Gold is always a popular topic in The Daily Cut mailbag.
And today we’ve got a question for Legacy Research cofounder Doug Casey that no one’s ever asked us before…
Reader question: I have heard Doug say several times that “Gold is the only financial asset that is not simultaneously somebody else’s liability.” This is very interesting to me. I think I get it, but do you have an article that really breaks this down and explains in detail?
– Scott E.
Great question, Scott. You’ll find the full explanation in this essay Doug penned a few years back…
But here’s the most pertinent passage:
The dollar is literally an “IOU nothing.” It’s true that your grocer and your barber have to accept the dollar because of “legal tender” laws, and because they currently wouldn’t know what else to take in payment. But that’s not true of foreigners, who own something like six trillion dollars.
Paper money is an excellent means for governments to tax people indirectly, surreptitiously, through inflation. That’s one reason central bankers love paper money, but also, phony economic theories, like those of John Maynard Keynes, hold that the government not only can but should meddle with the economy, and the ability to print paper money gives them a means to do that.
In today’s world, not only do people around the world take it for granted that paper is money, but that it should be so.
But it’s all nonsense. After the current system collapses, as every paper money system in the past has collapsed, some form of money will have to replace it, and it’s almost certainly going to be gold.
While we’re on the subject of money, a question for world-renowned crypto expert Teeka Tiwari (Palm Beach Letter, Palm Beach Confidential, Alpha Edge, and Crypto Income Quarterly)…
A newer reader is curious about the recently announced plans by JPMorgan Chase and Facebook to develop their own cryptos…
Reader question: Will these new cryptos be autonomous and exist independent of one another? More importantly, will they have any interaction or reaction to the current more well-established cryptos?
Or will these “Establishment” cryptos undermine the others? Can they potentially cause a devaluation of current “Un-establishment” cryptos?
– Peter H.
Teeka’s answer: Let me be clear: These coins aren’t cryptocurrencies. They’re derivatives – ways of moving money across networks. So they’re really not much different from PayPal, Venmo, or Cash App.
But what’s very interesting is that, for much of last year, these two big companies claimed to completely hate crypto.
For a while, Facebook banned crypto ads. But it reversed the ban just before it started working on its own coin. And JPMorgan CEO Jamie Dimon infamously called bitcoin a “fraud.” Yet, his company is now using cryptographic tokens to move money around.
The fact that this technology is getting co-opted by some of the biggest players on Wall Street and in Silicon Valley is very positive for crypto.
In fact, I’ve been saying that 2019 would be the year of Wall Street greed. And my thesis is playing out with these big institutions entering the space…
As more people get exposed to crypto-like assets and functionality, they’ll understand how much more powerful bitcoin and ether are compared to JPM Coin and Facebook Coin.
Now, I know a lot of people are wondering whether JPM Coin or Facebook Coin will kill the rest of the crypto space. But the answer is, of course not… They’re just internal coins. They’ll only make the rest of the crypto space much bigger.
The best parallel I can draw is with the internet.
During the internet’s early days, you saw major corporations create their own internal internets, called “intranets.” These were private networks used to disseminate information to employees about projects and customers, for instance.
Well, here we are 20 years later… and nobody uses intranets anymore. They were a complete flop. And the same may happen with these private coins.
At the end of the day, I believe – and my team also believes – that, in terms of remittances and distributed applications, public blockchains like bitcoin and Ethereum will be the leaders in the crypto space. That’s where most of the development will take place.
But again, the big players will expose people to crypto…
Facebook has 2.3 billion users it’ll need to educate about crypto coins… how to use them… and how to store them in wallets. And that’ll essentially grow the entire market for – and enable widespread adoption of – true crypto assets like bitcoin and ether.
So Facebook and JPMorgan will expose people to the crypto space, just like intranets exposed people to the public internet.
Before moving on from Teeka… one reader wants to know more about Big T’s new home away from home in the Caribbean…
Reader question: I’m a Palm Beach Confidential subscriber with a question for Teeka: In your current update you mentioned you were at home in Puerto Rico. Some time ago, I recall you were looking into whales that were setting up residency in Puerto Rico for tax treatment benefits.
What is the lure of Puerto Rico from a crypto perspective? Many thanks for all that you do.
– Ray K. (Legacy Research member)
Teeka’s answer: If you file the correct paperwork, 100% of your capital gains are tax-free.
Also, under one provision of the Puerto Rico tax code, you can drop your corporate tax rate to just 4%.
