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11.11.2017 - Free Investment Newsletter Bookmark

Gold, Silver, Bitcoin and You
 
If you’re a metals investor, you know that things have been rough. Really really rough. For well over a decade we had the metals nailed almost as well as you can nail them. Initially investing in gold in 2000-2001, we rode it from 293 dollars an ounce to 1900 an ounce in 2011.
 
Along the way, we made some interesting investments in Silver. Beginning in 2006/07 we rode silver from under 10 to just shy of 50. Then there was the “Vegas plays”. The first one, using options on silver miners, turned 30K into 1.2 million. The second one turned 19K into 244,000 at the peak.

We had it figured out. Or, so we thought. The global economy was crap, the banks were printing like never before, millions were unemployed, housing had become a bubble looking for a pin, manufacturing was dead, and so on. All the ingredients for a metals recipe were there and it worked really well.
 
And then it didn’t. Since 2011, the metals have sunk back, and simply trade sideways. The miners, often noted for their insane runs higher have done nothing but puke. What’s happened?
 
I’ve stated quite publicly that it is my belief that “Bitcoin” was launched as a way to get people away from buying gold and silver. Think about it for a minute. Why do you buy silver eagles in the first place? Well, they’re basically anonymous. They have no debt attached to them. They’re easy to carry, easy to store. They’ve been “money” for over 5,000 years and what crap hits the fan, gold and silver have been the “go to” medium for eons.
 
Well, think about how Bitcoin was sold to people. It’s supposedly anonymous ( it’s not) it’s not connected to the Government ( It is) it allows you to bypass the banking system ( It does) it carries no transaction costs.
 
Basically  bitcoin was sold or introduced to the very people that hate having Uncle Sam track them. To the prepper folks that want anonymity, to the people disgusted by the fiat currency banks, to those looking for a way to get around the system. And, it worked. Slowly at first and then like a tidal wave. People STOPPED buying Silver eagles and started buying this “cryptocurrency”.
 
Now, there’s some folks that run on the alternative/techie side of things that think these crypto’s are the hottest thing that ever happened. They love the “peer to peer” aspect of it. But as I’ve written in the past, isn’t this just another “fiat” currency? Indeed it is. It’s created out of nothing ( actually research shows that it uses an incredible amount of natural resources to mine this stuff) it’s stored where you can’t touch it, it’s only got value, because other people are willing to buy it. That my friends;  is a fiat currency.  But, maybe worse.
 
Just the other day, 300 million worth of Ether currency (another crypto like Bitcoin) vanished due to an accident supposedly committed by just one user.  A series of “bugs” in a popular digital wallet service led a curious developer to accidentally take control of and then lock down the funds.
 
In basic terms, some user accidentally stole hundreds of these “wallets” and then as he panicked and tried to put them back they went “poof” into thin air. The same air they were developed in.
 
Now the entire Ethereum community is suggesting that they all agree to “backtrack” the blockchain and reverse the big mistake. Uhm, are you getting this? These crypto’s that everyone is so gaga over as some store of wealth, can vanish into thin air because some dork played around where he shouldn’t have?? And worse, if the community agrees and they can backtrack the chain, then what’s to stop them from erasing any transactions they don’t like?
 
Likewise, Reuters reported that cryptocurrency exchanges - where virtual currencies are bought, sold and stored - have become magnets for fraud and deception. More than 980,000 bitcoins - the most popular virtual currency - have been stolen since 2011. Today they would be worth about $5 billion.  Stolen from whom? And if it was you, how do you get it back? Most could not.
 
So let me get this right. People have shunned gold and silver, neither of which can “vanish” by some software error, or some hacker playing around, because crypto’s are somehow better??  How is it better if you owned say 25K worth of Ether currency and you woke up today to find your “wallet” is empty and there’s not a damned thing you can do about it? 
 
Listen, I’m not beating up on the crypto’s because I missed out. Here, read this: I blew it. I missed out on buying that stuff when it was pennies and now it’s thousands”  there, okay? I’m not whining about it. What I am doing however is suggesting that those people seeing it rise, and then selling off their gold and silver to buy it, might be in for a wicked surprise one day. Maybe their wallet gets hacked. Maybe the power goes down. Without internet, AND power, you have squat. Jack diddly.  Maybe your particular crypto gets abandoned for a better one? There’s like 200 of them out there now.
 
