Bitcoin, Gold, Real Estate: What in the World Is Going On?

In this episode, Wade Lopez and Gary Aiken explore the complex dynamics of gold, Bitcoin, and real estate in today's macroeconomic environment. They discuss recent market movements, underlying demand, and strategic roles for these assets in a well-constructed financial plan.

Transcript

Announcer 0:00

Views expressed are solely those of the speakers and do not represent this show or its team.

SPEAKER_03 0:05

Bitcoin is a speculative asset that is outside your portfolio. Gold and precious metals are a less speculative but more long time, long-term hold as a hard money asset that will keep pace with inflation over time. And your house isn't an investment at all. It's a domicile, it's where you live, it's where you raise your children, and it's a lifestyle choice.

SPEAKER_00 0:34

Welcome to Build to Last, conversations about wealth, work, and life. I'm Wade Lopez, and I'm joined by our Chief Investment Officer, Gary Aker. Okay, so let's just say it out loud. If you've been paying any attention to the news lately, three things keep coming up over and over again: Bitcoin, gold, real estate. And depending on what you read, one of them is the greatest investment opportunity for generation. One is in a free fall, and one is completely roping. And you're usually the same person saying all three things at the same time. Here's what is actually happening. Gold hit an all-time high of roughly $5,600 per ounce in late January of this year. Then it pulled back sharply and is now sitting under $4,000. Bitcoin ran up past $100,000, came down hard, and it's trading in a low 60,000 range right now. And real estate, man, inventory is slowly improving. Prices are essentially flat nationally. Mortgage rates refuse to come down, and yet the housing market has not collapsed the way some people predicted it would. Three very different asset classes, three very different stories. But underneath all of them, there's a common thread. People are trying to figure out where to put their money in an environment where inflation is real, interest rates are elevated, geopolitical risk has not gone away, and the rules feel like they keep changing. Gary, let's start with a question I think most of our listeners are actually asking. When everything feels like it's moving at once, what does a disciplined investor actually do?

SPEAKER_03 2:10

Well, I think a disciplined investor needs to go back to what their fundamental uh process is, of course, and our process is to look at global macro trends that are going on. And I think that those global macro trends are going to be really important for all three of those asset classes that you talked about. And then the next thing is we needed to look at the technicals of them because these types of investments, gold, bitcoin, and uh and real estate, really have a lot of technical factors that the average, like common stock and normal bond portfolios. So there are definitely things that we need to talk about with relation to each of those that we wouldn't talk about necessarily, uh talking about stocks and bonds.

SPEAKER_00 2:58

Well, okay, let's start with the gold because this is the one that has had the most dramatic swing in the shortest amount of time. Gold hit 5,600 in January 28. That was a record. It broke through a price ceiling that many analysts didn't expect to see broken, certainly not this fast. It was also the first time in real terms adjusted for inflation that gold exceeded its 1980 peak. That's a meaningful threshold. And then over the following five months, it fell more than 20% and it's now sitting in around 4,000. Gary, what do you think drove gold to 5,600 January and how much of that move was structural versus just simply being emotional?

SPEAKER_03 3:38

I think what was driving gold was a number of things. Um, first was certainly central bank accumulation of gold. Um, with the dollar sort of falling last year and and uh political unrest in the US and political turmoil sort of around the world growing, I think there was a desire on the part of many central banks around the world to shore up their non-dollar reserves. And one of the places they get that is from gold. Um secondly, we did have additional industrial demand because of the AI boom. Uh, you know, gold is a great conductor, and so it's used in industrial purposes in semiconductors and other types of um uh you know uh chip-related uh uh places in the industrial complex. So you had those two things going on. And then of course there were, you know, the retail investor really got into it, and that was driving flow of funds to uh to gold ETFs and gold mutual funds. And uh and I think those those three things combined, central banks, semiconductors, and uh and the retail investor really, really getting involved, uh, those are the things that drove uh gold up to its uh up to its recent peak.

SPEAKER_00 5:03

Well, like you just said, central banks, you know, they were buying gold double their pre-2022 pace. And in fact, China purchased something like 317 tons in the first quarter of this year. That's not speculation, that's a sovereign government decision that talks about reserve diversification. What does that tell us about the underlying demand story for gold?

