Mark, thank you so much for these videos! It is amazing how you take real life examples and explain it having applied CFA materials. I really appreciate your work! No one could explain things better ❤️
I'm currently reviewing macroeconomics level 1 for March exam. This video helps me to see all the theory applied to the real world. Great content ! Thanks again professor.
Fantastic! Cleared up part of my disconnected thoughts. I have better clarity now. Will be sleepless nights for me waiting for the next two videos and I'm pretty sure it can clear up most of the rest. This has also given me a better idea which corner of the market to play in the coming few years. Can't say enough thanks to you professor.
One thing that was not discussed in this video was ( although I know this isn't something you might want to discuss right now) the end game of this endless borrowing from your own central bank (printing) and spending. This without a doubt can't go on forever. And there is no end in sight. Plus I don't expect US to do the right thing. So what's the end game here ?
Next week? inflation?, all I know is that all my life "P" has just gone up and up, my first house, 1966, brand new, in SF Bay Area cost $18,000 and now takes over $700,000 to buy it. All I need to know.
The suggestion of a supercycle in commodities looks evident in lithium for batteries or uranium for power supply. There is an agreement with the American dollar base case and the crowding-out effect that appears to be occurring from the amount of government borrowing and unemployment. That said a good hypothesis that got me thinking. However, I am a student to finance, so I find bitcoin ideology fascinating (don't worry, I'm not a zombie bitcoiner, I'm Canadian). The idea of a sunk cost, when newspapers were being printed for the common to read, there were logistics involved to develop the textile and print the headlines on the paper. Therefore, a breakeven of the number of units produced and fixed costs, in other words, sunk costs in terms of creating the newspaper. Innovative companies such as Amazon, Facebook, and, most importantly, alphabet have removed the sunk costs. Creating a marginal revenue equalling marginal cost maximizing profits, not to mention the price discrimination, but these monopoly companies have altered the way we access information by removing a sunk cost of the paper material. Reading books on a tablet, for instance. The argument that bitcoin has optimism towards the capital accounts and the current account deficit is where someone is placing their fortune, savings account for that matter, where it's collecting nearly no interest after-tax implications. The money supply, or rather the paper money is endless and very comparable to how Japan's printing press was going off in 1998. Fidelity, square, PayPal, and a senate seat holder in America own bitcoins. Being decentralized from the government gives this unique valuable factor against the regulation policy, and the time horizon since 2008 while still being very volatile has kept increasing. Also, American banks started a share buy-back program to create a sentiment of value in the market (even though it's financed anyway)? I know it's intangible and has no earnings, but the ideology of digital money is making a presence. Cheers,
Working in the tech realm I understand and see both sides to the Bitcoin situation. The whole point is that there is a finite amount, it is decentralized to the point where no organization can control it (whether that be a bank, government, etc), and it’s secure and cheap to transfer. Another hugely overlooked aspect is that it’s creator is not a public figure. When other cryptos are made, their founders, whether that be a company, government, bank, etc, are attached to it. That defeats a lot of the qualities that make it so unique. With Bitcoin, it is essentially like gold, it has no creator; no one in control of it. Cryptos like ETH, Ripple, and others are simply modified versions of bitcoin’s idea that serve a different purpose. This can be said of precious metals as well. Gold was the original, while silver was used as a less valuable version of gold, platinum as well. Just like fools gold, the shitty versions of the crypto world will fade in value, most will become worthless as they are in fact just shitty knock offs of the original. The fundamentals of it are the same as any other currency, what you can buy with it. In its early days, it was illicit items. Now as more and more legitimate buying options are available, it’s value is rising. That being said, I tend to agree with Buffets point of view as well as the one expressed in this video that Bitcoin, like gold, is not a productive asset. Like Buffet says, you can fondle your gold all day or, in this case, stare at all the 0s in your crypto wallet, but it’s not going to produce anymore of it. I’d much rather own a hard asset like land, that is productive, as a hedge against inflation and the falling dollar.
Great video Mark, it's great to get your insights and I like that you connect the content back to the CFA curriculum. You probably don't want to hear it, but I'd say it's absolutely worth a few hours of your time to understand bitcoin. With yields near 0, I see large opportunity and need for a digital store of value.
Hi Mark, 40:19 on the Long commodities and its trend (inflation too), maybe you find this historical chart interesting twitter.com/Callum_Thomas/status/1339024896215506944. It supports your narrive I would say very well. Puting pen to paper, what are some examples of ETFs (base metals mostly my take) or other ways that one could get a passive exposure on the LONG Commodities theme ? Thank you !
Brent Johnson makes a pretty compelling bull case for the DXY with his dollar milkshake theory. In short, Brent believes the dollar is still the cleanest among every other fiat currencies and every other countries want the dollar, especially in crisis when liquidity is limited. The eurodollar market is much bigger than the dollar itself. I'm curious what is your view on that?
Great point about crypto! However, FB’s Diem (previously Libra) - as well as China’s crypto - will be about crypto backed by currency i.e. fiat digital currency. Anyway, this doesn’t change this argument that maybe somebody else comes up with another self-constraining algorithm to generate another crypto. One more reason that stops me from putting some money in bitcoin is the possibility of government’s ban or regulation.
Hi Mark, With the current landscape where DXY is rising due to Yellen's policies, and the interest rate still at the lows due to Powell's policies stance. Are we able to get an update to this video on the relationship between what Yellen and Powell's action have on the markets? The markets continue to move higher despite the logic that when DXY is up, the market shld be going down. In the above scenario, I have problems reconciling the rising yield curve on the 10year bonds and I hope we can get further insight into what is happening between the different treasuries (2,5,10,20) and Gold (Dipping past $1800) and the asset (equities markets). Hope to hear from you or viewers who get the whole ecosystem as I'm having a tough time understanding. Thank you everyone.
It seems like a lot of people are short the USD and long commodities. Does it ever worry you when you are on the same side as the majority? There is no rule to say you shouldnt but I think there is more that can go wrong?
Love your applied content! (As well as CFA material). Btw how fast has your subscriber base grown? I feel like it was a fraction of the current 100k last March.
Hi Mark, thanks for the video. A question on minute 37:00. I believe in Reading 10, in the Mundell-Fleming model, under high capital mobility condition (like the U.S), an expansionary monetary policy together with a expansionary fiscal policy leads to an ambiguous situation. Nonetheless you see it clear that the current scenario (both expansionary policies) will make the domestic currency depreciate. What is the thing that makes the Mundell-Fleming model not work in this case? Or perhaps I interpreted something wrong?
@@MarkMeldrum Thanks for the answer. Doesn't the MF model also argue about how monetary and fiscal policies exercise upward or downward pressure to the domestic currency? In this case both expansionary policies, under high capital mobility conditions would lead to an ambiguous situation. If you refer to what is explained in Reading 10, what is what would make this situation not so ambiguous, and thus apply downward pressure to the USD? (In your video from Level II Reading 10 you indeed mention that an expansionary fiscal policy applying upward pressure to the currency rates is something questionable for well developed countries).
Hello, Mark. I have a question regarding Z and G spread. Sorry for asking here but i do need the answer really and ASAP. Do these spreads be equal if we deal with 1-year 1-coupon bond? How would they differ? Thank very much in advance!
Dear Mark, do you think agricultural commodities (cattle, hog, sugar, wheat, etc) will benefit also from these factors you mention? I am asking because I can't open a base metal trade only and looking to do it with a commodity ex-energy ETF. Thinking in the 3 circles dimension you mentioned, inflation and weaker USD pass the argument for agricultural commodities to rise, but I am not so sure for economic activity.
