'The US Government Wants To Get Rid Of Crypto' With Clem Chambers
In this episode, we're joined by Seeking Alpha Contributor, Clem Chambers. Click here to listen to the episode or read the transcript.
'The US Government Wants To Get Rid Of Crypto' With Clem Chambers
Summary
- In this episode, we're joined by Seeking Alpha Contributor, Clem Chambers.
- Clem started in the investing world as a kid when his father traded commodities.
- We dive into Clem's methodology for investing in this type of market, his thoughts on the Fed, and why he is saying we're stuck in a range-bound market for the foreseeable future.
- Towards the end of today's episode, we get Clem's take on why he is expecting another significant drop in Bitcoin.
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Editor's Note: This is the transcript version of the previously recorded show. Due to time and audio constraints, the transcription may not be perfect.
We encourage you to listen to the podcast embedded above or on the go via Apple Podcasts or Spotify.
Click here to follow Clem Chambers on Seeking Alpha.
This episode was recorded on March 6, 2023.
Transcript
Daniel Snyder: Welcome back to Investing Experts Podcast. I'm Daniel Snyder. Today, we're joined by Seeking Alpha Contributor, Clem Chambers, the man who started in the investing world as a kid when his father traded commodities.
Towards the end of today's episode, we get his take on why he is expecting another significant drop in Bitcoin. But first, we dive into his methodology for investing in this type of market. His thoughts on the Fed, and why he is saying we're stuck in a range-bound market for the foreseeable future.
Just a reminder, anything you hear on this podcast should not be considered investment advice. At times, myself or the guest might own positions in the securities mentioned, but this is for entertainment purposes only, and you should seek advice from a licensed professional before investing.
And if you're enjoying the show, do us a favor and leave a rating or review on your favorite podcasting app, or leave a comment on our show notes page. We love the feedback in interacting with the best investing audience in the world. Now, let's get to the interview.
Clem, so great to have you on the podcast. Thanks for taking the time to join us today. For the people that don't know who you are, and what you've been writing about, give us a little intro of how you guys started investing and what you focus on here on Seeking Alpha?
Clem Chambers: Well, I got started in investing because back in the day in the dot-com boom, the company that I was running was an incubator. And the big thing that we got right was a European financial website for private investors called ADVFN. And I thought, well, we really got to make this work. I'd made a huge dot-com style fortune from doing all that stuff. And lost a huge dot-com star fortune in 2001 and 2002. But at the time, my idea was, I've got to have skin in the game.
So, I took all my money and that was liquid and I stuck it in the market, because if you're going to build a site for private investors, you might as well put your -- all your money on the line and build that site for yourself. So that was kind of the first or the second generation.
Now the first generation was, when I was a little child, a very small child. My father was a very large commodity speculator in the 70s. And he put a little earpiece on the telephone, and he said, well, when I'm on the phone to my brokers, rather than asking, yeah, what's going on buddy? Just pick up this earpiece and put it to your ear.
So, I would put this to the ear and hear my father buying coffee and gold and all that stuff, and the rings and all that, you know, not Lord of the Rings, but the ring of commodities. And people, you know, we used to take orders, and there were people, and they would come away and say, I got you 200 lots and all that stuff.
So, I was brought up as a very small child. I'm -- you're talking about 10 year old with that going on around and being welcomed to the party by my father to all that coming and going, which of course when you're really that young, you absorb a lot of stuff that an adult wouldn't absorb. And the insiders says that even the adults involved don't absorb, you kind of hear that in your child's mind.
So then back in 2000s, you know, another 20 odd so years later, there I was with all my liquid in the markets building and this financial website, and that financial website, InvestorsHub, which is a U.S. small cap financial website. And then for the next 20 odd years, I was doing that. Now initially, I was told, oh, by the PR people, oh, why don't you write stuff about stocks and shares? You know, you'll become -- help, you know, marketing of your website.
So, I thought I was really good. I was already writing for the financial page of WIRED magazine during the dot-com. That was something I did back then. So, I fell naturally into writing financial articles.
But what I found was, it's very valuable because you have to have your thinking straight if you're going to write articles and pieces about investment. Because, I mean, you can't write this stuff, oh, this one's going to the moon, that one's going to -- that's rubbish, that is…and oh, this one's, you know, it's going to 10x, or you see a lot of that. But I kind of not interested in that. What I'm interested in is, what, why, how, when, who, and have a, as I say, a thesis, I hate that word. But, you know, to have a thesis, and to have a thesis, to write 600 words or a thousand words, you've really got to crystallize your thinking out.
So, over the years, I've used my writing to crystallize my thinking. And I have over the years seemed to have caught all the crashes right. I not be there and when they happened and be in at the bottom. I've predicted a few that haven't happened. But I'll tell you missing the ones that do happen is well worth getting out before the market doesn't crash and then kind of going back and going, oh, well, it didn't happen today, oh, dear, dear.
