Thiel: Bullish On Bitcoin, Trump, & Musk; Bearish On AI, EU & Political Correctness

This report was originally published by Tyler Durden at Zero Hedge

Fresh off his move to Los Angeles, and a profile in the New York Times where he defended President Donald Trump and lashed out at the pervasive groupthink that drove him out of Silicon Valley, billionaire venture capitalist and PayPal co-founder Peter Thiel sat for an interview with Maria Bartiromo at the Economic Club of New York.

Early in the discussion, Bartiromo asked Thiel – who famously opened for Trump at the Republican National Convention – what he thought about Trump’s performance.

In response, he explained that he’s extremely happy with the president’s performance during his first year in office. While the media has been hyperfixated on the latest leak from the Russia probe, Trump has quietly been slashing regulations and questioning orthodoxies like the economic benefits of free trade.

“That’s why, if he runs again, he will be reelected,” Thiel said.

Though “it’s probably the case that Democrats will do quite well in the midterms.”

He also pointed out the irony that people in the Bay Area describe him as a “contrarian” for supporting Trump…

“Supporting Trump was the least contrarian thing I ever did…nearly half the country voted for him. But within the context of Silicon Valley it was viewed as extremely contrarian.”

“The one thing that I liked about Trump and still very much like about him is a willingness to ask questions and to reframe the debate and not be bound by these strictures.

“There are any of a number of issues where it’s good to rethink things.”

Later in the conversation, Bartiromo asked Thiel about the “Gawker situation.” Thiel, who sounded uncharacteristically willing to discuss an episode about which he has been famously reticent, explained that Gawker’s argument in its own defense was, in reality, an insult to journalism. Thiel said that just because Gawker billed itself as a news site doesn’t automatically extend first amendment protections to everything it publishes.

“I’m very proud to have supported Hulk Hogan in a successful lawsuit… The claim that a pornographer pays someone for sex tapes, and a journalist gets to publish sex tapes without paying people… that’s what in effect what Gawker was arguing.”

“We have a first amendment, we believe in free speech, but that doesn’t mean you get to steal a sex tape made in the privacy of a bedroom and post it on the Internet for everybody to see. We have a first amendment…but we also have a fourth amendment that protects us from unreasonable search and seizure…so that’s the legal framing.”

The Gawker lawsuit demonstrated to America why defining the scope of privacy protections in the digital age is so important. Today, the conventional wisdom is that Americans have tacitly surrendered their right to privacy by participating in the digital world. But Thiel says this notion is anathema to the preservation of a free society.

There was a brief discussion of trade, in which Thiel briefly pointed out that US is in a much stronger position to bargain with China and EU than vice versa…

“Quite unclear where China can reciprocate with tariffs on US. We’re exporting so little. US no longer is a monopoly exporter in any single area.”

“With Germany, it’s a very similar thing, hard to know how you retaliate in a way that hurts them more than it hurts US.”

The Silicon Valley billionaire then added that Peter Navarro has sold 1 million copies of his book “Zero To One” in China vs. 40,000 in India, which Thiel says is one way to show how one country is thinking about entrepreneurship versus the other.

When Bartiromo raising the European Union’s decision to introduce the “first ever” regulations of Google, Facebook and other giant tech platforms. Thiel sees good reasons and bad reasons for this threat of regulation:

“The good reasons are these privacy concerns and the bad reasons are there are no successful tech companies in Europe and they are jealous of the US so they are punishing us.”

Additionally, Thiel acknowledged that “privacy in a digital era deserves to be rethought” but said that “as a libertarian I always dislike regulation.”

Intriguingly, amid all the hype and anxiety surrounding investment, Thiel explained why, as an investor, he wasn’t particularly interested in artificial intelligence: because of its bad reputation.

“The thing that struck me is how uncharismatic AI is at the point. Basically, it’s going to take our jobs and, once it takes our jobs, at the singularity [the theoretical point at which superhuman artificial intelligence is created, triggering an unprecedented cascade of technological change] it’s just going to kill everybody.”

“I’m not sure that dystopian view is necessarily correct but that’s actually what most people believe,” he said, adding that when considering investments he tends to ask whether technologies are good and how they are going to make the world better…

“The answers for things like AI are quite weak,” he said.

Bartiromo then steered the conversation toward bitcoin, and mentioned that, the last time she had spoken to Thiel, that he had expressed reservations about a lot of cryptocurrencies, but was optimistic about the long-term prospects of bitcoin. Thiel explained that he’s owned bitcoin for a long time, and has been consistently bullish.

Though he doubts it’ll ever be successful as a medium for payments, Thiel believes bitcoin could endure as a store of value that, much like gold, could serve as a hedge against inflation.

“The technology that people like to talk about is the blockchain technology, and I’m somewhat skeptical about how that translates into good investments, but the one use-case of cryptocurrency as a store of value may actually have quite a bit of a ways to go. I would be long bitcoin and neutral to skeptical of just about everything else at this point, with a few possible exceptions.

“The question with something like bitcoin is whether it can become a store of value. And the thing it would replace is something like gold. The analogy is it’s like bars of gold in a vault that never move and you get it and it’s a hedge of sorts against the whole world falling apart.”

“The objections that people have to bitcoin are also objections to gold. It’s this weird currency that’s not backed by any government. Same thing is true of gold. It’s not clear what the intrinsic value of bitcoin is. Same thing is true of gold. It may well be a bubble, but – and most bubbles are unstable and end – one of my friends has this line that ‘money is the bubble that never pops’, so if it is a bubble, then it is money.”

“If everybody decided that a $100 bill was worthless then you wouldn’t want to have a $100 bill.”

There are a lot of crazy dynamics in the crypto world, but one thing that’s different from the dot-com bubble of the late 90s is there aren’t any Wall Street bankers involved… yet – one reason why bitcoin strikes Thiel as “deeply contrarian.”

At the very least, both Wall Street and Silicon Valley were both late to the bitcoin party. While this isn’t a reason to be bullish in and of itself, it’s definitely a factor worth considering. And while there are risks surrounding the influence that miners exert, as well as the unraveling of privacy protections. But, Thiel says, there will likely be only one online equivalent to gold…and right now, bitcoin is the only crypto product that fits that bill.

Thiel offers some parting advice: “Never bet against Elon.” and “don’t compete with Amazon.”

When Thiel first invested in Musk’s rocket company, SpaceX, he was sceptical that it would be able to build a reusable rocket.

“I have known Elon for 18 years and you should never bet against Elon,” he said.

“I thought it was inconceivable that it could be done … and they have actually pulled it off,” he said.

The company to watch, he said, was Amazon, which has expanded into a broad range of industries, from infrastructure and logistics to retail and healthcare.

“Amazon is the most ferocious company in the US at this point. It’s probably the company you don’t want to be competing against,” he said.

“I can’t think of any other company even close to Amazon.”

Finally, Thiel circled back to Silicon Valley and the politically-correct folly of it all…

“It’s striking how what had always been a very liberal place has become almost a one-party state,” he said.

“When you have complete unanimity that tells you that political correctness may have gone a little bit too far.”

How Will Gold Prices Behave During The Next Economic Crisis?

This report was originally published by Brandon Smith at Alt-Market.com

It is generally well known in economic circles and in the general public that precious metals, including gold, tend to be the go-to investment during times of fiscal uncertainty. There is a good reason for this. Precious metals have foundation qualities that provide trade stability; these include inherent rarity (rather than artificially engineered rarity such as that associated with cryptocurrencies), tangibility (you can hold gold in your hand, and it is relatively difficult to destroy accidentally), and precious metals are easy to trade. Unless you are attempting to make transactions overseas, or in denominations of billions of dollars, precious metals are the most versatile, tangible trading platform in existence.