Mark, question. Isn't this time different, given that: (1) pretty much nearly all countries are running very large current account deficits due to COVID-related spending, not just the U.S.; and (2) interest rates are low, again, pretty much globally, not just in the U.S. China, if I'm not mistaken, is an exception to this (rates are relatively high, and the current account is positive), but I do not see an inflow of foreign capital rushing from other countries to China, given the challenging legal and political landscapes
Current account is a trade deficit. I think you mean all counties are running fiscal deficits. Yes they are. However, the US is about 100% debt to GDP - that is an issue when growth in GDP is not greater than the effective interest rate on the debt. To solve that huge problem, the Fed has to finance the debt and keep rates low. However, there has to be an exit - I don't see an exit from growth - so there will have to be a major devaluation of the currency to fix the current account. If you can't get growth internally, you have to get it externally.
@@MarkMeldrum Thanks I appreciate the answer. And I greatly appreciate you doing this, especially an applied video on currencies and commodities. I have to admit, while I was going trough all three CFA levels, I had to pick and choose my battles (working full time while studying), and currencies and commodities are two topics that I didn't spend as much time as I should've had.
Dr. Mark - Why is the increased fiscal a negative for the USD? In CFA L2 we were saying that increase in fiscal --> yields higher --> domestic currency appreciates, so I don't see how that argument holds. Can you please clarify?
You are referring to Mundell-Fleming. You must consider that the Fed is actively keeping rates low. Buying $80T of Treasuries each month (1T a year) keeps that much supply off the market. That keeps rates from rising since less supply gets to the actual market.
well an argument for bitcoin is that it has no central point of control. If a large company were to create its own crypto, it would want control of it (similar to what facebook was going to do). When they have control of the network, people need to trust their system, whereas on a decentralized network like bitcoin's blockchain, no one needs to trust anyone. There's also the question of "faith". Similar to how gold became a popular tradable commodity among many many different types of metal in existence, bitcoin has that factor in it too. just my 2 cents.
Thanks Mark for the informative video. Small question about the historical precedent of large deficits coupled with low interest usually results less attraction to foreign capital. My thinking is whether inflated equity prices can attract foreign money to usa replacing the attractiveness of higher interest rates ?
Regarding Bitcoin, it's actually not comparable to the other coins. Bitcoin had an "immaculate conception" which basically means it was created by a pseudo-anonymous person (or group of people) back when no one believed any of these coins had value. The creator(s) then disappeared over time (most of which realized little-to-no benefit from the rising prices since before 2013), leaving the project to take on a life of it's own. All the other coins were created with profit in mind or with a select group of individuals managing/controlling the coin, which means they have already failed in becoming truly decentralized. Why does that matter? Decentralization is how you solve the problem of "bypassing" the traditional banking system when monetary/fiscal policy is abused by authorities. That is Bitcoin's use case. Decentralized, borderless, value transfer/storage with a deflationary coin issuance pre-determined by an algorithm. Every transaction is publicly verifiable and anyone can monitor/store all the network activity by running a Bitcoin node, eliminating the need for an intermediary. No one can truly shut down the Bitcoin network (even though China has been trying and failing for years) because that would require shutting down the internet. This is not the case with other coins. Other coins can be traced back to a single person or organization who are at the mercy of the authorities (i.e. they are not decentralized, even though they falsely claim to be). So, saying there is an "unlimited supply" of these other coins is true, but that doesn't have any effect on Bitcoin's utility, value or issuance. Love your vids, just thought I'd point that out.
Great video. Your insights are invaluable. I'm new to following the markets and it is always great to learn from you. By the way, after your last video, I was listening to some other analysts opinions on where the market will be in 2021. Tom Lee (who has been very accurate on his calls this year) has a very similar prediction to the one you outlined in your last video. He expects a correction of 10-15% to occur sometime between Feb-April which may drop the market from around 4000 down to 3500, and then a recovery from there, which would take the market to around 4300 by end of the year. Cathie Wood also had an interesting interview on Bloomberg .. I think it was a very good interview with good questions and answers. Also, I was watching some of your older videos back from this year. Good call in June on that 4000 level on the SPX by the end of this year. We are very close to that level and there are still around two weeks left.
I guess the main differential between Bitcoin and other crypto currency is that we don’t know yet who invented it. The whole point about crypto is decentralization. Any company or any entity who attempts to do ICO is actually no different than a central bank cuz they reserve the power to issue more coins and that’s a form of centralization, defeating the purpose and idea of blockchain. However, I don’t own any Bitcoin, just try to share a thought
Thank you for the great explanation! Just wondering how you've gone long on base metals? ETFs on things like copper, lead, nickel, palladium and zinc are not particularly liquid (unlike SLV) and options for them, if available, have huge bid-ask spreads. I'm guessing you're doing it via futures?
@@MarkMeldrum If so, I'm assuming you believe there is going to be some downward pressure on the prices of those metals or is it just a matter of things working out on macro and policy level? In passing, today seems to be like a nice big day in red, as you say. We now know there's going to be $900bn stimulus, yet markets over here in Europe are in a bit of a panic because of the UK's Brexit negotiation troubles and the new strain of Covid-19 there. Futures on the S&P500 indicate it's likely going to open at some 2% lower in a few hours. The VIX has jumped to nearly 30. It's great day to sell puts on certain things, it seems, but I digress...
@mark.meldrum, thank you! So clear and valuable. Bit sad that some idiots online make you spend valuable air time on warnings. I looked at commodities ETFs (ex-oil) - as you said there are few , but no obvious candidates for option trades. Which ones are your picks?
If the value is created from scarcity, then it is totally fine, just like a million dollar painting. If Bitcoin is unique among other cryptocurrency then it's value is justfied. If Bitcoin is treated as function currency, then you can think about it from a rational lense.
The case for BTC is far more nuanced. BTC supply is price-insensitive and total BTC is finite + known. Gold, on the other hand, is the opposite. It is also quite inconcievable to move $1m worth of gold across borders, whilst the equivalent transaction in BTC is far easier. For me the BTC story is not a DXY-bear story, but a gold replacement story. When you look at the market cap discrepancy between gold ($10t+) and BTC ($400b), the direction is obvious to me.
You can't compare 1970 till now gold vs snp500. US was booming back then was the leading country. The big daddy. Now it's the old grandpa struggling to stay alive. The point made against gold is valid if you want to compare a developing country and gold but not a developed country vs gold. They kill their own currencies.
I think Bitcoin price should be understood as a pure form of a supply/demand function. It's a thing that has value only because other people think it has value. I see no fundamental basis to compare whether the current price is high or low. But the well defined supply makes it easier for demand to outstrip supply and is certainly a natural advantage for the upside. Since there is zero fundamental basis for a price, anything from $1 to $2 million is actually reasonable. It's just supply and demand, right? Making the bull case here then would then be about changes in demand and flows. I see this rally having more non-retail flows than last time (Square, etc). Doesn't seem retail driven, so could be the beginnings of an S-curve of adoption among professional investors. Secondly, these same DXY bear case arguments apply to BTC and gold equally, which could be a headwind for BTC. So those are two factors pointing to increased demand. Whereas the rampant retail speculation of 2017 seems quiet this time around, so that weakens one of the bear concerns. Personally I'm not invested in BTC for the same reasons I'm not invested in gold, as you eloquently laid out here. But I do think there is a legitimate bull case to be made! As for the other cryptos, I view that as analogous to other precious metals. There is gold, and then everything else (silver, platinum, diamonds, etc). There is bitcoin, and then everything else. Humans greatly prefer gold when picking shiny things, because we know others greatly prefer it too. A self fulfilling cycle. We have seen gold pull away from silver and we will likely see bitcoin pull away from the others in a similar fashion. I would stay the hell away from alternatives coins. Pls don't block me and tell me if this wasn't good logic to you!