And so, you know, the big money that in my experience is not to buy Apple (AAPL) at $0.05 and sell it at $200. If you could do that good, good on you. Is to just not be there when the earth cracks open and everybody falls in, and to be able to buy the aftermath. And that is what I kind of focus on that. And then why what's going on here? What's all that about then? Why is that doing that? It doesn't make any sense. And then trying to make sense of it.
Trying to understand what's going on below the surface. Not, you know, the Fed said this, and somebody woke up in the morning with a great idea and that's why it moved today, but the underlying drivers of things. And to do that, you have to do a lot of study, but also you have to then synthesize it into something. And you don't have to be right. But if you've got a map, when things start to go away from what you think is going to happen, it gives you an ability to steer back on to the right course.
So that's a short story of my journey. My journey. I have to say this, because I've been on an investment journey. So that's a portrait history of my investment journey.
Daniel Snyder: It is a journey indeed. And I wanted to follow-up and ask or do you - it sounds like you have this wealth of knowledge. From having the young upbringing, talking about commodities, and listening to what was going on there, so then moving into equities, and we're talking internationally around the world and understanding how the workings all happen. What is your approach nowadays, when - are you picking individual stocks? Are you picking futures? Are you in commodities? Are you in crypto? How do you select things nowadays?
Clem Chambers: When I was much younger, I had the opportunity to change my life dramatically, and the big change was I didn't have a television. And if you want to change your world, get rid of your television. If you can get rid of your television, you are left with a lot of time, a huge amount of time. And for me, that meant going on various, you know, wild goose chases into mathematics, into all sorts of knowledge. And all knowledge is valuable as it should be, and knowledge is power. And if you take your knowledge and roll it into your investment, then you'll get some great investments and you should make decent money. And one place that I stopped off at was math a long, long time ago. And I did quite a lot of study there.
And if you look at game theory, which is very powerful and also it can't be used in a very evil manner, not often is. There's a very interesting idea of games. So, if you're -- if you look at the stock market as a game, one side and that side. And in fact, a lot of people have mental pictures of the markets in terms of things like, it's a war, it's a battle. They did this and all that good stuff. Well, actually, if your abstract games out, there's 3 sorts of games. There's a positive sum game where by playing it there's money coming to the table. So, you can imagine that you're playing, I don't know, checkers, and someone keeps bringing sandwiches. So, it doesn't matter who wins and loses, they all get sandwiches out of it.
Yeah. And the game is 50-50 plus sandwiches. So that's a positive sum game. And in that, pretty much everybody should be able to win. And the stock market is on historically a 7% positive sum game. So, if you throw darts at the Wall Street Journal, and I recommend that. Or wherever you do, put it at the bottom of your parrot tray and wherever the parrot [ph] leaves it's breakfast, you buy that stock. On average, you should get 7% every year.
Now, your parrot [ph] is a pretty good stock picker when it comes to that, which is the basis of ETFs, random walk down Wall Street and all that good stuff. And that's a game you want to play because if your parrot [ph] can get 7% in the market, you should be on good ground even if you're wild and crazy and do worse than random. And then this is zero sum game, where you're playing this game at the table. And if you win 10, the guy at the other side loses 10. Well, that's a bit of a skill game, and you better be skilled. And when you look out your window, you see this crystal tower with JPMorgan (JPM) on top, and you realize it's packed out with PhDs and all got computers and all modeling the market like crazy. You know, you got to really have a high opinion about yourself to think that you're going to beat them.
And then you've got a negative sum game. And that's like poker in the casino. So, you sit there playing and the winner takes the pot and all that. But the house has taken 10% on every pot. So, the pot is always shrinking. In that game, you will always lose. You must lose. It's very, very difficult for anybody who constantly plays that game to win, because the tide is always going out. The pot of money you're playing for is always draining away. Now, it's very hard to find a financial market that isn't negative sum. Options. Wow. That's a negative sum game for here.
And, you know, at quantities, it's a negative sum game because you got to realize in the market where's the value coming to the table? Where are the sandwiches? Yeah. And commodity, someone takes it up, someone buys it, someone's got a risk, he's going to dig out and no one's going to want to buy it. Someone's got a risk of non-supplying in with the cocoa beans for his chocolate. So that's why it exists. But in terms of direction, in terms of making money out of supply and liquidity, it's hard to see where the value is there.
When you go to equities, it's very easy. It's economic growth. And progress. You know, someone at Microsoft (MSFT) goes, oh, got a better idea. Oh, I've been betting one of these. So there's value coming into that dynamic. There's no very, you know, maybe there is some value coming into options. I can't say it. Maybe there is some value coming into commodities. So I can't really say it. Maybe there is some value coming to forex, I can't see it. But I can clearly see the sandwiches coming to the table in equities, so that's the game that I play. So that's why I do equities.
