Four things are happening (and one of them is gold) that make a terrifying situation.
Facts:
- Gold has reached all time highs
- US debt (ie T-bills) selling at all time lows
- US equities are at all time highs
- USD falling day over day, month over month, year over year
All 4 of those facts cannot remain true indefinitely. The all time high equity prices are because it requires more USD(which is decreasing in value) to purchase them. Gold is at all time highs because USD is decreasing in value, and the flight to safety leads people to gold. US debt is falling in value because no one wants to buy it. At some point, equities will give up and crash, or gold will have to crash....and I don't think it's going to be gold crashing.
The thought seems to be that prices of everything are high, because the dollar itself has lost value. Makes sense. The conclusion then being a crash. But why? If the dollar is worth less and stops devaluing so badly, we'd just expect a stop in growth rather than a crash. Or are you projecting a strengthening of the dollar rather than just stabilization?
I'm still not sure why anyone is surprised by a devaluing of the dollar -- that's literally what the monetary kooks in the current US administration are on record as wanting to cause.*
Thought process goes: (1) devalue dollar, (2a) make basic US industry more globally competitive, (2b) devalue US debt to "solve" it without having to implement
austerity, (3) stronger US industry
Given that equity nominal values (read: future profits) will grow (to balance out the decreasing fiat value), purchasing power / wealth holds something close to constant and market numbers go up (which keeps voters from becoming unruly).
The only people who really get fucked are (a) people who aren't invested in the stock market (read: poor), (b) fixed income folks (read: retirees who will be dead before it fully plays out), and (maybe c) labor (if wage growth doesn't keep pace with purchasing power loss).
It's not the worst economic-political plan, other than the fact that no one is being honest with the public about it and some idiot ALSO picked the same time to drastically decrease the domestic labor supply (by sharply decreasing immigration and mildly increasing deportations) and increase tariffs. Both of which make completely offshoring labor more attractive.
* See also why Trump has such a bug up his ass about the Fed, as this becomes a lot harder if they don't play ball. Say, by following their mandate to fight inflation...
this is not true unless you’re doing some kind of adjustment. For t bills, us03m yields were much higher 30-40 years ago.
> US equities are at all time highs
this is true
> USD falling day over day, month over month, year over year
if falling means inflation, yes in banal way. If falling means relative to other currencies, that’s the last 9 months or so. Previously the USD was quite strong
> US debt is falling in value because no one wants to buy it
this appears to be the hinge of the argument? It is not true. 10y yields have been down / flat since beginning of 2025 (i.e., price up). also tsy auctions remain well-subscribed / within historical range
A buddy of mine is retired and managing his own investments, and he's a reasonably savvy investor. He has some guys he follows and like 2.5 years ago they were all predicting the market would crash in the next 3-6 months. We have lunch every 2-3 weeks, and we've been holding their feet to the fire, "Still hasn't crashed". (Not saying it won't, it "feels" over-hot).
I just moved my son's "kid retirement plan" (giving him matching and compounding interest, he can access it at 18) into a custodial account, and put his money into a few stocks and ETFs (including PHYS, a gold ETF). So far in the last week it has gained $140 on $940 investment. I've warned him: This is fun to see these gains, but we can't expect it to always happen, we just need to protect our gains by using stops.
I also had him pick a stock that is something he likes and thinks will go somewhere. He picked Roblox. My FIL had given me the advice to take a little bit of your money, "pocket change", and invest in something you like, to keep it fun. My first investment following that advice went from $7K to $200K, so I was a big fan of that. ;-)
If you're worried about risk and being able to sleep at night, you can dial back from 100% equities (S&P 500, Russell 3000), and do some bonds. Vanguard (e.g.) has funds that are fixed 80/20, 60/40:
> Cash in the bank so you can buy equities at the bottom.
JFC, this is the dumbest possible advice given this thread.
If someone thinks equities are overpriced and one thinks the value of USD is decreasing, then 'cash in the bank' is an equally bad answer to 'buy equities now'.
