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Why ‘bad times’ are the best times for investors

Navigating the sink holes of life

Those in geographically unstable areas will be familiar with sinkholes: where the earth suddenly gives way beneath your feet, and sometimes swallows an entire building. These may be unfortunate for the building owners or occupants, however, it does create new opportunity for stabilisation and construction jobs. We like to look on the bright side.

One of our good friends and mentors invested heavily into Caterpillar (NYSE: CAT) just as the Gulf War was breaking out. Most of the US stock market was dropping as fast as the bombs came down, and fears of a protracted war had most investors running scared and selling off stocks. We asked Bob why he chose to invest into Caterpillar, a seemingly boring truck company. “Once the bombs have finished dropping, they are going to need dozers to move all the rubble. They are going to need to truck in new building supplies. A war-torn country needs to rebuild, and they’ll probably use the world’s biggest and best.”

We had to concede his point. We also admired that Bob didn’t invest into weapons manufacturers; only into companies which helped to recreate. Weapons may be profitable, but ethically questionable, and it doesn’t take too much effort to discover an ethical company which makes profits from bad times.

At present, things may seem bad all the time. However, this period of history is not so different from anytime in the past. There have been conflicts since Cain & Abel’s first pissing competition, and they are unlikely to go away (despite the best efforts of ex-presidential candidate Marianne Williamson).

Wherever there is conflict, fear, panic or dropping markets, there is also an opportunity for profit. As stated in the book ‘Who’s Taking Your Money?’, “there is always a boom on somewhere.”

A little over twenty years ago, in 1999, people thought the “millennium bug” or “Y2K” would obliterate the world’s computers. Doomsdayers foresaw planes dropping from the sky, banking systems wiped out and a dystopian “Mad Max” future. But we all survived.

The year following 2000, the world faced 9/11 terrorist attacks and threats of anthrax. We survived. In 2002, it was West Nile Virus. SARS was the big medical beat-up of 2003. The next year, we had bird flu. The following year, it was E. Coli. Bird flu gave way to Swine Flu in 2009. A few years later in 2014, the world feared Ebola. The next year it was “Disney measles”. Zika virus was our top fear in 2016 and now in 2020 we run from the corona virus (COVID-19), and the possibility of a major economic slowdown in China.

There is always a boom on, somewhere

When the developed world started outsourcing to China and India, many lamented the jobs lost locally. It seemed that local manufacturing jobs were all going to overseas “sweat shops”.

As the old proverb says, ‘A bad sailor curses the wind. A good sailor adjusts his sails.’ Those who saw the change in the wind and took action by investing into China, India and other emerging economies made good profits since 2000.

The complainers are probably still complaining. As conflicts, crashes, outbreaks of disease, famine and war look likely to continue for as long as there are humans, you would be wise to look to the horizon and see the opportunity to take action; ethically and responsibly.

Here’s why COVID08* is worse than COVID19

Yes, death is sad, and the cost of human life is immeasurable. Politicians and investors are instead measuring the impact of COVID19 on businesses, jobs and financial markets.

With thousands of Chinese factories shut down, retail goods may be unavailable, and jobs will be lost. Restaurants, hotels and airlines will feel the pinch as people stay home.

Whilst COVID19 (the new corona virus) may be a trigger event, we must remember that the financial instability in 2020 markets started over a decade ago with the GFC.

As a knee jerk reaction to #GFC1, governments created billions of dollars from thin air to bail out stupid or irresponsible corporations.

This was #COVID08: the *Creation Of Virtually Infinite Dollars (2008)

Reserve banks have put more money into circulation since GFC1 than for the previous hundred years. This has resulted in asset bubbles in almost every market, and the devaluation of paper money

“You can’t spend yourself out of debt” is wisdom to a college student that is lost on governments and reserve banks.

Ever since the Creation Of Virtually Infinite Dollars started in 2008, the world has been piling up the tinder for #GFC2, and waiting for someone to drop a match.

Perhaps someone will create a cure for COVID19 tomorrow, and it won’t be the trigger event to slip the world into recession. But COVID08 means there •will• be a trigger event.

It may be a terrorist attack, an assassination, or a natural disaster. Sooner or later something will click, and Reserve Banks will have to admit they can’t keep printing fictitious money forever.

Invest for safety. The COVID08 virus has been working slowly, with only a few symptoms, but soon, with debt piling on unsustainable debt, the whole paper system will crash.

This is why Bitcoin and other cryptocurrencies came into being after #GFC1. The endless proliferation of worthless fiat currency is doomed to fail, just as it did in Roman times, and more recently in Germany, Zimbabwe and Venezuela.

(*Thanks to Vern at the Rum Rebellion. Stay safe from all viruses: biological, financial, natural and man-made. Invest into defensive assets and good health.)

What is on the other side of the sink hole?

