Saturday, August 31, 2019

Economic Turmoil Boosts Safe Haven Assets: Long Real Money, Short Fiat

safe haven assets

  • Gold and Bitcoin are becoming correlated for the first time in history
  • Stocks in the US are beyond overvalued
  • The Fed may ease monetary policy further
  • The US Dollar is losing reserve currency status
  • Gold continues hitting record highs against major fiat currencies
Safe-haven assets are seeing massive capital inflows. This has been forecasted for a long time by many people, including GSB and its readers and subscribers. Let’s examine some of the details of this development.

Bitcoin vs Gold: Safe Haven Assets Now Correlated

The whole “bitcoin vs gold” or “drop gold, buy bitcoin” feud is nonsense. And now data is finally emerging to prove that.
BTC and gold are moving together more and more as safe-haven assets become more attractive.

safe haven assets

This only validates what many in the crypto community have known for years: as global volatility increases and fiat currencies begin to collapse, hard money like gold, silver, and bitcoin will be increasingly bid.

Fake Markets: Stocks in America

The US stock market is being propped up. The market has been artificially inflated for a decade through quantitative easing, zero percent interest rate policy, and corporate share buybacks. The market also continues to be engineered to bounce back every single time there is a drop.
This pattern has been repeating for some time, and there’s no question that honest price discovery mechanisms have ceased to exist. Just look at the following chart showing the correlation between stock buybacks and the S&P 500:

safe haven assets
Chart via

Most of the market is extremely overvalued. Look at price to earnings ratios, for example.
Historically, stocks have averaged a P/E ratio of about 15 – 20. A ratio of 40 is generally considered very high, while 7 and under is considered low.
The P/E ratio of Amazon (AMZN) in 2018 was 89.65. And that’s nothing compared to some other tech stocks like Hubspot (HUBS) and Square (SQ), with P/E ratios of 388 and 1052, respectively.
At the same time, companies that are not even making a profit are seeing sky-high valuations. Uber, for example, has a P/E ratio of just 0.04. Yet the stock has a market cap of $55.6 billion and is trading above $32 per share.
All of this shows that the stock market no longer reflects reality. Financial engineering has gone on for so long and to such an extent that stocks are no longer a valid indicator of economic activity.
With free money at 0% interest from central banks, companies have bought back their own stocks to outrageous degrees. Despite this, the return of holding stocks has paled in comparison to that of safe-haven assets.

Yearly Returns of Stocks, Gold, and Bitcoin

Let’s compare the year-to-date returns of stocks, gold, and bitcoin. These figures reflect the global economic slowdown and the steady failure of fiat currencies.

Stock Market Returns: <1%

Despite lots of volatility, the S&P 500 index has been almost completely flat for the past year.
Year-to-date returns look pretty good at over 16%. But that’s only because of the deep dive stocks took in Q4 2018.

safe haven assets

Over the course of the past year, the return on the S&P 500 is a meager 0.36%. That doesn’t even keep pace with inflation.

Gold Returns: 27%

What about gold?
Gold is up more than 27% in the past year as investors seek shelter from overvalued stock markets, rising debt, negative-yielding bonds, FED rate cuts, trade wars, and rising geopolitical tension.

gold price chart

Bitcoin Returns: 35%

And bitcoin? Well, that’s another asset story entirely. The best performing asset class of the last decade hasn’t disappointed.
Returns on BTC exceed 35% in the past 12 months. Year-to-date returns are an astronomical 150%!

bitcoin price chart

There’s asymmetrical upside in crypto, with potential returns far exceeding potential losses if you allocate even a small portion of your portfolio there.

While it’s wise to reduce your overall equity exposure and rotate into non-correlated safe-haven assets, dips can also be used as an opportunity to buy dividend-yielding stocks. Soon there won’t be anywhere else to earn a regular return, as the rising tide of negative real interest rates consumes global capital.

