Programmable Digital Currencies Are Coming — Here’s What That Means
Aug 17, 2020 | Educational
On Aug. 13, a top official confirmed that the U.S. Federal Reserve is preparing for a digital currency. Lael Brainard, a member of the Federal Reserve Board of Governors since 2014, told an audience last week that the Federal Reserve was experimenting with “a hypothetical digital dollar for research purposes,” according to Bloomberg. Brainard also said the Federal Reserve was…
How Gresham’s Law Drives the Bitcoin Price
Aug 14, 2020 | Educational
“Gresham’s Law” has been around a long time. It was coined in 1860 by Henry Dunning Macleod, a Scottish economist. But Macleod named Gresham’s Law after Sir Thomas Gresham, a 16th century English financier. Nicolaus Copernicus, the Renaissance-era astronomer who proposed that the Earth revolves around the sun, rather than vice versa, also described a version of Gresham’s Law in…
Berkshire Hathaway Should Rationally Own Bitcoin
Aug 13, 2020 | Educational
Believe it or not, Berkshire Hathaway is a concentrated stock with a high degree of geopolitical risk. Its positioning is risky, with heavy exposure in a handful of notably vulnerable areas today. The solution is elegant and simple: Berkshire should purchase billions worth of Bitcoin. In fact, we think it would be irresponsible for Berkshire not to do so. Buying…
Stimulus Failure Today Means More Stimulus Tomorrow (the Stock Market Knows This)
Aug 11, 2020 | Educational
The stock market continues to trade vigorously, with the S&P 500 in touching distance of all-time highs. This bullish behavior has many investors confused. Those who are optimistic about a U.S. economic recovery think the market is looking past the short-term news and forecasting blue skies ahead. Those paying attention to the data, meanwhile, are left wondering whether the market…
Terms You Should Know: Financial Repression and Fiscal Dominance
Aug 10, 2020 | Educational
There are two financial terms that explain what is happening right now. Most investors don’t know these terms, but they are common knowledge among central bankers. The Bank of International Settlements, also known as “the central bank for central banks,” has even published white papers discussing them. The terms are “Financial Repression” and “Fiscal Dominance.” Financial Repression is about what…
How Supply Shocks Create Stagflation (and Why We’re Headed That Way)
Aug 07, 2020 | Educational
Inflation is a funny thing. It comes in different varieties and can show up in different places. As such there is no “one size fits all” version of inflation. The classification really matters. Take the difference between asset price inflation and wage inflation, for example. It is often the case that one exists without the other. Equity and real estate…
Gold, Bonds, and Equities are All Saying the Same Thing
Aug 06, 2020 | Educational
There is a narrative that says the market has lost its mind, and that divergent market signals no longer make sense. The market is broadcasting multiple messages, and the messages are in deep conflict. Through this interpretation, three areas in particular — gold, bonds, and equities — are in direct conflict, and seem to be at odds with each other….
Ugly Goldilocks is Turning into Mutant Goldilocks
Aug 05, 2020 | Educational
A number of years ago, long before Jerome “Jay” Powell became Chairman of the Federal Reserve, your editor proposed something called the Ugly Goldilocks scenario. You likely know the children’s story of “Goldilocks and the Three Bears.” Goldilocks didn’t want the porridge that was too hot, or the porridge that was too cold. Instead she ate the porridge that was…
Big Tech is the Zero-Coupon U.S. Treasury Substitute
Aug 03, 2020 | Educational
As U.S. Treasury yields fall toward zero, and the Federal Reserve deliberately erodes the value of U.S. debt, investors will be forced to seek new safe havens. A broken and dysfunctional U.S. Treasury market, no longer appealing in terms of yield income or downside protection, will create a bond-sized hole in a great many investor portfolios. That hole will have…
How the Gold Price Could Go Parabolic in a “Reverse Bank Run”
Jul 30, 2020 | Educational
If you think the recent moves in gold and silver are wild, buckle up. There is a realistic scenario where the gold price goes full-on parabolic, and it could happen at any time. If this scenario takes hold, we could see the gold price blast through the $2,500 level, or even the $3,000 level, within a timeframe of weeks or…
