NORMANDY, FRANCE – Bitcoin is making itself useful. Bloomberg is on the case:
“Bolívar to Bitcoin Market Hits Record $1 Million Per Day”
The Venezuelan bolívar to bitcoin market reached a record on Tuesday, as the dollar-starved nation increasingly seeks the digital token in exchange for its nearly worthless currency.
Venezuela is a disaster. Inflation is expected to hit 13,000% this year.
But disaster isn’t sedentary. It’s nomadic. And our guess is that it is headed our way.
First, let’s turn to the research department to find out how close it might be…
What’s up with the Doom Index?
As you recall, our researchers – led by the indefatigable Joe Withrow – came up with a way to tell when a crash was likely to happen. We call it the Doom Index.
No guarantees, because these things are unpredictable. But a measure based on a broad group of indicators should be more reliable than your editor’s hunches, right?
Well, who knows.
But yesterday, Joe gave us an update:
The Doom Index spiked up to 7 – our extreme warning level – back in January… and it will remain at 7 for at least another three months based on first-quarter numbers.
But it is not signaling the crash alert flag… yet.
What has kept the crash alert flag in storage – and perhaps what will keep the markets chugging along for another quarter – is an uptick in credit growth. After falling to 1.6% last quarter, credit growth increased to 2.4% during Q1 2018.
Remember, we are leaning on economist Richard Duncan’s analysis here. Duncan says that the modern economy requires at least 2% credit growth to avoid recession. So 2.4% is just enough to avoid a Doom Point.
On the flip side, there was a sharp drop in non-farm payrolls. Non-farm payrolls steadily increased for 29 consecutive quarters – that takes us back to 2010. But they plunged 1.2% during Q1 2018. 1.2% sounds like a small move, but that’s the biggest drop in non-farm payrolls since the start of 2009.
So we saw an uptick in credit growth, but a fall in wages this past quarter. Perhaps those two moves are related… I don’t know… But we find ourselves right back where we were in January.
Okay. “Extreme warning.” But no crash yet.
And while the data is giving us an “extreme warning,” so are the fundamentals – which is why a catastrophe may be headed towards us… and why there may be no way to avoid it.
Markets go up and down all the time – sometimes sharply.
People never know what things are worth. They discover prices by bidding against one another. And human beings tend to overdo it.
They get overly optimistic or overly pessimistic… driving prices too high or too low… causing mini-booms and panics.
Between the end of the War Between the States and the Great Depression, there was the Panic of 1873, the Panic of 1884, the Panic of 1893, the Panic of 1901, the Panic of 1907, and the Depression of 1920–21.
The pain and damage done by these setbacks varied. But generally, they came and went. Markets quickly adjusted. Prices fell. Companies went broke. Entrepreneurs and speculators picked up the pieces… and got back to work.
Anyone can make a mistake. But if you want a real catastrophe, you need the government. The feds began to “do something” about these periodic overshoots following the crash of ’29. The result was the Great Depression.
Then, the Federal Reserve got in on the action.
Taking Away the Punchbowl
The Fed was set up in 1913. At first, its job was modest: to protect the currency and make sure the big banks made money.
This it did cautiously, at first, by “taking away the punchbowl,” as former Fed chief William McChesney Martin described it, when the party started to get out of hand.
It wasn’t until the 1980s that the Fed became the life of the party itself. By then, the U.S. had a new currency (the ever-stretchy, post-gold-backed dollar)… and the politicians had realized that “deficits don’t matter.”
They didn’t seem to matter because beginning in the late-’80s, the Fed was no longer restraining excess spending… It was enabling it.
Deficits used to draw down the nation’s savings. That’s because the feds had to borrow to fill in the hole. And when you borrowed, you borrowed what someone else had saved.
No more. The new dollar and the Fed’s low interest rates made real savings irrelevant. The Fed dropped interest rates to make saving unattractive… and covered the deficits with fake savings – credit it invented “out of thin air”; it bought U.S. Treasury bonds itself.
Back when the feds had to borrow real savings to close the gap between outlays and tax receipts, there was a natural limit on what they could spend.
If they borrowed too much, they “crowded out” private borrowers. Interest rates rose. Savings increased. The economy cooled down. And tax receipts fell.
Every lawmaker knew that the federal government had to manage its finances responsibly. Neither party wanted to get a reputation for incompetence with money.
But now, all that has changed. The illusion of abundance – provided by the Fed’s EZ-money policies – has bamboozled them all.
More to come…
MARKET INSIGHT: TRUMP GREENLIGHTS LEGAL MARIJUANA
By Nick Giambruno, Editor, Crisis Investing
The legal marijuana market just got a huge boost thanks to President Trump…
Some readers may remember that, earlier this year, Trump’s attorney general, Jeff Sessions, rescinded an Obama-era policy that made it easier for legal marijuana businesses to operate.
You see, marijuana is legal in many states. But it’s still a Schedule I drug according to the federal government.
And what Sessions did in January made it easier for federal authorities to crack down on the legal marijuana industry.
That had many investors on edge… uncertain of the future.
But now, it looks like the president is putting his foot down.
It’s being reported that Trump is abandoning the Justice Department threat to crack down on recreational marijuana. The decision came after a Colorado senator appealed directly to the president.
In short, Sessions got overruled by his boss.
Trump the Businessman
I think there are a few reasons why Trump gave the marijuana industry a green light.
For starters, legal marijuana is now very popular among Americans. Have a look at the data recently released from Pew Research:
As of last year, marijuana legalization was favored by 61% of Americans. Compare that to only 12% back in the late-’60s.
But I think there’s another reason why Trump is happy to let the legal marijuana industry grow: money… and lots of it.
The legal marijuana industry is estimated to be worth around $7.7 billion today. But by 2021, it’s predicted that it will hit $31.4 billion and that it will see a compound annual growth rate of 60%.
