Get Ready For A Falling Dollar. It Will Change Everything | Tavi Costa

**Tavi Costa** (0:00)
I think that what we've seen so far of this dollar appreciation is completely unsustainable. You know, if we keep seeing this, the tightening of monetary conditions and financial conditions globally will be substantial. And we're starting, we're probably going to see the other side of this, which is a real contraction of growth globally, which wouldn't be positive for the US. I mean, if you look at US companies, majority of their revenues come from outside. I'm of the viewer kind of in that pivotal moment in history that I'm not sure, as Scott Bassett himself said, I want to be part of monetary alignment that I think we're getting into. And to me, he's precisely right. Monetary alignment means a lower dollar.

**Adam Taggart** (0:49)
Welcome to Thoughtful Money. I'm its founder and your host, Adam Taggart. The US dollar has been very strong for several years now. Amongst other implications, capital from the rest of the world has flooded into US stocks as a result. Today's guest predicts that for many reasons, especially America's need to get bond yields lower in order to make its debt more serviceable, the dollar will fall materially over the coming year. If that happens, it will likely be unfavorable for US stocks, but it will add a tailwind to other assets, some of which are trading at attractive discounts today. So where do the best opportunities lie for investors? To find out, we turned to macro and commodities expert Tavi Costa of Crescat Capital. Tavi, thanks so much for joining us.

**Tavi Costa** (1:37)
Thanks for having me again, Adam. Appreciate the interview.

**Adam Taggart** (1:40)
Oh, it's such a pleasure. It's been far too long since we've had you on, so thank you so much for coming on here. Tavi, you are one of the most prolific and I think one of the most respected chart producers out there. And I know you've got a couple of your charts that we'll walk through here in a little bit. But just a huge fan of your work and the work that you and your team there at Crescat do. All right. So lots of questions for you around inflation, commodities, etc. But before we get to them, if I can just start at a very high level with you, what's your current assessment of the global economy and financial markets?

**Tavi Costa** (2:14)
I love that question because it can go in so many ways. But I think the thing I'm taking the closer attention when it comes to the macro world is certainly what's happening with the US dollar and the new administration.
There's perhaps two takes you can take here, sort of a more coordinated one, which has been happening with the new administration towards especially regarding the yields, the 10-year yields with Scott Vassin mentioning so many times his concerns about lowering rates. When you're running a fiscal deficit to the degree we're running, but more importantly, when you start getting into 5% of interest payments relative to GDP, in other words, when you have to grow your economy by 5% just to pay down your debt, it becomes a real burden, and it's almost forces you to have as a priority lowering rates at almost at all cost. So there has been this focus from the media mostly on 10-year yields, rightly so, but nobody's really paying attention to the effect of that, because when you look across other countries, none of them actually have the same level of interest payments relative to GDP that the US is facing. So, you know, this is going to have an impact. As we see the reduction of rates on the relative basis to the rest of the world, the biggest impact this creates is on the dollar. And when you look over the last two years or so, the dollar has been trading just like the 10-year yield. And everyone is focused on the 10-year yield, but the dollar is the big question. For many reasons, the dollar, in my view, is extremely overvalued.
Usually, when we hit that point, we tend to see a major turning. And I think we're in the process of seeing that. When you look at the 10-year performance for the dollar has already began to turn. Recently, since Trump took office, Scott Bassin said in an interview recently, we've had five candles, weekly candles, declines in the US 10-year yield. Well, what he didn't mention is we also saw a straight down decline as well to the US dollar versus other currencies. We're starting to see the outperformance of equities in the rest of the world relative to American companies. And so there's so much to unpack in that front. But that turn of the US dollar is what sets the stage, in my view, for a lot of things. It's not just gold. Gold, in terms of the history lesson, the crash course that a lot of people have always either neglected or ignored. The history of credibility of gold as a haven asset are finally learning a lesson, especially younger people. And at the same time, I think there's the derivatives of gold that have been waiting for that green light. And when you have cap yields and a cap US dollar in terms of strength, that is what I view as the green light for things such as emerging markets, such as other developed economies, such as other resources, natural resources, particularly silver and other metals. And ultimately, it's what drives the margins of mining companies as well, which is another derivative of the gold price that have been, for a long time, also neglected and ignored, and are, in my view, on the verge of becoming one of the most, the biggest cash cows of the overall market. And so a lot to unpack there, but that's basically what my assessment of what's been happening more recently with everything that has been changing almost daily.