Over the last two years or more, most of us have been living under tremendous psychological pressure. First of all, the threat of the covid epidemic, which was joined this year by the conflict in Ukraine, the threat of food and energy shortages, and high inflation.
It is not surprising that few people remain calm in this situation, although our psychological disposition to lose balance varies.
However, the principles of how to maintain psychological balance remain the same even in this extremely difficult time as in times of relative calm and peace. A generalized expectation of danger occurs during the stressful condition known as anxiety. The anxious person experiences a state of heightened tension.
Many of us ask the following questions: Will inflation break my budget?
Consumer prices rose higher globally in 2021 than at any time since 1982. For those who have fixed incomes or those who are retired, it can mean hard choices like delaying medical care or eating unhealthily.
The global pandemic caused massive disruption in the workplace and across most industries, so it’s not surprising to find that for many people, it is contributing to financial anxiety.
Experts agree that we do have some power to control the things that are making us anxious when it comes to our money, and that usually means finding a way to earn more of it or spend less.
When a person evaluates the situation as hopeless, he gives up the activity. This is what manipulators use.
Right now, we live in uncertain times. We don’t know what tomorrow shall bring. The experience Covid-19 has brought made our daily routines completely different from what they are usually supposed to be. Many people began to suffer from death anxiety, and now comes to it the anxiety of lack of money because of the energy crisis.
Financial experts say the most important thing is to understand where your money is going. That means making a budget so you can look more carefully at where you could cut back. If your financial anxiety is rising, then getting control over some costs can be a significant factor in paring it back.
Will I be able to cover my medical expenses?
Especially in the US, as they age, most Americans worry about covering medical expenses. The survey found they’re the number two factor for financial anxiety for Americans 55 and over. COVID-19 also made many people pause decisions about moving into assisted living centers and retirement communities.
Unlike Australia, the U.S. does not have universal healthcare. Private health insurance costs hundreds of dollars a month, and medical debt is one of the leading causes of bankruptcy in the U.S.
Though the situation with health insurance is different in other parts of the world, the financial problems are generally similar everywhere.
Maintain your mental balance
For many people,life involves an element of anxiety. This is perfectly normal, and in some cases, it is also helpful. When we worry over the current circumstances in our life, things such as finances, work, and family, the worry can lead to well-thought-out decisions and carefully made plans.
When worry becomes overwhelming for our psyche and emotions, it can quickly become debilitating and negative. If you have been experiencing worry in an uncontrollable and excessive way for an extended period of time, there is a good chance that the worry has transformed into anxiety.
Here are some methods which you can use to avoid the anxious mind setting:
#1. Write About It
You can use this method to ease the stress of negative thoughts and feelings when you have something on your mind but aren’t sure how to let it go. It can help to write about the situation or event causing the anxiety to help you process your thoughts and feelings so that you can work through them. From a scientific perspective, writing activates the right side of your brain, which is the side that processes emotions, letting you understand the situation from a new perspective.
#2. Concentrate on Your Breathing
The task is to slow down your heart rate, which is often the physical accompaniment to anxiety. To start out, try breathing in for four beats and out for four beats. Five minutes of this should even out your breathing and calm the heart.
#3. Question Your Thoughts
You can easily forget or simply not notice when your thinking has become negative. By watching and questioning your thoughts, you have a chance to reverse a negative train of thought. It is not always easy; some things just seem fundamentally negative.
#4. Exercise
Physical activity works as both a long and short-term solution to anxiety. Bringing your body’s activities in line with the activity of your mind will help you balance. From there, you can begin calming your body and mind together and enjoy the endorphin rush that exercise brings.
#5. Aromatherapy
Certain aromas have calming and soothing properties, which create a sense of tranquility when they are in the air. There are many new humidifiers and scented candles available to help you set a relaxing and soothing mood within your house, office, or wherever you are staying. Lavender, Chamomile, and Sandalwood are just a few good options.
More possibilities to fight anxiety
We are living through a historically stressful time, with chronic stress from unrelenting issues. Nowadays, it is still more important to focus on taking care of yourself first by eating a balanced diet, spending time outdoors, and talking with others with similar concerns.
