Last night was one of those nights where you wake up and things occur to you. I’ve had quite a few of those lately, but this one seemed especially illuminating. For a while now, we’ve had the word bubble planted in front of us by the media for quite a while to convince us stock markets, bond markets, commodity markets and biggest of all, cryptocurrencies are too high and may be about to crash.
Using reverse psychology, you should wonder if there really is a bubble. After all, a real bubble happens when everyone is too carried away by the emotion and success to recognise the bubble for what it is. In fact, bubbles don’t normally get identified until long after they pop. In hindsight, a graph usually makes it clear and everyone who once yelled loudly about their success now remains quiet and tries to forget the whole sorry episode.
Perhaps the one where you could say the graph seems to show a bubble, is Bitcoin. While I regret not being in on the Bitcoin boom, I’m still not convinced and find myself on the side of Peter Schiff and Jim Rogers, versus such other illuminaries as Doug Casey and Robert Kiyosaki. Yes, billions are being made and yes, we can agree fiat currencies are in massive decline. However, to me, the best medium to avoid that is the precious metals, with thousands of years of history to prove it, not electronic bits on a screen with no intrinsic value. Of course, the blockchain technology, decentralisation and ability to pay without banks are excellent, but it all runs on establishment hardware. Beginning with your smartphone, then the networks that pass your data across the world. As the establishment gets better at tracking, they will undoubtedly find ways to switch you off if they want to. There are certainly some fascinating debates out there to watch on the subject between these knowledgeable and successful people. Meanwhile, stories like this, about a German who won’t give the police his password and would rather sit in prison, remain amusing and stick two fingers up to the powers that be.
I am certainly an interested observer. Even the mysterious Satoshi Nakamoto, who supposed started up Bitcoin is an enigma. For some reason, his name reminds me of the government department, the NSA (National Security Agency) and it’s always seemed strange that organisations with a global reach and unlimited funds are unable to track down the person who started it all. As an adult, you know that sometimes the best way to keep a child or dog occupied is to throw them a ball and part of me has wondered lately if that’s exactly what’s happened here. Throwing a ball to keep people busy and distract them from the best investments, while you clean up on the cheap.
Take, for example, the recent purchase by Tesla of $1.5 Billion worth of Bitcoin. Why would they do that, you might wonder? Whatever reasons are given, I find myself doubting they are the full truth. Then, we hear that Apple may also buy Bitcoin. Both stories helpfully plugged on mainstream media, to ensure maximum public reach.
So why are they buying?
Last night was my own Eureka moment. On a yearly basis, there isn’t enough silver mined to meet demand. Only about 80%, with the rest met by recycling. Fair enough, excellent reuse, but for how long will there be enough scrap silver to go around, and, if a sniff of inflation came around, how many of those recyclers would be willing to sell their metal at the current prices? It led me to get thinking about the products of Tesla and Apple, and the amount of silver they consume yearly. In the case of Tesla, one electric car consumes 1 kilogram of silver. It doesn’t sound like a lot, but if they make one million cars a year, then they will consume 5% of world silver demand. To put that in perspective, Ford alone produced 4 million cars last year. When it comes to Apple, I am grateful to this excellent infographic for explaining it all very clearly, albeit it from 2013. I can only guess that bigger iphones means even more metal in there.
Here’s my view – the public has been thrown a ball to play with. Indeed, it may continue to shoot up and entertain us all, the same way the Dutch went wild for Tulip bulbs in Amsterdam in the 1600s, and for a while, we may all feel ourselves rich or stupid for not participating. Indeed, some will walk away with fortunes. The majority probably won’t, however.
Meanwhile, the elite can stock up on the proven store of value and have a good laugh as many lose everything and are forced to succumb to The Great Reset.