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Inflation Crisis and the Imploding Dollar: Panic of the Profiteers

When I became an institutional FX trader in 1999 at the introduction of the euro currency, there was much concern among respected economists that the US dollar would lose great favor as the Chinese sold their Treasury securities and sought the sounder money of European shores.

But it never happened. In fact, the euro went south and the US dollar was still the safe haven after 9/11.

By my second year of deep macro analysis on the interbank trading desks, during all time zones (I cut my trading teeth for 3 years on the overnight European shift), where I had to analyze interest rate forward curves from a half-dozen countries every day, I concluded that in FX, "it was truly all relative."

Then the pendulum swung in favor of the euro as commodities spiked -- remember $150 oil?

Then, in the aftermath of the GFC (great financial crisis), the pendulum swung back in favor of the #1 safety trade of all -- good 'ole USD, still.

The 3 Blinding Biases of Armchair Economists

In the Cook's Kitchen video that accompanies this article, I show a long-term chart of the dollar index so you can see all these "stories," including the current narrative where the dollar should be imploding.

Yes, the current inflation flare-up and rising interest rates can make the dollars in your pocket appear to shrink.

But if you haven't been enjoying their tremendous purchasing power and ROI in technology products and technology equities for the past 10 years, then you have bigger problems with your money management.

I explain in the video why the current trends are a little more than a "pendulum swing" now because of pent-up energy which was suppressed by artificially low rates and high stimulus for so long. The centrifugal force of asymmetric convexity has been released.

I also put the current breathless panic of profiteers (usually those selling gold or "crisis" newsletter subscriptions) in perspective with "3 Blinding Biases" about economics and markets that are easily apparent in their rants.

When Predictions Fail, Blame the Gov, or the Fed, or Me

By the time you are reading this, the market will be digesting a 50-basis point jump in Fed funds by a central bank that is behind the inflation curve.

And speaking of curves, I use the concepts of curvature -- like convexity and asymmetry and option gamma -- to highlight how unpredictable complex systems can be when variables change and "wild randomness" emerges.

What does this mean for key technology stocks like NVIDIA NVDA and Advanced Micro Devices AMD who just reported a strong beat-and-raise quarter on Tuesday?

I write a lot about NVIDIA and AMD because they are so central to a data-driven and HPC (high-performance computing) world where machine learning, automation, and artificial intelligence will keep creating new industries, tools and paradigms for business, and indeed civilization.

And what about the bursting bubble in SaaS-land where Block SQ and Shopify SHOP crashed over 70%?

I have owned both Block and Shopify and been shocked at the extreme pessimism now prevelant in their shares when both companies will most likely be dominant ecosystems in this decade.

Such are the vagaries of market players who live and die by the extremely sharp swords of greed and fear.

A Vital Conversation for the Next 10 Years (so leave your comments on YouTube for history's sake)

Finally, here are some relevant article and video topics I mention in today's edition of Cook's Kitchen...

The Technology Super Cycle

Why the National Debt is Irrelevant: John Oliver is Funnier, But We Reach Same Conclusion

Why Gold Is Headed to Zero -- And What You Should Buy Instead

The last article is more of a thought piece about the "barbarous relic" and different ways to think about its value in a world of bitcoin and asteroid mining, that has also been eaten by software in the last decade.

Ever since 2009, when I predicted the surge to $2,000 on CNBC with Maria Bartiromo, I have been telling investors there are so many better places to park your money than gold bars or the money-burning SPDR Gold Shares ETF GLD.

Just about any software or semiconductor investment would have given you ten times the return.

So be sure to watch the video and learn about the "3 Blinding Biases" as well as my advice on stocks right now and what the Fed got wrong.

This is timeless stuff you will be able to use for the next decade of investing. And hopefully you will exercise your own agile intelligence and never blame me if your predictions don't all come true. Remember my market mantra...

"I'm just a surfer looking for the next wave, never blaming or hating the ocean for being itself."

Talk soon,


Disclosure: I own shares of NVDA, AMD, SQ, and SHOP for the Zacks TAZR Trader portfolio.

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