Feb 22 Markets Report: Fiat Currency Going to Zero?

You can call it karma, the Golden Rule or even Newton’s third law. But at the end of the day, actions have consequences. And not even the Fed is above universal laws. 

Ever since the Fed’s money printers went Brrrr to the tune of $16 trillion, consumer prices have hit a 40-year high. And the Federal funds rate is currently sitting at 0.08% with the majority of analysts expecting a 0.25%-0.50% rate hike during next month’s Fed meeting. JPMorgan Chase expects interest rates to climb as high as 2.25% over the coming year. Translation: The cost of living will continue trending up. 

To add insult to injury, global supply chain issues and the Russia-Ukraine conflict are still ongoing, prompting investors to seek safe haven assets. Check out the details and get updates on more of your favorite asset classes below.

The S&P 500 fell another 1.8% in the past week, bringing its year-to-date (YTD) performance to -8.7%.  The Nasdaq’s losses are almost double, at -14.74% YTD. 

Most of this slump can be attributed to the will-they-won’t-they Russian invasion of Ukraine that Wall Street is watching with bated breath. U.S. and Russian officials are set to meet in the coming week, so fingers crossed for a peaceful resolution to this conflict. 

On a more positive note, The FOMC has officially banned Federal Reserve officials from buying stocks and other assets like commodities, crypto and individual bonds. Last year, Fed officials like Robert Kaplan were ousted for making million-dollar stock trades based on their inside knowledge of where the economy was headed. The public was obviously outraged, hence the new rules. Sounds good to me. If only the government could ban Nancy Pelosi and her peers from insider trading, too.

Nobody likes a Debbie Downer, but buying your dream home is starting to become a pipe dream. According to Bankrate, mortgage rates across the board have risen to 3-year highs. The average 30-year fixed mortgage is now 4.19%, meaning that the monthly repayment for every $100,000 borrowed has gone up by $6.93 since last week. 

And that’s not all folks. The NAHB came out with some new data showing that volatile lumber prices have added more than $18,600 to the average price of a new single-family home.

Remember what we said about actions having consequences? Case in point: A near infinite supply of dollars is chasing a finite supply of homes. Whenever that happens, mortgage rates and home prices can only move in one direction: up.

Warren Buffet is considered by many to be the greatest investor in history. But he would not be the man he is today without his right-hand man Charlie Munger. During a recent interview, Munger said that investors should assume that fiat currency (e.g. US dollars) is going to zero over the next hundred years. 

Well that’s great publicity for crypto, right? It depends, since Munger and Buffet also happen to be massive crypto haters, calling Bitcoin “rat-poison squared” and comparing crypto to a venereal disease. But hey, do you expect anything less from a couple of 90+ year old gentlemen?

In another example of bad publicity potentially being good publicity, this past week the Canadian government clamped down hard on the Freedom Convoy. This is a group of truckers and other supporters who have been protesting vaccine mandates down in Ottawa since January 22. 

First, the Canadian government shut down their GoFundMe campaign. So protestors naturally turned to crypto donations, which soon amounted to over $700,000. But on February 14, the Canadian government invoked the 1988 Emergencies Act. 

In short, this gave banks the ability to freeze accounts linked to protestors and supporters. The Royal Canadian Mounted Police (RCMP) even instructed crypto exchanges to report any activity by a set of blacklisted wallet addresses. 

These emergency measures have frankly shocked the international community, with many perceiving them as signs of a declining democracy.

Just a few years ago, JPMorgan Chase CEO Jamie Dimon criticized crypto for not having any intrinsic value. Today, JPMorgan Chase is the first bank to embrace the metaverse. Maybe there’s hope for Warren Buffet and Charlie Munger after all. 

In January, JPMorgan released a report estimating that the metaverse will become a $1 trillion market. This past week, they followed up by opening a virtual lounge in Decentraland called Onyx.

Apparently, the New York Stock Exchange (NYSE) also wants in on NFTs and the metaverse. The NYSE recently filed a trademark stating that they want to offer “downloadable virtual goods” and other crypto-related products. Sounds like they’re looking to compete with OpenSea. And the timing is perfect. 

OpenSea has been dealing with a bunch of security issues as of late. Last month, an OpenSea bug allowed attackers to buy expensive NFTs (e.g. Bored Apes Yacht Club) at huge discounts. This past weekend, some users fell victim to an email phishing attack. The hackers sent official-looking emails that convinced OpenSea users to transfer $1.7 million worth of NFTs to malicious wallets. OpenSea is currently investigating this exploit.

Gold doesn’t usually perform as well when interest rates rise, since investors are more attracted to fixed income. But that hasn’t been the case this time around. 

Gold has been doing better than most other assets, up 3.64% YTD. On Friday, Gold briefly broke above $1,900 a troy ounce before reverting to $1,890. Still, Gold is trending up and analysts at Citigroup and Goldman Sachs believe that it could hit $1,950-$2,000 in the coming months.

Last week, oil prices peaked at $94.87 amid expectations that Russia was at the brink of invading Ukraine. But when that didn’t happen, oil prices started falling. Talks of a nuclear deal between Russia and Iran sent the price plummeting further, since that deal would bring millions of barrels of oil onto the market. At this point, it’s a tug-of-war between oil bulls and bears — and the bulls are leading.

Move over France, American fine wine is on the rise. Over the past decade, California’s share of the fine wine market has grown from 0.1% to 7.9%. California is currently in fourth place behind the French regions of Bordeaux, Burgundy and Champagne. And Californian wine prices are reflecting this growing demand. 

Over the past year, The California 50 Index has risen by 31.9% — outperforming the industry benchmark Liv-ex 100 by 7.3%. Screaming Eagle was The California 50 Index’s top-seller for 2021, with the Screaming Eagle 2010 listing for as much as £12,000.

Circle is the crypto startup behind USDC, the second-most popular stablecoin on the market. Just six months ago, Circle was valued at $4.5 billion. But now it’s running circles around that previous valuation. 

The company recently announced their intentions to go public at a $9 billion valuation via a SPAC deal with Concord Acquisition Corp (CND).

For context, a SPAC (special purpose acquisition company) is a shell company that raises capital and goes public for the sole purpose of acquiring or merging with a private company at a later date. Through this process, the private company can go public at a rate that is both faster and cheaper than a traditional IPO.

Some investors say that stablecoins are the most important products in crypto. And judging by the $181 billion market cap of the stablecoin sector, I can’t say I disagree.