkeley Law, focused on financing and regulatory issues surrounding initial coin offerings (ICOs). Representatives from the SEC were present in full force.

One of the most striking comments made at the conference in NYC was that the “institutional guys are not really in it; the market just isn’t big enough yet… we really need to get up to the trillion-dollar market size and then the institutional funds will get in.”

Now that may sound surprising. Investors see the price of cryptocurrencies like bitcoin climbing almost daily. You might assume that this is already a huge market.

But have a look at the size of the cryptocurrency market in comparison with other financial markets.

Chart

As I write this, the total market capitalization for all cryptocurrencies is $355 billion. That’s about 5% of the value of all physical gold. It is less than 7% of the daily foreign exchange trading, and less than .5% of the total value of global stocks.

The cryptocurrency market is just getting started.

I expect to see a trillion-dollar market within 18 months. Now, what do you think will happen when the market gets big enough for institutional funds to jump in?

I’ll tell you: It is going to explode.

The industry is moving so fast right now. And with the right time horizon, many more cryptocurrency millionaires will be minted with well-placed investments in these blockchain technologies.

Jeff Brown

P.S. Smart investors stand to make 21 times their money over the next few years with blockchain technology. But 99% of investors are so distracted with bitcoin that they are missing the bigger picture. You don’t have to be one of them.

I’ve uncovered three ways to profit safely from the blockchain explosion without ever downloading a digital wallet or logging onto a cryptocurrency exchange. Click here to see how.

FEATURED READS

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Dow 30,000
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MAILBAG

In the mailbag, readers consider if work or money is more important

My feeling is that Clive Bell does seem to be a quite remarkable species of idiot. Your “better half” has it right. She gave an extraordinarily lucid and concise counterargument. It is unfortunate that Bell’s view is gaining traction as his nonsense seems to have the potential to drop us into a new Dark Age.

– Al R.

Yup. I agree with your better half. We can’t cure or outlaw stupidity.

– Patrick V.

Your wife said… “Where did we get the ideas behind the Declaration of Independence? And the Constitution? It was from these British thinkers – Locke, Hume, Smith – who had the educational foundations and the leisure time to be able to explore ideas and understand them.”

The Declaration of Independence and Constitution come from four or five liberty charters stretching back into British history, forced upon government by an oppressed people. A history of people rebelling against the tyranny that comes from this high life of contemplation at others’ expense, which it must be, since the high thinker doesn’t have time or interest to produce it themselves.

– Mike R.

I’m 79 years old and do not want to give up designing electronics for spacecraft and performing Chopin’s Études. I don’t understand how a person wants to “retire.”

– Phil D.

Meanwhile, Bill’s Diary entry “Why Are the Homes of the Elite So Ugly?” has gotten another reader thinking…

Great article! I am an architect that had to move out of the U.S. 9 years ago to escape a criminally insane government. Unfortunately we moved to Costa Rica, which believes everything U.S. is worth imitating. The good news is that they aren’t very good at actually accomplishing anything. I just wanted you to know that when you are shaking up the sleeping status quo, you are pleasing me. Keep writing.

– James W.

IN CASE YOU MISSED IT…

On January 1, 2018, recreational marijuana will be legal in California. And that will unleash a $50 billion industry.

No matter how you feel about legal weed, this is an investing opportunity that comes around once in a lifetime. Here’s how you can play it.

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