How did you equate gold to S&P500? ~47:30, when you say "X ounces of gold to buy the S&P"... are you talking about a 1 future contract or something? If buying an S&P 500 index or mutual fund, I specify a $ amount or number of shares. thanks
Hey Dr. Meldrum , I've noticed you've mentioned DBB for potential exposure to base metals. Just curious, as a Cad resident, say we'd convert funds now to USD, buy DBB and eventually sell & convert the USD back to our domestic currency, wouldn't we be cutting a chunk of this hedge in the lost exchange rate between today and in the future? Am i missing something? This alone has made me not want to invest in US markets due to worries of currency devaluation, thanks immensely for the great content as always!
If your local currency strengthens more against the USD than the commodities strengthen against USD, then you will even be in negative territorry. So the solution I think is to hedge that USD.CAD position you open.
@@dxlor Exactly my thought process. That's why I'm curious as to why Dr. Meldrum would suggest a USD based ticker like DBB instead of one in his domestic CAD currency, for example XMB (quick lookup). Unless there's something I'm missing, for example, the USD currency depreciation would be implied in the price of DBB, which would make its return greater than XMP in base currency, but converted back to CAD would be the same as XMP? That's what I'm unsure of..
You have part of it. I need an ETF denominated in USD to respond to a falling USD. If the CAD is strengthening it may be that commodity returns in CAD are muted as a result of a weak USD. This can be currency hedged. However, I also need volume and liquid, or at least relatively liquid, options.
@@MarkMeldrum Oh i see now, that does make much more sense, especially if the plan is to also play the options, i completely missed that. Thanks for answering and clearing it up, this was nagging away at me hahaha. All the best Dr. Meldrum
Hi Mark its a very good video. Thannk you! There is an issue I cannot really follow. That is each real asset is a currency and hence appreciates in value. Well a house gives me the value of housing, this does not change over time, equivalent with other real assets. However, the central bank and fractual reserve banking dilute currency (currencies cannot store value over long time - see evaporate 2% of purchasing power p.a. as central banks aim). So the argument is correct if we meassure our welfare in fiat. But since real assets are stable in value, my fridge gives me the same value as 10 years ago. So since everything rises in fiat numbers, but real assets stay in value. Fiat is what declines in value right?
How can you say a house does not change in value. You get a convenience yield (as a home) + capital appreciation. Further, houses are better built today, safer, more modern. You have to consider the quality improvement. Housing prices have increased on average at a rate higher than inflation. Durable goods are depreciating assets (appliances). They are goods, not assets. As for inflation making the value of your money a moving target, yes it does.
@@MarkMeldrum Hi Mark, right we have convenirnce yield on the house as we had 10 years ago. This did not change (Assume we repaired all arising issues and this has been curable). The convebience yield measured in fiat might be risen due to a fall in value of fiat. Of course we have better houses today, but when I stay in my home the convenirnce yield did not change. You are right the new ones is most likely higher in value an convinience yield. However where we do not agree is capital appreciation, thats first price increase not value increase. Since we measure capital appreciation in some diluted fiat, we should consider fias is aimed to be destroyed by e.g. 2% in value or CPI (or more when checking shadowstats). We may get more fiat for the house, but do we get more cars, beefs, health insurance, educational programs with the house or the fiat as 10 years ago? Well back in the 60s an average one year sallery was needed to buy a home, today its much more, well they might be more modern yes but donwe flip houses each year? Probably you can buy a more with the proceeds from a house sold that we bought 10 years ago... I do not claim the ratios fixed, but central banks love to type curreny and devalue its fiat and this makes capital appreciation natural in fiat terms By the way, red in the readings and you mentioned in the video about the issue of current account deficit and also keeping currency price low to maintain 'competitiveness' maybe it could be good to explain the consequences in when it is convenient in one of the future videos. The curriculum has room for improvement in this area and for myself I see capital missallocation as the issue, but maybe there is more. PD fiat is not money, because fiat cannot store value over long time horizon. The evidence is that all fiats failed and that ones that today still exist decline in value measured in real goods.
I have the same exact perspective on crypto as you. Whenever my friends ask me about various block chain based currencies I always think about the U.S in the early 1900s when the banking industry isn't consolidated and banks can have different notes as money. I read this from the book 'Lords of Finance', but if I understand correctly, the Fed was put in place and the banking industry was completely reformed in order to bring about a unique currency that is the US dollar. Before that, there was too much individual risk in banks. A bank going bankrupt can completely devalue their notes and lose people their life savings. I see the same type of individual risk in crypto currencies and I can't understand why they have any value to begin with. However, when 25 yo me explain this to my friends and tell them I study finance they somehow look at me as if I'm a retarded boomer :p
Mark, but currencies are a "relative" game. So if the US outlook becomes better going forward relative to Europe's outlook for instance, then the USD should appreciate relative to the EUR, as the US will look like a better place for money to flow into. So why can't that be the catalyst for DXY to not drop even more?
@@MarkMeldrum if US outlook starts to look better, growth and inflation expectations will go up = yields go up = money flows in chasing yields. Not expected to happen in EU as much. Just my view.
55:55 As you said in the video, weakening dollar and inflation are actually helping the earning of SnP 500, and if inflation is going up cash will be a bad asset class to be in, why do you want to be in 100% cash position? ( I watched your last video and I understand you don’t see much upside on the REITs, but does it make sense to continue to some exposures in the SnP?)
Cash has returned almost 7% in one month. That is the lost value of the positions I exited. Had I stayed, even after dividends, I would be down 7% since moving to cash.
@@MarkMeldrum I see. But I remembered one of your videos, portfolio management as a retail investor. You use SPY to get exposure on the market and actively trading in the REITs space. When you say 100% cash position, do you just mean you free up all the cash in the REITs space or your whole account?
This feels like a christmas special! By the way hearing the way you talk about bitcoin, I'd say you don't really understand bitcoin. Yes, there is a finite supply but that's not the whole case. Bitcoin is a bet on digital scarcity & censorship resistance. I also think you're confusing bitcoin with securities. Companies have issued cryptocurrencies and they've all consistently gone down. I would love to see you make a case for 'why bitcoin is unique' in a future video (even if you don't agree with it) as you do so eloquently on other topics. There is more to bitcoin than just the trading/economic side. My guess is you'll better understand why bitcoin is unique if you understand the technical side.
keywords: en.wikipedia.org/wiki/Byzantine_fault Byzantine fault tolerance, en.wikipedia.org/wiki/Proof_of_work proof of work (basically converting energy to a lock+key combination).
Good operating leverage. Find well run companies. The increase in prices should boost operating margins be a greater percentage than the move in gold or silver prices. The upside for well run, high operating leverage companies is compelling. But, once momentum is prices are gone, share prices will drop as easily as they went up.
@@MarkMeldrum I got that part. My question is actually why the YC would become upward sloping if the central bank does nothing. Is it because when demand for the US Treasury is low and supply is increasing, the price of treasury bond will go down which make the yield higher?
If we look cryptocurrency as evolution to existing currency then we can compare cars vs horse. Sure many companies can start cryptocurrency but not many will survive, just like auto companies 100 years ago. Many big buyers believe Bitcoin will survive, I do not know the answer. If cryptocurrency really will be adopted, should short the existing currency instead of buying any specific cryptocurrency.
Side topic, how will 2021 possibly be for the old chaps FNMA & FMCC ? Ackman has it around cost for about 7y, hence a dragger so far, but still did not sell, expects it will pop ... cheers m.th-cam.com/video/_UAprkduLoo/w-d-xo.html
I'd argue if you want long exposure to possibility of a sound digital money being possible than Bitcoin is the best crypto currency to hold. What is going to come along to disrupt the network effects Bitcoin has built in the last decade. No marketing campaign can buy the mind share Bitcoin has currently. I think the limited supply + storied past make a compelling case for Bitcoin for being valuable and that no one is going to be able to copy cat it. If you want to make a case of in 10+ years, then sure maybe something else will come along, but in that time frame I'd be able to trade some BTC for the new thing. For value I think about it like a search says 6.1 billion ounces above ground gold @ 1850 / oz comes to ~11 trillion. If Bitcoin can capture ~10% and become worth a trillion, the price will still double. I don't think thats an entirely unrealistic scenario, but too optimistic to justify buying in significant amounts at today's prices for me. For me I find having a position helps me sleep at night though. I think of it more as a form of schmuck insurance as Chamath Palihapitiya describes it.