There are more methods that are more time demanding – such as meditation which takes time to master, but it can be a helpful tool for managing anxiety.
Root chakra healing – Let go of fear
Other relaxation – Let go of fear techniques may be activities such as yoga or tai chi which are also helpful for promoting relaxation and helping reduce anxiety and stress.
Great and uncomplicated help represent some herbs. Here are a few main ones you can use to maintain your mental health.
Indian ginseng induces calm and harmony
Ashwagandha (withania somnifera) is an evergreen shrub that grows in India, the Middle East, and parts of Africa. It has a long history of use in traditional medicine.
Ashwagandha, or Indian ginseng, is one of the most popular Ayurvedic herbs. It is used to treat bronchitis and asthma, while it also works reliably for rheumatism, psoriasis, or insomnia. This miracle drug also has sedative properties, so it calms the mind and helps the body to better adapt to stress.
Dandelion
A drink prepared from dandelion (taraxacum) has a positive effect on mental mood and induces a good mood. At the same time, it normalizes the blood pressure level and detoxifies the organism.
A drink prepared from dandelion has a positive effect on mental mood and induces a good mood. At the same time, it normalizes the blood pressure level and detoxifies the organism.
Passionflower
Passionflower (passiflora) as a safe bet (an evergreen climbing plant of warm regions, which bears distinctive flowers with parts that supposedly resemble instruments of the Crucifixion)
A climbing plant from the passion family is an indispensable helper for all forms of mental exhaustion. Experts are so enthusiastic about its capabilities that they even compare it to pharmaceutical anti-anxiety drugs in terms of effectiveness. However, unlike them, this treasure does not have any unwanted side effects or the risk of addiction, which is why they recommend it so warmly.
Be mindful of your media consumption
You may want to avoid or decrease the amount of time you spend on news and social media, particularly before bed, and refine your information sources to outlets that offer straightforward facts.
No matter how relentlessly bleak the headlines may become, the ability to recognize what we can change and what we have to adapt to can help to limit our stress response.
In this short video above, a famous Czech doctor shows how to combat unpleasant anxious feelings by inducing laughter. It may seem crazy to you, but check him out. He looks like a little Buddha.
“Courage is resistance to fear, mastery of fear, not absence of fear.”
About: Markéta Hálová. (Czech Republic) A crypto enthusiast, keen online marketer and passion for photography. I love interacting with the community of Entrepreneurs at Markethive. I believe in free speech, liberty, sovereignty for all. Find me at my Markethive Profile Page | My Twitter Account | and my LinkedIn Profile.
BlackRock – Shadow Government?
Is It Too Big To Fail? Or Has It Now Got Too Big To Control?
There is a company out there that has more funds running through its systems than the entire GDP of the USA. A company that can and has used its clout to effect “societal change” whether we like it or not. A company with a direct connection with powerful politicians in the world has recently come front and center as it has started exploring investments in the crypto space and venturing into governance territory that will impact worldwide.
The BlackRock Behemoth
BlackRock is the world’s largest asset manager, and while many may have heard of it, you may be surprised just how much control it has over the financial markets. A control is afforded to it through leveraging our money, so there’s a strong chance that you and your money are connected with it somehow. It is a company that has its fingers in many pies, with over $10 trillion in assets under management.
They are also one of the most secretive companies in the world of finance. Trading and commodities are two areas of BlackRock’s business that have come under scrutiny from government regulators in recent years.
The Commodity Futures Trading Commission (CFTC) has claimed that the process of trading commodities futures is not transparent and is likely being abused by large investment firms like BlackRock. One of the most controversial aspects of BlackRock’s business is the way they have been operating their so-called dark pools.
Blackrock’s political connections are extensive. Over the past couple of years, there has been growing concern about how much control large corporations like Blackrock exert over American politics and economic policymaking.
Although they claim to be a non-political organization whose only interest is maximizing shareholder value, it is clear that many large corporations like Blackrock do wield significant influence over how our government works and what kinds of policies it enacts into law.
