2448 FBF: Dan Ferris, Bitcoin, Inflation is Coming; Don't Predict It, Prepare For It

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Welcome to episode 1616. Now there's a memorable episode number. One six, one six. I like it. Do you like it? Anyway, welcome everybody. So today we will have part 2 with Dan Ferris from Stansberry Research. This guy had some good information, good information. And as you all know by now, the crash bros have been wrong, wrong, and wrong again. Sorry, Crash Bros. You know, it's good for clickbait when you want to get views, when you want to get listeners, when you want to get people reading your blog or your social media post. Just post something negative. Human beings have a bias for negativity. I'm no exception. Everybody does. Why is that? As we've discussed over the years, you might remember Most of the time throughout all human history, we lived in an environment of scarcity, of lack, of danger, of need, of just the opposite of the world we live in today. The world we live in today, even during tough times, but as Robert Shuler said in his great book title from many years ago, I read it back in the '80s, Tough Times Never Last, But Tough People Do. That's a good book, by the way, folks. It's an oldie but a goodie. Tough Times Never Last, But Tough People Do. Yes, Robert Schuller, the founder of the Crystal Cathedral in Garden Grove, California.

You might remember him.

So even in tough times, we live in an environment of massive, massive abundance. It's so abundant, it's ridiculous. The world is awash in goods. I even remember when I was a kid, and you know, I always say watch old movies, watch old TV shows, listen to old music, how— and I'm not saying the world is better today. In a lot of ways, it's dramatically worse today. It's definitely worse in terms of culture. The culture sucks!

Yes!

Good people, you have lost the culture war.

Sorry.

Oh well. The culture war is over and the good people lost. The idiot social justice warriors have won. And their name is such a misleading name. Isn't that a misleading name? SJW, it sounds like it's a good thing, but those people are really not good people. Oh well. Anyway, enough of that. So it's good and bad. The world is awash though in abundance in terms of standard of living, in terms of stuff. The world is awash in goods. Remember how in the old days when a thing Used to be significant. What do I mean by a thing? I mean a widget. I mean anything. Remember how maybe some of you used to get hand-me-down clothing and that was a normal thing to have hand-me-downs. It was a normal thing in the old days to mend your clothes. I bet almost none of you sew anything. How many of you Sew.

Yes.

How many know how to sew? I'm not saying manually, with a machine. You have a machine to sew for you, but nobody sews anymore, right? You don't mend anything. You don't darn your socks anymore. You throw them out and get new socks. And guess what? Look at the size. Look at real estate. Look at houses. Old houses, guess what they have? Even high-end, nice, older homes, they have very small closets. Nowadays, even lower-priced, smaller homes have very large closets.

Why?

