How do you express this idea in the FX markets?

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Dec 23, 2022·edited Dec 23, 2022

Russell if the 1970s were accepted as the start of a pro capital shift and the beginnings of pax Americana how come the USD was so weak during that period?

Agree that a structural reduction in US hegemony will be bearish TLT and bullish GLD

But a lot of this hinges on Ukraine: what happens if the result is reinforced US control over the EU and Japan? Will Chinese and Russian selling be enough to push USD structurally lower against GBP EUR or JPY? Looking at the GBP chart the big pound bear market only started in the 1930s.

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Allowing your currency weaken is profoundly pro-capital I think. While it is inflationary fo the country devaluing, it deflationary for everyone else.

Ukraine is a big deal - but China US relations are more important..

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Yes that definitely makes sense

However if we take the Japanese case - they've traditionally devalued in a cyclical slump, that's pro-capital (exporters). Now if they abandon YCC and let yields rise, that's pro-labour. The problem for me as an investor is that the relationship to equities is ambiguous, it's definitely negative for exporters but otherwise could go both ways.

Finally if China is as pro-labour as you think, then even with cheap valuations we should be very cautions about equities. But there is always a bull market somewhere, and capital flows to where it's treated best.

Turkey is the most obvious example of a mercantilist, devaluation strategy that has propped up the stock market. Where else can we find examples of the same?

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How do you think Buffett's purchases of the Japanese Sogo Shoshas (Itochu, Mitsui etc) fits in the pro-capital vs pro-labour framework? Is it an implicit bet on persistently high commodity prices? Yen appreciation? Or just plan old deep value

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