And Ray isn’t the only Legacy reader who’s curious about living outside the good ole US of A…
Next up, a question about the next leg of Dan Denning’s (The Bonner-Denning Letter) bolthole tour…
Reader question: Hi, Dan. I just finished your latest issue. Another excellent dive into what’s going on. Are you planning to head to South America next winter? If so, you’re welcome to come visit us in Ecuador.
– Jeff J. (Legacy Research member)
Dan’s answer: Yes, South America is definitely on the agenda. I’ve only been there once before (to visit a rose farm outside Quito 10 years ago). But obviously, with Bill’s history in Argentina, and Doug Casey’s history in Uruguay, there’s a lot to look into.
I know some readers are still unsure about the idea of geographic diversification (both with their money, and really, their life). It’s certainly not for everyone. But it’s not as hard as you think.
The biggest obstacle for most people is mental: Deciding these issues are serious enough to start making a plan and executing it.
What issues? Well, the domestic ones in the U.S., mostly.
We have a trade war in which the United States and China are vying for long-term dominance of the global order (what rules we trade by, the role of the internet, what currency dominates).
And we have a political sea-change moment in the U.S. where, for the first time in their lives, the baby boomers are confronted by an activist political generation (the millennials), who have different values and priorities.
In other words, it’s an era of huge political and economic and social change in America.
Having an option to leave the country from time to time (or having a second passport) isn’t a bad idea – especially if an economic crisis in the U.S. (the failure of the Fed) triggers the kind of financial repression we expect.
By then, it will be way too late to do anything practical with your wealth. Capital controls will be firmly in place.
You’ve got to jailbreak your money and think about strategic relocation before that.
Let’s close out this week’s mailbag with two questions from fans of Jeff Clark (Market Minute, Delta Report, Delta Direct, and Jeff Clark Trader).
Question No. 1…
Reader question: Good morning, Jeff. I’m a curious newbie. Would there ever be an occasion where you had placed an options order and the option price declined, let’s say by half, and that you had so much conviction that a positive move was imminent, that you would consider increasing your position?
I would imagine that there would be many factors to consider, such as time to expiration, position size, oversold/overbought extremes, etc. Thoughts?
– Guy V. (Legacy Research member)
Jeff’s answer: Thanks for the question. I get asked this a lot. And, my response is always the same…
NEVER add to a losing option position unless that was part of your original strategy.
Let me explain…
If you take a full position on a trade at the outset, and that trade goes against you, then buying more of the position is usually a dumb idea. It’s throwing good money after bad.
When you buy options, you have to get the direction right, and you have to get the timing right. That’s often hard to do.
Options are wasting assets. Every day that passes without the underlying stock moving in your direction costs you money.
But, if you sense that you may be early on the trade – and folks who’ve traded stocks and options for any length of time know what I’m talking about here – and you take a smaller than normal position to kick off the trade, then adding to that position is often a good idea.
You recognize your habit of being early. You hold some ammunition back, just in case you start off wrong on the trade. Then, you complete the position at lower prices.
That’s all good.
It’s not good, though, to take a full position right away and then add to that trade when the position moves against you. You end up with a larger position than you would normally carry. That makes you prone to get emotional over the trade. And that impairs your judgment.
This is where it helps to know yourself as a trader.
If you’re often early on a trade – and you recognize this – then you can scale into a position rather than jump in all at once.
On the other hand, if you’re timing is spot on – and you take full positions right away – then adding to losing trades is almost always a bad idea.
And question No. 2…
Reader question: I have not heard a mention of what Delta Report subscribers are averaging this year or any year. Did I miss something?
I have traded options in a similar way to the way Jeff trades, but I have always had limited success identifying good trades. The testimonials from subscribers that mention a single big trade do not tell me how they’re doing, overall. I have had some huge gains using my method, but I am not consistent. Obviously, I need help.
If you can provide me some information that says how well the subscribers to Jeff’s recommendations do on a monthly or yearly basis, I would be more interested.
Of course, I realize that some people have trouble following directions and that would affect the results. Maybe a better question would be: If Jeff’s recommendations are followed to the letter, what would be the average percent of return YTD? What was it last year? Thanks.
– Terrill S.
We can answer that for Jeff…
Through the end of May 2019, Jeff recommended 25 trades to his Delta Report and Delta Direct subscribers. And the average gain on those trades is 13.7%.
Looking back to 2018, Jeff recommended 147 trades with an average gain of 16.3%.
That’s compared to gains of 10% and 8% for the S&P 500 over the same timeframes.
Hope that helps your decision-making.
And we hope everyone has a nice weekend.
Regards,
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James Wells
Director
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