Bitcoin, Bonds, Gold and Stocks
In this educational idea I will talk about the current state of the global economy and how Bitcoin fits in.
Most people don't realize how bad the current situation is. It could last for a few more years, as we have reached a new level of madness. Right now people are buying bonds which are so expensive, that there is no way they will get anything out of them. Not only they won't get anything, but they will get less money back at maturity. They do this only because they think somebody else is going to buy them at a higher price. Bonds have risks so they should have a yield, but now they are yielding almost nothing. Even Greek bonds are yielding 2% and they are extremely risky. Imagine paying so much for something that could cost you everything. This is definitely a bubble that could last for quite some time until everything snaps.
The on going war on cash will only ramp up and we are on the verge of a cashless society. There is no way banks can survive negative interests rates without collapsing. Low interest rates have damaged them very badly as they are struggling to make a return, and negative interest rates would totally destroy them as people withdraw their money. So a ban on cash is inevitable in order for such an event to be avoided. This will have a profound effect on bonds as people will prefer them from keeping their money in a bank. Not only this, but Central banks will also most likely keep on printing money and buying bonds, pushing their price even higher.
All this along with aging population, too much debt and pension funds being unable to make real returns are a very explosive mix that is ready to explode any time. We are seeing this especially with European banks like Deutsche bank, as well as European nation states having problems with growth. With the Fed making its first cut in 10 years, the situation in Hong Kong getting worse and with the HKD and CNH losing their 'pegs' to the dollar also very bad signs. Not only that but there is an on going global USD liquidity crunch that is most likely going to push the dollar higher, and make people that borrowed dollars in a very tough spot.
At the same time US is at full employment which is usually a point where things start trending down from that point onward. So far we are seeing US stocks having crazy valuations with their P/E ratios at pretty high levels and with large caps leading the way. This probably due to all the indexes out there, people preferring large names as a 'safe-haven' or simply larger companies having cheap access to capital to buy back their own stocks. This means that smaller companies are not following and this isn't a good sign. It shows weakness and sign that the economy is overleveraged. Central banks have muted returns by supposedly lowering risk and protecting the economy, but this has made lots of people and funds increase their leveraged positions in order to get better returns.
Not only that, but US stocks are up 30% over the last 2+ years, while for UK stocks have been pretty much stuck for almost 10 years. The US economy is the biggest in the world and it is struggling, while others have been in serious trouble. The US can't remain unaffected by what is happening around it forever. From Powell's speech it is clear that the global picture is not looking good and the Fed is clearly 'worried' about it.
Now let's get to Gold. Since 1460 it became obvious to me that Gold would continue higher. To me Gold's bubble hadn't truly popped (didn't correct completely), but I was totally discounting how much credit and money has come into the global economy through banks and central banks over the last 20 years. Based on that alone someone could say Gold is undervalued and with the current situation it could trend higher as a safety trade. Most fundamentals point to gold being the safety trade and not the Dollar, but so far we don't know how the world react if the dollar starts going higher. Right now it isn't impossible to see both of them go higher as it has happened over the last few months. As the world is moving into more insanity, everything should be expected.
In another analysis of mine I mentioned the issues I see with Gold and why we'll never see a functioning gold standard. Long term it is too problematic and during a crisis central banks could end up dumping a lot of it. A dump could come simply due to the fact that many institutions hold it and could be used as collateral. So far many central banks have been buying, but we don't know when will they be forced to sell their stock piles. People think Central Banks can't fail, but they certainly can. They are buying an asset that is actually a threat to them if it keeps appreciating. They buy gold low so that they can regulate their currencies by selling later. Currently trust in central banks is currently at an ATL and many people are questioning their effectiveness in managing monetary policy.
