THE THREE GREATEST SWINDLES OF ALL TIME
Or Bitcoin Fundamentals Apart From Bitcoin
Allow me to resume on Medium by briefly writing about the macro fundamentals that got me to Bitcoin in the first place . . . fundamentals that are in place today just as they were a generation ago. . . fundamentals apart from bitcoin that bring bitcoin into The Big Picture (or Tyler Jenks Hyperwave). . . the fundamentals of the forest distinguished from the trees.
As Bitcoin Standard Bearers we sometimes lose sight of the underlying forest of fundamentals. It is easy to get lost in the latest chatter, exciting bitcoin innovations, or dumbstruck by the corruption rampant in The Crypto World.
But long before bitcoin existed are underlying festering fundamentals that we can ignore only to our own peril.
Two generations ago in The Money Mirage Edward C. Harwood outlined THE THREE GREATEST SWINDLES IN THE HISTORY OF MANKIND and defined the term swindle as follows:
The word “swindle” is the usual name for obtaining money or property by fraud or deceit. The key elements of a swindle are that money or property has been taken from someone, with or without his explicit consent, and that the person has been deceived or somehow led to believe that his money or property either remains safely in his possession or would be available to him in the future.
Harwood goes on to outline these three greatest swindles of all time as The Inflating Swindle, The Social Security Swindle, and The S.E.C. Swindle.
This article will not reiterate what is freely available from THE AMERICAN INSTITUTE FOR ECONOMIC RESEARCH, a think tank created by E. C. Harwood. However, it should be noted that The S.E.C. Swindle remains an active dynamic swindle emerging in The Crypto World and is especially relevant to bitcoin in 2019 as many pundits are seeking government regulation.
“The Securities Act of 1933 and subsequent amendments thereto were intended to prevent a repetition of the 1929–19 32 experience for investors, when many of the securities sold earlier proved to be worthless or nearly so. New issues are required to be registered, and much detailed information must be provided not only to the Commission but also to anyone to whom the security is offered. Moreover, no offers may be made until the registration becomes effective, that is, has not been rejected or postponed by the Commission.
Sellers of new issues are not permitted to represent that the Securities and Exchange Commission has approved or recommended a security. Nevertheless, anyone familiar with what occurs in brokers’ offices throughout the Nation has seen ample evidence that the general public assumes that the S.E.C. somehow is safeguarding the investors’ interest. If not, why does it exist?
Any experienced observer of the securities markets knows that in most instances during recent years, new issues were rapidly bid up to levels above the offering price, usually to at least double and in many instances to several times the offering price within a few months. This is the classical procedure for “pulling in the suckers.” One result is that the initial offering brokers “make a killing” and the general public pays far more than the original offering price for the stock.” (The Money Mirage, pages 16–17)
The evidence suggests that S.E.C intervention in The Crypto World will feed a false sense of safety negating hard lessons already learned in an unhampered marketplace.
Harwood went on to ask . . .
- Has the S.E.C., unwittingly, of course, served as a Swindlers’ Encouragement Commission?
- Did the S.E.C., unintentionally, of course, serve as a Suckers’ Entrapment Commission, by ignoring the rampant manipulation of prices for new issues in the over-the-counter market, thereby inducing confidence where there should have been skepticism?
- Is the whole idea of an S.E.C. a basically mistaken one in that it seeks to substitute voluminous representations of facts, accounting records, etc. for what I believe is the investor’s only practicable protection, finding wise and honest men who will safeguard his investment to the best of their ability? That the S.E.C. (and the “baby” S.E.C.’s in many States) has been a wonderful thing for the legal profession, for accountants, and for printers of prospectuses seems indisputable, but that the funds of the average investor thus have been safeguarded seems open to question.
Moreover, E. C. Harwood speaks from personal experience and not just economic theory. A brief history of his experience with the S.E.C can be found in a June 1981 interview with REASON magazine.
But for eight hours time difference between courts in two different jurisdictions (Switzerland and USA) all assets would have been seized, a remedy no longer possible with the advent of War On Drugs legislation and warrantless property seizures since this affair in 1975–1977.
The S.E.C. was within 8 hours of destroying a legitimate and honorable investment enterprise that had not one investor complaint, while failing to protect less savvy investors filing formal complaints against a plethora of ongoing scams.