Negative Interest Rates

It’s possible the Fed could take rates into negative territory in America at some point. With such a massive debt load, there eventually becomes no other option.
Outright default or hyperinflation have been the historical outcomes of crippling debt. But that was before modern financial engineering courtesy of massive central bank intervention.

negative interest rate chart

(Notice how over the past year, as negative-yielding debt has soared, so has the price of gold).
Negative interest rates amount to a soft default. This has no precedent beyond our current time frame. The central bank of Denmark was the first to go below zero, in 2012. To the surprise of many, it did not result in stress in the financial system. In 2014, several of Europe’s central banks followed suit. Two years later, so did the Bank of Japan. Beyond this current experiment, negative interest rates have never been attempted.
With the Fed Funds Rate now at 2%, the Fed doesn’t have much room to move when the economy worsens, as it already has. A big move downward in rates leads to negative territory – there are no two ways about it.
And now President Trump is urging the Fed to cut rates by as much as 100 basis points. And yet he also claims that the economy is doing great. Why is a rate cut needed if things are just fine?  
The whole political stage on both sides has been a bad reality show for decades, but that’s beside the point. Despite his pronouncement at the beginning of every press conference that everything the Fed does is “for the good of the American people,” Jerome Powell isn’t helping anyone.
Central banks got us into this mess, ensured the problems that led to the last crisis would continue, and now have set the stage for stealing everyone’s money in the name of saving the monetary system as it begins to fail.
Many other countries aren’t buying it. They’re smart enough to ditch the fake debt-based currency that is responsible for a lot of the world’s problems.  

Dollar Losing Reserve Currency Status

President Trump has said that the American economy is “the best in the world” right now. Even though this might be true in some ways, being the cleanest shirt in the dirty laundry is nothing to brag about. And why does America enjoy a heightened standard of living despite being the biggest debtor nation in the world?
The answer is simple: The Fed gets to print as many dollars as it wants for whatever it wants.
How can they do this without causing runaway inflation?
Because those dollars get exported to other countries who are forced to use the dollar for international trade. Countries who don’t comply meet untimely ends, whether through violent regime change, internal revolution or civil war, or a soft coup.
As Paul Krugman once said, the dollar is “backed by men with guns,” therefore it’s more valuable than any other form of money.

Is this a valid metric for measuring the worth of a currency? What happens when the rest of the world revolts against this form of monetary tyranny? Not by taking on the US military, but by using alternative payment systems?
This has already begun and the trend is increasing.
Everywhere you look around the globe, examples of de-dollarization can be found. 
In Latin America, Venezuela has begun pushing for greater use of its Petro cryptocurrency, a unique kind of stablecoin pegged to the price of oil. Venezuela has faced harsh sanctions and repeated attempts to overthrow its government from within.
In the Middle East, Iran has been pursuing alternative payment methods as a means of bypassing American sanctions. The same goes for North Korea.
In the Far East, major superpowers are making big moves away from the dollar. Russia, China, and India have made agreements to cut out the dollar by not using SWIFT, the dollar-based global financial gateway.

safe haven assets

Even Europe is in on the trend, with countries like Germany, France, and the UK also participating in the elimination of SWIFT.
And let’s not forget that in April 2016, China launched its own gold price fix. There are two prices for gold, one in USD and one in Yuan, another monetary situation without precedent.
We are entering uncharted territory with everything that has been happening. Events will escalate quickly from here. There’s no better example of this than what’s been happening in the gold markets.

The Gold Bull Market of the Millennium Has Begun

The price of gold has been skyrocketing this year. While the dollar price of gold is still far from record highs, the price of gold as measured against many other fiat currencies has already reached all-time highs.

In fact, even as far back as January, gold had already hit all-time highs in 72 currencies!
Here is a partial list of currencies against which gold has hit an ATH this year:
  • Australian Dollar
  • Argentine Peso
  • Algerian Dinar
  • Mexican Peso
  • Swedish Krona
  • Syrian Pound
  • Egyptian Pound
  • Brazilian Real
  • South African Rand
  • Russian Ruble
  • Turkish Lira
  • Indian Rupee
This rally has gotten so strong that it’s hard to keep up. Just a few weeks ago, I mentioned gold consolidating over $1,450. Now it’s hovering near $1,530 at the time of writing.
Jason Hamlin of Gold Stock Bull recently increased his 2019 price target for gold from $1,600 to $1750. If the current price trajectory continues, this estimate could end up being rather conservative.