Because the world is abundant. We have so much clothing, all of us. We have tons. We have full closets. We have full garages. We have stuff coming out of our ears. Stuff, stuff, stuff. Stuff everywhere. Too much stuff. Okay, it's an abundant world, and unfortunately we are taking this into our body. We have abundant waistlines too, don't we? Especially us Americans. Yeah, we gotta, we gotta curb that. Intermittent fasting, drinking more water, eating healthy vegetables, not too much meat. Not too much, you know, fattening stuff. We have abundance. It's too much abundance. You know what I saw the other day? I couldn't believe this. If you want to know the model for consumption, it is nature. Nature will tell us how much to consume. Here's an example. You know, I traveled last week. I know, I know, it's a miracle. Woo! Something crazy. 10 months. 10 months I wasn't on an airplane. I couldn't believe it. It's been 10 months since I've been on an aeroplane. So I went to St. Louis, I went to this conference, saw a lot of my friends, associates, contacts, etc. I saw our attorney there. Bob was there, our friend Bob, our favorite attorney with, with the webinar at JasonHartman.com/protect. So Bob and I hung out, we had dinner one of the nights I was there, and it was an abundant dinner. You notice the servings in restaurants, you could literally split them easily between 2 people, if not 3 people. Literally, 3 of us were at dinner— myself, Bob, and another friend of ours. We could have ordered 1 dish instead of 3 and split it 3 ways, and that would have been enough food for all of us. Yeah, it's, it's absolutely shocking how abundant the world is, yet we don't even notice it. We don't even appreciate it. Welcome to this week's edition of Flashback Friday, your opportunity to get some good review by listening to episodes from the past that Jason has handpicked to help you today in the present and propel you into the future. Enjoy. And you can appreciate it by watching old movies, old TV shows, and look around in their environment and look at how much less stuff they had. Anyway, so Bob's webinar, JasonHartman.com/protect. We got that out of the way. Food prices. Speaking talking of food, global food prices— now this is globally, not United States— global food prices have hit a 6-year high. Now you might recall a couple of months ago I reported on food prices in the US hitting a 50-some-odd-year high. I think it was a 52-year high. This is all adjusted for inflation. We know the inflation index is manipulated and obscured, but Whatever, it is the official index, so, uh, we'll just use that and understand we need to make our own adjustments. But yes, food prices high. There is definitely inflation in the system, no question about it, no question at all about it. And an interesting thing I saw today is about the areas prone to Guess what? We've suffered a lot with it this year. Homes— this is according to the Wall Street Journal, by the way— homes in wildfire and flood-prone areas appreciate more slowly. They say prices for homes in high-risk of wildfire areas increased 2.9% year-to-date in 2020 versus 5.2%. So think about it, folks, that's almost double. Okay, I know our human minds tend to think in terms of, well, the difference between 2.9% and 5.2%, what's that? That's 2%, that's 2.3% is the difference. No, it's not 2.3%, it's almost 100% It's almost double. That's almost double. That's so significant. It's huge. It's a big deal, big deal. And the picture in the Wall Street Journal is a picture of San Francisco. You know, it's, it's been very hard hit there, very hard hit. I've reported to you in the past about the high-frequency traders, you know, those Wall Street firms that have the latest and greatest technology. And it was the subject of one of Michael Lewis's books, you know, The Big Short author. And, uh, he talked— it was Flash Boys, that was the Flash Boys book. Yes, if I'm getting that correctly. He talked about these high-frequency traders and how Wall Street is a total scam, and we, we mere mortals cannot compete with Wall Street. We can't even come close because they are fighting over the real estate that is closer to the stock exchanges because they can gain a billionth of a second advantage over competitors and they can trade shares faster. Now, do you think, do you think you can beat them? Do you think you can beat their computers that execute those trades so quickly. Here's what the, here's what the Wall Street Journal article says: high-frequency traders get even speedier with cutting-edge cables. So now they're into these new cables that make the trading even faster. The article says high-frequency traders are using an experimental type of cable to speed up their system by billionths of a second. Billionths of a second. The latest move in technological arms race to execute stock trades as quickly as possible. It says the cable is called a hollow core fiber. So you've heard, of course, of fiber optic cables. Well, this is a hollow core fiber. And I am not a physicist, I'm not a scientist. I'm no expert, but without even reading any further— and I have not read this article, I'm reading it to you for the first time. I just read the title and I thought I gotta, I gotta report on it to you. But I'm guessing what this is about to say is that the fiber cable itself slows down the speed of light. So you actually want the core to be hollow so that there is no fiber there to slow the light. Now, as you may know, and I originally learned as a little kid because I was very into the space program and space exploration and astronomy, you know, when I was a kid, that was— I was super into that stuff. And I was also really into inventions and Thomas Edison. And do you know, as a kid, I made hydrogen in the kitchen sink? Yeah, all you have to do is hook up a transformer Put it in the water, put some salt in there, put a bottle to catch one end of it. The bottle fills with hydrogen. This is what every parent wants their kids to be doing, making flammable hydrogen in the kitchen sink. But yes, I used to do that. I also made a carbon arc light in my bedroom. That was pretty neat too. Okay, so anyway, I'm guessing that 186,000 miles per second Not hour, 186,000 miles per second. That's the speed of light. And that means light goes around the Earth 7 times in less than a second. But our high-frequency traders on Wall Street that some of us stock people that should be investing in real estate think we're gonna beat, um, they— that's not good enough for them. So yeah, the hollow core fiber, let's go back to the article, is a next generation version of fiber version of fiber optic cable used to deliver broadband internet to homes and businesses, made of glass. Such cables carry data encoded as beams of light, but instead of being solid, hollow-core fiber is empty inside with dozens of parallel air-filled chambers narrower than a human hair. Folks, it's an amazing time to be alive. Isn't that incredible? That is super incredible. Because light travels nearly 50% faster through air than glass, it takes about one-third less time to send data through hollow-core fiber than through the same length of standard fiber. The difference is often just a minuscule fraction of a second, but in the high-frequency trading business, that can make all the difference between profits and losses. HFT—high-frequency trading firms—use sophisticated algorithms and ultra-fast data networks to execute rapid-fire trades in stocks, options, and futures Many are secretive about their trading strategies and technology. Wow. So there you go. Yeah, that's, that's super interesting. And it's so amazing that, uh, the trader on his online portal at home thinks he can actually beat those high-frequency traders. If you didn't see the Michael Lewis interview on 60 Minutes about this when he published the Flash Boys book, Go back and watch that. We played some of it on a prior episode when we reported on this originally years ago. He just basically looks right at the camera and he says, Wall Street is a scam. So yeah, you know, the best you can do on Wall Street, I think, is just buy the index. But much better to buy a bunch of rental properties because income property is the most historically proven asset class in the entire world It's the most tax-favored asset class in America, and thankfully it is the most debt-favored asset class in America. And when we say debt-favored, we mean good debt where we get 3-decade-long fixed-rate mortgages with inflation-induced debt destruction at negative interest rates. That's why we love our income properties, don't we? Answer my question, folks. Nod your head right now. Say yes, Jason Hartman, we do. All right, hey, let's get to part 2 of Dan's interview. Um, really some interesting stuff revealed here. Let's jump in.

