The price of Bitcoin has tripled over the past month.  A clear “feedback” loop is underway in bitcoin price action right now.

The Media reports on the new highs, which ignites interest from mom and pop investors who want in on the opportunity. Then, it hits another new high. The Media reports on it again, which ignites another round of buying.

Some Wall Street professionals have warned this could be bubble-like activity. Maybe, maybe not. Only time will tell. That does beg that question, could a Bitcoin price retreat have a spillover impact on other financial markets or the broader economy?

Let’s look to history as a guide.

When bubbles burst in the past two decades there has been meaningful impact on the broader economy and the financial markets.

1. Remember the Dot.com bubble that burst in early 2000?

• It took the S&P 500 13 years before it surpassed the 2000 high again.

2. Remember the U.S. Housing Bubble that peaked in 2006?

•  Housing prices in some states still have not returned to those price levels.

Bitcoin has few Links to the Actual Economy

Bitcoin is not intertwined in the real economy, or even the financial markets in any meaningful way. One major investment firmed called it “a curiosity.” If the price of bitcoin were to correct sharply lower, it won’t hurt the economy, the labor market, or the stock market. That’s the good news.

Gold Report

The price of gold fell last week, skidding to a fresh four-month low? The culprit?

Blame it on the speculators.

The “excuses” for gold selling included:

• U.S. dollar strength
• Senate approval of the U.S. tax cut package
• Stronger-than-expected U.S. labor report for November

But, at the end of the day, it was speculators pressing on the market as day traders took advantage of “shorting” opportunities.

Fed Watch

As expected, the Federal Reserve hiked interest rates at this week’s meeting on Wednesday afternoon. While the rate hike was widely expected, it could open the door to modest weakness in the gold market. The short-term gold chart outlook has weakened in the wake of the recent selling. That means there could more to go on the downside, before a “bottom” is found and long-term investors swoop in for great bargains.

What level should you be watching for? The $1,225-$1,215 per ounce area offers potential support for gold. If the price drops that far in the days ahead, long-term investors would be lucky to have the opportunity to buy at that price.

Stay tuned. Buying opportunity ahead for gold.  

Look Before You Leap into Bitcoin

Remember the dot.com boom? Internet companies with no revenues and profits, but massively overvalued stock prices?

The current mania round Bitcoin has a similar look and feel. Are people talking about Bitcoin? You bet. Were taxi drivers and hair dressers talking about dot.com stocks? You bet. And, that did not end well.

Throughout history, markets of all kinds tend to “peak out” or post “blow-off” tops not long after the man on the street starts rushing to join the party. It is a cycle that repeats over and over again and Mom and Pop are always the one who get hurt. At tops the general public rushes in because they are attracted to rising prices. Just like Bitcoin right now. The general principles that underlie the markets don’t change and continue to drive price cycles over and over again.

We’ve already outlined 3 key reasons investors should be wary of Bitcoin 1) It has no intrinsic value. 2) It appears to be a bubble. 3) Bitcoin could simply disappear one day.

Here are 8 more points investors need to read:

4. Is Bitcoin a currency?

Let’s talk about what defines a “currency.” Since 1913 in the United States, our currency has been issued by the federal government.

The U.S. dollar and major currencies around the world are:

• Backed by the full faith and credit of that government.
• It is physical. There is paper money and there are coins that you can touch.

Bitcoin is not backed by any government. There is nothing tangible that you can ever see, touch or hold.

In fact, bitcoin is the antithesis of gold. Let’s look at some key characteristics of gold and why investors continue to turn to precious metals as a true viable method of wealth preservation and accumulation.

• Gold is a tangible asset.
• Gold is physical.
• Gold is not issued by a government, which means it is nobody’s liability (not associated with any government debt or deficit).
• It has true physical supply – you can only pull so much gold out of the earth. (Unlike a computer software program where they can change the “rules” and create more than 21 million bitcoins at any point in time).

5. Cryptocurrencies are Unknown and Unproven

Get this. There are over 1000 cryptocurrencies right now. Have you heard of:

• Litcoin
• Namecoin
• Ethereum
• Zcash
• Dash
• Ripple
• Monero

These are all part of the “altcoin” fad. Any of these cryptocurrencies could go bust at any time, leaving investors with zero. In fairness, these cryptocurrencies can explode in value as well. 

6. Regulators May Pounce At Any Time

Sudden regulatory changes could emerge at any time in response to the concerns that this cryptocurrency is being used in black market transactions, money laundering and other illegal activities.

