Reaction & Commentary
Trade in our own currencies we’re going to trade all the Commodities in Chinese yen Russian rubles and Russia has pushed the brics countries which is Brazil Russia India China South Africa to create their own unified currency like a brics currency to replace the dollar in global trade so two questions have been
Asked a lot off by my students number one can the US dollar be replaced as a global Reserve currency is the dollars status coming to an end number two if that’s gonna happen how will that affect the U.S stock market so let’s find out in this video foreign
First you must remember that the prophecy that the US dollar would lose its Global uh dominance is not something new in fact it was prophesized a lot in the early 2000s especially when the Euro was created in 1999 the European countries they got together Germany France Italy and whatever right Greece
They got together and they created the euro currency now initially the euro currency did really well if you look at the Euro versus U.S dollar currency pair you can see that initially it took off like crazy and especially during the great financial crisis when the U.S federal reserve they cut
Interest rates to zero the U.S dollar lost a lot of its value so at the time I remember a lot of people were joking that the US dollar was becoming like toilet paper that the US Dollars uh dominance was coming to an end that you’ll be replaced by the Euro
And sure enough it looked that way from 2003 all the way to uh 2008. you can see the Euro USD going up which means Euro going up dollar collapsing right but then what happened then everything reversed and over the last 13 years from 2009 to today the Euro has collapsed
The Euro has collapsed against the US dollar so what happened why did this Euro fail in fact at one point of time they were saying that maybe uh they’re gonna disband the Euro right they’re gonna kill the Euro so what happened you know they realize after a while that
Creating the European currency was a really bad stupid idea because you got all these European nations and all these European countries have different economic growth different debt levels so when they all form a single currency it’s going to be very difficult for that currency it’s kind of like if you are a
Rich person and you’ve got friends who are very poor and you exchange credit cards you gotta fight right so like Germany’s a rich EU country but they have to kind of like have the same currency as Greece which is a poor Euro country that creates a lot of problems
So and so that is why the Euro has in fact been depreciating against the US dollar and is nowhere close to replacing the dollar as a global Reserve currency now if the Euro failed right the Euro which is a group of all these European countries fail then if you think that
The brics currency is going to succeed against the dollar you’re on freaking drugs why why will it not work why can’t the Chinese yen become the global Reserve currency see there’s no freaking way let me tell you why because remember that China is a communist country at the
End of the day and China has strict Capital controls which means the Chinese yen is a control currency it cannot freely move uh in and out of China or around the world did you know that a lot of Rich billionaire Chinese they can’t get their money out of China they can’t
In fact I’ve got good friends who are millions and builders in China and they can’t get their money out because the yen is a control currency now China knows that if they allow the yen to have no Capital controls which means you can bring money in and out easily a lot of
Chinese billionaires will pull their money out of China and that will cause the Chinese economy to really really collapse so China kind of fought to do that that’s why the Chinese yen is a control currency so as long as the yen is a control currency there’s no way it
Can become a global Reserve currency there’s no way it can come close to replacing the dollar now how about the other countries Russia the Russian Ruble or police you know that’s that’s in a [ __ ] house right how about the Indian rupee oh my God the Indian rupee has
Been depreciating against the US dollar for for many many years right same with the South African Rand and the um Brazil real right so in fact if you take a look at history you can see that every one of those currencies in a brick block they have been losing value against the US
Dollar for many many years so you can see that on this chart right I plot all the different currencies against the US dollar uh almost every major currency has lost value against the US dollar take a look number one Euro USD which is the Euro versus USD down for 13 years
The Chinese yen has been well more or less flat right um the Yen Japanese Yen has been going down versus the USD the pound has been going down versus the USD the Indian rupee has been collapsing versus the USD and finally the Russian Ruble has been collapsing against the US dollar right
Now you hear a lot of people saying that oh the US dollar is losing value yeah all Fiat currencies lose value all of them okay but the US dollar is the best house in a bad neighborhood because every our other currency loses value even more than US dollar except except I’m very
Proud to say the Singapore dollar that’s right from Singapore the Singapore dollar is one of the few currencies that actually gained against the US dollar for the last 13 years everything else has lost value against the US dollars so if you ask me is there any chance for
Any other currency to replace the US dollar as a global Reserve currency not in the next 30 to 50 years if you think it will you’re freaking [ __ ] because take a look at that right now it’s got 59 share of will foreign exchange reserves and China uh Chinese
Yen is only 2.8 percent okay the Russian Ruble is not even there closest would be the Euro at 19.7 but that’s been losing value like crazy and next in line will be the Japanese Yen and then the British pound which again are all losing value against the US dollars so to answer that
First question note the US dollar will remain the global Reserve currency and the global dominant trade currency for the next 30 to 50 years let me answer the second question which is in the event that the US dollar does lose value against other currencies is that bullish
Or bearish for U.S stocks and the answer is in the short term in the short term it is actually bullish for U.S stocks a weaker dollar is good for U.S companies why because when a dollar is weaker that means that U.S companies their products products and services will look cheaper
To foreign countries so it becomes more attractively priced so that will increase their sales and profits number one number two when the US dollar is weak and a U.S company like McDonald’s they earn money all around the world and they bring back all these foreign currencies to the US when they convert
To U.S dollar it converts to more US dollars since the dollar is weaker versus foreign currency so again in the short term when the US dollar weekends U.S stocks tend to go up and you can see it from this chart now over here you can see I’ve plotted the US dollar Index
Which is the US dollar versus a basket of foreign currencies plotted it against the S P 500 which is in Orange below so again you can see this is the short term this is over about two years you can see what happens when the US dollar strengthens right
