What’s the takeaway? Precious metals lead the way with huge gains, while the VIX (also known as the market’s ‘fear gauge’) is down big.
Stocks are at record highs and the VIX is tame. The run-up in hard asset prices is not about fear.
It’s about the capex boom around AI, and the retooling of trillions of dollars of global computing (i.e. datacenter build-out).
And it’s about owning hard assets as insurance against currency debasement, driven by debt and deficits.
Related, it’s also about a weaker dollar (down 9%), and about a new tech-influenced monetary order — digital currencies.
NYU keeps a table of historical asset returns dating back to 1928. If we look back at the years when gold was up 40% or more, we get only four years of the past 96 years — 1972, 1973, 1974 or 1979.
If we look at years where gold was up at least 30%, and stocks (S&P 500) up 10% or more, and bonds were positive, it only happened twice — 1972 and 1979.
So we have the 70s, and 1972 is particularly interesting as it involves a new monetary order — the shift to the post-Bretton Woods era and floating exchange rates.
Today, there is a shift. The monetary system is becoming programmable.
And policy paths are diverging. As we discussed yesterday, the U.S. is pursuing private, regulated stablecoins. And much of the rest of the world is moving down the path toward central bank digital currencies (CBDCs).
The uncertainty on how it plays out is reason alone to hold hard assets as a hedge. Moreover, those on the CBDC path have to be contemplating the risk of having the government turning their money off.
PS: If you know someone that might like to receive my daily notes, they can sign up by clicking below …