“ Now, every time there’s been some kind of a scandal, like the Vesco scandal and so on, the SEC has stepped in and made a big hurrah about it. But damnit, they’ve never stopped any losses to investors. They’re always after the fact. I don’t think they can cite one example. I’ll bet you they can’t cite one example where they have stepped in in time to stop a big swindle like that.” (Harwood Interview, Reason Magazine, page 4.)
Harwood concluded,
“Perhaps the principal influence accounting for the simultaneous flourishing of the three greatest swindles is the prolonged inflating since the l 930’s. Andrew Dickson White pointed out many years ago that, in times of inflating, many if not most persons lose all sense of integrity, that fraud, swindles, and chicanery of all sorts grow like “fungus on a muck heap.” What an incredibly rich muck heap the great inflating has provided, nourishing forces that may destroy civilized society.” (The Money Mirage, page 18.)
The point is that any hope that the S.E. C. will provide any investor protection through regulation is severely misplaced. The evidence suggests quite the opposite is true. It is much more likely that the coming S.E.C. regulation will simply add to more rampant swindles in The Crypto World by providing a penumbra of legitimacy.
While there is great hope by a new generation in bitcoin due to it being the longest chain secured through proof of work, with a limited fixed supply, trustless, borderless, and unconfiscatable, mankind’s corruption exacerbated by inflating has no sign of abating.
While a new innovation has eliminated the need for Harwood’s “wise and honest men” by replacing the integrity of men with the integrity of code, without a change in human values advancement of bitcoin beyond a poor store of value is unlikely. The emergence of sound commercial banking necessary for the advance of civilization will depend on men of integrity.
Further, it is highly likely “We ain’t seen nothin yet!”
The fundamentals for pending catastrophe apart from bitcoin is far greater today than it was a generation ago. Inflating, unfunded liabilities of Social Security and other entitlement programs, deficits, unconstrained debt growth, along with unsustainable and unrealistic low-interest rates suggest some type of runaway inflation with corresponding increased draconian measures modeled by those implemented in the phony War On Drugs and War On Terror, designed to oppress and disguise reality, will only increase.
What can be done? Harwood provides an answer, not a panacea.
Almost certainly, the trends now apparent cannot be reversed in your lifetime. Try as you might, remedying the situation within a few or even several years probably is beyond the power of all in your age group, even if they could be united in understanding and purpose. What can you do? Two courses of action are open to you.
The first, of basic importance, is to provide adequately for your own future by arranging for the maximum income after taxes during the remaining years of your life. Then you will have excess income part of which you can apply where you believe it will be best used to fulfill obligations to others, including your children and grandchildren.
The second is to aid the educational effort required if the basic principles embodied in the Constitution of the United States are to be restored to their earlier status. How can you do this?
a. You can provide pertinent reading and discussion for friends, including your descendants. Perhaps you have tried this in the past and have been discouraged by the results. Do not forget, however, that the consequences of present trends are becoming increasingly evident. Adversity will incline more and more people to seek the information you can help to provide. Expect a long, uphill battle, but do not shrink from it.
b. You can apply the extra income obtained by your Harvest Years Financial Plan to support organizations that are engaged in the educational effort. Included are a few independent colleges that have refused government funds as well as a number of other organizations such as the American Institute for Economic Research.
c. You can arrange reserved-life-income contributions to tax-exempt organizations as part of your own financial plan. Such contributions may be either to pooled-income funds or in the form of charitable gift annuity trusts with life incomes reserved to yourself and your dependents. This procedure can minimize estate taxes while providing income protection for yourself and dependents. Much that might otherwise go to profligate politicians can thus support activities you believe will help to restore sound constitutional government in the United States.
In his addendum, The Road to Wealth Harwood reveals himself as The Original Hodler
During more than a half-century, I have read hundreds of different investment advisory letters or bulletins. There must be few if any, that achieved substantial circulation during those decades that I have not read over periods ranging from several weeks to a few years.
By far most of them attempted to forecast market trends. Only a few tried to outguess the short-term ( days to a few weeks) changes, and I do not recall one that was not soon discredited. The great majority strive to forecast the longer trends ranging from a few months to a few years, the latter being known as cyclical trends because of their relation to business-cycle changes.
