3 Minute Gold News
A Quick Read for Busy People
A synopsis of Michael Saylor with Daniela Cambone-Taub of Stansberry Research.
Michael is the Founder, Chairman & CEO of MicroStrategy $MSTR , an MIT alumnus, and author of The Mobile Wave.
Topics:
Inflation
Gold
Bitcoin
Bonds
Commodities
Oil and Fracking
Central Banks
Future Prices
Over the past decade Michael Saylor didn’t pay much attention to macroeconomics, but now everyone has woken up to that world.
We’ve just had the largest intervention from the Federal Reserve, maybe in the history of the United States.
Over the past year the U.S. interest rate went from 2% to zero.
During the last ten years the money supply has been expanding by 7%.
The actual inflation rate on assets is not 2%, it’s actually 7 – 8% if you’re holding equity and 22% if you’re holding the long bond.
Inflation for the next few years has got to be about 10% or more.
Michael started thinking about the cost of his capital being 10%, and that he was holding $500 million yielding zero percent interest.
He realized that his real yield is about negative 10% for at least for the next three years, and then he imagined $150 million of his $500 million getting burned up and disappearing.
It made him very anxiety ridden.
GOLD AND BITCOIN
Gold miners produce 2% new gold every year, and over the next hundred years there’s a possibility of more than 2% per year. That meant for Michael that over one hundred years his gold would be debased down, and that $100 million would lose $12.5 million as 2% in supply is created every year.
He looked at Bitcoin.
There’s never going to be more than 21 million Bitcoin created, so the stock to flow is going to infinity, and at most $100 million would be diluted by $10 million over one hundred years.
Bitcoin is an infinitely hard asset, while gold can be produced by humans, given enough incentive.
Michael believes that over the long term Bitcoin is a harder asset than gold because there is a finite number of Bitcoin and an expanding supply of gold.
BONDS
Daniela says she talks to many gold bugs, and they believe that when money leaves the bond market, which is already happening, that it will flow into gold and drive its price to $5,000, $10,000, and ultimately a projected $20,000 US per ounce.
Michael believes the money will flow from the bond market to something different, but that gold would be his number two choice.
If you double the price of gold then it doubles the incentive of miners to produce it.
But, on the other hand, if Bitcoin’s price goes up by a factor of 10, no amount of investment in Bitcoin mining can produce more Bitcoin.
COMMODITIES
Michael sees gold as the most pristine of commodities.
The history of commodities shows that when the price goes up then human ingenuity and capital goes into producing more of that commodity.
OIL and FRACKING
There’s no oil crisis in the US anymore because when the price went to $100 per barrel they invented fracking and increased their production.
There hasn’t been a major gold discovery in years, but Michael puts forward that while the amount of new gold discovered if the price rises can be debated, there is more gold produced each year. But more mining done for Bitcoin won’t produce more Bitcoin, just more security, which will make the network better and safer.
CENTRAL BANKS
Bitcoin is digital gold in that it is a store of value but is faster and smarter.
The first investors in Bitcoin will be technology investors, then super high net worth individuals, then private companies, and then public companies.
There are institutions that bought Apple stock but they did so after the technology investors. For example, Warren Buffett bought Apple stock ten years after Michael did.
Central banks are buying NASDAQ stocks today, but they didn’t five years ago.
Bitcoin will grow in the natural wave of adoption.
Bitcoin is the best security and the most liquid security invented in the history of the world.
You can’t convert US dollars into yen or gold on a Saturday afternoon. With Bitcoin you can get a bid on it 24/7/365.
That means you can mark it to market at all times.
We’ve never, in the history of the world, had a liquid security that you could mark to market everywhere on earth, every minute of the day, with no holidays.
That’s what makes Bitcoin an extraordinarily pristine asset.
FUTURE PRICE
Michael isn’t a trader, so he doesn’t buy something to sell it next week and buy it back the week after.
He buys Bitcoin because he expects to have it forever. He doesn’t know where the price will go but he believes it’s incredibly valuable.