1:01:50 Bitcoin fundamentals are in a nutshell: scarcity, salable, secure, decentralized, fungible, portable, seizure & censorship-resistant, borderless, liquid, divisible, durable, and more easily verifiable. Besides that, Bitcoin is continuing to increase in value because it has far superior SOV and monetary properties than gold. 1:02:10 Gold needs a custodian / 3rd party to transact globally; additionally, gold requires trust. We know banks control the custodian game, and governments & banks are closely-Knit. Bitcoin fixes this drawback because the transactions & clearance do not need trust in a third party. People are in control. The rest of the cryptocurrencies are basically dog shit. The only ones with real value are the ones with real utility and practical use cases., like Etherum or Ripple.
But this is my point - there are others beside BitCoin and you mention 2 viable ones. Was is stopping Apple, Google, Amazon, central banks, from issuing cryptos? If an unlimited number of limited cryptos can be introduced, where is the scarcity?
@@MarkMeldrumnothing, actually they have plans to issue coins that mimics the properties of fiat money. I think the people assign value to Bitcoin due to the decentralization and -in theory- the lack of manipulation by a central authority. So, in consequence, they can avoid situations of currency or laws manipulation that saves Wallstreet rather than Mainstreet (like in periods with a crisis of liquidity, like the Subprime crash) For the scarcity point, I completely agree with you. I think that crypto is gaining momentum due to the frenzy around technology -implicit in the investment world- and the detachment from financial fundamentals. Just see Tesla, Uber, and Airbnb. The investors trows a lot of money into these cash-burning machines.
@@lautaroparada950Tesla and ABNB have already crossed over to the profit making stage (for normal times) and are absolute gargantuan industry leaders. Uber, meanwhile, hasn’t really gone up that much compared to its IPO price, with its piling losses and lack of visibility for breaking even acting as major drags. Not sure if you can really have concrete grounds for lumping these three equities with the crypto movement together. Technology, yes, everyone can see that connection. But I’m not sure whether your implied correlation is really that strong to hold up against all kinds of possible headwinds.
@@MarkMeldrum I find this report from Fidelity to answer most of your questions about Bitcoin Mark, I really think you could find value in reading it, the main argument supporting higher Bitcoin prices in the future is a greater level of adoption among institutional investors. With only a 1% of allocation to Bitcoin in institutional portfolios SAA you would have a big amount of monetary inflows into this limited asset and that’s how you get the expected value of Bitcoin, you get a higher price the higher the % allocated to Bitcoin from their alternatives assets bucket: www.fidelitydigitalassets.com/bin-public/060_www_fidelity_com/documents/FDAS/bitcoin-alternative-investment.pdf
Anyone can create a company but there is only ever going to be one Apple. There are many networks but there is only one Internet. There are going to be many blockchains but there is only going to be one Bitcoin. The value of Bitcoin is in the physical deployment of the Bitcoin dementalized network and the brand, these can not be copied. Bitcoin is open source you can literally bring up your own separate "Bitcoin" network and give yourself all the coins in that network but they obviously have no value. Blockchains are the next step in human technological advancement after things like the Internet and smart phones, they are going to revolutionize the financial sector and so much more. Think about how little people understood the Internet in 1990, that is where we are with blockchains. Bitcoin is probably going to be to blockchains as the Internet is to networks, maybe along side a few other blockchains like Ethereum for different uses. People keep talking about Bitcoin replacing gold as a store of value and it probably will but it will also do so much more. Eventually Bitcoin will most likely switch to a proof of stake protocol in which case Bitcoin will have a yield that is guaranteed by mathematics not a government and that yield will be in Bitcoin not a fiat currency. Bitcoin could very well become pristine collateral replacing US treasuries. We're already seeing the beginning of some companies holding some of their reserves in Bitcoin. The downside of holding 1% of your portfolio in Bitcoin is so small but it could also easily double the value of that portfolio in 15-20 years by itself. Could bitcoin go to zero? Yeah, it could but you have to play the probabilities and if you take the time to understand it's crystal clear you should own some.
Thanks for the video, a lot of goods information that will help me to hone my strategy. About cryptocurrency, your intuition relates to wrong pieces of information. This because, as you said, you don't understand the topic. It would be best if you had stopped talking about it right there and not continue about google and apple, because you will give wrong opinions to people who might have no understanding about it and will take what you say as advice to follow. 1. Why bitcoin will very probably have the leads over all the others: a) It's the first cryptocurrency ever created. Many Facebook tried to be the new Facebook, but they never did, and this works for all the markets. b) Bitcoin, alive for 11 years and not a single time down so far. The most secure network. The most popular crypto and 100% of the services relating to cryptocurrency are dealing with Bitcoin. It is the safest crypto asset in terms of: "No one can close your account or drain from it-especially a government or governmental institution." because the network is the most unstoppable c) Over the decentralized protocol that Bitcoin is, it is the most decentralized and permissionless cryptocurrency over the whole market. With no cult-leader vulnerability, it never leaned and never will on the founder/team reputation. When the sentiment and trust for governments and big institutions (all centralized) are decreasing, it's probably a safe choice to own bitcoins, which stays currently the safest asset that these can't do anything against. Remember, cryptos are not about blockchain or cryptocurrency or bitcoin, it's about DE-CEN-TRA-LI-ZA-TION. 2. Why Apple, Amazon, and more could not create a cryptocurrency? They could and they probably will, it's probably going to work in the short run because it will make big titles in the news, and a lot of investors are going to gamble on the short term, but in the long one these are just going to be evolved traditional currency with centralized protocol and at the end, people are all going to go back at the same place: Bitcoin or any truly decentralized cryptocurrency where they can be sure to not be fooled by a 3d party.
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One of the few channels where I fully watch videos and sometimes rewatch. A truly unique content.
i pinch myself everytime I watch one of his videos, i cant believe the quality and depth of the content and we get it for free! Mark is the MVP.
Mark, thank you so much for these videos! It is amazing how you take real life examples and explain it having applied CFA materials. I really appreciate your work! No one could explain things better ❤️
1 hour video from MM. Grabs popcorn.
Studying for CFA LVL 1 right now! May 2021.
Dr. Meldrum. These videos have been invaluable for me for hedging purposes. Many thanks.
Dr. Meldrum, I’d be willing to pay to have you doing this weekly. A weekly show perhaps.
I'm currently reviewing macroeconomics level 1 for March exam. This video helps me to see all the theory applied to the real world. Great content ! Thanks again professor.
Fantastic! Cleared up part of my disconnected thoughts. I have better clarity now. Will be sleepless nights for me waiting for the next two videos and I'm pretty sure it can clear up most of the rest. This has also given me a better idea which corner of the market to play in the coming few years. Can't say enough thanks to you professor.
Always waiting for an update! Many thanks for the CFA prep!
Thanks Dr. Meldrum. Always spot on.
One thing that was not discussed in this video was ( although I know this isn't something you might want to discuss right now) the end game of this endless borrowing from your own central bank (printing) and spending. This without a doubt can't go on forever. And there is no end in sight. Plus I don't expect US to do the right thing. So what's the end game here ?
Next week? inflation?, all I know is that all my life "P" has just gone up and up, my first house, 1966, brand new, in SF Bay Area cost $18,000 and now takes over $700,000 to buy it. All I need to know.