SPEAKER_03 5:27

Well, when we look at uh underlying demand, and uh going by some of the you know banks that I follow, JP Morgan, Goldman Sachs, they say the demand picture for gold is still very strong. Um, you know, central banks are going to continue to buy. I have a different viewpoint on that, which is that when the war in Iran began and oil became scarce, um I think all of these trends sort of turned on their heads, right? There was a flight to safety in the dollar, and the dollar going up really put pressure on non-dollar reserves. And if you were a country that needed to secure oil, uh you needed to buy uh you needed to buy that oil in dollars, and so you needed dollars again. And where where was the place where you could sell something in dollars to get dollars to buy oil uh and other commodities? Uh, that was gold. And I think that was that was probably the major uh reason why we saw gold fall precipitously once the once the war began.

SPEAKER_00 6:35

The the conflict drove inflation expectations, which caused the Fed to signal the rate cut. But you know, that that was basically off the table, and possibly, you know, even hikes may be coming. Higher rates increases the opportunity or increase the opportunity, I should say, um, for the cost of holding gold, right? So walk us through that relationship because I think a lot of people don't understand why gold and interest rates can move in opposite directions.

SPEAKER_03 7:05

Yeah, I think it's it's pretty confusing, and frankly, it's confusing to me sometimes too, because you you hear this, you hear this story that gold is an inflation hedge, correct? And uh over long periods of time that's that is true, uh, or has proven to be true in the past. Um But in the in the short run, we saw inflation start to spike and interest rates start to spike, and you would think that that would be a a place where gold would also go up too, because it's an inflation hedge. But but gold went down as uh as inflation was rising. So it wasn't a very good inflation hedge once the inflation started to re-emerge around the world. Um, so it's sort of a conundrum. And you know, that that's why we when we talk about you know, that it's different than stocks and bonds that have a pretty obvious relationship to interest rates and inflation. Um uh gold gold is a little bit more leading into and then selling, you know, more of a buy the rumor, sell the news, maybe, uh, with regards to inflation and interest rates.

SPEAKER_00 8:20

Well, you mentioned JP Morgan a minute ago, and they still have a year-in target of like 6,000 an ounce. Goldman Sachs is at 4,900. So even the more conservative bank forecasts are saying gold is undervalued right now relative to where they think it's going, how should investors think about a situation where the asset has pulled back significantly, but the structural case has not changed?

SPEAKER_03 8:43

Yeah, if you believe the structural case hasn't changed, and a lot of those banks were also moving their price targets up at the same time that gold was was breaching previous price targets. Um we need to be careful about what price targets are. But I think structurally, you know, now that the war potentially is winding down, and maybe we'll start to see a reversal of the trends from the war, we may see a resumption in the dollar declining and gold, uh gold going back up again. Um and so and central banks may need to uh may go back to sort of uh gold accumulation. Um so it's I think the demand picture, you know, the story hasn't really changed very much. Um so those price targets, I guess if they were reasonable, um, you know, and gold is trading slightly below those, uh, you know, it presents it presents some discount to fair value.

SPEAKER_00 9:44

You know, Peter Schiff's been right about gold for a long time now, but Grant Cardano is pairing real estate portfolios with Bitcoin on the same balance sheet, and Robert Saki is telling everyone to buy silver. Every high-profile investor seemed to have a different answer right now. How do you cut through all that noise?

SPEAKER_03 10:04

Well, um, silver is a completely different story. Um, you know, silver has more industrial uses, it's also significantly more plentiful um that than gold, um, easier to easier to get at in different places. Um, and uh, and so you know, there there was a a run up in silver, sort of because there was a run-up in gold. And of course, silver being more volatile, um, you know, had had an even more extreme move than gold did. Um, you know, but is there a place for precious metals in client portfolios? Yeah, I think I think so. You know, one one rule of thumb potentially is you know, have sort of 1% or something small uh in physical gold and silver, and you know, you know, monitor that um you know outside of your investment portfolio. And then, and then, you know, if if it drops below 1% of your portfolio, then you know, buy a little bit more in in the open market. But you know, going to Costco and buying you know uh uh an ounce of gold at uh you know $5,800, uh you know, you you should be prepared to hold it for a long time.

SPEAKER_00 11:24

For at least a little while. So I'm talking about your favorite topic here. Let's jump to Bitcoin. You know, it hit 115,000 mid 2025, which was an all-time high. It ended last year down about 30% from the peak. It's currently trading in the low 60 range, which still represents a stunning multi-year return, but it's down dramatically from where it was, and people, you know, they're feeling it's it's everywhere, right? We feel like it's all over the map. What has changed in the last two years in the is kind of the institutional landscape, right? Spock Bitcoin ETFs were approved in the U.S. in January of 2024, companies have been adding Bitcoin to their corporate balance sheets. Some governments are having conversations about it as reserve assets. That is a fundamentally different environment than the Bitcoin five years ago, but the volatility is certainly not gone what. Gary, does the institutional adoption of Bitcoin over the last two years represent a genuine change in what Bitcoin is? Or does it simply mean that more sophisticated investors are now participating in the same bottle speculation that has always defined the asset?

