Lots of crypto questions in our inbox this week. And we’ll get to those in a bit.

But first, I want to address a common question about our experts’ investment recommendations…

Reader question: Just joined Palm Beach Trader; not familiar with you yet. On 7/18, I looked at your recent recommendations. They were dated 7/11 and looked out of date (over the limit). Is a week after recommendations too late to take action?

– John R. (Legacy Research member)

Reader question: I was unable to enter your 7/11 speculative trade recommendation. Would you please comment to your subscribers about perhaps entering a position now, with this major price breakdown? You have always warned us away from trying to catch a falling knife.

– Wayne W. (Legacy Research member)

All our recommendations – whether they be stocks, options, cryptos, or whatever – include a “Buy Up To” price.

You’ll find it as part of our guidance in each issue (often labeled with “Action to Take”)… and on the portfolio page for each of our advisories.

If the given recommendation is below that price… it’s still OK to buy. So, make sure you check the “Buy Up To” price for each recommendation before entering the position.

And now for those crypto questions.

First up, digital currency pioneer Marco Wutzer (Disruptive Profits) addresses a common fear among crypto investors – and one we heard a lot this week…

Reader question: Since cryptos compete with every fiat currency on the planet, why won’t governments worldwide ban their use?

– Bruce T. (Legacy Research member)

Marco’s answer: Any government can ban any cryptocurrency.

This has about the same effect as if you were to ban it yourself. You don’t have any authority over bitcoin (or other decentralized cryptos).

Neither does the government.

That’s because bitcoin is decentralized and, therefore, not easily stopped. There is no company or central server to go after and shut down.

It’s one of the key benefits of blockchains. They are an autonomous, decentralized, global infrastructure. They can be accessed by anyone and used to transfer value without middlemen and, therefore, without interference by governments.

Bruce T. also had another question about cryptos. And again, Marco is on hand with the answer…

Reader question: Why is bitcoin limited to 21 million? These things are a creation of a programmer. What prevents them from programming another 1-21 million for themselves, thereby diluting all the existing holders?

– Bruce T. (Legacy Research member)

Marco’s answer: The limit of 21 million bitcoin is defined in bitcoin’s software code. bitcoin’s code is open source, and anyone can verify the parameters it uses.

The reason why a programmer cannot simply add any coins for himself is that the bitcoin network is decentralized. There are many thousands of computers running the bitcoin software.

For any change to happen, a majority of at least 51% needs to agree with the changes and start using a new software version that contains them.

This ensures that only non-controversial changes that are beneficial to the bitcoin network, such as technical improvements, can happen.

This characteristic makes bitcoin one of the most stable and secure stores of value in the world.

Our next question concerns Libra – the digital currency Facebook is developing.

And who better to answer than Teeka Tiwari, our world-renowned cryptocurrency expert and editor of Palm Beach Confidential

Reader question: My understanding was that Libra was only usable on Facebook. With the exception of quantity, wouldn’t it be much like a Chuck E. Cheese’s token, or a casino chip that can be used only where purchased?

– Gale P. (Legacy Research member)

Teeka’s answer: For those who aren’t familiar, Libra is a digital coin that’ll be pegged to a basket of major currencies (like the dollar and euro).

And it could pose a legitimate threat to the U.S. dollar. Think about it…

Facebook has a global user base of nearly 2.7 billion people. Libra’s adoption would be almost immediate if it launched today. It would become the world’s most widely used currency overnight.

And imagine if Facebook negotiates with advertisers to give Libra users 5-10% discounts on all their products and services. How would governments or central banks compete with that?

They can’t – which is why they want to stop Facebook.

And now for our last question of the week…

One gloomy reader asked for guidance navigating the next market bust. So, we turned to Dan Denning (The Bonner-Denning Letter) – our most bearish bear – for some answers…

Reader question: Hi, I am really concerned about the coming deflationary bust. I don’t know where a safe haven is.

What will happen to gold and silver? Will they get smacked down the same way as every other asset?

Will it be safe to hold cash? I hope to keep liquid for buying discounts and trading the big down moves.

– Brendan V. (Legacy Research member)

Dan’s answer: Who says there will be a deflationary bust?! Well, quite a few people DO say that. It’s because of the debt. There’s a lot of it.

Global debt (government, corporate, financial, personal) hit $246 trillion in the first quarter of this year, according to the Institute of International Finance. That’s just $2 trillion below the all-time high set in the first quarter of last year. If the Fed cuts rates on July 30-31… those “easier” conditions should see new all-time debt highs in Q2.

Our debt-based money system requires ever more money to pay off old debts, to finance investment and growth, etc. That’s why Bill Bonner’s been repeating the mantra “Inflate or Die” in his Diary.

Central bankers around the world know that if debt doesn’t grow, you get debt deflation. That is, the money supply shrinks as debt matures or is paid off (or defaulted on).

Some version of this happened in the 1930s, which plunged the global economy into the Great Depression. It’s the intention of central bankers to avoid this again.

Their latest plan (if BlackRock’s Larry Fink gets his way) is to revive QE (quantitative easing). But this time, they want to use the Fed’s “printing press” to buy stocks!

The purely rational way to play all this is to front-run the central banks BEFORE they buy stocks. You can do this just by owning an index fund. An index fund of the biggest, most liquid blue-chip stocks is likely to be the easiest way to ride asset inflation. But when do you get off the train?

Before it crashes! I just wrote in the latest issue of The Bonner-Denning Letter that silver is making a move (the gold-to-silver ratio is mean-reverting back to something more normal after years of radically unloved silver prices).

And several of my Legacy Research colleagues agree. Dave Forest and E.B. Tucker, two guys who live and breathe resource investing, agree that silver still has lots more room to run, especially when stocks turn south.

Gold is also a great place – perhaps the best place – to weather a stormy stock market. So now is a good time to add some gold to your portfolio. And if you already have some… add more.

It should be noted that cash does well in a debt deflation. (Liquidity has a quality all its own when money is being destroyed… and cash gives you choices to buy quality stocks on sale… AFTER the crash.)

It’s not an easy one. The central banks are all-in on their monetary experiment. It’s “Inflate or Die.” For investors, both results (inflation… or death) have consequences. Because they’ve never tried anything this meddlesome or intrusive, we don’t know how (or when) it will end.

That’s why we continue to recommend a five-asset-class strategy that’s rebalanced once a year. It has a big allocation to cash and real assets (precious metals mostly). But also, some to stocks (you can’t sit out entirely if you need the stock market to help your retirement) and (reluctantly) bonds.

Will the financial world end in fire or ice?

In the end, both results destroy wealth. Try to convert your financial wealth into things – like cash and tangible assets – that will get you to the other side of the experiment with something left over to start again.

That’s all for today.

Have a good weekend.



James Wells

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