What’s Good for Gold Is Good for Bitcoin

Gold… and the End of American Empire

“It’s easy to mock gold bugs, but their moment may finally have come,” writes Rana Foroohar in the Financial Times.

Foroohar, the FT’s New York-based “global business columnist,” is a reliable weather vane for the power elite’s opinions.

Since at least early 2023, she’s been worried about a topic that was once the exclusive preserve of, well, gold bugs — the prospect that the U.S. dollar might lose its status as the globe’s reserve currency.

“Gold is historically an inflation hedge. But it’s also something investors turn to when they are worried about the stability of the status quo,” Foroohar writes this week. “It will languish for decades, then break out when the world is at a major pivot point, as it is now.

“It’s no secret that the Washington consensus — which expected emerging nations to fall in line with free-market rules written by the West — and the postwar Pax Americana are over.

“Trade tensions between the West and China are growing. Meanwhile, the weaponization of the dollar following the outbreak of war in Ukraine has quickened moves in many countries, most importantly China, to sell Treasury bills and buy gold as a hedge against America’s financial might.”

Which brings us to another hot take from the mainstream that we didn’t expect to see…

From the beginning when Russia invaded Ukraine in February 2022, Paradigm’s macroeconomics maven Jim Rickards warned Americans would rue the day when Washington immediately froze $300 billion in U.S. Treasuries held by the Central Bank of Russia.

Ever since, leaders of every country around the world that might be on the outs with Washington began wondering What if we’re next?

Result: The dollar’s share of global currency reserves plunged from 55% in 2021 to 47% in 2022.

But the Beltway class is undeterred: In recent months, both the Biden administration and GOP House Speaker Mike Johnson have talked openly of taking the freeze a step further — seizing Russia’s Treasuries and handing the proceeds to Ukraine.

Remarkably, The New York Times gave space to Christopher Caldwell — part of the paper’s regular Op-Ed rotation — to warn against such a reckless step.

“The very act of seizing Russian assets would pose dangers to the U.S. economy,” Caldwell writes, “because other countries, not just Russia, would view it as an act of brigandage. This could weaken the dollar’s status as the main global reserve currency.

“The dollar is probably the most valuable strategic asset the United States has. We exercise a degree of control over the world economy because the world, for trading purposes, allows its transactions to pass through our currency. This leaves us with cheaper transaction costs and lighter financial burdens. It gives us leeway to run up debt ($34 trillion of it so far) that other countries lack.

“If Russia, China and other diplomatic rivals were to decide that their dollar assets were vulnerable and that they could no longer trust the dollar as a means of exchange, we would feel the pain of that $34 trillion in debt in a way that we don’t now.”

Yep. Huge quantities of dollars sloshing around overseas that no one wants anymore would come back home in a tsunami — potentially making the 9% inflation of 2022 look like a picnic.

Which brings us back to gold and back to Rana Foroohar’s FT column: Even if Treasuries held overseas weren’t at risk of confiscation, they’re at severe risk of losing value.

“The final reason to be bullish on gold,” she writes, “is the picture on U.S. debt and deficit, which is quickly becoming unsustainable. The most recent Congressional Budget Office projections put U.S. debt at 99% of GDP by the end of this year, and have it on track to reach 172% by 2054. If this happens the result would be monetization, inflation, financial repression and a period of extreme chaos in monetary policy and markets. Bad for the world; good for gold.”

Foroohar approvingly quotes mainstream forecasts of gold rising from $2,400 now to $4,000 in “the not so distant future.”

What’s Good for Gold Is Good for Bitcoin

What’s “bad for the world” and “good for gold”... is also good for Bitcoin.

For younger people especially, Bitcoin has a store-of-value appeal very much like gold.

In recent years it’s been Bitcoin enthusiasts — not gold bugs — who’ve red-pilled millennials and Gen Z types about the hazards of “fiat” currency backed only by the hollow promises of governments.