The price will go up with these 4 drivers:
1. More people adopt it as their treasury reserve asset.
2. The technical utility increases
3. The productivity of all the people that adopt it goes up they sweep their cash flows into it
4. The asset inflation rates of all the fiat currencies it trades in increases and people move from the currencies into Bitcoin
In the same way Apple de-materialized your camera, Facebook de-materialized your photos, and Google de-materialized your library, Bitcoin dematerializes gold as a pristine asset.
INFLATION
Inflation is a vector.
Things like YouTube views and a bowl of manufacturing goods won’t inflate very fast. The more pristine assets will inflate faster.
Scarcer assets like pure financial assets will inflate even faster than that.
As we produce more currency we’ll have a range of inflation rates from zero percent to 25%.
Bonds have been inflating at 20% per year for a decade. In 2010 you could have spent $1 million on a bond that paid you $50,000 per year in interest. This year you would have paid $10 million for the same bond that pays you $50,000 per year. That’s a 22% inflation rate.
Michael believes we’ll see those kinds of products keep on inflating and that people will begin to change their behaviour.
The future is unclear, except for the fact that you don’t want to be holding assets with a negative real yield.
Michael can be found at http://www.Microstrategy.com and on Twitter at http://www.twitter.com/michael_saylor
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My THOUGHTS…
I began tracking Bitcoin daily when it was under $100 US and made my first purchase when it was under $200 US. I used the first Bitcoin ATM in the world.
Being a folk singer, I was watching the geopolitical movement of empires, technology and the rise and fall of power. I was in the book industry as a COO and Managing Editor, and watched that world go digital. There were winners and losers as it sorted itself out. As a musician I watched the musical universal go digital, and as a songwriter I watched the symbols of history repeating. I’m Gen X, so I’ve observed the change in technology over time. I grew up playing in the woods and reading. I sang in my parents’ choirs and then led my own.
I ran a publishing company and left it for philosophical reasons. I saw hard persuasion. I’ve seen coercion and deception used in media to create an unfair outcome to the benefit of one group, who saw bending and breaking rules/laws/etiquette as worth it and virtuous in order to have an outcome they believed was for the greater good. I’ve seen it writ small. And our world is weaving it now life sized.
So, let’s see if we can unravel a few smaller fractals to see a bigger picture. And in that picture we’ll be able to see further backward and forward in time.
My personal view is that gold has a long term role. It underpins a world system that’s been here a very long time. But it is not used in day-to-day trading. Most have never seen a gold coin or would know it’s value. But the hub of the financial wheel at this time is the IMF and BIS at the United Nations, and they settle out nations with gold.
Gold is where the capital flows when there is mistrust in governments. A government decrees that taxes must be paid in a noted currency, but they print the currency or somehow debase the value, until there’s no trust in it left.
Funny enough, when more and more public and private parties began buying gold late last century, and price took off, an Exchange Traded Fund was created. Smaller parties could join in the price without holding the metal. The ETFs, paper gold contracts, track the price but you don’t own or hold physical gold. It’s all fine, until and unless there’s a collapse in the system and they close the contract, pay you out, and only those holding the gold keep, well, holding the gold.
The ETFs diluted the “supply” which brought down the price. The physical gold stayed with the wealthy parties. The system itself looked to regain its order and trust to the surface viewer.
And now Bitcoin is here.
Other forms of media went from centralized to decentralized control. Media changed from a one-to-many format (like TV and newspapers), to a many-to-many format (like the internet). Time and space changed. We were everywhere at once. While the printing press moves left to right we were now off and on. Zero to everything at once.
There’s so much more to say from a Communications perspective.
Adoption of Bitcoin is growing. Some of the smaller parties are purchasing Bitcoin instead of gold. Larger and more influential parties are joining. I’m watching it like it’s a fight. But I believe the actual struggle is much larger than a single person buying gold or Bitcoin. I see physical and digital. As my friend, Josh Crumb, says, “There is zero chance Bitcoin changes gold’s long term role in the markets.”. I hold the same view.
I don’t believe Bitcoin is gold’s replacement, but I believe it could and seems to be becoming the digital symbol, or as Michael says, the “de-materialization” of it. A trusted way of marking value as we move from planet to planet and beyond.
