Wall Street Unplugged
Episode: 889May 4, 2022

Why Bitcoin beats gold

Bitcoin vs. gold
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By the time you get this today, the Federal Reserve will have announced its latest action on interest rates. Daniel and I kick off the podcast with what we expect from the Fed… and how it will be received by the markets. 

Speaking of interest rates, we discuss why rising rates are terrible for gold… how Bitcoin is replacing the yellow metal… and which gold investments are still worth owning today.

Fidelity recently announced it will allow investors to invest in Bitcoin through retirement 401(k) plans. Daniel and I dig into the details… and the impact it will have on the crypto sector.

Inside this episode:
  • The Fed’s latest interest rate actions [1:10]
  • Why you should own Bitcoin vs. gold [6:00]
  • Wall Street continues to move into crypto [16:50]
  • Fidelity offers Bitcoin in 401k(s) [22:50]
Transcript

Wall Street Unplugged | 889

Why Bitcoin beats gold

Announcer: Wall Street Unplugged looks beyond the regular headlines heard on mainstream financial media to bring you unscripted interviews and breaking commentary direct from Wall Street right to you on main street.

Frank Curzio: How’s it going out there? It’s Wednesday, May 4th, and may the fourth be with you. I’m Frank Curzio, host of the Wall Street Unplugged podcast, where I break down headlines and tell you what’s really moving these markets. So, it’s Wednesday, bringing in Daniel Creech. What’s going on, Daniel? How’s everything?

Daniel Creech: May the fourth be with you, Frank.

Frank Curzio: It’s Star Wars day. I just found out from a big Star Wars fan. I think they have a day for-

Frank Curzio: Yesterday was what? Teachers appreciation day. And we have all these… So, we have to have a day for ourselves, right?

Daniel Creech: That’s right. For investors, for capitalists. That’s what we ought to do.

Frank Curzio: For capitalists.

Daniel Creech: We ought to take it main stream. But yeah, it’s Wednesday, favorite day of the week, because of this podcast and other reasons. Middle of the week, things start to slow down. It’s a great time.

Frank Curzio: Yeah. Slow down for you maybe.

Daniel Creech: Yeah. Well… Hey, everybody’s selfish. I’m talking about me. We got-

Frank Curzio: Yeah, exactly.

Daniel Creech: We got all kinds of fun things coming up.

Frank Curzio: So, a lot going on here, right? And we have the Fed. And you’re going to listen to this, where the Fed has already made the decision, but we’re taping it before, which is always fun. Right? I’m going to take a stab here and say that the Fed is going to raise by 50 basis points, a half percentage. And I’m taking another stab here that they’re finally going to launch their program to reduce this balance sheet by 95 billion a month. Yeah. So, that’s what I’m predicting for later.

Announcer: I don’t know about the balance sheet thing. Obviously, the 50 basis point hike is in, or being priced into the markets right now. We’ll see how it reacts. But I would say, if I had to flip a coin and pick… And that’s what you’re doing here, because anything could happen. I would guess that, from the 2:00 PM… 2:00 to 4:00 PM today, markets rally. So tomorrow, if I’m welcome… today, that happens. We’ll see what happens.

Frank Curzio: Which is great. This is what I love. The market, right? I talked yesterday about how volatile the market is, right? When I walked in earlier, you’re like, “Everything’s rallying dude. Bitcoin’s up.” Because when I get in… Daniel’s here a little bit early. He’s giving me the scoop and everything. So then, we come in here, we come to tape. The NASDAQ is down like one and a half percent. And we just… This is like the last half an hour of us taping, just walking in here. Right? So, that’s how much the volatile… I talked about it yesterday, how uncertainty is, right? So now, you’re coming in and Bitcoin’s holding it. The Dow is still up, but the NASDAQ’s getting crushed. The Dow’s belly up, but just from an hour, right? And really, nothing’s happening. Nothing’s going on right now, right?

Frank Curzio: It’s not like we had these massive earnings. A couple companies reported earnings, but you’re looking and saying, “What’s the Fed going to do?” Well, I’m joking around because there’s a hundred percent chance, 100% chance, those are the odds on Bloomberg, that’s going to be a 50 base point hike. I told you what I think it should be, but they’re not going to do that. They’re going to pray that inflation moderates and 95 billion a month. And I want to put this in perspective real quick, Daniel. The Fed needs to get it 2.8%. That’s their target. They really need to get to about 3.25. Okay. So, a 50 basis point hike, it gets them to, say, 1%. Right? Between seven point… about 0.75 to 1%. So, they got a long way to go. The $95 billion a month reduction in its balance sheet, that’s what they’re supposed to announce.