BlackRock is a New York City-based company founded in 1988 by Laurence [Larry] Fink and Ralph Schlosstein. Starting as a Bond Asset manager, it quickly grew into a financial services company that provides investment management, risk management, and fiduciary financial services to a wide variety of clients ranging from Central Banks to pension funds and individual investors.
In 1999, BlackRock became a publicly-traded company and continued its rapid expansion in the asset management sector. In 2006, the firm acquired Merrill Lynch's Asset Management business, which rapidly expanded its offerings in the equities sector. This was further compounded by the purchase of Barclay’s iShares in 2009. At $13.5 billion, this was one of the biggest deals in Asset Management history.
As a result, BlackRock quickly morphed from being a bond asset management company to an Index Fund provider. Index Funds, sometimes called Exchange Traded Funds, are collective investment vehicles that track the performance of a particular index or basket of Securities. They're hugely popular, not only because they're easy to invest in but also because they incur lower fees than more active investment management firms.
These benefits have also made index funds extremely attractive for more passive institutional investors, the most common being pension funds. Trillions of dollars are invested on our behalf and find their way into index funds of some sort. So there’s a strong possibility our money has been invested through BlackRock somehow. Either that or it's being invested by another index provider thanks to BlackRock’s technology.
The point is that BlackRock is a behemoth that invests on behalf of hundreds of millions of people, and what that means is it has an interest in nearly every company you can think of. Since BlackRock must invest funds to track indexes or other investing themes, it must invest in the underlying assets. If these funds track an equity index, BlackRock must take a stake in the underlying company, so BlackRock is often one of the largest shareholders of a company's outstanding shares.
These companies include some of the biggest Wall Street banks, like Goldman Sachs, JP Morgan, Bank of America, and Citibank. Essentially, BlackRock is one of the top three shareholders in the banks that keep the financial markets running.
BlackRock is also vested in the media with Comcast, Viacom, et al. Also, social media and tech companies with large stakes in Google, Apple, and Twitter. They even have stakes in the food industry with Mcdonald's, Chipotle, et al. Along with State Street and Vanguard, BlackRock forms a trio of the largest shareholders in the vast majority of publicly-traded companies in America.
For example, according to a recently published paper by Corpnet, these prominent three asset managers are the largest shareholders for over 90% of all companies in the S&P 500. In fact, in the broader collection of all outstanding publicly traded companies, 40% of them have these three as their most significant shareholders. And it’s not just America; it holds considerable positions in companies in Europe as well.
A Slice Of The Real Estate Pie And Now Crypto
BlackRock has its eyes on cryptocurrency with BlackRock CEO, Larry Fink saying the firm is studying the crypto sector broadly, including assets, stablecoins, permissioned blockchains, and “tokenization,” where it perceives a benefit to its customers. We are increasingly seeing interest from our clients, he said.
BlackRock is an investor in a $400 million fundraising round for Circle Internet Financial, the crypto-focused company that manages the stablecoin USD Coin. During a conference call in April 2022, Larry Fink said BlackRock has been working with Circle over the past year as a manager of some of Circle’s cash reserves. He said he expects BlackRock eventually to be the primary manager of those reserves. We look forward to expanding our relationship, he said.
You might also be surprised to learn that asset managers like BlackRock have been competing with you regarding residential real estate. Last year, large institutional investors bought up entire property units to diversify their holdings. Just imagine, large asset managers could potentially be using your pension money to outbid you on a home. Despite how crazy all this sounds, it’s just the tip of the iceberg.
ALADDIN – BlackRock’s Genie Of Growth And Control
BlackRock has not only made a name for itself through its index funds, but it's also developed an institutional investing platform that is the backbone of the asset management system. The “central nervous system” is relied upon by nearly every billion-dollar capital allocator. It’s called Aladdin, an acronym for Asset, Liability, And Debt, Derivative Investment Network.
Since Aladdin’s humble beginnings as a time-saving system that BlackRock could use to report on bond positions automatically, it has grown over the years to become the operating system for the company that inhabits multiple data centers and is maintained by a group of between 1,500 and 2,000 people.