There are some limitations to metals, but the most commonly parroted criticisms of gold are in most cases incorrect. For example, consider the argument that the limited quantities of gold and silver stifle liquidity and create a trade environment where almost no one has currency to trade because so few people can get their hands on precious metals. This is a naive notion built upon a logical fallacy.

Gold backed paper currencies existed for centuries in tandem with the metals trade. Liquidity was rarely an issue, and when such events did occur, they were short lived. In fact, the last great liquidity crisis occurred in 1914, the same year the Federal Reserve began operations and the same year that WWI started. This crisis was, as always, practically fabricated by central banks around the globe. Benjamin Strong, the head of the New York Fed in 1914 and an agent of the JP Morgan syndicate, had interfered with the normal operations of gold flows into the U.S. and thus sabotaged the natural functions of the gold standard.

Central banks in Germany, France and England also applied influence to disrupt currency and gold flows, causing a global panic. This engineered disruption seemed to take place through conscious co-operation between central banks. Does any of this sound familiar?

For those who are interested, the history of the 1914 liquidity crisis is outlined in detail in the book ‘Lords Of Finance: The Bankers Who Broke The World’, by Liaquat Ahamed.

When gold and currency are tied together, gold prices tend to remain rather stable, as they are often set by the national treasury. In 1914, the price of gold was $20 per ounce and had maintained that approximate value for decades. To give some perspective on value, in 1914 the average house cost $3,500, or 175 ounces of gold.

But what happens when gold and national currencies become disjointed from each other? Take a look at the hyperinflationary crisis in Weimar Germany. The price of gold per ounce went from 170 marks to 87 trillion marks within five years! Over that same five year period, gold value in Germany had increased at almost TWICE the rate of inflation, indicating that gold not only kept up with the devaluing mark, but made anyone holding gold rather rich in the process.

This is a very important fact. The common argument against gold is that the metal is not really a wealth creating investment, but merely protects your buying power. As the Weimar crisis shows, this is not always the case. In some circumstances, often during times of economic disaster, precious metals can in fact generate more wealth than what you put into them.

Then there is the issue of government interference in gold markets and trade during crisis. As the Great Depression in the U.S. began to take hold, investors turned aggressively to gold and silver as a means to offset the crashing values of most other assets. In a highly controversial move in 1933, President Roosevelt outlawed the private ownership of gold bullion and set the price of gold at $35 per ounce.

Keynesian economists like Ben Bernanke often try to assert that the gold standard was the reason why interest rates had to be hiked as the depression was escalating, and that this was the cause of a greater crash. They are only half correct. Increased rates did indeed cause a larger and more prolonged crisis, but this had little to do with the gold standard.

Clearly, in 2008 the U.S. and most of the world was NOT on a gold standard, yet we suffered a very similar collapse in credit and equities as happened in the Great Depression. Also, there is no gold standard forcing the Federal Reserve to raise interest rates today, yet they are doing so despite escalating negative indicators in the real economy.

Whether or not this will cause an even more violent economic catastrophe remains to be seen, but Jerome Powell, the new Fed Chairman himself, warned in 2012 that this is exactly what could happen. Jerome Powell has stated in no uncertain terms that rate hikes will continue under his watch in 2018.

Central banks were the core institutions to blame for the Great Depression, not the gold standard, considering the fact that central banks did NOT follow a true classical gold standard exchange internationally, and instead tried to establish a global basket exchange system of multiple currencies and gold in what they called the “gold exchange standard”.

Add to this the unnecessary interest rate hikes as deflation was pummeling assets, and you have a perfect recipe for calamity. Even Ben Bernanke, in a 2002 speech to honor Milton Friedman, openly admitted that the Fed was the root cause of the prolonged economic carnage during the Great Depression:

“In short, according to Friedman and Schwartz, because of institutional changes and misguided doctrines, the banking panics of the Great Contraction were much more severe and widespread than would have normally occurred during a downturn.

Let me end my talk by abusing slightly my status as an official representative of the Federal Reserve. I would like to say to Milton and Anna: Regarding the Great Depression. You’re right, we did it. We’re very sorry. But thanks to you, we won’t do it again.”

The use of gold prohibition had mixed results. Obviously, it did not stop the freight train of the Great Depression. In fact it probably exacerbated difficulties in trade and savings. Black markets took over and precious metals were still highly sought after.

As far as the crash of 2008 is concerned (a crash which is still ongoing today), we all know what happened with gold markets. In the lead up to the crash, from 2004 to 2008, gold doubled in value. Then, after the initial crash from 2008 to 2012, it doubled again.

Despite predictions by mainstream economic naysayers, gold has not collapsed back down to pre-crash levels. In fact, gold has remained one of the most effective investment performers for years.

The question is, what happens next? Setting aside gold confiscation as a factor (a factor which I believe would be impossible to enforce in today’s markets), we can see that massive fiat stimulus as a means to artificially support a deflationary fiscal system, as well as central bank intervention in general, leads to collapse and a flight to hard assets like gold. Even with rising interest rates and the potential for a spike in the dollar index, if the rest of the economy is in steep decline, investors and others will still turn towards precious metals.

As I have mentioned in previous articles, the initial reaction of gold prices to faster interest rate hikes may be negative. That said, I do not believe gold will drop as dramatically as mainstream economists expect. Once higher interest rates kill the stock market bubble as well as the renewed housing and credit bubble, gold will skyrocket as one of the only asset classes with tangible real world value.

 

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You can contact Brandon Smith at: brandon@alt-market.com

After 8 long years of ultra-loose monetary policy from the Federal Reserve, it’s no secret that inflation is primed to soar. If your IRA or 401(k) is exposed to this threat, it’s critical to act now! That’s why thousands of Americans are moving their retirement into a Gold IRA. Learn how you can too with a free info kit on gold from Birch Gold Group. It reveals the little-known IRS Tax Law to move your IRA or 401(k) into gold. Click here to get your free Info Kit on Gold.

WATCH LIVE: News That Affects Your Liberty; Plus MC Laubscher Talks Building Wealth Without Wall Street

By Vin Armani

WATCH livestream at 10am PST (1pm EST) below. In the first hour, Vin discusses news that affects your liberty – the political fallout from the Florida school shooting, latest cryptocurrency news, statists hate Uber and free markets. And, in the second hour, MC Laubscher is here to talk about building wealth outside of Wall Street and away from the tax man.

M.C. Laubscher is a wealth strategist, educator, and financial freedom fighter. He is the President and CEO of Valhalla Wealth Financial and creator and the host of the popular business and investing podcast, Cashflow Ninja. His mission is to help as many people as possible eliminate the control banks and financial institutions have over their lives by building their wealth in a variety of ways outside of Wall Street. He believes the best way to achieve this in the Information Age, is by reclaiming the banking function in your own financial life through structuring an efficient cash flow management system and creating and building assets that provide multiple streams of income.

Visit Valhalla Wealth Financial at http://valhallawealth.com

Listen to Cash Flow Ninja Podcast at http://CashFlowNinja.com

Live free and succeed outside the rigged system at Counter Markets.

Vin Armani is the host of The Vin Armani Show, CTO of CoinText, author of Self Ownership, founder of Bebi Vodka and co-founder Counter Markets. Follow Vin on Twitter and subscribe on YouTube. Get the weekly podcast on iTunes or Stitcher. Available for interviews at email – Vin (at) VinArmani.com.

