War, Volatility, & Avoiding Reactionism

Transcript:

Hello everybody, I hope that this quick audio piece finds you well. Today is March, goodness, what is it? March 3rd, 4th. 

It's the third. It's hard to keep track of time, I swear. I'm stuck in the car right now and I wanted to use this opportunity to record just some preliminary thoughts because of course, over the past 72 hours or maybe a little more than that now, things have basically fallen into place. Um, if you did take the opportunity to watch the 1st quarter CHAMP Model Update video, which in reality, was much more of a market commentary and breakdown of what is in order for 2026, you would not be surprised to find that this is all falling right in line. 

This is what we were expecting. Now, that being said, if you were to log into your portfolio today, you might be saying, Casey, why on earth are we down so much today? Well, there's very clear, clean cut answers for today. 

Now that being said, things can always change. Things will change, and that's one of the big takeaways right now is there is no clear path forward right now. There will become a clear path forward. We will have much more clarity. We will get signals, we will get quality understanding of what is most likely to occur, but more importantly, how whatever occurs is going to be digested by and, uh, let's just say, kind of embraced by the market. But before I touch on sort of what we're seeing now, I'm going to quickly highlight one of the biggest drivers for the volatility today, and again, today is Tuesday, is the dollar has accelerated in its valuation very rapidly. Now, a question that I have received multiple times in the past 3 days. 

When I suggest to people that the dollars increase is what is driving the volatility in the market, people say, why? Why does the dollar go up right now? Casey, you told me back in that video that one of the reasons that we're being very cautious and how we are mitigating risk is the dollar is losing value. 

That remains true. However, major structural changes. And I mean that in terms of the structure of the market, the structure of global markets, structure of global economies that don't change overnight. We are still on track for the dollar to continue being at risk of losing its role. And most of it, in so many different ways, it already has lost the role that it once played in the world, but it continues to lose more of its hegemony in terms of global finance, the reserve currency, the default trade currency, all of those different factors. Those are all still in play. 

However, in this moment, in the moment where you're seeing this increased amount of tremendous volatility, in the world, um, and a lot of questions as to what's really going on here. You know, one of the biggest questions that people are rightly asking, and Marco Rubio, kind of let the cat out of the bag, is why? Why now? 

The Pentagon, you know, suggests they had absolutely no intelligence, suggesting that there was an imminent strike on the U.S. You know, we've heard leaders in Israel tell us for the better part of the past 30 years, 40 years. It's been basically the entirety of my life that Iran, as always, just 2 days away from having a nuclear weapon. We know that, unfortunately, our so-called greatest ally in the Middle East is actually the one country that does have nuclear capability where they got it as a little suspect. 

We know where they got it, but that would require people to kind of understand that there's more to the story than what they're told. But, you know, there is a known nuclear power. Was Iran pursuing? 

Maybe, maybe. And I'm not, I don't have intelligence. I just simply look at the history of things. 

And I would say that there is an overwhelming amount of scrutiny that has been applied to Iran. And we didn't have any indication that they were. putting the U.S. at risk. But as I mentioned, Marco Rubio effectively alluded to it that the U.S. was going to be involved one way or the other, and the hard truth was that Israel was probably going to do something really, really stupid, and then we'd have to go in and clean up their mess. So instead we chose to strike first. 

Now, what's the veracity of that? Look, at the end of the day, I don't put any stock in what any politician says. As far as I see it, you can't trust anything. And I only say that because I'm going to see the proof in the pudding. I'm going to see it when it applies to the market. 

I'm going to see it when, when things kind of, again, matriculate through the systems, if you will, and eventually a truth will become more readily available, but for right now, we don't have truth. It's not there. It doesn't exist yet. And the people that do have it are probably going to keep it under wraps. Because it's probably not as glorified as they might want it to be perceived. So, as we look forward, we would say, okay, so maybe our hand got pushed as a nation. 

