Welcome to your Sunday digest…my weekly breakdown of the stories we’re thinking about and talking about in the Global Intelligence world.
This week, I’ve been out and about in Prague more than I’ve been in months, as the pandemic restrictions finally start to recede.
Restaurants have been reopening over the past week, mostly for outdoor dining, and I’ve been taking full advantage.
One evening, I popped out to have a beer and burger with my landlord, a lovely guy.
On another, I went for tacos al pastor at one of my favorite authentic Mexican eateries in the city (it’s not all schnitzel and goulash here).
There’s a real sense that things are improving at pace. Tomorrow, I’m scheduled to go in for my first COVID vaccine shot (very excited, because it means I can travel again and start hitting some destinations I want to write about, particularly Malta and Albania). And restaurants and bars are expected to reopen for indoor dining in a couple of weeks.
That will be very welcome, as even during the spring/summer months, the weather in Prague is temperamental. Indeed, this was a gray, rainy week.
Though, truth be told, that’s one of the reasons I like it here.
Call me crazy, but I dig seasons, even changing, unpredictable weather. Back when I lived in Los Angeles, the endless sunny days seemed to bleed together. Seasons help mark the passage of time.
Plus, sometimes the darker, rainy days help enhance the gothic beauty of this city (as I attempted to capture in the photo on the right, which I took during one of my strolls this week).
Of course, I know that not everyone shares my passion for changing seasons. So, if you dread the cold and snow, you might like to know that my colleagues at International Living are currently running a free webinar on how you can move to the last affordable destination in the Caribbean.
This is a place where you can buy an oceanfront home for as little as $150,000 or rent a furnished condo with a sea view and a pool for as little as $1,000 a month. (You can check out that free webinar here.)
With my blathering about Prague out of the way, on to our first update.
This week, famed billionaire investor Carl Icahn said in an interview with Bloomberg that he’s looking at making a significant investment in crypto…and by significant, he apparently means $1 billion to $1.5 billion.
Icahn, who reportedly has a net worth of about $16.5 billion, is a one-time crypto skeptic…previously comparing crypto to a historic real estate bubble.
But, he’s now changing his tune…stating in the Bloomberg interview that crypto assets are “here to stay.”
In reversing his public opinion on crypto, he joins many other prominent billionaire investors including Mark Cuban and Ray Dalio.
The latter, who is head of the world’s largest hedge fund, recently admitted to owning “some” bitcoin.
Dalio says he is worried about spiraling inflation and government debt, and believes bitcoin can be a store-of-value…meaning a way to protect your wealth, like gold for the 21st century.
Which is exactly what I’ve been writing about bitcoin since the middle of last year.
If the billionaire hedge fund guys are pouring their wealth into crypto, you can be sure that this is not a fad or a flash in the pan.
Speaking of government debt, during the week, news agencies started reporting that the Biden administration would be proposing a $6 trillion budget to fund priorities in infrastructure, healthcare, and social support spending.
This would put the U.S. on the path to annual budgets exceeding $8 trillion within a decade.
Now, the administration will never get that budget passed. This is just Biden’s opening gambit in the annual game of budgetary chess between Congress and the White House.
Still, the final number, once it’s negotiated, is likely to be massive. And this will set up another battle—between the bond market and the Federal Reserve.
The bond market will react to huge budget deficits with higher rates, rightly fearing that deficits will spiral out of control.
Bond jockeys are the rocket scientists of Wall Street—the smartest guys in the room, by far. And they have a way to forcing the government’s hand by manipulating bond prices lower and interest rates higher (the two move inversely).
If that occurs—if the bond market grows increasingly worried about federal deficits and an exploding budget—that could very well force the Fed to start raising interest rates at some point in the near future, maybe before the end of the year.
Or maybe the Fed’s up for a game of chicken.
Maybe the Fed will refuse to budge, given its current intransigence (willful blindness?) in the face of rising inflation. In a game of chicken: Bet on the bond jockeys—on higher interest rates and lower bond prices. They’re global and more powerful than the Fed in the end.
Anyway, the financial impact of all this on you and me will be that interest rates start to rise in the bond market, either because bond jockeys are pushing the rates higher to limit U.S. borrowing…or because the Fed catches a clue and realizes it has to raise rates to stanch the inflationary urges now playing out.
Either way, we face higher interest rates, which will likely take some air out of Wall Street, while pumping gold and other commodities…which is why we own gold and commodity exposure in our Global Intelligence portfolio, and why we’re adding a new commodity in June. But more on that in the upcoming June issue of the Global Intelligence Letter.
That brings us to the end of this week’s digest. If you have any feedback or questions, please feel free to send me an email any time at firstname.lastname@example.org.
I hope you enjoy the rest of your Sunday!