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Currencies and the Market Report
Just a reminder, the stock market is now up 40 percent since the day in April CNBC head pump’n’dumper, Jim Cramer, warned of a possible 1987 Black Monday-like crash. Is the market overvalued now? On a risk-reward basis, yeah probably, but it’s tough to say. When you continue pumping trillions of cash & debt into economies, it’s only logical that nominal values of all asset classes go up, similar to what we’ve seen with houses and groceries. It’s also tough to gauge how much is just money being shifted around. When interest rates and bonds start paying lower rates, as they are now, investors soon look to put their money elsewhere. That is, unless panic & worry set in again.
My guess is there will be some kind of trigger in coming months, such as an inflation reading spike, big drop in one of the Magnificant 7, war/terror event, or whatever provides some fodder for the pump’n’dumpers to push for selling. As always, though, it will likely be short term, which is why a steady long-term approach is your best investment strategy.
However, I don’t believe this long-term approach matters when it comes to investing in currencies. This includes precious metals, fiat money like the U.S. dollar, and cryptocurrencies like bitcoin. All of them have two things in common: 1) They don’t produce anything of real value. In other words, they’re temporary storage values of wealth, unlike a business which is building and producing something of tangible value. 2) Their entire measure of worth is based on perception of value. In other words, as long as people believe a currency has value, then it continues to be a valid store of wealth. It’s a big reason I refuse to invest in cryptocurrencies like Bitcoin. To me, they’re the modern-day Tulipmania. All it’s going to take is a few panic-inducing events, such as a technical glitch that causes thousands of investors to lose money, and it could be a bloodbath of selling. It’s an asset class that could literally go to zero.
Government currencies are, of course, not entirely reliable either, as money printing continues to dilute the values. Keeping your money in a government currency is the equivalent of stuffing cash under the mattress. When you finally take it out to spend, you will be able to buy less and less. Hopefully, with not as much dilution as the hyperinflation of Weimar Germany, Zimbabwe, or Venezuela.
The best investors of all time, such as Warren Buffett and Peter Lynch, will tell you to buy what you know. Buy what you understand. Buy companies that produce items of real value. And if you don’t have the time or expertise to analyze investments yourself, just make regular contributions to a low-cost market index fund such as SWPPX or VTI. If you may need to spend your money in the short term, by all means buy cash equivalents such as CDs, but long-term diversified investing will represent value growth and protect you from the currency manipulation of politicians, as well as the speculative bubbles of the pump’n’dumpers.
Blog Link: https://educationdojo.com/study-break/2025/12/12-07-education-dojo-daily/#random_thoughts
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Bumper crop today! Thanks Joe.
Walz facilitated the theft…and got a HUGE KICKBACK for his efforts.
I’m not sure I agree that investing in physical gold is crazy risky
Agreed…at least they can’t print more of it. However, since it’s not a productive asset, it’s likely to only return the rate of inflation over time. That may be an acceptable option in today’s world though. Unlike Bitcoin, gold has no chance of going to zero.
Although I disagree with your “precious metals provide _zero_ value” (to a point) I do see that we are much less tied to the precious metals vs. value thereof system. Gold is still used in chip and computer manufacturing, platinum is still used in making catalytic converters. Although silver’s use in plumbing, limited electronics & the medical field still exists, it doesn’t have the “sway” it once had back in the analog imaging days (think film cameras, optical typesetting, etc.). Without silver, those industries possibly would have never existed. Are the values inflated just because it’s “shiny?” Probably. But, at least those items still have some form of use unlike Bitcoin & its ilk.
Good points, Roger. Yep, if precious metals ever stopped being used in currency/trading, they’d definitely have some utility value. However, the vast majority of metals nowadays are stored in vaults, represented by electronic ledger accounts or paper certificates (except of course for the empty vault at Fort Knox 🙂 That’s where the “perception of value” factors in. It’s very doubtful that gold or silver would ever nosedive in value though, as it will likely always bring the most global confidence as a currency, and the supply can’t be manipulated by governments like dollars, yen, euros, etc.