Frank Curzio: So, let’s say a hundred, a hundred billion dollars a month for math purposes. Right? So, if you’re looking from now, because they haven’t done it yet, through the end of the year, that’s 800 billion. The balance sheet is 9 trillion. Right? So, it’s going to be, at the end of the year, 8.2 trillion. Right? So, we’re looking at 8.2 trillion. And to put this in perspective, balance sheet was at 4 trillion pre COVID and 7 trillion in January 2021, when everything… Asset prices were at all-time highs, earnings all-time highs, everything, right? It was at 7 trillion. They released another 2 trillion into the market for purposes and reasons. And that doesn’t even include the Build Back Better bill, which they were trying to force through, which would’ve been a joke and really would’ve saw inflation through the roof. But just to show you, in short, people think that a Fed could get dovish share. And they may, just like Powell tried to do last time and got dovish. He’s like, “Oh well, we might not be that-“

Frank Curzio: And the market went, it’ll go up for a couple days like it did last time and probably come down a lot because what do we know? We know the Fed has to be incredibly hawkish. They have no choice, right? I mean they’re predicting… They need to get to 2.8%. They’re going to be at 1%. You can’t be hawkish, right? You have a long way to go. You’re looking at reducing its balance sheets. You have to aggressively do this. Right? And over the next six to nine months. Again, with 9 trillion, it’s not even going to be a dent by a hundred billion dollars a month. So, they can’t get… I mean, he could say whatever he wants now, and that might move the markets a little bit or whatever. But I’m just saying, he has to be hawkish, which means he’s going to say that we got to tighten a lot more.

Frank Curzio: But just hearing that, people are like, “Oh, he might be a little dovish and that may be good for the markets.” He could say whatever he wants, but he has… he’s got to be… He’s going to be hawkish. He has to be hawkish. He has to raise rates aggressively. He has to reduce his balance sheet. Let’s see how it plays out and what he says. Because again, there is a lot of confusion for the first time where people are like, “Wait a minute.”

Frank Curzio: This is the first time where I really… you can’t get a grasp on the Fed so much because it was 25 basis point last time hike, Daniel. And then, what happened? All the Fed governors for the next couple days said, “Holy cow. What are you, crazy?”

Daniel Creech: Right.

Frank Curzio: And then, Powell came out three days later and said, “No, no, no. We’re going to aggressively…” I mean, you don’t see about face in three days from the Fed. So, let’s see what happens this time around.

Daniel Creech: Yeah. And this is a crap shoot. I mean, it’s a roll of the dice on what’s going to happen. It’s a leveraged earnings release. You can come out with great earnings and the stock sells off for whatever reasons or comments are made on the conference call. This is the same thing, in my opinion. I still think it’ll rally after the announcement. We were joking around and talking this morning earlier about how there was a CNBC Fed survey that basically has the 100% already priced in for a 50 basis point hike now. And then, next month, 90% for another 50 base point. So, unless Powell comes out and says, “Hey, we’re going to raise by 75 basis points,” which I argue he should, I just don’t think he will, because it’s clear to me that he wants to steer the economy and the stock market.

Daniel Creech: Even though they lie to us and tell you they don’t pay attention to it, they absolutely do it. They check their own portfolios. Hell. It was just a couple months ago when they decided that they shouldn’t run on insider information and we had a couple step down. So, we’ll help you weed through the BS here. It’ll be entertaining. And we can just strap in for a good time, Frank.

Frank Curzio: Yeah, I definitely will. And I want to go over some of the things that… So, regardless of what… It’s going to be temporary if the Fed does say, “Hey, you know what? Whatever. We’re going to not be hawkish or whatever.” So, the bottom line… We know where they’re going. We know where they have to go. Right? We’re all smart enough to know that. And what are the plays on this? And a lot of people say, “Well, gold could be the play on this.” And you do a lot of research on gold and I just don’t get it. I really don’t.

Frank Curzio: I mean, you could say, “Well, it’s a safe haven and you invest. For a safe haven, you invested a store of value. You invested so many different things.” And it hasn’t really been that much of a safe haven through this. It’s down a little bit less than the markets, but not really. I don’t feel comfortable. I feel comfortable in cash. Right? I mean… so gold is down. But yeah, I’m looking more and more at gold and starting to realize something, that I don’t know why anyone should own gold.

Frank Curzio: I have a lot of friends that listen to this podcast in Vancouver and they’re going to be sending me emails for saying that, but this is about you. This isn’t about my friends. This isn’t about anything. This is about your investments. And what I see with gold coming down to pipeline… I mean, if you believe that the dollar’s going to be strong, it doesn’t make gold as good an investment. But if you look at the data today…

Frank Curzio: I don’t know, maybe it’s you. I mean, you could find a reason to buy gold. I mean, I could break it down for you why you shouldn’t. But I know… Being gold is a safe haven, or gold right now is where there’s all this confusion, I think you’re crazy to own gold right now.

Daniel Creech: Well, I am crazy, so that’s easy.

Frank Curzio: There you go.

Daniel Creech: Yeah. Well, that’s no doubt.

Frank Curzio: And by the way, we have gold in our portfolio that’s doing okay, because we got in early, right? There’s one stock that we recommended that almost topped out because…

Daniel Creech: Yeah, I was going to have fun with you on that.

Frank Curzio: Dead.

Daniel Creech: And it’s not like you don’t have any exposure to gold.

Frank Curzio: I have a lot of exposure to gold.

Daniel Creech: Yeah, exactly.

Frank Curzio: But you know what? I’m going to start reducing my exposure to gold.

