Decrypting Crypto

by | Sep 22, 2021 | Archives

The dollar is doomed.  Always has been. Always will be.  The only question is when… the downfall.

Like all currencies, no matter how well they work, governments cannot leave them alone.

The nature of government is to spend more money than it has.  This wanton spending creates inflation.  Inflation eventually destroys almost all currencies that are capable of being manipulated by governments.

That’s why gold has always been a good money.  Governments cannot manipulate (much) how much gold is in the ground and what it requires to mine it.

But governments will attack anything that threatens their ability to control money.

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Image from “Understanding The Correlation Between Gold And Bitcoin” (1)

For example in the 1930s, gold rose in importance as the US economy collapsed.  FDR signed Executive Order 6102, forbidding the “hoarding of gold coin, gold bullion, and gold certificates within the continental United States”.  The “Trading with the Enemy Act of 1917” and “Emergency Banking Act” were used to limit American gold ownership.   The penalty could be as much as $10,000 and/or up to five to ten years in jail!

The stated reason for the ban was that hoarding of gold made the depression worse.

The real reason was to remove constraints on the Federal Reserve on increasing the money supply during the depression.

That law was not repealed until 1974.

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Government opposition is one reason why cryptocurrencies are at risk.

A 2019 message at this site, Crypto at Risk outlined how the US government via the Federal Reserve Bank and IRS had started the cryto attack.

The Wall Street Journal just reported another way that the US government resisting cryptocurrencies.

An article “U.S. to Target Crypto Ransomware Payments With Sanctions” (2) shows one more way the government is attacking crypto currencies.  It quotes John Paulson, a former hedge-fund manager, who made a killing betting against the U.S. housing market before it collapsed.

“Cryptocurrencies, regardless of where they’re trading today, will eventually prove to be worthless.
Once the exuberance wears off, or liquidity dries up, they will go to zero. I wouldn’t recommend
anyone invest in cryptocurrencies,” John Paulson, president and portfolio manager of U.S. investment firm Paulson & Co., told Bloomberg Wealth in an interview that published on August 30. Paulson said it wasn’t even worth shorting bitcoin given its extreme volatility, and instead suggested investors sock money into bullion, due to “a very limited amount of investible gold.” Paulson sees investors pulling money out of fixed income and cash as inflation rises, then heading toward the only logical destination — that is, gold.

However it also pointed out that other top-rated money-managers, including Stan Druckenmiller and Paul Tudor Jones, remain bullish on crypto.

The article continues: Biden administration hopes to disrupt digital finance infrastructure that facilitates ransomware cyberattacks, a threat traced to Russia

The Biden administration is preparing an array of actions, including sanctions, to make it harder for hackers to use digital currency to profit from ransomware attacks, according to people familiar with the matter.

The government hopes to choke off access to a form of payment that has supported a booming criminal industry and a rising national security threat.

The Treasury Department plans to impose the sanctions as soon as next week, the people said, and will issue fresh guidance to businesses on the risks associated with facilitating ransomware payments, including fines and other penalties. Later this year, expected new anti-money-laundering and terror-finance rules will seek to limit the use of cryptocurrency as a payment mechanism in ransomware attacks and other illicit activities.

This article provides a clue on one way crypto currencies can be positioned in a portfolio.

Another article in yesterday’s Wall Street Journal shows another government attack by the SEC.

The article “SEC’s Gensler Doesn’t See Cryptocurrencies Lasting Long” says:  Regulator says history of ‘wildcat banking’ in U.S. shows limited viability for private forms of money

Securities and Exchange Commission Chair Gary Gensler said Tuesday he doesn’t see much long-term viability for cryptocurrencies, underscoring the importance of protecting investors in the market and bringing it under regulatory oversight.

On Tuesday he took aim at stablecoins, a fast-growing segment of the crypto market that has attracted increased scrutiny from regulators in recent months. These tokens—including Tether, USD Coin and Binance USD—are pegged at a one-to-one ratio to the dollar and say they are backed by high-quality assets. They are used primarily to trade other cryptocurrencies.

In separate remarks Tuesday, Acting Comptroller of the Currency Michael Hsu said Tuesday the crypto industry is on a path that resembles that of credit derivatives ahead of the 2008 financial crisis. He expressed doubt that cryptocurrency is achieving its goal of promoting financial inclusion and criticized crypto instruments that promise steady yields to investors for failing to explain how those returns are generated.

“I have seen one fool’s gold rush from up close in the lead-up to the 2008 financial crisis,” Mr. Hsu said in remarks to the Blockchain Association, a crypto lobbying group. “It feels like we may be on the cusp of another with cryptocurrencies and decentralized finance.”