The IMF, BIS and their groups are moving towards worldwide digital money. Christine Lagarde recently admitted in a speech that their debt-based currency, zero interest rate policy money system had failed. She stated that it divided the haves and have nots with a greater divide than before. The winners won more and the losers lost what little they had. It has failed. So she then requested wealthy nations give the IMF more money by taxing their citizens more, so she could give more to poorer countries and try their new system out. A recent symposium had participants lamenting that private companies and countries were not jumping on board.
The system will reset one way or another. My song, Not Much of a Holiday, discusses it. Which way will it go?
My song, Bitcoin Barbarian, was written based on something Max Keiser said a few years ago. Here’s a few lyrics:
Ruled and run by a dollar and a gun,
The world is spun by some media fun,
And the Ponzi game in Caesar’s name
is virtually done
There’s a new race
The Bitcoin Barbarians at the gate
Opened wide, the peasants can’t wait
‘Cause they were robbed while the bankers played
So the penny’s going to drop in this coin race.
Circus shows for the taxed and owned
Bread in Rome while they reap what’s sown
The Ponzi game in Caesar’s name
is virtually done
There’s a new race
I don’t see gold as money, per se. I see it as more of a backbone of what is reality in a physical world. Value is more than money, though that’ss tough for some to hear.
Tears of the sun. Energy. Malleable. Pristine. The condensing of value into its most fundamental, physical form.
I believe as Joni Mitchell said, “We are stardust. We are golden. And we’ve got to get ourselves back to the garden.”
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Bitcoin tips – 1NiwT1PjmbJHT9LZcHHerL4TxMrJg8veaF
Thank you for your support!
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Thank you to Jim Rickards for including me in his bestselling book The New Case for Gold.
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Nothing on this site is intended as individual investment advice. We’re all watching which way the wind is blowing.
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Bitcoin is at $18,741.97 USD
Gold is at $1,870.82 U.S. per ounce.
via Gold Price
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From the recent Cariboo Gold Rush Trail trip.
I’m creating jewellery from ethically sourced, fair paid, locally placer mined gold from the Gold Rush Trail. Available soon.
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Coins and Crowns
words and music Elaine Diane Taylor
SOCAN/ASCAP
from the album Coins and Crowns
Coins and Crowns is featured in Episode 1 of Mike Maloney’s documentary series Hidden Secrets of Money.
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Not Much of a Holiday (Bank Holidays and Media Persuasion)
words and music Elaine Diane Taylor
Single available on iTunes and wherever you like to purchase your music.
Available on the site Store.
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A Terrible Breeze (War and Social Media)
The news comes down
A little bluebird sings
Words of war
Fire and furious things
Of testing might
‘Til no patience knows
If keeping still
Still keeps you safe at home
It’s a terrible breeze
They speak of today
Of threats that used to live a world away
We all know wind
Can blow both ways
And a terrible breeze can blow it all away
A worldwide net
Sees our village grow
Until we all forget
What each one used to know
How a blind bird’s wings
Can reach the shore
And turn the wheel of peace and war
Village fools sinking down, down, down
Debt and gold wound in numbered shrouds
Deal of a life it’s bread and clowns
Can we afford another go around?
The news comes down.
It’s a terrible breeze. The news comes down.
words and music Elaine Diane Taylor
Single available on iTunes
Available on the site Store.
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Preparing for the Fall live boutique album available for digital download now — featuring Wag the Dog, Black Swan Dive, American Pie and Gods of the Copybook Headings. Also available on iTunes, Google Music, Amazon Music and major digital distributors.
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The Gods of the Copybook Headings
words by Rudyard Kipling and music by Elaine Diane Taylor
from the album Preparing for the Fall.
The copybooks of the early 1900s gave us all the wisdom we need. The sayings that were copied are the truths, the gods, of our world. All the empires who followed the gods of the marketplace instead have fallen, and there’s terror and slaughter when the gods of the copybook headings return. The lyrics are by Rudyard Kipling. One of my gurus.
Another Week on Wall Street
words and music Elaine Diane Taylor
from the album Coins and Crowns.
“A little grease (Greece) is floating out to sea, and little pigs (Portugal, Italy, Greece and Spain) are bobbing up and down, they’ll send a storm and we’ll see, when the tide goes out who’s naked on the beach“. The world is changing as we know it.
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Elaine Diane Taylor 