Why I'm Buying Gold and Bitcoin - Part 4

Published August 19, 2020

This is the final chapter of my 4 part series. The other posts can be found here:

Scarcity in a World of Unlimited Money Printing

“We are witnessing the Great Monetary Inflation (GMI)—an unprecedented expansion of every form of money unlike anything the developed world has ever seen.“

-Paul Tudor Jones

Remember this chart?

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Decades of future growth was pulled forward, fueled by debt. We’re at the end of the big debt cycle, and have been in a phase of deflationary deleveraging since the global financial crises.

Central Banks have been fighting it for years.

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Source: SingularityHub - Marc Prosser

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Source: Treasury & Risk

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Source: CNBC

The Fed has struggled to reach its 2% inflation targets.

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Source: US Inflation Calculator

Having to print more to get the same results.

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Source: Bloomberg, EPB Macro Research

Demographics are also working against them.

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Source: Real Vision

COVID19 is accelerating this trend.

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Source: Foreignpolicy.com

And technology is supercharging it.

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Remember Moore’s law? (Log scale!)

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Source: The Price of Tomorrow - Jeff Booth

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Source: SingularityHub - Marc Prosser

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Source: iot for all - Calum McClelland doom

Source: iot for all - Calum McClelland

Will they change the system?

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Source: The Price of Tomorrow - Jeff Booth

Or continue to use the same tools?

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Source: CNBC

In fact, they are doubling down.

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Source: Twitter - RudyHavenstein

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Source: The Price of Tomorrow - Jeff Booth

In a world of unlimited fiat, I’m investing in scarce assets.

Gold is scarce.

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Source: Visualcapitalist

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Source: Gold.org

This equates to a 1.5% increase in supply of new gold each year.

Fiat money has unlimited supply.

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The more fiat created, the higher the price of gold. doom

Source: Lyn Alden

Bitcoin is digital gold.

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-Paul Tudor Jones

For the next 4 years, the annual increase in newly mined bitcoin is set to 1.8%. Then it will drop down to .9% and continue to be cut in half every 4 years.

This is due to Bitcoin’s fixed monetary policy.

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What about the Dollar? The Fed increased the money supply by over 20%… in just one quarter.

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Source: Twitter - Lyn Alden

“Owning Bitcoin is a great way to defend against the GMI (Great Monetary Inflation), given the current fact set. As Satoshi Nakamoto, the anonymous creator of Bitcoin, stated in an online forum around the time he launched Bitcoin, ‘the root of the problem with conventional currency is all the trust that’s required to make it work. The central bank must be trusted not to debase the currency, but the history of fiat currencies is full of breaches of that trust.’”

-Paul Tudor Jones

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Source: Twitter

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Source: Twitter

Markets are starting to lose trust.

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Source: Twitter

Gold also does well when rates go to zero, and as opportunity costs increase for sitting in negative yielding treasuries.

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Source: Bloomberg

The Fed is trapped. And can’t afford to let rates rise.

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Which means continued strength for gold as investors seek a safe place to park their assets. doom

Source: Bloomberg doom

Source: Bloomberg

Everyone is bullish on gold.

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But it makes up only a small % of portfolios.

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Source: Bloomberg

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Source: Twitter

What about Bitcoin? The current market cap is 2.5% the size of the gold market.

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Source: Visualcapitalist

What happens when people start treating Bitcoin like Gold? doom

Source: Bloomberg

There is a lot more upside to Bitcoin than gold.

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-Paul Tudor Jones

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Source: Twitter

In fact, institutional investors are starting to move into Bitcoin.

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Source: Forbes doom

Source: Twitter

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Source: Forbes

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Source: CNBC interview with Matt McDermott - head of Goldman Sachs Digital Assets group

And so are corporations

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Source: Twitter

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Source: Twitter

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Source: Pomp Letter

Crypto is here to stay. doom

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With just a modest allocation, Bitcoin can dramatically increase both risk adjusted and absolute portfolio returns.

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Source: Twitter

Bitcoin is up 66% this year, vs 35% for gold. doom

It’s also better than gold as a hedge against central banks.

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Source: Twitter

At this point, I feel like it would be irresponsible NOT to have a huge allocation to Gold and Bitcoin.

And that my friends, is the Doom Portfolio.

What could go wrong?

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