And it’s time, time, time
And it’s time, time, time
It’s time, time, time that you love
And it’s time, time, time…
– Tom Waits
POITOU, FRANCE – “You cut that crooked.”
“No, I didn’t. The wall is crooked.”
“No, you cut it crooked.”
Damien insisted that his boss had made a mistake. Not one to give up on a good point, he pressed it until we picked up the saw and cut the board again.
We spent the weekend putting in a new floor.
After centuries of use, the beams in the gatehouse sagged and the floorboards had been eaten by wood mites.
The progress of work at Bill’s home in the French countryside
So we corrected the slump with framing lumber and put down a new layer of flooring using lumber from a fir tree that fell down in a storm nearly 20 years ago.
But now, it is Monday morning…
And today, we leave behind the world of bent nails and banged-up knees. Instead, let’s talk about cryptocurrencies – private digital currencies that use encryption to operate without the need for banks and central banks.
Herewith begin two days of thinking about why we should spend two days thinking about them.
We began our research yesterday:
“How much have you lost so far?” we teased one of our sons.
He is a big fan of cryptocurrencies and has invested not only his own money, but also some of the family money.
We thought it was a bad idea, little different from gambling. But heck, the kids need to learn to make good financial decisions.
How do you learn to make good ones?
By making bad ones!
“Heh-heh… Are you kidding, Dad? I’m glad we didn’t follow your advice.
“Bitcoin went up 10% on Saturday. We’re up $100,000 in the family account, since the end of June. That’s a 39% gain since we started. My account has done much better. But I started earlier.
“Look, cryptocurrencies are the most profitable investments in the history of the world. In 2010, if you just put $100 into bitcoin, today you have about $6 million.
“The Winklevoss twins – the brothers who sued Mark Zuckerberg over the origins of Facebook – have made billions. And ordinary people are getting rich overnight. This is no joke. I put $1,500 into one of these crypto startups. It was worth $36,000 in just a few days.
“At first, there were just a few libertarian nerds investing in cryptos. Now, there’s big money. If you can get a 10% gain in 24 hours, you’re going to get a lot of fast money moving in and out. And the crypto startups go much farther, faster.
“That ‘fork’ they just had in Bitcoin. It created a new cryptocurrency, Bitcoin Cash, which went from being worth nothing to $363 in a matter of hours.
“So a guy with $10 million to play with, for example, might put it into a new ‘coin.’ The coin then shoots up and draws in other speculators. And then, he might pull out – in less than 24 hours – with a $10 million profit.”
“Well, I suggest you sell out now… while you can,” father offered sage advice.
“This looks like a bubble.”
“Dad, you just don’t understand,” continued our son.
“Yes, it looks like a bubble. And, yes, it’s like buying a lottery ticket. Because you can just put a few bucks into a new crypto and you could be a millionaire in a few months. Or you could lose all your money.
“But at the same time, it’s not like a lottery ticket at all. Because there’s something happening that has never happened before. It’s an evolutionary leap in money itself.
“It’s like the early days when people found gold and began using it as money. They picked it up off the ground. It was worth nothing. Then, it became valuable as people realized its value as money. The same thing is happening with cryptocurrencies today.”
As near as we have been able to tell, when goods and services pass from one physical hand to another set of fingers, gold (or gold-backed tokens) is the best form of money. Cash-and-carry. You don’t need to know anything about your counterparty. His money is good money; that’s all that matters.
That’s what made modern civilization possible. But in the credit-based dollar economy, the hands disappear.
Instead, there are computer connections… and elaborate, costly barriers: your mother’s maiden name, telephone calls, source of funds verification, security codes, FATCA [Foreign Account Tax Compliance Act] reports, bank exchange fees, transaction fees, bank account fees, negative interest rates, tax inflation… and even hyperinflation.
The advantages of cash are lost.
Cometh the cryptocurrencies and cometh a revolution. But what the crypto innovators discovered in the world of the future was the past.
Here’s economist George Gilder in his latest book, The Scandal of Money:
[B]itcoin’s mysterious, pseudonymous founder, one “Satoshi Nakamoto,” specifically mimicked gold in developing his digital money, which becomes more difficult to “mine” with the passage of time. Its value, like gold’s, is ultimately based on its scarcity. It is not a competitor with gold but an Internet money that simulates the properties of the monetary metal and offers a path toward a gold-inspired standard for the net.
The key feature of gold and bitcoin is that they are both tethered to the real world – the world of splinters and time.
“It takes energy – in the form of computer processing power – to ‘mine’ bitcoin,” our in-house enthusiast continued.
“The more of them you mine, the more time and energy it takes to discover the next one. It’s like gold. You have to go farther… and deeper… to find the next ounce. And now, some of the most powerful computers in the world are mining bitcoins.
