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10.21.2017 - Free Investing Newsletter Bookmark

At The End of The Day
 
Over the years I’ve been asked about Bitcoin many times. For the most part my answer to it has remained about the same “at the end of the day, it’s a fiat currency”.  Now to the Bitcoin lovers, I’m just stupid. I have no problem with that. But then, do tell me...what exactly is Bitcoin backed by? Oh, digits “mined” from computer algorithms. In other words, I can’t exchange my Bitcoin for say gold, or silver? No. How about copper or Iron? Nope.

 
Bitcoin lovers will tell me that I can exchange it for dollars and then use the dollars to buy gold or copper. In other words, it’s a proxy for money, no? Yes. Sort of. Because “some” people will accept your bitcoin as payment for products and services, it can serve as a currency. At times. It’s sort of confusing.  
 
Look, any time something launches and if you were “smart” and bought a bunch of it, and just 5 years later you’d be rich, then it seems the “smart” people who jumped in were indeed smart. Once again us old dinosaurs that didn’t see how it was all that different from paper money, just “didn’t get it”. Well, I still don’t.
 
I have no love for the Federal Reserve. I have no love for the fact that my one-dollar bill only has the buying power of 5 cents. I don’t like the idea that they can print them up out of thin air, and instantly debase all the others already in circulation. I hate it. And, I’m not alone. The reason Bitcoin and the other cryptocurrencies became popular was that a LOT of people hate the Fed’s and their stupid paper dollars.
 
So we’ve seen this odd contraption launched, and over the years it has climbed in “value”. They tell me it’s the scarcity of the bitcoin that makes them valuable. Yet last month in Puerto Rico, all the bitcoin in the world wouldn’t have bought you a coke. See, after the Hurricane, the power was down. No internet. No Internet = No Bitcoin. Ouch.
 
And this guy that supposedly came up with Bitcoin and the technology behind it. Why the big mystery around him? Are we all that certain that Bitcoin wasn’t launched by some Government to get the feel of how people would react to a digital currency? I’m not certain of that at all. In fact, I’d probably bet money on it. ( but which form?)
 
I perfectly understand the push to get away from anything connected to the Fed’s and Uncle Sam. I really do. And for a while, it looked like people had decided that Gold and silver would again be the “real” money. Look at a chart of say gold from 2000 to 20011. It was the single best performing asset of ALL.  Am I to think that the powers that be didn’t notice that people were shunning dollars and buying gold and silver?  Could it possibly be that “they” needed something to take the pressure off all that gold and silver buying and “presto” bitcoin emerged?  Don’t laugh.
 
Run this around in your mind for a while and let it ferment like good Kimchi. China and Russia have been buying gold for years now. Are there no smart people in China? Why would they continue to buy up this “relic?” if they didn’t think it had value? They wouldn’t.  But as they were accumulating their metal, something else was going on. Here in the states, the US Mints couldn’t even keep up with the demand for Silver Eagles. Everyone wanted out of “dollars” and into something they couldn’t print out of thin air. Or inflate away. Or trace. They wanted Metal and it was driving the COMEX futures pits crazy.
 
As gold and silver were rising, there was a disconnect. The price simply wasn’t reflecting the true demand. Demand was through the roof, but via naked shorting on the COMEX, they kept the price of the metal lower than it should have been. The cry from the alt-right was “continue to buy physical, and one day the COMEX will NOT be able to keep the price down, we’ll overwhelm them”.
 
I think “they” knew this was the case. I think they knew they had to come up with some form of alternative currency that us “nut jobs” could buy that wasn’t dollars and wasn’t a precious metal. I think “they” launched bitcoin to funnel the demand for a good money away from gold and silver. They needed some way to stop the run away price rise of the metals that had seen gold go from 280 an ounce to 1,900. They had to find a way to steer people away from silver, which had run from 5 bucks to 50. But most important of all was that they needed to put a stop to the incredible demand for the metals. Many was the time the mint “ran out” of Eagles because demand was so strong.
 
It’s worked. As bitcoin continues to rise and rise, the demand for Silver eagles has plummeted. Many folks have sold their metals and moved it back to stocks or even a crypto currency. The COMEX is no longer in danger of being run over by physical demand that they couldn’t contain.
 
