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A recent survey of fund managers found that investors are quite bullish on bonds. The last time they were this bullish was towards the end of 2008. However, this popularity is growing alongside long-term risks for traditional asset classes. As a result, the founder of Morgan Creek Capital Mark Yusko believes that investing in Bitcoin as protective insurance could be important.
Global Bond Market Warning
During an interview on CNBC, Mark Yusko warned that the global bond market was in danger of bursting. He added that Bitcoin could be used as a chaos hedge against traditional markets, which were experiencing severe strain. According to him, the bond bubble will burst soon. He believes the world is currently undergoing one of the largest bond bubbles in history. The CEO added that the bond market was starting to show signs of failure.
For instance, the Dow fell by 800 points on August 14, which was the worst day for the Dow in 2019. Additionally, the bond market was showing signs of a recession. Mark Yusko added that they had been discussing the issue since the fall of 2018. He said that the market was showing similar signs to 2000, 2001, and 2002. He noted that in 2001, there was a mild recession but it was not until 2002 when the bond market bubble burst. Mark believes the same things are about to happen since so many firms are currently over-leveraged. He said that these companies were issuing debt that they were using for stock buybacks and soon they would have to pay since profits were dropping and growth was slowing.
Nations with Falling Bonds
Mark talked about various nations globally, which were experiencing falling bonds. These include Japan, Germany, and Switzerland. He also discussed various major companies such as Coke, Pepsi, and McDonald’s, which had debt dynamics that were not healthy. Additionally, he talked about Tesla, saying that the company’s equity could disappear in a heartbeat.
Bitcoin is a Safe Haven
Yusko said that he was nervous about the health of the global economy. He added that while Bitcoin has recently experienced a slide; it was still a safe haven for investors. Mark noted that he had been saying for years that those who concentrate on daily Bitcoin prices were not seeing the bigger picture. He said that Bitcoin was intended to be a store of value. In his opinion, this made it a chaos hedge. According to him, investors needed to think about its long-term trend. In a recent market report by Visionary Financial, we talked about Bitcoin eventually being a "Safe Haven." We stated that its still a bit early in our opinion.
With Bitcoin only approaching its 3rd halving out of 33, we still believe volatility is going to exist and that it won't always hedge the markets with its high potential growth model. VF also talked about this on Bloxlive TV which will be airing August 26th, 2019. In June, Bitcoin was trading at around $14,000 before it slid to below $10,000 numerous times in July and August. However, Yusko noted that each year the Bitcoin low was higher. As such, the network’s value was rising. In his opinion, people should have about five percent of their net worth in this asset. This would serve as a useful hedge against the equity and fiat markets. Mark said he believed the equity and bond markets were currently overvalued and thus the bubble would burst soon.