Why I’m Buying Gold and Bitcoin - Part 3

Published August 17, 2020

This is part 3 of a 4 part series. The other posts can be found here:

The Market is Rigged

STONKS only go up!

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The game is rigged, and people are starting to realize it.

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The market is at all time highs.

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Even though the economy is at all time lows.

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Source: Twitter - Bianco Research

The Buffet indicator of market valuation is flying off the chart.

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Any guesses why?

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Source: Twitter - Preston Pysh

The US gov’t cannot afford for the market to go down.

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Source: Tree Rings - Luke Gromen

The Fed will do everything it can to support the market. doom

Source: Bloomberg - John Authers

Even Pelosi admitted it

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Source: Nancy Pelosi Interview w/CNN 7/21/2020

Why is that? Because the stock market is responsible for a huge % of GDP growth. It effectively has become the economy.

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Source: Tree Rings - Luke Gromen

Also because of the looming retirement crisis.

Nearly all baby boomers are retiring this decade, and they don’t have enough saved up.

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Source: Real Vision

Bond yields are not enough to sustain their retirement plans, so they have bet the farm on equities.

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Source: Real Vision

“The real driver of net worth, has been the equity market… and is the only driver going forward. This means people have doubled up their bets, and tripled up their bets. They have this bet directly in equities, and in their pension plans.

The pension plans themselves have a record holding of equities vs fixed income. They also have record risk… risk seeking investments…because nobody can fund their retirements.

It’s the same story at the government level…defined benefit pension level…and same story at household and 401Ks.

Nobody has enough money to fund retirements, so everybody is taking the maximum risks.”

-Real Vision - Raoul Pal

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Source: Bloomberg

“Nobody has owned this many equities, or equity like instruments, risk seeking instruments, ever before. When the valuations have been so high. That is a dangerous setup.”

-Real Vision - Raoul Pal

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Source: Real Vision (Annotated by me)

“All of the life savings that are in equities, which is basically 70% of the entire household balance sheet, is going to get wiped out in one recession. And they won’t be able to buy back, because they won’t have an income to buy back. This is the biggest problem I can see today.”

-Real Vision - Raoul Paul

This explains why markets have to keep going up. doom

Source: Yahoo - S&P 500 chart

But are they really going up? doom

Source: Twitter - Lyn Alden

Same S&P 500 chart, but priced in terms of Bitcoin.

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Source: Twitter - Preston Pysh

Stocks went up in Venezuela…

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Source: Twitter - PlanB

And in Zimbabwe too…

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Source: Twitter

When their currency crashed.

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Source: International Monetary Fund imf.org (annotated by me)

Our currency is failing, and countries are starting to take action.

China, our biggest creditor, has been cutting usage of dollars for trade, and investing their USD’s around the world (rather than buying Treasuries).

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Source: Tree Rings - Luke Gromen

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Source: Tree Rings - Luke Gromen

They are trying to get away from dollar dependence.

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Source: FT

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Source: Bloomberg

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Source: Bloomberg, Interview with Ray Dalio

Is the USD’s status of global reserve currency at risk?

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Source: Reuters

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Source: FT

Probably not going to happen over night.

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Source: FT

And maybe not at all. The Dollar may even get stronger as other central banks print.

It’s a race to the bottom.

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Source: Katusa Research

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Source: Katusa Research

But a super strong dollar means havoc in the US Treasuries market, furthering a flight to USD.

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Forcing the Fed to print even more.

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Source: Tree Rings - Luke Gromen

Strong dollar against other currencies is one measure. But how about against gold?

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This goes back to the increased money supply issue.

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Central banks around the world have been buying more gold.

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Source: https://centralbankgold.org/2020-survey

Since 2009… coincidence?

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Reserve currency status is typically the last thing to go in a declining empire.

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Source: The Changing World Order - Ray Dalio

But when it goes… doom

Source: The Changing World Order - Ray Dalio

“History teaches us that they typically turn to gold, other currencies, assets in other countries not having these problems, and stocks that retain their real value.”

-Ray Dalio

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Source: The Changing World Order - Ray Dalio

I have no idea how it’s all going to play out, but this is the current macro backdrop we’re in.

Can you see where I’m going with this? doom

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