Exit Investments
Rates went as low as they can mathematically go, earnings ratios as high as they can go discounted by those lowest of the low rates. The old school fiat system has been pushed up the asymptote of debt creation by trillions in freshly typed money. The theme going forward for any investor, even Bill Gross is saying how it feels like the ending of a 34 year era, is positioning one’s capital for purchasing power preservation and also for growth in the face of phase transition. The transition begins in the minds of the people and ends in the database access protocols of the financial system. The more people realize that the digits on their online banking are fictitious notions, liabilities that cannot be honored indefinitely, and subject to limitation of use by decree, the closer the herd gets to a tipping point.
Bitcoin may have recently returned to bull market territory, volatile for sure, but it’s a 3.5 billion dollar market cap - it doesn’t take the whole world changing for it to double or triple from here. It only takes a few more institutions to follow the lead of the big 3 hedge funds already loaded, or another hundred thousand investors to take their first positons, to add $100 to the price.
What’s really going to change the game though is decentralized banking. Holding bitcoin beyond 10% of one’s net worth can be... stressful to say the least. It’s nice to see capital gains happening against the strongest currency in the world, out-performing bubble assets favored by the stewards of the bankrupt system, but if people can hold savings and make payments in that strongest, stable currency and get decent yield without risk of bank failure or capital controls, that solves a problem billions of people have.
So open source protocols are going to compete with proprietary permissioned ledger systems that are used by consortiums of legacy institutions, which has the double-benefit of accelerating the adoption of resilient infrastructure and keeping the financial industry around in a leaner, cleaner form - only 70% of the jobs will become redundant, fear not financial professionals!
For everyone else, there will be interesting investment themes from needed transformations of the food, energy and manufacturing organs of our economy, made possible by the efficiency gains that this transition to blockchain infrastructure is clearing up. Until then, the safe thing is to hold dollars, and the trader’s thing will be to go long the haven assets and short the weak stock indices and currencies. When holding dollars can also mean getting yields without credit risks because the counterparty is a series of smart contracts, we’ll see the highest-probability defensive move become the transformative trend to emerge from the looming cascade of crises.