Picasso Beats Government’s Paper

The old and new were jumbled together in the financial headlines when Bloomberg reported “The Wealthy are Hoarding $10 Billion in Bitcoin in Bunkers,” while “Picasso’s Nude Fetches $115 million at Rockefeller Auction.”

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Gertrude Stein, a friend of the painter in early 20th-century Paris, once owned the painting after her brother Leo bought the painting 1905 for just 30 gold-backed US dollars.

As for those attempting to diversify away from the flimsier, unbacked version of today’s greenback, with bitcoin, who knew you could, or had to, secure the ethereal currency, created by and stored on computers, in “a network of underground vaults on five continents, including one in a decommissioned Swiss military bunker.”
Tom Metcalf explains,
“The first rule of owning Bitcoin is to securely keep your private key — the code that lets you spend your coins. If thieves get it, they can loot your holdings in an instant, with no hope of recovery. Putting keys on a device connected to the Internet is both convenient and perilous: Hackers have proven adept at obtaining them from afar.

“The most popular alternative is called cold storage, keeping the key in an offline device such as a thumb drive. But risks remain: Hackers have also proven adept at setting traps on computers to access cold-storage devices the moment they’re online. More traditional criminals have committed home invasions and kidnappings. Some Bitcoin tycoons have resorted to hiding their identities, fortifying their homes and studying self-defense.”
Seems like a lot of trouble. Crypto fans will say, “you gold bugs have to do the same with your clunky coins.”
Not exactly, it’s hard to hack a Krugerrand from afar.

Speaking of coins, Reuters reported, “Gold American Eagle bullion coin sales from the U.S. Mint slumped to a third of the previous year’s level in 2017, their weakest since 2007.”

The yellow metal in coin form has lost its luster versus FAANG stocks and all thing crypto. Retina D. Young and Jan Harvey write, “They were down nearly 60 percent year on year in the first quarter. Sales so far this month [April], at 2,500 ounces, are less than half last April’s total, and a fraction of the 105,500 ounces sold in April 2016.”

When the public was worried the end of the modern financial world was nye, they were stocking up on gold, and presumably canned goods. However, the last few years has proven the coast is clear: paper and computer generated “assets” will do just fine.

Young and Harvey provide numbers that might make contrarians take notice.

In the final quarter of 2009, U.S. investors bought 21 tonnes of official gold coins, according to GFMS data. Nearly eight years later, with U.S. stocks swinging higher, sales had dwindled to less than a tenth of that.
At the same time, “The liquidation of metals in the secondary market was massive, in part because of the focus on higher metals prices as well as the equities bull market,” Terry Hanlon, president of Dillon Gage Metals, told Reuters.

Have gold coins gone the way of the buggy whip after thousands of years? Maybe Bitcoin is gold 2.0.

But if you have to store your keys in a vault, what’s the point? In the value race to be run over the next 100 years, it’s hard to imagine bitcoin, gold or a Picasso out performing Picasso’s gain during the past century. However, they are all a better bet than holding stacks of the ever-expanding supply of Uncle Sam’s paper dollars.. LW

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