Let's talk about Bitcoin a little bit. Yeah, you're a fan, right? Are you also a gold bug?

Um, I don't know if I'd call myself a gold bug, but I hold as well, and I advocate the ownership of gold and silver, frankly.

Yeah. So gold, silver, and Bitcoin, you like all three of those, right?

I do. Okay.

I do. And I, I mean, Bitcoin, is that in a bubble or is that still good? I mean, it's gone up a lot, right? It's a one-dimensional asset class. There's no income from Bitcoin. It's highly speculative.

But what are your thoughts? It is. It's in the early, early days. If, if it's still around, um, when the last Bitcoin is scheduled to be mined in 2140, if it's still around and still widely— it's gained widespread adoption, and if this continues, you know, the 300— I think the market cap of all the Bitcoin is like $320 billion now. I think all the gold in the world is somewhere around $10 trillion or so, $10 or $11 trillion, I want to say, these days. Um, so if you just If for some reason, I don't know what the reason would be, but if Bitcoin gets on par with gold, if the future sees more competition in the realm of stores of value, gold is a store of value, silver is a store of value, Bitcoin is a store of value in its very earliest days, you could be looking back at $20,000 or whatever it is right now, $18,000 or $19,000 Bitcoin and saying, Whoa, wow, I wish I'd loaded up back then. And will it be a volatile ride? Well, it's already been one. So the rational expectation is for that to continue. But at some point, this thing becomes money for a lot of people and a store of value for a lot more people. And the supply isn't going to go up at anything more than the prescribed rate. There's 18.5 million of them now. There won't be any more than 21 million, provided the protocols don't change or whatever. Between now and 2140. We printed $3 trillion new US dollars this year alone, so $4 trillion during all those previous QE. So, you know, Bitcoin is the hardest currency on earth.

Well, okay, so let me, let me pick at that one for a little bit. What do you think about the political and/or, you know, they're kind of the same, but regulatory risk? I mean, the, you know, the governments around the world are in a race to come up with their own cryptocurrencies, their own digital currencies, right? And those will be backed by standing armies, okay, and, and force of law. And they can just say, okay, you can't use Bitcoin, it's illegal, you know, or we're going to confiscate it like they did with gold in '33, uh, and maybe they'll give you some money for it. Now granted, this is a worldwide thing, it's not just a U.S. thing, but You know, maybe they can say it's illegal to use Bitcoin, you know, just like it's illegal to use, uh, drugs as a commodity. You can't trade in cocaine, right?

That's illegal. So has that law stopped people from trading cocaine?

No, it hasn't stopped them, but, you know, it's vastly diminished. I mean, I would argue that if it were a legal commodity— let me ask you this, Jason— traded a lot more.

You think the price of cocaine would be higher if it were legal or lower?

Well, that's an interesting question because it would be lower in the sense that there'd be more supply when you disrupt the crime syndicate's monopoly, which by the way is the same that already happened with marijuana. Okay, so we saw that happen with cannabis. The price dropped dramatically. I remember I visited a cannabis farm with one of my mastermind groups in Colorado shortly after it became legal there, and, and she said, you know, people think we're making all this money. We're not. It's— the price has dropped so much since it became legal. And, you know, the same is true with human trafficking. If you want to take the profit out and ruin the industry for the crooks and the scumbags, make prostitution legal, and then you're going to disrupt their monopoly, right? If you want to have competition on Wall Street and you want to have a startup culture, you want to have competition in the banking industry, deregulate it, and then you'll have much more consumer choice and competition. Listen, I'm a libertarian, okay? So I agree with you there. But yes, the legality in a sense makes it more expensive when it's illegal because producing it's illegal, but trading it, I don't know, it's kind of different, right?

What do you think? Well, let me ask you this. Can you, um, let's just think of it differently. I, I've seen this argument, you know, people come at me with this all the time and they say, what, you know, what if the government gets a hold of this? I think that's the wrong framing. I think the framing is—

You're talking about Bitcoin now?