Okay, what else, though? Why, why, what other benefits, causes, what else might be happening? One of the other big pieces of this is, of course, international trade is front and center right now. I talked in that last video about the fact that we're seeing either a polarization and a resource grab, consolidation of power, consolidation of trading partners, consolidation of critical materials, between either polar powers, hemispherical powers, or maybe it's more like pillars around the earth, right? Not so much polar, but pillars. Pillars meaning various regional power centers. The point remains. There has been this objective that's playing out. And one of the things that has been a concern for the United States is the fact, and this has been echoed loudly in the metals market, is that China's effective ability to corner not only the metals market, but the critical materials market, has been a great threat to the United States. 

So, even if it's just a conciliatory prize, the United States, by creating this disruption in the Middle East, very well may create a disruption for Chinese policy expansion. How would it do that? Well, at the end of the day, China, if they're going to continue building out their industrial production base, if they're going to keep building out their, whatever else it might be, they need to export the things that they make. Okay? But they also need to import the energy in order to produce these things. They are not an oil-rich country. They have been pushing harder and harder as of late to consolidate their, let's say, resource channels. And that has been a pain point for the United States, which is shown with the Venezuela move. It's been shown now with the Iran move. It's been shown with moves on Russia. This isn't to paint China as the bad guy, per se. It's simply to paint China as the competition. 

So that is a driving force for the US, but to get back to the dollar question, This is one of the ways that the United States is trying to pad the dollars roll in the global economy. It is also just a matter of fact, when I say that, you know what, things don't change overnight. The reality here is, The knee jerk instinct based on years of this being the default kind of de facto go to is that the dollar is a mechanism of safety when you're looking at either portfolio allocation or some other thing. 

So that's really what is pushing the dollars valuation up, is speculative currencies outside the US, are not where other countries, other large commercial investment entities. They're not going to sit around and dilly dally in a situation like this speculating on a foreign currency or some other, you know, whatever it might be. They're going to pretty aggressively go in position into the dollar. Now, is that long term? No, it is simply to weather the storm. But here's where things get even more interesting. 

In today's market, one of the other things that is driving this is, and as is often the case, with extreme volatility moments. following extreme placid level, you know, non-conflict, whatever. The, the, the truth is, is that, There are a lot of people out there that were speculating pretty aggressively. sitting on a lot of margin debt, kind of, you know, ramping up their returns, if you will. And now when you get just enough pressure to the downside, You get margin calls. 

And what that does is it forces those who are sitting out there. We call it naked, right? When you're sitting out there and you've got quite a bit of margin, meaning you're borrowing money to invest, and all of a sudden the investment that you have or your portfolio slides quite a bit in one day. 

It creates a carry-on trade or a pile on where these same people have to sell some of their positions, even if they don't want to, even if they're going long term, I want to be in this, but they have to sell it so that they can cover what's called their margin requirement. Now, we've seen this happen over and over and over again. We've also seen, unfortunately, big banks that are sitting in these kinds of positions, sometimes, sadly, will try to manipulate markets to a degree to help cover the fact that they are sitting out there a little bit too aggressive. 

Now, I'm not speculating that that's happening. 

I will say last week, we did see that on the CME group’s commodities exchange, the Comex. They ended up basically having a “technical glitch”. right at a critical point in the silver market. And they ended up shutting down the entire market. They also shut down the natural gas market. That is, without them admitting it, even some of the staunchest believers that markets are not manipulated and everything else have come out and basically said, you can't argue with this anymore. 

This was this was very clear market manipulation tactics. Now, It was meant for them to basically be able to cover everything that they needed to cover on a short term basis, and then they let the market go back and do what it's going to do. It's not permanent manipulation. It's temporary manipulation to get out from under a tough spot. Now, that's probably what is happening in the market today. Is it going to bounce back tomorrow? 

Might. I don't know. There could be all kinds of great news that come out over the next. 