Daniel Nevins: Economics for Independent Thinkers

This report was originally published by Adam Taggart at PeakProsperity.com

Economists are supposed to monitor and analyze the economy, warn us if risks are getting out of hand, and advise us on how to make things runs more effectively — right?

Well, even though that’s what most people expect from economists, it’s not at all how they see their role, warns CFA and and behavioral economist Daniel Nevins.

Economists, he cautions, are modelers. They pursue academic lines of thought in order to make their models more perfect. They live in a universe of equations and presumptions about equilibrium states and other chimerical mathematical perfections that don’t exist in real life.

In short, they are the wrong people to advise us, Nevins claims, as they have no clue how the imperfect world we live in actually works.

In his book Economics For Independent Thinkers, he argues that we need a new, more accurate and useful way of studying the economy:

However far you go back, you can find economists who had a more realistic approach to how humans actually behave, than the way that mainstreamers assume they behave in the models that the Fed uses to pick winners and losers.

You mentioned credit cycles, business environment, and behavioral economics. What I’ve done is to say, “Okay. We know that the modeling approach, the systems of equations approach doesn’t work. But instead of starting completely from scratch, what can we find in the economics literature that is maybe more realistic?”

And the interesting thing is that if you look at the work that was done, the state of the profession before the 1930s, before Keynesianism took hold, you can find a lot of work that was quite sensible.

I think where that points is towards this notion that when we think about economic volatility, there are really three things that we need to bring together:

One is the behavioral side. And we have to be realistic about the way that people really process information, the way that they truly make decisions.

The second has to do with the way businesses operate and all the challenges that businesses face to gain and retain profitability. That’s something that economists were intently focused on before Keynesianism and then it became kind of sidelined afterwards because all of these models assumed that businesses didn’t have any challenges.

If you pick apart the standard models that the Fed uses that are taught in PhD programs, they assume that business are always profitable, they always sell all of their output instantaneously, and they know exactly what their customers want, and businesses don’t struggle. So, that’s another thing we need to correct that you can find a lot of useful research if you know where to look (before Keynesianism and at the nontraditional schools that have continued in the older approaches).

And then the third thing is the credit side where mainstream economics is just so off-target, especially in their models that exclude any role for banks. Effectively, mainstream economists have made assumptions about the way money works and the way banks work that just flat do not match how they actually work in real life. That’s something that’s hugely critical to understanding economic volatility and understanding financial crises. But even regular business cycles have a lot to do with the ebbs and flows of bank lending. And banks just aren’t included in standard macroeconomic models(…)

Until you understand that the economic profession is really not doing anything like what I would say they should be doing—studying these things that go wrong, the recessions and depressions and crises—you might not realize that we shouldn’t really be relying on mainstream economists to tell us how policies should be crafted, to tell us what risks might be out there. We need a different approach.

Click the play button below to listen to Chris’ interview with Daniel Nevins (46m:19s).

For the transcript of this recording, please click here.

JPMorgan & BofA Admit “Disruptive Threat” Of Cryptocurrency To Their Business

This report was originally published by Tyler Durden at Zero Hedge

Having explained why central banks are so nervous about cryptocurrencies, it seems the rest of the banking sector is finally admitting the real driver behind their disdain for digital currencies – they are competition and an existential threat.

As CoinTelegraph’s Molly Jane Zuckerman reports, J.P. Morgan Chase has added a segment on cryptocurrencies to the “Risk Factor” section of their 2017 annual report to the US Securities and Exchange Commission (SEC), filed yesterday, Feb. 27.

The annual report mentions cryptocurrencies under the “Competition” subsection when describing how new competitors have emerged that threaten J.P. Morgan’s operations:

“Both financial institutions and their non-banking competitors face the risk that payment processing and other services could be disrupted by technologies, such as cryptocurrencies, that require no intermediation.”

The report notes that these new technologies, evidently including Blockchain, although they don’t mention it by name, “could require JPMorgan Chase to spend more to modify or adapt its products to attract and retain clients and customers or to match products and services offered by its competitors, including technology companies.”

This competition could potentially “put downward pressure on prices and fees for JPMorgan Chase’s products and services or may cause JPMorgan Chase to lose market share.”

J.P. Morgan Chase CEO Jamie Dimon had made waves back in September 2017, when he called Bitcoin (BTC) a “fraud” and threatened to fire any employee that traded BTC on company accounts. Since then, Dimon has backtracked slightly, telling a Cointelegraph reporter at the Davos World Economic Forum that he is not a “skeptic” on cryptocurrencies.

In the beginning of February, an alleged internal report from J.P. Morgan Chase referred to cryptocurrencies as “innovative” and “unlikely to disappear”, also noting cryptocurrency’s potential to be successfully applied to payment system areas that are traditionally problematic or slow, such as cross-border payments.

JPMorgan is not alone, as TruthInMedia.com’s Brendan Weber reports, in Bank of America’s new annual report filed with the U.S. Securities and Exchange Commission (SEC), the corporation largely reflected internally about a number of economic, geopolitical, and operational risks faced.

One of those stated risks is surrounding the increased adaptation of cryptocurrencies, which could have negative effects on the corporation’s earning potential.

In addition, technological advances and the growth of e-commerce have made it easier for non-depository institutions to offer products and services that traditionally were banking products, and for financial institutions to compete with technology companies in providing electronic and internet-based financial solutions including electronic securities trading, marketplace lending and payment processing. Further, clients may choose to conduct business with other market participants who engage in business or offer products in areas we deem speculative or risky, such as cryptocurrencies. Increased competition may negatively affect our earnings by creating pressure to lower prices or credit standards on our products and services requiring additional investment to improve the quality and delivery of our technology and/or reducing our market share, or affecting the willingness of our clients to do business with us.

Increased adaptation of cryptocurrencies also had Bank of America admitting that it may need to make “substantial expenditures” to compete with these rising technologies:

In addition, the widespread adoption of new technologies, including internet services, cryptocurrencies and payment systems, could require substantial expenditures to modify or adapt our existing products and services as we grow and develop our internet banking and mobile banking channel strategies in addition to remote connectivity solutions.

Bank of America might have already taken action to help counter these technologies by banning cryptocurrency transactions on their credit cards.

Additionally, the document stated concerns besides those directly affecting earning potential; they noted that emerging cryptocurrencies could impact Bank of America’s compliance with anti-money laundering regulations:

In addition to non-U.S. legislation, our international operations are also subject to U.S. legal requirements. For example, our international operations are subject to U.S. laws on foreign corrupt practices, the Office of Foreign Assets Control, know-your-customer requirements and anti-money laundering regulations. Emerging technologies, such as cryptocurrencies, could limit our ability to track the movement of funds. Our ability to comply with these laws is dependent on our ability to improve detection and reporting capabilities and reduce variation in control processes and oversight accountability.

Even though cryptocurrencies were a small mention within the entire report, its brief discussion indicated that the company is both aware of and reacting to the further potential impacts of cryptocurrency.

Here’s Why Banks Hate Cryptocurrencies

This report was originally published by Tyler Durden at Zero Hedge

Banks like to pretend that they’re so much more established and secure than the world of cryptocurrencies, but as anybody who pays close attention to the headlines would know…that’s just not the case…

Setting aside all of their rhetoric about embracing the blockchain, banks have mostly avoided or opposed cryptos (Goldman Sachs, sensing the opportunity for profit, is one notable exception), often citing their volatility and the ease with which they can be used to launder money as qualities that disqualify them from being taken seriously (though, as we recently witnessed with the US dollar, perhaps banks need to rework this volatility argument a bit).  Even yesterday’s announcement of the first criminal charges against a cryptocurrency trader pales in comparison to the many, many crimes that banks (or even one bank) have settled allegations of. The real answer to why the banks’ dislike cryptocurrencies is probably because they feel threatened. The recent selloff notwithstanding, the rise of cryptocurrencies has continued unabated, despite the efforts of some of the most powerful governments on Earth, while the concept is still very young, it does have potential to shake up the aging fiat system. In order to understand the race between the banks and cryptocurrencies, we developed a visual to see just how “David” is comparing to “Goliath.”