Balance crypto currency investments with gold.  Crypto, if it survives as an independent currency, could be the wave of the future, but its path is fraught with risk.  Expect the crypto price to be volatile at least and understand there is a risk that there could be a huge or even total loss.  Crypto will be especially vulnerable to times of infrastructure failure or collapse.

Gold on the other hand is most likely to be strong during times of infrastructure failure or collapse.

Create your own gold standard by limiting your investments in crypto to a link with investments in gold.

A Sciencedirect.com article “The Bitcoin and gold correlation puzzle” (4) shows that there definitely not a positive correlation between cryoto and gold that has developed so far.  These are early days for any long term assessment, but the chart below suggests slightly that a somewhat negative correlation could exist.

crypto

crypto

Images from sciencedirect.com “The Bitcoin and gold correlation puzzle”

The article says: Bitcoin is regularly referred to as new gold, digital gold or gold 2.0. If Bitcoin is indeed gold-like the correlation of Bitcoin and gold returns should be positive. We estimate the correlation of the two assets across time, across different return frequencies and across quantiles and find a near-zero correlation inconsistent with the claimed similarity.

The correlation between gold and Bitcoin continues to evolve and, for that reason, can be difficult to track. The correlation is easy to confuse as crypto currencies are often referred to as “new or digital gold”.

I treat the gold in my portfolio as insurance and I do not have crypto in my portfolio.  If I did, I would view it as a long term, high risk investment and limit the amount based on how much volatility my finances can withstand. I would also make sure that I had a balancing percentage of my portfolio in gold.

Gary

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The stock market has always been the best place of places to protect and increase wealth over the long haul.   Yet it’s also been the worst place to lose money, a lot of it, quickly.

There are only three reasons why we should invest.  We invest for income.  We invest to resell our investments for more than we had invested.  We invest to make our world a better place.

The goal of investing should be to stabilize our security, bring feelings of comfort and elimination of stress!

We should not invest in social networked protests that guarantee loss either.  This is like burning our houses down in protest.

If we want to change the world, we should invest in good equities that bring profit and use the extra wealth to create something beneficial for mankind.

We should not invest for fun, excitement or to get rich quickly. We should not divest in a panic due to market corrections.

This is why my core stock portfolio consists of 16 shares and this position has hardly changed in five years.  During this time we have been steadily accumulating the same Top Value ETFs  and have traded only a few times.

The study below shows a value based model portfolio that dates back to 1969 dramatically outperformed the US Market and almost every stock market in the world.

keppler

keppler

Over 51 years the Top Value Strategy (with dividends reinvested) appreciated 12.5% per annum compared to the 10.74% for the Dow Jones industrial Index (with dividends reinvested).  This is a 1.76% per annum difference.  This may not seem like much, but in the long term the difference is huge.  12.5% increases $10,000 to $4,062,362.22!.  10.74% turned the Dow’s $10,000 into $1,817,734.62 in 51 years.

No matter how we look at it, over time, value investing always wins!

Our portfolio is built around a strategy that’s taught in my Purposeful Investing Course (Pi).  I call these shares my Pifolio.  The course shows how to use the value analysis of Keppler Asset Management to create a portfolio of ETFs that cover undervalued stock markets.  I have combined my 50 years of investing experience with the study of the mathematical market value analysis of Michael Keppler, CEO of Keppler Asset Management.

In my opinion, Keppler is one of the best market statisticians in the world.  Numerous very large fund managers use his analysis to manage billions of dollars in funds.  However because Keppler’s roots are in Germany (though he lives and operates from New York) all of his funds are registered for the European Union citizens, Americans cannot normally access his data.

I was lucky to have crossed paths with Michael over 25 years ago, so I am one of the few Americans who receive this data so I can share it with Pi subscribers.

The Pifolio analysis begins with Keppler’s research that continually monitors 46 stock markets and compares their value based on current book to price, cash flow to price, earnings to price, average dividend yield, return on equity and cash flow return.  Keppler looks at these numbers and takes market’s history into account.

Fwd: keppler

Michael Kepler CEO Keppler Asset Management.

Michael’s analysis is rational, mathematical and does not worry about short term ups and downs.  Keppler’s strategy is to diversify into an equally weighted portfolio of the MSCI Indices of each good value (BUY) markets.

This is an easy, simple and effective approach to zeroing in on value. Little time, management or guesswork is required.  You are investing in a diversified portfolio of good value indices.

