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Signal and Bitcoin: Twenty-First Century Tools of Personal and Economic Freedom

Summary:
Key Points: Social media’s suspension of President Trump’s social media accounts should be troubling to everyone, whether you support him or not. Recall Ben Franklin: “They who can give up essential liberty to obtain a little temporary safety deserve neither liberty nor safety.” Privacy seekers are downloading Signal to replace WhatsApp. Biden’s proposed relief package, at .9 trillion, is expected to boost investor demand for real assets, including gold, Bitcoin and Ethereum. In my final commentary of 2020, I wrote that the U.S. media has a major trust issue. According to recent polls, most Americans put little faith in what they see and read on TV and the internet. These negative sentiments were probably not improved much by big tech firms’ decision to suspend President Donald Trump

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Signal and Bitcoin: Twenty-First Century Tools of Personal and Economic FreedomKey Points:

  • Social media’s suspension of President Trump’s social media accounts should be troubling to everyone, whether you support him or not. Recall Ben Franklin: “They who can give up essential liberty to obtain a little temporary safety deserve neither liberty nor safety.”
  • Privacy seekers are downloading Signal to replace WhatsApp.
  • Biden’s proposed relief package, at $1.9 trillion, is expected to boost investor demand for real assets, including gold, Bitcoin and Ethereum.

In my final commentary of 2020, I wrote that the U.S. media has a major trust issue. According to recent polls, most Americans put little faith in what they see and read on TV and the internet.

These negative sentiments were probably not improved much by big tech firms’ decision to suspend President Donald Trump from their platforms.

Twitter was the first to announce a permanent ban last Friday, following Wednesday’s storming of the Capitol. In the blink of an eye, more than 88 million followers could no longer visit the U.S. president’s account.

Other platforms soon followed suit: Facebook, Instagram, Snapchat, TikTok, YouTube, Pinterest.

The decision to muzzle Trump may not technically be unconstitutional—it was made not by the government but private corporations—but it’s highly problematic.

Even Twitter CEO Jack Dorsey admits as much. Defending his company’s deletion of Trump’s account, Dorsey tweeted that such bans “fragment the public conversation” and “limit the potential for clarification, redemption and learning.” He added that it “sets a precedent that I feel is dangerous.”

Many of Trump’s overseas critics agree. German chancellor Angela Merkel, who’s often shared an icy relationship with her U.S. counterpart, called Twitter’s move a breach of Trump’s “fundamental right to free speech.” Clément Beaune, France’s minister of state for European affairs, told Bloomberg TV that silencing an elected official “should be decided by citizens, not by a CEO.”

The crackdown isn’t limited to Trump. Parler, a networking app favored by Trump’s supporters, hit roadblocks this week when Apple and Google removed the app from its online stores. The service, which is financed in large part by hedge fund manager Robert Mercer, finally went offline after Amazon dropped it as a web hosting client.

I acknowledge these actions were prompted by a need to root out extremism and violence. I join others in calling on social media companies to do a better job at preventing extremism from flourishing. At the same time, there has to be a more equitable solution than permanently shutting down entire channels of free speech.

Founding Father Benjamin Franklin said it best: “They who can give up essential liberty to obtain a little temporary safety deserve neither liberty nor safety.”

Coinbase learned this lesson the hard way. In late September, the digital currency exchange instated a companywide ban on talking politics of any kind at work. Within days of the announcement, as many as 60 Coinbase employees had resigned.

A Signal of Privacy and Free Speech

The social media crackdowns have helped fuel people’s search for alternative communications platforms. One of those alternatives is Signal, a little-known messaging service that first debuted in 2014.

Similar to WhatsApp, Signal encrypts users’ messages end-to-end. Unlike WhatsApp, though, Signal isn’t owned by Facebook—or any other big tech firm, for that matter. It’s run by a tax-exempt non-profit, meaning its operations rely on donations.

So far this month, the app has seen a massive spike in downloads following WhatsApp’s announcement to users that it was changing its privacy policy. Tesla chief Elon Musk also threw his weight behind the app, tweeting to his 42 million followers: “Use Signal.”

According to app analytics firm App Annie, Signal has ranked number one in iPhone app downloads every day since January 9.

Signal and Bitcoin: Twenty-First Century Tools of Personal and Economic Freedom

As expected, Musk’s tweet triggered not only downloads but also investor interest. The problem is that Signal the messaging app isn’t listed, so investors were mistakenly buying shares of Signal Advance, a thinly-traded medical supplies company. As of January 11, Signal Advance stock had jumped more than 10,000% in 30 days, from $0.38 to $38.70. Daily trading volume surged from as little as a few thousand shares to over 2 million shares.

