I hold other currencies apart from USD because I’m a lunatic.
And I’m making one major change.
I held actual (paper!) Chinese Yuan as a small hedge against my USD not being ridiculously strong in the world of currencies over time, like I expect it to.
I ditched half of it this past week.
I traded it all in for USD because I found a local exchange where I was at in Central America who will take them, and I just happened to have the Yuan in my travel bag in case I ran into a place like this.
There are very few currency exchange places in the US outside of airports, exchanges by the way who should all go to jail for sodomizing people.
Why You Do This?
Well why did I hold CNY in the first place?
There was a time believe it or not when people thought China was going to become the next superpower.
They grew so fast! They made lots of money! They had all those people and factories! All this influence around the world. Do you see this map??!!
From: Visual Capitalist
The whole world wanted to invest in the next big superpower. We all thought the US would be soon passing the torch to a communist nation and letting them take it from here.
But China was in enormous trouble. And nobody seemed to realize it.
I read the book “The Accidental Superpower” by Peter Zeihan back around 2016, and I learned the importance of demographics.
Seriously, demographics are, everything. To the point where almost nothing else matters. I had no idea.
(China trades with everybody btw because they barely produce enough on their own to sustain their population.)
China was also insolvent money-wise, but then again, who wasn’t?
I still decided to hold Yuan, because empires take time to collapse, and a lot can happen in that time.
Also given the fact that most foreign currencies are just flat out a bad idea to hold as a USD hedge because they’re crap.
Fast forward to 2024, China’s terminal demographic problem not only got worse, but instead of having to face these issues full-on in 20-30 years, things have gotten so bad, they’re having to address them right now!
And Wall Street has FINALLY gotten the message.
Not one news outlet was talking about demographics not even two years ago. Now they’re magically a thing again. And China has become first up to bat.
(Spoiler Alert: Most of Europe and Asia is completely hosed when it comes to demographics, so their turn is coming. But China’s is arguably worse because of their “One-Child” policy from decades ago.)
Anyway, nothing China does seems to work now. Their “restart” from a year ago never happened, foreign money is fleeing, and only after all of their citizens have done their best to remove their own capital from the CCP.
Recently, there has been some positive news coming out of China on Twitter at least, but the timing seems weird to me, and nothing they do is going to reverse their financial or demographic problem long-term.
The future “safety net” of China and their huge economy, to me just isn’t there anymore.
So I dumped all of it.
What I Have Left
Bear in mind, I only hold these for the value they may provide in a catastrophic scenario, where the world is on fire, and for some magic reason, the USD falls apart yet some other currencies make it.
The chances of this ever occurring, in my mind at least are incredibly slim, but less slim than us falling into a Mad Max type of society where everyone is forced to pay with gold, silver and cigarettes, yet there are plenty of people who think it’s a good idea to prep for something like that.
So apart from USD, I now hold:
RUB (I have no idea how I’ll ever sell these, lol)
SGD
NZD
I did an episode on AUD, but this will only come into play after an upcoming recession is finally over and countries start to rebuild.
Now so far, the USD is holding up reasonably well against the other 7 majors.
1 year DXY chart
I remember when Finance Twitter was flipping out when the DXY dropped below 100. Nobody can see far out enough in front of their own faces, I swear.
And please keep in mind as always, none of this is about right now. The only reason I bother to hold these things is for the possibility of a very shaky and uncertain future.
Conclusion
I can’t believe anyone cares about this eccentric little route I take with these currencies, especially since there’s no real Alpha here.
It’s all defense, and defense for a situation that has a low chance of happening.
But it’s something I’ve chosen to do, and something I will continue to share with you all as we go along.
— VP