The Daily View: 2/20/2022

Bitcoin continues to crash, down 10% in a week to $38,000, following the stock market lower on Russia-Ukraine uncertainty. This proves again that Bitcoin is useless as a hedge against anything. Bitcoin is very highly correlated with the stock market to the downside and less so to the upside. Also, Bitcoin is down 30% year-over-year despite CPI gaining 5-7%. If something is marketed or hyped as an inflation hedge, odds are any abnormally high inflation is already priced into it.

UGA, which is a gasoline ETF, is probably the best commodity-based inflation hedge there is. Not many people know about it, because the media mostly focuses on oil, gold, or bitcoin, but gasoline prices tend to be much more sticky, so the gains hold better. Pain at the pump is here to stay, so UGA benefits from this. It would not have made a difference had Trump won: inflation would still be high. Inflation was already rising by the time he left office; why would it have abruptly stopped had he won. Trump , like Biden, supports tons of stimulus spending and aggressive monetary policy. There is nothing to suggest Trump would sacrifice points of GDP or points of the S&P 500 to reduce inflation. Every president , since Clinton ironically, has overseen the massive expansion of the deficit and national debt.

Regarding Russia and Ukraine, my prediction is that this will be a nothing burger, and this is a good opportunity to buy the dip in the stock market. The media is calling it a war, but it’s nothing at all like a war. At worst it is a self-contained, self-limited conflict/skirmish. Some people are already predicting nuclear war, which is just absurdly wrong. I am not even sure what sort of chain of events would have to transpire for that happen; it’s just so inconceivable. The way I know that this is media hype is how Putin/Russia keep intimating of doing something, but no one really knows what is going on. For the past 1-2 week it’s been just speculation by the media, Reddit, and blogs that something may happen. That’s not usually how war works though. An invading army intent on conquering does not telegraph its actions well in advance, as that would defeat the element of surprise. If Russia actually had any intent on conquering Ukraine, there would be no ambiguity or hesitation about it. There would be be no speculation by the media if/when Russia is going to act: it would be obvious by now. Also, with the exception of the Soviet invasion of Afghanistan, communist countries (although Russia is no longer communist, many vestiges of the UUSR remain) tend to be pretty defensive and restrained; invading is not their ‘thing’, compared to the US, which is much more aggressive, which is also why the ‘inevitable’ war with China will never come either and why China does not pose a threat. It’s much more likely that the US will initiate a war than the US having to defend itself.

I’m not sure why this is such a big story Queen Elizabeth II tests positive for COVID-19. “So what?” If she died or was seriously ill, then yeah, that would be a big deal, but merely testing positive does not mean much. It also shows how the above story about Russia is not that big of a deal if the queen having a cold is somehow of greater or equal importance to what has been hyped as another world war. Omicron is way overblown anyway. Daily deaths only ticked up 30% despite daily Covid cases quadrupling, suggesting Omicron is considerably less lethal than earlier variants.

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