The $100 Trillion Bitcoin Bet

We all know that cryptocurrencies, and particularly Bitcoin, are all the rage right now in the investing landscape. And while raging asset classes such as this tend to be extremely volatile, they also tend to be extremely profitable for intrepid investors who know the value of being early adopters.

One such investor also happens to be the CEO of one of the premier tech companies around today, and no, I’m not referring to Elon Musk of Tesla Motors (TSLA), although his company is in on it, too. Rather, I am referring to MicroStrategy Incorporated (MSTR) Chairman and Chief Executive Officer Michael Saylor.

As head of one of the best companies in the enterprise analytics and software security space, Saylor is betting big on Bitcoin. In an interview Tuesday with CNBC, Saylor talked about the news that his company added some $1 billion in bitcoin to its balance sheet. More specifically, the company purchased 19,452 bitcoins. That bumps up the company’s bitcoin holdings to 90,531.

That’s certainly a vote of confidence by one of the leading tech companies; however, what really made news was Saylor’s bold prediction that Bitcoin’s market value would rise to $100 trillion one day!

To put this very robust call into perspective, the current market value of all bitcoin is about $1 trillion. That’s a 100X call on an asset class! Here’s the money quote from Saylor explaining his reasoning behind the provocative prediction: 

“There’s a $500 trillion monetary planet and the outer layer is currency, then you’ve got stocks, bonds, real estate. There’s $10 trillion worth of gold in there, $1 trillion of bitcoin in there. Bitcoin is going to flip gold, and it’s going to subsume the entire gold market cap.” 

The “entire gold market cap” is certainly a very bullish Bitcoin call, and one that I must disagree with here, both practically and in principle. Practically, gold isn’t going anywhere because of its actual physical utility. It’s not just for coins, it has both ornamental and industrial uses. 

However, what I do agree with Saylor on is that Bitcoin still can be considered in the nascent stages of widespread adoption. Think about this: Bitcoin was first created in January 2009. That means it’s only 12 years old, which is the average age a human male enters into puberty. 

I don’t know about you, but I remember puberty as being a confusing, exhilarating and extremely formative time in my life, and you might say that’s what’s taking place with Bitcoin. 

Yet as the digital currency matures, and as it continues working through its growing pains, I suspect it will continue to go “mainstream,” and that means more and more companies will add bitcoins and other cryptocurrencies to their respective balance sheets the same way MicroStrategy, Tesla, Square (SQ), PayPal (PYPL) and many others already have. 

Now, the Saylor Bitcoin call is yet another example of why every investor needs to know about cryptocurrencies. More importantly, the surge in the price of a bitcoin, as well as the dozens of other cryptocurrencies out there, is an opportunity for you to profit — even if you never actually own a cryptocurrency. 

But how can you benefit bigtime from cryptocurrencies (and by bigtime I mean over 5,900% over the past year), and still not actually own any digital currency? 

You can find out very soon, as tomorrow, Thursday, Feb. 25, 2 p.m. Eastern time, I will be holding a live online cryptocurrency summit that we’ve titled, “My $20 Backdoor Bitcoin Play.” 

This summit is free, but you do need to register to attend. So, simply click here, and get ready to find out more fascinating facts about cryptocurrencies — and how you can make huge profits from this tsunami-like wealth creation wave in this potential $100 trillion sector!

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ETF Talk: Commodity and Natural Resources Fund Offers Profit Potential

Commodity and natural resource investments may be omitted from many portfolios, but such allocation choices now might be worth reassessing.

One way to invest in these investment themes is through the SPDR S&P Global Natural Resources ETF (GNR). The fund, evenly divided between the metals & mining, agriculture and energy sectors, is on the rise and can make money for investors.

GNR is weighted by market cap and holds roughly 90 companies in total. The maximum weight of each sub-index is capped at one-third of the index’s total holdings. As the name suggests, GNR offers some global exposure, although the United States is the most represented nation among the portfolio holdings.

This fund has outperformed the S&P over the last year to notch a 19% gain in that period, largely due to a very strong relative performance in 2021. Plus, GNR has an ordinary expense ratio of 0.40% and pays a 2.56% dividend yield. GNR currently holds $1.5 billion in assets.

Chart courtesy of www.StockCharts.com

The fund’s top 10 holdings include BHP Group Ltd. (NYSE:BHP), 5.46%; Exxon Mobil Corp. (NYSE:XOM), 4.72%; Nutrien Ltd. (NYSE:NTR), 4.12%; Chevron Corp. (NYSE:CVX), 3.88%; Total SE (NYSE:TOT), 3.77%; Royal Dutch Shell Plc Class A (NYSE:RDS.A), 2.66%; Vale S.A. Sponsored ADR (NYSE:VALE), 1.63%; UPM-Kymmene Oyj (OTCMKTS:UPMMY), 2.62%; and BP p.l.c. (NYSE:BP), 2.60%. The top 10 holdings make up about one-third of its total assets, as of Feb. 23.

After the United States, consisting of 32.80% of the fund’s portfolio, the countries most represented among GNR’s holdings are: the United Kingdom, 13.27%; Canada, 11.30%; Australia, 10.67%; Finland, 5.11%; France, 4.54%; Brazil, 2.94%; Russia, 2.92%; Japan, 2.26%; and Norway, 1.77%%.

For investors looking for a convenient way to hold some of the biggest and best in global natural resource companies, SPDR S&P Global Natural Resources ETF (GNR) provides an uncomplicated way to add the sector to your portfolio.

As always, I am happy to answer any of your questions about ETFs, so do not hesitate to send me an email. You just may see your question answered in a future ETF Talk.

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Talking Politics, Ideas and Gold with Good Friend Rich Checkan

What do you get when you bring two Renaissance Men together to discuss the current political, social and financial market craziness?