SPEAKER_03 12:41

Yeah, I don't think the the entrance into the Bitcoin market or the structures, ETFs, mutual funds, uh that are that are entering into the mark into the Bitcoin market, change the fundamental nature of Bitcoin. It has never lived up to, or at least it hasn't yet, lived up to this idea that it is an alternative currency to the dollar. We're still trying to figure out how to use uh uh tokens uh and and coin alternative coins in terms of uh you know dollar alternative assets, whether they're stable coins and things like that. Um but but Bitcoin itself uh I think has some has some structural disadvantages uh that that make it sort of impossible to be a true currency. And so it is a speculative asset, um and uh and a speculative asset with an extreme amount of volatility.

SPEAKER_00 13:43

Some analysts compare Bitcoin to digital land, a fixed supply asset that appreciates over time as demand grows. Others compare it to the dot-com bubble, real technology, but wildly overpriced relative to current utility. How do you frame the debate in a way that is actually useful for investors?

SPEAKER_03 14:02

I think the way we framed it in our April 2024 piece was talking about it as a more like a commodity. Right. You know, you mine it, although not with picks and shovels, but with mathematical computation. And and so in order to mine a new Bitcoin or a fraction of a Bitcoin, you have to you have to use an extreme amount of computing power and electricity. And so if you look at the the cost to produce mar a new marginal Bitcoin, you'll find that the that the cost is now slightly above the price of a Bitcoin. So if you look at a uh uh website like Hash Dex, where you can where you can find this information on the profitability of of Bitcoin miners, you'll see that they're actually, every time they they mint a new Bitcoin, they're losing money. So um, so you know, when when we talked about in April 2024, that you know, we would we would find it if it was a if it was a true commodity, we would find it attractive when it was priced below the marginal cost of production. And uh and I think we're we're we're there right now. That that doesn't mean that we're that we're buying it for client portfolios or recommending it, but you know, when it was at 115,000, we thought it was you know very overpriced. And at 60,000 or below, um, you know, it's it's either fairly priced or at a discount to at least the marginal cost to produce.

SPEAKER_00 15:37

Gary, if client came to see you right now and said, I want some Bitcoin in my portfolio, what's the framework you would use to have that conversation responsibly?

SPEAKER_03 15:46

I think the framework would have to be let's set aside some fun money that you don't mind losing virtually almost 100% of your money if it goes to zero, uh, which is a possibility. Um and uh and and you know, whatever amount of money that is that is in, you know, we would say, hey, take a look at where the price of Bitcoin is relative to the marginal cost produced. If you can buy it below that, you know, that's a decent entry point.

SPEAKER_00 16:15

Good deal. So let's talk about real estate. Here's the headline: the national housing market is essentially flat. Zillow puts the average home value at approximately 370,000, up less than 1% over the past year. JB JP Morgan Research is calling for zero price growth nationally, and yet mortgage rates are still above 6% on a 30-year fix. Affordability is still stretched. Monthly payments have roughly doubled since 2021, and the inventory shortage that has defined this market for the last several years is only slowly starting to erase. Here's what makes the real estate story unusual for me right now. The market has not crashed, which many people predicted it would when rates went from three to seven. It did not crash because people who locked in in 3% more years are not selling. That lock-in effect has kept spot artificially tight for three years, and it's the single biggest reason prices have remained elevated even as affordability collapsed. So, Gary, how do you explain the how they mark someone who's expected, you know, that double double in their monthly payments will cause prices to fall significantly? And yet that just simply hasn't happened.

SPEAKER_03 17:26

I think it's supply and demand, Wade. Um, we're not building a ton of houses. And uh the like you said, you know, uh the people who refinance their mortgages are not moving. So there's not a whole lot of sub new supply on the market. And that's keeping prices elevated. There's no there's not a whole lot of new construction, and there's not a whole lot of used houses uh you know coming on the market uh to support the number of people who who want to buy. And and it and so there's it's a in a supply-constrained environment, we can see prices sustain uh even even though, you know, rationally speaking, we would expect maybe prices to decline.

