Banananomics: Now The Truth About the U.S. Dollar

Now The Truth About the U.S. Dollar

The stock market could be in for a steep correction, resulting in a crash even worse than what investors saw during the Great Financial Crisis, according to Harvard economist Harry Dent.

Inputs that matter: Dent estimates that the S&P 500 could lose as much as 86% in value when that bubble finally bursts.

• The Nasdaq Composite could lose as much as 92%. 

• He said "Hero" stocks, like chipmaker Nvidia, could drop as much as 98%, implying a multi-trillion market crash.

• Dent estimated that the bubble has been forming for the past 14 years, far longer than most bubbles in history, which typically last for five or six years before bursting.

• This extended period is because markets have been bombarded with stimulus since the 2008 downturn.

• Since the financial crisis, markets have benefited from around $27 trillion in stimulus.

The opportunity: Meanwhile, Bitcoin whales took full advantage of the Bitcoin (BTC) price slump on June 11, accumulating a combined 20,600 BTC worth $1.38 billion.

• According to industry analyst Ali Martinez, Ethereum whales have recently bought over 240,000 Ether (ETH), worth nearly $840 million at current prices.

• However, unlike Bitcoin, the supply of Ether on cryptocurrency exchanges has recently increased.

Zoom in: Much of the stock market's success is due to the U.S. Dollar (USD).

• "Perhaps ironically, the U.S. dollar's strength is, in part, due to its near-unchallenged safe-haven status," said Steve H. Hanke, a professor of applied economics at Johns Hopkins University.

• Rising authoritarianism, threats to individual and property rights, and geopolitical tensions have meant that even if U.S. assets are less attractive than before, other options are worse.

• According to Newsweek, Russians lined up to purchase U.S. dollars after the Moscow Exchange immediately suspended trading in dollars and euros in response to fresh U.S. sanctions.

Between the lines: The Federal Reserve surprised Wall Street on Wednesday, signaling that just one quarter-point rate cut is likely this year. 

• New quarterly projections showed the Fed's benchmark interest rate falling to 5.1% this year, implying 25 basis points in rate cuts.

• As of March, policymakers were still leaning toward 75 basis points in rate cuts, which would lower the Federal funds rate to 4.6%.

Follow the money: The 10-year Treasury yield fell 11 basis points to 4.295%.

• The S&P 500 rose 1% and Nasdaq 1.65% in Wednesday stock market action, finishing at new record closing highs.

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