Part 3
Gold: How much of a portfolio?
I'm taking my time, savoring the subject, because there's lotsa fun nuggets that are worth their weight in gold.
Let's JUST focus alone, on the point that Richard did grab on to, which is that Schiff, being the gold guy, only recommends people hold 5-10% of their portfolio in gold. First, it isn't bad advice, any more than holding 10% of your portfolio in Bitcoin. The differences should be striking, though.
If 10 years ago, someone made the same recommendation in both camps, a person were given the advice to hold Bitcoin as 10% of their portfolio, just as an e-store of value in case they needed, let's say, a parallel means of transacting out of one asset and into another, and stablecoins didn't exist, the real purpose of having a store of value is in times where everything else you're doing isn't supporting your need to transact. In times of personal crisis, war, global unrest, natural emergencies. When you need a store of value, there are still good values in diversification, if any at all.
So, from 10 years projection, which is bound to be 1/4th - 1/5th of the lifetime of most of Peter's longest term clients, name me any of them who wouldn't be happier today with the Bitcoin vs. gold as their store of value? He doesn't have to answer that, because no one asked him that. SO annoying!
Peter doesn't want people holding more than 10% in gold, because as an investment vehicle, it serves no value. But, the thing is, it is NOT liquid to any of the same degree as Bitcoin as a form of payment transaction either! He made the argument that you can be your own bank backed by gold, but since no one within the criminal system of central banks is using a gold-backed value, it is not liquid to the same degree. You have to find a way to unload your gold in order to use it as fiat. If you own your own physical gold, it is the only sound means an investor can know that they actually own what they own, because they are selling fractional reserves of gold AND derivatives just as much as supposed actual custody accounts for gold.
You shouldn't be any more confident in an investment in gold that everyone swears by, that you can't hold in your hand, than an account granted giving you access to Bitcoin on an exchange of in a custody account. Most people aren't holding their own physical gold, and if a wicked political takes hold in their country, to which currently there aren't many clean leaders anywhere, you run the same risk of seizure in any asset regardless of what a financial advisor tells you. So, if you have your 'gold' in an account, 'safe' somewhere, you are at the identical risk as any crypto asset, and you can't get it without exposing all of your private data, and if everyone needed theirs at the same time, there's a good chance there is an ACTUAL Ponzi scheme where you are getting you Jane's gold while they are praying Jane doesn't want to sell hers at the same time.
The fact that gold recently spent 40 years in decline at all, is a strong argument against store of value, but remember, the real purpose isn't profit, it's liquidity. Store of value means that you didn't lose value overall like fiat, but at the exact point of need, you can turn it around into something else immediately. If you have it in an account somewhere, it isn't any more safe than crypto, and if you are serious about your gold and have it in person, you run the risk of getting robbed to cash out, and you run the risk of finding someone to sell it to if the govt. is already making it illegal to do so. The only time gold makes a really good store of value, is when you have sniper-like spidey senses and know it is the right time to cash out and get some liquid fiat before the rest of the market. It is safe, people don't see it coming, you have cash on hand at the depreciation value that is likely to stick for a few months, and you can probably re-enter stocks or even... gold, after the hardships have passed. You may have leverage to buy in to stocks at a bargain, but everything I just described, is someone like Peter Schiff's responsibility to KNOW, and to TIME, and guess what? They NEVER do! NEVER!
In fact, it isn't their job to know. It is their job to sniff out the safest, slowest moves, to make a few broad guesses here and there, understanding they will miss the target on half of them, but only in areas you were willing to gamble, and in the other areas, it will scale slightly better than what you lost in fiat..
So, the fact that 5-10% of someone's portfolio should be in a store of value, should be the premise that Richard came back to. Ten years ago, if Schiff had said that there was an emerging technology that, for 3 years running, was showing advances and had resolved the cryptographic puzzle of decentralized finance, and said "you know guys, it's a long shot, but it works and if it can protect people from governments, the real threat to financial crisis' when they come", the smallest part of their portfolios would easily be in the tens of millions of dollars if not hundreds of millions, while they were still getting a few grand in their safe dividends.
Richard is right about one thing, but he didn't mention it this time, which again annoys me! lol... That thing is, that mad gainz ARE a use case!
It drives me quite insane, when financial advisors argue against use case, when their entire career expectation of success is to make people money. What is the use case for a financial advisor?????? If they can't tell you there's value in something, then they are your anonymous pal on CryptoTwitter and nothing more. The use case, the use case, the use case... I bought $1000 of Bitcoin and now I'm set for life: THAT's a use case! I made so much I'm funding people who were going to lose their homes and now THEY're set for life. THAT's a use case. How about this one: I outperformed gold 10,000X. USE CASE!
It isn't a problem that Schiff, as a respected and responsible advisor, tells people to do what he perceives as cautious, responsible things. But, to frame the argument against something that some day, it will in fact go to zero, is holding a pin in place for the possible future date where it does go drastically down in value.
The thing is, we have seen the types of events that ARE the doom and gloom scenario. We saw the global virus scare. It was 10X more brutal on oil, of all things, than Bitcoin. It seems that the world's most powerful use case failed miserably for the assumption of "2 weeks" of little use of gas on the road. A barrel of oil tanked into literal negative numbers, and the imaginary internet money with no use case had SO much confidence, it held on the way down for 3 days back to back. It lost just over 1/2 its value, but played far more than 2X market volume in push back, and it went on tow double, double again, double again, and double again in the matter of 1 year; a year that sets records for people's lack of stability, trust, and global uncertainty.
So, from an investment vehicle, what exactly is a use case supposed to be?
In the next post, I'm going to go through the ideas of what makes for a good investment, and provide the debate points that should have glistened in the sun like gold.
And on that note, Crypto Gordon Freeman, for now... out.
