Chief Investment Strategist, The Freeport Society
Bitcoin (BTC-USD) is back, baby! Which, at this point, should be news to nobody.
The original cryptocurrency hit $72,706 as I was writing this. That puts it up well over 200% in the past year.
So, what’s next for Bitcoin?
$100,000?
$1 million?
I’ll be straight with you.
I have no idea.
Anyone who claims to know how high Bitcoin is going is either delusional or likely has oceanfront property in Arizona to sell you. Maybe both. Being delusional and a fraudster are not mutually exclusive.
But I don’t need a specific price target for cryptocurrencies because that’s not the point. Bitcoin isn’t a get-rich-quick scheme. It’s a dollar hedge.
I’m an American. My financial accounts are denominated in dollars. Most of the stocks I own are American stocks priced in dollars. My income is paid in dollars, as are my bills.
My life is in dollars.
That’s a major, open-ended risk given how poorly the greenback has been managed over the years.
By the Federal Reserve’s own estimates, the purchasing power of the dollar has declined by 97% since the central bank was formed in 1913. Considering that “price stability” is one of the Fed’s core mandates, scoffing at the competence of its leaders is justifiable.
And if you weren’t skeptical of the mandarins running the Fed before the pandemic, the experience of watching inflation explode to 40-year highs after the central bank blew out its balance sheet by $5 trillion ought to do it.
This chart shows you how badly the Fed has done its job…
Of course, the Fed hardly has a monopoly on poor stewardship of the dollar. Congress has managed to spend us $34 trillion into debt – and, for good measure, is adding a trillion dollars to that total every 100 days.
We already spend more on debt service – paying the interest on existing debts – than we do on our military. And lest we forget, our military isn’t exactly hurting for money. U.S. military spending is equal to about 39% of all military spending on the planet… three times larger than China’s military spending… and roughly the same size as the next 11 countries combined, most of which are our allies.
Yet our interest payments alone are larger than that.
So, yes, having a few dollar hedges in my investment portfolio makes sense. More than that… it’s critical.
In fact, this lack of fiscal responsibility is one of the reasons Bitcoin is surging.
Look, I don’t get culty about it. I’m not a cryptocurrency “true believer,” and I don’t expect that we’ll all be buying our lattes at Starbucks with Bitcoin tomorrow. But I do have very deep concerns about the dollar’s health, and I think we’d all be fools not to take those concerns seriously.
Everyone should own at least some gold (as I told you on Monday) and some cryptocurrency.
Having been used as a store of value for thousands of years, gold is the safer bet (incidentally, the price of this precious metal has hit all-time highs for much the same reasons as Bitcoin).
However, Bitcoin in particular has certain characteristics that not even gold can match. Its supply will be capped at 21 million BTC, and 19.6 million BTC have already been mined. Gold is scarce… but it’s not that scarce.
The question is: How much gold and Bitcoin should be in your portfolio?
There’s no iron-clad law of the universe that says exactly how large your Bitcoin allocation should be. The rule of thumb over the past few years has been 1% to 2% of your portfolio.
Cathie Wood, the celebrity fund manager and CEO of Ark Invest, recently suggested making Bitcoin a 19% allocation, though that sounds insanely high to me.
In my view, the “right” number depends on what sorts of dollar hedges you already have in play, your age and stage of life, and a host of other factors. And I would definitely recommend Bitcoin as part of a multipronged dollar hedge and not as the be-all and end-all itself.
This is how I’m approaching our model portfolio in The Freeport Investor. And currently, our dollar hedges are performing well. So are the investments that will benefit from deglobalization and exponential progress. Our Rich Man’s Super Currency holdings are sizzling, too. To find out how to see the model portfolio, and for an explanation of why we’re investing in these specific sectors, watch this.
Also, stay tuned. Next week I’ll share with you the government’s plan to destroy the dollar even further.
To life, liberty, and the pursuit of wealth.