Daniel Creech: Well, we got to keep the people on a stiff arm that are going to accuse us of double talk here, because I like this debate, because I will concede, right off the bat, that the only reason… I’ll give you the underperformance, depending on what we’re comparing it to. However, I have way too much of an old soul to disregard gold. And I just still believe that the world is big enough for both. When I say both, I mean Bitcoin, because it’s obviously stealing thunder and a lot of capital from gold. I will back it up from an older man’s perspective here, Frank, on manipulation and things. However, our Newmont Mining pick, which was in October of 2018, if memory serves me correct, is up about 180% since then, okay, which is great. It’s a great producer. It’s a very great management team, mostly friendly jurisdictions.

Daniel Creech: It’s going to produce millions of ounces for years to come, pay a dividend and all that. So, I would push back on that. Yes, we got in at a good price. However, I’m sure you have some charts and things over there, but I would argue this time is different for a couple of reasons. We can get into that in a minute. However, you don’t erase the purchasing power or the holding of value in gold. Yes, it fluctuates. But when something has the longest history of finance that we have, I’m not ready to do away with that. I understand there’s better times to own it or not, but I’m still okay with having exposure to that because of the results like Newmont mining.

Frank Curzio: And times change. And I know a lot of you… Listen, we have to discuss this because it’s important today., There’s a difference between gold… Well, you look at Newmont Mining, right? So, the junior miners are at the most risk here. And again, we do own some that are really, really good, but we might have to reduce exposure, just doing the research on this. But there’s a difference between gold and gold stocks, because Newmont mining produces gold. They could produce gold for $900 an ounce. We know what gold prices are: $1800, they were $1900, even to go to 1500. They’re printing money. They have dividends. I mean, what happened to them in 2012/13/14 is the best thing. They almost all went bankrupt because it was so aggressive. They shrunk their balance sheets. They tightened everything up.

Frank Curzio: Now, their profit margins are the greatest they’ve ever been. Right? So, it’s still a good place, some of these large cap producers on a fundamental level. Right? But we’re looking at gold itself, is why would you hold gold, physical gold? And you could say, “Well, it’s a great play during tough times,” which it’s not really. I mean, I think cash is much, much better. I mean, why don’t you put it in treasuries right now? Right? So, you’re seeing the rates go up and rates are a big deal when it comes to gold. Okay? Because if you’re looking at gold and holding it as a store of value, you have to be careful here, because it’s tied to real interest rates. Okay? And what’s real interest rates? It accounts for inflation. So, what do we have all this time, pretty much since 2010/11/12? In our words, we had the Fed lower rates considerably. Right? Inflation was held in check, but we saw it go to 2%, one and a half, two percent. Interest rates go to zero, meaning there’s a negative, real interest rate.

Frank Curzio: So, people want to hold gold when the interest rate is zero. Otherwise, treasuries make a much better investment because, again, you’re parking your money and you want to earn something on it. Right? So, let’s talk about that for a minute because the real interest rate argument, it didn’t really work too well for gold, but it did work in certain times. In 2012, real interest rates were at their lowest point in 20 years. Right? So, negative real rate was below. It was negative 1%. And gold spiked to all-time highs, which makes sense, to around 1900. In 2020, real interest rates fell below 1%.

Frank Curzio: Again, gold hit new highs, close to 2000, almost the same levels, 19 and change. We’re not going to have that anymore, Daniel. We’re not going to have negative real interest rates anytime soon. I mean, inflation is through the roof and the Fed is raising rates. It’s almost an impossible environment to have negative real interest rates. So, how could you hold gold to store value when you could hold treasuries, which makes much better sense here, now that rates are going higher? And people think inflation is going to moderate. But the real interest rate is spiking. It’s actually spiking. And the last time we saw it spike… Every time we saw a spike like this, real interest rate, like in 2013, early 2018, gold crashed to under $1,200 an ounce. That’s where we’re going right now. So, real interest rates are going to surge. As inflation’s high, the 10-year surge rate, interest rate surge, where do you think goal is going to go if you’re holding it as a store of value?

Frank Curzio: I mean, look. The data is there. It shows you when the best time to buy gold is, when you have that extreme, negative, real interest rate. We’re not going to have that. But let’s say this, Daniel. Let’s say, if we do have that, let’s say if inflation goes back 2% and the fed just says, “You know what? We’re going back to zero interest rates.” Do you really want to own gold, because we just… The last 10 years, what do we see in that conditions? That the equity market was the greatest investment ever and gold and growth stocks took off tremendously. Right? So, the rate that you’re praying for, for gold, which is negative interest rates, to really collapse… And that only happens if we have low inflation and low interest rates. Why would you rather own gold? Because even though gold spiked to those levels, equity is significantly outperformed. So, when I’m looking at gold as an alternative, with all of this going on, and people say they want to own gold, when you’re looking at gold, physical, it’s difficult for me to make the case.

Frank Curzio: Now… Yeah, that’s with gold? I mean, I don’t know. You’re right. We do own Newmont, but on a fundamental level, these guys are producing gold at a low, low price and selling for a much higher price. It makes sense. I’m talking about the gold price… But as gold prices come down, a lot of these stocks are going to get hit because the margins are going to shrink. Right? But I’m trying to find the case. And anyone out there, tell me what the case is, because it’s the same case since 1970. Right? You going to go to Peter Schiff or whatever. They’re going to argue the same reason to own gold in the seventies. The thing they don’t understand, that you said you’re not ready to give up on it, you have to get ready to give up on stuff when there’s new alternatives. Right?

