Bitcoin, the market, and EBC - some thoughts. A friend on another iHub board asked about Bitcoin because I've been recommending it for quite a while. It has blasted past the 2017 high of $20,000 and is over $27,600 as I type on this Sunday morning.
Like many, she is concerned about the market generally, and wonders what will best soothe the pain if there is another crash. This got me thinking. Bitcoin, EBC, gold, cash, or the market indices generally?
Cash is maligned by so many. It will lose value (1-5% per year based on who you believe about inflation). I will be raising more because the stampede away from it to overbid "inflation-resistant" assets is getting extreme, which buyers will discover when their low interest mortgages and margin debt has to be repaid.
EBC is my second choice for protection with upside. Best market area in the country and a conservavtive management. Little exposure to high risk borrowers, and priced below book. That's the cushion. Even if the stock price were to suffer short term, only an economic melt-down in the Boston area, with the country's best hospitals and schools, and a low level income tax (that cannot be graduated due to the state constitution) and real estate tax rates that cannot be raised more than 2 & 1/2 % except by 2/3 override, would cause permanent damage.
Bitcoin over gold, definitely. Only 21 million can be created, and 4 million are permanently lost due to owners losing their private keys, which cannot ever be recovered. Unlike the 2017 crash from $20,000, the market is now being dominated by institutions like MassMutual, Microstrategies, Guggenheim and numerous private wealth funds. PayPal and Square now allow Joe public to participate easily. The owner of the NYSE has developed a premier exchange for institutions to trade crypto futures, and Fidelity has adopted safe custody solutions for institutional ownership. Regulation is coming with enhanced KYC and tax reporting requirements. Although this hinders the libertarian purpose of Bitcoin (anonymity for transfers without intermediary banks) it is bullish for pricing and will be embraced by the growing institutional ownership which wants regulated Bitcoin legitimacy to support decisions to buy it. If the very wealthy deploy just 1% of their worth to Bitcoin, the price wil quadruple by some counts.
Gold is next to last. It's too expensive at $1,900/oz. when Barrick can extract it for an all-in cost of less than $1,000/oz. This high price will result in more production,which is what happened with oil. It could get a short term boost with a crisis, but it lacks the portability of Bitcoin, needs to be stored, is expensive to purchase and cannot be moved easily. If the price really took off, half of the world's supply is in jewelry, which will be melted down in spite of sentiment. Paper ETFs, which rely on counterparty contracts for ownership and concentrate storage in London have extreme risk.
Finally, we come to stocks, which are going up only because people are fleeing cash. The multiples against future earnings are stretched beyond belief. Still you have to own some stocks. At this stage, you need to pick a few and avoid indices, although indices drag down all stocks to some extent. Top on my list now, after EBC, is Weyerhauser (timber and land) Exxon (priced below book) and Facebook, which will have litigation risk, but fabulous future opportunities. I'm shedding my Russell indices which went up too fast, and may even sell some of my beloved (but overpriced) Costco and Microsoft, simply to have cash. If I miss the next leg(s) of a FOMO market, I can handle that a lot easier than a meltdown like 2008.
Anyway, now you have it, with EBC checking the boxes for future profits (and safety), Bitcoin for growth, cutting back the indices, and not buying more gold (but keep what you have, because you paid a lot to own it). Just an opinion, of course, which is worth what you are paying for it.
Cheers!
AI