SPEAKER_00 18:14

The inventory is up about seven to eight percent over year nationally. Nine states are now back above their pre-pandemic 2019 levels, including Tennessee, Florida, Texas. But the Northeast and Midwest are still tight. How does regional diverters change the real estate conversation for you?

SPEAKER_03 18:31

You know, there's that old adage, all real estate is local. Right. And I think investors in real estate need to need to consider uh that that each of these localities is different. Um, certainly in the in the northeast, I would think with populations uh declining or people moving uh to the southeast and to the west, uh, that you know there isn't a lot of new, there's probably less new supply. Uh, but in places like North Carolina, in Florida, where there has been an influx of people and an expected continued influx, there's probably been more development. Plus, uh those jurisdictions are probably more favorable to real estate developers as well. Um, and so uh, you know, money will flow and and development will flow to places where it encounters the least um least friction. And so those are places where you're likely more likely to get excess if uh if the buyer demand doesn't materialize. Yeah. Um each of these locate locations has a uh a specific sort of uh set of circumstances around it. Uh and uh and so you know taking it as a at a national level is is kind of difficult.

SPEAKER_00 19:52

Yeah, one of the very unusual dynamics right now that we're experiencing is that median resale home is more expensive than the medium newly built law. Uh that's only uh happened, I think, a handful of times in the last few decades. Builder incentives, rate buy downs, new construction is happening, have all contributed that. What does it mean for people deciding between buying existing versus new?

SPEAKER_03 20:18

I think uh that's a it's a personal decision. You know, your home uh is your domicile, it's where you live, it's a lifestyle choice. I don't think it should be thought of as an investment. If we look back over the long term, houses have generally appreciated at about 0.5% above inflation. You know, we would expect bonds uh to be about 1 to 2% above inflation and stocks to be 4 to 5% above inflation. So, you know, houses are not typically a great investment for a long-term appreciation. You get all of the appreciation, you know, in your pocket at one time when you sell. So you look at it and you say, wow, that's a lot of money. But investing the same amount of money in the stock market or the bond market would have yielded a higher return over time.

SPEAKER_00 21:10

So, how should investors be approaching deals differently right now?

SPEAKER_03 21:14

I think uh investors should be thinking about uh the dynamics of you know whether new construction is going to pick up um and the direction of inflation and interest rates, especially when we look at buying home builders or home builder adjacent things like Lowe's and Home Depot, right? Those those are all sort of struggling right now.

SPEAKER_00 21:38

Well, what's gonna happen if uh the Fed has erased race to combat inflation? What's the realistic scenario for real estate over the next 18 to 24 months?

SPEAKER_03 21:48

I think the the outlook is probably that things are going to be relatively flat. Um, you know, I don't think that the Fed is gonna have to raise interest rates uh dramatically. If at all, uh, but I don't think there'll be a huge case to lower interest rates dramatically.

SPEAKER_00 22:05

Well, is there a path where the market finally cracks, or is the structural shorters uh so significant pro that the prices are going to remain somewhat sticky no matter what?

SPEAKER_03 22:17

Yeah, I think prices remain sticky. Okay. Uh there hasn't been a whole lot of you know lending to unqualified buyers like we saw in the run-up to 2007, 2008. Yeah. And so you have a you have more qualified buyers, you have a stickier lending market, um, and uh and you have population dynamics that that uh you know aren't aren't super favorable. Um and uh and I think I think those are reasons sort of not to be super bullish on the price of housing, but also because it's sticky, not super bearish either.

SPEAKER_00 22:55

Yeah. Here's what I find interesting. When you put the three assets side by side, you got gold, bitcoin, real estate are all fundamentally you know stores of value. If you think about it, they're all things people buy when they're worried about the purchasing power of the cash, they're all inflation hedges in theory, and yet right now, in the same macroeconomic environment, gold has fallen 20% from its high, Bitcoin is down more than 40%, and real estate is barely moved at all. The same macro environment produce three completely different outcomes. That tells you something important. In my mind, these assets are not interchangeable, they respond to different forces on different timelines, different risk profiles, and different quid characteristics. The mistake is treating them like they're the same thing because they're all getting described as inflation values. So, Gary, if you had to describe the right role for each of these three assets in a well-constructed financial plan, what would that look like for the typical Kant research?

