Trader Note

Scalping direction: Be on the right side and scalp.

2018-01-01 Week

New Year. NFP. Bitcoin or Gold?

 

This Week

It is a short week, and some big traders have left their seconds in charge while they escape New York blizzards to sailboats in Sydney for NYE. They will be back and looking to put other people's money to work. As many have cashed out to lock in 2017 bonuses, they will be awash with cash and looking for bargains. So expect that any moves lower will likely go bid as bargain hunting occurs.

Jobs data will likely disappoint the market, but create a buying spree of speculative wealth. Chop the move, do not invest in it. There will be some harsh reality coming to markets in 2018.

 

NFP

January Non-Farm Payrolls data always trades a bit odd. Some supersites market players think that how markets trade in the first week of the year will mirrored across a longer time frame. So in that first week of the year when the NFP data comes out, it can mean that many speculators are going to be going long with their bets (or trading the buy side). This can cause a big down move when they puke out through their stop-loss orders. It also means that every dip will go bid as they try to get back in and win back their losses. So this NFP is difficult to trade, with the best advice to float some buy orders well below market for the flash-crash entry.

    

Gold or Bitcoin?

Do you hate the banks and want the government's hands off YOUR money?

There has been a prolonged attack on your wealth. Cash has devalued through money printing, and in some cases it has been removed from circulation by governments (especially large notes). Interest rates have been dropped to discourage savings, stealing money from future generations. Bonds have been devalued to the point of being laughable at best. Stocks are in a nasty bubble that is likely to pop any day. Real estate only has value when a TV-flipper slaps some paint on a shack and sells it to a fool. Banks have failed in this exact same market environment and stolen savers money before being bailed out by the government with taxpayers' money.
It stands to reason that you would want your money out of this system. After you have stocked up on canned food, and bought all the camping gear you will ever need, then you should consider crypto currency and gold. The problem is to decide which ones to choose to hide your ever dwindling wealth.

Both crypto and gold are a way to remove wealth from the system. Both take your money out of banks and trading houses that are reliant on government bailouts in the event of a market downturn. Big firms have your money (bailouts) as part of their risk mitigation models, so it is smart to remove your money from that system.

  

Gold

By holding physical gold, you have your hard earned money stored in a tangible item that is out of the reach of the banks. If you can hide it well, then it may be out of the reach of governments, too. The main problem with gold is being able to convert it back into cash (or trade) to liquidate. To convert it back into cash means finding a place to sell it, and trying to find a reasonable price. Gold price has been held down for years by short sellers in the paper market. Rampant manipulation, admitted to publicly, has meant that wealth stored in gold has not reaped the same benefits of other stores of wealth.

If you are a person expecting the end of the world, you have to think about how you will be able to trade your gold for goods and services when the end arrives. If you can avoid being robbed by someone with more guns, then you will find yourself haggling with someone with a sufficient stockpile of wealth (canned food, fuel, water, weapons, etc.) that is willing to trade. It is highly likely that thugs with excess materials for trade will be able to tell the difference between real gold and fake gold. So why bother to give them REAL gold when you could just trade fake gold?

Be aware that there are fake gold and silver on the market, so buy your precious metals from reputable dealers. Test the silver and gold with a magnet. Test the gold with an x-ray (possible at many American schools) if it is big enough to be faked (1 oz. or bigger, these days).

Currently, on the dark web, there are sellers of fake gold bars. I do not advocate fake gold and silver because it devalues the marketplace, but if you are holding it to the end of the world to trade for canned food, then that is a different matter. If that interests you, download a Torr browser and do a search for dark web markets. Use Duck Duck Go (https://duckduckgo.com/) because they do not store your search history. If you are feeling very paranoid, use a Tails operating system (https://tails.boum.org/) which doesn't store any data unless you specifically make it do so.

Once you do all of that, you will still need to buy crypto currency to buy your fake gold from strangers on the internet. So in the end, you end up an investor in crypto currency anyway.

    

Crypto Currencies

The best thing about crypto currencies is that it is easily converted back into cash (for now). It can be backed-up so it is recoverable in the event of disaster (somewhat). While precious metals are heavy, crypto currency is easy to carry in massive amounts. You can move large sums of money anywhere in the world faster than the banks can initiate a wire transfer (at a lower cost).

Most crypto currencies are garbage. The market is in a bubble, and ICOs are putting out rubbish crypto currency every day to dilute the investor pool. If you are trying to store wealth, then the only crypto currency to buy are those that are likely to survive this chaotic market: Bitcoin (extended) and Ethereum.

That means ACTUALLY buying Bitcoin and Ethereum and storing it yourself (not on an exchange or futures market settled in cash). Bitcoin, being the original, is the gold standard of crypto, while Ethereum is the silver standard for cryptos. Both are widely held, have accessible wallets and are currently convertible into cash, goods and services.

Bitcoin is most useful as a store of value. Most people have heard of it at this point, so it has gained wide market acceptance and usability. There are excellent wallets available (I like Electrum from the GNU project) so it is easy to store your wealth on YOUR local machine. Bitcoin is decentralized and also limited by how many are available in market. Bitcoin also has very high fees, currently, which means that most people buying Bitcoin are doing so as investors. Be aware that Bitcoin has many derivatives that are NOT useful or a good store of long term wealth (Bitcoin Classic, Bitcoin Gold, Bitcoin Diamond, etc.). Most of these derivatives have just made a copy of the Bitcoin code (like a kit-car is a copy of a Ferrari but will NEVER be a Ferrari).

Ethereum is more utilitarian that Bitcoin (just as silver is used in more industrial processes than gold). Ethereum has been designed in a way that let it do smart contracts. You don't have to understand what that means to know that it allows Ethereum to find use in business. That utility has taken Ethereum out of being only a store of value and making it more useful. However, Ethereum is privately managed which means that if Ethereum management decides to print more ether, it can flood the market as much as they would like. This limits the store-of-value aspect and adds risk (just like the silver market short sellers slamming price). If you are holding for some cataclysm, then expect that the collapse of order will mean that Ethereum won't be as useful to industry either.

We have seen in places like Venezuela and Zimbabwe that crypto currencies have found wide acceptance in a collapsed economy. So a dystopian future where society continues to exist but governments fail, crypto currencies will be very useful. As long as the internet continues, crypto currencies will continue to trade.

All cryptos have experienced high volatility. So if you are buying into this market, you can usually put in a low ball bid on one of the many exchanges. It is likely to hit on a flash crash. Then put in a high sell order which will hit on a peak. Or hold the crypto until you are satisfied with the amount of money you have made, then sell out and buy gold.

A market filled with speculators is bound to crash… often. So, once you double your initial investment, then sell half and cash out. Once you cash out your initial investment and all the rest is just cream on top (pure profit).

Long term, putting some of your savings into cryptos is sound, but not more than you are willing to lose. There is always the possibility that crypto currencies will collapse in value, taking any store of wealth with it.

In the event of an EMP, however, you might want to hold some gold. When the computers don't function, and society has collapsed, you won't be able to convert crypto to canned food.

  

Conclusion

I think that holding 10% of your savings (acquired wealth) in precious metals is sound investing. By physical gold and silver, and store it yourself. Make sure that YOU have access to it and the banks/government does NOT have access to it.

Holding some of your wealth in cryptos is also wise. Risking 10% may seem like too much for most but others are willing to store 90% of their wealth in crypto. YOU decide your own level of risk, so I cannot give you a number… but 1% seems like a fair punt for even the most risk adverse. For crypto currency, use sound trading because putting in any more than 10% of your wealth is speculative gambling.

And just to be safe, buy some canned food and toilet paper for the end of the world, too.

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