Jim Cramer: You Can Own Gold and Crypto as Hedges But You Need to Be Realistic
It’s not either or.
That’s how I feel about owning gold versus owning cryptocurrencies. There tends to be no love lost between these two alternative assets. The gold bugs are contemptuous of the crypto backers because gold’s been around forever and has always been a store hold of value from about 700 B.C. Talk about an enviable track record.
But the crypto backers think of gold as a fuddy-duddy investment, something that can’t get out of its own away while Bitcoin and Ethereum, the two I am most focused on, have made you fortunes. Gold, they say, was supposed to be a defense against inflation and governments printing too much money. But in this what have you done for me lately market it’s been a disappointment.
At the same time we’ve had spectacular performance from all sorts of cryptos which make them better per se.
Plus the gold people tend to be subdued. Mark Bristow, the CEO of Barrick (GOLD) , arguably the greatest gold company of our era, is using $1700 this year for gold but is basing his five year forecast for much lower levels.
In the meantime, Cathie Wood (ARK Innovation (ARKK) ), never one to be modest in her price targeting, thinks that the $48,000 Bitcoin could be at $500,000 in five years’ time. I don’t want to cast aspersions but Wood is a tremendous proselytizer and evangelist for what she believes, witness her very big call to buy Tesla (TSLA) not that long ago that made you fortunes. That allows her to make an otherwise outrageously bullish call without being laughed at. I don’t supposed that Bristow could say that gold will be at $17,000 five years from now without sacrificing hard won credibility.
Now I regard crypto as something that’s simply a very speculative asset that’s backed up by nothing, not history nor government.
Gold, on the other hand has tremendous scarcity value as well as a history of being difficult to find. The supply of found gold goes up about 1% a year which means there isn’t enough around to keep it low for too long. And it’s proven its worth in, well, gold, if you have to flee a dangerous venue for a more halcyon one.
So which is right? I am a believer in both gold and crypto. I regard gold as an insurance company against long-term inflation. I regard Ethereum as a speculative trade, I can’t regard it as anything more than that because it lacks a history and moves around in a fashion that has to be regarded as in keeping with caution. It’s a store hold of value when it goes up. It’s a colossal error when it goes down. That’s not what I am looking for in an insurance policy but it does have its advantages in terms of limited supply and demand and a currency of sorts that has boosters unlike I have ever seen for a security and that’s keeping them afloat on any weakness.
Far too often in this market I see people attacking those who they presume are wishy-washy. To me that’s bush league reasoning. I think you can own both gold and crypto as hedges but you need to be realistic: gold’s value is its timelessness. Crypto? It’s its timeliness, and, I fear, not much more.