Incredible, how you have over 100k subscribers and this precious video have not even 9k.
The suggestion of a supercycle in commodities looks evident in lithium for batteries or uranium for power supply. There is an agreement with the American dollar base case and the crowding-out effect that appears to be occurring from the amount of government borrowing and unemployment. That said a good hypothesis that got me thinking. However, I am a student to finance, so I find bitcoin ideology fascinating (don't worry, I'm not a zombie bitcoiner, I'm Canadian).
The idea of a sunk cost, when newspapers were being printed for the common to read, there were logistics involved to develop the textile and print the headlines on the paper. Therefore, a breakeven of the number of units produced and fixed costs, in other words, sunk costs in terms of creating the newspaper. Innovative companies such as Amazon, Facebook, and, most importantly, alphabet have removed the sunk costs. Creating a marginal revenue equalling marginal cost maximizing profits, not to mention the price discrimination, but these monopoly companies have altered the way we access information by removing a sunk cost of the paper material. Reading books on a tablet, for instance. The argument that bitcoin has optimism towards the capital accounts and the current account deficit is where someone is placing their fortune, savings account for that matter, where it's collecting nearly no interest after-tax implications. The money supply, or rather the paper money is endless and very comparable to how Japan's printing press was going off in 1998.
Fidelity, square, PayPal, and a senate seat holder in America own bitcoins. Being decentralized from the government gives this unique valuable factor against the regulation policy, and the time horizon since 2008 while still being very volatile has kept increasing. Also, American banks started a share buy-back program to create a sentiment of value in the market (even though it's financed anyway)? I know it's intangible and has no earnings, but the ideology of digital money is making a presence.
Cheers,
Thank you so much like always. MBA professors, take notes!!!
The applied series are my favours! look forward to see next week's video!
Great content Mark! Love this series :) Could you please make a playlist for these videos. Merry Christmas and Happy New Year!
Go to www.markmeldrum.comn and register for free. Complete playlist there - and some that are not on TH-cam.
Why not GDX and/ or GDXJ instead of Gold?
Thanks for sharing knowledge!
Working in the tech realm I understand and see both sides to the Bitcoin situation. The whole point is that there is a finite amount, it is decentralized to the point where no organization can control it (whether that be a bank, government, etc), and it’s secure and cheap to transfer. Another hugely overlooked aspect is that it’s creator is not a public figure. When other cryptos are made, their founders, whether that be a company, government, bank, etc, are attached to it. That defeats a lot of the qualities that make it so unique. With Bitcoin, it is essentially like gold, it has no creator; no one in control of it. Cryptos like ETH, Ripple, and others are simply modified versions of bitcoin’s idea that serve a different purpose. This can be said of precious metals as well. Gold was the original, while silver was used as a less valuable version of gold, platinum as well. Just like fools gold, the shitty versions of the crypto world will fade in value, most will become worthless as they are in fact just shitty knock offs of the original. The fundamentals of it are the same as any other currency, what you can buy with it. In its early days, it was illicit items. Now as more and more legitimate buying options are available, it’s value is rising. That being said, I tend to agree with Buffets point of view as well as the one expressed in this video that Bitcoin, like gold, is not a productive asset. Like Buffet says, you can fondle your gold all day or, in this case, stare at all the 0s in your crypto wallet, but it’s not going to produce anymore of it. I’d much rather own a hard asset like land, that is productive, as a hedge against inflation and the falling dollar.
Great video Mark, it's great to get your insights and I like that you connect the content back to the CFA curriculum.
You probably don't want to hear it, but I'd say it's absolutely worth a few hours of your time to understand bitcoin. With yields near 0, I see large opportunity and need for a digital store of value.
Hey Mr. Meldrum, thanks for the video it really is very insightful! Looks like I'm long some CAD hedged SPX ETF for the year.
@DrMark I suggest creating a Patreon with more frequent videos.
I will keep these free for a while. They will eventually end up just on my site for full CFA content subscribers.
Hi Mark, 40:19 on the Long commodities and its trend (inflation too), maybe you find this historical chart interesting twitter.com/Callum_Thomas/status/1339024896215506944. It supports your narrive I would say very well. Puting pen to paper, what are some examples of ETFs (base metals mostly my take) or other ways that one could get a passive exposure on the LONG Commodities theme ? Thank you !
What if you make a podcast so I can listen in the car?
Brent Johnson makes a pretty compelling bull case for the DXY with his dollar milkshake theory. In short, Brent believes the dollar is still the cleanest among every other fiat currencies and every other countries want the dollar, especially in crisis when liquidity is limited. The eurodollar market is much bigger than the dollar itself. I'm curious what is your view on that?
Why would you avoid the British Pound?
Great point about crypto! However, FB’s Diem (previously Libra) - as well as China’s crypto - will be about crypto backed by currency i.e. fiat digital currency. Anyway, this doesn’t change this argument that maybe somebody else comes up with another self-constraining algorithm to generate another crypto. One more reason that stops me from putting some money in bitcoin is the possibility of government’s ban or regulation.
Canadian dollar is the so called commodity curreny.
Love your explanations Mark !
Hi Mark,
With the current landscape where DXY is rising due to Yellen's policies, and the interest rate still at the lows due to Powell's policies stance.
Are we able to get an update to this video on the relationship between what Yellen and Powell's action have on the markets?
The markets continue to move higher despite the logic that when DXY is up, the market shld be going down.
In the above scenario, I have problems reconciling the rising yield curve on the 10year bonds and I hope we can get further insight into what is happening between the different treasuries (2,5,10,20) and Gold (Dipping past $1800) and the asset (equities markets).
Hope to hear from you or viewers who get the whole ecosystem as I'm having a tough time understanding.
Thank you everyone.
It seems like a lot of people are short the USD and long commodities. Does it ever worry you when you are on the same side as the majority? There is no rule to say you shouldnt but I think there is more that can go wrong?
Just so enjoyable to watch and listen to
Love your applied content! (As well as CFA material). Btw how fast has your subscriber base grown? I feel like it was a fraction of the current 100k last March.
Hi Mark, thanks for the video. A question on minute 37:00. I believe in Reading 10, in the Mundell-Fleming model, under high capital mobility condition (like the U.S), an expansionary monetary policy together with a expansionary fiscal policy leads to an ambiguous situation. Nonetheless you see it clear that the current scenario (both expansionary policies) will make the domestic currency depreciate. What is the thing that makes the Mundell-Fleming model not work in this case? Or perhaps I interpreted something wrong?
The MF model was for the level of interest rates, not the level of the currency.
@@MarkMeldrum Thanks for the answer. Doesn't the MF model also argue about how monetary and fiscal policies exercise upward or downward pressure to the domestic currency? In this case both expansionary policies, under high capital mobility conditions would lead to an ambiguous situation. If you refer to what is explained in Reading 10, what is what would make this situation not so ambiguous, and thus apply downward pressure to the USD? (In your video from Level II Reading 10 you indeed mention that an expansionary fiscal policy applying upward pressure to the currency rates is something questionable for well developed countries).
Hello, Mark. I have a question regarding Z and G spread. Sorry for asking here but i do need the answer really and ASAP.
Do these spreads be equal if we deal with 1-year 1-coupon bond? How would they differ? Thank very much in advance!
Dear Mark, do you think agricultural commodities (cattle, hog, sugar, wheat, etc) will benefit also from these factors you mention? I am asking because I can't open a base metal trade only and looking to do it with a commodity ex-energy ETF. Thinking in the 3 circles dimension you mentioned, inflation and weaker USD pass the argument for agricultural commodities to rise, but I am not so sure for economic activity.
Business want to trade Payments in USD, if they can help/control it. USD is the standard, before BTC/GLD.
You were talking about ETFs that were ex-energy and ex-food. Did you mention them?