You get a really fun, lively and informative conversation between myself and former U.S. Army officer, West Point graduate and current expert on investing in precious metals, Rich Checkan of Asset Strategies International.

In this episode, Rich and I talk about the Capitol Hill insurrection, the state of societal discord, the importance of listening to others and the current and future prospects for investing in gold and other precious metals.

If you want to sit in on two friends discussing critical topics of the day, and how to approach those topics Renaissance Man style, then this is the podcast for you.

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In case you missed it…

Will Bitcoin Become the New Buck?

The price of one bitcoin is, as of this writing, $51,360.37. I say “as of this writing” because, by the time you read this, that number is likely to be higher. At least, that’s what we’ve seen with Bitcoin, as well as just about every other cryptocurrency, over the past six months.

To illustrate this point, consider that Bitcoin’s price has spiked nearly 315% since the middle of August. Oh, and over that same time period, the benchmark domestic equity index, the S&P 500, is up slightly more than 16%. That move in the S&P actually is very robust by index standards, but when it comes to Bitcoin and cryptocurrencies, a 16% move is a like a day’s pay.

So, is it any wonder why cryptocurrencies have become all the rage on both Wall Street and Main Street? 

Now, in the interest of full disclosure, readers of my Fast Money Alert and Bullseye Stock Trader advisory services have been profiting bigtime from the move higher in cryptocurrencies. In fact, on Tuesday, Feb. 16, we realized a gain of 101.07% on one common stock position and a 378.42% gain on a call option position — all in just one week! (No, that is not a misprint).

We also continue to have exposure to several positions that are profiting from the Bitcoin craze, including one stock that’s up nearly 170% in just a few weeks and another that was up 140% in just over one week. Notice here that I said stocks, and not a cryptocurrency or bitcoin itself.

You see, I am a stock picker at heart, and while I won’t hesitate to recommend hard assets, real estate or digital assets when the time is right, I always prefer actual companies run by smart people engaged in in the enterprise of providing a good or service for a profit. Because in my universe, “profit” isn’t a dirty word, it’s a sacred word. 

Another word I consider sacred is one that many Americans also hold in a consecrated fashion, and that word is “freedom.” And when it comes to Bitcoin and the promise of cryptocurrencies, freedom is, in part, at the heart of its appeal. Indeed, the popularity of cryptocurrencies is actually rooted in libertarian ideas about the need for a stateless, distributed, noninflationary currency that can be more private, and more secure, than traditional dollars.

More importantly, cryptocurrencies are seen as a way to eliminate the middleman, i.e., to finally be rid of governments and their central bankers, and to liberate money from the hands of Big Brother and put it back into the hands of individuals.

Of course, this is a big undertaking, and one not likely to be adopted anytime soon. Yet in a provocative opinion piece at the website Coindesk.com, Alex Treece, co-founder of fintech platform firm Zabo, argues that adoption of Bitcoin as a reserve asset by the U.S. government would be in our strategic best interest.

And in my opinion, that could be a good way to begin the process of making Bitcoin the new buck, i.e., replacing fiat currency with cryptocurrency. As Treece explains it, the reason the U.S. government should embrace Bitcoin as a reserve asset is simple economic self-interest:

“In the near term, there exists an irresistible arbitrage opportunity for a country silently to accumulate a bitcoin position and later announce its holdings… It finally happening would send an ultra-bullish signal and vaporize doubts among traditional investor holdouts, including other central banks. The resulting adoption acceleration would bestow huge windfalls for early adopter countries who managed to accumulate early in this transition.”

Self-interest is always a key ingredient when it comes to necessary change, and though I don’t expect the United States to abandon the dollar anytime soon, having an early position here in Bitcoin could put our country in a very strong position. Moreover, this will be especially important because of the fact that the U.S. dollar is currently the global reserve currency. 

Rival countries Russia and China have already been building out their dollar alternatives via the accumulation of massive gold reserves, especially over the past several years. And as Treece explains, “Their overall goals are clear: create alternatives to the current U.S. monetary hegemony. As bitcoin continues to gain adoption and becomes a global reserve asset, it will be thrust into this great competition between nations.”

Treece finishes his opinion piece with the following provocative observation: “If America’s rivals embrace bitcoin first and take advantage of the reserve asset arbitrage, not only will they secure a once-in-a-generation economic windfall, they will also be in position to damage U.S. foreign policy and strategic interests. Fortunately, the U.S. can avoid this outcome, if it acts boldly and embraces bitcoin first.”

This most interesting take on Bitcoin, the dollar and rival nations is something I am going to be watching over the next several years, and most likely beyond, because if the situation plays out problematically for the dollar, that will have serious implications for everyone. 

In the meantime, it only makes sense for investors like us to take advantage of this tremendous wealth-creating wave that is cryptocurrencies. And as I’ve told you already, you can do that without actually owning any cryptocurrencies directly.

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Speedwagon Wisdom 

So if you’re tired of that same old story

Oh, turn some pages

I’ll be here when you are ready

To roll with the changes

— REO Speedwagon, “Roll with the Changes”

Learning to deal with change isn’t easy. And it seems as though the older we get, the more set in our ways we become. Yet when it comes to embracing the new, and embracing new investments, it behooves us all to learn to “roll with the changes.” The reason why is because change means new, and new means big opportunities to make money in new products, new technologies, new trends — and, yes, new forms of money such as cryptocurrencies. So, if you are tired of the same old story, then turn the pages on your current ways and embrace rolling with the changes.

Wisdom about money, investing and life can be found anywhere. If you have a good quote that you’d like me to share with your fellow readers, send it to me, along with any comments, questions and suggestions you have about my newsletters, seminars or anything else. Click here to ask Jim.