Turkish Lira crashes, crypto crashes: right again. Mid-year recap.

Time for a mid-year recap post of all the predictions.

The Turkish Lira crashed this week on Turkey’s newly appointed Finance Minister, Mehmet Simsek, ending the Turkish Central Bank’s costly scheme to prop up its currency. Just like I said would happen earlier this year:

Prediction 1: Turkish stock market and ETF (ticker symbol: TUR) will crash in 2023. So will the Turkish lira (USDTRY). I forgot to add this in my original post. Turkey has the same problems that have plagued it from 2013-2021, such as brain drain, low IQs, lack of foreign investment, hyperinflation, incompetent leadership, etc.

Monetary gimmicks by Turkey’s central bank will only delay the inevitable crash. Without foreign investment and real economic growth, there is nothing that can save Turkey’s economy.

So many pundits from 2020-2023 were expecting the US dollar to crash, such as due to Covid spending, yet over and over, it’s everywhere else that is crashing. Not the US. Every problem that the US has is worse elsewhere, like inflation and recession in Germany.

And Japan’s Nikkei 225 index keeps going up. So much for all the doom and gloom about lost decades, falling population, and poor demographics. Just another example of experts and pundits always being wrong. Japan is a low-inflation, high-trust, ethnically-homogeneous, high-IQ haven in a world overrun with social instability, unwanted immigration/migration, inflation, unrest, and crisis. Investors will pay up for that even if there is not much economic growth or unfavorable demographics.

So another correct prediction to add to the leaderboard for 2023, including:

1. Huge tech stock rally (QQQ)

2. Worsening Bitcoin regulation (Binance and Coinbase sued by SEC this week.)

3. Meta/Facebook and Tesla stock surge (Meta up 170 percent this year, beating almost every other stock)

4. Bitcoin lagging big tech massively. Bitcoin down 15 percent vs 10 percent gains for QQQ over past 3 months, the widest divergence of performance in years. So I was right and Balaji was wrong, which is not that surprising.

It is already crashing some more, now at $25k, soon to be $10k. The entire crypto market is deep red, with some coins down 25 percent or more over the past 24 hours:

The US government cannot shutdown Bitcoin, nor does it want to or need to. Instead, by making it over-taxed, de-anonymized, and over-regulated, there is no reason to own it…the entire value proposition is gone. It’s just another risky asset that does nothing, as well as a tool for surveillance by the government.

5. Turkish Lira implosion as discussed above

6. Ark Investments fund lagging QQQ

7. Russia-Ukraine still a stalemate, as I also correctly predicted. No escalation of conflict to involve other countries, no boots on the ground. Only military aid. Biden to his credit has resisted all calls for escalation.

8. Trump indicted for possession of classified documents. This is just another contrived charge that is so obviously, transparently politically motivated. This is coming from someone who is not even that far to the right, and thought the same about the Lewinsky scandal, as also being motivated by politics. The way we know it’s fake is, when the story broke last year, was the left more appalled by the implications of national security possibly being compromised, or jubilant that Trump was under investigation?

But I was wrong about this, having in 2022 predicted he would not be indicted. However, the prediction has two parts, the second being that he would not be arrested, so I could still be right about the second part.

This is why I don’t bet on political outcomes, such as on prediction markets. Politics tend to much more random compared to economics or finance. Investing and finance is governed by systems and gradients of capital flow, that are surprisingly predictable for long durations such as the weakness of Bitcoin relative to big tech or the persistent weakness of Turkeys’ economy, whereas politics is more capricious.

The weakness of emerging markets, the Lira, non-tech sectors, and cryptocurrency is also part of the ‘great convergence’ of all capital flowing into just a handful of superior assets and sectors–those being ‘big tech’ (like Tesla), the US dollar, ‘big retail’ (like Walmart), ‘big health’ (like United HealthCare), and Bay Area real estate (and other expensive, high-IQ locations)–and out of everything else. No one wants second-best. No one wants to be stuck with crud like crypto when there is better stuff out there, such as Meta or Nvidia stock.

Yes, the world is unknowable and unpredictable most of the time, but there are still trends and patterns that can be isolated and exploited for profit by someone smart or astute enough to find them (a major part of IQ is pattern recognition and information processing). Such trends tend to last longer than most people expect or assume, in part because they are hard to identify or seem counter-intuitive. The response is usually disbelief that such trends will continue, but they do. Too many people overestimate the propensity of complex systems to fail or for trends to mean-revert.

A lot of people thought that Facebook was a bubble in 2013. A decade later Facebook and Instagram are bigger and more popular and profitable than ever in terms of global usage and ad revenue. Or the left becoming more extreme over the past decade. The intensification of the ‘trans wars’ in 2021, such as the use of puberty blockers, turned up the woke-left a notch on the dial when it was thought that things could not be more extreme in 2016-2020 after Trump won and during Covid. Or the same for US home prices, which keep going up despite endless predictions of housing market crash.

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