• Governments could ban the use of bitcoin at any time.

The SEC has already warned that Bitcoin is subject to regulatory risks and federal securities laws.  It would not be surprising for a regulatory body to issue regulations that could completely disrupt the availability and accessibility and liquidity of bitcoin.

A Federal Reserve regulator said last week that bitcoin could pose a threat to financial stability. Regulators are just getting started. Once regulations come down, investors could be left holding a worthless piece of cyberspace.

7. Exchange Heists

There are no bank robbers with guns. But, they steal money just the same. More than 980,000 bitcoins have been stolen from exchanges, either by hackers or insiders, according to news reports. That totals more than $10 billion at current exchange rates. Few of the stolen bitcoin have ever been found.

8. The IRS are getting involved

Anyone who thinks they can avoid taxes using Bitcoin is wrong.

A federal court has demanded that Coinbase, the largest cryptocurrency exchange to hand over its customer list to the IRS. More than 14,000 customers are suspected of tax evasion.

Because Bitcoin is viewed like any other asset by the IRS, every transaction, no matter what size must be reported.  Coinbase is fighting this, but they are expected to lose. The IRS is a powerful entity and will demand what its due in back taxes, penalties and fees once they obtain the customer list.

9. The Smart Money Doesn’t Invest in Bitcoin

Institutional investors are not investing in bitcoin. There may be some speculative trading in bitcoin. But, smart money investors are not buying bitcoin to buy and hold. It is a speculative market. The Wild West.

10. Bitcoin is not viable for Traditional Commerce

The intense volatility of Bitcoin prevents it from being used in commerce in any meaningful way. The wild swings in price, both higher and lower, create uncertainty when it comes to buying and selling in bitcoin.

• It fluctuates – often dramatically – on a daily basis.

In fact, in early 2017, McKinsey consulting firm said that it appears unlikely that the Federal Reserve for the U.S. Treasury will start accepting bitcoin as a form of payment anytime soon due to regulatory risks.

It is, however, being used by criminals due to its decentralized structure and ability to move money from local currencies into bitcoin, and then out of the country and finally into a different currency.

11. Bitcoin Is Not A Safe Haven

Bitcoin is no safe haven asset. It is a wildly risky and speculative investment.  That compares to gold, which has proven itself over the millennia.  It is real currency and a real store of value.

Consider these facts about gold:

• Gold is a physical hard asset that you can hold and touch, or put in your safe deposit box. It’s real.
• Gold is considered to be the world’s first international currency when King Croesus first minted coins back in 564 BC.
• Governments around the globe continue to buy and hold gold because of its true intrinsic value.
• Gold is rare. At the end of 2012, there were only 174,100 metric tons of stocks in existence above ground. If every single ounce of this gold were placed next to each other, the resulting cube of pure gold would only measure 20 yards in any direction, according to the World Gold Council.”

Investors who want to preserve and grow their wealth should consider a currency that has been around for over 2,000 years – has been tried and tested – a proven portfolio diversifier. From  1968 to 2016, optimal portfolio had 27-30% of its assets in gold and the rest in stocks and bonds, according to Jeffrey Christian, managing director at CPM Group.

Can you make money in bitcoin?  Some will, most won’t.

Have you wondered if you should buy some bitcoin? If you answered yes to that question you are not alone. After all a massive media blitz has highlighted the cryptocurrency’s recent surge to a new all-time high above the $16,000 level.

Sounds like an investment you should be in on, right?

If you were lucky enough to purchase bitcoin at $1,000, congratulations!

While the tug of the “Fear of Missing Out” could be strong, remember the old Latin phrase: Caveat Emptor, which simply means “let the buyer beware” applies here. Let’s start with the basics.

What Is Bitcoin?

Bitcoin is a digital “virtual” currency developed in 2009 by the shadowy figure Satoshi Nakamoto. It is a global payment system that allows for anonymous peer-to-peer payments with no centralized authority. Bitcoin transactions take place via “blockchain technology” which is a so-called digital ledger where these transactions are publicly and chronologically recorded.

• Bitcoin is not a physical currency. It is not issued by any government and it is not legal tender.

People who use bitcoin confirm the validity of bitcoin using the publicly availably blockchain transactions on the open source digital ledger.

Where Does Bitcoin Come From?

So-called “miners” earn bitcoins who use their computers to confirm Bitcoin transactions. Every transaction is linked to other transactions to create blocks. These are linked to create the blockchain. This blockchain technology holds a record of every Bitcoin transaction that has ever taken place. As these computer operators verify transactions, they earn new Bitcoin, which is how new currency is “created.” The original computer program allows for 21 million Bitcoin to be generated.