Aladdin is so integral to BlackRock’s internal risk management systems that around 13,000 BlackRock employees use it worldwide. Aladdin also became so sophisticated that BlackRock saw an opportunity to start making money from competing asset managers, institutional investors, and corporates by making the platform available to them. It would also allow these investors to manage their portfolios and model the inherent risk.
The list of companies that use Aladdin is vast, with over 240 external clients currently relying on the platform. Companies like Google, Apple, and Microsoft use it for their corporate treasury management. The $1.5 trillion Japanese government pension fund is also a client, as well as State Street and Vanguard.
So, in reality, BlackRock’s biggest competitors are effectively paying to use BlackRock's systems and, in the process, giving BlackRock access to reams of data about their portfolios. This data further helps BlackRock refine Aladdin and better model risk. Needless to say, because all these portfolios are linked, it certainly gives BlackRock the edge with Aladdin as a critical component in the global management of assets.
In 2020, an estimated $21.6 trillion sat on the platform, which is higher than the entire GDP of the United States at that time. Another comparison is if you were to empty the bank account of every one of the 7.6 billion people in the world, every single bill and coin, and place them all in a pile, it would be worth around $5 trillion.
So, this means that Aladdin has grown into a system that is responsible, directly or indirectly, for over four times the value of all the money in the world. Aladdin doesn’t make investment decisions, but its risk models inform the investment decisions of all who use it.
There have been many who have questioned whether this system poses a systemic risk to the market. For example, given how many managers rely on its analytics and modeling, does this create complacency and reliance that could give a false sense of security? What happens if there are inaccurate or erroneous readings? It's only a computer model, after all.
A UK regulator, the Financial Conduct Authority, reported that the failure of an extensive portfolio and risk system like Aladdin could cause serious consumer harm or even damage market integrity.
Jon Little, former head of BNY Mellon's international asset management business, told the Financial Times,
“The industry is becoming reliant on a small number of players such as Aladdin, yet regulators seem to be reluctant to regulate or intervene to supervise these key service providers directly.”
This video sums up the level of involvement BlackRock has with their technology, Aladdin has and looks somewhat like a terrifying science-fiction scenario, but it is happening today.
BlackRock’s Helping Hand
Did you know that BlackRock was instrumental in the bailouts and deals in 2008’s GFC? It was a key adviser to other big banks and the government itself. So BlackRock is not only a massive asset manager that controls one of the world’s most powerful computers, but it also offers advisory services.
It’s called the Financial Markets Advisory or FMA. It was born from the financial crisis as these big banks, along with the US Treasury and Federal Reserve Bank of New York, turned to Larry Fink of BlackRock for help and counsel on their predicament.
Through an array of government contracts, BlackRock effectively became the leading manager of Washington’s bailout of Wall Street. The firm oversaw the $130 billion of toxic assets that the U.S. government took on as part of the Bear Stearns sale and the rescue of A.I.G.
It also monitored Fannie Mae's and Freddie Mac's balance sheets, which amount to some $5 trillion. It provided daily risk evaluations to the New York Fed on the $1.2 trillion worth of mortgage-backed securities it had purchased to jump-start the country’s housing market.
Eleven years after the financial crisis, we had another emergency, the pandemic, which brought on a level of spending that was many multiples larger. The FED embarked on an unprecedented bond-buying program and monetary stimulus. These were trillions upon trillions of dollars that are used to buy back not only treasury securities but, more risky, corporate bonds and mortgage-backed securities.
And, of course, they needed the advice of someone who knew about these types of securities. Thankfully, they had the industry experts such as Larry Fink on speed dial. It was later disclosed that BlackRock was central to the pandemic response. According to this New York Times article, Larry Fink was in constant contact with Jerome Powell and Stephen Minuchin in the days before and after the FED's stimulus program announcement.
According to a contract posted in March 2020, the FED hired BlackRock to help with the corporate bond purchase program. Although there was much more transparency about the terms of the deal compared to its work back in 2008, it meant that BlackRock was instrumental in that bond-buying program.