Using data from Yahoo Finance and CoinMarketCap.com, HowMuch.com‘s data team developed a visual that compares the market caps between some of the world’s largest banks and the largest cryptocurrencies. On the left blue column, there are four banks listed from largest to smallest market caps: JPMorgan Chase, Bank of China, Goldman Sachs, and Morgan Stanley. Conversely, the right red column features the total cryptocurrency market, Bitcoin, Ethereum, Litecoin, NEO, Ripple, Bitcoin Cash, Cardano, and Stellar. The larger the circle, the bigger the market cap.

Total Crypto Market Exceeds Size Of JPMorgan; Banks Fight Back In Attempt To Slow Growth

After an extraordinarily volatile (even for bitcoin) start to the year, cryptocurrencies are rallying once again, with bitcoin breaking above $10,000. As of Feb. 16, 2018, the crypto market had a market cap of $470 billion – larger than the size of the United States’ largest bank, JPMorgan Chase.

Bitcoin’s market cap alone is comparable to Bank of China’s. The second largest cryptocurrency by market cap, Ethereum, is comparable in size to Morgan Stanley. It is stats like these that have the global banking sector worried that cryptocurrencies are on track to make a serious impact on their operations.

One of the most recent efforts to help slow the pace of crypto growth were announcements from several banks saying that customers could no longer purchase digital currency with their credit cards. Berkshire Hathaway’s Charlie Munger has called Bitcoin “totally asinine” and Warren Buffet has said he would “buy a five-year put on every cryptocurrency.”

Overall, cryptocurrencies are seeing their size and value top even some of the largest financial institutions in the world. This has caused banks to fight back and attempt to slow their growth. However, even banks clearly don’t know what they really want. After JPMorgan CEO Jamie Dimon famously declared Bitcoin a “fraud”, it is interesting to now see a report published by the investment bank that calls Bitcoin-based ETFs the “holy grail for owners and investors.”

And should the bitcoin ETF become a reality, do you really think banks will turn down those lucrative fees?

What do you think?

3 Things You MUST Know to Protect Your Money (Even If You Know Nothing About the Market)

This article was originally published by Anonymous Financial Guy at The Organic Prepper

In this economic climate, lots of folks are wondering how to protect their money. Some people are forced to invest in retirement funds by their employers, others play the market, some invest on their own, and nearly everyone has checking and savings accounts. But when the amount of money you have goes beyond something you could live off for a month or two, how do you deal with it wisely while minimizing your risk?

There is a history of government seizure or confiscation of assets. This can be found in nearly every country, including both the Federal and State level in the United States. Rather than go into the nature of politics or maintaining a wartime economy or support of an asset-based currency or filling tax revenue shortages through seizures, let’s just acknowledge that a government entity of any sort may choose to make a rule that effects a transfer of a citizen’s wealth to that government for whatever purpose. That is a political risk that will not go away.

Instead, let us focus on contracts and agreements that we can control. Namely, our relationship with banks and custodians. Those agreements can impact our ability to maintain our wealth, ourselves, and hopefully be redeemable for cash upon demand.

There are three rules for protecting your investments and we can learn those through situations that we all read about in the news. Let’s first examine some relatively recent history, here in the United States, when US citizens could watch their wealth evaporate quite legally, because of contracts they did not pay attention to.

Rule #1: Make sure you have more than a Chinese firewall in place between your financial instrument and the reporting entity.

Everyone remembers Bernie Madoff –  many clients of Bernie Madoff lost a lot of money. Was this legal? No – it was a Ponzi scheme, but it’s worth examining as your protection for something Illegal as a counterpoint to what is legal. A Ponzi scheme is when a client’s withdrawals come from other client’s money.

How can this happen? Well, in order for this to be successful, you need to have a security, a sales force, and a custodian (reporting agency) all working together, in one house. Checks and balances in the US financial system virtually assure (that as long as the regulators are doing their jobs) an issuer of a security may not report on their own value while they sell their issue directly to clients. This, however, is exactly what Bernie Madoff did. He offered his own “strategy” to his own clients and made his own statements as to client value.

Knowing this, Rule #1 for protecting your bank accounts and investment accounts is to make sure you have more than a Chinese firewall in place between your financial instrument and the reporting entity that tells you what your balance is. A lot of folks with checking accounts as well as IRA or investment accounts at the same national banks should pay close attention to this. We will discuss why in detail presently.

If you own the data, and you control the asset, guess what? That is why banks and custodians call the shots. Everybody else plays by their rules. That is where the control is.

Rule #2: Read your custodial and banking agreements.

Not too long ago, there was a company named Lehman Brothers, which was a Wall Street finance firm that became heavily invested in CDOs (mortgages mostly) in 2008 and whose over-leveraged collapse heralded the 2009 market crash. Now there is quite a bit worth knowing about Lehman Brothers, but for the purpose of this article, I would like to highlight one significant aspect involving the clients of Lehman Brothers Prime Brokerage Services, whose accounts on deposit were considered assets of Lehman Brothers for firm-level financing in what is known as rehypothecation.

Since these client monies were considered firm-level collateral for lending purposes, those assets were frozen while Lehman Brothers went through bankruptcy proceedings. What is different with this scenario than with the Bernie Madoff scenario is that the rehypothecation aspect of assets on deposit through Lehman Brothers Prime Brokerage Services was in the fine print of the actual custodial agreement.

It was legal. The assets were separately accounted for on the client level and they remained in the client’s name, but the effect of client money being a “co-signer” for Leman Brothers’ open market fundraising made that money subject to the claims of creditors.

Market circuit breakers, black box algorithms and the technology underlying the stock market have changed dramatically since the year 2000, and a lot of folks do not quite realize exactly how much. Now, this topic is pretty detailed and could easily cover several pages itself, but for the purposes of our article, we’ll just cover absolute basics.

Fractional ownership of shares and omnibus trading: It used to be that a single stock was set at a price and that is what you paid for it. Now, not only can you own an account for partial shares, but block trading (also called omnibus trading) of large lots of shares with multiple owners is commonplace. It actually gave rise to major discount brokers like Etrade and Scott Trade in the late 90s. But technology on the trade routing side progressed immeasurably after the NASDAQ in the early 2000s went “public” and began to attempt to resell trade and order routing software to other world exchanges.

Circuit breakers:  Sept 11, 2001, is probably going down as the last time the overall market would be shut down due to a calamitous event because now exchanges have circuit breakers in place. In the old days, market makers were required to buy or sell particular issues on demand, thus the term ‘market maker’. If there was power to the exchange and floor, traders placing orders, then stocks were changing hands.

Today, the entire market process is automated to a very large extent. Computers control large orders almost as they are confirmed by the exchanges. That is how fast the market reacts – within milliseconds. Obviously, there is potential for issues, and that is where market circuit breakers come into play. For example, a circuit breaker may look at each issue (stock) individually, and if too much momentum is experienced either up or down in too short a time, the circuit breaker engages. Then, all trades are held and may potentially be backed out. Keep in mind this is after a confirmation has been issued but before settlement. We will talk more about settlement, but for now, just be aware that major stock exchanges have the ability to halt individual issues, in addition to the actual halting of trading (giving trade confirmations) and if that happens, those frozen trades go into to limbo for a period of time (potentially days) and may be kicked back or canceled.

