Trump Triggers a BUY for This Sector
This week I’m vamping in Vegas!
I’m penning the Daily Prophecy letters from FreedomFest — the annual libertarian carnival of ids and ideologies, investment ideas and catastrophe pitches — at the Paris Resort.
By the way, do you know why the rooms are cheap here?
Because there are thousands of gullible galley minions pumping away at the oars of the slots and punching the panels on the casino floor below the Paris’ Eiffel Tower.
They submit amiably to the rule of gambler’s ruin, which keeps the rest of us comfortable pumping our iron and gold, bitcoins, and prostitutes upstairs (just kidding).
Hey, life is unfair.
Joining me at FreedomFest this year are Trump’s favorites for Federal Reserve seats, Herman Cain and Steve Moore. They’re here to tell us what they would have done at the Fed, if they hadn’t been denied seats at the table.
But that’s not all that’s in store. Several topics will be covered this week, covering opposing sides of debate.
For instance, FreedomFest has several panels explaining why inequality is good (“the genius of inequality”). But it also has panels describing how inequality doesn’t exist (the estimable supply-side economist Jim Gwartney on “Surprise, Surprise, the Remarkable Worldwide Reduction in Income Inequality”).
My take? Both are correct.
Yes, Gini coefficients — which measure imbalance in the US — may be rising because of money shenanigans. But they are plummeting globally.
Billions of Chinese, Indians, South Asians, South Americans, and Africans are joining the middle class, negating the skewed financialization and scandal of money in the US.
At the same time, the genius of inequality argument is also correct.
Soon these emergent players will be the world’s major investors, creating newly fertile crescents of inequality around the globe.
Think about it… Inequality reflects illiquid investments and means growth and opportunity. Americans will do well to position their money to benefit from this tide of change.
To help me learn how, I began last night with a free dinner in the Eiffel Tower sponsored by my friends from the American Institute for Economic Research (AIER).
Two Great Calls is All It Takes
Residing in a rugged stone mansion nine miles from my home, AEIR was built on two great calls by Colonel E.C. Harwood.
Originally a Barron’s columnist, Colonel Harwood’s calls were so great that the SEC tried to put him in jail in the mid 1970s for fraudulent financial advice.
By the time the case came to trial, Harwood’s alleged “victims” were so rich that they didn’t care.
The story began in 1971…
When Nixon got out of gold, closing the gold window, everyone knew — from Milton Friedman to Paul Samuelson — that the gold price would plummet. Instead, the Colonel said get inat $35.
When Reagan got in nine years later, the price was closer to $800. Interest rates were spiking near 20%, and stocks were in the pits (and expected to go lower).
The Colonel said get out. Sell gold and buy stocks.
The Harwood lesson is that just two great calls at the right time can make your fortune.
So, question today at FreedomFest — and at my Seattle COSM conference in October with Peter Thiel (scroll down to see how to join us) is, what great calls should we be making today?
A Solid Buy Signal for Crypto
Firebrand investor Doug Casey might have some answers.
He was at dinner eating well before his session on “Surviving and Prospering in the Coming Dollar Collapse.” Casey, though, has become a novelist (author of the superb Speculator), and always believes the dollar is collapsing.
So rather than short dollars, perhaps it is another time to buy the Cryptocosm — represented today by bitcoin and gold.
After all, we just saw a buy signal for crypto that was comparable to the SEC’s Harwood prosecution.
I’m talking, of course, about the declarations by President Trump and Treasury Secretary Steve Mnuchin that cryptocurrencies are a “national security issue.”
Seems that cryptocurrencies are used by criminals for drugs, sex, cyber-hacks, and tax dodges. (That claim is so lame that it actually focuses attention on the dollar, which after-all is the currency of choice for most of these uses.)
Cryptocurrencies actually represent an important step forward beyond paper currencies.
Like cash, these new digital media offer some degree of anonymity: You don’t have to divulge much personal information to use them.
But unlike the dollar, cryptocurrencies provide attestation. If you are charged with a crime or beset by corporate litigation — or faced with claims that you violated some contract — you can produce a timestamped, immutable record of your behavior as registered in transactions.
This gain alone is so obviously desirable that it assures the ultimate triumph of crypto.
However, the existing cryptocurrencies, as I show in my book Life After Google, suffer from serious flaws. Thus, they have become speculations rather than measuring sticks.
Here at FreedomFest, Gale Pooley and Marian Tupy of Cato give us clues as to why that’s the case. They also cast serious doubt on many of the claims of rising inequality.
Pooley and Tupy believe that money is a measuring stick and it is ultimately measuring time. As I mentioned earlier this week, time is what remains scarce when all else grows abundant.
Plus, Pooley and Tupy show charts that indicate that — measured in time to produce a unit of value — the US and world economies have been growing several times faster than usually measured under existing inflation indexes.
Put another way, all around the world, it takes fewer hours of labor to buy a middle-class standard of living than ever.
FreedomFest epitomizes the bounties of capitalism, piling up new mountains of wealth and inequality.
But two serious problems remain: the breakdown of Internet Security and the scandal of money.
The Internet breakdown was dramatized by last year’s billion breaches of personal data, sowing paranoia everywhere.
The scandal of money comprises $5.1 trillion a day of currency trading — 25 times world GDP. We can’t establish currency values sufficiently reliable to stop ruinous trade wars and currency conflicts.
I believe the Cryptocosm will prevail when it solves both of these key economic problems.
And investment opportunities are shifting away from the US and the dollar… and toward emergent economies that are becoming rich (and even unequal), as well as toward currencies rooted in math and gold, crypto and blockchains.
That is where we are finding the most exciting opportunities today. Stay tuned.
Editor, Gilder’s Daily Prophecy