It again shows how reliant these officials have become on this behemoth of Wall Street. So it's clear that BlackRock has political influence or, at the very least, is aligned with some really powerful people. But perhaps more concerning about the firm is its power and intention to exert over corporate board rooms.
BlackRock’s Role And Goal Posts Have Shifted
As mentioned above, BlackRock and the top three asset managers generally are the largest shareholders in hundreds of Fortune 500 companies. What this means is that not only do they own the shares, but they also get board representation. These corporate boards are designed to help advise on company strategies, and board members can have much more say in a company’s strategic objectives.
Given that BlackRock invests on behalf of clients, it is considered a passive investor, meaning it's merely tasked with allocating capital and voting in the best interest of shareholders. Up until a few years ago, that's precisely what it did. However, in 2018, it all changed because, at this time, Larry Fink wrote a letter to the CEOs of some of America's largest public companies. This was the first salute in his pitch to better contribute to society,
“Society is demanding the companies, both public and private serve a social purpose. To prosper over time, every company must not only deliver financial performance but also show how it makes a positive contribution to society.”
This was a novel idea at the time but has since shaped the mood around investing based on ESG or Environmental Social and Governance principles. The primary modus operandi behind this investing methodology is that companies should not only be graded on their bottom line but also on how they impact society.
This letter was a big deal. You had one of the most powerful investors on Wall Street saying that it would be using ESG criteria to grade companies, everything from their climate change records to diversity on their boards. Some wondered whether BlackRock really would carry out these plans for a more activist role; any doubts on the matter were laid to rest with some controversial shareholder votes.
For example, last year, BlackRock disclosed that as Exxon Mobil's second-largest shareholder, it was backing board changes proposed by an activist hedge fund. The fund in question was Engine No 1, and it's been trying to get Exxon Mobil to move faster in reducing its carbon footprint. The activist investor only held about $50 million in stock but had proposed some board members who Exxon claimed didn't possess the requisite skills to serve on the board.
As mentioned in this WSJ report, BlackRock also backed similar initiatives by voting against a board director of an Australian oil and natural gas producer called Woodside Petroleum. The reason for the vote was that the company was not outlining targets for emission reductions to its customers. So the world’s largest asset manager is showing it is more willing to use its heft to influence the policies of the companies it invests in.
Rich Field, a partner at the law firm King & Spalding, who focuses on corporate governance issues, said,
“BlackRock has strongly signaled that quiet diplomacy is not the only tool in its toolbox. We expect more votes for shareholder proposals and against directors in this and future years.”
Since 2020, BlackRock has stepped up pressure on more companies by publishing criticism with online bulletins about key votes. Some executives worry they could face lawsuits for publicizing details on labor or climate plans in areas where global disclosure standards don’t yet exist.
There are so many boards that BlackRock sits on that it could be hard to apply proper due diligence to these ESG votes. Some have complained BlackRock’s recent votes have come without warning or an adequate rationale. Ali Saribas, a partner at shareholder advisory firm SquareWell Partners, said,
“BlackRock’s approach will fuel a rising frustration among companies that believe BlackRock’s stewardship team will most likely apply a tick-the-box approach given the sheer volume of companies they passively own.”
Jessica Strine, CEO at advisory firm Sustainable Governance Partners, says,
“It would be very hard for a passive fund manager to support a shareholder proposal that addresses systemic risks but wades too far into dictating strategy.”
Investors propelled ESG funds to new heights in 2020, and federal agencies are watching. WSJ explains why regulators have ethical and sustainable investment funds under review. Photo Illustration: Alex Kuzoian
Has BlackRock Gone Too Far?
Some may think this is good news for a better future. Still, one of the biggest problems with this approach is that it assumes that meeting these ESG criteria could be complementary to the shareholder returns objectives.
However, this is often not the case because meeting these criteria may come at the expense of potential company performance and long-term shareholder returns. For example, in the case of the Exxon proposal, unless these standards are applied to all competing companies in the field, you are hampering some to the advantage of others.
