I'm writing this post a little after 8:00 am, Pacific time, on December 5th, 2023. This clip above is talking about Bitcoin hitting $42,000 per Bitcoin yesterday, and hovering around $41,000 and change. Bitcoin bottomed out, in the last trough, in December of 2022 at around $16,600 per Bitcoin. As I write this, Bitcoin is $42,304. So Bitcoin is up about 155% in less than a year. Why? It continues to attract investors as a store of wealth, a "digital gold," as some people call it. But mostly, financial giant BlackRock will probably get the approval for a Bitcoin spot price ETF (exchange traded fund), possible as early as January 8th, 2024. If not in January, that ill most likely happen in mid March, 2024. That will allow major institutional investors (hedge funds, pension funds, etc.) to invest in the ETF, based on the price of Bitcoin, as easy as investing in any other stock or ETF. That's BIG. BlackRock has also applied for an Ethereum spot price ETF, as well, so the same could happen for Eth, most likely at a later date.
This post is written for entertainment and education purposes only, and should not be taken as investment advice. Do all needed due diligence, and consult needed professionals, before making any investment decisions. Please read the disclaimer linked below.
But Bitcoin is not even the big news in the market today. The real news is another huge decline in bond rates. The benchmark U.S. 10 year treasury bond, was paying 4.98% in interest on October 18th, 2023. To put that in perspective, on January 5th 2020, pre-pandemic, it paid 1.79% in annual interest. In August of 2020, that rate of return dropped to about .53%, one half of one percent interest paid on your money each year. That's not much.
The bond market is HUGE, much bigger than the stock market. This is where the Big Boys (and Big Girls) play, where institutions with billions of dollars (euros, yen, yuan, kroner, whatever) put large portions of their money. Now, bonds have an inverse relationship between price and interest rates, which is tricky to get your head around. When prices go up, when buying bonds is popular, the interest rates go down. When investors sell bonds to buy other things, the interest rate paid goes up. So, in the last month and a half, enormous amounts of global money have been going into bonds, and that has pushed the interest rate on the U.S. 10 year bond (a good gauge of the overall market), from almost 5% interest, down to 4.17% right now.
At the same time, gold prices have soared. They had hovered around $1,950 (per troy ounce)for a long time, then dipped down to around $1,850. Now gold is up to $2,013. It spiked up to $2,148 the day before yesterday.
What does it mean when the biggest institutional investors in the world pour hundreds of billions of dollars into gold and U.S. government bonds? They're scared. This is called a "flight to safety." The most sophisticated investors in the world are running for cover. They know a global recession is here in places (like Germany), and that's it's coming to pretty much everywhere else. They smartest investors in the world are hunkering down for a financial storm, an economic hurricane. They're protecting their wealth from loss, until the storm blows over, and the big damage is done. Then they'll look for new opportunities, when things settle down.
Here's what that means for all of us regular people. Here's how I see the next couple of months playing out:
Stocks- The U.S. stock market is at or near all time highs, about the same levels it was at two years ago. But now our dollars are worth about 20% less, due to all of the inflation. So stocks are actually worth less than they were in 2021. It's December 5th. On Friday, December 8th, the window for most companies to buy back their own stock closes, because the next earnings season is approaching. So the biggest driver in stock prices, businesses buying back their own stock, will mostly shut off this coming Friday. I expect stock prices to really begin dropping next week.
Virtually every economic indicator has been flashing red, recession warnings, for months now. The stock market has ignored this. Starting next week, it looks like reality will begin to set in. After the holidays, reality will REALLY set in on stocks. I personally expect 30% to 50% drops in stocks in the next few months, overall.
Gold- Back in July, somewhere, I said I expected gold to pop up to around $2,150, maybe $2,200, and then back off. I think we are near peak gold prices now. It may get to a solid $2,200 for a week or two, maybe. But I DO NOT think gold will soar to $3,000 an ounce. Sorry gold bugs. I like gold, over the long term, but our inflation is turning into disinflation now, and probably outright deflation come January. I think gold will settle at a new level, a bit over $2,000 an ounce, and stay there for most of 2024 and into 2025. Silver? It should pop higher, maybe to $35-$40 and ounce, but it's stuck at $25 right now. I don't see it soaring either. Silver is also a good hedge against future inflation, and affordable to average people, at $25 (plus premiums) an ounce. But I don't see it taking off in 2024.
Interest rates- Here's the good news, for average people, interest rates, overall, should drop quite a bit in 2024. The Fed will begin lowering rates, because of the recession that we are already in (in my opinion), but that hasn't been officially recognized yet. A banking crisis will force The Fed's hand, in early 2024, and interest rates will probably drop 1% to 2% in 2024, generally speaking.
Credit- The bad news about interest rates dropping is that this recession will hammer the banks, who are already in sad shape. The banks have totally tightened credit. They will tighten more, making it harder for everyone to get loans. Cash is king in 2024. It will be hard to get mortgages, car loans, and credit cards, because there will be a record level of defaults and foreclosures as the recession becomes obvious in early 2024, and continues to play out. So even though interest rates will drop dramatically, it will still be hard to get loans, unless you have excellent credit, and a low debt to income ratio. This goes for businesses and individuals. Alternative financing options will be huge in 2024. Non-traditional ways, owner financing, etc., will be the way to purchase big items (which will be at huge discounts).
Crypto- Crypto hardcores are chomping at the bit right now. Crypto winter is over, and we're well into crypto spring. Even though we are heading into a massive recession, huge amounts of money will pour into crypto in early 2024, because of the BlackRock ETF's, (Bitcoin and most likely Ethereum), and potentially Bitcoin ETF's by other companies. Major crypto coins will be the only "major asset" giving good returns in 2024, in my opinion, though even Bitcoin is not a "major asset" to most investors yet.
All investors, large and small, will be drawn to crypto, because that's where the good returns will be. Also, the Bitcoin halving happens in about April, which also usually leads to higher Bitcoin prices, in time. You can research that for more info. In this post, about three weeks ago, I wrote about the Bitcoin ETF, and the case for Bitcoin going forward. Bitcoin was $36,366 per BTC. Bitcoin has gone up $5,938 per BTC, or over 16%, in three weeks. Just sayin'. I think we'll see $100,000 per Bitcoin in 2024, almost certainly. I, personally, think the next peak will be in the $150,000 to $180,000 per Bitcoin range, maybe in 2025. $200,000 isn't out of the question, taking all things into account. It'll plummet after, to a new higher low. But that's the area where I think it'll peak.
Real estate- Want to buy a house from a disgruntled Millennial who paid $40K over asking price in 2021 because of the FOMO hype? What to buy a former Air BnB home at 50% off because the owner has 12 of them that aren't renting? 2024 is your year. If you have CASH. Want to buy a 20 year old office building for 80% off, or a dead mall? 2024 is your year... if you have CASH. Otherwise, forget real estate and watch the crash from a distance. It's going to be brutal.
Collectibles- If you're into any kind of collectibles, keep and eye on Craigslist or eBay, there will be lots of people selling collections of one kind or another, after getting laid off, in 2024. So, IF you know that particular market, from sports cards and comic books to exotic cars, there will be deals to be had... if you have CASH.
OK, that's my outlook on the financial world, overall for December 2023, and into January, and farther into 2024. This post is written for entertainment and educational purposes, and should not be taken as financial advice. Do your own research. Do your own due diligence. Consult professionals wherever and whenever needed, before making any investment decisions.
Buckle up. We've now have four years of warm-up craziness. Now things are about to REALLY start going nuts.
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