“I could potentially see Bitcoin to become the 21st-century gold,” says Deutsche Bank analyst Marion Laboure.

Barron’s points out in a recent article — as we did earlier this year — that the launch of a gold ETF in 2004 helped propel a seven-year gold rally. And the same is in store now that Bitcoin ETFs are available.

And BCA Research said the following just last week: “Gold and Bitcoin are conceptually joined at the hip because the value of both comes from their non-confiscatability by inflation, by bank failure and — in the case of Bitcoin — by state expropriation.” Even if a government bans Bitcoin, it still has value because it can be easily transferred to buyers in another country in exchange for fiat.

One final analogy: In the same way that tiny gold-mining stocks can radically outperform gold bullion… tiny alt-coins can radically outperform Bitcoin. We’re talking about the potential to 100x your money or more.

And now — with Bitcoin’s every-four-years “halving” just days away — there’s no better time to consider alt-coins as part of your portfolio strategy.

On Sunday night, our James Altucher discussed his top six coins you’ll want before the halving… and he gave away the name of one of them. Click here for the name and ticker, 100% free of charge.

The IPO Drought Is Over

“The IPO window has finally opened, signaling a return of investor enthusiasm to the markets,” says Paradigm income-investing authority Zach Scheidt.

“Reddit's IPO saw the stock price jump 50% from the initial offering price, while Astera Labs surged 70% on its debut.”

Zach is quick to caution this is no sign of a stock-market bubble, not now: “Today’s volume of new IPOs hitting the market is still well below the frothy levels we’ve seen before, like the dot-com boom when hundreds of new stocks went public each year. The current pace is more moderate, and the total dollar amount being invested in these new listings isn’t overshadowing the broader market.”

Still, there’s an old saying about how the best time to buy an IPO is before it goes public. That is, the biggest gains can be had only by investors with deep pockets who can take advantage of a private placement faraway from the stock exchange.

But there’s a way you can access those investors with deep pockets — via the private equity outfits that do trade publicly. One of Zach’s longtime favorites, which we’ve spotlighted before, is Blackstone Inc. (BX).

“As these IPOs materialize,” says Zach, “Blackstone will be able to lock in profits and boost its payout to shareholders. In addition, Blackstone has roughly $200 billion in ‘dry powder,’ or available cash it can use to invest in new ventures.

“This is something I’m especially excited about, since there’s no shortage of opportunities in today’s market, leading to more growth down the road.”

After another nasty day yesterday, the major U.S. stock indexes have arrested the skid.

At last check, the S&P 500 is down only four points to 5,058 — for the record, a 3.75% fall from the index’s record close on March 28.

Still, Paradigm trading pro Greg Guenthner is on edge: “The five-plus month rally has been perfect — almost too perfect,” he wrote his Trading Desk readers yesterday. “Time for a little pain to scare some bulls?”

Gold is steady at $2,381 but silver got whacked overnight in Hong Kong and the bleeding continues now at $28.21. Crude has inched back above $85.

Bitcoin’s pre-halving slump — not an unprecedented occurrence before the next leg up — has brought the flagship crypto below $62,000.

The IRS’ Advice for Criminals

I know Tax Day has come and gone but… did you report your illegal activity on your 1040?

I mean, not that I’m suggesting you’re into drug dealing or “money laundering” or whatever… but according to IRS Publication 17, "Income from illegal activities, such as money from dealing illegal drugs, must be included in your income on Schedule 1 (Form 1040), line 8z, or on Schedule C (Form 1040) if from your self-employment activity."

Or maybe you’re fencing some stuff as a side hustle? The IRS has specific guidelines in that instance: "If you steal property, you must report its fair market value in your income in the year you steal it unless you return it to its rightful owner in the same year."