So far my analysis is about the current issues I see in the economy. Now let's see what how you could protect yourself in case things turn bad, because just knowing that bad things are coming is pointless. You need to know how to defend yourself. The things I will mention will allow you to capture some upside too and not just protect yourself. It will be a low risk strategy that in my opinion is well diversified. Personally like I mentioned before I am all in on BTC and that won't change, but if I wasn't, here is what I'd be doing:
First of all you want something they can't control, they can't censor, they can't inflate, they can't shut down, that you can have anywhere you go with you, that they can't detect, that allows you to pay people worldwide nearly instantaneously, that is easy to verify if it is genuine by yourself, that is impossible to counterfeit or charge back, that you own and hold yourself (there is no counterparty risk), easy to store, provides you with more privacy that paypal, you can buy goods your government might disapprove and so on. Now think which of these things can gold do and which ones Bitcoin can do. Regardless of what you think about Bitcoin viability, it is always good to have some in case it succeeds. Bitcoin will most likely give you nice upside to your entire portfolio while also protecting you from government and central bank madness. You don't know when will they ban cash, You don't know when your government will default. You don't know when hyper inflation will occur. You don't know when the stock market will crash after a 10+ year rally.
With all the above you can see why Bitcoin is better than Gold and why you should own some Bitcoin. Its current performance is also very telling about its future potential. Now in case you want to diversify I'd recommend to mostly stay away from most bonds, stocks, banks, real estate, most fiat currencies and most commodities. Here is what I think is best for those that like diversification and low risk:
- 80% in Bitcoin, Gold, US Dollars and Yen
- 20% split in several things based on your risk appetite
a) USD/USDT loans on crypto currency exchanges like Bitfinex, Poloniex, Liquid and Gate. Better yields than bonds and they pay daily interest . Are also very easy available to convert to any crypto any time. Many are strong, liquid and regulated, meaning the risk of default is pretty low.
b) Silver and Gold stocks. Silver has been pretty low compared to gold and its chart looks pretty good. Gold stocks could also perform really well, but you need to pick them very carefully. View these two as a leveraged Gold long position.
c) Stocks that historically perform well during a recession or provide services valuable in hard times. Buying already cheap stocks, that have positive cash flows and are not in indexes. Buying some in emerging markets might be a good strategy, like some Greeks stocks which have been right at the bottom for years. Personally I wouldn't put much in here, but if I did buy stocks then emerging markets with low debt or really low P/E ratios is what I'd buy.
d) In case you don't wanna buy any stocks, it would ok to get some exposure by buying some call options on certain the S&P500 in case it goes a lot higher over the next couple of years.
e) In case you are scared or not feeling like doing c or d because of the risks, it would be also prudent to short some bank stocks. Regardless of whether you long stocks or buy call options, bank stocks in Europe look pretty awful and on the current environment have pretty much 0 upside and plenty of downside. Low leveraged shorts would be a nice hedge against all uncertainty.
f) Buying and staking some new cryptocurrencies like Tezos, Algorand, Cosmos. Large, new cryptocurrencies that offer rewards for holding and staking are very attractive as traditional investors will prefer them for multiple reasons. Mainly due to liquidity, accessibility and due to the fact that most want to buy something that has a yield.
g) Other established cryptocurrencies that are either new, are connected with real businesses, exchange tokens, privacy and so on. For example I like DOGE, BFT, QASH, GT, LEO, HT, KCS, MCO, DGD, NPXS, DCR, WAXP, FSN, NKN, GRS, BTT, DUSK, ANKR, WTX, REP, MANA, LOOM, NEXO, FTM, TUBE, XMR, RIF, DERO, BCD, SC, KMD, DASH, WAVES. I don't think the right time to invest in them is now, but they will quite attractive to put some BTC in them BTC goes above 20k
h) A 1:1 leveraged Bitcoin long. Allocate some capital and long Bitcoin with low leverage. It will be very hard for you to get liquidated. Bitcoin is in a bull market and as long you buy a dip, it will be very hard for you to get stopped out.
So essentially the first category is so that you can both increase your purchasing power slowly, as well as protect yourself in case things turn bad. The second is there so that you can take a bit of extra risk and risk max 20% of your capital.