Yeah, Bitcoin. Bitcoin. We're back to Bitcoin. That was where we started. That's really what I want to get to. The framing to me is not what if the government makes it illegal or regulates it heavily? The framing to me is this was created to be outside of that system, period. It is anonymous. It's effectively unhackable. And they're now wanting to compete. They are scrambling to try to compete with this. It's not like they're sitting around wringing their hands, and they can't wait to get their hands on it and regulate it. They're scrambling to figure out how the hell they're going to disintermediate and compete. And they're not. That's why—

You mean with Fedcoin or the Chinese digital currency? Yeah. Is that what you mean?

That is what I mean. They are trying to figure out some way to compete with this. They're not going to make it go away. It was created to get around all that because the original Bitcoin paper was like, boy, fiat currencies suck. Let's make a truly hard currency. I'll be damned if they— it's early days. It's 11 years old. So let's not get too crazy, but so far so very good. You know, we got, um, the PayPal deal, which is like 300 million plus customers, 26 million merchants. I mean, when this thing gets— but PayPal's gonna—

they're not gonna get rid of it. PayPal doesn't have—

there's no government competition. PayPal's not competing with the government, right? See, governments don't have to compete on merit, they just make a law. They ensure their monopoly. Right?

So— Comes out of the barrel of a gun, right? Right. Yeah. So I don't worry. I think most folks worry about that government regulation angle on Bitcoin too much. I think Bitcoin is— it's gained momentum. It's gained even at its tiny $320 billion market cap compared to tens of trillions of dollars of the biggest reserve currency, US dollar. Dollars and euros and yen, the other two big ones. We get a little tiny piece of that. Bitcoin gets a little tiny piece of that. It's going to be a million per Bitcoin. It's going to be— it could wind up being like a multi-hundred bagger over time, and a 50-bagger or so is not hard to envision at all. Yeah.

I mean, see, the thing is, Dan, nobody actually uses it as a currency. No, that—

well, I mean, we all thought that way. I've used it as a currency.

Remember when the founder of Overstock, you know, he was on the show and, you know, I really enjoyed him as a guest. You know, he's a big Bitcoin fan. So he— Overstock was like, you know, it was a huge deal when they said, we're going to accept Bitcoin. You can buy stuff on overstock.com with Bitcoin, right? I don't know, even I doubt you still can. I'm not sure. But, you know, nobody uses it in commerce. It's just, it's just like this thing out there that they, they all traded for dollars like You look at the Cash App, and the whole point of it is, okay, buy some Bitcoin, but you need dollars to buy anything else. So you're just going to convert it to dollars.

But I think the important thing is that these are the fat pipes that are put in place and nobody's using them. Right. But you put the fat pipes in place, eventually people use them. So I don't worry about that at all. In fact, when I see all this adoption by merchants and services like PayPal. I'm like, fine, trade it, you know, trade it in dollars, do whatever you want to do with it. But one day, you will— your trust in the US dollar will begin to fall. And you and I both know that when that sort of thing happens, it can happen so fast that if you're not prepared well ahead of time, it can really catch you off balance. And, you know, so you want everything is, as I see it, everything is proceeding very well for Bitcoin to become a currency. Lots of people will accept it as a currency right now.

Well, they've had 11 years, and nobody's really accepting it now.

Yeah, but what's 11 years in the life of a currency?

I know, but I mean, they started to accept it a little bit, right? Like, people bought pizza with it. Now, that pizza would be $100 million or some ridiculous—

Yeah, that first $20 million pizza.

But it's just not used.

And, and, you know, the other thing is I'm surprised you hear—

so, you know, it's funny, it's like millennial hypocrisy, right? Um, you know, millennials are really into it, okay? They, they like it because it's a cool technology, but it's super bad for the environment. I mean, mining Bitcoin is terrible for the environment, right, with the electric usage and the—

that's if you buy that whole argument. Creating electricity in certain ways is better. I don't— I mean, I understand that they will make it—

electricity would be much better for the environment if it was all nuclear, because that's the best form of electricity bar none. I mean, it's way better than solar or those spinning guillotines in the sky that kill all the birds and take tons of resources to make, and all kinds of environmental sins are created in making solar panels and windmills. I mean, solar panels are toxic waste.

Oh, terrible. I know. It's ridiculous.

And there is one place for solar panels though, on cars and boats and motorhomes. That's a really good use of solar panels.