Frank Curzio: And you’re looking at Bitcoin as an alternative here. And I know that sounds crazy because people like Bitcoin and gold. But for me, and I’ll show you, it… To me, Bitcoin is a much more logical answer here than gold if you’re looking as a store of value.

Daniel Creech: I like that. And I agree with all of that. I would push back on this. And this is a short timeframe. But year-to-date, the price of gold is actually up a little bit from about 1800. It spiked to 19. But comparing that store of value and such, the market’s down 10 to 20%, depending on which industry you want to look at. So, being flat year-to-date on the price of gold is pretty good. The other thing I’ll say is that this proves that money and investing is emotional with greed and fear. Yes, you could say gold has been outperformed by a lot of things. I was actually just having a conversation with a very close person of mine the other day. And I said, “Hey, I don’t think you’re crazy if you own gold coins and hold gold, just understand your expectations and why you’re holding it.”

Daniel Creech: I’m not saying go all Scrooge McDuck and have so much, because you got to have an exit plan. Are you going to sell these back for dollars later? Why are you owning this? From that perspective though, I do think it’s going to continue to hold its purchasing power. And this is where I’m going to get a little crazy here real quick for you, Frank. There is no way in the world that the price of gold is not being massively manipulated lower. And that’s okay. That’s the environment. I don’t expect that to change. However, a quick search through any search engine, Frank, you can pull up that JP Morgan Chase already paid over a billion dollars for manipulation prices and precious metals and futures. You can pull up searches where it has Barclays slapped with 44 million. This is from 2014. Deutche Bank paid over 130 million to settle charges in 2021.

Daniel Creech: I mentioned the 920 to a billion from JP Morgan Chase. Now, I’m not saying going full tin foil hat here, but I don’t think it’s a big stretch to think that, if you had a little bit of clarity and/or collapsing in markets, which when shit hits the fan, mortgages, gold, commodities, treasuries, whatever… When you have this washout period, I think, when it reprises, that’s a potential. However, I totally concede what you just said. I’m just not ready. I think there’s better times than now. And I agree with your interest rate argument. And I know you’re not saying to sell all gold, but I’m still okay with having a little bit into physical gold as an oh shit moment. But I admit it’s purely emotional, but that’s the way it is.

Frank Curzio: If you’re a data and numbers guy, it makes sense. Look, I still have gold investments. I have lots of gold investments. And we have a couple of picks in a portfolio. But when I’m looking at gold right now, where I’m seeing the real interest rate actually just spike the last couple times it did this, gold fell to 1,200. Right? So, let’s see if it happens. It doesn’t mean it’s going to happen. But the reasons for people to tell me to own gold, just like you said… You said, “Well, year to date.” Year-to-date, it’s up about 1%, a tiny bit over 1%. Right? So, for me, I’d rather own cash. It’s more liquid. I could see if it was up 10%. That’s pretty cool. But if you’re at 1%, what’s the difference in cash, when I’m much more liquid, and get in and out wherever I want and do whatever… You know?

Frank Curzio: So, when I look at it from that perspective, it’s not enticing enough for me to say, “Okay, yeah. You’re right. You know what? Gold, definitely.” It’s just, for me, it seems like gold is more comparable to cash, and a lot of times cash is better. And yes, you account for inflation. And people are going to say, “Well, you’re purchasing power is lower and stuff like that.” And I get it with gold. But still, we don’t know where gold’s going right now, but I don’t know if I really want to own gold if the market continues like this. I really don’t know if I want to continue to own gold. But getting back to Bitcoin guys, look, Bitcoin’s been all over the place. It’s down off 60,000. It’s still… It’s rallying today. It’s actually one of the assets that… Oil’s up today. But you’re seeing Bitcoin up nicely, up like 3%. If you guys get a chance, you go look up the Wall Street Journal. And just type in crypto and Wall Street.

Frank Curzio: And these are articles that have come out, Daniel, just over the past week, week and a half. All of these major banks are getting into crypto. And they’re saying it. If you’re looking at the titles of Wall Street Journal articles, and if you look at my YouTube page, I could probably bring them up. Let me see.

Frank Curzio: So, one of them says… And I’m going to bring this up right here. So, this is from Bloomberg first. Wall Street Firms make crypto push to catch up with cool kids. Again, this is a couple weeks ago. It just shows Jeffrey’s expanded services, BlackRock, back to stable coins. But these guys… But just trillions, trillions of assets, we’re talking about. I mean, these are the biggest companies in the world, right? And when you look at… And I’ll bring that up right here for the Bloomberg article, for those of you watching on our YouTube Curzio Research channel. And when I bring up a lot of stuff like this, when you’re seeing, even with Wall Street… And here it is. Okay, cool. And this is from May 1st and it’s a very big article, right? So, it’s, “Wall Street Reluctantly Embraces Crypto.” And it’s a long detailed article, but it goes through all of these firms that are now jumping into crypto.