Safe Haven Assets Are the Endgame

We are entering the end of an unprecedented monetary experiment involving negative rates and trillions of fake currency units. It is not in the distant future but is kicking in the front door at this very moment. This becomes obvious when looking at the tanking velocity of money.

Chart via

A worldwide global depression is underway, and many millions of people will be caught off guard. Don’t be one of them.
We believe it is important to allocate an increased percentage of your capital to safe-haven assets like gold, silver, and bitcoin in the current environment. Some commentators are even urging as much as a 30% allocation to physical gold in light of negative-yielding debt going parabolic.
Junior gold mining stocks are still undervalued as well and provide leveraged gains versus holding gold alone. These stocks will see even bigger growth as this crisis continues to unfold.
There’s still time to protect yourself and profit from this crisis.
Subscribe to the GSB newsletter for exclusive access to our most in-depth research, real-time market updates, and our top investment ideas to help you weather the coming storm.
By |August 30th, 2019|Gold & Silver Commentary

[Originally posted on on August 30th, 2019

Sunday, August 25, 2019

Bakkt Launch Leads to Moon? Positive Crypto News

bakkt launch

  • Bakkt is set to launch on September 23rd
  • Bitcoin hash rate reached a new ATH this month ahead of halving
  • New Zealand tax authority lets citizens receive crypto salaries
  • BTC/USD bull market is far from over
August 2019 has been full of positive crypto news so far.
The Bakkt launch will bring legitimacy to crypto and attract additional institutional capital. The BTC hash rate hitting a new all-time high indicates the world’s largest cryptocurrency is doing well and miners are betting big on price increases leading up to next year’s halving event. New Zealand has issued new tax guidance for wages paid in crypto, and the bull market for BTC/USD is not over.

Bakkt: Institutional Custody and Physical-Settled Futures Contracts

Bakkt will offer custodial services for over 100 tokens on 13 blockchains, including many coins in the top 20 by market capitalization such as XRP, ETH, XLM, LTC, EOS, XMR, DASH, and more, in addition to a long list of ERC-20 tokens on the Ethereum blockchain.
In a blog post published August 16th  entitled “cleared to launch”, Bakkt CEO Kelly Loeffler described the difference between Bakkt derivatives and other platforms offering similar contracts:
“Uniquely, Bakkt bitcoin futures contracts will not rely upon unregulated spot markets for settlement prices, thus serving as a transparent price discovery mechanism for the benchmark price for bitcoin. The importance of this differentiator is only amplified by reports of significant manipulative spot market activity, and other concerns such as inconsistent anti-money-laundering policies and weak compliance controls.
Bakkt’s bitcoin futures will be exchange-traded on ICE Futures U.S. and cleared on ICE Clear US, which are federally regulated by the CFTC. Regulated exchanges differ from trading platforms, such as crypto spot markets in many respects, including risk management, compliance and market surveillance.”
The introduction of a regulated custodial service offering physically-settled bitcoin futures contracts represents a massive step forward in institutional adoption of cryptocurrency.

In addition, the existence of a regulated price discovery mechanism for bitcoin could make regulators more likely to approve a bitcoin ETF, another bullish development.

Bakkt Launch a Price Fix?

Some have said that the Bakkt launch could be used to manipulate crypto prices. After all, gold and silver prices are “fixed” on the COMEX every day and have been manipulated by banks using naked paper shorts.
There are two reasons this isn’t true for bitcoin, and they can be explained in short order.

bakkt launch
First, Bakkt isn’t cash-settled like most other derivatives platforms. It’s physical-settled, meaning contracts payout in the underlying asset, in this case, bitcoin.
Second, bitcoin is a digital asset that can’t be duplicated at will, unlike fiat currency. Users can take ownership of their private keys and nothing fake (e.g., naked paper shorts) can be created in their place. This would pull the rug out from underneath any price-fixing mechanism, as the asset would no longer be there.