Mark, question. Isn't this time different, given that: (1) pretty much nearly all countries are running very large current account deficits due to COVID-related spending, not just the U.S.; and (2) interest rates are low, again, pretty much globally, not just in the U.S. China, if I'm not mistaken, is an exception to this (rates are relatively high, and the current account is positive), but I do not see an inflow of foreign capital rushing from other countries to China, given the challenging legal and political landscapes
Current account is a trade deficit. I think you mean all counties are running fiscal deficits. Yes they are. However, the US is about 100% debt to GDP - that is an issue when growth in GDP is not greater than the effective interest rate on the debt. To solve that huge problem, the Fed has to finance the debt and keep rates low. However, there has to be an exit - I don't see an exit from growth - so there will have to be a major devaluation of the currency to fix the current account. If you can't get growth internally, you have to get it externally.
@@MarkMeldrum Thanks I appreciate the answer. And I greatly appreciate you doing this, especially an applied video on currencies and commodities. I have to admit, while I was going trough all three CFA levels, I had to pick and choose my battles (working full time while studying), and currencies and commodities are two topics that I didn't spend as much time as I should've had.
Dr. Mark - Why is the increased fiscal a negative for the USD? In CFA L2 we were saying that increase in fiscal --> yields higher --> domestic currency appreciates, so I don't see how that argument holds. Can you please clarify?
You are referring to Mundell-Fleming. You must consider that the Fed is actively keeping rates low. Buying $80T of Treasuries each month (1T a year) keeps that much supply off the market. That keeps rates from rising since less supply gets to the actual market.
Prof, you are the best!
well an argument for bitcoin is that it has no central point of control. If a large company were to create its own crypto, it would want control of it (similar to what facebook was going to do). When they have control of the network, people need to trust their system, whereas on a decentralized network like bitcoin's blockchain, no one needs to trust anyone. There's also the question of "faith". Similar to how gold became a popular tradable commodity among many many different types of metal in existence, bitcoin has that factor in it too. just my 2 cents.
Joy. Thanks!
Thanks Mark for the informative video. Small question about the historical precedent of large deficits coupled with low interest usually results less attraction to foreign capital. My thinking is whether inflated equity prices can attract foreign money to usa replacing the attractiveness of higher interest rates ?
Regarding Bitcoin, it's actually not comparable to the other coins. Bitcoin had an "immaculate conception" which basically means it was created by a pseudo-anonymous person (or group of people) back when no one believed any of these coins had value. The creator(s) then disappeared over time (most of which realized little-to-no benefit from the rising prices since before 2013), leaving the project to take on a life of it's own. All the other coins were created with profit in mind or with a select group of individuals managing/controlling the coin, which means they have already failed in becoming truly decentralized. Why does that matter? Decentralization is how you solve the problem of "bypassing" the traditional banking system when monetary/fiscal policy is abused by authorities. That is Bitcoin's use case. Decentralized, borderless, value transfer/storage with a deflationary coin issuance pre-determined by an algorithm. Every transaction is publicly verifiable and anyone can monitor/store all the network activity by running a Bitcoin node, eliminating the need for an intermediary. No one can truly shut down the Bitcoin network (even though China has been trying and failing for years) because that would require shutting down the internet. This is not the case with other coins. Other coins can be traced back to a single person or organization who are at the mercy of the authorities (i.e. they are not decentralized, even though they falsely claim to be). So, saying there is an "unlimited supply" of these other coins is true, but that doesn't have any effect on Bitcoin's utility, value or issuance. Love your vids, just thought I'd point that out.
Great video. Your insights are invaluable. I'm new to following the markets and it is always great to learn from you.
By the way, after your last video, I was listening to some other analysts opinions on where the market will be in 2021. Tom Lee (who has been very accurate on his calls this year) has a very similar prediction to the one you outlined in your last video. He expects a correction of 10-15% to occur sometime between Feb-April which may drop the market from around 4000 down to 3500, and then a recovery from there, which would take the market to around 4300 by end of the year. Cathie Wood also had an interesting interview on Bloomberg .. I think it was a very good interview with good questions and answers.
Also, I was watching some of your older videos back from this year. Good call in June on that 4000 level on the SPX by the end of this year. We are very close to that level and there are still around two weeks left.
Hi Mark - what resources do you use to determine which countries have US dollar denominated debt? (ie for EM)
Dr Meldrum, if you ever plan to have a subscription service for currencies and/or options trading. I'm in!!
Great content as always.
I guess the main differential between Bitcoin and other crypto currency is that we don’t know yet who invented it. The whole point about crypto is decentralization. Any company or any entity who attempts to do ICO is actually no different than a central bank cuz they reserve the power to issue more coins and that’s a form of centralization, defeating the purpose and idea of blockchain. However, I don’t own any Bitcoin, just try to share a thought
Thank you for the great explanation! Just wondering how you've gone long on base metals? ETFs on things like copper, lead, nickel, palladium and zinc are not particularly liquid (unlike SLV) and options for them, if available, have huge bid-ask spreads. I'm guessing you're doing it via futures?
I don’t think it’s a trade until end of Q1/Q2 2021. But ETFs are an issue. DBB is on my radar.
@@MarkMeldrum If so, I'm assuming you believe there is going to be some downward pressure on the prices of those metals or is it just a matter of things working out on macro and policy level? In passing, today seems to be like a nice big day in red, as you say. We now know there's going to be $900bn stimulus, yet markets over here in Europe are in a bit of a panic because of the UK's Brexit negotiation troubles and the new strain of Covid-19 there. Futures on the S&P500 indicate it's likely going to open at some 2% lower in a few hours. The VIX has jumped to nearly 30. It's great day to sell puts on certain things, it seems, but I digress...
@mark.meldrum, thank you! So clear and valuable. Bit sad that some idiots online make you spend valuable air time on warnings. I looked at commodities ETFs (ex-oil) - as you said there are few , but no obvious candidates for option trades. Which ones are your picks?
If the value is created from scarcity, then it is totally fine, just like a million dollar painting. If Bitcoin is unique among other cryptocurrency then it's value is justfied. If Bitcoin is treated as function currency, then you can think about it from a rational lense.
The case for BTC is far more nuanced. BTC supply is price-insensitive and total BTC is finite + known. Gold, on the other hand, is the opposite. It is also quite inconcievable to move $1m worth of gold across borders, whilst the equivalent transaction in BTC is far easier. For me the BTC story is not a DXY-bear story, but a gold replacement story. When you look at the market cap discrepancy between gold ($10t+) and BTC ($400b), the direction is obvious to me.
You can't compare 1970 till now gold vs snp500. US was booming back then was the leading country. The big daddy. Now it's the old grandpa struggling to stay alive. The point made against gold is valid if you want to compare a developing country and gold but not a developed country vs gold. They kill their own currencies.
I think Bitcoin price should be understood as a pure form of a supply/demand function. It's a thing that has value only because other people think it has value. I see no fundamental basis to compare whether the current price is high or low. But the well defined supply makes it easier for demand to outstrip supply and is certainly a natural advantage for the upside.
Since there is zero fundamental basis for a price, anything from $1 to $2 million is actually reasonable. It's just supply and demand, right?
Making the bull case here then would then be about changes in demand and flows. I see this rally having more non-retail flows than last time (Square, etc). Doesn't seem retail driven, so could be the beginnings of an S-curve of adoption among professional investors. Secondly, these same DXY bear case arguments apply to BTC and gold equally, which could be a headwind for BTC.
So those are two factors pointing to increased demand. Whereas the rampant retail speculation of 2017 seems quiet this time around, so that weakens one of the bear concerns.
Personally I'm not invested in BTC for the same reasons I'm not invested in gold, as you eloquently laid out here. But I do think there is a legitimate bull case to be made!
