“This time is different.”
– The swan song of the failed investor
It is widely known that the U.S. dollar has long held the position as the world’s “Reserve Currency,” a fact which we should all get on our knees and thank God for every day. The dollar currently comprises over 57% of official foreign exchange reserves in the world, and this strong position is truly the primary source of our prosperity and quality of life in America.
However, every once in a while, a popular doomsday scenario emerges that the dollar is losing its reserve status, and some other currency will soon replace it. This is often closely tied to the idea that American society, politics, and economics are in decline, and that when the world recognizes this, the U.S. dollar will implode. The latest version of this that has been touted by the media is that either the Chinese yuan will replace the dollar, or that a group of nations who are not all exactly friendly to the United States — the BRICS countries of Brazil, Russia, India, China, and South Africa — will band together and create a new common currency that will challenge the dollar.
The recent tariff tantrum was a golden opportunity for this doomsday crowd to advance their thesis, as it caused a significant decline in the dollar, which is down in value by just about 9% so far this year. In my opinion, the idea that the dollar could lose reserve status is not realistic, I actually think it’s somewhat illogical. Check out my video below to find out why.
While we are on the topic of doomsday theories, let’s talk about the financial media’s propensity to publish sensationalist content that peddles constant fear and negativity. Occasionally, conditions warrant that the media gets downright doomsday in nature and begins to proliferate a form of media that advances the fallacy that “This time is different,” and that the U.S. economy and market are fundamentally broken, forever. I’ve seen this form of media many times over my 32-year career, most notably during the tech bubble burst, the Great Financial Crisis of 2008, and the Covid meltdown — all of these times saw a rise in this kind of media.
The recent tariff tantrum was no exception; in fact, it may be even worse than those times. I’m not sure I’ve ever seen so much catastrophist media in my career as we are seeing today. They say they don’t ring a bell when the market bottoms, but I have learned to regard these articles as the closest thing I’ve ever heard that sounds so much like a bell.
Please check out our latest video, in which we discuss these topics and the danger of falling for the fallacy that “This time is different.” Importantly, we also offer some new thoughts on how a true long-term equity investor will use this time as an opportunity to prosper.
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