That Was Boring

by JDH on January 23, 2021

Last week I predicted we were in for a week that would change the world.  Well, not so much.

The Inauguration was a non-event.  The stock market didn’t do much.  Gold is trading about where it started the year, which is strange for the month of January.

Bitcoin, on the other hand, went on something of a wild ride.

After starting the year under $28,000, Bitcoin had a new year’s spike to a new all-time high of $42,000 on January 8, and then promptly dumped to just over $30,000 on January 11, bounced back over $40,000 on January 14, and then dumped again, touching $28,700 on January 21.   As I write this Bitcoin is back over $31,500, but wait 5 minutes and the price will be different.

So is Bitcoin a good store of value if it’s “value” can change by 33% in 3 days?

Is that not the very definition of a bubble?

Or a Ponzi Scheme?

Probably, but does it matter?

Is real estate a bubble?  Of course.  What about stocks?  Yup.

As long as the government prints money, that money will go somewhere, and that somewhere is assets like stocks, and real estate, and crypto.  The party will end when the government stops printing, or when speculators believe that the government will stop printing.  Until then, it’s full steam ahead.

Will Biden stop printing?

(That’s a rhetorical question; you know the answer).

So, as long as the money spigots are open, certain stocks will do well, and Bitcoin will also do well.  It’s just math.

But what about the crash in Bitcoin?  Here’s the truth: As of Saturday morning, January 23, 2021 at 8:00 am Eastern Time Bitcoin is trading at around $31,500, which is exactly where it was on January 2, 2021.  Bitcoin is actually up slightly on the year, and if the “crash” flushed out the week hands, it is likely to go higher over the next few weeks.

Institutional investors are still buying, and I see no reason why the smart money wouldn’t have viewed this correction as a great buying opportunity.

I believe it is also becoming conventional wisdom that you should have between 1% and 5% of your portfolio in Bitcoin, for the possible upside, but also as protection against a stock market crash (which is inevitable at some point).

For Canadian investors, who want to hold crypto in their RRSP or TFSA, QBTC or QETH can be purchased in Canadian or US dollars, and you don’t have the hassle of crypto exchanges and wallets.

Just a thought.

Perhaps next week something will happen in gold and we can discuss that.  More next week.

 

The Week That Will Change The World

by JDH on January 16, 2021

Wednesday, January 20, 2021, is Presidential Inauguration Day in the United States.  It appears that tens of thousands of National Guard troops and other military are already in Washington D.C., preparing for the Big Day.  It also appears that the public is not invited.  Large gatherings are not permitted during the COVID-19 pandemic, so the inauguration will be a virtual event.

So, if the military is blocking access to D.C., and not letting members of the general public in, why do you need tens of thousands of troops to protect the festivities?  Interesting question.

I have no idea what will happen on Wednesday, but if the events of 2020 were any indication, whatever happens on Wednesday will be totally unexpected.  A big surprise.  A day that will change history.

So how then does one speculate on the uncertainty?

VIX

You could buy the VIX, the CBOE Volatility Index, a measure of volatility.  Prior to the election, the VIX spiked, hitting over 40, before spending most of December and January in the 20 to 24 range, where it closed on Friday.  The RSI is now at 53, typically a very good buy level.

Of course, you can’t actually buy the VIX, just like you can’t buy the DOW; it’s an index.  There are various ETFs and Exchange Traded Notes you can buy, like XVZ –  iPath S&P 500 Dynamic VIX ETN.  Its performance is similar to the VIX, but not identical.  It’s a gamble, so you should not play with big money, and you should treat it as a short-term hold.  Buy on Monday, sell on Wednesday or Thursday, and hope you don’t lose all of your money in the process.

Gold

A more obvious way to play uncertainty is the traditional safe haven, gold.  The seasonality of gold price movements generally leads to a strong up move in January, and over the first few months of the year.  That has not happened, yet, in 2021.  Gold started the year around $1,900, and closed on Friday at $1,829.

