I just finished reading Michael Ballanger’s latest missive and here are a few paragraphs of his that I found to be very logical and I totally agree with.

“Before I swing around the year-end prognostications for the precious metals, I wish to put up two more charts. The first one is the CBOE (Chicago Board Options Exchange) Put/Call Ratio; the second is a four-year chart comparing Bitcoin to the S&P 500. I must have had two hundred or more emails asking my opinion of Bitcoin, and if there is one crumb of wisdom I have retained after forty years it is this: If you do not have the answer to a question, do not try to “wing it.” So, I will reserve judgement on the merits of owning Bitcoin, but I will offer as fact the following:

  • Bitcoin and the S&P 500 are almost perfect correlated. They track one another and it stands to reason that excessive speculation in the stock market will be accompanied by excessive speculation in Bitcoin.
  • The CBOE Put/Call Ratio is at the lowest level ever (not a typo—ever). When the ratio of puts being bought to calls being bought drops to an extreme, it is a sign of excessive bullishness and is normally associated with a top in equity prices.

If I revert back to the commutative properties of arithmetic, I know that if A = B and B = C, then A = C, right? If the CBOE Put/Call Ratio is flashing a “sell” signal for stocks, and if the S&P 500 and Bitcoin are almost perfectly correlated, then the CBOE Put/Call Ratio is flashing a “sell” signal for Bitcoin.

Furthermore, if it was the torrid performances of stocks and Bitcoin that stole the thunder from the precious metals since early August, then the inverse correlation between the precious metals (PMs) and stocks/Bitcoin suggests that the former is due to advance and the latter is due to decline. Again, all based upon the CBOE Put/Call Ratio being at all-time record lows.”                   I have enjoyed reading his thoughts whenever I come across them and they  always make a lot of sense.