What about Regular People?

People can buy bitcoin on exchanges, such as Coinbase and pay a fee to store Bitcoin in an online wallet.

11 Things to Consider Before You Buy Bitcoin

1. What is the value of Bitcoin

People are focusing on the massive price increase, the record-setting “value.” But, what is actual the value of Bitcoin? There is none. People are buying Bitcoin on the “hope” that it will become widely accepted and widely used.

Recently, JPMorgan Chase & Co. Chief Executive Officer Jamie Dimon called bitcoin a “fraud” and he said he would fire any employee who was caught trading bitcoin for being “stupid.” However, he did admit that bitcoin was a good option for murderers and drug dealers.

2. Could Bitcoin be in a bubble phase?

People are buying it as part of a speculative buying binge. Remember the economic bubble in Dutch Tulip Bulb Mania?

In 1637, at the height of tulip mania some single tulip bulbs sold for more than 10 times the annual income of a skilled worker. Like all economic bubbles, it eventually popped. As tulip bulb prices dramatically collapsed over the course of a single week, many tulip bulb investors instantly went bankrupt.

“These bubbles tend to end in tears. And I worry about how this bubble might end,”

Billionaire hedge fund manager Ken Griffin said about bitcoin to CNBC on Nov. 27, 2017.

3. Security Risks: Any Bitcoin you might buy could simply disappear one day.

Bitcoin may be hacked. Operational glitches or malware could disrupt the peer-to-peer network. Cyberattacks can open the door to stolen private encryption keys.

This has already happened:

• Hong-Kong based Bitfinex was hacked in August 2016. That resulted in the outright theft of $65 million in Bitcoin.

• In 2014, the Mt. Gox bitcoin exchange filed for bankruptcy and announced that 850,000 bitcoins had vanished into thin air. Simply gone.

The hackers: The bitcoin world is their world. They understand the shadowy worlds of the dark net better than anyone. If you think any bitcoin you might buy is “safe,” just remember how protected your Social Security number was by Equifax earlier this year where 145 million Americans had their most sensitive personal data stolen. Simply stolen. Bitcoin is a computerized technical system with who knows what vulnerabilities yet to be discovered.

Investors who are considering buying bitcoin need to understand the realities of what bitcoin is and isn’t. Take the time to learn the facts.

More reasons that you should be wary of Bitcoin in Part 2 of this Special Report.

Millennials have a lot of people confused.

Countless articles offer advice for those presented with the scenario of engaging Millennials in the workplace. Moreover, major corporations like Mastercard are tripping over themselves to understand the mind of a Millennial. However, there’s one simple, overarching truth that everyone is missing; Millennials are people, and people like to feel secure. Before long we might begin to see Millennials seek security in their finances by embracing gold for its enduring characteristic as a safe haven asset.

Part of the value for Millennials who seek gold as an investment comes from their lengthy time horizon. With an extended period of growth, compounding can build returns over decades. Additionally, interest rates may also offer benefits to gold investors. The chief market strategist and head of research at the World Gold Council explained this phenomenon in an interview. He remarked that if global economies, “are unable to tolerate higher interest rates, then I suspect that interest rates won’t be going up for very long and that, I suspect, will be good for gold.” Of course, if interest rates rise those holding gold might see a deterioration in the value of their holdings. Even in this scenario of rising rates, however, there are reasons for Millennials to make gold part of their portfolio.

In the same interview, experts discussed the importance of considering the long-term. With so many decades of working years ahead, Millennials need to look beyond the hot equities market of today. That is, while stocks are rising fast now, there’s no reason to believe they will sustain this acceleration given outsized valuations. Gold, in contrast, is finite in its supply offering considerable upside potential for those disciplined enough to adopt a long-term strategy. Gold has returned an astounding 335% over the previous 30 years. Moreover, during a long enough period gold outpaces many other investments. For example, over a 45-year duration, history has shown that gold has outpaced both stocks and bonds.

Millennials, by definition, are young. They’re also plentiful; Millennials are the largest generation this country has ever seen, and they’re starting to save. Therefore, this generation should be considering how choices today will pan out over lengthy spans like 45 years. While many were young during the financial collapse of 2008/2009, they remember the tumultuous years and have resolved to evade the anguish of such financial burdens. Additionally, they remember the fraud and dishonesty of those who helped cause the mess. Gold does not require that the investor trust a CEO or a financial officer.