The uptrend line is broken if gold falls much below $1,800, but the downtrend line needs a close above $1,950 to assert a return to higher prices.  Hard to see a $2,000 gold price in the cards, imminently.  Gold last traded at $2,000 on August 11, 2020.

However, if you are looking for a way to hedge against whatever may happen this week, holding some blue chip gold shares is an obvious choice.

Can’t hurt.

Bitcoin

This brings us to the biggest Ponzi Scheme since the Tulip Mania, Bitcoin.  I won’t bother telling you the price or showing you a chart, because whatever I show you will have changed in the last five minutes, making the history out of date.

I will say that on January 14 Bitcoin did touch $40,000, again, so it ain’t dead yet.

Yes, Bitcoin is air.  You can’t touch it or hold it like gold, and you can make anything with it.

But, if others believe it has value, it does, and it seems prudent to me to have 1% to 5% of your portfolio parked in this speculation.  See my comments from two weeks ago on QBTC, QETH, and how to invest in crypto.

My final advice: sit back and watch the show.  It should be a good one.   See you next week (if the world is still here).

 

Bitcoin: The Runaway Train

January 9, 2021

Interesting week, eh?  I don’t mean politics.  I don’t care about that.  I assume it’s all theatre.  I mean the crypto world. I won’t bother showing you the charts, because they change every minute, 24-7, but I can tell you that on January 1, 2021 Bitcoin traded at $28,572, and it peaked on January 8 […]

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QBTC, QETH, Bitcoin, and How to Invest

January 2, 2021

As I write this on Saturday morning, January 2, Bitcoin has just reached yet another all-time high of just shy of $31,000 USD.  Ether, the cryptocurrency based on the Ethereum blockchain, traded over $750, so while not an all-time high, it is getting close to its all-time high achieved three years ago. I am not […]

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Will Bitcoin Replace Gold as a Safe Haven in 2021?

December 26, 2020

No. No, Bitcoin will not replace gold as a safe haven in 2021. There, I just saved you from having to read my disjointed ramblings on that subject.  For those who have time to kill on this Boxing Day weekend, here is a more detailed answer: Yes, 2021 will be the year that Bitcoin enters […]

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Bitcoin, Ethereum and Gold

December 19, 2020

Three charts for your viewing pleasure:  all three are one-month charts, as of the morning of December 19, 2020, with a red horizontal line drawn from the short term high that occurred early in December.  First, gold: As you can see, gold is back to about where it started the month, around the $1,880 level, […]

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Gold – An Update

December 12, 2020

Not a great last four weeks for gold, eh? On November 9 gold peaked at $1,965, and then crashed to $1,849 later that same day.  November 30 saw a further low of $1,763, before recovering to the close on Friday at $1,839. The gold chart shows an obvious wedge formation.  Which trend will prevail?  The […]

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My Most Bizarre Successful Investment: Canadian Bank Stocks

December 5, 2020

Given that the world is in lock down, unemployment is high, borrowers were granted up to six months in interest deferrals due to the pandemic, and businesses are going out of business, how do you think bank stocks are doing? Very well, it turns out. How is that possible? Government stimulus, I assume, in many […]

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Bitcoin – What’s Really Going On

November 28, 2020

Bitcoin was trading at $3,825 on march 13.  On November 25 it traded at just under $19,500.  It then “crashed” to $16,225 the next day.  And so it is with Bitcoin. Is Bitcoin a scam?  A Ponzi Scheme? Perhaps. Is the US Dollar a Ponzi Scheme? Perhaps. But that’s not the point.  If people believe […]

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Nothing More to Add

November 21, 2020

I have nothing more to say this week.  I’ve said it all before. A few weeks ago I talked about being in a Holding Zone, and last week I talked about the possible Rise Before the Fall, and those comments are still valid. We are in a period of huge uncertainty. The election results are […]

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