Now, obviously, you can go -- well it's proven obviously Yen is going to go up now or it's proven obvious that the Turkish lira is going to go down. But it's very easy to be wrong there. Whereas with equities, your parrot [ph] can do it. So, you should be able to add to your parrots [ph] return. In equities, you do a bit of study, you'd be a bit sensible, read a few books about sensible investing rather than the thousand books about getting rich quick. You'll be in great shape.
So that's why equities are benign because it's a positive sum game. And you only ever want to be playing positive sum games if you want to make money. Now a lot of people you say, well, a lot of people lose money in the market. So, what's going on there? And they get paid not in money. They get paid in kind. They buy stocks that make them feel good. For whatever reason because they go down the country club and say, oh, I bought some of this, I bought some of that. And sometimes maybe it does make the money.
Sometimes it will lose a whole lot of money. So, the market will pay you in the coin that you want to be paid in. And if you want to be paid in prestige, if you want to be paid in fund, I mean, why would you buy a pink sheet stock? But it's a lot of fun. Why would you buy a game stock? Well, it's a lot of fun until you know, rip your wallet out of your back pocket. So people want to get paid in excitement, dopamine fun. The market will pay you in that, but it won't pay you in cash as well. Right? So, when you go down into the areas that someone like Mr. Buffett goes to, which is so dull, dull, dull, dull, dull.
Right? And, you know, why would you want to buy that? Why would you want to buy, you know, Chevron (CVX) or whatever it was -- Exxon (XOM), I wrote a piece on Exxon a few years ago, I very rarely tip single stocks. It's got 400%. Why is it down so low? Who want to sell Exxon? Oh, Exxon, you know, oh, what a boring person you are. Right? So, it has to pay you in cash. So, I stick to boring stuff that pays in cash. So positive sum game, borrowing the pays in cash, and you know, you're really mainly done.
Daniel Snyder: Alright, Clem. So let me ask you this. We're in an interesting year of time. For the last 2 years. Right? This bear market has been going. We've seen the rips of the upside here in the first 2 months of the year, well, first month up, second month down. For you and these boring names or these sectors, what are you favoring for the year to be in a boring name during a time that doesn't seem as boring for investors.
Clem Chambers: Okay. When I was really, really young, my father was making huge, absolutely mind blowing sums in qualities. And I thought, well, you know, I'm going to ask him how he's doing this because all these other parents seems thicker as, you know, thick as mints, as I say, in the UK. And they're counting their pennies. It's the seventies. And, you know, he's making unbelievable money. So go, dad. How do you make money in the markets? This is me. I'm 9 or 10. And he says, very simple son. All you got to know is which way the market's going. And as a 9 year, I wasn't convinced about that.
I said, what do you mean? He said, well, you know, you find something that's going to go up a long way. You buy it. It goes up a long way and then you sell it. Simple as that. All you need to know is which way the markets go.
And I thought, that's really disappointing that my dad won't tell me how you do it. So anyway, 40 years went by, or 30 years went by, and I realized he was absolutely right. All you got to do is know which way the market is going. And if you don't know, what the devil are you doing? You can't make money being long when the market's going down. You can't make money if the market's going to go sideways. So, you have to know the market's going up.
And if you don't know the market is going up, you shouldn't be in it. And it's too damn obvious. And people go, what you mean you got to know the market is going up? But if you don't know, what are you doing? Yeah. What are you doing? So the answer is, the market direction is really, really important. And right now, it's extremely difficult to judge because it's no longer a free market. You know, it's the Fed and it's the Chinese Central Bank. And to a lesser extent, well, it's not really the European central bank. And UK Central Bank, it was very important for recently, but they're generally not a long term influence. But that makes it very difficult and very dangerous.
You have to be able to read the mind of the Federal Reserve, and you know, that's very, very, very tricky. My take on it is as follows: in the past you've got lots of crashes because the regulator had no idea what was going on. I mean, back in 2007 and 2008, I had no idea about all these blooming CDIs and CD squares and all these derivatives had hollowed out a huge section of the financial industry. I had no idea. The same thing goes back with the old S&L loan.
The S&L loan is almost a photo rather the credit crisis, the global financial crisis, whatever they're calling it this month. It's almost a photographic reproduction of the S&L collapse in America. It's the same thing that mostly when hollowed out all the S&L with dodgy derivatives. And when they all failed, the regulator had to come in and say, what are you doing? What's happening? They didn't know it was coming. Right now, they know where we are.
They've been through enough to know that the whole system is under a threat of systemic collapse. Because, you know, one of the those sites, one of the financial institutions would fall out and if not take everything up with it. So, their own point, they're on patrol and they're trying to hold what I would say is a lie. Because the crypto crisis the lockdowns, that took out 20% of global GDP minimum.