I can take my little ¼ ounce gold coin to any corner of the earth, and even if the people don’t speak my language, nor me theirs, I can do business. With Bitcoin, billions of people have never heard of it. Not to mention that using it to buy food in say deep Africa isn’t going to work, because you still need internet and power to even prove you have it.
 
There’s something mystical about gold. Not only has it been around for like 10 billion years, it can’t be created out of thin air. Alchemists have been trying for 1000 years to “make it” but they can’t. It’s an element, not a compound. It is unique to itself.  But bitcoin? They make it every day. And as Etherium just showed us, can destroy it any day. If you think that a store of wealth is something so flimsy that a software glitch can erase it, you need to review your idea of value.
 
What’s my point here? My point is simple. Gold, silver and the miners have been left for dead. The powers that be wanted something to halt the incredible demand for the metals before their COMEX system imploded for lack of deliverable metal. They handed us blockchain and launched it on the people to see how they’d take to it. Well, the sheeple loved it. And the elites went back to buying up gold and silver without those pesky peons buying it all up.
 
Now the question is this:  Is gold and silver ever going to regain the status they had? My guess is that yes they will, but NOT until the big reset hits. There’s going to be a global monetary reset and it is still my opinion that gold is going to play a role in that reset.  The Chinese aren’t stupid. They’re still buying tonnnes of gold. The Russians aren’t stupid. They’re buying tonnes of gold. They never stopped.
 
That’s my benchmark folks. If I ever see the Russians and Chinese selling their gold, then yes it’s 5000 year reign is over. But if they’re still soaking it up ( they are)  they’ve got plans for it. I’m not willing to feed their appetite. I’m not going to give up my gold and silver and let them have it so I can buy some silly cryptocurrency that is here today and possibly gone tomorrow. No, I’ll sit on what I have.
 
Since bitcoin really started getting traction in late 2010 and into 2011, the metals have pulled down. The Vegas plays aren’t working, the miners are dead weight, and owning the coins is paramount to sitting in a chair waiting to petrify. But it is my guess that one day this will reverse again. The metals were hated and shunned from 1980 until late late 2000.  Then they rallied for 11 years. I hope we don’t’ have to wait 15 more years, but again, I think we’ll see them shine again.  Watch the Chinese. If they’re buying, I’m buying. It’s not a bad strategy.
 
The Market:
 
Red? Yep, you’re not hallucinating. We ended the day red on Friday. One might question whether that’s even legal in 2017.  It appears that this market can only go up and if it doesn’t there’s got to be an investigation.
 
Naturally I joke here, but it is somewhat true that no matter what the issue, the market simply powers its way higher. Yet in the past few days there “feels” like a change has settled in.
 
The IWM which is the small caps, have been trading sideways and down for a month. They’ve found some support as they literally “sit” on the indexes 50 day moving average. The S&P has lost ground two days in a row.  The DOW also.
 
Could it be that the delay of the tax reform, coupled with the end of earnings season and the idea of a December rate hike, has finally pushed some of the big players to cash out? It’s possible. I have a hard time grasping it however, because as we all know, the enormous amount of global liquidity has not dried up and that money has to go somewhere. Thus, calling a halt to this ever-rising market is dangerous.
 
They very well might just come in Monday and jam us to new highs again. It won’t surprise me in the least. I’m simply saying that over the past few days, their dogged determination to drive the markets higher, has faded out a bit. Maybe they’re just tired. Maybe they’ve used up the liquidity they had on hand and have to wait for more. Or maybe, just maybe, they’re willing to sign out the year and go home with some impressive yearly stats.
 
We don’t know. All we’ve been doing is taking some short term trades, cashing out and moving to the next. For instance on Friday morning I told the members of the Insiders Club ( that’s our pay for membership area) that I really liked the chart of GRMN and if it got itself over 60.00 it looked like a buy to me. Well, it did just that and ended the day at 60.83 after hitting 61.04. 
 
We’ll continue to trade this market on the long side, until it stops working. We’re in such a unique time in the markets, that unless you’re one of the elites at the BIS, you really have no clue what’s coming next. More highs? A rug pull? A crash? DOW 40K?  I can make the case for all of them.
 
Lean long, keep a finger near the sell button and don’t for a moment think that any of this is normal. This is so far from normal, we’ve entered a new universe. 

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