Another good week for everything but resources, but an exceptional week for Bitcoin, which closed Friday on a new all-time high of 601 mg, up 15.4%. The old high, set back on 9-Jun-2011 at 598.3, was achieved suddenly – tripling from 200 to almost 600 in just 8 days and 188 kg of trading. This time around, it took 100 days and 1349 kg of trades to move from the 200 to the 600 level. It will be fascinating to see whether we continue higher from here, or pull back and spend some time consolidating first. Either way, some bitcoins should be part of your speculative portfolio. Although the possibility of Bitcoin going bust is very real, the upside potential is huge. If Bitcoin is still around in 5 years, I'd be very surprised if 1 BTC wouldn't buy more than 1 oz of gold.
The government issued currencies were also higher, led by the Yen and the USD, which each rose 2.3%. This puts the USD 17.4% above its half-life curve, and deep into overvalued territory. While it can certainly get even more overvalued, now is the time to start moving out of dollars and into precious metals, farmland, mining stocks and other anti-dollar investments.
Bonds were up in line with USD cash. The short term SHY rose 2.3%, tracking the underlying USD, while the longer term TLT was a bit stronger, rising 2.7%.
Once again, stocks were mostly higher, with the gold miners being the exception. The big mover was the Nikkei Index, which rose 4.2%. The S&P 500 added 2.0% while the Dow Jones Industrials gained 2.4%. The Gold Bugs Index was down 3.0%, setting another new post-2008 low of 6.98 g on Wednesday. While this is getting pretty cheap, keep in mind that the HUI's 2000 low was 4.21 g, about 40% below today's levels. Still, with the USD so overvalued, it makes sense to begin adding to your collection of high-quality mining stocks.
Commodities were mixed, with Coffee and Cotton rising, and Crude Oil and metals declining. Coffee rose a stunning 6.9% to close at 28.2 mg/lb, while Cotton gained 2.4%. Copper gave up all of last week's gains and then some, falling 3.2% to close at 69.8 mg/lb. Silver lost 2.4% while Crude oil was 0.6% lower. Platinum also pulled back this week, finishing down 1.7% at 31.78 g, now 2.2% above parity with gold.
Comments on Market Update 22 Feb 2013: Bitcoin hits new high
I caution against investments in farmland, particularly in the US. The US government's corn ethanol fuel mandate has caused 40% of our corn crop to be burned in a remarkably Rube Goldberg thermodynamically inefficient manner – and has roughly doubled the price of farmland, especially in the Midwest. This mandate has also artificially inflated the prices of other types of farmland as more farmland has been converted to growing corn. It is rarely wise to invest in anything (such as fiat currency or Treasury bonds) whose value is so dependent on government mandates and promises.
Although I grew up on a farm, I am not investing in farmland. I am investing in local single family residences that I rent for a roughly 10% return on my invested capital after all expenses. (Also gold,) When the Fed's Quantitative Easing Infinity eventually fails to continue to suppress interest rates to far below their market levels, rents will rise as mortgage interest payments rise. Caution: Beware of buying during a real estate bubble! I live so far out in the boondocks that we never had a residential real estate bubble here; that is not the case in most US urban and suburban areas as the Fed's QE-Infinity is rapidly re-inflating the US real estate bubble in most places,
Hi Durk, I agree with you regarding US farmland. It is overpriced and over regulated. I do think that productive farmland in other parts of the world can be a good investment, especially South America and Eastern Europe, but also in parts of Asia. Take care, and good luck!