RANCHO SANTANA, NICARAGUA – Over the weekend, bitcoin rose to more than $7,500 – a 200% gain from when we bought in June.
“Is that all?” replies a colleague. “I got into a bitcoin miner at 2 cents a share. It’s now trading at $7.
“I’ll do the math for you. If you had put in $1,000, you’d have $350,000 today.”
What to make of it?
“Nothing like this has ever happened before,” says another colleague.
Bitcoin offers neither products nor services. It makes neither profits nor losses. It is neither animal, vegetable, nor mineral… quick nor dead… ridiculous nor sublime… Laurel nor Hardy.
Is bitcoin better money? A bubble?
Perhaps it is both.
We repeat our caution to readers. Bitcoin is not an investment; there’s no way to analyze or estimate the likely return. It’s not a speculation or even a gamble; there’s no way to compute the odds.
But it’s hard to resist an asset that doubles every 90 days.
Our advice: Treat it like entertainment. Put in a little money. If you get rich, lucky you. If you lose your money, don’t worry about it; enjoy the show.
Do not count on bitcoin for your retirement.
Bitcoin is based on new technology. And new technology is our subject recently.
Most people believe that progress and time are the same thing. If it is newer, it must be better!
Think of all the progress we’ve made since we lived in caves and ate raw bats.
It’s easy to believe that time will inevitably bring more progress. Sometime in the future, we will discover cures for cancer and foot rot. Women will be treated like men. Energy will be free and clean. No one will have to work (thanks to obliging robots).
And everyone will get a check from the government.
Cars will finally fly, too. Or maybe pigs?
But new technology doesn’t always make us richer or better off. (What did the nuclear bomb do for us?)
And some new technologies seem to destroy GDP rather than add to it.
Innocent and Charming
Today, we introduce a more shocking and thoroughly disagreeable idea: Maybe the future won’t be all it’s cracked up to be. Maybe the past was actually better.
Imagine that you lived in a comfortable, nice house from the 1950s… in a cute little town like Mayberry, North Carolina.
You had a small TV set in the living room, where you watched Amos ‘n’ Andy and I Love Lucy… a 1956 Chevy in the garage… and – instead of the iPhone X – you had an old-fashioned telephone on a party line.
“Mabel…” you’d say to the operator… “would you put me through to Eleanor?”
“Oh, I’d like to, Doris. But she’s at the beauty parlor.”
Sounds delightfully innocent and charming, doesn’t it?
Of course, you would have none of the tech breakthroughs and refinements of the last 50 years: No opioids paid for by the government. No cruise control. No GPS. No remote control. No cellphone. No laptop. No microwave oven.
Would that be so bad?
It is estimated, for example, that the average person now spends 8.4 hours a day on some form of electronic communications device.
Surely, that marks “progress.”
Or does it?
Experts warn that people now spend so much time on their iPads, iPhones, and other gadgets that they aren’t getting enough sleep.
One doctor, quoted in the Daily Mail newspaper, guessed that two-thirds of the British population suffer from sleep deprivation.
People are spending more than half their waking hours in communion with an electronic device. What did they do with those hours in the 1950s?
Talk? Read? Think?
We know what has been gained: hours of distraction and idle amusement on Facebook, Instagram, WhatsApp, and email.
But what has been lost?
We don’t really know.
A pleasant greeting on the street… a fresh tomato on your plate… a free parking place… a wink from the bookie… a cold beer with the undertaker… a kind word at a funeral… a good book by an open fire… a pile of leaves in the front yard…
…a moonlit night… a conversation on the front porch…
Isn’t it possible that by barging blindly into the future, like a toddler changing his own diaper, we make a mess of things?
More to come…
Further Reading: Learn how you can take part in the bitcoin show that Bill mentioned above. Our go-to cryptocurrency expert Teeka Tiwari just released a free cryptocurrency webinar. Teeka spent years traveling the globe, speaking with high-level crypto insiders. Here’s what he uncovered.
