The Daily Valet. - 5/20/25, Tuesday

Tuesday, May 20th Edition
Cory Ohlendorf  
By Cory Ohlendorf, Valet. Editor
How much cash do you have in your wallet right now?

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Today’s Big Story

The Dollar’s Decline

 

American currency set for more weakness as “Brand USA” falls further out of favor

 

Trade wars and recession fears are casting a long, dark shadow over the American dollar. The currency’s slide is raising some serious red flags for everyone from investors and big companies to everyday consumers. After a decade of strength, the dollar has fallen more than 7.5% since the start of 2025.

Reuters points to the current landscape of trade-related uncertainties, ballooning fiscal debt and weakened confidence about enduring U.S. exceptionalism as the main weights on U.S. assets—but the dollar is the one taking the biggest hit. “Investors see the currency losing more of its luster as the greenback comes back to earth from lofty valuations.”

The Trump administration's tariffs salvo this year prompted investors to cut exposure to U.S. assets after a long period of over performance. While the U.S. currency steadied somewhat in recent sessions as investors took heart from a truce in the ongoing U.S.-China trade war, it came under renewed selling pressure after ratings agency Moody's cut the United States' pristine sovereign credit rating by one notch.

“There’s plenty of room for further depreciation, purely from a valuation perspective,” George Vessey, lead FX and macro strategist at payments firm Convera told Reuters. The “sell America” trade was back in focus after Moody’s U.S. credit downgrade, he said. The U.S. dollar index has tumbled as much as 10.6% from its January highs, one of the sharpest retreats for a three-month period, leaving speculators net short the dollar to the tune of $17.32 billion, close to the most bearish position on the buck since July 2023, according to CFTC data.

Investors and strategists have viewed the dollar as overvalued for years but betting against the currency has proved painful time and again, as the U.S. economy powered on. That could be about to change. With investors beginning to doubt the long-standing trend of U.S. exceptionalism, PIMCO warns that the door is now open for investors to move their capital away from the U.S. dollar and Treasuries into bonds issued by Europe, Japan, the U.K. and emerging economies. Investors are also concerned about the long-term fiscal picture for the United States. Analysts say Trump’s sweeping tax-cut bill would add between $3 trillion to $5 trillion to the nation's $36.2 trillion in debt over the next decade.

 
FYI:
 
Strategists say that while a marginally weaker dollar likely won’t have a huge impact on the portfolios of U.S.-based investors, it‘s a good time to revisit their international allocations.

The Rare Earth Mineral Cold War

 

U.S., Brazil are among countries competing with China to mine and refine metals for EVs and smartphones

The future of everything from smartphones, to military equipment, to electric vehicles hinges on a collection of “rare earth minerals” and the magnets that they’re made into. And China—the world’s largest refiner and producer—is now tightening its grip which is threatening the largest U.S. companies. And The Verge is calling it a new “Cold War” for the modern age.

According to analysts, more than 90% of the world’s supply of those crucial elements at the bottom of the periodic table are mined, refined, and turned into rare earth magnets in China. After Trump announced tariffs of up to 145% on Chinese imports, the country retaliated with a number of tariffs and export controls of its own. And, more importantly, it revised its export rules for rare earths.

Of course, when geopolitical tension closes a door, it often opens a window. Brazil has the world’s second-largest rare-earth reserves after China, some 21 million tons, according to the U.S. Geological Survey. That represents more than a fifth of known global reserves—and more than 10 times those in the U.S. The Wall Street Journal reports that Europe has worked to reduce its reliance on China as well. The European Union aims to process 40% of the critical raw materials it needs and has agreed that no outside country should supply more than 65% of Europe’s annual consumption of a list of designated materials that includes rare earths.

 
Dig Deeper:
 
What are the rare earth elements? Here's a closer look at the set of seventeen metallic elements.

Trump-Putin Call Fails to Yield Breakthrough

 

Ukraine and Europe push for immediate ceasefire, but Kremlin offers no timeframe

Donald Trump said after his call on Monday with President Vladimir Putin that Russia and Ukraine will immediately start negotiations for a ceasefire, but the Kremlin said the process would take time and the U.S. president indicated he was not ready to join Europe with fresh sanctions to pressure Moscow.