When the US dollar strengthens the S P 500 goes down right the U.S stocks go down and when the U.S dollar weakens then U.S stocks go up so in the short term a weak US dollar is good for the stock market in the short term but in
The long term in the long term it doesn’t make any difference it has no correlation let’s look at the long term over 40 years right this over 40 years so you can see that over 40 years the again the US dollar Index has gone through periods where it gains against
Foreign currencies then it weakens against foreign currencies it goes through these Cycles right depending on whether the fat raises or Cuts interest rates so you can see for example uh over here in the early 1980s the U.S dollar gained a lot of strength U.S dollar went up but
What happened to the stock market in Orange the stock market went up as well so both went up at the same time right then in the late 80s to early 90s the U.S dollar collapsed in value but the U.S stock market went up again right and over here you can see US
Dollar goes up stock market goes up then over here the stock market goes down stock market goes down as this kind of like goes sideways right and then dollar collapses U.S stocks go up then over here US dollar goes up stock market collapse then over here US dollar strengthens in the last
Um uh 10 12 years 12 12 years and the U.S market goes up so in the long run there’s no correlation between the US dollar and the U.S stock market now some students have been asking me hey Adam if if the US dollar loses its Global Reserve currency status can U.S
Companies still do well can U.S stock market still go up yes so case in point take a look at this example I showed you that in the last 13 years the Euro was a very very badly performing currency the Euro collapsed against the US dollar right but if you look at specific
European companies some of them did even better than U.S companies so in Europe my two favorite companies are number one asml so asml as you guys guys know is the largest semiconductor equipment company in the Netherlands all right so they produce a UV photolithography machines used to make
Semiconductor chips so asml in full disclosure is in my portfolio I own the shares it’s a one of my favorite stocks so again asml they report in Euros right so it’s an European currency but take a look the the stock esml has gained 585 percent
Return versus the s p of 98 return over or since 2015 all right my other favorite European stock is lvmh Louis Vuitton I love the company I love the company and again this company trades in Euros right which again lousy currency but look at the stock lvmh sticker
Symbol MC listed on the uh Paris urine X exchange you can see it’s gained 646 percent way higher than the S P 500 so that goes to show you that um whether a stock goes up or not depends on the fundamentals of the individual business a lot of people buying Louis
Vuitton handbags a lot of people uh you know creating semiconductor chips using asml equipment right it’s got nothing to do with the uh currency in which that company operates in so in summary remember that all Fiat currencies will lose value over time now a lot of people
Have been uh looking at this chart and say look at the US dollar the US dollar has lost 90 percent of its value in the last you know 100 years and that’s true again all fiat currency loses value over time but remember that as the US dollar loses value other Fiat currencies lose
Value even more the Yen the Euro the Russian Ruble they all lose value even more so what do we need to do in order to protect and build our wealth we need to invest in assets that will hitch against um the devaluation of Fiat currencies so
Of course what you invest in some people will say well that’s why you buy cryptocurrencies like Bitcoin because you know Bitcoin has limited number now again I’m not going to argue some of you but I just don’t buy that argument uh so it’s something that I don’t invest in I
Still personally feel that in the short term sure Bitcoin can go up because of speculation because of uh manipulation but I think in the long run it’s going to be worthless and again that’s just my opinion please don’t listen to me if you don’t agree that’s great go buy some
Bitcoin right but I’m not gonna buy any Bitcoin of course there are some people say hey buy gold right goal is real you know but I subscribe to Buffett’s Logic on goal uh I do uh think that you can go to YouTube there are a lot of videos on
It this is a great video on why Warren Buffett thinks that gold is a very stupid investment in the long run uh and it compiles all his speeches about gold now the long and short of it is that goal is a non-productive asset cryptocurrencies are non-productive asset now what’s a non-productive asset
It is an asset you buy that doesn’t produce anything its value comes purely from what people think it is worth it’s only called psychological value it’s got no intrinsic value if you bought gold you know 10 20 30 years ago you bought gold what can you
Do with that piece of gold you can rub it you can form the lid you can kiss it you can caress it right and after 20 years you still have one piece of gold right that’s it it doesn’t produce other piece of pieces of gold all right but it’s
Maybe worth more because people are willing to pay more psychologically right so in the short term any asset can outperform another asset so in the short term crypto could outperform stocks gold could outperform stocks anything can happen in short term because short term is all driven by emotions but in the
Long run in the long run a productive asset will always outperform a non-productive asset a productive asset is an asset that you buy that generates cash flow if you buy real estate you can rent it out it generates cash just a productive asset so for me personally I
Put all my money into the stock market because when I buy stocks I’m buying pieces of businesses and businesses are productive assets like you own a piece of Apple a piece of McDonald’s a piece of Nike a piece of Walt Disney they are businesses that produce goods and
Services that people use every single day they generate 3 free cash flow every single year and so at the end of the long term not only do you own the company you get all the cash that the company generates in dividends and and and capital gains and so on so forth
So again if you take a look at the long run you can see that uh the S P 500 way outperforms a non-productive asset like gold and that’s why to answer some of my students questions I I don’t buy gold I never have I never will I only buy
Productive assets so hope you enjoyed this video hope it’s been useful and like always I’ll see you guys in the next one may the markets be with you if you want to catch my latest videos click on the Subscribe button right now click on the Bell so you get instant
Notifications once I upload my latest video if you want to check out my online courses go to piranaprofits.com we’re going to learn how to invest and how to trade the financial markets and create an income from all around the world if you want to join my live wealth
Academy program go on to wealthacademy global.com and find out more about how you can learn investing and trading live online this is Adam cool and may the markets be with you