Frank Curzio: And it’s pretty crazy when you look at the trillions, and as… Just now, jumping into crypto. So, this is Jeffrey’s, Blackrock, Goldman Sachs, right? Then, you have Fidelity and Callan. So, Fidelity Investments, they just started, announced, to allow individual savings to add Bitcoin to their 401ks. I mean, you’re looking at Bitcoin, right? It has a fixed amount here. It’s digital. It’s new age. Right? So, you could use it as a currency. You could pay for cars. You could pay for a lot of things through Bitcoin right now. You really can. All these banks are touched. So, you have BNY Mellon, State Street. This is what the article said. So, they’re all saying, listen, they want it because their clients want it. And yes, that’s true. But these guys have to get in here. They have to do this because, Bitcoin and crypto, it’s threatening their extremely super high margin models, which is charging massive fees for being middle men.

Frank Curzio: And that’s what Bitcoin and crypto is doing. So now, they’re going all in. Guys, they have 200 and… What is it? 50 trillion in assets, under management, right? This is $250 trillion under management. That’s total global assets under management.

Daniel Creech: Oh, okay.

Frank Curzio: And most of that’s not in crypto at all, Daniel. Right? So, now that you open up the doors and you’re providing regulation behind this, which the Biden administration said that they’re going to do, for me, I’m hearing from institutions, now they know they could put money into this. And there’s no coincidence, over the past couple weeks, all this is coming out. This is a massive amount of money that’s going to go on Bitcoin. And guys, for anyone of you out there, listen, it’s been tough. And even in our portfolio, we have our average position down probably about 25%, and that’s the positions over the last six months. Okay. This is the same percentage we saw when we first started this portfolio. We’re down 35 and 40%. And these are names that are up 20 X, 15 X, 10 X, which you’ll see in our Crypto Intelligence portfolio.

Frank Curzio: My point is, right now, when it comes to crypto, you got to be careful because 90% of the shit is garbage, but there’s a lot of great things and innovation’s coming out of here. But man, it’s just… If you’re looking at a place to put your money during these uncertain times, you’re going to see a lot of people start going into Bitcoin. And the fact that there’s only…. There’s a fixed supply of this. And if you compare it to gold, Daniel, which is… To me, it’s a baby boomer asset, okay? This is an asset that the old generation knew about, retirees now knew about. And a lot of people are still sold on it, but they… You have to look at the younger generation, gen X, millennials. This is a digital generation. They know nothing about gold. They have no idea. They have no idea how it’s mined. And it takes 15 years to produce gold from the start. They have no idea, right?

Frank Curzio: So, when I look at safe haven store of value… And say this group, over the next 10 to 30 years… We’ll go that far out. They’re not going to turn to gold, right? They’re going to turn to Bitcoin. So to me, Bitcoin is a secular growing market while gold, in terms of its investor pool, is a slowly secular declining industry, or arguably a cyclical industry, right? So, you could say, “Well, it’s cyclical.” But cyclical, it’s supposed to do really well, but negative real interest rates… We’re not going to see negative real rates for a very, very long time because that means inflation is not only moderated, but it’s down considerably. And the Fed isn’t going to… The rates have come down. So, for me, when I’m looking at this under these conditions, the perfect conditions for gold, I’d rather own equities. And the perfect condition where… The conditions that we’re seeing now, I will look as Bitcoin as the place to be, and all the money coming into it now, because it has very little institutional flow right now.

Frank Curzio: Now, you’re going to see institutional money flow into this tremendously, especially over the next six months, a year. I mean, the biggest hires that they have in banks over the past… I’ve been talking about this, the past nine months, 12 months, have been in digital, in crypto.

Frank Curzio: So, they’re hiring people like crazy. And now, you’re seeing it. They’re all getting into this. And these guys all have trillions of assets. It’s not going to be the whole entire asset base. But if you just get 1%, 2%, 3%, that’s a significantly lower allocation compared to what’s going into technology, what’s going into healthcare, what’s going into these sectors. This is going to be a certain sector and a certain allocation where we say, “Hey, the 12 sectors…” Or whatever. It’s 12/13 sectors of the S&P 500. There’s going to be a crypto sector pretty soon. And I have no doubt about that. But right now, if you’re looking for crypto, you’re looking at a place to put your money, the innovations coming from… For me, it’s a great, great time because it reminds me, when we first started this newsletter, and this is like 2018, the market came down and a lot of this stuff was so volatile.

Frank Curzio: But man, with the money coming in, it’s going to go into the great projects. That’s what you’re seeing, even through the metaverse and stuff like that, and even security tokens and NFTs and stuff, raising billions of dollars over the past four or five months, even in this market. But that’s where I see it going. But again, that’s my opinion. I look at the numbers. I look the data. And the data’s telling me that… Listen. Gold, if you’re going to buy it here, be very careful because it looks like prices are going to come down a lot, as the Fed’s tightening and inflation is not going to moderate anytime soon

Daniel Creech: You hit a couple of good points there on the younger generation and the capital flows into the space. And what stood out to me is this Fidelity accepting or allowing customers to buy into Bitcoin through their 401ks is huge, A, because they’re the first of the party on Wall Street to do something like that on a large scale. I do believe there’s other venues where you can. You have to jump through some more hoops. This will open it up from a one to two lane road to a six lane highway, like driving through Jacksonville here. That’s a big deal.

