Investing General Discussion

Cad

Sheriff Cad

scientia potentia est
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M Power said:
Not really. In fact it's very easy most of the time in current times. Trump posts stupidity on Truth social? Market reacts almost instantly. The algo's are actually rather predictable these days.
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Should be pretty easy for you to make money then, I look forward to your great success. Cheers.
 
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Flobee

Flobee

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M Power said:
You need to give more evidence if you're making such a statement.
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Evidence? For the straight being closed creating liquidity issues in the global market and likely resulting in a flight of capital away from risk? Evidence for capital moving away from USD assets and into Yuan, the currency now required for safe access? I don't need evidence, that's just simple observation for how capital flows are currently shifting. My point here is that markets, especially something like the S&P is FAR more sensitive to liquidity than it is to anything the specific companies sitting at the top of the index are doing.

Thats not something I need to prove, thats something you should investigate yourself if you don't understand. Are you aware of how our market is actually structured due to our reserve currency status? That is currently being threatened. If you don't understand how massive the foreign capital position is in our markets you (or really, anyone reading this) may not understand the risks in the market right now. There is no guarantee things go sideways, but this is about as risky a spot as we've been in my life at least. Jysin Jysin 's assessment is correct as far as I can see.

I'm by no means a doomer, but if oil trade outside the USD continues to accelerate and something drastic doesn't change there will absolutely be a lot of capital move out of our markets simply because its only here due to international trade requiring USD, so these entities hold USD denominated assets to shelter that capital. When Trump says he's going to re-shore production etc, he is also saying he's going to end USD reserve status, because you can't re-shore and be the reserve currency. That is what is happening and there WILL be affects to capital structures. Thats another discussion, but it is inevitably going to put downward pressure on US markets until something is done to plug that hole.

Happy to let someone smarter than me talk about all the medium-long term effects from the supply chain issues caused by the straight closure.

Edit: Some evidence since I'm up too early
The six Gulf countries’ eleven sovereign wealth funds invest about $2 trillion in the U.S, which is over 35% of their total assets under management. Thse countries invest in U.S. stocks, bonds, alternative investments such as hedge funds, real estate, and infrastructure. Over 25% of the total Gulf investments in the U.S. are in equities and about 17% are in fixed income products, especially U.S. Treasuries.
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finance.yahoo.com

Iran Reportedly Accepts Crypto and Yuan for Strait of Hormuz Shipping Tolls

Iran has established what amounts to a formalized toll system at the Strait of Hormuz, accepting Chinese yuan and crypto – specifically stablecoins pegged to fiat currencies – as payment for naval escort through the waterway, according to a Bloomberg report published April 1. The system...
finance.yahoo.com finance.yahoo.com

Too hard to find an actualy synopsis on the topic, so thanks AI:
Reshoring U.S. manufacturing while maintaining the USD as the global reserve currency presents a fundamental conflict, as the "reserve currency status" requires the U.S. to run trade deficits to supply dollars globally, often undermining domestic industrial growth. While some officials argue this status acts as a tax on American producers, experts argue that forced de-dollarization through tariffs could cause massive, rapid economic disruption. [1, 2, 3, 4]
Key Dynamics of US Reshoring and the Dollar:
  • The "Triffin Dilemma": To keep the dollar as the world's primary reserve, the U.S. must issue debt and run trade deficits to provide global liquidity. Reshoring and trade protectionism (e.g., tariffs) run contrary to this, as reducing imports would diminish the global supply of dollars.
  • Industrial Base vs. Reserve Status: Some U.S. officials argue that the dollar’s status has "hollowed out" the American industrial base. Proposals to reverse this include taxing foreign holdings of U.S. Treasuries to force a dollar devaluation, thereby aiding local manufacturing.
  • Alternatives Lack Maturity: While the US dollar has seen a slow decline in share to roughly 58% of global reserves, it still leads by a wide margin over the Euro (~20%), with no immediate viable alternative to take its place.
  • Challenges to Reshoring: Even if manufacturing moves back, high automation means that widespread reshoring may not bring back massive manufacturing jobs, with capital gains and technology advancements driving productivity rather than labor-intensive manufacturing. [1, 2, 3, 4, 5]
Implications of a Shift:
If the U.S. successfully forces a reduction in the dollar’s role, it would likely mean a weaker dollar, lower long-term debt service costs, but potential volatility in global trade and financial markets
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Foreign investors hold approximately 20% of all total U.S. securities outstanding, with the share varying by asset type, according to data from the U.S. Department of the Treasury. Due to the dollar's status as the primary reserve currency, foreign ownership is highest in Treasuries at about 30–33%, while representing roughly 17–20% of U.S. equities. [1, 2, 3]
Key Foreign Capital Ownership Percentages
  • Total U.S. Securities: ~20%
  • U.S. Treasuries: ~30–33%
  • Corporate Debt: ~27%
  • Equities (Stocks): ~17–20% [1, 2, 3, 4]
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Foreign investors hold US assets for a number of reasons, but primarily because of USD reserve status. If that status is in question, some of that capital moves and that is a hole that needs to be plugged, likely with $$$ printing in some form. Simple reality of the situation accelerated by the Hormuz situation. Plenty of reasons we could see a large decline in S&P. IMO they're gunna paper over that loss when it happens but there is a reason Berkshire is sitting on $373 billion in cash for example.

For fun, little clip of Luke Gromen on the topic, he's been lights-out on macro for the past year or so btw
 
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fris

fris

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self fulfilling prophecy

people think the market will drop, so they pull $$ out of the market. but high gas prices will pull down just about any physical product directly, and slow everyone's spending on everything else.
 
Borzak

Borzak

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A lot of stuff that are a physical product have some tie in to not only energy/oil but stuff made in related petro chemical. Everything from tires, fertilizer, plastics etc. all start at a refinery then off to a chem plant (often adjacent to a refinery) via feed stocks and onto to whatever industry that makes the final product. I'm sure that will take more time to work through than oil.

I used to have a pmaphlet one of the chem plants handed out of all the things made in that industry. Not name brands but types of stuff was like 400 and several pages. Cleaning stuff used around the house was a big one.
 
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ToeMissile

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Borzak said:
A lot of stuff that are a physical product have some tie in to not only energy/oil but stuff made in related petro chemical. Everything from tires, fertilizer, plastics etc. all start at a refinery then off to a chem plant (often adjacent to a refinery) via feed stocks and onto to whatever industry that makes the final product. I'm sure that will take more time to work through than oil.

I used to have a pmaphlet one of the chem plants handed out of all the things made in that industry. Not name brands but types of stuff was like 400 and several pages. Cleaning stuff used around the house was a big one.
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This was brought up on something I was listening to recently. Nitrogen and helium being two where ~25% or more is manufactured in the greater region and/or goes through Hormuz.
Nitrogen > fertilizer > US farmers.
Helium > medical devices, chip fab, more > healthcare & compute capacity a
 
Borzak

Borzak

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Sulphur was another, but no idea what it is used for. Gunpowder but I am not sure that is the issue. A large issue in the US is plants shutting down and the rest contracting to the US.
 
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