A similar phenomenon occurred last spring when investors began buying the wrong Zoom. Instead of investing in Zoom Video Communications—whose video conferencing services were suddenly in high demand thanks to lockdowns—investors piled into Zoom Technologies, a small Chinese firm.

The Price of Gold Has Historically Kept Pace with Money Supply Growth

The World Gold Council (WGC) has released its 2021 outlook, which you can download here, and there’s one chart in particular that stood out to me.

As you can see below, since President Richard Nixon formally ended the gold standard in the early 1970s, the price of gold has done a much better job at keeping pace with global money supply growth than Treasury bills have. Over the years, this has helped investors and savers preserve capital.

Signal and Bitcoin: Twenty-First Century Tools of Personal and Economic Freedom

I believe preserving your family’s wealth is reason enough to ensure you follow the 10% Golden Rule. As I shared with you recently, we’ve entered an era of record money-printing in an effort to curb the economic effects of the pandemic. U.S. money supply growth is up an unheard-of 66% from the last year.

The more fiat currency that’s in circulation, the more valuable I expect real assets like gold to become.

President-elect Joe Biden, who’s scheduled to take office next week, has called for a massive $1.9 trillion relief package that would include $1,400 checks for American adults. The bill, if passed, could lead to additional money-printing and, consequently, boost inflation.

In which case, you’d want to have some exposure to gold and other real assets like real estate and commodities.

HIVE Is Delivering on Operating Margin

That includes Bitcoin and Ethereum, two payment systems that provide end-to-end encryption, much like Signal. The world’s number one and number two cryptocurrencies recorded a weekly loss after Bitcoin hit a record high of nearly $42,000. After such a move, a correction is to be expected. I see the dip as a buying opportunity.

Investors seeking other ways to gain exposure have a few options. CME Group already offers Bitcoin futures and options, and next month, the exchange will be launching Ether futures. This is expected to support demand for Ethereum.

Then there are the miners. At the moment, HIVE Blockchain Technologies is the only one that mines both Bitcoin and Ethereum. What’s more, by one metric, HIVE is also the most profitable, beating its peers on operating margin for the 10-day, 30-day and 90-day periods.  

Signal and Bitcoin: Twenty-First Century Tools of Personal and Economic Freedom

Curious about the difference between Bitcoin and Ethereum? Watch my latest video to get the full details. Click here!

Gold Market

This week spot gold closed the week at $$1,828.45, down $20.56 per ounce, or 1.11%. Gold stocks, as measured by the NYSE Arca Gold Miners Index, ended the week lower by 5.56%. The S&P/TSX Venture Index came in up 1.26%. The U.S. Trade-Weighted Dollar rose 0.76%.

Date Event Survey Actual Prior
Jan-13 CPI YoY 1.3% 1.4% 1.2%
Jan-14 Initial Jobless Claims 789k 965k 784k
Jan-15 PPI Final Demand YoY 0.8% 0.8% 0.8%
Jan-17 China Retail Sales YoY 5.5% 5.0%
Jan-19 Germany CPI YoY -0.3% -0.3%
Jan-19 Germany ZEW Survey Expectation 58.5 55.0
Jan-19 Germany ZEW Current Situation -68.5 -66.5
Jan-20 Eurozone CPI Core YoY 0.2% 0.2%
Jan-21 ECB Main Refinancing Rate 0.000% 0.000%
Jan-21 Initial Jobless Claims 830k 965k
Jan-21 Housing Starts 1562k 1547k

Strengths

  • The best performing precious metal for the week was platinum, up 0.56% on positive comments on price outlook by an industry leader. After dropping on Monday, gold climbed back on Tuesday as President-elect Joe Biden is set to unveil plans for a multi-trillion-dollar stimulus package. This could mean huge inflation, which is historically supportive for the yellow metal. Rhodium is on a tear already for the year. Prices now exceed $20,000 an ounce, according to Johnson Matthey Plc data. The precious metal used to clean toxic emissions is soaring on the bet that China will see a recovery in vehicle sales.
  • Russia’s $583 billion reserves now consistent of more gold than U.S. dollars for the first time on record. Bloomberg notes gold made up 23% of Russia’s central bank holdings as of the end of June 2020 and the share of dollar assets fell to just 22%, which is down from over 40% in 2018. The move is part of the country’s goal to “de-dollarize” the economy amid U.S. sanctions and growing tensions. Gold is now the second-biggest component of reserves after the euro.
  • The World Gold Council (WGC) predicts gold demand in India will rebound this year after more than halving to just 275.5 tons in 2020. The group estimates pent-up demand from delayed weddings and festivals will boost sales. Newmont, the world’s largest gold producer, announced a $1 billion share repurchase plan for a second year, reports Bloomberg. The miner raised its dividend by 60% to 40 cents a share less than three months ago on the heels of higher gold prices boosting returns.

