The blog’s inaugural model portfolio worked out. Considering last year’s punishment and the fog at the beginning of the year it was …

Read more

After considering re-positioning in September, I am glad we held fast having uncovered some…

Read more

Read more

My soul goes out to those swept up in this terror filled war. The horrible images we’ve seen on the internet of in…

Read more

Other than lingering fear as the US enters its most important quarter, it has been a fantastic run for investors with a sunny disposition.

Stocks +20-30%

Bonds got crushed. But what a time to buy, with rates at nearly 20% year highs. I’ll take 5% at 0 risk all day.

So why the spookiness?

There’s a lot of fear that the US will undergo (another) “credit event” this year. Most armchair economists point at the US Real Estate Market, Banks, and rising interest rates.

We can dive into these credit fears in another episode but today I want to talk about the cost of being too spooked to act. The US economy has been crying recession for over a year and continues to do so into 2024.

The below examples break down what amounts cash holdings would have generated in returns by asset class over the course of the year with a 50/30/20 portfolio return simulated last.

Here’s an approximate breakdown of how much a certain amount of cash would have produced this year if invested in different asset classes. This illustrates the cost of inaction by staying in cash. Red indicates investments that produced net losses due to high inflation. Green indicates asset classes (or portfolio blends) that generated real returns.

Ignoring asset classes and rates, here are the ranges of money left on the table by portfolio size. On the low end, by investing in low-to-no risk assets you made the amounts in orange. The amounts in green are returns generated by investing in the S&P 500.

If you parked in cash this year, you got eaten away by inflation. Institutions don’t let this happen unless they need the cash on hand to buy something or pay for something. In many cases, institutions and the wealthy use debt for purchases anyway.

There is a positive spin for those that held cash like a lady clutching her pearls. You will be liquid if/when markets correct. Picking up great investments when sellers are panicking is how the best in the business do it. With so much fear present across public investments, Real Estate, and Alternatives a recession or credit event can produce incredible entry points.

Below we can look deeper at inflation’s impact across different assets and play with some fun scenarios.

Read more

Hi friends!

This Friday I’ll be live with John Bailey the Co-Founder of OneFund Investments, a platform that lets the everyman access the haute-couture world of Private Equity and Venture Capital.

I’…

Read more

War in Ukraine
Spotted Lantern Flies
A.I. 

All this talk about artificial intelligenc…

Read more

Read more

The short version:

Allied victory of WWII
+
US financing programs post-war
+
“Spheres of influence” Cold-War strategy.

However, as with any technology, there are challengers to supremacy. In the case of the US Dollar, commodity rich nations, new-money (crypto), and China's own financial OS have been grinding away at the old Dollar OS.

iOS lends users an ecosystem that makes their information, payments, and fulfillment frictionless.

The US Dollar does the same via its massive network of investors, central banks, and financial institutions that rely on it for trade and investment. This dominance gives the US an enormous advantage in the global economy, enabling it to access capital, maintain economic stability, and influence international relations. The US government and central bank are acutely aware of this advantage, and they often act out of self-preservation or self-interest.

So what other operating systems exist, or even, co-exist?

The Euro

The Euro, much like Android, is prevalent, yet a second-tier operating system. The Euro faces numerous challenges, including political friction and economic weakness. While the Euro has been able to provide some competition to the US Dollar, it has not been able to dethrone it. If anything the Euro is a symbiotic partner to the Dollar, providing an international on-ramp into Dollar OS. Coexistence.

Commodities

The most important on-ramp to the USD are commodities. Commodities are also the most viable weapon to challenge Dollar OS. How do sanctioned countries gain access to dollars? Commodity sales, narcotics sales, loans based on future commodity sales. States that can’t monetize their resources into dollars have to turn to other operating systems.

Chinese Renminbi/Yuan

China's currency, the Renminbi, is often seen as the next great challenger to the US Dollar's dominance. China has the world's second-largest economy and is becoming increasingly integrated into the global financial system. As China's economic power grows, so does the renminbi's influence, and it has been steadily increasing its use in global trade and investment.

However, the renminbi still faces several challenges, including restrictions on its convertibility, lack of transparency, and concerns over political interference. Additionally, the Chinese government's pseudo-authoritarian control over the economy and financial system raises questions about the renminbi's stability and credibility. China has also made unique efforts to establish financial relationship with developing countries via its Belt-and-Road initiative, expanding their OS with a freemium style model.

Another key factor here is China’s role as a buyer of commodities. The largest buyer.

Belt & Road + China’s commodity buying power = leverage.

Belt & Road is China’s Lend-Lease.

Technology, Sanctions, Regulations

Cryptocurrencies, have proliferated and on their potential to disrupt the traditional financial system and how individuals hold value. The theoretical value of cryptocurrency technology undermines the US Dollar's role as the world's preferred reserve currency.

The rise of the internet of things (IoT) has also challenged the traditional channels for liquidity, which has further weakened the US Dollar's dominance. The IoT has enabled the creation of decentralized finance (DeFi) platforms, where users can borrow, lend, and trade cryptocurrencies without the need for intermediaries. DeFi platforms have the potential to disrupt the traditional financial system, making it easier for individuals and businesses to access capital and providing greater transparency and efficiency.

Moreover, the emergence of NFTs (non-fungible tokens) has created new markets for digital assets, further decentralizing the channels for liquidity. NFTs represent unique, one-of-a-kind digital assets that can be bought, sold, and traded on blockchain networks. This has created new opportunities for artists, musicians, and other creators to monetize their work, bypassing traditional gatekeepers and intermediaries.

Legacy IoT platforms like StockX and eBay are proven marketplaces with live pricing. On-ramp into physical goods, and off-ramp into USD platforms/banks. These platforms allow individuals to appraise, buy and sell rare collectible items, further challenging the traditional financial system.

To protect the US Dollar's position, the US government and central bank will continue to take steps to maintain economic stability and prevent any threats to its dominance. This includes implementing monetary policies, such as interest rate adjustments and market operations, to stabilize the economy and prevent inflation. The US government will also continue to use its OS influence policy via sanctions and jurisdiction over US assets/accounts.

In light of these developments, the usefulness of the "Dollar OS" is being challenged. The US Dollar's dominance as the world's dominant operating system has provided the US with significant advantages in the global economy. However, the emergence of decentralized channels for liquidity, such as DeFi platforms, NFTs, and online marketplaces, presents a significant challenge to the Dollar's position. The US government and central bank will need to adapt to these new challenges, implementing policies that enable the US to remain competitive in an increasingly decentralized financial landscape.

While the US Dollar's position remains strong, the future of the global financial system is far from certain, and the US must be prepared to adapt to these new challenges to maintain its position as a global economic superpower.

Read more

Read more

Read more

Read more

Read more