Welcome reader,
The last few days have been full of military unrest in middle east, increased social and political tension over breakthrough vaccine cases, new all time-highs for the S&P 500, Bitcoin up-to $47K levels and much more….
The first thing to realize is that we live in a fucked up world. No two ways about it. Life is not fair, it will never be and thus we must play with the cards we have been dealt. When it comes to portfolio allocation, we want to to minimize risk and maximize returns, obviously.
Let’s start with the American market. 5 out of the last 6 trading days have closed with the S&P 500 hitting all-time highs. If you’ve been following my twitter, this shouldn’t be surprising. The Federal Reserve simply cannot allow a market correction and they continuously insist inflation is “transitory”. The weird thing is, even Jerome Powell, head of the Federal Reserve, said he doesn’t believe the data being thrown out by the government. CPI showed a ~5.4% increase, year over year in July. You have to keep in mind CPI doesn’t include things like gas, food and energy so the money is on core inflation being higher. ALOT higher. In consideration of your portfolio, it may be wise to think of inflation being in the 10-15% range.
We know money printing, QE, reverse repo’s and reckless monetary policies are not going away soon. In consideration of this, one must allocate their portfolio to be hedged against currencies that are being devalued. In Canada and the USA, more than 20% of all currency in circulation was printed within the last 18 months. The solution to hedge against this is hard assets.
Hard assets like stocks and real estate will continue to appreciate, as will the gap between the wealthy and the poor. One of the best ways to hedge against this devaluation is to simply get out of fiat. Allocate very little cash in savings, enough for emergency expenses and everyday living. Put the rest to work. I would also include Bitcoin in this conversation of hard assets but do your due diligence on understanding this asset class. I talk about this regularly on twitter, so feel free to ask any questions.
As for the traditional hedge, Gold, it dipped to $1600 levels a few days ago which must have been heart breaking for traditional investors. Gold “should” be over $3000 by now considering how much money was printed but it’s negative on 1YR and 10YR time spans. Something isn’t right with the Gold market. Maybe people don’t think inflation is a threat? The miners may be a good play especially with dividends but Gold is suppressed (manipulated?) for now.
Keeping up with current monetary policy, a new trillion dollar infrastructure bill was passed last week. It was full of random things like marijuana testing, evasive plant species and the highly publicized cryptocurrency section. The document was well over 1000 pages long, so I would be surprised if any politician in the Senate actually read the whole thing. Anyways, here’s a quick summary by Anthony Pompliano.
The title may be misleading but basically, the original bill wanted to tax the crypto industry as much as possible. No one minds paying taxes to help their country BUT people mind paying more taxes than they need to. Hence, amendments were proposed to reword certain definitions of crypto related practises. Ultimately, the amendment was not passed because you need an unanimous vote which didn’t happen. This shouldn’t change any of your BTC allocation. Stacking sats, earning interest and hodling may be your best friend for the imminent future. Bitcoin is currently hovering around $47K after withstanding alot of FUD from the crowd. If you had bought the BTC dip of 27K, you would currently be up over 42%.
International markets are in a topsy turvy situation. Asia has been relatively steady. The biggest news has been with Saudi Aramco, who are in talks to buy a portion of Reliance Industries Limited. Reliance is one of the biggest companies in India and their telecommunications brand Jio has a vast market share. Owning strong foreign businesses that are not denominated in USD may be a wise decision BUT do not allocate a large percentage as much infrastructural uncertainty exists within these regions.
Australia is in strict lockdowns again while most of Europe is contesting mandatory vaccine policies. Yields are negative in places like Germany which means you’re essentially paying the bank to hold your money. European markets may not be the best place to hold your money but YTD a-lot of countries (Belarus, Russia, Hungary, Czech Republic) have indices that are up over 40%. Depending on where you live and the currency you have, it may be wise to allocate 3 to 10% to these foreign markets.
Ending off with one of the most astonishing news stories to date. Afghanistan is now controlled by the Taliban. In a matter of weeks, the government was toppled. U.S equipment worth billions is now in control of the Taliban. Drones, Apache Helicopters, M16’s, M4’s and American bases. Some sources have reported that the US has spent in-between $2-6 Trillion on fighting the Taliban in the last 20 years. This is tax-payer money and it’s a shame that the Afghanistan government was toppled so easily. As for business, it’ll be interesting to see the prices of companies who have been given defence contracts. 2 of the top 10 companies are from China, a country that has openly said they will recognize the Taliban leadership. As for the American companies, their share prices have exponentially increased in the past few years. 10X returns are not uncommon with these companies. It is impossible to deny that war is good for business.
Pompliano, a vet himself, sums up the Afghanistan crises well in the video above. The next few weeks will be interesting to see as international markets react to the ongoing tensions with breakthrough cases, lockdowns and social unrest. If you’re unsure on what to believe with the current policies, one person I’d highly recommend listening to is Zuby. He is one of the few people who aren’t afraid to speak the truth.
Ignore this if you’re overly sensitive.
As always , thanks for reading and I hope you were able to find some information of value. Follow me on twitter for more in-depth content!
Disclaimer: None of this is financial advice. Please do your own due diligence.
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