Gold helps ease fears arising from turbulent equity markets because the metal has a historically low correlation with stocks. Gold offers similar protections against inflation and currency devaluation. In the coming years, the financial world is bound to experience more change as new global conditions arise and new investment products emerge. Gold creates a stabilizing force over the long-term amid these inevitable shifts.

Millennials, like all other investors want stability and a strong rate of return. Gold provides both.

If you are like many investors, your portfolio is on cruise control.

Maybe you have automatic paycheck deductions funneled toward your 401k. And, you chose your allocation and funds months or years ago and haven’t looked since. That’s normal. People are busy. Families, kids, weddings, jobs, sporting events, and even school plays.

Tending to your finances often falls to the wayside.

Here are 3 reasons why it’s time to add “Rebalancing Your Portfolio” to your to-do list this month

• Lock In Some Stock Market Profits

It’s not a profit until you actually exit the trade. Sure, the stock market is posting healthy gains in 2017, but those numbers you are staring at in your IRA or 401k account are just “paper gains.” Until you actually hit the button to sell out a portion of your stock position in a quarterly or yearly “rebalancing” effort, it is just a paper profit that could disappear fast in the next correction or bear market.

In a well-diversified portfolio, history suggests it is good to sell some of what has gone up and buy more of what has gone down in your portfolio from time to time. Stocks have gone up this year. If you intended to allocate 60% of your portfolio to stocks it could be at the 70% or even 75% level right now.

Now is a great time to lock in some of those paper profits.

• Rebalancing Helps You Manage Risk

It’s important for any investor to rebalance in order to manage risk. For example, in the current environment where the stock market has been strong it’s likely that an investor will have a larger allocation to stocks. This larger allocation brings with it more market exposure and may be riskier then that investor can tolerate or even wanted.

Rebalancing brings your portfolio back into alignment so you can sleep easy at night.

• Individual Investors Rarely Succeed In “Timing” The Market

Individual investors often fall into the trap of trying to time the stock market. It is easy to say “I’ll sell it at the top and then buy it at the bottom.”  It has been shown time and again that trying to outsmart the collective wisdom of the millions of smart, well-informed people who trade in the market is very hard to do consistently no matter who you are.

Rebalancing also means that investors are buy low and sell high, which after all is the goal in investing. Without the discipline of rebalancing, many self-directed investors tend to buy high (when markets are hot and rising) and then sell low (when the market has tanked and they panic).

Disciplined rebalancing keeps you away from that market timing trap.

What is rebalancing?

Rebalancing simply means selling a portion your winners and not letting your portfolio get off track from your goals and objectives. Pick a regular time – either quarterly, twice a year or once a year and realign the portfolio for your pre-established risk-level.

How to rebalance

It’s simple and easy to do. Pull out your statements and take a look at your entire investment picture. Rebalancing simply involves selling a portion of your portfolio and using those proceeds to increase another investment. For example, in today’s climate, many investors are selling a portion of their stock exposure and transferring those proceeds into physical gold. That locks in their stock price gains in a vehicle that is proven to hold your wealth over time. You can even easily add physical gold to your IRA account.

Why precious metals?

Gold acts as an insurance policy, a hedge against equity market declines and a vehicle to protect and grow wealth. Blanchard and Company recommends that its clients allocate 10-15 percent of their investment portfolios to gold.  Recent research has shown that portfolios with a 30% allocation to physical gold have shown better overall long-term performance. When the equities markets falter, gold performs strongly which is why diversification is important in the first place.

We can help

It may seem like a chore, but taking a few hours this weekend to shore up your portfolio may be one of the most important things you do this month. If you want some advice or help in the process, one of the Blanchard portfolio managers will be happy to walk you through the process. Give us a call today!

Shoppers are getting ready. Black Friday is just around the corner and retailers will be welcoming them with door busters and discounts before the Thanksgiving meal has even ended.

If you are planning to scoop up some deals this weekend, you aren’t alone. About 164 million Americans plan to shop during Thanksgiving weekend, according to National Retail Federation’s annual survey.

Every year shoppers look forward to discounts and retailers look forward to ringing cash registers. Here’s what’s new this year:

1. More Americans will shop online than in brick and mortar stores in 2017.

Why fight for a parking spot at the mall? The convenience of “click and buy” online is the number one way holiday shoppers will buy gifts this year. For the first time ever in survey history, online is the most popular shopping destination in 2017 cited by 59 percent of consumers in the National Retail Federation.