A BUY rating for an index does NOT imply that any one stock in that country is an attractive investment.  This eliminates the need for hours of research aimed at picking specific shares.  It is not appropriate or enough to instruct a stockbroker to simply select stocks in the BUY rated countries.  Investing in the index is like investing in all the shares in the index.  You save time and gain incredible diversification because all you have to do is invest in the ETF to gain the profit potential of the entire market.

To achieve this goal of diversification the Pifolio consists of Country Index ETFs.

Country Index ETFs are similar to an index mutual fund but are shares normally traded on a major stock exchange that track an index of shares in a specific country.  ETFs do not try to beat the index they represent.  The management is passive and tries to emulate the performance of the index.

A country ETF provides diversification into a basket of equities in the country covered.  The expense ratios for most ETFs are lower than those of the average mutual fund so they provide diversification and cost efficiency.

Here is the Pifolio I personally held at the beginning of 2021.   There have been no changes since.

70% is diversified into Keppler’s good value (BUY rated) developed markets:  Germany, Hong Kong, Italy, Japan, Norway, Singapore, Spain and the United Kingdom.

30% of the Pifolio is invested in Keppler’s good value (BUY rated) emerging markets: China, Brazil, Chile, Colombia, South Korea, Malaysia and Taiwan.

There is one trick Pi subscribers learn about China which is different from the rest of the funds.

iShares Country ETFs make it easy to invest in each of the MSCI indicies of the good value BUY markets.

For example, the iShares MSCI Germany (symbol EWG) is a Country Index ETF  that tracks the investment results of the MSCI Germany Index. The fund invests at least 80% of its assets in the securities of its underlying index that primarily consists of all the large-and mid-capitalization companies traded on the Frankfurt Stock Exchange.

iShares is owned by Black Rock, Inc. the world’s largest asset manager with over $4 trillion in assets under management.

There is an iShares country ETF for every market in our Pifolio.

This year I celebrate my 53rd anniversary of writing about global investing. Our reports and seminars have helped readers have better lives, with less stress yet make fortunes during up and down markets for decades. This information is invaluable to investors large and small because even small amounts can easily be invested in the good value shares we cover in our seminar.

How you can create your own good value strategy.

Stock and currency markets are cyclical.  These cycles create extra profit for value investors who invest when everyone else has the markets wrong.  One special part of your course looks at how to spot value from cycles. Stocks rise from the cycle of war, productivity and demographics.  Cycles create recurring profits.  Economies and stock markets cycle up and down around every 15 to 20 years as shown in this graph.

The effect of war cycles on the US Stock Market since 1906.

Bull and bear cycles are based on cycles of human interaction, war, technology and productivity.  Economic downturns can create war.

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The chart above shows the war – stock market cycle.  Military struggles (like the Civil War, WWI, WWII and the Cold War: WW III) super charge inventiveness that creates new forms of productivity…the steam engine, the internal combustion engine,  production line processes, jet engines, TV, farming techniques, plastics, telephone, computer and lastly during the Cold War, the internet.  The military technology shifts to domestic use.  A boom is created that leads to excess.  Excess leads to correction. Correction creates an economic downturn and again to war.

The next four years will be a period of high overseas stock growth.

The chart below shows the last 26 years of real-time forecasting by the global equity analyst we track to make our portfolio decisions.

The analyst is Keppler Asset Management and the index they create The KAM Equally Weighted World Index is 15.4% below the value that the analyst forecast four years ago in September 2016.

The chart shows how in the past, two and a half decades there have been four opportunities (red Xs) when the entry levels in global markets were below or around the lower valuation band.  In the previous three low points like this, there has always been the highest growth and positive returns three to five years later.

keppler

So it’s good to know that if you invest in global stock markets overall, now, you’ll make capital gains over the next four or five years.

More importantly you get paid more income now!

Current markets have turned economic history upside down.  Normally bonds pay the highest interest rates and add safety to a portfolio.  Not in recent years!

The standard now is that equities have been paying a higher yield than bonds.

Top value stock markets (shown below) pay higher dividends.  That’s one of the main reasons they are considered top value.   They improve diversification, give the best long term profit potential, and as the chart below shows, pay almost twice the the average US dividend yield. 

keppler 4-2021

Plus Value ETFs are Safer

The people who dominate stock markets include a pack of thieves.  This fact has always been true.

Shares in stock markets are manipulated all the time.  Stock markets (in fact almost all types of markets) are led by sharks plain and simple.  Count on this fact.  This is the nature of the beast and the number one goal of many big businesses is to take as much of your money as they can to line their pockets.

