In today’s Money Morning…big green numbers for the Dow…Biden presidency to hasten the demise of traditional fiat…nothing goes up forever, even bitcoin…and more…
What does tax and spend mean for your investments?
Some sectors will thrive, while others will get smashed.
After the chaotic events of last week on Capitol Hill, the Democrats are pushing for a largely symbolic impeachment victory.
This is a complete sideshow for the investment world.
Take this picture, for instance, if you wanted to see what the market thought of the events:
Big green numbers for the Dow.
There’s an easy explanation too, and it all comes down to what happened in the Georgia Senate races.
As Reuters outlines:
‘Market participants generally assume a Democrat-controlled Senate would raise the chances of new stimulus and infrastructure spending, an outcome that – along with the rollouts of vaccines against COVID-19 – is seen as positive for companies whose businesses have been hit by months of coronavirus-fueled lockdowns and travel restrictions.
‘Bond yields surged while the dollar hit its lowest level in nearly nearly three years before rebounding later in the session.
‘Bets on economic growth helped spur outsize gains in the shares of infrastructure stocks, energy companies and other sectors that had been among 2020’s biggest losers.
‘At the same time, the worries over increased regulation by Democrats and a spike in benchmark Treasury yields to above 1% hurt the big technology stocks that had led the markets higher last year.’
Biden’s multitrillion stimulus scheme is due to be unveiled on Thursday.
There’s no mystery here, $2,000 cheques are in the pipeline.
You will likely see some big infrastructure spending and more money for renewables.
The thing is though, that the market’s been anticipating this outcome for some time.
But also, don’t be surprised to see some movement for ASX-listed lithium companies and other clean energy players on Thursday as well.
Don’t forget about ASX-listed cannabis companies either.
Here’s the real story however…
Massive spending and tax hikes will have huge implications for the future of money and the global monetary system, which is why I’m tipping Bitcoin [BTC] to beat all other asset classes again this year.
Biden presidency to hasten the demise of traditional fiat
The AUD/USD pair is climbing ever higher, trading at 77 cents as you can see below:
That chart looks almost exactly like the NASDAQ chart. Or the BetaShares Nasdaq 100 ETF [ASX:NDQ].
It’s no coincidence either.
The same forces that are pushing the NASDAQ higher are pushing the Aussie dollar higher.
A flood of cheap cash from the Fed will do this, and at some point, this year, governments will face a fiat reckoning.
Up to 20% of all USD in circulation was created in 2020 alone.
You simply cannot do this and expect nothing to happen.
Where fiat currency fails, crypto will step in.
And I think it’s no surprise that the US Securities and Exchange Commission (SEC) is getting more active in regulating cryptos like Ripple [XRP].
Some would say that this is a sign that the bigwigs are worried about their precious (and rapidly devaluing) fiat.
I’ve flagged the rise of central bank backed digital currencies before.
I may’ve jumped the gun on the timing of their launch, but I’m convinced it will happen this year.
Which means you should tread cautiously on the big banks — I doubt they will emerge unscathed from a shift to digital currency.
My colleague Ryan Dinse thinks this is just the beginning though.
Here’s what he said to his subscribers just before Christmas…
What Ryan thinks will happen next to the Bitcoin price
This is what Ryan said:
‘I’ve seen this “slingshot” play out many times.
‘The mechanics of why are pretty simple…
‘When BTC goes on a run, altcoin bag holders without exposure to BTC start to panic. So, they sell out of their altcoins to move funds into BTC. This causes a wave of altcoin selling.
‘Then when BTC eventually stabilises, and the last of the altcoin panickers have sold, any small increase in demand can make the price of an altcoin soar very fast.
‘The process from before then goes into reverse and buyers rush into buy surging alts.’
Believe it or not, nothing goes up forever, even bitcoin.
There are cycles in every market and being familiar with their mechanics is essential to successfully profiting off them.
It’s why people pay attention to things like Kondratieff waves and the Gann real estate cycle.
Ryan has a system for flip trading crypto and it’s well worth paying attention to.
You will hear more from us about this system in the coming weeks.
Until then, I’d also recommend you follow him on Twitter via his crypto handle @CryptoDataHound.
For Money Morning
Lachlann is also the Editorial Analyst at Exponential Stock Investor, a stock tipping newsletter that hunts for promising small-cap stocks. For information on how to subscribe and see what Lachy’s telling subscribers right now, please click here.