And they printed huge amounts of money, so the whole system wouldn't collapse. You can't go looking up your people for a year and bit or a couple of years or whatever, and not bail out the whole country. Because, you know, it's like everyone in America takes holiday for 2 years. And you're going to have an economic collapse, aren't you? It's going to be Armageddon. So, the only way across a wave over it is the oldest trick in the book. The oldest trick. The Romans did it. Everybody did it, which is print and debase your currency.
Right? After every war, they always debase the currency because they have to pay, well, they can't pay back the debt. But everybody pays back the debt by having their money debased. And, you know, hyperinflation in Germany after 20s, the French franc after the second World War, you know, the British had a silver coin before 1918 or 1920. And then they had a half silver coin up to 1947. Every time that hard currency goes out, the money is after a war. And the current -the COVID crisis was the economic equivalence of a war. So, inflation follows. But they do know that everybody's up the creek. It's not like before whether, you know, 6 months later, they worked it all out and they're now furiously bailing away.
They've been furiously bailing away, ever since the COVID lockdowns. And they're still bailing away. So really, what I think you're seeing in America in particular is them trying to hold a line because as you have inflation, so you get back to some normality. Because inflation, you put a large amount of money, and then you get inflation because it comes through the pipe over time. But if you stop printing money, your inflation then disappears because you only get it, when you're increasing the money supply. If you stop increasing the money supply, it works its way through. So here we are, particularly with the Fed, actually trying to manage a transition from a disaster back to normality.
And the stock markets are going to follow that. So, I'm expecting -- was expecting until I thought it's going to, you know, we're going to have a nasty crash. It goes sideways as we did after 2000 because, you know, it wasn't Bernanke. It was Greenspan. His move after the dot-com crash was basically to pin the Dow in a range and you've got 9:11 which knocked it out. But you can see that there's sideways range going for years because they can turn liquidity on and off.
And basically, range bound the cost -- the price of financial assets. And that's what I think they're doing. But it makes it very, very tricky because you're not in a free market. You're in a market that's very, well, totally controlled, fixed if you want to put it this way, cornered if you want to put it another way, by the regulators, in this case, the Fed, Now going back to the UK, UK nearly fell into the North Sea and drowned before Christmas because their pension funds almost went bust, because they had borrowed huge sums of money to buy government bonds, to leverage up government bonds, to leverage up government bonds, to leverage up government bonds, ring a bell.
That's the way it always goes. So, when interest rates went up, they got margin calls on those government bonds they'd borrowed, and they nearly went bust. So out came the government and went -- would bail you out? And the disaster didn't happen, and everyone's forgotten it occurred even because no one remembers a disaster, if it doesn't happen. Anxious is good.
Now the UK stock market is now looks like it's going through the roof because the pension funds are going, well, actually, but not get any more money into those government bonds. You better put it somewhere else. Where are we going to put it? Oh, into equities like we haven't done for the last 20 years that much. So, off the equities are going. So, gain, it's like a government intervention. It's the central bank dictating what happens next. And you've got to be able to guess that. And that's really difficult.
So right now, I'm in a very unhappy place because the market is incredibly difficult to call. Because of the fact that it's basically being led around by the nose, by the central banks. And that puts us all in a quandary, I think.
Daniel Snyder: You did put out a recent article here on Seeking Alpha, talking about the velocity of money and the money supply and the Federal Reserve and everything else. I think, I was just enlightening that you see us in this range bound market, which we've heard elsewhere in the industry as well before. But for now, it's kind of like how long will this be? Does it need to stay in this range bound market in your opinion, maybe for the amount of time of taking out the excess $2 trillion that we pumped into the economy. Do you have any thoughts about how long this might last?
Clem Chambers: Being an old man, I should be sort of [indiscernible] about it and go, well who's going to come to the industry, and the world is going to crash. And you know, there are circumstances when things crop up and they can't fix them. So, for example, the Fed could be pulling liquidity out of the market. The banks could be keeping it in the reverse repo. I'm just saying, just no. We're not going to lend it to anybody. No. No. So, you get this kind of total drying up of money.
Even those large amounts of it, it'll be stuck somewhere. And, you know, putting cash new money into illiquid corners is really what the central banks have been doing for quite a long time now. And because it creates trickle down. So, you print the money, you get it into the system, so people put it into semi or not very liquid assets. And then it trickles down. So, if you put it into housing, for example, oh, yes, a lot of people can't afford it anymore. But, you know, the money that went in got stuck in the houses and then it dribbles out when people remortgage and when they, you know, sell the house or when they drop dead and give it to their children. So that avoids the sort of explosive inflation that we see now.
Now if you want to get explosive inflation, you do the helicopter money. You just write people checks. You say, here you go. Sit at home. Have a grand a month. And bang. They go, yay, let's play Robinhood. Yay. Let's whatever. Let's go buy plastic toys at great expense. Let's have some board eights. So, you know, if you give money to the rich. They don't need it. And it kind of dribbles down and it -- and it keeps everything liquid and groovy, but it doesn't actually have an effect on prices. You give money to "the poor" which is most of us. Yeah? Not only do they have to spend it, they want to spend it.