“But since the supply of bitcoins is strictly limited to 21 million, they remain in tune with the rest of the world, where real resources – and time – are also limited.
“Governments can’t increase the supply of time. Central banks can’t increase the amount of real money. With bitcoin, no one can inflate the supply or use it to manipulate the stock market. It really is a better form of money… and people are gradually coming to realize it.
“It’s going to be a wild ride. But we’re on this train whether we want to be or not. The advantages of cryptocurrencies over the government’s money are so huge… they’re unstoppable now.
“Think about it… Cryptocurrencies like bitcoin do away with the need for banks altogether. And no central bank controls the supply.
“Meanwhile, you can do business with anyone anywhere in the world for just a tiny fraction of what it would cost via the banking system.
“And cryptocurrencies protect your identity. You don’t have to reveal your name, address, Social Security number, etc.
“Too much toothpaste is already out of the tube. From a financial point of view, this is probably the biggest breakthrough… the most liberating breakthrough… since the discovery of gold.”
More to come…
Editor’s Note: Colleague and self-described “bitcoin bull” Teeka Tiwari spent all last year traveling the world to learn everything he could about this booming crypto market.
Teeka and his team recently uncovered another digital currency that costs a fraction of bitcoin’s price… with even more upside. It’s being tested by banks, and Microsoft recently announced it will allow over 3 million of its developers to work on the currency’s network.
To learn about Teeka’s favorite “ground floor” alternative to bitcoin, and how you can buy it, watch his presentation here.
BY JAMES WELLS, EXECUTIVE EDITOR, BONNER & PARTNERS
Is it time to wave the “all clear”?
Investors seem to think so…
Today’s chart shows the number of short positions on VIX futures.
The VIX is the market’s fear gauge. So when investors short it, they’re betting that volatility (big fluctuations in stock prices) will be lower in the future.
As you can see from the chart, there have never been more short positions on VIX futures.
– James Wells
Bitcoin Cash Flounders
As Bill mentioned above, bitcoin had an eventful week with its “fork.” But now, Bitcoin Cash is sinking. Here’s one possible reason why.
Active Investing Isn’t Dead Yet
Bill has often warned about the dangers of too much passive investing through exchange-traded funds (ETFs). But now, there are signs that active investors might be making a comeback.
America’s Newest Crime Wave
Violent protests and riots have been plastered across the news in recent months. But behind this is a new crime wave. Colleague Jeff Brown shows why this new criminal element is the most dangerous one yet.
In today’s mailbag, one reader considers if the stock market has hit a top.
Regarding the stock market, I know it will have a major correction soon. Translate that to mean a crash, most likely. Right now, I’m ok and hope to be when the crash happens. They will blame Trump and he will not have caused it. I believe the Deep State has more to do with this sort of thing than anyone else.
As for Congress, they remind me of what Will Rogers said about Congress in ’32. “The Do Nothing Congress.” I think the Senate is the worst in that regard. Anyway, none of us can stop what is going to happen. One more thing I believe is that if/when the U.S. goes down, the entire world will also go down. A very sad state of affairs. It will get worse before it gets better.
– Diane V.
Meanwhile, thoughts on the state of American health care…
I used to feel as you do, at least about health care. Then my wife lost her leg. Then other people around me were hurt in various ways. I agree Obamacare is not perfect. I agree that there are too many win-lose deals. That more spending does not equate to better conditions. That the deep state has its hooks in everything. Cronies grow more powerful.
I’m a zombie. I’ve benefited from too much free money running around, and captured a share of it. Because of that, I can afford to pay to fix my wife, to the extent that she is fixable. Is that fair? But then, is any of it?
Libertarianism is a great concept. Unfortunately it’s a concept applied to people, and people suck. They are greedy. They are not all smart, or as economically valuable as others. You can start them in the same place, but they won’t all end up in the same place. Do we condemn people to die because they cannot afford to go to the emergency room after an accident? Do we allow fate and misfortune to allow an economically valuable person to become unvaluable, because they cannot afford the care to become valuable again? Perhaps.
Jesus said that you will always have the poor with you, and perhaps they should be left to their fate whatever it is, since there is only so much to be done against the vicissitudes of fate anyway. Has it all gone too far? Certainly.
We can postulate about ideal systems… but they’re still by and for people, and people are imperfect. You can start a group of people in the same place, but someone always wants to be a despot… someone always wants the power to take from others for free… and the barbarians always seem to win, eventually. So we fight… but it may always be a losing battle anyway.
– Jeff B.
Our colleague E.B. Tucker, editor of The Casey Report, just released a new training video.
In it, E.B. shows one common mistake that most investors make without even knowing it. It’s a mistake that could be costing you thousands of dollars a year.
You can watch the training video for free when you sign up for E.B.’s complimentary training webinar right here.