Some who make a fortunate forecast then capitalize on it by advertising extensively by mail or in the financial journals. They thus acquire a list of subscribers and inquirers who unwittingly help the service to survive when it happens to guess badly a few times. The “sucker list” then is rented or exchanged with other investment advisory services whose recent guesses have been more fortunate. Thus some investment advisory organizations of this type can continue for a long time.
Others who try to outguess the cyclical trends may survive for a few years, but even some of the most respected, such as the Harvard Economic Service in the 1920s, have succumbed after a few bad guesses. At least one widely known investment service found another way to “beat the game.” It owns several advisory services, and their advice differs enough so that each, in effect, is able to “hedge its bets.” If one of the group has bad luck for a time, its list of subscribers can be used as a mailing list by the others for a few years. By this means, one or another of the group almost always has a basis in recent lucky guesses for attracting new subscribers.
The underlying reason for the continued existence of such investment services is the greed and gullibility of so many investors. The long-term (decade or two) charts of stock prices or of prices in almost any other market suggest that anyone who could foresee the trends of several months or of a few years soon could make a fortune. No doubt, many investment advisors sincerely believe that they have found the formula that will enable them to forecast such trends successfully. However, in more than 50 years I have never known even one whose personal fortune reflected his supposed forecasting ability. Especially under the circumstances that have existed since 1965 and apparently will continue for a few decades, the odds in favor of the “investor” at Las Vegas probably will be much better than the odds in favor of those who try to outguess the cyclical trends of securities prices for a long time to come.
During the early decades of this century buying and holding the stocks of leading companies in the United States was the road to wealth for many. Those “too dumb to sell” thus acquired a fortune. Now that the self-destruct mechanism is operating so effectively, however, not even that procedure can be expected to succeed. There is a detour on the road to wealth; few will live long enough to reach its end.
What was true a generation ago, remains valid today. More so by a factor of 100x.
In Harwood’s day, financial protection was accomplished by dollar-cost averaging gold and the stock market along with legal structuring to avoid confiscatory taxation. Today a new asset class has been added for a prudent portfolio. Bitcoin is a new and prudent asset class because it is digitally secure, with a limited supply, borderless, and unconfiscatable so long as only you possess the keys.
Bitcoin sucks as a store of value and is lousy cash. Bitcoin is a speculative investment. . . a way to preserve and/or transfer personal wealth apart from body and soul. . . . an asset of last resort . . . a way to escape tyranny in whatever form lies ahead.
But even this quality is under severe attack, even from those attorneys nominally friendly to bitcoin.
But this should come as no surprise. As officers of the court operating within a nationalized monopoly and title of nobility, attorneys are under obligation to protect the court system over and above protecting the citizens they represent.
Just as if I lived 200 years ago in the presence of our founding fathers, I would have many slaveholding friends, I have many attorney friends today. Perhaps one day citizens will hold our arcane nationalized court system in contempt in the same way this generation is learning to hold national currencies in contempt. But this is not my fight, I can only bring attention to it, and is likely something that can be effectively addressed only after crippling the inflating and entitlements that enables it.
My point is simply that when it comes to unconfiscatability within the courts, attorneys are not friends of Bitcoin. If there is wealth to be had, they will actively work to gain access to it through prosecution or defense. Securing private keys in a way that they remain private remains the responsibility of the holder alone.
Even with exceptionally poor timing Bitcoin accumulation has provided adequate financial protection so long as a disciplined strategy of dollar-cost averaging is followed.
By definition of dollar-cost averaging an investor purchases more bitcoin at low levels than at high levels. The result provides similar results of the savviest investors without taking the inherent risk of second-guessing market direction. . . so long as one is fundamentally correct in the market.
In summary, Bitcoin and Bitcoin alone is a new asset class that should be in the portfolio of every entrepreneur, businessman, professional, and wage earner. The risk of not having Bitcoin ownership under full personal control far outweighs the risk of having 5%-15% of one's net worth in Bitcoin.
Successful investing even by dollar-cost averaging is by no means assured. But the risk of not recognizing Bitcoin for its unique properties is foolhardy after four generations of the inflating swindle, the social security swindle, and consequential controls over the financial systems.