Think about that. The legal marijuana industry is expected to more than quadruple in the next three years.
And as I’ve reported in the past, states like Illinois with unfunded pension liabilities will need the tax revenue from legal marijuana to dig themselves out of the financial holes they’re in.
That’s not wild conjecture. The Wall Street Journal confirmed as much when reporting on the Illinois gubernatorial race last month:
Democrats running in state primaries across the country have been promoting legal marijuana as a painless way to raise money while avoiding tax increases.
In Illinois, the candidates vying to be the party’s gubernatorial nominee are so invested in the issue they have been attacking one another for failing to embrace it with enough vigor.
So let’s think about this…
More Americans want legal marijuana than ever before… the industry is expected to skyrocket… and more and more state governments are getting on board.
No matter what you think about the president, remember, he started life as a businessman. And he knows a promising investment when he sees one.
– Nick Giambruno
P.S. Don’t worry if you missed the first wave of marijuana investing. We think the 2018 marijuana boom could be eight times bigger than the first… when pot stocks averaged peak gains of 24,000%.
But this second chance is time-sensitive. We’re sharing all the details on Thursday, April 26 at 8 p.m. ET, during the Pot Stock Millionaire Summit. Space is limited. So click here to reserve your spot now.
Warren Buffett’s Seven Secrets of Success
Warren Buffett is the world’s most famous investor. What accounts for his great success? According to Charlie Munger, vice chairman of Buffett’s Berkshire Hathaway, it comes down to these seven things…
Chinese Stocks Are in Trouble
American investors are on edge with newly volatile U.S. stocks. But it’s nothing compared to the Chinese market. The Shanghai Composite Index is down 13% since late January, the largest drop worldwide. And Chinese stocks are reaching a “make-or-break” moment…
Before You Buy Cryptocurrencies, Read This
As Bill showed, people are flocking to cryptocurrencies like bitcoin to protect their wealth from bad government money. But investing in cryptos comes with new risks. Read this essay from Bill’s top technology expert, Jeff Brown, before you buy a single crypto.
In the mailbag, there’s talk of currencies, of both the fake and crypto varieties…
The market will only go down long-term. Our currency is a joke, a fraudulent piece of green paper, a note for a dollar that used to be redeemable in lawful money (but is no longer). And until we straighten out this bit of fraud, well, the future only looks bad.
– Lawrence S.
Isn’t the government the only one that can legally print money? If so, when will it shut down all cryptocurrencies?
– Paul C.
Don’t bitcoins and cryptocurrencies have a sinister side, which is also pushing up their value at a ludicrous rate? It’s something that hasn’t been investigated and which should be. Yes, the money launderers’ dreams may come true. When you buy gold or other valuables, due diligence is carried out. However, can the same be said for a cryptocurrency? Does anyone want to look at that baby?
– Richard P.
Thanks for all your insights and analysis; I find nothing to disagree with in your prognosis. My question is: How will gold be able to be used once cash is outlawed? My thinking in having physical precious metals for the coming collapse has always been that I could go to a precious metals dealer, sell some coins for cash, and deposit that into my checking account to pay taxes, buy food, gas, etc. In a cashless economy, would precious metals coins not be considered the same as cash, and would transacting in them be outlawed as well? Or perhaps there would be a windfall profit tax applied to take most of the coins’ value for the state.
I realize we are all speculating as to how it will all come down once the Deep State decides to collapse the system to implement the one-world economic, political, and religious system (which the Bible predicts will happen, so we know it will!). But I realize my above premise is most likely flawed, at least in the long term. Your insights on this would be appreciated, probably by many more than just myself! Thanks very much.
– Paul B.
You wrote, “What the market may have discovered is that bitcoin has a value as, well, bitcoin. When financial chaos strikes, gold holds its value… and bitcoin goes up.”
Sorry mate, but there is no proof of this theory yet; it’s just speculation. How can a trader of motorcars trade with bitcoin, sell a car via bitcoin at $15,000, and now that trade is booked at $7,000? It’s confounding and will send you to the poorhouse in double-quick time. Also, the advent of all sorts of crypto and robocop coins – yes, each has a supposed limit. But if the amount of coins increases by 1,000, it’s just a big con job.
However, the recent spike in bitcoin does whet my appetite for gold in a full-blown financial crisis. Imagine what tangible gold could do. The bitcoin hysteria spike tells me that gold could play out in a big-time spike. Bitcoin recently went parabolic and has crashed to fill in the spaces on the chart. I figure it will behave like a dying fish, whilst gold will prove to be the real store of value… in the adults’ room.
Gold had its parabolic move in its bull market infancy, and has, predictably, come down in Fibonacci movements. It has had to fill in the gaps on the chart, and that has taken time. The next move in gold will be real, as opposed to bitcoin theory. A bit of a coin is no coin at all; a bit of gold is still, well, gold!
– Jay T.
I have not invested in bitcoin because I don’t know where I can spend it. Can I buy an airline ticket with it? Or groceries, land, or a house? Because if I can’t, it seems that it would be useless to me.
– Linda E.
Meanwhile, a Dear Reader offers advice on Bill’s car troubles…
I have been enjoying your Diary for years. Missives on missives! Regarding your Normandy battery problem, I suggest you install a battery disconnect on the battery cable to lengthen the battery charge life between uses. Given your deep roots are now implanted in France, I suggest the guillotine style!
– David S.
IN CASE YOU MISSED IT…
We recently had a conversation with Jeff Brown, Bill’s top technology expert. What he said shocked us…
A technology is being tested that has the potential to permanently cure thousands of diseases. It could even guarantee America’s energy independence for decades to come. It sounded too good to be true. But then we watched this presentation.