Now, most average investors will never experience this, because your common, the retail public has very limited, very controlled access to actual trade windows.

Rule #3: Just because you have a confirmation, it doesn’t actually mean you have a trade or anything resembling settlement.

Know your trade windows and anticipated settlement times so you can get in front of a problem before it gets exponentially worse.

Now let’s talk a little more about the settlement of securities. Another aspect to be aware of in your custodial agreements is exactly how your security gets settled and turned into cash. You place a trade and the trade happens according to schedule. Then there is a period of time for settlement where those funds may not necessarily be available to commit elsewhere. This is your estimated settlement time. It is somewhere between Trade Date +1 day and Trade Date + 3 days depending on what you are buying or selling.

After that period of time, then you have monies available in your brokerage money market fund (as long as your custodian can’t rehypothecate it right?. Well, at least not with government money market funds. Proprietary money market funds maybe not…they have their own rules.) Then you can request for those funds to go into your bank account so that you can withdraw the cash physically.

But not always. If for whatever reason, things really go sideways and your brokerage firm cannot “sell” your position, your brokerage agreement may allow your custodian to settle your trade-in kind. This means a physical delivery of the stock certificate you were trying to sell. Once again…see Rule #2 and beware of your agreements.

So you can see that with a brokerage account of any kind, the potential to have your trades held, or not settled directly before even getting to your bank might throw your planning a bit off.

So… what about big banks?

Let’s re-visit using national, well-known banks for both banking and brokerage or securities. While this is a big mess if you follow financial industry and banking industry history, rather than go into any details, now that you have a little bit of understanding of the mechanics of the industry, what do you think of this?

• A national bank that controls your checking and savings accounts (and potentially what you can access on a daily basis)


• And that national bank also has the convenience of brokerage services


• And that national bank even has their own proprietary mutual funds and money market funds.

The five largest banks in the US could be directly described as above. Not to ring any alarms, but if there was going to be a call for capital controls to prevent a bank run, where do you think the government would be wisest to focus their efforts?

There are ways to get in front of these modern issues and red flags to be aware of.

• Remember the 3 Rules.


• Keep 6-12 months worth of living expenses of cash on hand.


• Use multiple banks, brand names are fine, just keep in mind separation of all brokerages and banks. Having multiples of banks and brokerages can be a pain but will be worth it for diversification of sources.


• For each account, you need to separately write down in a single location the best contact number, your account number, and passcodes and the 3 best ways for them to receive written instructions. (Email? Fax? Weblink? Trading software?)


• Always maintain a physical copy of a blank withdrawal form and ACH request form. Know if these need to be notarized or not and know where to send them.

I just wanted to paint a picture of one small piece of the current financial system. I hope this was helpful to the folks out there who aren’t privy to the nuances of modern finance.

***

About the Author

Anonymous Financial Guy is a blue jeans and flannel wearing critical-thinking financial advisor who enjoys systems and structure, understanding underlying limitations, and has a healthy dislike of authority.

What The Crypto Crash & Stock Market Plunge Have In Common

This article was originally published by Adam Taggart at PeakProsperity.com

Today saw Jerome Powell sworn into office as the new Chairman of the Federal Reserve, replacing Janet Yellen. Looking at the sea of red across Monday’s financial markets, Mr. Powell is very likely *not* having the sort of first day on the job he was hoping for…

Also having a rough start to the week is anyone with a long stock position or a cryptocurrency portfolio.

The Dow Jones closed down over 1,200 points today, building off of Friday’s plunge of 666 points. The relentless ascension of stock prices has suddenly jolted into reverse, delivering the biggest 2-day drop stocks have seen in years.

But that’s nothing compared to the bloodletting we’re seeing in the cryptocurrency space. The price of Bitcoin just broke below $7,000 moments ago, now nearly two-thirds lower from its $19,500 high reached in mid-December. Other coins, like Ripple, are seeing losses of closer to 80% over the same time period. That’s a tremendous amount of carnage in such a short window of time.

And while stocks and cryptos are very different asset classes, the underlying force driving their price corrections is the same — a change in sentiment.

Both markets had entered bubble territory (stocks much longer ago than the cryptos), and once they did, their continued price action became dependent on sentiment much more so than any underlying fundaments.

The Anatomy Of A Price Bubble

History is quite clear on how bubble markets behave.

On the way up, a virtuous cycle is created where quick, outsized gains become the rationale that attracts more capital into the market, driving prices up further and even faster. A mania ensues where everyone who missed out on the earlier gains jumps in to buy regardless of the price, desperate not to be left behind (this is called fear of missing out, or “FOMO”).

This mania produces a last, magnificent spike in price — called a “blow-off” top — which is then immediately followed by an equally sharp reversal. The reversal occurs because there are simply no remaining new desperate investors left to sell to. The marginal buyer has suddenly switched from the “greater fool” to the increasingly cautious investor.

Those sitting on early gains and looking to cash out near the top start selling. They don’t mind dropping the price a bit to get out. So the price continues downwards, spooking more and more folks to start selling what they have. Suddenly, the virtuous cycle that drove prices to their zenith has now metastasized into a vicious cycle of selling, driving prices lower and lower as panicking investors give up on their dreams of easy riches and increasingly scramble to limit their mounting losses.

In the end, the market price retraces nearly all of the gains made, leaving a small cadre of now-rich early investors who managed to get out near the top, and a large despondent pool of ‘everyone else’.

We’ve seen this same compressed bell-curve shape in every major asset bubble in financial history:

And we’re seeing it play out in real-time now in both stocks and cryptos.

The Bursting Crypto Bubble

It’s amazing how fast asset price bubbles can pop.

Just a month ago, the Internet was replete with articles proclaiming the new age of cryptocurrencies. Every day, fresh stories were circulated of individuals and companies making overnight fortunes on their crypto bets, shaking their heads at all the rubes who simply “didn’t get” why It’s different this time.

Here at PeakProsperity.com the demand for educational content on cryptocurrencies from our audience rose to a loud crescendo.

We did our best to provide answers as factually as we could through articles and webinars, though we tried very hard not to be seen as encouraging folks to pile in wantonly. A big reason for this is we’re more experienced than most in identifying what asset bubbles look like.

After all, we *are* the ones who produced Chapter 17 of the The Crash Course: Understanding Asset Bubbles:

To us, the run-up in the cryptocurrencies seen over 2017 had all the classic hallmarks of an asset price bubble — irrespective of the blockchain’s potential to unlock tremendous long-term economic value. Prices had simply risen way too far way too fast. Which is why we issued a cautionary warning in early December that concluded:

So, if you’ve been feeling like the loser who missed the Bitcoin party bus, you’ve likely done yourself a favor by not buying in over the past few weeks. It is highly, highly likely for the reasons mentioned above that a painful downwards price correction is imminent. One that will end in tears for all the recent FOMO-driven panic buyers.

And now that time has shown this warning to have been prescient in both its accuracy and timeliness, we can clearly see that Bitcoin is following the classic price trajectory of the asset price bubble curve. The chart below compares Bitcoin’s current price to that of several of history’s most notorious bubbles:

This chart (which is from Feb 2, so it doesn’t capture Bitcoin’s further decline below $7k) shows that Bitcoin is now about 2/3 of its way through the bubble life-cycle, and about half-way through its fall from its apex.