So, bang up goes prices, up goes the prices of lettuces [ph], et cetera. And you know, that's the trouble that they've been through. But underneath the hood of all this, there are always economic levers and all these economic measures. And the velocity of money had been dropping, and it took a long time to work this out here. What's going on with the velocity of money? What's going on? Well, they're printing it, but they're definite places where it doesn't get used.
So, the amount of money going around the circuit is roughly the same, but the amount of money out there is much more so the average speed goes down because most of it's stuffed under the mattress and in people's socks or in this case in big houses and in Tesla's stock and Apple. I mean, if you look at Apple, 3 trillion market capital, whatever it is. I mean, that's the best part of an iPhone for half the people in the world. I mean, you know, how does that happen? Well, there's all this money. It gets stuffed into assets like that.
And you know, I remember you could buy 30 great house in Hollywood for $150,000, $200,000, $300,000. So, $10 million now. Right? But the money that went in there is stuck there. So, the money supply blows up. But the velocity of the money going round the loop is the same, so the velocity drops off. But of course, if suddenly something squeezes all that money out, you're going to get problem. Or you can't get it out when you need it because it doesn't dribble down.
And all the rich people say, I'm going to, you know, keep it in Microsoft and everyone else can, you know, go -- can stay outside my barbwire compound. So, there's all these problems that that people like the Fed have to do because ultimately, the world does 20% of its GDP. And a huge price was paid to save millions of lives. But a huge price has been paid, and it's now being paid. And one of the ways that governments pay the price for actions is through inflation. Because everybody pays it, it's a hidden tax. So that's where we are. Now there's this money stuck in reverse repo.
So, when that starts to dribble out, that means things are going well. That means the money is being drained out by tightening because as they tighten the money supply, the banks are saying, oh, we'll have that money back from Fed. I'll lend it to the guy down the road. But if they don't, that's going to be interesting. But I think, you know, the Fed gets a very bad rap for what it does because people don't spot the disasters that didn't happen.
They don't spot America falling into a financial abyss in 2009. That could have happened. It was very close. I mean, there was a big company whose name I won't mention just in case they sue me. They're on the edge of going bust. I mean, American -- huge American conglomerate, totally famous. That if America hadn't done all that unorthodox, remember the old unorthodox monetary policy, that's what they were calling it. Well, this is all going to go horribly wrong. What are you doing?
And without that large swathes of American industry would have vanished. It would have been the thirties all over again, but they pulled it off. They pulled it, you know, they're alright. They missed the fact that Wall Street was running away with all these inventions at the time. And you know, the whole world did lock down. And that money was lost, that industry -- the industry didn't turn like a handle, those cars weren't made, those roads weren't laid, et cetera.
That bread wasn't baked. And that money was -- that wealth was not curated. And yet, it's been a nasty dip. It's been a ruffle row, but it's not a catastrophe. And that's been -- although, no one can ever get it perfectly right. But they are now trying to navigate us through out to the other side, and inflation will start to drop off. And there's all sorts of ways that things could go wrong from here that could make matters worse.
So, you know, going back, this -- the money supply in America has been cut-off, has been slowed down. It is in abate, and they will turn it on and off. Depending how well they think or how badly they think stuff is going on. They will not kill the American economy to get inflation down to 2%. They'll just say, oh, yeah, it's bit tricky. We've got a bit more inflation than expected. Yeah. That's because you turn it not marked money. You know, they could turn it off tomorrow, bang.
They could throw the whole of the American economy into depression, and there wouldn't be any inflation. But they're not going to do that. They are turning it on and off, and they're doing a pretty good job playing it by ear because they don't know. Nobody knows. No one's been here before. So, you know, it's a tight rope and they've been very good to get down it and they might fall off it and somebody might knock them off there and who knows, you know, no one's expecting mad Mr. Putin to do what he did.
So, there's plenty of black swans that can come paddling up. But if they don't come along, I'm expecting them to put a little bit of a bend in the market. I think there's potential for another maybe a double bottom on the NASDAQ. It'll be interesting if we get there to see whether there was another leg down. But the American markets are, see, what's happened? This is a bit of a theory on mind, and you won't read it anywhere.
If you go back to the days of hedge funds, you take somebody that makes dog biscuits and someone that makes dog biscuits. And the one that makes dog biscuits well and it's got, you know, Mr. Dog Biscuit runs it, it's great. He's a genius of dog biscuits. And then you got Mr. I don't really care about dog biscuits. I'm just doing my job, dog biscuit company. So, they shot that one, and they long the clever dog biscuits company. Right? And then doesn't matter which way the market goes. The dog biscuit, that's a good company, will go up further, and the bad one will go down, and they make money, market neutral. So that's the hedge.