Daniel Creech: Frank, let’s have some fun here. When was the 401k invented? Do you have any idea, if you had to guess? Was it… Let me help you out here? Was it in the 19… Early 19 hundreds? Was it the 1930s? Was it the 1950s? Or was it the 1980s?

Frank Curzio: I told you, I thought it was probably the new deal 1930s, right, when you asked me that, I think, a couple weeks ago. But it’s not, right? It’s actually more recent than it.

Daniel Creech: Right. So, I was looking at Northwestern Mutual, so mutual insurance company here. And they have a brief history of the 401k. It was actually created, what they call, by almost an accident, when Congress passed the revenue act of 1978 and took until 1980 for the first 401k account. Actually, a guy, a tax guy, was doing it for a client, pitching it to his client. He didn’t like it. So, they actually did it. Johnson companies became the first company to provide a 401k plan to its workers. 1981, the IRS issued some changes, blah, blah, blah, blah, blah.

Daniel Creech: That’s pretty cool for two reasons: One; because the majority of people out there email us, daniel@curzioresearch.com and frank@curzioresearch.com, I do believe that most people would guess that they have been around longer than that. The other point to that is with Fidelity, a big juggernaut in the room, Frank. Last year, let’s see, 23,000 companies used Fidelity as their administrator retirement plan, Frank. Okay. They have-

Frank Curzio: How many is that?

Daniel Creech: 23,000 companies. The company, Fidelity, administers plans with more than 20 million participants and they have around 2.7 trillion in those accounts. I’m going to skip forward here. I liked your one to 2% thing. Here you go. About 2% of the 63 employers in a recent plan sponsored council of American poll said they would consider adding crypto to their 401k accounts or their 401k menu. Now, that’s only 2%. Okay? If you just take 2% of Fidelity’s 2.7 trillion, that equates to a huge number. Given Bitcoin right now, that’s probably 7% of the market cap of Bitcoin.

Daniel Creech: Now, that would take years to implement and roll out. Frank. Fidelity is letting people put how much of their money into Bitcoin, do you think? And it’s Bitcoin only. Fidelity is only offering Bitcoin right now in the 401k. How long do you… I give it six months before they offer something else. It’s only going to expand in our opinion, in my opinion. But how much… What allocation do you think you can put in Bitcoin through Fidelity 401k, Frank?

Frank Curzio: Do they have it listed there that… They’re telling you?

Daniel Creech: Yeah.

Frank Curzio: I have no idea.

Daniel Creech: Under the plan, Fidelity… This is from the Wall Street Journal, would allow savers to allocate as much as 20% of their nest egg…

Frank Curzio: Holy shit. Is it really that high?

Daniel Creech: Into Bitcoin. Frank, don’t do that. That sounds bad. Yeah.

Frank Curzio: 20% into Bit… That’s what they’re saying?

Daniel Creech: That’s what it says.

Frank Curzio: Oh my God.

Daniel Creech: Now, the administrator’s plan-

Frank Curzio: And I’m bullish on Bitcoin.

Daniel Creech: Now, the admin-

Frank Curzio: It’s a speculative new asset. I mean, you don’t want to put… I could see like 3%, 5% of your money. And I’m very clear on that. Even in our investments, where this is speculative, hold that thought. When I say speculative, this is why I think crypto is amazing because I’m talking about the gains in our portfolio. And yes, everything has gotten crushed. But you know what? I think it’s 50% now of the companies in the NASDAQ are down more than 50%, right? So, the NASDAQ is down more than… Much more than our crypto recommendations except, as we’ve showed, the crypto recommendations have… I mean, 20X, 10X, 15X. We had one up 40X at one time, upside, compared to NASDAQ, where you’re not going to see that type of upside unless you get in a video right when it comes to…

Frank Curzio: Especially now, they come out with IPOs where these valuations are inflated. It’s almost impossible. So, from a risk reward standpoint, Bitcoin makes a lot more sense than getting into just crazy high growth companies. But it’s still speculative, right? I mean, it’s like telling you 20% should go into these crazy specs. I mean, that surprises me. Holy… That is crazy. That’s a great stat. That’s a great stat.

Daniel Creech: So, under the plan, Fidelity would let savers allocate as much as 20% of their nest eggs to Bitcoin, though that threshold could be lowered by the plan sponsor. So, Curzio Research could say, “Hey, you’re only allowed to put 2% in, or 5%, or 10%.” But Fidelity is letting you do up to the 20%. The other interesting thing I like about this is participants who invest in the Bitcoin will encounter a popup box with educational information on crypto when they log into their accounts. Okay? Why is that important? Because the educational side to this is going to happen and we want to pull that forward. There’s a big need and a big demand for educating on cryptos. The big gateway and the easiest one is, as these plans get easier to implement, as the average Joe… First of all, I do think… I honestly believe this, Frank. And I would assume you do too, but this catches people off guard. Investing is not near as hard as what most people think or perceive it to be.

