Sometimes we can look at history and make some interesting observations about what might lie ahead from where we are today. In regard to bitcoin, and many other cryptos, I have many times said that it was like the Dutch tulip mania back in the 1600s. We look at that today and think how could anyone sell a house for a tulip bulb? How was anyone so clueless that this tulip bulb was worth so much?
Of course, you and I were not there so we don’t really know what the mindset was, but it appears that the one thing that doesn’t seem to change-human nature- took over and many people had FOMO (Fear of Missing Out) as prices for those tulip bulbs just kept rising higher and higher.
There was a book published in 1841 (Extraordinary Popular Delusions and the Madness of Crowds by Scottish journalist Charles Mackay) that said “The rage among the Dutch to possess them was so great that the ordinary industry of the country was neglected”. HMM. Does that sound familiar to what is going on now as those collecting government handouts are spending their time not looking for work but looking for the next speculation that they can “make a fortune” with?
In the first 7 months of fiscal year 2021 the USA has spent nearly DOUBLE the revenue it has collected. The US Treasury collected $2.14 Trillion in revenue and has spent $4.075 Trillion- that they admit to. There is other off-balance sheet spending which adds to the numbers- actually over $326 Billion according to the US Treasury.
It appears to me that we have become a nation of speculators rather than producers. The productive capacity of the USA is what made it a world leader for the past 100 years- not betting and skimming profits.
Bill Harris, former CEO of Intuit and Paypal wrote an article in 2018 “Bitcoin is the greatest scam in history” He also wrote “In my opinion it’s a colossal pump and dump scheme, the likes of which the world has never seen”.
I have often wondered out loud about just that. It appears that we may be getting an answer on that now. It seems amazing to me that Elon Musk goes out and buys billions in bitcoin and then announces that Tesla will take bitcoin as payment. Bitcoin explodes higher. Just a few weeks later he announces that Tesla will no longer accept bitcoin as payment anymore. To be fair he may have taken bitcoin last week at $64,000.00 and this week it was around $54,000.00 when his announcement came out (Trying to hold 50k as I write this) so it may just be that he took a bath on accepting it as payment. On the other hand, he may have sold his positions when his tweets made bitcoin skyrocket- or both.
In any case, it illustrates why bitcoin is not a reliable option for payment as the price is too volatile. That doesn’t even mention that a 1099 has to be filled out each time you buy something with it or sell it.
Elon’s excuse is that bitcoin causes too much fossil fuel usage. That I’m not buying one bit. To produce those lithium batteries it is nowhere near environmentally friendly. To be fair there was a report in Wall Street on Parade which referenced a 2018 report that said the amount of energy used to produce Bitcoins in the last 30 months was equal to 1 million automobiles used during the same time.
I don’t want this to be a bitcoin-bashfest but it seems that the madness of crowds is as alive today as it was in the 1600s.
Getting back to the real world-which we all live in and need REAL food, water, shelter and energy the picture is becoming more bleak by the day. Prices are rising rapidly and just this week we have seen another oil pipeline shut down and a bridge crack on the Mississippi River in Tennessee that has 800 barges of goods stranded.
While the economy continues to freefall the stock indexes, despite some recent choppiness is continuing its march higher with central banks “buying it all”. Real Estate continues to boom in some places and bust in others but the prices are too high in all places. How Can I say that? The majority of our population cannot afford homes at these prices. You have the Fed buying mortgage backed securities at $40 BILLION per month. This is adding to a bubble that will be a disaster when it bursts. Of course, the Fed, like in 2008, will foreclose on all of those homes, throw many out into the street (as if there aren’t enough there already) and they will own the homes- just like in 2008 when the Fed became the largest owner of real estate in the USA. Add that to their $4.5 trillion in junk bond purchases and they will likely also be the largest owner of US corporations also- while the common and preferred shareholders get 100% wiped out.
My opinion is that a LOT of personal debt will be defaulted on. A LOT of corporate debt will be defaulted on. Cities and states will likely default on much of their debts. Yes, even the US government will default either by making repayment virtually worthless (my guess) or an outright default (not likely since we are a debt-based system .
Are you chasing the latest fads? Are you pinning your retirement on promises from others to fund it? Have you done any research to have a clue how likely (or unlikely) it is that you get repaid?
I have looked at the numbers and they tell a story of over-indebtedness in every aspect of our society. Not only here but indeed globally.
Personally, I am far more comfortable with gold and silver as my “money” because it is the only “money” that is actually an asset rather than a liability. It is tangible and most people know what it is. It has had value and has been used as money for over 5000 years.
With the games being played to keep the price of gold, silver, platinum and palladium cheap in the paper market we have a unique opportunity to buy these grossly undervalued assets on sale.
Opportunity is knocking for those paying attention.
Your moves in the next few months may determine whether you have a truly comfortable retirement or if you will have to battle in your “golden years”.
Any opinions are those of Mike Savage and not necessarily of those of RJFS or Raymond James. Expressions of opinion are as of this date and are subject to change without notice. The information in this report does not purport to be a complete description of securities, markets or developments referred to in this material. The information has been obtained from sources deemed to be reliable but we do not guarantee that the foregoing material is accurate or complete. Any information is not a complete summary or statement of all available data necessary for making an investment decision and does not constitute a recommendation. There is no guarantee that these statements, opinions or forecasts provided herein will prove to be correct.
Commodities are generally considered speculative because of the significant potential for investment loss. Commodities are volatile investments and should only be a small part of a diversified portfolio. There may be sharp price fluctuations even during periods when prices are overall rising.
Precious Metals, including gold, are subject to special risks including but not limited to: price may be subject to wide fluctuation, the market is relatively limited, the sources are concentrated in countries that have the potential for instability and the market is unregulated.
Diversification does not ensure gains nor protect against loss. Companies mentioned are being provided for information purposes only and is not a complete description, nor is it a recommendation. Investing involves risk regardless of strategy.
Prior to making an investment decision, please consult your financial advisor about your individual situation. The prominent underlying risk of using bitcoin of a medium of exchange is that it is not authorized or regulated by any central bank. Bitcoin issuers are not registered with the SEC, and the bitcoin marketplace is currently unregulated. Bitcoin and other cryptocurrencies are a very speculative investment and involves a high degree of risk. Investors must have the financial ability, sophistication/experience and willingness to bear the risks of an investment, and a potential loss of their investment.