Weaknesses

  • The worst performing precious metal for the week was silver, down 2.57% on the fall in gold. Gold slid as much as 1.7% on Monday after suffering its worst three-day decline through Friday since August. “The metal is starting to look precarious,” said Rick Bensignor, president of Bensignor Investment Strategies in a Bloomberg interview, highlighting gold’s failure to move above $1,927 was a major technical miss. The rising U.S. dollar and higher Treasury yields threaten more trouble for the yellow metal.
  • UBS Group sees gold weakening to $1,800 by year-end as the macroeconomic backdrop improves and the Federal Reserve signals it will taper its bond-buying program. Analysts including Giovanni Staunovo said low real rates and a weaker dollar should support gold’s recovery to around $1,950 in the first quarter. However, prices may come under pressure mid-year due to modest ETF inflows. 
  • Hecla Mining announced preliminary results for the fourth quarter and full-year 2020 that estimate gold production fell 23% year-over-year to 208,962 ounces. 2019 was Hecla’s highest gold production on record. The miner did say it expects an increase of 7% in silver ounces from the year prior.

Opportunities

  • Peru’s new mining minister Jaime Galvez has vowed to streamline the consultation period prior to granting mining licenses as part of planned reforms to the country’s mining regulations. Peru currently has a $56 billion mining construction portfolio and could continue to grow amid new interest. Precious metals producers such as Rio Tinto, Barrick Gold, Fortuna Silver Mines and Gold Fields could be big beneficiaries. Oro X Mining, a gold explorer already developing projects in the country, now has an even more favorable environment.
  • Gold production in Burkina Faso surged to a record 60.8 tons last year, according to the country’s Chamber of Mines, after recovering from a jihadist raid in 2019 that killed 39 employees of Semafo’s operation. Endeavour Mining bought Semafo in 2020 for $690 million in shares. Bloomberg reports Burkina Faso is now Africa’s fourth-biggest gold miner after Ghana, South Africa and Sudan.
  • Sibanye Stillwater, the world’s top platinum miner, said it expects the price of the precious metal to climb more than 80% over the next four to five years as the globally economy improves and supply shrinks. “Platinum has only just started to re-rate and it will continue,” CEO Neal Froneman said. “There is no reason why platinum will not eventually trade at $2,000 an ounce and probably even higher.” Bloomberg reports the metal has nearly doubled since its 18-year low in March due to supply disruptions and growing demand from China for use in pollution-control devices.

Signal and Bitcoin: Twenty-First Century Tools of Personal and Economic Freedom

Threats

  • U.S. retail sales disappointed, falling 0.7% in December after a drop of 1.4% in November. Economists were expecting a decrease of just 0.2%, reports Kitco. Gold fell immediately after the data was released to $1,841 an ounce. The U.S dollar was also higher on Friday morning, sending both bullion and silver lower. A strengthening dollar is a threat for precious metal and commodity prices.
  • Chile’s state-owned Codelco, the world’s top copper producer, said it will up precautionary measures against the coronavirus at its mines amid a recent increase in infections. This is a cautious sign that other miners might need to take similar measures. Rising virus cases worldwide remains a threat to miners of all types who might face another round of lockdowns.
  • Members of Arizona’s San Carlos Apache tribe filed a property lien on Thursday in an attempt to regain control over land the U.S government is set to give to Rio Tinto for its copper mine, reports Reuters. The tribal members say the government has illegally occupied the land for more than 160 years and does not have the right to give it to anyone.

Signal and Bitcoin: Twenty-First Century Tools of Personal and Economic Freedom

Index Summary

  • The major market indices finished mixed this week. The Dow Jones Industrial Average lost 0.91%. The S&P 500 Stock Index fell 1.48%, while the Nasdaq Composite fell 1.54%. The Russell 2000 small capitalization index gained 1.51% this week.
  • The Hang Seng Composite gained 2.05% this week; while Taiwan was up 0.99% and the KOSPI fell 2.10%.
  • The 10-year Treasury bond yield fell 2 basis points to 1.092%.

You can read the remainder of the article at https://www.usfunds.com/investor-library/investor-alert/signal-and-bitcoin-twenty-first-century-tools/

January 15, 2021

By Frank Holmes
CEO and Chief Investment Officer
U.S. Global Investors

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