One only needs to ask, “What assets do I have that are unconfiscatable? What assets do I have which are borderless? What assets do I have that are truly trustless?”
These are new words that have been invented by sages in perilous times hinting a new reality not yet realized in the minds of others. . . there is but one asset that meets this criterion. . . Bitcoin. The likelihood that the marketplace will wake to a very real fundamental situation is inevitable. Yet no one knows exactly how this sleeping giant in the psychic of men will come to be. We can only prepare in our own small spheres of influence providing much-needed light for those currently in darkness.
There is a wide divergence of opinion of the short term price of bitcoin. Ranges from under $1,000 to over $10 million dollars. . . both opinions from the same source! Yet this is simply a reflection of the uncertainty in the air. And this is why Tyler Jenks has so aptly termed bitcoin as the only digital Hyper-Wave candidate.
These are the times in which we live and I am truly in awe to be part of it.
If you have skipped down to this part without reading this lengthy prologue, I encourage you to go back later and read it as it puts into context the daily details that we emotionally crave.
I have been noticeably absent . . . but only from writing Medium articles.
Frankly, the unmasking at Unconfiscateable had more effect on my soul than I realized . . . and two days ago after asking my beloved wife who I should be . . . she said, “ Conrad you are The Ugly Old Goat.” And cautioned me to guard my own personal experiences.
Yet there are things I want to say. . . so much I think I can contribute. . . so much I hope yet to do . . . yet it is mid-autumn for me . . . perhaps mid-winter and writing as an Ugly Old Goat has helped address hard issues I could not otherwise address. . . turning Medium it into a genuinely enjoyable experience
Self-motivation has been the booger . . . usually my strength except when it is not.
You see, I don’t have to do this. My family is provided for . . . and I consider this my only great success in life. . . yet financial security is simply an empty obligation without a foundation example of integrity. . . for which I fall so short.
Anyone can learn to be a successful trader . . . and I realize this is the reason most of you follow me.
But I don’t want this to be about me or successful trading. . . it is about sound money! Sound money is a reflection of character individually and of Nations. As sound money emerges the need for speculation diminishes as a new La Belle Epoque emerges.
Trading must be a sideshow for me now. The trading success I attribute solely to the principles I am trying to teach here. By the same token, I can write about trading because I have met the criteria of my mentor.
I initially purchased bitcoin in August of 2013 for just under $100. And I have successfully traded Bitcoin every year since, the bull market and bear market, not in terms of dollar equity but in terms of bitcoin. I need not trade another Bitcoin in my life. But I will do so for those who are called and have ears to hear and want to learn to trade.
When I left off I was long Bitcoin to my maximum limit risking 6 BTC of the 22 BTC I accumulated on the leg down. This long position was established primarily because the basis was in backwardation.
On January 27th the way back from Las Vegas the position of 65,000 spot, 60,000 March, and 55,000 June were liquidated (rket)for a total loss of 5.5 BTC on a position of about 50BTC. Moreover, on February 2nd my wife logged into her account in Mexico using a US cell phone since it was her only phone with a signal. Amazingly, Bitmex closed her account despite being a Mexican citizen, a Mexican resident, logging in from Mexico, and providing Mexican KYC documents. The account was closed simply because she logged in from Mexico using a U.S. phone number.
This should raise alarm bells for all traders on Bitmex and is confirmed with Tone Vays recent tweet.
I have now lost all referrals on my closed personal account and lost all referrals (substantially fewer) on my wife’s closed account. So here is my wife’s new account in which we will only long in from Mexico using a Mexican phone. Hopefully, this ends the problem.
Again, I have the highest regard for Bitmex. It is the best exchange I have ever used in my 43 years of trading, regulated or unregulated, and I can only sympathize with the needless harassment from the U.S. government which I also expect is instigated by U.S. exchanges who simply do not compete with the excellent service provided by Bitmex.
I hope Bitmex wins the battle. By the same token, it is this type of tyranny that adds fundamental value to Bitcoin and should give pause to all U.S. citizens. The lesson here is to keep no funds on exchanges that you cannot afford to lose.