Projecting from the paths of previous bubbles, we shouldn’t be surprised if Bitcoin’s price ends up somewhere in the vicinity of $2,500-$3,000 by the time the dust settles.

Did The Stock Market Bubble Just “Pop”?

Despite the extreme drop in the stock market over the past two days, any sort of material bubble retracement has yet to begin — which should give you an appreciation of how overstretched its current valuation is.

Look at this chart of the S&P 500 index. Today’s height dwarfs those of the previous two bubbles the index has experienced this century.

The period from 2017 on sure looks like the acceleration seen during a blow-off top. If indeed so, does the 6% drop we’ve just seen over the past two trading days signify the turning point has now arrived?

Crazily, the carnage we’ve seen in the stock market over the past two days is just barely visible in this chart. If indeed the top is in and we begin retracing the classic bubble curve, the absolute value of the losses that will ensue will be gargantuan.

If the S&P only retraces down to the HIGHS of its previous two bubbles (around 1,500), it would need to fall over 43% from where it just closed today. And history suggests a full retracement would put the index closer to 750-1,000 — at least two-thirds lower than its current valuation.

How Spooked Is The Herd?

As a reminder, bubbles are psychological phenomena. They are created when perception clouds judgment to the point where it concludes “Fundamentals don’t matter”.

And they don’t. At least, not while the mania phase is playing out.

But once the last manic buyer (the “greatest” fool) has joined the party, there’s no one left to dupe. And as the meteoric price increase stops and then reverses, the herd becomes increasingly skittish until a full-blown stampede occurs.

We’ve been watching that stampede happen in the crypto space over the past 4 weeks. We may have just seen it start in the stock markets.

How much farther may prices fall from here? And how quickly?

History gives us a good guide for estimating, as we’ve done above. But the actual trajectory will be determined by how spooked the herd is.

For a market that has known no fear for nearly eight years now, a little panic can quickly escalate to an out-of-control selling frenzy.

Want proof? We saw it late today in the complete collapse in XIV, the inverse-VIX (i.e. short volatility) ETN that has been one of Wall Street’s most crowded trades of late. It lost over 90% of its value at the market close:

The repercussions of this are going to send seismic shockwaves through the markets as a tsunami of margin calls erupts. A cascading wave of sell-orders that pushes the market further into the red at an accelerating pace from here is a real possibility that can not be dismissed at this point.

Those concerned about what may happen next should read our premium report Is This It? issued over the past weekend.

In it, we examine the congregating perfect storm of crash triggers — rising interest rates, a fast-weakening dollar, a sudden return of volatility to the markets after a decade of absence, rising oil prices — and calculate whether the S&P’s sudden 6% rout is the start of a 2008-style market melt-down (or worse).

Make no mistake: these are sick, distorted, deformed and liquidity-addicted bubble markets. They’ve gotten entirely too dependent on continued largess from the central banks.

That is now ending.

After so many years of such extreme market manipulation finally gives way, the coming losses will be staggeringly enormous.

The chief concern of any prudent investor right now should be: How do I avoid being collateral damage in the coming reckoning?

Click here to read ‘Is This It?’, Part 2 of this report (free executive summary, enrollment required for full access)

Mnuchin: “We Want To Make Sure Bad People Can’t Use Bitcoin To Do Bad Things”

This article was originally published by Tyler Durden at Zero Hedge

Back in September 2015, when we first predicted that Bitcoin would enjoy an exponential price increase as first the Chinese and then everyone else realized that the cryptocurrency is nothing less than the digital equivalent of borderless Swiss account, bypassing capital controls with ease and enabling money laundering anywhere and everywhere, its market cap was $3 billion. It is now $230 billion.

Today, a little over two years later, the US Treasury has finally this figured out, and on Friday Treasury Secretary Steven Mnuchin said he will work with the Group of 20 nations to prevent cryptocurrencies such as Bitcoin from becoming the digital equivalent of an anonymous Swiss bank account.

“We are very focused on cryptocurrencies,” Mnuchin explained, pointing to discussions with other regulators within the U.S. government and later stating: “We want to make sure that bad people cannot use these currencies to do bad things.”

Speaking at the Economic Club of Washington, Mnuchin said that the Financial Stability Oversight Council, a government body that assesses financial system risks, has formed a working group focused on cryptocurrencies, and explained that “In the United States — and people may not realize this — under our laws, if you have a wallet to own bitcoins, that company has the same obligation as a bank to Know Your Customer. So, in the United States, we have rules for anti-money-laundering, for all different types of entities, we can track those types of [transactions]. The rest of the world doesn’t have that. So one of the things we are working very closely with the G-20 on is making sure that this doesn’t become the Swiss numbered bank account.”

During the remarks, Mnuchin also suggested that the Federal Reserve is unlikely to develop its own digital version of fiat currency – a topic under discussion at a number of central banks worldwide – in the near future.

“The Fed and we don’t think there’s a need for that at this point,” Mnuchin said.

Mnuchin added that he was worried about heightened levels of speculation in the bitcoin market. “The other concern I have is, there’s a lot of speculation in this, and I want to make sure that consumers who are trading this understand the risks,” Mnuchin said. “I am concerned that consumers may get hurt.”

Apparently he was far less concerned about consumers buying the S&P at all time high valuations.

More to the point, yes the US will gladly tax crypto trading now that the total market cap of all “coins” is $700 billion, and no, it has no intention of cracking down on Bitcoin or other cryptos.

Mnuchin also said that he is “not at all” worried that Russia may use cryptocurrencies to help its banks avoid international sanctions. An adviser to President Vladimir Putin is reported to have said that sanctions against Russia have created a need for digital currencies as officials there fear expansions in 2018.

As we reported in December, Russian PM Dmitry Medvedev signed a decree allowing the government to classify purchases by the Defense Ministry, Federal Security Service and Foreign Intelligence Service as state secrets.

“This idea that Russia or Venezuela can thwart the pressure from sanctions just by developing their own cryptocurrency is silly,” lawyer Erich Ferrari of Ferrari & Associates told Bloomberg. “It’s like trying to do it by using cash. Yes you can do it more easily with cash, but it doesn’t mean you’re evading. It’s harder to get caught.”

Full remarks below

Study Finds That 22 Percent Of Bitcoin Investors Are Using Debt To Fund Their Investments

This report was originally published by Michael Snyder at The Economic Collapse

Investing in cryptocurrencies such as Bitcoin, Ripple, Ethereum and Litecoin is extremely risky, and experts all over the country are warning that people should only invest what they are willing to lose. Unfortunately, many are getting swept up in the current euphoria surrounding cryptocurrencies and are not listening to that very sound advice. A disturbing new survey that was just released found that 22 percent of all Bitcoin investors are either directly or indirectly investing in Bitcoin with borrowed money…

According to LendEDU, a personal loan research firm, more than 18 percent of Bitcoin investors have used borrowed money to trade the cryptocurrency. In a global survey of 672 active Bitcoin investors, researchers asked traders the method they used to fund their cryptocurrency trading accounts. The majority of investors used banking systems such as credit cards and ACH transfers to fund their accounts.

But 22 percent of traders revealed that they have not paid off their credit and debit cards after purchasing Bitcoin, effectively investing in the cryptocurrency with borrowed money.

Credit card debt is one of the most toxic forms of debt that you could ever carry, and investing in anything when you still have credit card balances is extremely unwise.

Yes, cryptocurrencies went on an epic run in 2017, but there is absolutely no guarantee that they will continue to rise in 2018.

