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May 31, 2021

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Hi Everyone,

Happy Memorial Day to all you Americans.

Hope you're enjoying the day off, but I know many of you are probably glued to the charts despite the total lack of market volatility, which is taking place even though brokers do seem to be open.

The lack of movement is definitely seeping through to the crypto market, which is kind of strange as I was promised that...

Guess it just goes to show how nobody can really predict the future, the direction of prices or how volatile any particular asset class may get.

Wood's Wood

Some people, on the other hand, make their mark by going against conventional wisdom.

Cathie Wood of ARK Invest, who I know many of you are fans of, is certainly one of those people.

Her latest statement, however, not only contradicts what many economists are saying, but also what those of us in the crypto community have been forecasting.

Had to highlight the word "deflation," as this headline nearly made me spit out my coffee.

Seems like just about everyone is expecting inflation to arise from all the new money in the system, and even the most recent consumer price index (CPI) data is a clear indicator that inflation is at our door, but Wood is going the other way entirely.

Obviously, she is much smarter than me, but her decision to cite the recent dip in lumber prices didn't really win me over.

Even with the recent 25% retracement from the peak, lumber is still up 222% since the start of last year.

What dawned on me however, is that Wood doesn't seem to be trying to predict the future here as much as the past.

The 10 or so years from 2009 through 2020 was mostly a very deflationary period in time, despite massive central bank stimulus.

One of the main reasons given for that is that technology was able to soak up a lot of the new money.

Markets can get irrational in the short term we know, but the invisible hand has a tendency to sort the manias.

Unlike bitcoin, when demand for lumber goes up, lumberjacks chop more to increase the supply.

Therefore, if new money is coming into the system, it's very possible that this money will flow into asset prices, which will remain elevated for the foreseeable future, rather than having a drastic affect on everyday goods and services.

The only thing that doesn't fit neatly into this theory, however, is the current supply crunch for microprocessors, a shortage that several industry insiders say could take 12 to 18 months to clear. So much for the deflationary tech theory.

Enjoy the rest of your day!

Mati Greenspan

Analysis, Advisory, Money Management