So, once you take that idea and then you spread it a bit and you spread it a bit and you spread it a bit, you might end up picking six companies going wrong on them and shorting the whole market. And so, you know, there's an element of these vastly overvalued companies. And a notion of value actually. There's a lot of value in the U.S. market. So that might unwind. So, all these, you know, how many billions? How many trillions? How much is that a person? Wow. Those guys they might be in for a reasonably long term problem, a bear market for the big guys.
But at the bottom, then this American company is actually paying dividends, actually on low fees, actually big, really solid companies that will go on forever, they might take a lift. But you know, the ability for the American markets to have these incredibly "overvalued" or "incredibly well-valued", "valued to perfection stocks" in a small group. And then quite a large group of really great companies that are undervalued, that might come on unwound as we go forward.
So, you know, there's a lot of companies out there which I look at and I go, oh, I'd love to buy I mean, take AMD (AMD) and Nvidia (NVDA). I mean, they're going to be AI. I mean, they are AI. All these open AIs and ChatGPT, that's all driven by their hardware. Right? So, you look at that and you go, well, you know, AI is the next big thing. I want to, oh, look at the valuations on that. So, you know, it's hard to look at a lot of those glory companies and see that they aren't vulnerable for this realignment of the America markets in line with squeezing out too much liquidity, which is obviously there.
Daniel Snyder: You painted an incredible picture of what's going on with the economy and money supplies and everything. But for the investors that are maybe not those banks locking up their trillions of dollars at the reverse repo and sitting on it and waiting for opportunity. And they want to put money to work now. Where should people be looking for that alpha in this market if even if it's just like, we're in a chop zone, how do you play the chop? How do people invest during this time?
Clem Chambers: I think you have to -- well, I mean, there's one way to play it. If you're all cash, well, you're in a good spot. You're just frustrated that you're not, you know, that you can't put it to work. If you've got -
Daniel Snyder: But inflation eats away at the cash.
Clem Chambers: Yeah. I know. I know, but not as fast as a stock market crash.
Daniel Snyder: True.
Clem Chambers: So, you know, you've got to decide which way the market is going, as man would have said. Is it going up or is it or is it not going up? So, I think you just have to be hyper-choosy, hyper-hyper-choosy. So, I mean, most people are. I mean, most people are not invested properly anyway. They don't have a diversified portfolio risk. They just have a few things they love, and they put all the money in it, which is madness.
I mean, technically, it's madness, but in a bull market, it makes you seem like a genius or very sadly misguided. You want a diversified portfolio risk. And you want to have, you want to have shares that you don't care if they go down 5% tomorrow. And you don't want to carry your leverage, and you just want to have conviction stocks as I would call it. I mean, what are the tests that I do? I mean, I prefer to be logical about things, but sometimes you have to be emotional about it. If you're thinking about buying a share and you want to ask somebody, should you buy it? You shouldn't buy it. Yeah.
And if you're holding a share and you wonder a) you think, why do I own that share? Sell it. If it troubles you, sell it. You should only have things in your portfolio that you don't really -- you're not bothered, whether you've got them or not. Because they're good companies. Whatever they do, it gives you a feeling that you're happy with that. And, you know, most people and a lot of people in the markets, they're not investors. They're gamblers. And gamblers don't gamble to win.
They're gamble to lose because they get all their brain chemicals from that. They get their dopamine from tracking it. They get their adrenaline from when it goes up a lot or when it goes down a lot. And, you know, they get their relief when it goes down a lot and comes back and all that stuff. They're just the same reason they sit around a table in Vegas. They get that emotional ride. Well, that is very costly way to do things.
But if you're an investor, you really look at the market. You go, well, I'm risk-owned. I want to buy. I wonder why I can't buy. And that's what with me. I'll go and look at it, if I like that. I'll buy it. And then I go, you know, 2 or 3 days will pass. I go, oh, I like that. I'll buy it. And I don't like it because of -- I just like it, because I know it fits in, you know, it's got a low PE, it's got a high dividend. The CEO doesn't write a lot about toffee in his statements. It's been going a long time.
It's got decent balance sheet. And as soon as I see that, the market is - it gives me a bit of a tailwind and I'll buy it. And so, I'll end up with a big portfolio of stuff. And then suddenly, the market will start behaving in a very strange manner. Because if you got a poor decently broad portfolio, it will behave in a certain way. It will you know, if the market goes up 10 points, you'll have made five grand. It goes down 12 points, you'll lose one grand. You -- that's good muck down. I don't know. It will and you'll learn its behavior and then suddenly it'll start to malfunction.
And that's often the signal, the same bad that's about to happen, because whatever's going on underneath the market has changed that dynamic. So, you know, big insurance companies having to sell stocks and switch it into forex or something, all that weighed and wonderful stuff. So, you sat there for 2 or 3 years and everything's going fine and suddenly it all starts to not behave right. So, it gives you a viewpoint on what's going on.
