The Threat of Alternative Assets

by Gerardo Del Real

Gold is dumb (a fund manager told me), sneaker resale valuations are at all-time highs and the stock market only goes one way.

The result has been a rise in rates in government and corporate bonds. The rise in borrowing costs has led to over $740 billion of notes across currencies this year. The most ever.

Like Nick Hodge likes to say, forever is a long time.

The new wave of speculative assets — think NFTs and cryptos with puppy names — along with a consistent wave of rising real rates continues to keep the gold price in consolidation mode.

Coinbase, the platform that facilitates the buying and selling of cryptos, is set to IPO this month.

The market is assigning a valuation of nearly 53 times 2020 revenue.

Companies on major exchanges like GameStop are trading like a junior with 30%-50% moves now becoming common.

Heck the guy that started the run on GameStop shares will now be the chairman.

Reddit, the platform that has facilitated the extreme price action on chosen stocks, is also going public.

Stimulus checks are hitting bank accounts, the vaccination rollout continues to pick up steam, and it appears we are as close to a new normal here in the U.S. as we have been in over a year.

Even central banks are wanting in on the action, as calls to regulate cryptos are gaining momentum, which is exactly what happens when the government recognizes capital pivoting into a space it cannot manipulate.

How much of a threat do alternative assets present to governments accustomed to controlling the printing press that creates magic money for corporations and banks?

So much so that billionaire investor Ray Dalio, the founder of the $150 billion hedge fund Bridgewater Associates — the world’s largest — says there’s a good probability Bitcoin could be outlawed.

Think it can’t happen? It has. With gold in 1934. The reasoning then is similar to the case that Dalio makes for the outlawing of Bitcoin.

As Dalio explained, the Gold Reserve Act of 1934 made it illegal for individuals to own gold “because government leaders didn’t want gold to compete with money and credit as a storehold of wealth.”

We are in the midst of one of the most interesting (that’s my nice word) monetary experiments I’ve ever seen. How I feel about the spending, how it’s allocated, etc. doesn’t matter.

What matters is that this debt jubilee is extremely bullish for commodities, including gold, so if it takes another month or two before the next rally in the precious metals and the junior resource space then so be it.

I’m more focused on making sure the companies I buy are adding value than I am share price.

That’s why I continue to write checks and add to my precious metals positions.

When will gold’s consolidation end? I don’t know, but I suspect we are close and I can’t stress enough the importance of using consolidations to your advantage.

The same price movement we’ve seen in the uranium juniors is coming to gold juniors.

You’re either going to make money off it or you’re not.

Everything is awesome and it all makes sense right? Of course not but in the end it won’t matter.

We’ve done well with the uranium portfolio, copper has done well and gold and the related equities will see their day in the sun.

In the meantime, Nick will soon be sharing one of the best ideas I’ve seen in a long time.  It's an idea that takes advantage of the electrification of everything megatrend that is just getting going.

It has to do with virtual power plants, which I actually have at my own house but didn't even realize.

Stay tuned.

Let's get it!