Many oil and gas companies are private or listed elsewhere, companies that don't have BlackRock as a shareholder and hence don't have to worry about meeting the same standards. They can compete as much as the law allows them to, and sometimes to the detriment of Exxon. This could lead to a fall in the value of Exxon shares and the company as a whole.
Now the same principles can, of course, be applied to the S and G angles of the ESG strategy too. Then, of course, you have the administrative burden and the unpredictable way this ESG mandate is managed.
The approach that BlackRock wants to take could hamper the efficient performance of a company's board and corporate strategy, which is unsuitable for that long-term shareholder value. Beyond the additional burdens that this could place on companies, you have the question of whether a company like BlackRock should have such a significant say in how society is shaped.
The Silenced Majority
Have all the stakeholders, the millions of us who have pension funds and invest in ETFs, been asked how we feel about these proposals? Are stakeholders polled on each one of these proposals? And how do we know there's no broader political agenda that could seep in should the winds of public opinion shift. Does this create a precedent for other large companies to follow suit? These are all relevant questions that need to be answered. It is, after all, good governance.
Many of us know BlackRock is a powerful company but to realize how far that power extends is an eye-opener, to say the least. As the world's largest asset manager, it manages an ocean of capital that gives it immense control over the financial system.
Given that it's the owner and operator of one of the largest and most crucial asset management platforms, many would argue that it's too big to fail, but more to the point, it's now too big to control. That's because BlackRock seems to be taking on a new mission beyond mere capital allocation.
The firm is looking to use its ESG mandate to shape the way that corporate America is run. It's also not as if politicians can really do much about it. Given BlackRock's connections with all of these higher-ups, it is more likely to call the shots than the other way around.
Of course, the mandate and goals of BlackRock may be benevolent and sincere, but you have to question how this power could be used in the future should it fall into the hands of someone who would use it for more than just ESG benchmarks? Money is power, after all, and given that BlackRock controls so much money, it has absolute power. And as the saying goes, absolute power corrupts, absolutely.
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Dutch and Korean Mainstream Media Extensively Cover Bitcoin Rally
Bitcoin is sustaining a strong price rally, maintaining its stability at the US$1,020 margin. Within seven days, the price of bitcoin rose by 9%, pushing the demand for the digital currency in exchanges worldwide. As a result, bitcoin began to gain extensive coverage by mainstream media in South Korea, Belgium, and the Netherlands.
Extensive Coverage in Belgium and the Netherlands
In the Netherlands, de Volkskrant, leading daily morning newspaper with a circulation of nearly 250,000 nationwide and De Telegraaf, the largest Dutch daily newspaper with a circulation of 430,000, provided extensive coverage on bitcoin and its recent price rally to their mainstream audience ever since bitcoin reached the $1,000 milestone.
Analysts at De Telegraff offered insightful and accurate assessment of bitcoin’s rising value, stating that current global economic instability and uncertainty led to the increase of demand for bitcoin. Researchers at the firm also mentioned China’s role in bitcoin’s recent price rally, explaining that investors, traders and households purchased bitcoin to move the Chinese yuan out of the country.
De Telegraff stated:
Bitcoin has in recent months was sought after by investors due to the uncertainty in the international economy. According to analysts, the popularity of bitcoin is enhanced by strong demand from China, where virtual currency investors are seeking for an interesting alternative to the yuan.
While tightening regulations and capital controls initiated and imposed by the Chinese government indeed played a vital role in pushing the price of bitcoin, experts like Vinny Lingham told users and investors that it is important to consider the impact of the Federal Reserve’s increase in interest rates on bitcoin.
The global economy is dependent on the US dollars directly and indirectly. Currencies like the Chinese yuan and South Korean won depend on the performance of US dollars and thus, when the US dollars rise in value, they decline in price.
Inevitably, when the Fed raised rates in December, the demand for bitcoin surged in countries like China and South Korea due to the rising number of investors and traders seeking for alternative assets to avoid currency devaluation.
De Tijd, a major newspaper in Belgium with 41,000 in circulation, also provided coverage on bitcoin on its online media outlet, emphasizing bitcoin’s strong performance throughout the year. Analysts at De Tijd noted that bitcoin was worth less than $500 in the beginning of 2016 and it reached a 3-year high price on the first day of trading in 2017.