But right now, are you risk-on or are you risk-off? And if you're risk-off, you should just do lots of house cleaning and sell down until you're comfortable. And if you're risk-on, you should be going around trying to find things that fit your investment criteria. I'm mainly invested in the UK because that's the market I know very, very, very well. And I'm a value investor, and there's so much value there. It would make your eyes bug out. So, you know, it's ultra, ultra-cheap stocks.
And there are cheap stocks in America, but in the U.S., I tend to follow, I have followed in the past Internet companies because I understand that. And they're often are cheap ones. And you go -- I used to go, oh, well, you know, if it's not 10 times sales, it's cheap. And if it's a good product, and I've used it, and they're making -- they're good making good sales. And it's a two times sales, why wouldn't I buy that? Because it should be somewhere between 2 and 10, and it's a turn, it's a good business. Buy it and sit on it until they get sold - they get bought out. So, you have your little tricks. You have your little ideas. And when you're risk-on, you go there. When you're risk-off, you leave. Or you just buy and hold and don't look at it and see how that works for you.
Daniel Snyder: I am loving the conversation. I want to make sure that before we get out of here that we get your opinions on what's happening within the crypto space. Because you do put out quite a few articles on Seeking Alpha about crypto and Bitcoin (BTC-USD) and what is happening there. I'm just trying to kind of open the floor to you because, obviously, I have so many questions that could be, like, where do you see it going. What's going on with the price action? I think there was a margin call that people have started speculating about last week, where Bitcoin's price just kind of tanked overnight, one night, like, what are your thoughts on this space? And is it investable right now?
Clem Chambers: Well, my thoughts to this is it's clear that the U.S. government want to get rid of crypto. And they're basically sending their drone armies out to choke it off. Now there was a thing called Operation Choke Point back under the Obama's administration where they tried to put out about 30 different industries out of business. And they did that by cutting them out of the banking system. And most of them, you'd want to see and put out business, you know, pornography, prostitution, payday loans, blah blah blah blah blah blah, ATM providers.
But you can see that some of them were euphemisms for other people, both for people that were borderline crime. But even had things like dating sites, dating services, and coin dealers. And you can look at it in Wikipedia, just type Choke Point. And it they got outed. People got wind of it and it came out in the media and they went, oh, I know it's naughty and I know we shouldn't be doing that. Oh, I'll stop doing it then. Yeah. Right. Of course you would.
So, what is going on with crypto right now in the U.S. Looks very much like choke point. Now, China has already done it, obviously, China, you know, crypto is basically illegal in China, although lots of things I'm sure are illegal in China that go on all the time. And America seems to be wanting to follow that loop. And it's, you know, very difficult to imagine why crypto is so high at the moment with that kind of going on? But I've come up with this completely insane idea, which, you know, you won't hear anywhere else, at least it's original even if it's rubbish. And that is, if you look at Grayscale, which is the Bitcoin trust. Bitcoin is $11,000 there.
And if you look at crypto on Binance (BNB-USD), God forbid you should use it and get arrested or whatever, you know. They're the sole people that are marked out by the U.S. as, you know, bad and must go. But if you look at Bitcoin on an exchange, on a Kraken (KRAK-USD) or a Coinbase (COIN), it's $22,000. So, what's going on there? Well, you could say Grayscale is all connected with the law and therefore, or you could just simply say, in the world of crypto, Bitcoin is worth $22,000. And in the world, in our world or not maybe not mine, but in most people's world, Bitcoin is worth $11,000. So in the real world, it's worth $11,000. But in the crypto world, it's worth $22,000 because that's so divergent. They're such a different world.
And I was thinking about this back in the day, 18th century. There was a set of islands called the Yap Islands. And the Yap Islanders used big rocks with holes in the middle as money. I'm sure small rocks. They're called rai stones. And they used to have to paddle out to this volcano many miles away across the sea and then chip them out of the rock and then put them in the canoes and row back. You can imagine that that had - it's like mining Bitcoin, had a certain value of rarity in it, and that was their currency.
And the more, Yap stones, the bigger they were, the more they were worth. And even if your canoe sunk, and you drop this big Yap stone in the sea, it can never be come out. It could still be counted as an asset, you know. We've seen all those assets before a lot of money. Anyway, they were Yap stones, and they had a great value to the Yap Islanders -- rai stones, not Yap stones.
Anyway, so along comes Mr. Saving ship from Europe and goes, oh, you want to swap those valuable wood trees and spices for some rocks? Have I got a deal for you? Off they went, carved out the rocks, came back, and completely inflated the local currency of rock until it was worthless. Because they could get them easily and cheaply and bring them to the Yap Islanders because they got nice big boats. And you know, the value of a Yap stone to -- sorry rai stone to the people of the Yap was worth a lot more than the value of a rock with the European sailors.
