This is the eighth issue of the LSMIF newsletter. Please share with your friends and family and message in the Discord to participate and share a story!
Current News and Affairs:
Credit Suisse chair apologises to investors at bank’s final AGM – Executives had been braced for protests from Swiss citizens outraged at takeover by UBS – One thing I find hilarious is his Lehmann’s quote: “It is a sad day. For all of you, and for us” He has to remind himself that he’s supposed to be sad and pretend he lost money like the average person.
Sterling rises to highest level in 10 months.
Blackstone fund hit by $4.5bn of withdrawal requests despite property pitch – March conference on sector opportunities fails to stem efforts to pull money out of BREIT. This is interesting because Blackstone has attracted a lot of confidence recently, is this the sign of a general market decline?
Donald Trump to be arraigned in New York criminal case – Former president expected to enter ‘not guilty’ plea as he makes his first appearance in hush-money case – The main man himself! If he makes a come back from this it’ll blow my mind
L’Oreal buys Australian luxury cosmetics group Aesop in $2.5bn deal!
JPMorgan executives joked about Jeffrey Epstein’s behaviour, US Virgin Island alleges – Filing comes in litigation accusing the bank of benefiting from its relationship with the late sex offender – I mean where there’s money, there’s crime. Where there’s a wealthy banker….
Russia confiscates passports of senior officials to stop defection – Kremlin tightens Soviet-era travel restrictions in ‘sensitive’ areas – Nothing spells confidence in your government like them taking your passport so you can go against their unjust war!
Virgin Orbit files for bankruptcy protection in US – Richard Branson’s rocket launch spin-off has already ceased operations and cut 85% of workforce – Branson’s actually having a stinker! The space industry isn’t for everyone is it Branson or Bezoz?
OPEC+ makes surprise 1 million-barrel cut in new inflation risk! This favours Russia, with Saudi Arabia and Russia lead the charge with a -500k BPD cut!
BRICS (Brazil, Russia, India, China and South Africa – the leading emerging markets!) are developing a new form of currency! This is the dollars biggest threat!
The De-Dollarisation: A commentary on the position of the US Dollar:
Past and History:
Gold is very important, and it used to be to the Dollar. It was the standard of trade between countries and exchange of value for currency valuation. The US pivoted to a lack of reserve value for the dollar and started to print more money with no “worth” behind it. This shift happened as they essentially defaulted on their overspending with not enough gold to back up the cash they had printed. So Nixon was forced to do this in 1971 to save the dollar.
With no gold to hedge its value, the constant printing and spending of the dollar has led to its gradual devaluation as we know it, and this rhymes with the decline of previous empires, such as the Dutch and the British. This lack of hedged value, coupled with creating more money and printing it endlessly devalues the currency more and more overtime, making the price of everything go up in response (inflation). A rule of thumb, when central banks print a lot, buy more stocks and commodities as these values will rise while paper money falls.
With over 80% of US dollars printed in the last 5 years, we are entering a period unbeknownst to most of us in terms of size and speculative decline. The dollar may rise and fall short-term, but the long-term outlook looks to be bleak for the dollar.
The US has had 3 sizeable boom and busts since the 90s and this looks set to happen again.
We are close to entering the crossover to Chinese power and currency dominance!
I’m using these graphs by Ray Dalio as a metric for time frames and also the position the dollar is at. I hate to say it but the US is in the decline phase.
The dollar positioned itself as the leader for trade of petrol; control the black gold, control the world. Now the petro-dollar is starting to weaken excessively as OPEC pivots to control petrol prices and outflows as well as using alternative currencies or means of trade between one another to offset the power of the dollar. China is creeping in areas that the US has failed in. They have cemented themselves in Nigeria’s infrastructure and oil production and they love it!
The creation of OPEC itself and now their chokehold on oil productions and therefore prices just highlights the decline of the US’ power. China and Russia have also been buying substantial amounts of gold for trade between them and for the creation of their new currency with has support from large emerging markets like Brazil. The creation of a new currency for trade, backed partly by gold, oil, and the yuan is seemingly on the horizon. Jerome Powell of the US’ Fed himself said there is the possibility of more than one global reserve currency. I think this is a substantial threat that we have never seen before.
I just want to highlight this graph. China is really playing its cards well in terms of the 8 metrics which contribute to the rise (and fall) of empires. Education, innovation and technology, competitiveness, output, trade, military power, financial centres, and reserve status. The US education system, like the UK, is stagnating leading to a technology stagnation (eventually). Look at China. They dominate in the majority of these areas minus reserve status and military power. They even limit game time, screen time, and the content on TikTok if it is not educational!
It’s hard to say that the US hasn’t started to lose its global grip and dollar devaluation and therefore a global overvaluation. Dollars held around the world by central banks have been declining since 2008 and continue to do so. This does not mean the yuan is suddenly a gem. It’s not. China holds a lotttt of US treasury bonds and still has to deal in dollars and does hold a decent amount. They would not benefit off a huge immediate decline. But… they would benefit from a 15-20 year transition where they position themselves perfectly to watch it crumble and pick up the pieces.
Russia has recently been crippled when its dollar wallet was frozen in retaliation but its alliance with China and mass oil output, means it can sell oil and trade in currencies that aren’t the dollar keeping it charging forward. Most countries are following suit, dropping the dollar when oil trade is in the picture. Petro-yuan or gold, not petro-dollar….
I see the Ukraine war and potential Taiwan war as catalysts for internal and external shifts within and between countries, in some part amounting to the end of the dollar. Which, as I said, if it happened now, would massively harm China and the world.
So, the dollar is still relatively strong and will see some upside…. for now.
Note for Anyone who actually read this far!
Please shoot me a message if you’ve read this far on what you enjoyed/didn’t enjoy and with any recommendations etc! I’m going to start looking at trading pies on Trading212 so if you have any you’d like to be featured please shoot me a message!
As always, thank you for your participation and attention.
Chief Investment Officer