The market “generals” continue to fall behind… Gold’s bull run is gaining steam… Why gold bugs were the original bitcoin buyers… In the mailbag: “They drink the blood of the American people”…

October has left deep scars on our collective psyche…

It’s no surprise.

Some of the biggest crashes in history happened in October – the Panic of 1907… the Black Thursday, Black Monday, and Black Tuesday plunges that preceded the 1929 Crash… the second Black Monday crash in 1987… and the 14% drop for the Dow that preceded the 2008 Great Recession.

So far, October 2018 is living up to its reputation as a cruel month for stocks.

Yesterday, the Dow shed 600 points – a 2.4% drop. And the S&P 500 fell 3%.

But the worst losses were suffered by the tech-heavy Nasdaq. It closed the day down 4.4%.

All three indexes are now in negative territory for the year.

Of particular concern is the weakness of the market “generals”…

As we’ve been telling you, one way to figure out the overall direction of the stock market is to focus on how the leading stocks and sectors are performing.

These market leaders are often referred to as the “generals.” Because, like the generals in a battle lead their troops, these stocks and sectors lead the rest of the market.

If these “generals” start to break down, it’s a sign of a market that’s topping.

And right now, that’s exactly what’s happening with the tech sector “generals.”

Take the so-called FAANGs – Facebook (FB), Apple (AAPL), Amazon (AMZN), Netflix (NFLX), and Google (GOOG).

From the start of 2014 to the end of September of this year, the FAANGs are up more than 304%, versus a gain of 73% for the S&P 500.

But as of this morning’s open, the S&P 500 is down 9% so far in October… the Dow is down 7%… and the FAANGs are down 13%.

It’s one of the reasons we’ve been banging the drum so hard on gold…

Since the start of October, the price of an ounce of gold is up by about 3%.

And more speculative gold mining stocks have done even better.

The VanEck Vectors Gold Miners ETF (GDX) tracks a basket of 48 of the world’s top gold mining stocks. And so far this month, it’s up by about 7%.


Put simply, the gold market is zigging while stocks are zagging. It’s one of the main reasons you want some exposure to gold – to hedge against falls in stocks.

A great way to do that, as we told you yesterday, is to follow the “Golden Rule” and have at least 10% of your wealth in gold.

Another portfolio diversifier we’ve put on your radar is bitcoin…

The young guns in our research department tell us that bitcoin has had a 0.092 “correlation” with the S&P 500 over the past two years (as far back as Bloomberg’s data set goes).

Don’t be put off by the jargon. The correlation between two investments is just the degree to which they move in relation to each other.

A correlation of 1 means two investments have been moving in lockstep. A correlation of 0 means they’ve been moving independently of each other.

A correlation of 0.092 between bitcoin and the S&P 500 means they march to different drummers. This suggests that bitcoin – like gold – can help you ride out hits to the stock market.

But a lot of investors think about gold and bitcoin in binary terms…

For many dyed-in-the-wool gold bugs, bitcoin is a potential usurper to be resisted at all costs.

They point to bitcoin’s reliance on the internet to stay up and running… and the potential for governments to crack down on folks exchanging their fiat currencies for bitcoin.

Meantime, some crypto folks see gold as a relic of an analog age… with no place in a digital world.

Sure, it’s been used as money for centuries. But have you tried using gold to buy something online? Or what about using gold to pay someone on the other side of the world?

For many true crypto believers, gold’s physicality is a defect, not a benefit.

It doesn’t have to be that way…

As we told you in yesterday’s Daily Cut, I (Chris) hopped on a call earlier this week with one of the world’s most respected gold fund managers, Frank Holmes.

Our conversation was mostly about gold. But it took in bitcoin, too. As Frank explained it to us, many early bitcoin investors were gold investors…

The idea of bitcoin came out of the 2008 crisis. Governments dealt with that mess using taxpayers’ money to fund various bailouts.