The correct answer, given those beliefs, is 'buy commodities' (or scarce assets).
Or a mixture of cash and gold or another hard asset / inflation hedge considering the US dollar already eroded 10% this year and Trump openly wants the dollar to devalue further.
You should add the introduction/print of trillions of usd into the global economy during the pandemic crisis into your equation. That itself means that prices will increase as the total supply of available USD is greater and can lead to newer standards that don't make sense when not taken into consideration.
> All 4 of those facts cannot remain true indefinitely.
Why? Is it some law of nature that the USD can't itself crash. It would then be sensible investment to buy both Gold and Equities. I sometimes wonder if we are seeing the USD unfolds on the equities and commodities market before it does for food and transport.
Watching that video with a couple year's hindsight and cracks are starting to show. The rest of the world is slowly getting rid of their dollars and his points about the international stock market are no longer as valid. International indexes are beating the US market right now.
I think they have to, but I agree completely. I don't think it follows from this particular argument.
Instead I think the only argument that matters is that P/E ratios are really high even though interest rates are high and you can see that it's hard to justify the equity prices using present value of dividends and that sort of thing.
Equities can melt up in real terms for a very long period of time, there doesn’t have to be a return to normalcy within in our lifetimes, though I do predict there will be an economic calamity within my lifetime.
The main issue is how will asset prices be maintained when civil unrest makes securing physical assets so expensive that they can no longer yield positive returns. Until then the system is stable as the people with power are able to retain power, the increasing inequality helps intrench the power further.
People see a wealth tax as a way out, but if that happens the state is entirely dependent on the growing the wealth of the mega rich and will act in their interest in effect cementing their power even further.
> but if that happens the state is entirely dependent on the growing the wealth of the mega rich and will act in their interest in effect cementing their power even further.
This is a laughable premise.
A huge amount of government revenue has always come from the wealthy, yet there is consistent pressure to reduce their taxes in the US government. Why? Because the IRS doesn't run the US government, politicians do. Why would a wealth tax based government be any less likely to try and reduce their tax burden?
A rich person's power comes from being rich: From controlling significant resources, things like communication channels, important industry, bribes/kickbacks/whatever you call them
I didn’t suggest that the wealthy would want their taxes increased, but that it would increase inequality that would benefit the wealthy.
That said there are many billionaires who advocate for greater taxes, Patriotic Millionaires and Proud to Pay more. Including but not limited to Warren Buffet, Bill Gates, George Soros, and Abigale Disney. Bill Gates, as an example, goes to incredible lengths and uses shady Caribbean methods to minimize the tax he pays.
It’s important to make a distinction of weighting the wealthy by numbers vs wealthy by wealth, the higher the inequality the bigger the difference. The wealth is dominated by an increasingly small minority.
I’m making a prediction of what I strongly believe will happen, not what has happened. There are examples in history where there were unexpected emergent behaviors created out of perverse incentives. One of my favorite is the selling of indulgences by the Catholic Church to pay for St Paul’s cathedral, meant the Catholic Church made more money if people sinned more, which created some problems.
If it doesn't crash due to these factors, IMO Boomers aging and dying will crash the economy due to the outsized share of wealth they have locked up. They're going to cash it out as they incur more and more health/assisted living costs. Whatever is left will be sold immediately by their heirs to pay off debts or other forms of spending. I also have a theory that Boomer spending right now is the only thing keeping a lot of business in the black, especially higher end services, food, and tourism.
Facts:
- Gold has reached all time highs
- US debt (ie T-bills) selling at all time lows
- US equities are at all time highs
- USD falling day over day, month over month, year over year
All 4 of those facts cannot remain true indefinitely. The all time high equity prices are because it requires more USD(which is decreasing in value) to purchase them. Gold is at all time highs because USD is decreasing in value, and the flight to safety leads people to gold. US debt is falling in value because no one wants to buy it. At some point, equities will give up and crash, or gold will have to crash....and I don't think it's going to be gold crashing.
edit: formatting