Most people don't realize how bad the current situation is. It could last for a few more years, as we have reached a new level of madness. Right now people are buying bonds which are so expensive, that there is no way they will get anything out of them. Not only they won't get anything, but they will get less money back at maturity. They do this only because they think somebody else is going to buy them at a higher price. Bonds have risks so they should have a yield, but now they are yielding almost nothing. Even Greek bonds are yielding 2% and they are extremely risky. Imagine paying so much for something that could cost you everything. This is definitely a bubble that could last for quite some time until everything snaps.
The on going war on cash will only ramp up and we are on the verge of a cashless society. There is no way banks can survive negative interests rates without collapsing. Low interest rates have damaged them very badly as they are struggling to make a return, and negative interest rates would totally destroy them as people withdraw their money. So a ban on cash is inevitable in order for such an event to be avoided. This will have a profound effect on bonds as people will prefer them from keeping their money in a bank. Not only this, but Central banks will also most likely keep on printing money and buying bonds, pushing their price even higher.
All this along with aging population, too much debt and pension funds being unable to make real returns are a very explosive mix that is ready to explode any time. We are seeing this especially with European banks like Deutsche bank, as well as European nation states having problems with growth. With the Fed making its first cut in 10 years, the situation in Hong Kong getting worse and with the HKD and CNH losing their 'pegs' to the dollar also very bad signs. Not only that but there is an on going global USD liquidity crunch that is most likely going to push the dollar higher, and make people that borrowed dollars in a very tough spot.
At the same time US is at full employment which is usually a point where things start trending down from that point onward. So far we are seeing US stocks having crazy valuations with their P/E ratios at pretty high levels and with large caps leading the way. This probably due to all the indexes out there, people preferring large names as a 'safe-haven' or simply larger companies having cheap access to capital to buy back their own stocks. This means that smaller companies are not following and this isn't a good sign. It shows weakness and sign that the economy is overleveraged. Central banks have muted returns by supposedly lowering risk and protecting the economy, but this has made lots of people and funds increase their leveraged positions in order to get better returns.
Not only that, but US stocks are up 30% over the last 2+ years, while for UK stocks have been pretty much stuck for almost 10 years. The US economy is the biggest in the world and it is struggling, while others have been in serious trouble. The US can't remain unaffected by what is happening around it forever. From Powell's speech it is clear that the global picture is not looking good and the Fed is clearly 'worried' about it.
Now let's get to Gold. Since 1460 it became obvious to me that Gold would continue higher. To me Gold's bubble hadn't truly popped (didn't correct completely), but I was totally discounting how much credit and money has come into the global economy through banks and central banks over the last 20 years. Based on that alone someone could say Gold is undervalued and with the current situation it could trend higher as a safety trade. Most fundamentals point to gold being the safety trade and not the Dollar, but so far we don't know how the world react if the dollar starts going higher. Right now it isn't impossible to see both of them go higher as it has happened over the last few months. As the world is moving into more insanity, everything should be expected.
In another analysis of mine I mentioned the issues I see with Gold and why we'll never see a functioning gold standard. Long term it is too problematic and during a crisis central banks could end up dumping a lot of it. A dump could come simply due to the fact that many institutions hold it and could be used as collateral. So far many central banks have been buying, but we don't know when will they be forced to sell their stock piles. People think Central Banks can't fail, but they certainly can. They are buying an asset that is actually a threat to them if it keeps appreciating. They buy gold low so that they can regulate their currencies by selling later. Currently trust in central banks is currently at an ATL and many people are questioning their effectiveness in managing monetary policy.