Bitcoin was a response to that. So it should be no surprise that the original buyers of bitcoin were gold bugs. They didn’t sell the gold to buy bitcoin. Instead, they diversified some of their portfolios into bitcoin because they knew its supply… like gold’s… was strictly capped. And that… like gold… it had scarcity value.

Bitcoin isn’t for everybody…

There’ll always be folks who prefer something that’s been used as a store of wealth for 5,000 years to something that’s barely a decade old.

But adding even a 1% allocation to bitcoin has been shown to boost your overall returns without adding any extra risk.

That may sound strange, given bitcoin’s renowned volatility. But the numbers back it up. More on that next week. So stay tuned…

Meantime, in the mailbag: “They drink the blood of the American people”…

The feedback’s pouring in for the Digital Bill of Rights proposed by Bill Bonner Letter coauthor Dan Denning

What a sad story! Sounds like George Orwell’s 1984. And it reminds me of General Eisenhower as President. He explained it all to the world in his goodbye speech. He said that what he feared most is that the U.S. gets under the control of the so-called “Defense Industry.”

Since then, the U.S. has always been involved in criminal wars, stealing the money of the taxpayers and their children and grandchildren. And because of the democratic Constitution, they must “make” the opinion of the mass of voters. So they need censorship and fake news!

The POTUS is only a puppet on a string for the so-called Deep State, which in reality, are the exponents of the war industry. They really drink the blood of the American people. A very sad story!

– Georg S.

I am glad to be one of the first of many that will see and sign this. And I will forward it to my state representatives and family and friends. Thanks for doing the work to make this happen.

– Philip B.

Good job! Will pass on to everyone. Well written. Thank you.

– Pam D.

Sirs: This Bill of Rights is a terrible idea. Here’s why: The Constitution is a charter of negative liberties. Not enumerated rights. It says what the government cannot do, not what we can do.

As it was argued in 1791 and what has come to pass, the listing of specific rights is considered inclusive – and what is not on the list is not a right. Rights are not “things we want,” “things that sound good,” or even “things that are right” or “things that are fair.” Every interest group has a list of “rights” they demand – always at the exclusion of rights that do not capture their interest.

Finally, rights impose a duty on everyone else. That’s why there are so few of them. Who is going to enforce the duty-bound rights you suggest? Please, re-think your ideas. There are MUCH better ways to secure those goals.

– Jeff G.

When Facebook came out, I heard that anything said or typed on it would be there forever and never go away. I figured that if I ever ended up in court, the prosecution would go on Facebook and look for anything I had said or written there and that, knowing them, they would take anything out of context and use it against me. So I never signed up for Facebook, Twitter, or anything like that.

I like Dan’s Bill of Rights and will send it to everyone I know and leave it everywhere I go. If you knew who I was in the saving America of the ’80s to the 2010s, you’d think I was a relative of Dan’s.

– Richard S.

I more than support it. Distributed this to a number of colleagues and lawyers in Germany and France. From the get-go I disliked Facebook. The other problem is that people do not know how to handle digital media and are too easily seduced in showing off – without realizing how much private information is put on the table. Judicious use of electronic media is the key.

– Teunis B.

Once again, an insightful column today from The Daily Cut, particularly Dan Denning’s (with Bill Bonner) “Digital Bill of Rights.” Chris – as you made clear – this document is very important in our rapidly expanding “Digital Age.” It’s good to see you’re strongly promoting the “Digital Bill of Rights” to your constituents. Keep up this important work!

A thought: Keep the original “Digital Bill of Rights” in its current size, then continue to add the names of signers to an ever-growing document. Unrolled, may it soon reach 100 feet long! Then, flatten this roll and, every so often, send it to each of the appropriate corporate and political ruffians, as the word continues to spread among those who cherish their freedom.

– Bill Z.

Did you sign Dan’s Bill of Rights? Have you shared it with friends and family? Tell us how you’re getting on at [email protected].



Chris Lowe
October 25, 2018
Dublin, Ireland