Most of us have no idea what lies ‘somewhere over the rainbow’ or even ‘through the looking glass’. We often talk about going ‘down the rabbit hole’ as if it is a bad thing; however, it gave Alice a new perspective on life. If Neo had taken the blue pill, ‘The Matrix’ would have been a very short movie. There is a certain humanness in wanting to discover what’s on the other side, even if it may be scary or uncomfortable.

Most of us live in (blue pill) blissful ignorance and have no idea what it would be like if the world as we know it collapsed. Most of us have not seen an economic meltdown or the rapid devaluation of a currency. We have not had to carry hefty bags of dollar notes like those in the Deutsche Republic or Zimbabwe. We may think we have seen tough times and survived, but it’s an interesting thought experiment to wonder ‘what if?’

At present, in Italy, football games are being played with zero audience in the stadium. Most people have been asked to work from home and stay home as much as possible. Fashion shows are cancelled but sporting events still occur; televised live to those who have placed themselves voluntarily into quarantine in their own homes. There are concerns that the 2020 Olympic Games in Japan will not occur. It’s a whole new world already and we are only a few weeks in.

If the COVID19 virus is indeed a trigger event that ignites COVID08, how will you fare? Imagine that many goods you ordinarily purchase may become hard to obtain, as Chinese factories are shuttered, slowed or overloaded. The west has relied on Chinese manufacture for so long that it is hard to imagine life without almost everything being “Made in China”.

Yes, the downturn will likely create a boom somewhere. Perhaps other Third World countries may find themselves filled with newly created factories to satisfy western commodity addiction. Perhaps the west will downsize, slow consumption and go all Marie Kondo (but probably not). Perhaps goods out of China will increase in price as demand exceeds supply. Once the virus is defeated (making room for the next global pandemic alert), will prices drop back down again, or will they stay high?

We are assuming the world will survive this virus, economic disruption and an oncoming recession or depression. Reserve banks may find themselves dropping interest rates to zero or even below. Quantitative Easing polices may see billions of dollars created from thin air to stimulate economies (simultaneously devaluing currencies and building unstable asset bubbles). This has been coming a long time, and those who have been in cryptocurrency long enough will know two things:

  1. Satoshi Nakamoto was a true visionary, and

  2. we will probably be OK.

In all likelihood, Satoshi Nakamoto, the creator of bitcoin, died several years ago from ALS. Even if he had lived to be 100, he still would not have seen the end of the legacy which he created (the last bitcoin will not be mined for at least another 120 years).

A few centuries ago, one could not imagine a world without kings and queens of each country. A few decades ago, we could not imagine the world without sending letters through the mail and waiting a few days to see if your photos turned out. Satoshi imagined a world without Reserve Banks and without national currencies.

We may see this in our lifetimes: a world where a few enthusiasts collect old national banknotes and old stamps, just for curiosity, as they will have no earthly use.

If you are in cryptocurrency now, you are very much an ‘early adopter’. Like the first person in your street to have a computer connected to the internet in 1995, you may have to wait a while for others to catch up. Rest assured that they will. Your early investment may be worth an absolute fortune in a decade or two, and your early knowledge and experience may be in high demand.

How did we go this month?

Zooming back in from a world view (a dystopian future for central bankers, more utopian for ordinary individuals), let’s have a look at how the Boston puppies went in February.

Bitcoin increased again, to almost US$10k then dropped back as some investors took short-term profits. It’s good to have a zoom lens sometimes: if you focus on the short drop from $10k to $8.5k, you may miss the fact that BTC was $3k last year. Long-term investors did not lose 15%, they gained close to 300%

Our big winners this month included the ‘blockchain agnostic’ ChainLink which we have been lauding for many months now, as well as Celsius, the ‘unbank’ of the crypto world. (If you missed our interview with Celsius, click here. It will change your life, even if you never wish to own bitcoin or crypto, as their rates of interest on $US and $AU are significantly higher than any domestic bank.)

If your friends are seriously anti-crypto, they can still profit from crypto banks which use pegged currency or stable coins. Tell them about the ‘unbanks’ and they will be very happy that you did, particularly as many local banks will drop their interest rates in the next 60 days.

If your friends are pro-crypto (or even crypto-curious), tell them about #BostonCoin. Your friends will love you for telling them about the “coin of coins”, and we may even send you something from our BostonCoin swag bag for referring a newcomer to the puppy pack

This month:

ChainLink up 373%

Celsius up 331%

Binance Coin up 177%

Basic Attention up 124%

WanChain up 108%

We anticipate further increases from Bitcoin as we head closer to the next ‘halvening’ in April/May 2020. Previous halvenings of mining rewards have seen the price of bitcoin more than double, as its scarcity increases. We do not have crystal balls, so we cannot guarantee that past events will occur again. History does not repeat, however, it does tend to echo. Bitcoin is likely to increase post-halvening, and the increased media exposure may well spill over into increased exposure and higher prices for many of the good altcoin projects. We are staying safe and exploring opportunities. See you safely on the other side of the sink hole


BOS NAV 28/02/2020


BOS price 30.6277005