South Korea: Fed Rate Hikes, Bitcoin Demand Rises
The South Korean economy is slowly recovering from controversies surrounding President Park’s involvement in bribery and other serious offenses.
When the Fed announced its plans to raise interest rates last month, mainstream media outlets in South Korea expressed their concerns with the decreasing value of the South Korean won. Such coverage led to increasing demand for bitcoin within the country and ultimately, extensive coverage from mainstream media.
Mainstream media coverage in leading countries like the Netherlands and South Korea are exposing millions of people to bitcoin on a daily basis. If bitcoin continues rise in price, it will aid mainstream adoption of the digital currency in the long run.
Right now, we are exiting the eye of the giant financial hurricane that we entered in 2007, and we’re going into its trailing edge. It’s going to be much more severe, different, and longer lasting than what we saw in 2008 and 2009.
In a desperate attempt to stave off a day of financial reckoning during the 2008 financial crisis, global central banks began printing trillions of new currency units. The printing continues to this day. And it’s not just the Federal Reserve that’s doing it: it’s just the leader of the pack. The U.S., Japan, Europe, China…all major central banks are participating in the biggest increase in global monetary units in history.
These reckless policies have produced not just billions, but trillions in malinvestment that will inevitably be liquidated. This will lead us to an economic disaster that will in many ways dwarf the Great Depression of 1929–1946. Paper currencies will fall apart, as they have many times throughout history.
This isn’t some vague prediction about the future. It’s happening right now. The Canadian dollar has lost 26% of its value since 2013. The Australian dollar has lost 29% of its value during the same time. The Japanese yen and the euro have crashed in value. And the U.S. dollar is currently just the healthiest horse on its way to the glue factory.
These moves show that we’re in the early stages of a currency crisis. But if you make the right moves, you could actually make windfall gains instead of suffering losses. Here’s how to do it…
The huge winner during this crisis will be the only currency that has real value: gold.
Gold has been used as money for thousands of years because it has a unique combination of qualities. Very briefly, it’s durable, easily divisible, convenient to carry, consistent around the world, and has value in and of itself. Just as important, governments can’t create gold out of thin air. It’s the only financial asset that’s not simultaneously someone else’s liability.
When people wake up and realize that most banks and governments are bankrupt, they’ll flock to gold…just as they’ve done for centuries. Gold will rise multiples of its current value. I expect a 200% rise from current levels, at the minimum. There are many reasons, which we don’t have room to cover here, why gold could see a 400% or 500% gain.
This should produce a corresponding bull market in gold stocks…perhaps of a magnitude we’ve never seen. A true mania for gold stocks could develop over the coming years. This could make anyone who buys gold stocks at their current depressed levels very rich.
What History Teaches Us About Great Speculations
Many of the best speculations have a political element to them.
Governments are constantly creating distortions in the market, causing misallocations of capital. Whenever possible, the speculator tries to find out what these distortions are, because their consequences are predictable.
They result in trends you can bet on. Because you can almost always count on the government to do the wrong thing, you can almost always safely bet against them. It’s as if the government were guaranteeing your success.
The classic example, not just coincidentally, concerns gold.
The U.S. government suppressed its price for decades while creating huge numbers of dollars before it exploded upward in 1971. Speculators who understood some basic economics positioned themselves accordingly. Over the next nine years, gold climbed more than 2,000% and many gold stocks climbed by more than 5,000%.
Governments are constantly manipulating and distorting the monetary situation. Gold in particular,
as the market’s alternative to government money, is always affected by that. So gold stocks are really a way to short government—or go long on government stupidity, as it were.
The bad news is that governments act chaotically, spastically.
The beast jerks to the tugs on its strings held by various puppeteers. But while it’s often hard to predict price movements in the short-term, the long-term is a near certainty. You can bet confidently on the end results of chronic government monetary stupidity.
Mining stocks are extremely volatile for that very same reason. That’s good news, however, because volatility makes it possible, from time to time, to get not just doubles or triples but 10-baggers, 20-baggers, and even 100-to-1 shots.
