Current Personal Thesis and Reflections

Our choices are dollars or not dollars...

It’s Dollars or Not Dollars

In more recent years, investment choices are in simplest form dollars or not dollars given there is no longer an implied savings mechanism (risk-free rate).

Post GFC most global central banks have increasingly come to understand the monopoly created by the Bretton Woods Agreement, and on some level, they’ve all begun battling for global positioning through currency manipulation/devaluation and cyber-attacks or hacking.

The reality is, there is one dictator in this process, the FED. Due to the nature of the reserve status of the USD, all other countries have increasingly found they are merely a 2nd or 3rd derivative to moves in the dollar. In many ways, this further compounds systemic risk and liquidity issues as countries attempt to find ways around the negative effects of being in a dollarized system. Eurodollars are a good example and so too are stablecoins. The latter will likely cause additional disruptions as these new technology rails provide avenues of capital flight via cryptocurrencies and continued growth. Though stablecoins possibly have some destabilizing components, on the whole, I think they are superior monetary technology and an improvement over the rails of the existing system.

After the GFC

Post 2008 the direction of the dollar has increasingly dictated all other asset movements. Due to the chain reactions caused by this, Central Banks have in almost all cases become the largest hedge funds in the world, while at the same time losing their favored tool of rate manipulation. Regardless of a CBs global position, they are finding their just playing second fiddle to moves initiated by the FED. The Post GFC environment has created an unseen but present WWIII scenario on two fronts between Nation States. State actors are increasingly attacking each other via

1) cybercrime

2) through currency manipulation.

Can’t Get Your Way? Disrupt the Supply Chain

Additionally, it seems in 2020/2021 we are seeing a new strategic attack vector popup and that is supply chain disruption. If you can’t come to agreeable terms on currency parity or pegs you can force hands by crippling or not allowing delivery of basic and needed goods. “Sometimes you have to cause a problem to fix a problem.”

This along with new rails for capital flight through monetary networks like Bitcoin, Ethereum, etc is disrupting the legacy systems, but on a positive note probably builds a better system of balance out some time in the future. Over the past few years, if you watched big spikes in Bitcoin price, most of them seem to correlate well with failing currencies in Greece, Lebanon, Venezuela, Argentina, Italy, capital flight from China due to capital controls, etc.

The Rise of Digital Assets

To me, these asset class dysfunctions and changes in rotations that started around 2018 (possibly as early as 2015) are reasons for incorporating digital assets in what has come to be known as the 60/40 asset allocation model.