Bill Bonner – Bill Bonner’s Diary (United States) –
BALTIMORE – Are you rich yet?
We hope so. Every else seems to be.
The U.S. stock market is up more than 20% so far this year.
Our country-specific stock portfolio is up about 30%.
As we explained back in April, it’s a selection of the world’s worst-performing markets.
Here’s how it works: We buy the cheapest stock markets in the world… and wait.
It’s part of our ESP approach to investing… where we try to identify Extremely Simple Patterns.
One of the most reliable patterns is “reversion to the mean.” When things are extraordinary, it’s a good bet they will be more normal in the future.
Otherwise, the word “normal” wouldn’t exist.
Nonsense on Stilts
Normal describes what things usually are… and they wouldn’t be that way if they were abnormal all the time… So it’s a good bet that when a stock market has suffered an extraordinary setback, you should expect it to get back on its feet at some time in the future.
Are you following us?
What’s extraordinary now is that everything is going up.
Even U.S. crude oil is nearly $60 a barrel – more than double what it was two years ago.
And we put some money into the recommendations colleague Chris Mayer has been making at Bonner Private Portfolio starting back in April, 2016. On average, Chris’ picks are already up 21%.
[Editor’s Note: Bill waits 48 hours after Chris’ initial recommendation before investing money from his family trust. This ensures that Bonner Private Portfolio subscribers have the opportunity to take action first.]
Even Grandma Is In
Tellingly, nothing is going up like nothing itself… Bitcoin, that is. It’s up tenfold this year.
Neither animal, vegetable, nor mineral. Neither quick nor dead. Neither saved nor damned. The world’s first cryptocurrency is nearing $12,000 this morning. That’s up from about $2,500 when the family bought it in June.
Let’s see, at this rate, we should make about six times our money by the end of the year.
“You’re not the only one,” said our cautious, sober lawyer. “I put a little money into bitcoin three months ago. I just wanted to see how it worked. And now my investment is up three times. It’s crazy.”
“Even Grandma Is In,” revealed another WSJ line last week.
Gee, who’s left to get in? we wonder.
Crazy is what it is. But these are wild and crazy times. And of course, this is just the beginning of the craziness.
Internet security guru (and one-time murder suspect) John McAfee says bitcoin will go to $1 million by 2020.
Wow! Then we’ll all be rich.
Nasty, Brutal, Short
In the Diary last week, we wondered if getting rich was such a good idea.
We channeled British art critic, now dead, Clive Bell. Having money was great, he believed… but not if you had to earn it. Making money takes your attention away from more civilized pursuits.
Not so, responded our better half, Elizabeth, yesterday. Unearned money does more harm than good, she suggested… pointing out the window at Greater Downtown Baltimore.
A half-century of fighting poverty in Baltimore – with free money – has not exactly created a paradise of wealth and civilization.
Just the opposite. It is more in line with the life Thomas Hobbes believed prehistoric man lived – “poor, nasty, brutish, and short.”
Judging by the experience of the last few years, if the world improvers really wanted to fight poverty in Baltimore, they’d hand out bitcoin.
It wouldn’t really make the locals any better off… but it would be fun to watch.
But we are not trying to build a better world here at the Diary; we’re just trying to connect the dots.
What could possibly be making so many people so rich? Where is the money coming from? Is it real? Where does it go from here?
We don’t know. We’re in over our s like everyone else. But it may be a good idea to try to swim to the shore… where at least our feet can touch the ground.
Stimulate, Stimulate, Stimulate
Here’s what we think we know:
Economies, not markets, produce wealth. Wealth must be earned. And you can’t make an economy produce more wealth by giving it fake money. If you could, Zimbabwe and Venezuela would be the richest places on Earth. They’ve got plenty of fake money.
The U.S. economy is growing – at best – at a rate of 2% or 3% a year, after you factor in inflation.
But when you add money and credit – fake or otherwise – to an economy, prices rise. If the money goes to Main Street, consumer prices and wages go up. If it goes to Wall Street, asset prices go up.
Over the last 20 years, central banks worldwide have added about $20 trillion to the world’s money supply, mostly feeding Wall Street and the Deep State by buying government bonds.
Stimulate, stimulate, stimulate… The recent “tax bill” could add another $2 trillion of stimulation. Very extraordinary.
And now, with bitcoin up 1,000% this year, could it be that the world’s markets are overstimulated… sweating profusely and getting the shakes, as if their medication were wearing off?
And watch out. Maybe it is. There’s an ESP at work here, too: Easy come… easy go.