Daniel Creech: And with that, you have to understand. If the biggest barrier to entry is education on, “Hey, it’s nervous to do something new,” and fear about losing money. So, as the big dogs, Wall Street, Fidelity… If every plan sponsor on that just starts seeing popup windows and says, “Oh, I can buy Bitcoin with a click of a mouse. And this is pretty easy through a trusted name I’ve been with for years,” that is going to encourage and cause a lot of people to flow into the space.

Daniel Creech: With that, you want to educate yourself on that because a rising tide lifts all boats. That is a tremendous momentum that’s going to play out for years and years to come, in my opinion. But I do like the fact that they’re trying to educate people. That’ll not only bring more people to the platform and prepare them and get them ready for it, but that’s just a huge dam waiting to break, if you will, Frank, on the amount of people, interest, and money that will flow into the space. So, I agree with you on that. The 20% thing I do think is fun. I think that, that’s good to be high on. But remember, this is allocating towards… Or this is aiming towards younger generations. In fact, David Gray, who is head of the workplace retirement… Oh man, Frank, titles are ridiculous.

Frank Curzio: Titles are ridiculous. I know. I do research. Yeah.

Daniel Creech: David Gray works for Fidelity. Let’s put it that way.

Frank Curzio: Yep.

Daniel Creech: But he just… They highlight and say, “We fully expect that cryptocurrency is going to shape the way the future generations think about investing.” That’s a hell of a quote. And I agree. I just think it’s amazing in that you want to take quotes like that, think about them for a while, and apply them through your investment decisions, i.e. get exposure to Bitcoin.

Frank Curzio: Okay. I’m a numbers guy here. Okay? So, I was doing numbers while you were talking a little bit.

Daniel Creech: I noticed you weren’t listening to me, but…

Frank Curzio: No, I was listening to you. I was fascinated by that stat. Right? So 7.8 trillion, right? They have in assets under management, right?

Daniel Creech: Who?

Frank Curzio: Fidelity.

Daniel Creech: 2.7. They have 23,000 participants that make a-

Frank Curzio: So, it’s 2.7 trillion, right?

Daniel Creech: Yeah. So, it’s 20 million participants with 2.7 trillion in assets under management… Under administration for Fidelity.

Frank Curzio: Okay. 2.7 trillion in assets under management. Right? So, 2.7 trillion. All right. So, we’re looking at what? Say if they did decide to put all that in there, how much is that? Is that 500… 20% would be what? About 500, right? 540/50, whatever it is. 550 billion dollars. Right? Just Fidelity, right? So, am I right in my math? Right? So, 20% of that would be around whatever. It’s around… What is it? About 540, right? So, 540 billion dollars, right? It’s for my math, the 20%. If everyone allocated, that’s 27. We’re just talking about Fidelity. Right? Just talking about Fidelity. We’re looking at… If they put that into Bitcoin, Bitcoin’s current market cap is just 730 billion dollars.

Daniel Creech: Yeah.

Frank Curzio: This is just Fidelity. Right? This is just Fidelity. What about BlackRock? What about State Street? What about all these other companies? Charles Schwab. They all have trillions, right?

Daniel Creech: Yeah.

Frank Curzio: If they open this up to that limited supply, where do you think Bitcoin’s going to go? I mean, whether you believe it or not… And that’s the math. And the younger generation, the 401ks, this is what they know. This is the digital generation. This is where it’s going to be every place. More and more places are accepting Bitcoin. So, this isn’t like touting something… If you look at the data and you look at numbers… And again, this is open to discussion, guys. So, if you don’t believe in Bitcoin, if you don’t believe my argument in gold, I want to hear from you, right? Say, “Hey Frank, this is why I believe you’re wrong.” And that’s how we get a great discussion. I feel like, “Frank, you’re an asshole. I… Gold, gold…”

Frank Curzio: That’s what I hate about gold bugs and Bitcoin bugs. I’m not a Bitcoin guy that’s sitting here going, “Bitcoin’s going to a million. Buy it.” No, it’s not. I think it’s going to a hundred thousand, maybe in 18 months, maybe in two years. But it’s going to go much, much higher from here, just simply for things like this, where institutions are going in. And the fact that you don’t want regulation in this industry and you are a Bitcoin bull, I get it. But if you really want this to go to a hundred thousand to 500,000, you need the institutional money like this to come in, because you could see how game changing this actually is when you’re looking at these numbers. But that is… That’s an incredible stat. That’s really…

Frank Curzio: I mean, if that’s not enough for you to buy Bitcoin, how this is just one company, and the biggest, when it comes to retirement 401k plans… A lot of other companies are coming out, same thing. And they’re going to open this up. Like I just said, they’re opening up, they’re hiring people. They know… Because their clients want… This is what they want. Here you go. I mean, this is it. This is a chance to get in at Bitcoin that just declined 50%. And you’re going to see why, that every time it’s coming down, you’re seeing more and more money come in. But you’re going to see a lot of them going to come into this thing. So, it’s pretty exciting, man. That’s cool.