MARKET INSIGHT: DISCOUNT RETAIL CLIMBS
By Chris Lowe, Editor at Large, Bonner & Partners
America’s middle class is shrinking… And it’s showing up in their shopping habits.
Today’s chart looks at the performance of stock in discount retailer Dollar Tree, which sells items for $1 or less.
And it compares it with the performance of stocks in middle-class retailers JCPenney, Macy’s, and Target.
As you can see, over the past 12 months, shares in Dollar Tree are up 27%.
That compares to losses of 71%, 52%, and 13% for JCPenney, Macy’s, and Target, respectively.
– Chris Lowe
Can Bitcoin Be Tamed?
As Bill mentioned above, nobody knows precisely what will happen to bitcoin. But the world’s largest derivatives exchange sees a legitimate future for bitcoin as an asset, not a currency.
Japan Back on Top
Most people remember the Japanese stock market crash of the early ’90s. In 1990, the Nikkei stock index plummeted to half its peak. But things may be turning around for Japanese stocks. The Nikkei just posted a 25-year high.
How to Solve the Pension Crisis
States like Illinois are in the midst of a full-blown pension crisis. Crisis Investing editor Nick Giambruno details the one unconventional step governments will take to avoid disaster… and shows how you can profit.
In the mailbag, more discussion on the problems with 21st-century companies…
The news is far worse for Amazon than you realize. Its storage “rental” service renting out space on the hard drives and solid-state drives in its servers is a huge money-maker. And that money subsidizes the retail losses, down to the overall loss you’re talking about. Things are much worse than many people realize. And yet the stock price keeps going up.
– Jeff J.
I have to tell you, Amazon and Tesla are way ahead of their competition! To stay ahead of the competition, they have to pour everything back into their growing enterprise! This is the new concept! Whether it works remains to be seen! But right now, they are leading everyone in their respective fields! You cannot argue that!
Giving money back to shareholders is not the way to stay ahead in today’s world! Right now, I would rather own Amazon or Tesla than General Motors or General Electric.
– William C.
The vendors on Amazon are making money. They are eager to keep the customer pleased. Their profit is unrecorded because there are so many small entrepreneurs. Amazon makes it easy to be a vendor and it also polices the vendors to serve the customer. Amazon’s customer service is beyond the call of duty.
Some of those vendors don’t admit they are in backwater countries, and you get bad or counterfeit products from them, but Amazon gets your money back to you. It’s possible Amazon is waiting until after the competitors are defunct to raise prices like the mafia is known to do.
– Emily S.
Regarding Amazon, I think there are some things that I think a lot of people overlook (although I’m not a stockholder and wouldn’t touch it, even with Trump’s money), and one big one is the 2 million people – individuals and small companies, that sell on Amazon. I read that 40% of Amazon’s sales come through these vendors.
Amazon makes it easy to build a business for practically anyone willing to do some research, using their FBA program and special shipping rates. But they don’t do this for free, they take a good sized cut of every item sold and also charge advertising and other fees. Also they have recently started charging to store the goods in their warehouses. I would imagine this is one of the things that enables them to sell other products at a loss.
All of these new garage businesses have to add to GDP, although to your point, I’m not sure it makes up for what they destroy. But Amazon is much more than an online store, they have a myriad of creative ways to generate revenue for themselves.
– Rick T.
I hope I’m not being too familiar by calling you Bill. After having read so many of your articles and books, it just seemed appropriate.
Your Diary Market Insight on labor participation rates raised some questions in my mind. This chart is another that seems to have an eerie connection to the point in time when the U.S. went off the gold standard. Just a coincidence? Also, what is the effect of so many two-income families on this chart? So since 1975 or so, the participation rate climbed. But before that date, we were much lower in participation rate. What do we use for normal here? Everything is related to the economy and GDP. But how? Just some musings on my part.
– Gordon S.