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LAWRIE WILLIAMS: H1 2018 Investment – all fall down (almost)

Investors in almost all asset classes will have had a torrid time so far this year with losses in almost all asset classes occurring across the board.  The exceptions on the ones we are looking at only being the S&P 500 – up marginally by 1.6% - and oil, as represented by Brent crude up a decent 19.3 %.  All the others we have been monitoring ended the period in negative territory – some doing worse than others. 

The big loser was bitcoin with BTC falling by over 50% - indeed down nearly 70% from its bubble peak despite a decent upwards kick on the final trading day of the half year period. 

See table below.

Table: H1 2018 Performance















Brent Crude






S&P 500




FTSE 100






Shanghai Composite


Hang Seng


U.S. markets will be closed shortly for the 4th July Independence Day holiday.  Could things change thereafter?  We have noted before that the big U.S. holidays frequently seem to provide an inflection point trigger for the markets although the July 4th one tends to have a muted influence given that that represents the time that many investment professionals choose to go off on their summer holidays leading to correspondingly thin markets.  But then thin markets can exacerbate price movement trends and with an ever increasingly fragile geopolitical environment it might not take much to spook the equities markets into a much anticipated collapse.  Now might well be a good time therefore to move into precious metals investment – or at least into gold and silver which are seen as relatively safe havens in an economic crisis. 

Interestingly gold was allowed to close the half year on a slight upwards path at just over $1,250 for the first time in a few days, although the recent precious metals weakness is largely a representation of dollar strength embellished by the American trade tariff implementation rhetoric.  The likely trade war may not be advantageous to the American consumer, but it is also seen as possibly more damaging to non-U.S. economies – notably to the EU and China –  and perceived weakness in those areas is seen as beneficial to the U.S. dollar index – at least in relative terms although its effects on overall dollar domestic purchasing power may well be negative.

So what happens next?  The weakness in precious metals since February has largely been put down by analysts to better investment options elsewhere detracting from gold and silver in particular but as can be seen from the table above, equities markets have been virtually flat at best and little better than gold and silver in their performance year to date – and bitcoin investment has been disastrous.  We have always been dubious about cryptocurrencies in general and were perhaps early in suggesting liquidating any positions held feeling that a BTC price of $10,000 might precipitate a collapse.  As it was bitcoin soared to almost $20,000 before the collapse set in and even its current price level of just over $6,000 is, in our view, still extremely vulnerable.  Here we side with right wing commentator Michael Lewitt, who publishes the excellent Credit Strategist subscription newsletter who says he expects bitcoin to end the year at around $2,000 – and even at that level we think it may be overvalued!

While we don’t agree with all Lewitt’s writings, we still think his newsletter is one of the best around and his views on bubbles like bitcoin and Tesla have to be some of the best out there.  He accuses Elon Musk, Tesla’s CEO, of continually lying to the markets and that it’s only a matter of time for Tesla stock to crash and the company to fail and Musk to be the subject of an SEC investigation.

But that’s by the by.  Lewitt may be politically well on the right, but he does call out President Trump’s ‘incendiary and vulgar rhetoric’ as being counter-productive and potentially leading the nation into an increasingly divisive and anarchic confrontational divide, although he does agree with some of the President’s economic policies.

Lewitt is also a long term believer in gold – “Gold remains a laggard which simply means you should keep accumulating it in order to save yourselves from the inevitable destruction of fiat currencies.” he says and we wouldn’t argue with that sentiment!  Silver may even be a better bet in a rising gold price scenario, but it is very much more volatile and thus carries a greater risk element.

01 Jul 2018 | Categories: Gold, Bitcoin

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