Reflecting on Bubbles
Gold, Silver, Bitcoin, Miners and more... My short history of manias.
The dollar is weakening, and the cracks are beginning to show. The USD is pushing other assets higher, but while the forex market hints at a decline, a deeper look suggests the situation for the dollar is worse than it seems. This could fuel a significant rise in risk assets like gold, commodities, crypto, and more. We're entering the next phase of this cycle.
The currency market is no exception. By analyzing what is moving against the dollar, we can better position ourselves, and right now, it looks like gearing up for a weaker dollar over the long term is the smart play.
The level we need to watch for is the level between 101 and 99.
This is a beautiful pattern. We broke down right in to a major support zone and bounced and now we are moving lower.
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At the same time as we see the dollar breakdown, we see gold ripping to new highs. This is fueling gold prices.
That's a significant move— a 30% breakout in one of the least volatile precious metals. Precious metals have outperformed most stock market sectors year-to-date. I understand that buying into breakouts isn’t easy; the choppiness can be stressful. But looking at this chart, the potential rewards are clear. A few moves like this a year can provide enough momentum to outperform the market.
We've seen some options trades surge 5x, and we've held positions in gold, gold miners, and silver throughout the year. (You can track these in our portfolio updates—gold has been a constant, while silver and gold miners were added in March.)
My key takeaway is that this signals the start of the commodity cycle. I'm not ready to call a top in gold yet, even though it typically leads the way.
Look at this WSJ cover from 2011.
From 2009 to 2012, everyone was rushing to buy gold as the ultimate hedge against everything.
Don’t like bonds? Buy gold.
Concerned about a dollar collapse? (That fear was at its peak back then, as seen on this TIME magazine cover.)
Buy gold! I’ve been a gold enthusiast myself, and even I thought things were getting a bit wild.
But what do we hear about gold today? Almost nothing.
Let me remind you of a recent moment in history that should be fresh in everyone’s mind.
Bitcoin moving 10,000%…
In 2017, the biggest, scariest guy I know threatened to murder me for saying that it was impossible for Litecoin to be worth more than Bitcoin based on the coins in circulation.
I wish I could show you a picture of this man, but you'll have to imagine: someone so intimidating that even in the middle of a death metal mosh pit, no one would dare mess with him. (Yes, that actually happened.)
By the end of 2017, everyone I knew owned Bitcoin, and it was plastered on the cover of every magazine. The mania of 2020-21 doesn't even compare to what we saw that year. Fraud, daily ICOs, tattoos and people going homeless to buy more Bitcoin was a daily event in 2017.
After that threat, I brought my son into the room to watch me make a sale, as a way to teach him about market mania and the importance of knowing when to sell. He thought I was crazy—after all, he was asking for crypto as a Christmas gift!
Why would I sell, especially when everyone was convinced it would keep rising?
Even systematic me—who usually sticks to my strategies, knowing my systems are smarter than my gut—I broke my own rule. This was one of the rare moments where I sold based on instinct. I can count on half of one hand how many times that has happened
I hit the sell button around $17,000, and over the next year, Bitcoin crashed to $3,000.
Back to Gold…
When I visit gold shops, no one seems to care about gold. They have high premiums and an oversupply—far from the signs of a mania. This isn’t just a gold trend; I believe it's broader. With the dollar likely to keep weakening, I expect gold, silver, copper, and even oil to start new uptrends in the coming months.
Stay open-minded—imagine where the market could go—but don’t sell your bond positions. Trends will shift, and when they do, you'll face the most crucial question every trader must ask.
When to sell?
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