And then all of a sudden the euphoria hits again, possible. We're not going to be making any moves, though, because most of the selling that we're seeing today is selling right down into what we would call an orderly technical, It's orderly selling. is the easiest way I can put it. It is all of the selling that I'm seeing across positions that we own in our portfolio are selling down to the support regions that I expect them to sell to when selling occurs. 

What that means is it's not time to get out yet. Now, can that change? Yes, it absolutely can change. If more volatility ensues, if we see a massive spike in the dollar, if we see China use this opportunity where the US is very preoccupied in the Middle East to, let's say, push a little harder on the Taiwan move. It's a possibility that cannot be, you know, we can't exempt that from possibility. All right? 

Or one of the other things that they very well may do is try to manipulate the currency markets a little bit to their advantage. Now, is that them being a bad guy? No, that's the thing. 

We've got to get out of our heads that there's bad guys just because they are pushing back against the United States. Now, is it is it is it bad for the United States? Yeah, to a degree, it certainly is. So for that reason, sure, you want to call them a bad guy? call them a bad guy. But they're not doing anything the U.S. doesn't do. And that's an important, and the reason I say that is like, it's, it's, it's, it's really easy to kind of get into this, “This is the good team and this is the bad team”. But if you're going to do that, you need to be very cautious not to, you know, or to remember the fact like, are you observing your team's behavior and are they really being good? Like are they are they really doing the right thing? And that is very questionable right now. It's just a fact. So, for that reason, um, we're going to remain, let's say, just optimistically skeptical about everything right now. 

I would like to believe that this sees resolution or at least Things calm down very quickly. At the end of the day, if there is anything that you all know about me is as a lowercase L libertarian leaning person, I am, I believe in non-aggression principles. I believe in, you know, war is something that you really don't do unless somebody attacks you first. I also respect and understand that the art of war and especially in our modern day, often requires significant intelligence and, you know, preemptive attacks so that you don't have a loss of life. I would feel a lot better about that right now. Honestly, if the Pentagon had said, like, yeah, we actually, you know, we did have intelligence that this was, but the point being is I don't want to see people dying — especially innocent civilians. 

Not to say that military forces shouldn't die either, but when you see civilians being killed, regardless of the side, because the governments are at war with each other, That's terrifying. and it's it's just, it's, it's just repulsive to me. I would like to see resolution. I don't think that that's necessarily in the works right now, but I would like to believe it is. 

Either way, though, the question really becomes what signals are we going to get over the course of the next few days, the next week, next 2 weeks? We're going to be positioning accordingly. If we need to make changes in the portfolio, we're going to make changes in the portfolio. But in the meantime, we're not going to make any irrational jumps because at the end of the day, that's where you lose the most money in a portfolio is you miss those best recovery days when you go through the, you know, we we often refer to, you know, we joke about the market, it takes the elevator down and the escalator up. Yes, that is true. However, some of those escalator steps are a bit taller than others, and we don't want to miss out on those. 

As long as we don't have conclusive evidence that selling is going to be necessary because we've reached critical thresholds that the floor is falling out. So that is my takeaway right now. The dollar strength is what is driving this. 

I have a few marks on the dollar that I'm watching pretty closely. Because of that, you know, if we exceed those numbers, yes, we very well might see that some of our international exposure, we just peel it back a little bit and sit tight for a little while. Where are we going to sit? It's not necessarily going to be in cash. It's not necessarily going to be in money market, even though that is where so much of the safe money is trying to float to right now. We might just simply park in something else that is incredibly low volatility or an incredibly de-correlated asset that really is just not doing much of anything right now.  

But to be determined, in the meantime, I hope this is helpful. As always, if you have any questions or if you want to talk about your portfolio, if you want to talk about any of this and simply bounce ideas off me. I'm more than happy to field those calls and answer questions that you might have and share whatever perspective I can with you. In the meantime, though, just, you know, like I try to remind myself, go home, love your family, pay attention to your local community. I know that the bigger picture world items can be scary and they can be a pain in the rump in a lot of cases. But, stay focused on what's in your immediate locus of control. 

And I will talk to you soon. All right, bye bye.