When gold starts moving higher, it’s going to direct a lot of attention towards gold stocks. When people get gold fever, they are not just driven by greed, they’re usually driven by fear as well, so you get both of the most powerful market motivators working for you at once. It’s a rare class of securities that can benefit from fear and greed at once.
Remember that the Fed‘s pumping-up of the money supply ignited a huge bubble in tech stocks in the late 90’s, and then an even more massive global bubble in real estate that burst in 2008. But they’re still creating tons of dollars.
This will inevitably ignite other asset bubbles. Where? I can’t say for certain, but I say the odds are extremely high that as gold goes up, a lot of this funny money is going to be directed into these gold stocks, which are not just a microcap area of the market but a nanocap area of the market. The combined market capitalization of the 10 biggest U.S.-listed gold stocks is less than 29% of the size of Facebook.
I’ve said it before, and I’ll say it again: When the public gets the bit in its teeth and wants to buy gold stocks, it’s going to be like trying to siphon the contents of the Hoover Dam through a garden hose.
Gold stocks, as a class, are going to be explosive. Now, you’ve got to remember that most of them are junk. Most will never, ever find an economical deposit. But it’s hopes and dreams that drive them, not reality, and even those without merit can still go up 10, 20, or 30 times your entry price.
And companies that actually have the goods can go much higher than that.
You buy gold, the metal, because you’re prudent. It’s for safety, liquidity, insurance. The gold stocks, even though they explore for or mine gold, are at the polar opposite of the investment spectrum; you buy them for their extreme volatility, and the chance they offer for spectacular gains. It’s rather paradoxical, actually.
Why Gold Stocks Are an Ideal “Asymmetric Bet”
Because these stocks have the potential to go 10, 50, or even 100 times your entry price, they offer something called “asymmetry.”
You probably learned about symmetry in grade school. It’s when the parts of something have equal form and size. For example, cut a square in half and the two parts are symmetrical.
Symmetry is attractive in some forms. The more symmetrical someone’s face is, the more physically attractive they are considered to be. Symmetry is often attractive in architecture.
But when it comes to investing and speculating in the financial markets, the expert financial operator eschews symmetry. Symmetry is for suckers.
The expert financial operator hunts for extreme asymmetry.
An asymmetric bet is one where the potential upside of a position greatly exceeds its potential downside. If you risk $1 for the chance of making $20, you’re making an asymmetric bet.
Amateur investors too often risk 100% of their money in the pursuit of a 100% return. These are horrible odds that the financially and statistically illiterate flock towards…the kind you find in casinos and most sports betting. It’s one of the key reasons most people struggle in the market.
I’ve always been more attracted to asymmetric bets…where I stand a good chance of making 10, 50, even 100 times the amount I’m risking. I’m not interested in even bets. I’m only taking the field if my potential upside is much, much greater than my potential downside.
Because of the extreme asymmetry gold stocks offer—because of their extreme upside potential—you don’t have to take a big position in them to make a huge impact on your net worth. A modest investment of $25,000 right now could turn into $500,000 in five years. It has happened before and it will happen again.
Right now gold stocks are near a historic low. I’m buying them aggressively. At this point, it’s possible that the shares of a quality exploration company or a quality development company (i.e., one that has found a deposit and is advancing it toward production) could still go down 10, 20, 30, or even 50 percent. But there’s an excellent chance that the same stock will go up by 10, 50, or even 100 times.
I hate to use such hard-to-believe numbers, but that is the way this market works.
When the coming resource bubble is ignited, the odds are excellent we’ll be laughing all the way to the bank in a few years.
No one, including me, knows that the Mania Phase is just around the corner. But I’ve operated in this market for over 40 years. This is a very reasonable time to be buying these stocks. And it’s absolutely a good time to start educating yourself about them.
There’s an excellent chance a truly massive bubble is going to be ignited in this area. If so, the returns are going to be historic.
If you believe that my message is worth spreading, please use the share buttons if they show at the top of the page.
Stephen Hodgkiss
Chief Engineer at MarketHive markethive.com
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