After getting stopped out, and her account closed, my wife opened a new account with 2 BTC and went long on my recommendation after taking out the two week high at 3659 with a reduced position of 30 BTC+. She as managed to recapture most of the previous loss.
Again, the backwardation on the basis indicated the market would not break $3,000 just as similar backwardation indicated 6 tests of the $6,000 could be safely purchased. The disappearance of backwardation indicated the next dip below $6,000 should not be purchased and technical indicators along with the BCH debacle gave short sell signals with a ride from $6,400 to $3,400 with a net gain realized of 22 BTC from an initial position of 2 BTC.
Notice that due to the initial loss, my next position was reduced, not increased. Followers should fully understand why things were done this way. It is simply a function of money management.
It should also be noted that had I not been stopped out of my initial long position I would have added 30–40BTC to the initial 50 BTC position after we took out the two-week high at 3659.
Again my style of trading is to establish a basic position when markets are in narrow trading ranges and add to the position after a breakout and setback. But since I did get stopped out, my position was reduced accordingly. And I entered on the setback after the breakout.
The basis has now transitioned from backwardation to a small contango, but at best reflects full carry without a speculative premium. What this means fundamentally is that futures are healthy to be used by miners and other sellers for bonafide hedging. Future sales can now be laid off profitably on the futures market, reducing selling pressure in the spot markets.
While the market appears to be sitting in a position similar to when backwardation disappeared in late October both the technical and fundamentals are quite different. We do not have a descending triangle with backwardation on each test of the lows. Instead, we had a backwardation with a double bottom, a double bottom which also happens to test quarterly lows and 2018 lows.
Further, the substantial breakout into contango indicates the bull market is sustainable. While I watch the basis and do not chart it, I did run across an excellent illustration by Joe McCann @joemccann.
Frankly, we are in a position with large upside potential and minimal risk. I am not looking to trim my base position in any major way unless we reach sharply higher levels, and I will also be looking to add to or recover trimming on any setback which I do not anticipate from current levels.
I realize there are lots of bearish folks out there looking for a substantial break below $3,000. All things are possible, but I have made my livelihood trading by taking a position and riding it for all its worth. It is not an easy thing to do, but that is what makes a successful trader. I have traded bitcoin successfully for 6 consecutive years.
At the Unconfiscatable Conference, I was asked where the market is going. . . again let me emphasize this is the wrong question. I have no clue. You can ask whether I am long or short and I will tell you and it could change in a heartbeat, but as a trader, I have no pretensions of foreknowledge.
Also, please note while I may have a speculative short position I am never net short bitcoin.
What I will say is this. There are forecasts under $1,000 as well as over ten million dollars. I understand the thinking of both scenarios and all those in between. But the underlying fundamentals apart from bitcoin indicate it is a necessary portfolio addition for anyone interested in saving unconfiscatable capital.
I am in full agreement with my colleagues that bitcoin and bitcoin alone will emerge as the primary digital asset . . . as the Bitcoin Standard. I would simply say that it is just as likely, probably more so, that bitcoin can achieve new highs while The Crypto World tries but fails. Just as Ethereum peaked after the Bitcoin peak, Bitcoin can peak at new highs as The Crypto World withers away. We just don’t know.
My point is simply that the average investor need not worry about price so long as a sound investment strategy is followed. I would also point out that three major asset classes (stocks, gold, and bitcoin)seem to be moving in tandem reflecting major shift as capital senses the need for a home. . . which again is a reflection of bitcoin fundamentals apart from bitcoin.
I hope this helps. I look forward to getting back in the groove. And in this regard, we will be having the first Ensenada Bitcoin Meetup at the new Ensenada Tech House at 7 p.m. on Friday, March 1st. And all of you are, of course, invited. If we get a large enough response it will be followed with a full-day seminar on Saturday, March 2nd. It is my hope this will evolve into a monthly event. Email me with your name and address at uglyoldgoat@protonmail.com and I will send you the location.
This is the last time I will be publishing the trading account on Medium. Most of the publishing will remain free but I will be charging a small lifetime subscription for those interested in trading which will include a regular update in my actual trading.
More on these things later. Sorry if I have ignored you. . . .I will be catching up tomorrow.
Ugly
