When the “Smart Money” Will Come Into Gold
The collectibles and alternative assets market has been on fire.
That includes cryptos and altcoins. We saw Bitcoin run to $65,000 earlier this year.
But the alternative asset market in general has been on fire with everything from Magic the Gathering and Pokemon cards selling at records to rare baseball cards holding their value and even being auctioned off for millions of dollars — now being combined with NFT components.
Paintings are being sold at records and holding their value. And of course, classic coins are holding their value.
And not just these alternative assets themselves, but in the stock market as well. There's a company called Collectors Universe that was co-founded by a friend of this letter, Van Simmons. That company was recently sold to an investor group led by Steve Cohen for over $850 million.
It was a stock listed on a major exchange. The ticker was CLCT. And that stock was able to be bought out here in the past 12 months as an effect of an inflating collectibles market that “big money” now wants in on.
The point I want to make is that contrarian money was well ahead of that “smart money”. Van would be a perfect example of seeing where the collectibles market was going and having the wherewithal to stick through it until the endgame ultimately played out: selling his company to an investor group led by a billionaire.
Collectors Universe is a gatekeeper to the collectibles market because they grade so many items. It was taken out in February. I published newsletters that recommended Collectors Universe below $15 per share. It was taken out for over $90.
I saw an article last week about how the Blackstone Investment Group just bought a stake in a company called Certified Collectibles, and is being joined by Jay-Z in doing so.
My first take on that is they're coming to that market at a, I don't want to say a top, but certainly late. A contrarian comes to it ahead of time, as evidenced by Collectors Universe, which I just opined on.
Alternative assets are one of the places money is going to hide from inflation. As a result, it has also become a hit sector of the stock market.
And following my lead would’ve had you harnessing all the upside.
A growing component of the collectibles market is in the realm of the blockchain and non-fungible tokens, or NFTs.
That’s because digital properties, whether that's a video of an athlete or a picture of an athlete, or simply the ownership of a physical item as recorded on the blockchain, cryptocurrencies are increasingly playing a role in the collectible space.
And you'll see companies like Topps, for example, the famous baseball card company, recently IPOing via a SPAC, the Mudrick Capital Corp (NASDAQ: MUDS) — clearly reflecting that trend in the stock market.
So the alternative assets, the collectibles, continue to hold their value because you can't make more of them in a similar way that you can't make more Bitcoins, and in a similar way that something etched and stored and secured or tokenized on the blockchain can't be duplicated, and everyone knows who owns it.
I spent some time with a gentleman recently who made a good amount of money — six figure — on Dogecoin. And he was explaining to me a little bit about the altcoin universe and why he owns some of the coins he does.
Some of the sentiments reflected how I view the markets and the world as well — being "jaded with the system", knowing that the system is rigged, being too late to build an asset base that can appreciate fast enough or in time for a secure retirement.
He also mentioned the independent nature of cryptocurrencies, and that they're separate from the government, and of course, the propensity to start from a very low base with altcoins like SafeMoon, for example, trading with a dot and then several zeros in front of the first number. So you have the chance to multiply your wealth quite quickly as an altcoin goes from .001 to .01, just as a random example.
But there are also ways, I think, to do that in the stock market. Just take the collectibles that I discussed above, or the current real estate market. They're not making any more Honus Wagner cards just the same way as the housing stock is not easy to duplicate. Only a certain number of houses are built every year because it's a hard asset, just like there's only so many ounces of gold mined each year.
So I understand all that philosophy behind cryptocurrency. And I'm certainly an owner of Bitcoin.
In fact, I was recommending premium readers buy Bitcoin below $1,000 as far back as 2013. So I certainly get that market. But I don't think it's “the” market. I don't think cryptos will overtake everything. I don't think cryptos are the only way to invest.
And I still think that the people who've pioneered that space and people like the gentleman who I talked to last week — they've had a great amount of success, and well done and kudos. But I think there's still a lot to learn, for example, about trends and cycles within cryptocurrencies and how human behavior affects that, and why you should take profits at $65,000 Bitcoin and look to buy in a bit lower because things don't just go straight up — they have to consolidate and pull back and sell off, et cetera.
There’s a cycle to everything.
I think cryptos are going to be a firm piece of the financial market going forward for their transactional value and their ability to track things across supply chains.
But I don't think it's the only way to invest. And I think that the people who are only invested in crypto will diversify into other things, either as they take gains off the table, or as it eventually plays out that all these altcoins aren't going to make it and money starts going to money heaven.
That includes gold, which is trading near $1,800 per ounce and is actually down for the year so far.
What I would submit is that if you look at the money supply, like the M2 money supply over the past couple of years, gold has kept precise pace with it, and so is very much doing its job as an inflation hedge, up something like 30% commensurately with the expansion of the money supply.
But other sectors — real estate, energy, cryptos — for example, have simply inflated faster so capital has gone into them and gold has cooled off from the record prices it notched last year. And the gold equities have cooled off along with it.
That's not to say that gold isn't still in a secular bull market and that prices won't go back up. It's just not being looked to as an “in” sector right now the way collectibles and cryptos are.
And in that respect... gold and gold stocks are something to take a look at from a contrarian perspective.
The smart money will come soon enough.
Call it like you see it,
Publisher, Resource Stock Digest
Nick Hodge is the co-owner and publisher of Resource Stock Digest. He's also the founder and editor of Foundational Profits, Family Office Advantage, and Hodge Family Office . He specializes in private placements and speculations in early stage ventures, and has raised tens of millions of dollars of investment capital for resource, energy, cannabis, and medical technology companies. Co-author of two best-selling investment books, including Energy for Dummies, his insights have been shared on news programs and in magazines and newspapers around the world.
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