In fact, there is a very real possibility that we could see a cryptocurrency crash, and there are many investors that are actually eagerly anticipating one…

Well, as many traders expected, it appears that institutions are using the futures product to slowly but surely build a short position in bitcoin. According to the CFTC Commitment of Traders report (available CBOE futures), non-commercial traders held a net short position of around $30mn as of Tuesday Dec 26, or around half of the total open interest.

Separately, the Traders in Financial Futures breakdown provided by the CFTC show that the leveraged funds category that consists largely of hedge funds and various money managers had a short of around $14mn, or around a quarter of the total open interest.

In other words, spec investors have used the futures contracts to establish Bitcoin shorts.

On the other hand, there is also the possibility that cryptocurrencies such as Bitcoin could continue to defy gravity and soar even higher over the next 12 months.

In fact, a rumor that Amazon.com will soon start accepting Bitcoin has lots of people buzzing…

As a backdrop to all of this, there is a strong rumor that Amazon is about to accept Bitcoin as a method of payment. Patrick Byrne, the CEO of Overstock, has stated that Amazon will soon have no choice but to start accepting it. He is quoted as saying, “… they have to follow suit. I’ll be stunned if they don’t because they can’t just cede that part of the market to us if we are the only main large retail site taking Bitcoin.” Scott Mullins, an Amazon executive has confirmed that Amazon is, “working with financial institutions and crypto-experts to spur innovation, and facilitate frictionless experimentation.”

If the Amazon rumor turns out to be true – Bitcoin will probably go into orbit! Be prepared…

If someone knew exactly what would happen throughout 2018, that individual could make an absolutely obscene amount of money.

Unfortunately I don’t know where cryptocurrencies are heading, but it does appear that things are about to get a whole lot more interesting. According to Reuters, it looks like you will soon be able to invest in Bitcoin using leveraged ETFs…

The new idea is to build “leveraged” and “inverse” funds that would rise – or fall – twice as fast as the price of bitcoin on a given day.

Direxion Asset Management LLC plans to list such products on Intercontinental Exchange Inc’s NYSE Arca exchange if U.S. securities regulators give the nod, according to a filing by the exchange this week.

In the filing, the exchange said the listing “will enhance competition among market participants, to the benefit of investors and the marketplace.”

So if Bitcoin rises or falls a thousand dollars in a single day, those financial instruments will be designed to move by about twice as much.

That should be fun.

Meanwhile, some are asking what will happen to cryptocurrencies such as Bitcoin, Ripple, Ethereum and Litecoin if the long-awaited collapse of global financial markets finally happens this year.

Well, some believe that it would be doom for cryptocurrencies, but others believe that cryptocurrencies would be like gold and would actually do extremely well during the next great financial crisis…

The question is what will happen to Bitcoin and Cryptocurrencies once the financial collapse takes place. The signs are that when economic circumstances start to deteriorate the price of Bitcoin rises. A prime example of this is during the Cyprus and Greece bailout which saw the price of BTC rise considerably during this period. With banks stopping access to cash in ATM machines, Bitcoin was the perfect solution to be able to store it safely out of the banks and Governments’ hands.

What also happens during a depression is interest rates skyrocket and start to see hyperinflation. This will mean it is extremely hard to get finance from banks and the cost can make it unsustainable. The ICO market is a perfect solution to this problem and as the banking sector suffers, ICOs will boom. More companies will look to these as a cheap way to raise money and will create their own cryptocurrency.

It will be fascinating to see how all of this plays out.

There are some financial experts that believe that Bitcoin is going to zero, and there are others that are absolutely convinced that it is going to a million dollars.

As with so many things in life, timing is everything. If you are investing in Bitcoin, let us just hope that you got in at the right time and that you will also get out at the right time.

Michael Snyder is a pro-Trump candidate for Congress in Idaho’s First Congressional District, and you can learn how you can get involved in the campaign on his official website. His new book entitled “Living A Life That Really Matters” is available in paperback and for the Kindle on Amazon.com.

Michael T. Snyder is a graduate of the University of Florida law school and he worked as an attorney in the heart of Washington D.C. for a number of years.Today, Michael is best known for his work as the publisher of The Economic Collapse Blog and The American Dream. 

If you want to know what is coming and what you can do to prepare, read his latest book Get Prepared Now!: Why A Great Crisis Is Coming.

Bitcoin Bubble: Is Bitcoin Going To $1 Million Or Is it Going To Zero?

This article was originally published by Michael Snyder at The Economic Collapse

The price of Bitcoin continues to rise at an exponential rate, and the financial world is in a complete state of shock. Just yesterday, I marveled that the price of Bitcoin had surged past the $13,000 mark for the first time ever, but then on Thursday it actually was selling for more than $19,000 at one point. As I write this, Bitcoin is sitting at $16,877.42, but a few hours from now it could be a couple of thousand dollars higher or lower than that. Those that got in early on “the Bitcoin revolution” have made extraordinary amounts of money, and many believe that this is just the beginning.

Of course many of the most respected names in the financial world were convinced that this would never happen. For example, back in 2014 Warren Buffett encouraged investors to “stay away” because he believed that Bitcoin was a “mirage”.  And not too long ago JPMorgan Chase CEO Jamie Dimon said that “if you’re stupid enough to buy it, you’ll pay the price for it one day”.

But for now, it is Bitcoin investors that are having the last laugh. If you would have gotten into Bitcoin back at the beginning of this year, your investment would be worth 16 times as much today. The following comes from CNN…

Bitcoin cracked $1,000 on the first day of 2017. By this week, it was up to $12,000, and then it really took off: The price topped $16,000 on some exchanges Thursday, and $18,000 on at least one. Other cryptocurrencies have seen similar spikes, though they trade for much less than bitcoin.

There’s a long list of factors people may point to in an attempt to explain this. Regulators have taken a hands-off approach to bitcoin in certain markets. Dozens of new hedge funds have launched this year to trade cryptocurrencies like bitcoin. The Nasdaq and Chicago Mercantile Exchange plan to let investors trade bitcoin futures, which may attract more professional investors.

At this point, Bitcoin has a market cap of approximately 280 billion dollars, and that means that if it was a stock it would “rank among the 20 largest stocks in the S&P 500“.

To put this another way, Bitcoin’s market cap is now greater than the GDP of the entire nation of Greece.

Earlier today, Zero Hedge posted a chart that showed how meteoric Bitcoin’s rise has been…

• $0000 – $1000: 1789 days


• $1000- $2000: 1271 days


• $2000- $3000: 23 days


• $3000- $4000: 62 days


• $4000- $5000: 61 days


• $5000- $6000: 8 days


• $6000- $7000: 13 days


• $7000- $8000: 14 days


• $8000- $9000: 9 days


• $9000-$10000: 2 days


• $10000-$11000: 1 day


• $11000-$12000: 6 days


• $12000-$13000: 17 hours


• $13000-$14000: 4 hours


• $14000-$15000: 10 hours


• $15000-$16000: 5 hours


• $16000-$17000: 2 hours


• $17000-$18000: 10 minutes


• $18000-$19000: 3 minutes

So where is Bitcoin headed next?

Whenever we see anything go up this fast, it is inevitable that there will be a pullback, and that is precisely what we are witnessing at the moment. After soaring past the $19,000 mark, Bitcoin dropped back to under $17,000. But this pullback could just be temporary, and there are some that are absolutely convinced that Bitcoin will blow well past the $20,000 mark by the end of December.

In the long-term, experts such as John McAfee and James Altucher believe that the price of Bitcoin will reach one million dollars. But there are others that believe that Bitcoin is one of the biggest financial bubbles in history and that it will eventually end in an absolutely horrible crash.

So who is correct?

Well, it is entirely possible that both sides are correct.