You know, that's about it so far. Mobility is nice. That's right. Yeah. Yeah. But the other thing is, you know, we're talking about not using this as a, as a currency. I mean, I can't do that with gold either, really. I know some people will accept, some people would love to accept it, but we have these legal tender laws. Bitcoin and gold are designed to get around all that. They're stores of value. Frankly, you and I know that these slips of paper that I have wadded up here in my pocket, this thing that they're in, this silver thing is a better store of value than all this paper right here.

Dan, I don't know. I would love to— like I've said a million times, I'd love to be wrong about this, but those wads of paper, have aircraft carriers behind.

Sure, how many aircraft carriers does it take to decrypt all your Bitcoin?

Well, it's not about decrypting it, it's about the fact that those legal tender laws that support those dollars have a giant global institution with military bases in like 170 countries. I mean, you know, that's what backs the dollar..

And the Bitcoin network is the biggest one in the world of just about any kind associated with that type of a system.

So, well, like I said, I want you to be right about this. Okay. You really, really do. Yeah. Okay. So, uh, what else, uh, should we cover as we wrap it up here, Dan? Anything more just generally on the economy? What's next? What 2021 is going to look like? And you are an inflationist, right? You, you believe inflation is definitely here or, and, or coming, right?

Eventually it's inevitable. It is the last resort of every fading republic is to degrade the currency. Absolutely. The mechanism is different than most people understand, but you know, sooner or later they're going to, they literally sit around thinking, we need to do something. How can we push prices up? And we should take them at the word. It will happen.

Yeah. So yes, no, inflation is a fantastic business plan for governments and central banks because, especially when they're debtor nations like the US, right, because they, they deflate the value or inflate it away, the value of their debt, whichever way you want to look at it. You know, the debt gets cheaper to repay if there's inflation, right? So that's a very good deal for governments and for central banks. So yeah, they want it. Um, any thoughts on, on all this talk about the Great Reset? It's amazing that the elites who run the world, or at least think they run the world, um, you know, are just completely open about the Great Reset. I mean, it's like they're not even hiding it.

Well, yeah, the World Economic Forum's Great Reset. Yeah, I went to the website, read about the Great Reset, and it sounds so— I hope I'm allowed to talk this way— it just sounds so airy-fairy and kind of nebulous, but we all know what it means. It's just a bunch of people like we were talking about. It's a bunch of people telegraphing that they're going to aggregate as much power as they can to change capitalism. We should take them at their word as well, and they will try to do it. You and I both know you can regulate and you can change things and you can clamp down on people, but you can't make markets go away. Away. That's why drug dealers do so, make so much money, at least the people at the top, the rest of them don't make anything. I'm not telling you I know how the future comes out. You'll never hear me predict. I say, don't predict, prepare. I think the way you prepare is by being truly diversified, certainly as an investor and as a human. You need to hedge all kinds of eventualities. My wife made me, or she didn't make me, she said, I'm buying earthquake bags. Which are these backpacks filled with supplies that you might need to strap on if you got to walk out of your house because everything—

The 72-hour bug-out bag is what he's talking about.

Bug-out, yeah, that's right. Bug-out supplies, that's a hedge. Firearms are a hedge, aren't they? The training that goes along with them and entertaining all the scenarios in which you may have to use them. It's the same with finance. I wouldn't run out and sell all my stocks and bonds, But I want to be truly diversified, meaning have your stocks and bonds and your cash. That's in the financial system. You need it to function, right? But also go outside the financial system. Have your Bitcoin, have your gold and your silver, preferably in not just in the country you live in. Right. And also, we all know, like you're a real estate guy, we all know something about some asset or some potential store of value that might not be traditional. I heard about a guy who's investing in whiskey and casks in Scotland and making money because—

I've seen those deals. Yeah.

Dark spirits actually can hold their value over time because they sit there for 30 years, and not everybody is making this or that particular brand. People do that with wine. They do it with Ferraris. They do it with guitars. If you talk to rich people in Europe who preserve value over centuries, You say, how do you do it? They say a third, a third, and a third— land, gold, and art. Not stocks, bonds, and cash— land, gold, and art. And the idea is that you got to figure out how to preserve wealth over time outside the financial system. And that's something we need to think about more than ever. Yeah.

And remember, the financial system is low-hanging fruit for the powers that be because They can just come along and say, oh, you know what, all those retirement accounts that have brokerage accounts attached to them or savings accounts, we're just going to nationalize all that. It's been done before, folks, and they can do that with a stroke of a pen. And that's really easy to get to. It's really low-hanging fruit, you know.

So give out your website. Oh, investorhour.com or stansberryresearch.com. That's where you can find me. Good stuff.

Dan Ferris, thanks for joining us.

Hey, man, it was a lot of fun.

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