2. There is more time to shop this year.

Retailers are cheering because shoppers have an extra day to pile up the gifts in 2017. “Christmas falls 32 days after Thanksgiving this year, one day more than last year, and is on a Monday instead of Sunday, giving consumers an extra weekend day to complete their shopping,” the NRF said.

3. Holiday season is more than 1/4 of annual U.S. Retail Sales.

Holiday shopping is huge. The holiday shopping season accounts for more than $1 Trillion (yes, with a T) in sales and over one quarter of total annual U.S. Retail Sales, according to the Deloitte 2017 Holiday survey.

4. People spend…a lot.

In 2017, the average shopper will spend $1,226 this holiday season. For high income folks (or those earning over $100.000 that doubles to $2,226).

5. Holiday shopping can be budget busting.

While this is the season of giving, it’s also the season of stretching budgets. NerdWallet’s 2017 Consumer Holiday Shopping report found that some Americans are still paying off holiday bills from 2016.

“Baby boomers were the most likely to accumulate debt (63%) among those who shopped during the 2016 holiday season, compared with 58% of Gen Xers and 40% of millennials. Of those who incurred holiday shopping debt in 2016, however, millennials and Gen Xers are more likely than baby boomers to still have it — nearly a quarter of millennials (24%) and 16% of Gen Xers have yet to pay theirs off, compared with just 8% of baby boomers,” the NerdWallet report said.

Key Takeaways         

The holiday shopping season is a critical time for the nation’s retailers. Holiday shoppers have been conditioned to look for lower prices. Savvy online shoppers can easily look for the best deals there.

What’s On Your Shopping List?        

Silver Coin Makes a Shiny Stocking Stuffer

As you make your lists and check them twice, consider the gift of something with true long-term value. A gift of gold or silver coins are something that will be treasured and can increase – potentially significantly – in value in the months and years ahead. Like cars, many material items bought for gifts decrease in value from the moment they leave the store. Not so with gold and silver coins, the long-term trend points higher for precious metals.

There might not be a better surprise in a stocking than a gift that is truly an investment. You can purchase a 1 ounce American Eagle silver coin for under $20. Deals don’t get any better than that.

People are getting scared. Forbes warns that “China’s Economy Will Overtake The U.S. In 2018.” Meanwhile, others are issuing equally dire warnings. Fortune stated that “China Says It Will Lead the World Economy.” For more than a decade major news publications have proclaimed that China’s rise to dominance is inevitable. In fact, the threat of China absorbing American jobs was a central issue our last presidential campaign.

These concerns, however, ignore a key point that should lay many of theses anxieties to rest: we live in an increasingly globalized world. The rise of one could easily mean the rise of another. Why? “China dreads the wrath of an alienated Western middle class,” remarked The Atlantic. As major trading partners, the U.S. and China share more goals than most understand.

Why does this matter to gold investors?

Recently, the World Gold Council reported that gold “ETF inflows slowed sharply from the spectacular 2016 levels.” As we’ve explored earlier, gold ETFs, don’t offer some of the most cherished characteristics of physical gold. However, this downward movement in the ETF world can have ramifications for even those holding physical gold. Bad news right?

Wrong.

As ETF flows near a halt, bar and coin investment is up. Who is responsible for this restorative effect? China. In the third quarter, gold bar and coin demand spiked 17% year-over-year, and China was the largest contributor to this growth with demand up 57%. Moreover, China has experienced the second highest volume of demand for bar and coin investment on record. This news should delight anyone holding gold no matter where they live.

China’s renewed interest in gold comes amid two developments in the country. First, many fear an eventual devaluation of the yuan coupled with rising inflation. When concerns surrounding currency pervade a country gold often becomes a hot commodity. Second, while some new investment opportunities are opening to Chinese citizens, there are still relatively few to choose from. This scarcity of options is compounded by recent moves to restrict real estate investment in the country.

The ordinary investor living in the U.S. may have little regard for these sweeping trends in China. But, as the economy continues to globalize, “the butterfly effect” is becoming less of an abstract concept and more of an economic truism. Of course, the global economy is more complicated than the network of transactions linking the U.S. and China.

Consider, for example, that recent gold prices are supported by a 36% increase in bar and coin demand in Europe compared to the third quarter last year with Germany as a key driver of the total demand. The rise of economies in other countries does not necessitate peril in the U.S. As these increases to bar and coin demand abroad have shown, U.S. investors can benefit from the success of others when the asset is a globally accepted currency.