And I've got a funny feeling that there's this tension between the believers, the crypto people like me. And the rest of the world will go, crypto. What's that? And there will be this war between the people that get it, whether it's people that get it, that it's a lot of rubbish, and the people that get it, they'll think it's the best thing since sliced bread. But it's a very, very, very tough road ahead if the American government is set upon no, basically squishing cryptocurrencies, which is what the way it will go. Or basically, squeezing it down into a niche that's so controlled that it will be, you know, it won't have the power and benefits that it has had in the past from being something that could run more right for one of the better way of putting it.
So, I think it's a very mixed picture ahead. And it's still -- I can't understand why it's so high, but it's very, very high. And I'm thinking - I feel until it goes under 10,000, I'm not going to be playing because it's not cheap until it's under 10,000. And I like to buy cheap and then sell when it's not cheap and at the moment it's not cheap. But if you take that and forget everything I've just said and just go, what's Blockchain about? It's about much, much, much, much more than cryptocurrency. Cryptocurrency is just like a side issue. It's where it was born.
It was the tip of the spear. The actual rest of crypto was behind the tip of the spear is much, much more important than Bitcoin and even Ethereum (ETH-USD). It's what Ethereum opened up with its internal computing abilities. And things about NFT, which are keys to a whole -- into - it's a whole new industries. And what's going to come after that? DAOs, maybe some permutation of that. But there's a whole set of applications that haven't even been invented yet, that will just turn everything upside down. Because what Blockchain actually does is it delays all these gatekeepers and middlemen that we are so, you know, that are a pestilence in all our lives.
Daniel Snyder: Clen, I'm going to go ahead and say, let's wrap it up. There was a lot of great information you gave out to us. But if people want to get in contact with you, stay in touch, read your articles, whatever, where can they find you? Where can they reach out to you at that?
Clem Chambers: Well, you can get me. I think I've got on the bottom of my articles with you, I've got an email. And I do read the email and you know, if you've bought a Bitcoin at $60,000 or I've got some guy who's upset with me because I have said Bitcoin will - when it was at $60,000, will get down to $13,000, and it only got down to $15,000, and he missed this little bump. So, you know, I even read those ones.
Daniel Snyder: Clem, I got to say, I was reading the most recent Bitcoin article you put out. I think it was here at the beginning of the year, and you did mention that $13,000 on Bitcoin has been your target for a year, and you could easily see another leg down before Easter. It's kind of sounds like you're still on that boat. Right? Now you're saying under $10,000.
Clem Chambers: You know, it's very hard to get the bottom. And even if it got there, it might only be there for 10 minutes. Because the bottom of the market, it doesn't sit around, wait for the flag sign, I'm here. You get that moment of capitulation. And it can only last minutes. So, you can't expect to get that. All you need to do is get near the bottom and get out near the top. Or get in nearest the bottom and get out in the middle, and you'll be laughing.
But, you know, that these developments with the American government, which seem to be like swarming around all sorts of different pinch points. You know, that's very bearish in my book. And you know, the American government always gets its way. And if they really do want to squish Bitcoin and Eth and all this stuff, then, you know, it's going to have a very hard time and it'll be down to Europe to take up the whole idea. But the thing to remember about new technology is that you can't put it back in the bowl.
And I mean, the funny story that I like to tell is, once upon a time, in Venice, Venice was the Mediterranean superpower. And it had galleys. Like Ben-Hur rowing galleys. And they would -- they fight their wars with galleys. And people came to them and said, no, you got to use sailing ships. You know, sails, and that's the future, that's the new technology. And they went, you got to be kidding me. Right? Because those things, the wind blows one way, they have to go one way. And they can't just turn around like we can around you. You know that's just rubbish.
So, we've ruled the whole of Mediterranean for 500 years with row boats. We're not going to go with these sail boats. That's just rubbish. So anyway, it turned out that the sailing ship, the canoes was the way to go. So, Venice went from a country or a small city that ruled the whole of the Mediterranean to a city that just had a [dam] problem.
Daniel Snyder: Right? Clem, thank you so much for your time today. Everyone that's listening to you right now, I can't encourage you enough to go read Clem's research on Seeking Alpha. He's there. He interacts. I see you answering people back in the comments. So, thank you so much for being a part of the community. Thank you for coming on the podcast. We can't wait to have you on next time.
Clem Chambers: Thanks, Daniel. Look forward to it.
Daniel Snyder: Just a reminder, everyone, if you enjoyed this episode, leave a rating or review on your favorite podcasting app. And we'll see you again next week with a new episode and a new guest.
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Comments (66)
Printing money is the government's racket. It will not allow anyone else to create money from nothing and muscle in on it's racket.
but all it will do is push it off shore somewhere and they will wait it out till another regime steps in and welcomes back crypto