Bitcoin could theoretically continue to skyrocket for the next few years if the economy remains somewhat stable. And it is also true that given a long enough time frame, virtually every financial investment goes to zero.

Just like every other financial investment, the key is to get in at the right time and to get out at the right time.

For now, Bitcoin has sparked a worldwide craze that is absolutely unprecedented. The following comes from the Washington Post…

Such warnings have not stopped the craze surrounding the currency as the sharp rise in value creates ever more demand. In South Korea, people are pouring their life savings into bitcoin and other digital currencies. In Venezuela, after observing the rise of bitcoin, the government announced it would launch its own virtual currency called the “Petro” to get around U.S. sanctions.

And of course Bitcoin has spawned a whole host of competitors. At this point there are more than 1,000 virtual currencies in existence, and that number is constantly growing.

To me, this whole phenomenon is absolutely amazing. Bitcoin and other cryptocurrencies are digital creations, and they don’t have any real intrinsic value.

But something doesn’t have to have intrinsic value in order to be extremely expensive. For example, a single painting by Pablo Picasso once sold for more than 100 million dollars. You and I may consider it to be just a silly painting, but because there are people out there that are willing to pay more than 100 million dollars for it, that is how much it is worth.

The same thing is true with cryptocurrencies. At this moment there are people willing to pay more than $16,000 for a single Bitcoin, and therefore that is what it is selling for.

Someday if this craze fades or global governments really start cracking down on cryptocurrencies, things could change very, very rapidly. So anyone that is considering investing should be aware of the risks.

But for the moment Bitcoin is on a wild ride, and it has been fun to watch. And since Bitcoin and other cryptocurrencies are not controlled by the authorities, it is easy to root for them to be successful.

However, now that they are getting so much attention it is inevitable that the heavy hand of government will come down hard at some point. In the end, government usually ends up ruining just about everything, and I have a feeling that cryptocurrencies will be no exception.

Michael Snyder is a Republican candidate for Congress in Idaho’s First Congressional District, and you can learn how you can get involved in the campaign on his official website. His new book entitled “Living A Life That Really Matters” is available in paperback and for the Kindle on Amazon.com.

Michael T. Snyder is a graduate of the University of Florida law school and he worked as an attorney in the heart of Washington D.C. for a number of years.Today, Michael is best known for his work as the publisher of The Economic Collapse Blog and The American Dream. 

If you want to know what is coming and what you can do to prepare, read his latest book Get Prepared Now!: Why A Great Crisis Is Coming.

This Is What A Pre-Crash Market Looks Like

This report was originally published by Michael Snyder at The Economic Collapse

The only other times in our history when stock prices have been this high relative to earnings, a horrifying stock market crash has always followed. Will things be different for us this time? We shall see, but without a doubt this is what a pre-crash market looks like. This current bubble has been based on irrational euphoria that has been fueled by relentless central bank intervention, but now global central banks are removing the artificial life support in unison. Meanwhile, the real economy continues to stumble along very unevenly. This is the longest that the U.S. has ever gone without a year in which the economy grew by at least 3 percent, and many believe that the next recession is very close. Stock prices cannot stay completely disconnected from economic reality forever, and once the bubble bursts the pain is going to be unlike anything that we have ever seen before.

If you think that these ridiculously absurd stock prices are sustainable, there is something that I would like for you to consider. The only times in our history when the cyclically-adjusted return on stocks has been lower, a nightmarish stock market crash happened soon thereafter…

The Nobel-Laureate, Robert Shiller, developed the cyclically-adjusted price/earnings ratio, the so-called CAPE, to assess whether stocks are likely to be over- or under-valued. It is possible to invert this measure to obtain a cyclically-adjusted earnings yield which allows one to measure prospective real returns. If one does this, the answer for the US is that the cyclically-adjusted return is now down to 3.4 percent. The only times it has been still lower were in 1929 and between 1997 and 2001, the two biggest stock market bubbles since 1880. We know now what happened then. Is it going to be different this time?

Since the market bottomed out in early 2009, the S&P 500 has been on a historic run. If this rally had been based on a booming economy that would be one thing, but the truth is that the U.S. economy has not seen 3 percent yearly growth since the middle of the Bush administration. Instead, this insane bubble has been almost entirely fueled by central bank manipulation, and now that manipulation is being dramatically scaled back.

And the guys on Wall Street know what is coming. For example, Joe Zidle says that this bull market is now in “the ninth inning”…

Joe Zidle, of Richard Bernstein Advisors, is arguing that the bull market has entered the bottom of the ninth inning.

“This is a late-cycle environment,” Zidle said on CNBC’s “Futures Now” recently.

“In innings terms, they’re not time dependent. An inning could be shorter or they could be longer. It just really depends,” the strategist said.

This bubble has lasted for much longer than it ever should have, and everyone understands that a day of reckoning is coming.

In fact, earlier today I came across an article on Zero Hedge that contained an absolutely remarkable quote from Eric Peters…

“We are investing as if 1987 will happen tomorrow, because it will,” said the CIO. “But we need to be long, or we’ll be out of business,” he explained, under pressure to perform. “So we construct option trades that are binary bets.” Which pay X profit if stocks rally, and cost Y if markets fall. No more and no less.

“What you do not want is a portfolio whose losses multiply depending on the severity of a decline.” That’s what most people have today. “At the last stage of the cycle, you want lots of binary bets. Many small wins. Before the big loss.”

“Are we at the start or the end of the ‘Don’t know what I’m buying’ cycle?” asked the same CIO. “No one knows.” But we’re definitely within it.

“When their complex swaps drop 40%, and prime brokers demand more margin, investors will cry ‘It’s not possible!’ But anything is possible.” The prime brokers will hang up and stop them out.

In case you don’t remember, in 1987 we witnessed the largest one day percentage decline in U.S. stock market history.

When it finally happens, millions upon millions of ordinary Americans will be completely shocked, but most insiders know that the other shoe is going to drop at some point.

In particular, watch financial stock prices very closely. Last month, Richard Bove issued a chilling warning about bank stocks…

One of Wall Street’s most vocal bank analysts is troubled by the rally in financials.

The Vertical Group’s Richard Bove warns that the overall market is just as dangerous as the late 1990s, and he cites momentum — not fundamentals — as what’s driving bank stocks to all-time highs.

“If we don’t get some event in the economy or in politics or in somewhere that is going to create more loan volume and better margins for the banks, then yes, they would come crashing down,” Bove said Monday on CNBC’s “Trading Nation.” “I think that the risk in these stocks is very high at the present time.”

It isn’t going to take much to set off an unstoppable chain of events. Our financial markets are even more vulnerable than they were in 2008, and the right trigger could unleash a crisis unlike anything we have ever seen in modern American history.

Unfortunately, most Americans keep getting fooled by the artificial boom and bust cycles that the central banks create. Right now most people seem to have been lulled into a false sense of security, and they truly believe that everything is going to be okay.

But every time before when the market has looked like this a crash has always followed, and this time will be no exception.

Michael Snyder is a Republican candidate for Congress in Idaho’s First Congressional District, and you can learn how you can get involved in the campaign on his official website. His new book entitled “Living A Life That Really Matters” is available in paperback and for the Kindle on Amazon.com.

Michael T. Snyder is a graduate of the University of Florida law school and he worked as an attorney in the heart of Washington D.C. for a number of years.Today, Michael is best known for his work as the publisher of The Economic Collapse Blog and The American Dream. 

If you want to know what is coming and what you can do to prepare, read his latest book Get Prepared Now!: Why A Great Crisis Is Coming.