A study of 92 years of investment returns shows that, despite the fraud and cheating and deceit, stock markets are still a good way to make your money grow… if you invest long term and diversify.

keppler

Our Purposeful Investing Course (Pi) strategy makes it harder for cheaters to grab your wealth because it’s very hard to manipulate an entire stock market, much less a dozen or so stock markets around the world.

Manipulators have a hard time tricking an entire market, especially larger markets.  If you get the best value country ETFs, your chances of long term profits improve.

Pi teaches an an easy, simple and effective approach to zeroing in on value because little time, management and guesswork is required.  You are investing in a diversified portfolio of good value indices.

Sticking to math based stock market value and country ETFs eliminates the need for hours of research aimed at picking specific shares.   Investing in an index is like investing in all the major shares of the market.  You save time because all you have to do is invest in the ETF to gain the profit potential of the entire market.

Here’s how you can create your own good value strategy.

I would like to send you, on a no risk basis, a 130 page basic training course that teaches the good value strategy I use.  You learn all the Pi strategies, what they are, how to use them and what each can do for you, your lifestyle and investing.

You also begin receiving regular emailed Pifiolio updates and online access to all the Pifolio updates of the last two years.  Each update examines the current activity in a Pifolio, how it is changing, why and how the changes might help your investing or not.

You also receive a 100+ page PDF value analysis of 46 stock markets (23 developed markets and 23 emerging stock markets).  This analysis looks at the price to book, price to earnings, average yield and much more of all 46 markets.

This year I will celebrate my 53rd anniversary of global investing and writing about global investing.  Our reports and seminars have helped readers have better lives, with less stress yet make fortunes during up and down markets for decades.  This information is invaluable to investors large and small because even small amounts can easily be invested in the good value shares we cover in the Pi course.

Time is your friend when you use a good value strategy.  The longer you can hold onto a well balanced good value portfolio, the better the odds of outstanding success.

A 45 year portfolio study shows that holding a diversified good value portfolio (based on a  good value strategy) for 13 month’s time, increases the probability of higher performance to 70%.  However those who can hold the portfolio for five years gain a 88% probability of beating the bellwether in the market and after ten years the probability increases to 97.5%.

Subscribe to the first year of The Personal investing Course (Pi).  The annual fee is $299, but to introduce you to this online, course that is based on real time investing, I am knocking $124.50 off the subscription.

Save $124.50 If You Act Now

The global recovery from the pandemic is going to take years, so we have not only lowered the initial fee for the course, we have reduced the subscription to just $99 a year rather than $299.  Your subscription will be autorenewed in a year at $99, though you can cancel at any time.

Triple Guarantee

Enroll in Pi.  Get the 130 page basic training, a 46 stock market value report, access to all the updates I have sent in the past five years right away, plus numerous updates over the next year. 

#1:  I guarantee you’ll learn ideas about investing that are unique and can reduce stress as they help you enhance your profits through slow, worry free, easy diversified investing.

#2: I guarantee to send you monthly updates that are based on a study of every share in 46 stock markets around the world.  These updates will show the values, the earnings of all these markets and categorize each market as Top Value (buy), Neutral Value (hold) or Poor Value (sell)

#3:  If you are not totally happy, simply let me know. I guarantee you can cancel your subscription within 60 days and I’ll refund your subscription fee in full, no questions asked.:

You have nothing to lose except the fear.   You gain the ultimate form of financial security as you reduce risk and increase profit potential.

When you subscribe to Pi, you immediately receive a 120 page basic training course that teaches the Pi Strategy.   You learn all the Pi strategies, what they are, how to use them and what each can do for you, your lifestyle and investing.

You also begin receiving regular emailed Pifiolio updates and online access to all the Pifolio updates of the last five years so you can back track if you desire.  Each update examines the current activity in a Pifolio, how it is changing, why and how the changes might help your investing or not.

Subscribe to a Pi annual subscription for $174.50 and receive all the above.

Your subscription will be charged $99 a year from now, but you can cancel at any time.

Gary

 

(1) www.pelicoin.com/blog/correlation-between-gold-and-bitcoin

(2) www.wsj.com/articles/u-s-to-target-crypto-ransomware-payments-with-sanctions-11631885336?mod=itp_wsj&mod=djemITP_h

(3) www.wsj.com/articles/secs-gensler-doesnt-see-cryptocurrencies-lasting-long-11632246355?mod=itp_wsj&mod=djemITP_h

(4) www.sciencedirect.com/science/article/abs/pii/S2214635021001052

 

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