SPEAKER_03 23:52

I think the the way to approach them is that Bitcoin is a speculative asset that is outside your portfolio. Gold and precious metals are a less speculative but more long time, long-term hold uh as a hard money asset that will keep pace with inflation over time. And your house isn't an investment at all. It's a domicile, it's where you live, it's where you raise your children, and it's a lifestyle choice.

unknown 24:23

Yeah.

SPEAKER_00 24:23

So how do you your gold drop twin, people panic to sell, bitcoin drops 40%, people think it's over, real estate feels stuck. How do you help clients separate price movement from the underlying case for an asset?

SPEAKER_03 24:38

I don't think you can. I think we look at prices and technicals really, really importantly, right? We if you're gonna trade an asset that has zero cash flow, like gold or like Bitcoin, then you almost certainly have to trade it on flows and technicals. And so if we take a look at the technicals and the flows on Bitcoin, uh, you know, you can make a case that it's attractive at this level. If you take a look at the price of gold and uh and its price movement and the technicals and what we anticipate flows will be, you could also make a case that, given the recent pullback in gold, that it's fairly attractive as well. Um so so I think that's that's one way to look at it. And I would say the same thing if you talk about investment real estate as well. That now that you've converted it from a place where you live to something where you're you're hoping to get rental income from, I think then you can make a determination as to whether an individual investment is attractive or not based upon uh the cash flows that you expect to get from that.

SPEAKER_00 25:47

We're an environment where inflation is above target on geopolitical risk is real. Fed's seating when it may have to raise rates, and the national debt trajectory is genuinely concerned. That is classically the environment where hard assets are supposed to perform. Yet two of the three of the hard assets are in meaningful pullbacks right now. What does that tell us about the limits of the inflation hedge narrative?

SPEAKER_03 26:12

I think it turns it on its head and uh for it to be to be kind, yeah, and uh and makes us you know want to take a step back from that as a uh as a conventional wisdom item and say, well, maybe this is another example where the conventional wisdom is wrong.

SPEAKER_00 26:33

Right. All right, Gilliam, let's let's bring this thing home. We've talked about gold at an all-time high and now in a sharp correction. Bitcoin is off peak, uh, it's sitting in a very different environment than it was two years ago. And real estate market has basically defied the prediction of the people who were calling for a crash, right? So the three questions we always end with, right? What is the single most important thing that matters right now when it comes to how investors should be thinking about hard assets like gold, bitcoin, and real estate? Technicals and flows. Right. All right. What are you watching over the next six to twelve months that every force person in this audience should have on their radar?

SPEAKER_03 27:23

I think uh the uh with relation to Bitcoin and gold, uh, I think uh people should take a look and and see if the fundamental story around both of those continues to hold. Um, you know, with Bitcoin, if it's going to survive, then the next halving event is in 2028, and we would expect you know the price of Bitcoin to rise dramatically into that halving as it has every other time in the history of Bitcoin. Um so you know, it's either going to go to zero or it's gonna go much higher from here. Um and of so I I think that's something to look at.

SPEAKER_00 28:09

All right, last one. What's the one thing investors absolutely need to avoid right now when it comes to these three asset classes?

SPEAKER_03 28:18

You know, I think uh the one thing that investors need to avoid is investing in binary outcomes, and that's the reason that we've never invested in Bitcoin and and probably will never invest in Bitcoin directly for clients uh in in client portfolios. Uh binary outcomes, any time you can lose all of your money. Um uh and and the reason for losing all that money is something that you can't possibly foresee uh uh or plan for. I just don't think that that's an investable uh asset class.

SPEAKER_00 28:53

I agree. Yeah. Noise around Bitcoin, gold, and real estate right now is extraordinarily loud, and a lot of that noise is driven by people who are just trying to sell you something, whether that's a newsletter, a phone, a course, a theory about the collapse of their dollar. The louder the pitch, the more skeptical you should be. What does not change, regardless of which of these three assets you are talking about, is this purpose matters. Every asset in your financial life should have a reason for being there. It should serve a function, whether that is growth, income, inflation protection, liquidity, or legacy. When you are clear on the purpose, price volatility becomes a lot less frightening. When you are chasing performers without clarity on purpose, every move in the market feels like a crisis. If today's conversation raised questions about where gold, Bitcoin, or real estate fits in your specific financial plan, or whether any of them should be there at all, that is exactly what our team of Complete Wealth Partners are here to help you with. Gary, great conversation as always. Thanks, Wade. See you next time. Yes, sir, and that's exactly why we call this built to last. See you next time.

Announcer 30:06

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