An Uncomfortable Truth

• “In 2017,” Reuters recalls, “Deutsche Bank was fined nearly $700 million for allowing money laundering. The fines stemmed from a scheme of artificial trades between Moscow, London, and New York that authorities said were used to launder $10 billion out of Russia.”
• Citigroup, HSBC, Wells Fargo, and Barclays were all involved in the 2015 FIFA corruption case.
• It appears that four big banks — JPMorgan, Bank of America, Citigroup, and Deutsche Bank AG — aided Danske Bank Estonia in carrying out a $234 billion money laundering scheme involving Russian and Eastern European customers.
• The Telegraph reports that “Europe’s biggest bank, BNP-Paribas, has been charged with “laundering” tens of millions of euros’ worth of public money in France for the family of Gabon’s late leader Omar Bongo.”
• JPMorgan paid a $2.6 billion fine for a “decades-long role as [Madoff’s] primary banker, aiding and abetting” the fraud, according to a statement by trustee Irving Picard.
• According to the United Nations Office on Drugs and Crime, shady bank transactions reach up to $2 trillion a year…

Ray Dalio runs Bridgewater Associates, the biggest hedge fund in history. Founded in 1975, this behemoth has $140 billion under management. That figure includes investments from the Teacher Retirement System of Texas, Singapore’s sovereign wealth fund, and the IMF.

Last week, Dalio made headlines briefly for saying that he’d rather own Bitcoin than bonds.

Bitcoin > Bonds

Dalio’s statement sounds pretty innocent on the surface. I mean, who wants to own bonds when rates have to go lower for bond prices to go higher? 

Buy bonds now, with rates around the world at historic lows, and there doesn’t seem to be much chance for any appreciation of those bond prices. I don’t know about you, but I’m not partial to investments where the odds for making money are so low.  

Of course, there are risks with Bitcoin too. There’s no way to really establish a value for any digital currency. And we’ve been hearing rumblings from various U.S. government types that they don’t really like Bitcoin. Treasury Secretary Yellen went so far as to say she’d like to ”curtail” Bitcoin’s use.

Now obviously, much of a government’s power derives from its ability to control its currency. And much of a government’s ability to fund itself comes from selling bonds. Threats to that dual mandate won’t be looked upon kindly.  

But why is Dalio chiming on this Bitcoin discussion at this time? 

An Uncomfortable Truth

One of the biggest draws of Bitcoin is the encryption. Owning bitcoin and making transactions with Bitcoin is completely anonymous. You lose your “account number” and your Bitcoin is gone. There is no way to get it back. Amazingly, this is the case with 20% of all Bitcoin out there. It’s reported that $140 billion worth of Bitcoin is completely and permanently inaccessible because owners forgot their passwords. 

I’ve been told that I should etch my password into a strip of stainless steel so that I never lose any Bitcoin I may or may not own.

Everybody knows that this level of anonymity attracts some unsavory types. At the bottom, you have Chinese nationals using bitcoin to get their money out of China and away from that government. I’m sure the same is true for Russian oligarchs. 

In the middle, there are those that use Bitcoin to pay for a host of illegal stuff on the dark web.

At the top, there are sure to be drug cartels and the biggest criminals in the world converting ill-gotten booty into Bitcoin so that it will never ever fall into the “wrong” hands.

In the world of finance, cash is cash and nobody wants to dig too deep if there are fees to be made facilitating its movement around the world. 

Banks will turn a blind eye every time. And if you think hedge funds are squeaky clean, well, the uncomfortable truth is that money makes the world go round, and nobody’s digging too deep to make sure it’s just the “clean” money.

Until next time,

Briton Ryle

@BritonRyle on Twitter

The Wealth Advisory on Youtube

The Wealth Advisory on Facebook

A 21-year veteran of the newsletter business, Briton Ryle is the editor of The Wealth Advisory income stock newsletter, with a focus on top-quality dividend growth stocks and REITs. Briton also manages the Real Income Trader advisory service, where his readers take regular cash payouts using a low-risk covered call option strategy. He is also the managing editor of the Wealth Daily e-letter. To learn more about Briton, click here.