The world of cryptocurrencies is a bit of a magical world, except of course for those already participating in the ecosystem. The king of this world, bitcoin, is the most volatile currency in history. Perhaps it is not a currency after all, but an asset, or even an illusion. But the conclusion remains the same, considering its size of about $600 billion: a value that fluctuates with 100% volatility.

The bitcoin has just collapsed, like the value of growth stocks or European and American government bonds. The market sends us a message – not a “Message in a Bottle,” as The Police band famously sang in 1979 – but rather, a “Message in a Bitcoin.”

Luxury is like beauty: Rare, immediately perceivable, extremely valuable, and quite difficult to describe.

From an economic standpoint, however, luxury has a very precise meaning.

If you wish to know whether the product you bought or sold is considered luxury, grab a pen, prepare yourself for some basic mathematics, and jot this down.

What might surprise you along the way is how health may be turning into luxury.

Inflation, growth, profits, energy supply. So many uncertainties today.

One definite macroeconomic fact is the US monetary policy. The Fed will take a new trajectory on its balance sheet in a few weeks, for months and potentially years: A sustained contraction of a trillion USD per year.

This is a first in world monetary history.

Consequences?

What is happening on the battlefield in Ukraine left aside a second war (not military this time) in the monetary sphere. Roles are reversed. The Western world pushes hard to collapse the ruble, and thus destroy the Russian economy, and so, Russia retaliates. In both wars, resistance seems to be much stronger than expected. In three weeks’ time, we’ll see if Europe yields to President Putin’s requirement to pay Russian gas in rubles, or not.

The outcome could be a monetary game-changer.

For 150 years, investment cycles have been mostly controlled by the balance between efficiency and scarcity. Efficiency when primary energy is abundant and cheap; Scarcity when primary energy is scarce and expensive. In efficient times, the stock market thrives; In times of scarcity, it trembles.

Historically, expensive energy cycles tend to last a full decade. What if history repeated itself?

US Investors worried about equity valuations safely reallocating to fixed income. Safely?

With 10Y US government bonds providing negative real rates, losing more than 5% in the last 12 months (same for gold), cash yielding zero, and expensive TIPS reaching a 2 standard deviations’ outperformance vs. fixed-coupon bonds year-on-year, what exactly does safely mean?

Here, we propose a simple rule to dynamically select the best US fixed income asset.

The simplest rule ever.

Ahhh, the simple scientific world of René Descartes! Single cause, single effect. In the economic world however, this unfortunately is not the case. One cause can even bring about two opposite effects.

A devaluation, for example, usually produces a deterioration in the external accounts first and then an improvement second. Economists call this phenomenon the “J-curve.”

However for more than 20 years, the financial policies of developed economies have turned the page upside down. The “J” has become an “η.” Immediate relief and pain for tomorrow.

The tapering in view of the US Federal Reserve now raises the question: Would “tomorrow” be the end of the summer?

The economy and stock market’s profitabilities do not always walk hand-in-hand. In 2020, for instance, to the surprise of many observers, we saw the former collapsing and the latter booming. Is it possible 2021 might see the opposite?

A protest movement in France named the “Gilets Jaunes” (Yellow Jackets) began in October 2018 due to a tax increase on fuel. The movement was populist, widespread, and spontaneous, and only weakened in 2020 due to coronavirus lockdowns.

Was 2.6 cents per liter extra tax on gasoline such a big deal?

The answer is yes. Inflation on a household’s constrained expenditure can unleash the “Gilets Jaunes multiple,” and kill consumption and stock markets.

The risk has now crossed the Atlantic.

In a stable regime where finance and economy grow in parallel, cash and oil are two forms of free energy which, in theory, should be fungible. Since early 2020, however, the central banks from the US, Europe, and Japan, issued 40% excess cash on average out of the blue to fight the deflationary consequences of the pandemic.

Cash and oil are unlikely to remain fungible: you can print cash, but you can’t print oil.

A few months ago, with a mischievous look in his eyes, Charles Gave noticed the S&P 500 was paying one gram of gold per annum in dividends!

What kind of hidden information lies behind this coincidence? Scarcity, efficiency, and the competition between them in asset markets.

For the first time since the end of the subprime crisis in 2009, the S&P 500 book stopped growing on December 31st, 2020 over 12 rolling months. The US market momentum is therefore fully supported now by intangible value.

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