As for the other cryptos, I view that as analogous to other precious metals. There is gold, and then everything else (silver, platinum, diamonds, etc). There is bitcoin, and then everything else. Humans greatly prefer gold when picking shiny things, because we know others greatly prefer it too. A self fulfilling cycle. We have seen gold pull away from silver and we will likely see bitcoin pull away from the others in a similar fashion. I would stay the hell away from alternatives coins.
Pls don't block me and tell me if this wasn't good logic to you!
How did you equate gold to S&P500? ~47:30, when you say "X ounces of gold to buy the S&P"... are you talking about a 1 future contract or something? If buying an S&P 500 index or mutual fund, I specify a $ amount or number of shares. thanks
SnP500 index was $93 when gold was $35. The index is just a number of companies with a given weight.
Got it... you divided the value of the index by the price of an ounce of gold. Thank you.
Hey Dr. Meldrum , I've noticed you've mentioned DBB for potential exposure to base metals. Just curious, as a Cad resident, say we'd convert funds now to USD, buy DBB and eventually sell & convert the USD back to our domestic currency, wouldn't we be cutting a chunk of this hedge in the lost exchange rate between today and in the future? Am i missing something? This alone has made me not want to invest in US markets due to worries of currency devaluation, thanks immensely for the great content as always!
If your local currency strengthens more against the USD than the commodities strengthen against USD, then you will even be in negative territorry. So the solution I think is to hedge that USD.CAD position you open.
@@dxlor Exactly my thought process. That's why I'm curious as to why Dr. Meldrum would suggest a USD based ticker like DBB instead of one in his domestic CAD currency, for example XMB (quick lookup). Unless there's something I'm missing, for example, the USD currency depreciation would be implied in the price of DBB, which would make its return greater than XMP in base currency, but converted back to CAD would be the same as XMP? That's what I'm unsure of..
You have part of it. I need an ETF denominated in USD to respond to a falling USD. If the CAD is strengthening it may be that commodity returns in CAD are muted as a result of a weak USD. This can be currency hedged. However, I also need volume and liquid, or at least relatively liquid, options.
@@MarkMeldrum Oh i see now, that does make much more sense, especially if the plan is to also play the options, i completely missed that. Thanks for answering and clearing it up, this was nagging away at me hahaha. All the best Dr. Meldrum
@@agdaze26 so then what would be the best way to go about this? Buy DBB and short DXY? Is this possible in a TFSA?
Hi Mark its a very good video. Thannk you!
There is an issue I cannot really follow. That is each real asset is a currency and hence appreciates in value. Well a house gives me the value of housing, this does not change over time, equivalent with other real assets. However, the central bank and fractual reserve banking dilute currency (currencies cannot store value over long time - see evaporate 2% of purchasing power p.a. as central banks aim). So the argument is correct if we meassure our welfare in fiat. But since real assets are stable in value, my fridge gives me the same value as 10 years ago. So since everything rises in fiat numbers, but real assets stay in value. Fiat is what declines in value right?
How can you say a house does not change in value. You get a convenience yield (as a home) + capital appreciation. Further, houses are better built today, safer, more modern. You have to consider the quality improvement. Housing prices have increased on average at a rate higher than inflation. Durable goods are depreciating assets (appliances). They are goods, not assets. As for inflation making the value of your money a moving target, yes it does.
@@MarkMeldrum
Hi Mark, right we have convenirnce yield on the house as we had 10 years ago. This did not change (Assume we repaired all arising issues and this has been curable). The convebience yield measured in fiat might be risen due to a fall in value of fiat.
Of course we have better houses today, but when I stay in my home the convenirnce yield did not change. You are right the new ones is most likely higher in value an convinience yield.
However where we do not agree is capital appreciation, thats first price increase not value increase. Since we measure capital appreciation in some diluted fiat, we should consider fias is aimed to be destroyed by e.g. 2% in value or CPI (or more when checking shadowstats). We may get more fiat for the house, but do we get more cars, beefs, health insurance, educational programs with the house or the fiat as 10 years ago?
Well back in the 60s an average one year sallery was needed to buy a home, today its much more, well they might be more modern yes but donwe flip houses each year? Probably you can buy a more with the proceeds from a house sold that we bought 10 years ago... I do not claim the ratios fixed, but central banks love to type curreny and devalue its fiat and this makes capital appreciation natural in fiat terms
By the way, red in the readings and you mentioned in the video about the issue of current account deficit and also keeping currency price low to maintain 'competitiveness' maybe it could be good to explain the consequences in when it is convenient in one of the future videos. The curriculum has room for improvement in this area and for myself I see capital missallocation as the issue, but maybe there is more.
PD fiat is not money, because fiat cannot store value over long time horizon. The evidence is that all fiats failed and that ones that today still exist decline in value measured in real goods.
Thanks Mark
I have the same exact perspective on crypto as you. Whenever my friends ask me about various block chain based currencies I always think about the U.S in the early 1900s when the banking industry isn't consolidated and banks can have different notes as money. I read this from the book 'Lords of Finance', but if I understand correctly, the Fed was put in place and the banking industry was completely reformed in order to bring about a unique currency that is the US dollar. Before that, there was too much individual risk in banks. A bank going bankrupt can completely devalue their notes and lose people their life savings. I see the same type of individual risk in crypto currencies and I can't understand why they have any value to begin with. However, when 25 yo me explain this to my friends and tell them I study finance they somehow look at me as if I'm a retarded boomer :p
Mark, but currencies are a "relative" game. So if the US outlook becomes better going forward relative to Europe's outlook for instance, then the USD should appreciate relative to the EUR, as the US will look like a better place for money to flow into. So why can't that be the catalyst for DXY to not drop even more?
The US has been a better equity market since the 1980s. But still, 40 year secular bear market on the USD.
@@MarkMeldrum if US outlook starts to look better, growth and inflation expectations will go up = yields go up = money flows in chasing yields. Not expected to happen in EU as much. Just my view.
55:55 As you said in the video, weakening dollar and inflation are actually helping the earning of SnP 500, and if inflation is going up cash will be a bad asset class to be in, why do you want to be in 100% cash position? ( I watched your last video and I understand you don’t see much upside on the REITs, but does it make sense to continue to some exposures in the SnP?)
Cash has returned almost 7% in one month. That is the lost value of the positions I exited. Had I stayed, even after dividends, I would be down 7% since moving to cash.
@@MarkMeldrum I see. But I remembered one of your videos, portfolio management as a retail investor. You use SPY to get exposure on the market and actively trading in the REITs space. When you say 100% cash position, do you just mean you free up all the cash in the REITs space or your whole account?
Correct. REITs have been great to me. But their future is going to be one of underperformance. Know when to walk away.
This feels like a christmas special! By the way hearing the way you talk about bitcoin, I'd say you don't really understand bitcoin. Yes, there is a finite supply but that's not the whole case. Bitcoin is a bet on digital scarcity & censorship resistance. I also think you're confusing bitcoin with securities. Companies have issued cryptocurrencies and they've all consistently gone down. I would love to see you make a case for 'why bitcoin is unique' in a future video (even if you don't agree with it) as you do so eloquently on other topics. There is more to bitcoin than just the trading/economic side. My guess is you'll better understand why bitcoin is unique if you understand the technical side.
keywords: en.wikipedia.org/wiki/Byzantine_fault Byzantine fault tolerance, en.wikipedia.org/wiki/Proof_of_work proof of work (basically converting energy to a lock+key combination).
What is your thought on Gold&Silver Mining Stocks?
Good operating leverage. Find well run companies. The increase in prices should boost operating margins be a greater percentage than the move in gold or silver prices. The upside for well run, high operating leverage companies is compelling. But, once momentum is prices are gone, share prices will drop as easily as they went up.
