While most other analysts usually tell you where to invest, I prefer to tell you where NOT to do so; at least at this particular time. The backdrop of a deteriorating world economy, recurring financial catastrophes and the volatility which accompanies them, plus exacerbation of existing problems by governments and regulatory agencies, make it difficult to recommend investments on a fundamental basis.

Those deterrents likely won't stop the pundits from lauding the "benefits" of cryptocurrencies or predicting "outsized potential gains" in gold stocks; but, a more cautionary approach might keep you from getting caught up in emotional fantasies that don't materialize. Avoiding an extremely negative situation can be very positive.

The inherent risks in the following five investments are noteworthy and deserve your attention. We will talk about them in the order listed: 1) stocks, 2) gold stocks, 3) silver, 4) Bitcoin, 5) MicroStrategy (MSTR).

Stocks 

Nothing more aptly describes the current stock market environment than the term "irrational exuberance". This is true notwithstanding the fact that the term is attributed to none other than Alan Greenspan, former Federal Reserve Chair, in a 1996 speech "The Challenge Of Central Banking In A Democratic Society".

The word "irrational" is defined as "not logical or reasonable". Is it logical or reasonable for stocks to continually set new all-time highs when the bond market continues to fall and plumbs the depth of a 5-year decline approaching 50%?

Various economic reports are anything but positive, even after all of the revisions; yet, investors seem to think that "we have avoided a recession" and the recent election results are favorable for stock market investors. The economic growth simply isn't there to support the overly optimistic views of stock investors. Distorted numbers and blatant falsehoods don't seem to matter and the warning signs are being ignored.

Gold Stocks

For years I have written about the inferior performance of gold stocks relative to gold. Recent activity confirms the historical precedent of an ever-increasing gold price which continually distances the yellow metal from underperforming gold stocks.

At current prices both gold and gold stocks have corrected from recent highs. Gold stocks are showing considerably more weakness and have declined more severely than gold. Historically, gold stocks lose much more on the downside than gold itself and yet do not keep up with an increasing gold price over time.

The risk for serious downside price action in gold stocks is amplified by the risk of lower prices for both gold (the physical metal) and stocks in general. Lower prices in one or both of those could send already weak gold stocks much lower.

Silver 

Projections for outsized gains in silver compared to gold have continually suckered thousands of investors into believing there is some magical relevance in the gold-to-silver ratio. It is presumed that the two are correlated in some way that will bring about a return to the 16-1 ratio affixed arbitrarily by the United States government when gold and silver were convertible and exchangeable at a set rate. Hence, 1 ounce of gold @ $20.67 was equal to 16 ounces of silver @ $1.29; and, 20 USD was equal to either 1 ounce of gold or 16 ounces of silver.

Historically, the ratio continues to rise in favor of gold; albeit, with volatility. There is no special significance to the gold-to-silver ratio and the two metals are not correlated. Gold is real money and silver is an industrial commodity with a secondary use as money. (see Gold & Silver - Fundamentals Be Damned)

Historical underperformance of silver can be highlighted by drawing attention to the fact that at its peak intraday price in January 1980, silver traded at $48 oz. Forty-five years later, at its current price of $29.36 oz., silver is cheaper by almost 40%. Gold, on the other hand, peaked at $843 oz. and is currently more than three-fold higher at $2620 oz.

Silver's biggest moves are on the downside and are usually preceded by big, temporary, upside moves.  The silver price peaked several months ago and is showing signs of weakness now, even in the face of a relatively more stable gold price. Given all of the negatives generally speaking, silver's potential risks are greater than most investments and silver is likely to shock those who overstay their welcome.

Bitcoin 

From my article "Bitcoin And Beyond - Price Vs. Value"...

"Always searching, always relentless in the quest for more, bigger, better, etc. It is a never-ending thirst that cannot be quenched; a hunger that cannot be satisfied.

Today's investor seems oblivious to whatever it was that brought us to this point in world civilization.  Economic fundamentals have taken a back seat to fantasy and hyperbolae.

Case in point: Bitcoin.

When fantasy takes hold, the sky is the limit. There is no logic to the price that Bitcoin and other cryptocurrencies command. The arguments made in favor of these supposed "monies of destiny" may sound plausible to some. But the expectations for price exceed all fathomable rationale.

The problem is that most investors today do not understand the difference between price and value. As much as this is true of investments in general, it is especially true of Bitcoin.

"Bitcoin is a digital creation which has no value in and of itself. As such, it can never be used as a measure of value for anything else. Think of it this way: How many Bitcoins is your house worth? How many Bitcoins will your next car cost? If you can answer those questions without any calculations, you will know that Bitcoin has become 'a generally accepted form of money'." (see Does Bitcoin Have Value; Is It Money?)"

Bitcoin is a digital process for the decentralized, private transfer of money. That is all that it is. Governments will not allow anything to happen on any scale that could threaten their own control and power which is vested in their fiat currencies.

Potential downside for ordinary investors is huge. In fact, it is exceeded only by the downside of our final investment to avoid in 2025.

MSTR (MicroStrategy)

There is nothing logical or rational that supports any reasons to buy or hold this stock (MSTR). Its owner insists on buying as much Bitcoin as possible by borrowing as much money as possible. What I cannot understand is why others would accommodate (lend or invest) his penchant for financial suicide.

It was reported that he paid "well over $100,000 per Bitcoin" in his latest acquisition. Apparently, price is irrelevant for him. Investors in MicrStrategy stock don't seem to care either. Just this year, from a January low of 43 (split-adjusted), the stock rose 13-fold to a high of 543 in November. It has since backed down measurably to 330 currently.

The danger in this stock is heightened not just by a volatile Bitcoin price, but by the huge amount of leverage used to gobble up as much Bitcoin as possible. MSTR has lost nearly 40% since Thanksgiving. What would happen if Bitcoin goes into its own tailspin?

Conclusion 

Let's be clear about something. I am not predicting that the above investments will all go down in price; or, that investors should sell short in some fashion or other. What I am saying is that the risk-reward ratio for investing in them is skewed negatively and is not anything close to reasonable for most investors.

Even if you are totally optimistic about the future for the financial markets and the economy in general, there is still likely some serious repricing ahead of us and it is not favorable for the long side. The examples in this article appear to me to be deserving of extreme caution, if not outright avoidance.

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