Investors often fixate on nominal returns relative to the dollar. However, the true measure of wealth is purchasing power. A 10% gain in the stock market is actually a net loss if inflation causes your living costs to rise by 20%, or if other assets like gold appreciate faster.
Global central banks are buying gold not just as a hedge against the US dollar, but as a tacit admission of concern about the long-term value of all fiat currencies, including their own. This move signals a flight to a historical store of value amid fears of widespread currency devaluation.
The primary goal of certain US tariffs is not to generate revenue but to strategically weaken China's economy. By incentivizing US businesses to leave China, the US aims to slow its rival's growth, thereby protecting the dollar's global reserve status from the rising yuan.
Instead of betting on specific AI models like ChatGPT, a more robust strategy is to invest in the underlying infrastructure that all AI development requires. This 'onion' approach focuses on second-order essentials like semiconductors and data centers, which are poised to grow regardless of which consumer-facing application wins.
A president who wants low interest rates appointing a 'hawk' (who favors higher rates) seems contradictory. This could be a political maneuver to create a scapegoat. If the economy falters or policies don't achieve their goals, the president can blame the independent Fed chairman he appointed.
Geopolitical shifts, such as the US reducing its reliance on China, force the creation of entirely new domestic industries. For example, the need for a secure supply of rare earth minerals is driving massive government investment into a sector that was previously non-existent in the US, creating unique opportunities for investors.
Fed nominee Kevin Warsh suggests an unconventional monetary policy: lowering interest rates to make borrowing cheaper while simultaneously tightening the Fed's balance sheet (pulling money from the economy). This attempts to stimulate markets and manage inflation at the same time, a difficult and seemingly contradictory goal.
Market bubbles evolve through predictable psychological stages. Phase one is buying an asset for its fundamental value. Phase two is using debt and leverage to acquire more of the appreciating asset. Phase three is pure speculation where investors, driven by greed, no longer care about the asset itself, only its potential for quick profit.
The US government values its massive gold reserves at a decades-old price of $42/ounce. By simply revaluing this gold to modern market prices, it can increase its stated assets by over $800 billion. This accounting change would make US debt appear more credit-worthy to foreign investors without purchasing new assets.