34:05 Why the yield curve would become more upward slope when real rate is negative? Don't get that part.
No - the YC would become upward sloping as yields rise UNLESS the CB pushes it back down, making real rates negative.
@@MarkMeldrum I got that part. My question is actually why the YC would become upward sloping if the central bank does nothing. Is it because when demand for the US Treasury is low and supply is increasing, the price of treasury bond will go down which make the yield higher?
Bingo.
If we look cryptocurrency as evolution to existing currency then we can compare cars vs horse. Sure many companies can start cryptocurrency but not many will survive, just like auto companies 100 years ago. Many big buyers believe Bitcoin will survive, I do not know the answer. If cryptocurrency really will be adopted, should short the existing currency instead of buying any specific cryptocurrency.
Mark, when you refer to combos in your videos, are the 3 options European or American?
All American.
only value for bit coin i guess is for transfer money from country to country illegally
anything changed on your opinion of beyond meat
Side topic, how will 2021 possibly be for the old chaps FNMA & FMCC ? Ackman has it around cost for about 7y, hence a dragger so far, but still did not sell, expects it will pop ... cheers
m.th-cam.com/video/_UAprkduLoo/w-d-xo.html
I'd argue if you want long exposure to possibility of a sound digital money being possible than Bitcoin is the best crypto currency to hold. What is going to come along to disrupt the network effects Bitcoin has built in the last decade. No marketing campaign can buy the mind share Bitcoin has currently.
I think the limited supply + storied past make a compelling case for Bitcoin for being valuable and that no one is going to be able to copy cat it. If you want to make a case of in 10+ years, then sure maybe something else will come along, but in that time frame I'd be able to trade some BTC for the new thing.
For value I think about it like a search says 6.1 billion ounces above ground gold @ 1850 / oz comes to ~11 trillion. If Bitcoin can capture ~10% and become worth a trillion, the price will still double. I don't think thats an entirely unrealistic scenario, but too optimistic to justify buying in significant amounts at today's prices for me.
For me I find having a position helps me sleep at night though. I think of it more as a form of schmuck insurance as Chamath Palihapitiya describes it.
interesting stuff
Why don't just go into BTC?
1:01:50 Bitcoin fundamentals are in a nutshell: scarcity, salable, secure, decentralized, fungible, portable, seizure & censorship-resistant, borderless, liquid, divisible, durable, and more easily verifiable. Besides that, Bitcoin is continuing to increase in value because it has far superior SOV and monetary properties than gold.
1:02:10 Gold needs a custodian / 3rd party to transact globally; additionally, gold requires trust. We know banks control the custodian game, and governments & banks are closely-Knit. Bitcoin fixes this drawback because the transactions & clearance do not need trust in a third party. People are in control.
The rest of the cryptocurrencies are basically dog shit. The only ones with real value are the ones with real utility and practical use cases., like Etherum or Ripple.
But this is my point - there are others beside BitCoin and you mention 2 viable ones. Was is stopping Apple, Google, Amazon, central banks, from issuing cryptos? If an unlimited number of limited cryptos can be introduced, where is the scarcity?
@@MarkMeldrumnothing, actually they have plans to issue coins that mimics the properties of fiat money. I think the people assign value to Bitcoin due to the decentralization and -in theory- the lack of manipulation by a central authority. So, in consequence, they can avoid situations of currency or laws manipulation that saves Wallstreet rather than Mainstreet (like in periods with a crisis of liquidity, like the Subprime crash)
For the scarcity point, I completely agree with you. I think that crypto is gaining momentum due to the frenzy around technology -implicit in the investment world- and the detachment from financial fundamentals. Just see Tesla, Uber, and Airbnb. The investors trows a lot of money into these cash-burning machines.
@@lautaroparada950Tesla and ABNB have already crossed over to the profit making stage (for normal times) and are absolute gargantuan industry leaders. Uber, meanwhile, hasn’t really gone up that much compared to its IPO price, with its piling losses and lack of visibility for breaking even acting as major drags. Not sure if you can really have concrete grounds for lumping these three equities with the crypto movement together. Technology, yes, everyone can see that connection. But I’m not sure whether your implied correlation is really that strong to hold up against all kinds of possible headwinds.
@@MarkMeldrum I find this report from Fidelity to answer most of your questions about Bitcoin Mark, I really think you could find value in reading it, the main argument supporting higher Bitcoin prices in the future is a greater level of adoption among institutional investors. With only a 1% of allocation to Bitcoin in institutional portfolios SAA you would have a big amount of monetary inflows into this limited asset and that’s how you get the expected value of Bitcoin, you get a higher price the higher the % allocated to Bitcoin from their alternatives assets bucket: www.fidelitydigitalassets.com/bin-public/060_www_fidelity_com/documents/FDAS/bitcoin-alternative-investment.pdf
Anyone can create a company but there is only ever going to be one Apple. There are many networks but there is only one Internet. There are going to be many blockchains but there is only going to be one Bitcoin. The value of Bitcoin is in the physical deployment of the Bitcoin dementalized network and the brand, these can not be copied. Bitcoin is open source you can literally bring up your own separate "Bitcoin" network and give yourself all the coins in that network but they obviously have no value. Blockchains are the next step in human technological advancement after things like the Internet and smart phones, they are going to revolutionize the financial sector and so much more. Think about how little people understood the Internet in 1990, that is where we are with blockchains. Bitcoin is probably going to be to blockchains as the Internet is to networks, maybe along side a few other blockchains like Ethereum for different uses. People keep talking about Bitcoin replacing gold as a store of value and it probably will but it will also do so much more. Eventually Bitcoin will most likely switch to a proof of stake protocol in which case Bitcoin will have a yield that is guaranteed by mathematics not a government and that yield will be in Bitcoin not a fiat currency. Bitcoin could very well become pristine collateral replacing US treasuries. We're already seeing the beginning of some companies holding some of their reserves in Bitcoin. The downside of holding 1% of your portfolio in Bitcoin is so small but it could also easily double the value of that portfolio in 15-20 years by itself. Could bitcoin go to zero? Yeah, it could but you have to play the probabilities and if you take the time to understand it's crystal clear you should own some.
Thanks for the video, a lot of goods information that will help me to hone my strategy.
About cryptocurrency, your intuition relates to wrong pieces of information. This because, as you said, you don't understand the topic. It would be best if you had stopped talking about it right there and not continue about google and apple, because you will give wrong opinions to people who might have no understanding about it and will take what you say as advice to follow.
1. Why bitcoin will very probably have the leads over all the others:
a) It's the first cryptocurrency ever created. Many Facebook tried to be the new Facebook, but they never did, and this works for all the markets.
b) Bitcoin, alive for 11 years and not a single time down so far. The most secure network. The most popular crypto and 100% of the services relating to cryptocurrency are dealing with Bitcoin. It is the safest crypto asset in terms of: "No one can close your account or drain from it-especially a government or governmental institution." because the network is the most unstoppable
c) Over the decentralized protocol that Bitcoin is, it is the most decentralized and permissionless cryptocurrency over the whole market. With no cult-leader vulnerability, it never leaned and never will on the founder/team reputation.
When the sentiment and trust for governments and big institutions (all centralized) are decreasing, it's probably a safe choice to own bitcoins, which stays currently the safest asset that these can't do anything against.
Remember, cryptos are not about blockchain or cryptocurrency or bitcoin, it's about DE-CEN-TRA-LI-ZA-TION.
2. Why Apple, Amazon, and more could not create a cryptocurrency?
They could and they probably will, it's probably going to work in the short run because it will make big titles in the news, and a lot of investors are going to gamble on the short term, but in the long one these are just going to be evolved traditional currency with centralized protocol and at the end, people are all going to go back at the same place: Bitcoin or any truly decentralized cryptocurrency where they can be sure to not be fooled by a 3d party.