The October “jinx” is taking its toll… Gold is zigging while stocks are zagging… The only bitcoin investing plan you’ll ever need… In the mailbag: “We are past the tipping point”…

Friday was another ugly day for stocks…

As we’ve been telling you, October has been a nasty month for stocks.

And the bad news continued on Friday… with the S&P 500 ending the day down 1.7%.

That brought the losses for the index to -9.3% since the all-time high it set on September 20.

Wall Street defines a correction as a 10% to 20% fall from a high. So we’re getting close.

Tech led the market lower again…

One signal that a market is topping is when the stocks and sectors that have been leading the bull market higher – aka the “generals” – start to lead it lower.

The generals of the current bull market are the so-called FAANG stocks – Facebook (FB), Apple (AAPL), Amazon (AMZN), Netflix (NFLX), and Google (GOOG).

From the start of 2014 to the end of September 2018, the FAANGs shot up 304%. That compares with a gain of 73% for the S&P 500 over the same time.

Now, the FAANGs are leading the rout. They plunged 4% on Friday. That left them down 13% for the month, versus a loss of 9% for the S&P 500.

Gold has been doing its job…

As we’ve been telling you, gold is a safe haven from catastrophe.

That’s why we saw the price of gold more than double from $833 at the start of 2008 to a record high of $1,900 in 2011.

And so far this month, gold has been doing its job… zigging while stocks zag.

An ounce of gold started the month trading at $1,189. Today, it trades for $1,231– a 3.5% gain.

Bitcoin is another wealth diversifier…

The world’s first cryptocurrency is famous for its big dives from time to time. It started trading in 2010. And already, it’s had five plunges of 40% or more.

It’s seen peak-to-trough falls – what Wall Street types call “drawdowns” – of 40%, 70%, 71%, 78%, and 83%.

But just look at bitcoin’s annual gains:

Bitcoin Yearly Returns
2010 (Partial) 233%
2011 1483%
2012 186%
2013 5507%
2014 -58%
2015 35%
2016 125%
2017 1331%
2018 (1st Half) -49%

As you can see, bitcoin investors may have had to stomach some big price plunges. But the super-charged gains have more than compensated for the bumpy ride.

We left you last week with a bold claim…

We told you that putting even 1% of your wealth in bitcoin could boost your returns – without having to take on extra risk.

That may sound crazy. After all, most folks still see bitcoin as a wild-eyed speculation, not a prudent diversifier in your overall portfolio mix.

But that’s what the numbers suggest…

Take the recent study by cryptocurrency asset manager Bitwise.

It looked at the performance of a traditional 60/40 portfolio (a mix of 60% bonds and 40% stocks) from January 1, 2014 to March 31, 2018. And it compared it with the performance of the same portfolio with 1% of bitcoin blended in.

The 1% bitcoin portfolio rose 31% versus a gain of 26.5% for the bitcoin-free portfolio.

And it had a smaller maximum drawdown (-11%) than the bitcoin-free portfolio (-11.3%).

In other words, you got a higher return without more downside risk.

That’s the magic of investments that zig while others zag…

They help you avoid big losses in your portfolio… and achieve “sleep easy” wealth.

It’s why if you walk into a big advisor firm with hundreds of millions of dollars to invest, you’ll typically end up with 20% to 30% of your investments in “alternative assets” – gold, hedge funds, real estate, and so on.

These investments tend not to track the stock market. So you get a smoother ride and a more “sleep easy” portfolio.

The same goes for bitcoin. But the returns to date have been so high that you needed a much smaller allocation in your portfolio for it to boost your overall returns.

We’ll end with a caveat…

There is no shortage of bitcoin naysayers out there who will tell you that returns will be lower from now on.

But as world-renowned crypto investing expert Teeka Tiwari told folks at our first annual Legacy Investment Summit in Bermuda earlier this month, he expects higher gains ahead for bitcoin as trillions of dollars flow from Wall Street into the crypto market. More on that tomorrow…

Switching gears, a reader says technology has pushed us “past the tipping point”…

In the mailbag, the conversation turns back to Bill Bonner Letter coauthor Dan Denning’s Digital Bill of Rights… And one of your fellow readers chimes in about “Peak Gold”…

I will sign it [Dan’s Digital Bill of Rights] and pass it on. I don’t use Facebook, LinkedIn, or other social sites. But it matters little, with face- or even walking gait-identification everywhere, we are past the tipping point.

I am sure the three-letter spooks are scanning this email for key words and profiling me. So I would like to tell them: Dear NSA and FBI, FU.

– Bernard B.

To complement the thoughtful Digital Bill of Rights you have written, our world needs an alternative mass media digital platform designed to benefit society and persevere humanity.

A platform to broadcast your Digital Bill of Rights in a variety of engaging, entertaining, and empowering formats.

– Jamie H.

Most people are too darn busy just trying to keep their head above the proverbial water to comprehend what the “end goal” of world powers are. That’s part of the plan.

We scream when the sales tax goes up. Our properties are “reassessed,” we express our objections. But the state gets their way. We don’t own anything; it’s on loan from the counties, the state, and the feds.

I am grateful for those people who have the gift of “deep thought” and are willing to stand up for what’s right, biblically speaking.

– Elizabeth G.

Jefferson called “the Fourth Estate” (a free press) more important than the other three – Executive, Legislative, and Judicial. I heartily agree. Your Digital Bill of Rights is right on. And nowadays, our freest press is digital.

– Robert F.

Peak gold? A replay of peak oil? The crowd never learns. Central banks have historically been sellers of gold at market bottoms and buyers of gold at market tops. (Central banks, and governments, are the ultimate crowd.)

A rally of $200 in gold will turn the Commitments of Traders report upside down. The crowd (hedge funds) will be desperate to buy gold, and the commercials will be giving them all the gold they want. That said, I have a nice stash of gold bullion in a very safe place.

– Richard S.

Did you buy gold or bitcoin to protect your portfolio against falling stocks? Tell us how it’s gone for you at [email protected].



Chris Lowe
October 29, 2018
Caherdaniel, Ireland