Daniel Creech: Yeah, absolutely. And listen, let me… And I know you’re not trying to paint as a cheerleader and everything’s perfect, because the market is in a huge downturn. We have a lot of positions that are getting hit. My personal positions are down underwater from call spaces, because I buy after our subscribers, because we love you so much and we don’t front run. However, we have seen this before. It’s not just buy blindly and buy every dip. But when you see downturns and things sell off, yeah, you can read and do some investigating and research, and see the money pouring in and the projects and the development of those projects and expansions continue. That’s putting the odds in your favor for another rally.

Daniel Creech: And that’s when you want to be buy. We’re not saying jump all in here, but it’s saying take advantage of this and pay attention to what’s going on right now. Yeah. The price is lower than what it was. You may be down. But if you’re on the sidelines, looking at what’s happening, Fidelity obviously has faith in this asset class going forward because this is a week old out of the Wall Street Journal, I think. Just take that with a grain of salt, but don’t… Be open-minded, as you said, to a generational movement or an… Opportunity, I guess, would be the better case.

Frank Curzio: No, that’s cool. That’s cool. Again, a lot of stats there. I know I’m probably going to get some emails, frank@curzioresearch.com. Daniel, what’s your email?

Daniel Creech: Daniel@curzioresearch.com.

Frank Curzio: And again, send those emails in for us. We like the discussion. We like to further the discussion. I mean, if you’re like, “Hey, you’re an idiot,” it useless when you say stuff like that. For example, when I broke down a fertilizer market and said, “China, largest phosphate producer,” I got someone who’s very familiar with that market. And it’s a friend and he’s a subscriber. He said, “First, I want to start off by saying that these emails are annoying. You don’t find them useful, please let me know. I won’t take offense, even as a paying subscriber.” But he broke down. “Now, China may be the largest exporter of phosphates, but they’re still heavily relying on seeds produced outside of China planting, which is 70%. And their domestic seed industry is not very competitive, and produces lower yield and quality in comparison.” He sent me a video and stuff like that to show it.

Frank Curzio: But yeah, he just goes on to say, “Not to sound like a broken record, but China is good at lying, cheating, stealing. They need the US more than we need them,” because I brought in Taiwan and stuff like that and shortage of food and how to have control. But this is the type of emails that are fantastic, right? Because you’re getting like insider stuff and this educates everyone to the point where we all want to be on the right side of the trade. I know a lot of my friends own gold. For me, I’m trying… Make the case to buy gold right here over Bitcoin, please. Make it. I want to hear it, because everything… All the reasons that you would buy gold for, cash to better investment, especially during tougher times, you’re more liquid, if you’re looking at inflationary times, it’s usually really bad for gold.

Frank Curzio: And we’re going to see that where you’re not going to have negative real interest rates anytime soon. And we saw, when that rate goes higher, gold falls pretty hard, right? So, Bitcoin’s a better alternative for money to come in. But again, that’s open for argument because we all want to get it right. We all want to be on the right side of the trade. That’s how we all make money. But we do that by debating, by debating and having facts and stuff like that. And yeah, I just want to thank all listeners because I always get great, great emails like this. And this is from a buddy. And absolutely not, absolutely not, this isn’t an annoying email. This is a great email.

Frank Curzio: The annoying emails are just like three words of “Frank. I don’t agree with you” or with no facts and no numbers. It’s a waste of time. But when you have added value to these emails, even if it’s a different opinion, that’s fine. I mean, that’s how we all get smarter and it makes me research things even further. And that’s how it should be for everybody, so really cool stuff. So, Dan, great stuff, bringing a lot of cool statistics and everything to the podcast today. Appreciate it.

Daniel Creech: Yeah, absolutely.

Frank Curzio: All right. Cool. Getting good at this, buddy.

Daniel Creech: Well, we’ll see. We’ll see what the emails say.

Frank Curzio: He’s going to take over my job soon.

Daniel Creech: Hey, real quick on that, with the emails… If we don’t reply, which we try to reply most we can, if we don’t, it doesn’t mean we don’t read them and encourage you. So, don’t take that personally, and appreciate all of them. Even the bad ones. You can send me three word emails. I don’t care.

Frank Curzio: Yeah. The bad one’s are actually kind of funny, so I don’t mind. That’s cool. All right, guys. That’s it for us. Thanks so much for listening. Questions, comments, again, frank@curzioresearch.com. Enjoy today. I’ll see you guys tomorrow. Take care.

Announcer: Wall Street Unplugged is produced by Curzio Research, one of the most respected financial media companies in the industry. The information presented on Wall Street Unplugged is the opinion of its host and guest. You should not base your investment decisions solely on this broadcast. Remember, it’s your money and your responsibility.

Frank Curzio
Frank Curzio, founder and CEO of Curzio Research, is one of America’s most respected stock experts. His research is regularly featured on media outlets like CNBC’s Kudlow Report, The Call, CNN Radio, ABC News, and Fox Business News. His Wall Street Unplugged podcast—ranked the No. 1 “most listened-to” financial podcast on iTunes—has been downloaded over 12 million times.

Editor’s note:

Later today, members of Crypto Intelligence will receive Frank’s latest recommendation…

An investment he calls “the most exciting, high-upside project I’ve ever found in the early stages”…

The biggest gains go to those who get in early… so don’t wait to get access.

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