The Pomp Letter - Geopolitical Chess Meets Economics
To investors, There was a flurry of new legislative bills related to foreign conflicts that made progress in recent days. Although it seems absurd to send nearly $100 billion abroad while the United States has significant domestic issues that have gone unaddressed, there is one detail in these bills that really caught my attention — the REPO Act. According to NBC News, here is what the REPO Act entails:
This is noteworthy because the United States is essentially planning to take money from the Russian people to give to the Ukrainian people. CrossBorder Capital’s Michael Howell said it best: “Whatever the compelling moral case, the economic impact of April 20th's decision could match August 15th, 1971 when Nixon took US off gold.” Personally, I can’t think of another example of something this severe happening in my lifetime. While the United States and her allies are optimizing for the short-term in Ukraine, we are essentially pushing every country to consider gold, bitcoin, or other non-fiat currency assets to hold as a growing percentage of their central bank reserves. The freezing and/or confiscation of one country’s assets will lead to many countries creating structures that minimize this risk for them in the future. Remember, gold’s price was pushed up to a new all-time high within 48 hours of the Iranian missile attack on Israel. We still don’t know who was buying so much gold in the days leading up to the attack. That feels like an increasingly important question to answer. This geopolitical chess game is all happening against a backdrop of the strengthening dollar. According to Bloomberg:
We are also seeing aggressive buying of stocks for the first time in weeks, despite all the chaos on the geopolitical stage. Bloomberg’s Jan-Patrick Barnert writes:
So the stage is set for more uncertainty in the coming months. The Federal Reserve has lost the fight against inflation and is too scared to raise rates higher after their promise of incoming rate cuts. The consumer across the American economy is spending like it is 2021. The largest countries in the world are playing a game of chicken across various conflicts. Central bank assets have now become the possession of whoever touched them last. And the United States is preparing to hold an election between two elderly candidates, including one that is being criminally prosecuted by his political rival. The whole situation is insane. Investors have to ignore all this noise though. It won’t help you allocate capital any better. The short-term fear and uncertainty is not going to change the long-term trend of assets. The US dollar will continue to be debased. The national debt won’t stop growing. Stocks will go up over the long-run. Bonds will continue to be a losing trade. Bitcoin can’t help but appreciate in price as the dollar is destroyed. And the citizens who invest, rather than save, will end up pulling away on the positive side of the wealth inequality gap. We make not like the situation, but these are the cards we have been dealt. Hope you all have a great start to your week. I’ll talk to everyone tomorrow. -Anthony Pompliano Reader Note: Today is a free email available to everyone. If you would like to receive these letters each morning, please subscribe to become a paying member of The Pomp Letter by clicking here. Mark Yusko is the Founder, CIO, & Managing Director of Morgan Creek Capital Management. David Alderman is a Digital Asset Research Analyst at Franklin Templeton. Adam Sullivan is the CEO at Core Scientific. This conversation was recorded at Bitcoin Investor Day in New York. In this conversation, we discuss bitcoin halving, institutional demand, bitcoin miners, ethereum, and future outlook of crypto industry. Listen on iTunes: Click here Listen on Spotify: Click here Panel Discussion on Bitcoin HalvingPodcast Sponsors
You are receiving The Pomp Letter because you either signed up or you attended one of the events that I spoke at. Feel free to unsubscribe if you aren’t finding this valuable. Nothing in this email is intended to serve as financial advice. Do your own research. Invite your friends and earn rewardsIf you enjoy The Pomp Letter, share it with your friends and earn rewards when they subscribe. |
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