I don’t much believe in coincidence. The launch of Bitcoin raises my eyebrows. How is it that this ‘thing” called bitcoin, launched in January of 2009, right during the worst financial meltdown of the last 75 years? How is it that this “new” technology just happened to get introduced right in the middle of the most powerful demand for precious metals we’d ever seen? How is it that it was presented as being an alternative to fiat money, while in essence -  it is the perfect example of fiat?
 
This was not by accident. Not in my view anyway. I think the powers that be sold this “thing” as the ultimate “up yours” to the establishment, and people hungry to give the establishment the finger, bought the story. I think the elites were tired of the common man nibbling on their metals and needed a way to get him out of the way.
 
Many people still believe it’s totally anonymous. It is not.  This by Forbes is a start:
 
But spending Bitcoins to anonymously score drugs online isn't as simple as it's often made out to be.
 
We at Forbes should know: We tried, and we got caught.
 
To be clear, we weren't caught by law enforcement--so far at least, our experiment last month in ordering small amounts of marijuana from three different Bitcoin-based online black markets hasn't resulted in anyone getting arrested. But a few weeks after those purchases, I asked Sarah Meiklejohn, a Bitcoin-focused computer science researcher at the University of California at San Diego, to put the privacy of our black market transactions to the test by tracing the digital breadcrumbs that Bitcoin leaves behind. The result of her analysis: On Silk Road, and possibly on smaller competitor markets, our online drug buys were visible to practically anyone who took the time to look. "There are ways of using Bitcoin privately," says Meiklejohn. "But if you're a casual Bitcoin user, you're probably not hiding your activity very well."
 
In an age where the powers that be want to know every single thing about us, where they’ve tapped our phones, video’d our moves, facial recognitioned our activities, photo’d our license plates, scoured our social media, am I to believe they’d let a truly anonymous currency hit the market, and not go crazy? In their own words, the reason they want a digital global currency is to cut down on Black market buying and tax evasion. Yet somehow they’re going to let a bitcoin thrive in anonymity? Me thinks not.
 
Finally, the Puerto Rico thing. Or the Florida thing. When Irma hit and parts of Florida were without power for weeks, how valuable was your bitcoin? In PR when the Hurricane hit, people lined up for hours to get 60 bucks from an ATM. Their bitcoins? Worthless. No power and no Internet. What kind of money is it that needs BOTH to operate? Not the kind of money I’m terribly interested in for  keeping my wealth safe.
 
Well it isn’t just natural events that can be problematic to Bitcoin. See, over the years, all the “law enforcement” agencies have worked with the manufacturers to put in “back doors” on their products. It first came to light when news was out that all the Cisco routers had a back door. Then we came to find out it was virtually everyone.

Inside every Intel microprocessor is a smaller processor that lets Intel - who works for the Department of Defense - control every aspect of your computer remotely no matter what encryption codes or firewalls you use. All Intel microprocessor chips have a built-in backdoor that allows complete remote access to a PC through a second physical processor embedded within the main processor which has its own operating system embedded on the chip.
 
It is advertised as something that will allow IT professionals to remotely troubleshoot a PC. According to WikiLeaks, there is even secret diskless memory embedded on each chip that spies can use to store and retrieve data and instructions on each chip that is inaccessible to the user and supposedly only used for internal operations and maintenance. Intel’s latest x86 chips contain a secret backdoor with an embedded subsystem called the Management Engine (ME) that functions as a separate CPU and cannot be disabled, and the code is proprietary.
 
I could go on and on about such things, 99%  of it from DARPA, our friends at the military. My point is that am I to believe that if they ‘want to” they can’t single out bitcoin transactions in processors, routers, modems, switches, etc and shut them of?  In other words they don’t have to shut down the “net” so to speak. All they have to do is shut off bitcoin transitions.  Oh and yes, they can.
 
I see bitcoin  rising. I’m not oblivious. I actually wish I’d have bought a ton of them when they launched. I have no issue whining about how I “should have’ bought some. It’s no different than when Wall street falls in love with a stock that has no business rising and the thing gains 40 bucks a share. I am sad when I miss them too. But I fear that bitcoin is not the rosy alternative that will save the world that so many believe. I hope I’m wrong.
 
The Market:
 
On Thursday, the market woke up in a sour mood. The futures were fairly ugly and sure enough we opened down about 100 DOW points. The calls were going out that “maybe, finally, this market is ready for a rest”.  Well, I didn’t much think so. Why Thursday? Why dump it with all this momentum? While it “could” happen, I didn’t much think it would.
 