It was a shift from Trump’s recent threats of more pressure on Russia, such as when he raised the prospect of new banking sanctions in April because Putin may not “want to stop the war” and “has to be dealt with differently.” Without any major progress toward an immediate ceasefire, Trump sought to emphasize what he described as an excellent “tone and spirit” shared with the Kremlin leader. Putin, meanwhile, described the call as “meaningful and frank.”

According to the Washington Post, Vice President JD Vance has said that Russia has been asking for “too much,” including the push for Kyiv to cede even more territory in eastern Ukraine. He has expressed frustration about the pace of talks. Ukraine’s President Volodymyr Zelensky insisted that his country would never yield to Russian ultimatums. And after a massive weekend barrage of Russian drones strikes, it didn’t appear that a breakthrough was imminent, despite what Trump said was an offer by Pope Leo XIV to host additional talks at the Vatican.

 
FYI:
 
Ukrainians are confident that they can continue fighting, even without the same level of American support.

This Storm Season Is Brutal

 

More than 30 million Americans are under severe weather alerts

A deadly, tornado-spawning storm system was slamming the Central U.S. into Tuesday, as the Southeast braced for a fresh round of severe weather on the heels of a deadly tornadic events. As people in my hometown of St. Louis are cleaning up after devastating storms, the National Weather Service confirmed at least four tornadoes in Oklahoma and Nebraska, and some 30 million residents from four states are currently under severe weather threat.

The NWS said the risk of severe weather and flash flooding will move across the Mississippi Valley and south on Tuesday, with the Southeast and Mid-Atlantic up next on Wednesday, the service added. Those storms are likely to rapidly intensify in scale and become severe, producing strong and damaging wind gusts, large hail and powerful tornadoes.

As The Atlantic points out, tornadoes are generally quick to form and difficult to predict—unlike hurricanes, which form steadily and are relatively easy to track. Because they appear very quickly, giving populations and emergency services little time to prepare, tornadoes can be particularly deadly. And Axios reports that experts agree that climate change is causing extreme precipitation events to become more frequent in much of the U.S.

 
FYI:
 
The severe weather outbreak has already caused an estimated $9 billion to $11 billion in total damage and economic loss.

Partner

Zillow's Co-Founder Wishes They Did This Before the IPO

The key to a $1.3T opportunity

A new trend in real estate is making the most expensive properties obtainable. It’s called co-ownership, and it’s revolutionizing the $1.3T vacation home market.

The company leading the trend? Pacaso. Created by the founder of Zillow, Pacaso turns underutilized luxury properties into fully-managed assets and makes them accessible to the broadest possible market.

The result? More than $1b in transactions, 2,000+ happy homeowners, and over $110m in gross profits for Pacaso.

With rapid international growth and 41% gross profit growth last year, Pacaso is ready for what’s next. They even recently reserved the Nasdaq ticker PCSO.

But the real opportunity is now, before public markets. Until 5/29, you can join leading investors like SoftBank and Maveron for just $2.80/share.

This is a paid advertisement for Pacaso’s Regulation A offering. Please read the offering circular at invest.pacaso.com. Reserving a ticker symbol is not a guarantee that the company will go public. Listing on the NASDAQ is subject to approvals. Under Regulation A+, a company has the ability to change its share price by up to 20%, without requalifying the offering with the SEC.

Shopping

What We’re Buying

 

Shorts

 

Summertime calls for plenty of comfortable and stylish shorts. You can't have too many, right? So you'll want to make sure you save money in order to get a good variety. The nice thing is right now, you can find plenty of quality pairs for not much of an investment. In fact, we rounded up a few of our favorites, which are all on sale. So grab a pair (or two) before they sell out.

 
Our Pick:
 
Baggy pleated short, $60 / $49.99 by Abercrombie & Fitch

Morning Motto

Go wild.

 

There will never be the perfect time. Do the stupid thing now. You deserve it.

Follow: 

@disappointingaffirmations

 

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