Bitcoin Hash Rate Reaches New All-Time High

While everyone likes to discuss the dollar price and market capitalization of bitcoin, hashrate is one key metric that often gets overlooked. It’s easy to argue that hashrate is more important than any other factor when evaluating the health of a mineable cryptocurrency.

BTC hashrate chart via

Coindesk reported on August 5th:
“According to data from mining services operator, the average bitcoin mining hash rate over the last two weeks has reached 71.43 quintillion hashes per second (EH/s), up from 64.49EH/s on July 23. The threshold was breached as bitcoin adjusted its mining difficulty at block height 586,672 on Monday 2:52 UTC – that is a 6.94EH/s, or 10.78 percent jump since mid July. 
Bitcoin mining difficulty is a measure of how hard it is to compete for mining rewards on bitcoin. Just how difficult the bitcoin software makes it to generate new blocks adjusts every 2,016 blocks – approximately every 14 days – to ensure the block production time remains about 10 minutes at the next cycle.”
The BTC hash rate fell sharply from its ATH just days after reaching its new high as torrential rains led to mudslides that mucked up several large Chinese mining operations, as Coindesk also reported. 
Still, we remain confident that mining power will bounce back, as Chinese miners rebuild operations and compete for new blocks before the 2020 halving.
For a countdown until the next halving, see There are 38,700 blocks and 253 days left to go at the time of writing.

Outlook for BTC/USD Remains Bullish

While the tremendous bull run that began in April of this year seems to have stalled out, it doesn’t appear as though the bears have gained control.
Traders are watching for support at the $9,500 level to hold in order to maintain the bull market. But 9,180 is the major support level to be wary of.
A breach below this price could signal a significant downtrend.
To the upside, major resistance points are at the Fibonacci retracement levels of $12,00 and $13,700.

BTC/USD Chart via

Failure to break through either of these support or resistance levels within the next few months could indicate BTC/USD is entering a period of consolidation. For now, it’s too soon to tell. The Average Directional Index is indicating a weak trend (in other words, selling or buying pressure isn’t too intense), and while BTC has been making lower highs, it has not been making lower lows. This is a hopeful sign for the bulls.
In my view, BTC under $12,000 is an obvious buy, and under $10,000 is a super buy. If the support levels mentioned are breached in the near term, however, it may be wise to wait for a bottom before acquiring additional coin, as further downside could be ahead.

New Zealand Tax Authority Issues Crypto Guidance

Citizens of New Zealand are one step closer to using cryptocurrency as actual currency.
The island nation’s tax authority has issued guidance for how wages paid in crypto will be taxed.  
Cointelegraph reported on August 17th:
“The national tax authority of New Zealand, the Inland Revenue Department (IRD), has recently published binding rulings and guidance for salaries and bonuses paid in crypto, made under s 91D of the country’s Tax Administration Act of 1994. This ruling applies only to salary and wage earners and not to self-employed individuals, and only for services performed by an employee for a fixed amount and as a regular part of his/her remuneration.”
While this ruling isn’t quite what some crypto enthusiasts hoped for, in terms of classifying crypto as legal tender (like Japan has done), it’s still a huge step forward.
Classifying crypto as an asset results in double taxation and doesn’t make any sense. You can’t tax currency.
Receiving crypto as payment when it’s an asset makes it subject to income tax, and then again subject to capital gains tax when it gets converted to fiat currency. The next logical step then would be for New Zealanders to be allowed to make tax payments in cryptocurrency, as locals have been hoping for some time.
Now all eyes are on the IRS to issue its new guidance for American taxpayers, which the organization has promised to do very soon.

GSB is on the Money

Events taking place so far in 2019 have begun to make clear the effectiveness of the GoldStockBull philosophy and investment strategy. Safe haven assets are seeing incredible gains as a result of increasing global instability and central bank debauchery, with gold, gold mining stocks, and bitcoin providing the best returns anywhere in the market.

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