Well it didn’t. It took them a while, but they brought the market all the way back up and when the final bell rang, we were GREEN across the board. Not by much, but green none the less. Then came Friday.
 
Friday the futures were in a much  better mood. We had big futures ahead of the open and when we did open, we were indeed up sharply. After a small moment of pause, they started back in and clawed the market up and up. When the final bell rang, we had gained 165 shiny new points. The S&P picked up 13. For the 55th time this year, we had hit “All-time” new highs.
 
I truly hope you are all enjoying this ride. I also truly hope you’re not delirious and think that somehow this is normal. I assure you, it is not. However, that said, I am never going to pretend that I have the big answer to the “end game” here. I simply don’t.

Let me explain. There are some that think this is simply a repeat of 1995 - 2000. Back then the market went bonkers, where fund managers had deluded themselves into thinking that this new “thing” called the Internet was somehow going to produce profits for companies that had nothing but a business plan and a Phone. They were giddy with excitement, and ignored the idea of no profits “right now” but bet they’d be coming. They were sorely disappointed. No, it’s not that at all.
 
Others think it’s something akin to the great housing bubble, where from 2004 - 2007 stocks and real Estate just went up and up and up, because “real estate can’t go down” and all these companies were making gobs of money because of all the financing and building going on. No, it’s not that either. There’s NO leading industry right now that’s so hot people can’t wait to get into it.

So what is it?  As I’ve written about until your eyes are bleeding from reading it, what we’re witness to is the single greatest coordinated money printing operation the earth has ever seen. While you can add up the numbers from say the European Central bank, as they print their 65 billion a month, or the Japanese CB and their 65 billion a month, the fact is, we have NO IDEA what was and is being printed and distributed. Why? Because believe it or stick your head in the sand, they have hundreds of ways to print money and dole it out without telling you about it.
 
Remember in 2011 when the Fed’s emergency lending programs were audited by the Accounting office? What did they find? They found that our own Central bank, the Federal Reserve, had “lent” 16 TRILLION dollars to various European banks for “financial assistance” during the 2008 melt down.  16 trillion folks. Money they printed and never told a sole about.
 
Forbes - $16,000,000,000,000.00 had been secretly given out to US banks and corporations and foreign banks everywhere from France to Scotland. From the period between December 2007 and June 2010, the Federal Reserve had secretly bailed out many of the world's banks, corporations, and governments. The Federal Reserve likes to refer to these secret bailouts as an all-inclusive loan program, but virtually none of the money has been returned and it was loaned out at 0% interest. Why the Federal Reserve had never been public about this or even informed the United States Congress about the $16 trillion dollar bailout is obvious - the American public would have been outraged to find out that the Federal Reserve bailed out foreign banks while Americans were struggling to find jobs.
 
That’s simply the money we STUMBLED ON. It was never reported. How many more trillions has our Fed, the ECB, the BOJ, the SWN and others printed up and doled out that we’ll never know??   Multiples I’m sure. Oh and when Alan Grayson drilled Fed head Ben Bernake on “who got the money??” Bernake answered “I don’t know.”   Amazing.
 
So what we have is a market, fueled by so much liquidity sloshing around at the coffers the biggest institutions, that a percentage of it is landing in the stock market and they’re buying. They don’t care about earnings, or P/E, or book to sales. They don’t care about anything. Why should they? If 50 million fell in your lap, probably untraceable, wouldn’t you want to take a free shot at some fun in the market? Besides, it’s the easiest way to “launder” that money.
 
That and that alone is why these markets have gone up for the last 8+ years. Does it stop? Does it have to stop? How will it stop and why? I don’t have clear answers folks, but what I can say is that you are living through something we’ve never ever seen before. Uncharted water.  I can give “guesses” as to how it ends, but they’d be just that, guesses.
 
Some suggest that it doesn’t have to end. Just print for “ever”. However, that brings up the concept of hyper-inflation hitting at some point. Some feel they’re going to juice this until their new replacement for the global reserve is set in stone and then “pull the plug”. Others think they’ll continue to print, and all the while continue to buy up big positions in the worlds leading companies, thus one day owning “everything”.

See? There’s ways this can go. I don’t know the plan, I just know we’re “living it”. This has already gone far further than I’d have ever expected. But judging by Friday, there’s more to come. Lean long, and hope for the best. It’s all we can do

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