You can’t make this stuff up. “Ultimately, the IRS guidance perfectly sums up how patently absurd so much of the tax code is,” says Reason writer Joe Lancaster — who reminds us that the feds ultimately nailed the gangster Al Capone for tax evasion, specifically on the grounds that he failed to report his income from illegal activity.

Well, don’t feel too bad if you forgot to report your income from illegal activity. You can always file an amended return…

Mailbag

“You guys are aware that the numbers for the Dow, S&P 500, gold, etc., that you put in the 5 Bullets are way out-of-date by the time you publish the newsletter and it gets to us readers, right?” a reader writes.

“We know it takes a few hours to write the Bullets, but if people are that interested in the S&P 500 minute-by-minute value, they can look it up all day online and get a current number, including when the markets close.

“I’m afraid you are using up valuable space in the 5 Bullets putting numbers that are as relevant as the ones in yesterday's newspaper. Just saying.”

Dave responds: I get where you’re coming from. But the point isn’t to convey the “minute-to-minute value.” The point is rather to take Mr. Market’s temperature each day.

That’s hard to do without some kind of number as a reference point — to wit, oil’s reaction yesterday after the Iranian attack on Israel.

Too, even if the numbers aren’t up to the minute, we aim to give them context as we did today — i.e. how far the S&P has fallen from its record high (not much) or how while Bitcoin is down in recent days it’s hardly out. That won’t change by the time you read this, even if the exact numbers do.

Granted, Mr. Market’s temperature can change over the course of a day — a morning fever can turn to afternoon chill and vice versa — but usually after the first hour of stock trading the day’s tone has been set.

What we are modifying this spring is our approach to the economic numbers. We’re dialing back on what we mention unless there’s a story the mainstream is overlooking or the market reaction is so obvious we can’t ignore it.

“I wanted to vote in favor of a memecoin advisory,” writes the first of two readers reviving a topic from earlier this month.

“I'm a member of James’ crypto investor group, and as a tech nerd I've always liked the long-term technical potential of crypto.

“However I also like money, and if there's a way to make a quicker buck from crypto that's ethical then I'm all for it. Memecoins are pretty dumb, but it's no secret that they're intended for nothing but a quick profit before they crash, so I have no problem with trading them. I've kept away from them so far because I have no idea how to make an intelligent gamble in that market, but you guys have much smarter people than me on board, so I'd be prepared to take a chance with it.

“My only concern would be the cost - I'm in New Zealand and the exchange rates are pretty bad right now with US$1 being around NZ$1.70, which hurts a little... I hope to see it go ahead anyway.

“I love your 5 Bullets newsletter by the way. The world's a crazy place and getting crazier by the day, and it's good to get some diverse and informed opinions on what's happening.”

Another reader seconds those remarks. A memecoin service is “really no different than providing Greg's Trading Desk option service in the sense of it being a speculative bet that readers can choose to use or not.

“The question I have with you offering a service of this sort in a business sense is twofold. First, most memecoins are not offered on the exchanges that are available for U.S. citizens. You'll need to provide instruction on how to access your trades on non-U.S. exchanges, which may discourage potential clients.

“Second, the narrative case for memes is generally only useful during a crypto bull market, which we are currently in and will probably end in 2025. What then?

“Thanks for the 5 Bullets. I enjoy all your analysis and comments daily.”

Dave responds: Excellent points — and ones I assure you we’re taking into consideration as we decide whether to move forward.

I should mention that the first of these two readers is a charter subscriber to Altucher’s Early-Stage Crypto Investor. He’s seen many ups and downs, but he sounds like a satisfied subscriber.

There’s no better time than now to join his ranks. With the Bitcoin halving coming sometime Friday or Saturday, a new breed of tiny cryptos is set to soar in the coming months — with the potential to turn a tiny grubstake into a fair-sized fortune. And as James shows you here, the opportunities from this halving will prove more lucrative than any of the previous three.

Best regards,

 

 

 

 

Dave Gonigam
Managing editor, Paradigm Pressroom's 5 Bullets