We have all seen the stock picks from investors and day traders in chat rooms, message boards and cable news. We’ve all seen the short-squeeze strategies and hot stock tips. While these are good sources of information, there is much more out there for us to investigate. In addition to these sources for investment ideas, there are three more types of investors you should be watching:
- Central Banks
- Countries and governments
What are they buying? Many of their investment purchases don’t make the mainstream news, but can be important clues to what’s going on behind the scenes. These investors can spend hundreds of millions or even billions of dollars on investments. If they consider something worth buying, should we give them a closer look as well? In this article, we will highlight some of the most popular investments of those who make investments the average person can only dream of.
Investment #1: Bitcoin
Bitcoin has exploded onto the scene recently, going over $60,000 per bitcoin. Consider the following large purchases and investments in bitcoin:
In February 2021, Elon Musk, the CEO of Tesla, announced in an SEC filing that his company has bought $1.5 billion worth of bitcoin. They also said it would start accepting bitcoin as a payment method for its products.
The bitcoin bought by Tesla for $1.5 billion in January is worth $2.5 billion after bitcoin’s rally.
Cash App has also invested in bitcoin:
The company recently invested 1% of its total assets, or $50 million, into bitcoin. One percent is a small amount of their business, but it’s a signal that bitcoin is on their radar, and they are willing to give it a try. The move has been a success, with the company generating more than $1.63 billion in bitcoin revenue in Q3 2020, which is an increase of more than 1,000% over the same period last year.
In addition to Cash App, PayPal has also invested into bitcoin:
In October 2020, PayPal rolled out direct purchases of Bitcoin (and three other cryptocurrencies) within the PayPal digital wallet, through a partnership with Paxos. This allows users to pay PayPal-supported merchants using Bitcoins they bought through the service.
El Salvador has become the first country to make bitcoin legal tender in addition to the US dollar. In June, 2021, El Salvador’s Congress voted in favor of a law that will make it the first country to establish bitcoin as legal tender alongside the US dollar.
These moves by Cash App, PayPal, Tesla, and many others signify the potential for bitcoin to be a mainstream way to hold money. This could cause the price to rise even higher. Will bitcoin continue to rise, or will it come crashing down to earth? Time will tell, but it’s definitely getting people’s attention.
Investment #2: Gold
Gold has recently taken a back seat to bitcoin in the court of public opinion, but many countries and central banks around the world are quietly accumulating the precious metal. Gold has been used as currency for thousands of years. (Up until 1971, the U.S. dollar was backed by gold). This chart shows the gradual increase in physical gold held by central banks:
Central banks are the national banks that operate to establish monetary and fiscal policy. They also and control the money supply and interest rate. The goals of central banks are to stabilize the nation’s currency, keep unemployment low, and prevent inflation. The central banks can print money, as seen with the various stimulus checks received by people in the United States and around the world.
Top central banks of the world include the following:
- U.S. Federal Reserve System–The Fed.
- European Central Bank–ECB.
- Bank of England–BoE.
- Bank of Japan–BoJ.
- Reserve Bank of Australia–RBA
- Reserve Bank of New Zealand
- Bank of Canada–BoC
Russia and China Gold Purchases.
It’s not just central banks purchasing gold, countries are doing so as well:
- In 2019, China was reported to have bought nearly 10 tons of gold adding to its eight-month buying streak and bringing its reserves to 62.26 million ounces — about 1,945 tons.
- Russia also has a large gold reserve, estimated to be worth of $100 billion.
In addition, Russia now holds more gold than U.S. dollars for the first time in history:
Ask yourself: why are these central banks as countries accumulating several tons of gold? Is this something I need to investigate? Do your research and due diligence and decide for yourself.
Hungary Triples Gold Reserves.
Other countries are buying gold as well.
Hungary’s central bank raised its gold reserves to 94.5 metric tons from 31.5 tons, citing “long-term national and economic policy strategy objectives.” This marked one of the most significant central bank gold purchases in decades.
“The appearance of global spikes in government debts or inflation concerns further increase the importance of gold in national strategy as a safe-haven asset and as a store of value. As a result of this decision,”Read the article HERE.
Warren Buffet Buys Gold!
The final example of gold purchases comes from Warren Buffet. The CEO of Berkshire Hathaway, Buffet has been buying and selling stocks for over 50 years. He recently purchased shares in a gold mining stock.
This caught many by surprise, because Buffet has long been a harsh critic of gold, as seen in the following quotes:
“Gold gets dug out of the ground in Africa, or someplace. Then we melt it down, dig another hole, bury it again and pay people to stand around guarding it. It has no utility. Anyone watching from Mars would be scratching their head.”
“The problem with commodities is that you are betting on what someone else would pay for them in six months. The commodity itself isn’t going to do anything for you….it is an entirely different game to buy a lump of something and hope that somebody else pays you more for that lump two years from now than it is to buy something that you expect to produce income for you over time.”
“What motivates most gold purchasers is their belief that the ranks of the fearful will grow. During the past decade that belief has proved correct. Beyond that, the rising price has on its own generated additional buying enthusiasm, attracting purchasers who see the rise as validating an investment thesis. As ‘bandwagon’ investors join any party, they create their own truth — for a while.”
These quotes give you a great idea on how Buffet feels about the precious metal. So again, ask yourself: why is Buffet buying gold now? Is this something I should investigate for myself?
Investment #3: Silver
The 3rd investment being purchased is silver. Like gold, silver is a precious metal that has been used as currency for thousands of years. It has fallen out of the general public’s favor also, but many individual investors are buying the precious metal (myself included).
One of the biggest reasons to consider purchasing silver is due to its heavy price manipulation. In 2020, three JPMorgan traders were charged by the DOJ for allegedly running an eight-year conspiracy that involved placing thousands of fraudulent orders on precious metals in order to confuse the market and force rival traders to act accordingly.
The tactic, known as “spoofing,” can be effective and was made illegal after the 2008 crisis. After an investigation by the SEC, FTC and U.S. government, the bank was found guilty and fined $920 million dollars for the crime. Ask yourself: why would J.P. Morgan go through such great lengths to keep the price of silver down?
Silver has many uses and is found in many surprising products:
- Dental compounds
- Electrical contacts
In addition to the above, silver is also used as a conductor for heat and electricity. As the world moves towards green energy, the demand for silver could increase dramatically (such as in solar panels). Many experts believe the price of silver will rise due to the increased demand for the metal. Due to the believed continued manipulation, the price (currently $27/ounce is believed to go significantly higher.
As a result, many are investing in silver mining stocks as well as silver coins, bars and bullions. Both gold and silver coins and bars can be purchased HERE.
By keeping a close eye on current events and how these investors move money, we may be able to reap some of the same benefits, albeit on a smaller scale. Change your mindset about investing. Your portfolio might thank you.
Call To Action
Talking with friends and reading the latest on social media is good, but it’s critical you watch what’s going on behind the scenes. Just because it doesn’t make mainstream news does not mean it isn’t newsworthy. Watch the moves of central banks, governments and large institutions closely. Your portfolio might thank you.
Looking for more investment ideas? Pick up a copy of my book Invest For Success: Millionaire Wealth Strategies Not Taught in School. Available in eBook, paperback and audible versions on Amazon.
Online courses for investment strategies are available as well. Register for our online course Tired of the 9-5? How to Retire early with Passive Income. Available on Udemy.