So far my analysis is about the current issues I see in the economy. Now let's see what how you could protect yourself in case things turn bad, because just knowing that bad things are coming is pointless. You need to know how to defend yourself. The things I will mention will allow you to capture some upside too and not just protect yourself. It will be a low risk strategy that in my opinion is well diversified. Personally like I mentioned before I am all in on BTC and that won't change, but if I wasn't, here is what I'd be doing:
First of all you want something they can't control, they can't censor, they can't inflate, they can't shut down, that you can have anywhere you go with you, that they can't detect, that allows you to pay people worldwide nearly instantaneously, that is easy to verify if it is genuine by yourself, that is impossible to counterfeit or charge back, that you own and hold yourself (there is no counterparty risk), easy to store, provides you with more privacy that paypal, you can buy goods your government might disapprove and so on. Now think which of these things can gold do and which ones Bitcoin can do. Regardless of what you think about Bitcoin viability, it is always good to have some in case it succeeds. Bitcoin will most likely give you nice upside to your entire portfolio while also protecting you from government and central bank madness. You don't know when will they ban cash, You don't know when your government will default. You don't know when hyper inflation will occur. You don't know when the stock market will crash after a 10+ year rally.
With all the above you can see why Bitcoin is better than Gold and why you should own some Bitcoin. Its current performance is also very telling about its future potential. Now in case you want to diversify I'd recommend to mostly stay away from most bonds, stocks, banks, real estate, most fiat currencies and most commodities. Here is what I think is best for those that like diversification and low risk:
- 80% in Bitcoin, Gold, US Dollars and Yen
- 20% split in several things based on your risk appetite
a) USD/USDT loans on crypto currency exchanges like Bitfinex, Poloniex, Liquid and Gate. Better yields than bonds and they pay daily interest . Are also very easy available to convert to any crypto any time. Many are strong, liquid and regulated, meaning the risk of default is pretty low.
b) Silver and Gold stocks. Silver has been pretty low compared to gold and its chart looks pretty good. Gold stocks could also perform really well, but you need to pick them very carefully. View these two as a leveraged Gold long position.
c) Stocks that historically perform well during a recession or provide services valuable in hard times. Buying already cheap stocks, that have positive cash flows and are not in indexes. Buying some in emerging markets might be a good strategy, like some Greeks stocks which have been right at the bottom for years. Personally I wouldn't put much in here, but if I did buy stocks then emerging markets with low debt or really low P/E ratios is what I'd buy.
d) In case you don't wanna buy any stocks, it would ok to get some exposure by buying some call options on certain the S&P500 in case it goes a lot higher over the next couple of years.
e) In case you are scared or not feeling like doing c or d because of the risks, it would be also prudent to short some bank stocks. Regardless of whether you long stocks or buy call options, bank stocks in Europe look pretty awful and on the current environment have pretty much 0 upside and plenty of downside. Low leveraged shorts would be a nice hedge against all uncertainty.
f) Buying and staking some new cryptocurrencies like Tezos, Algorand, Cosmos. Large, new cryptocurrencies that offer rewards for holding and staking are very attractive as traditional investors will prefer them for multiple reasons. Mainly due to liquidity, accessibility and due to the fact that most want to buy something that has a yield.
g) Other established cryptocurrencies that are either new, are connected with real businesses, exchange tokens, privacy and so on. For example I like DOGE, BFT, QASH, GT, LEO, HT, KCS, MCO, DGD, NPXS, DCR, WAXP, FSN, NKN, GRS, BTT, DUSK, ANKR, WTX, REP, MANA, LOOM, NEXO, FTM, TUBE, XMR, RIF, DERO, BCD, SC, KMD, DASH, WAVES. I don't think the right time to invest in them is now, but they will quite attractive to put some BTC in them BTC goes above 20k
h) A 1:1 leveraged Bitcoin long. Allocate some capital and long Bitcoin with low leverage. It will be very hard for you to get liquidated. Bitcoin is in a bull market and as long you buy a dip, it will be very hard for you to get stopped out.
So essentially the first category is so that you can both increase your purchasing power slowly, as well as protect yourself in case things turn bad. The second is there so that you can take a bit of extra risk and risk max 20% of your capital.
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