Foreign Exchange Risk Management - The company acknowledges the Taiwan dollar's exchange rate as one of six factors impacting profitability, but emphasizes its inability to control it [1] - The company aims to leverage other controllable factors to maintain profitability despite unfavorable exchange rate fluctuations [1][2] - The company has contingency plans in place to address potential rapid appreciation of the Taiwan dollar [1] Hedging Strategies - The company employs multiple strategies to manage US dollar exposure, including spot market sales, forward contracts, and transferring US dollar cash to an offshore holding company [3] - The offshore holding company's financial statements are denominated in US dollars, reducing hedging costs [3] - The company prioritizes a combination of tools, considering market appetite and hedging costs for each [4] - The company has been using capital injection to the offshore company for years as part of its hedging strategy [4]

Purchasing Power of the US Dollar in June since 1950:• 1950: $1• 1975: $0.55• 2000: $0.14• 2025: $0.07 ...

Market Outlook & Investment Strategy - The firm suggests rotating into value and small-cap stocks, as they have underperformed in the first half of the year [5] - The firm is at target for large-cap stocks but overweight in small-cap and non-US equities, believing there is better value in these areas for the second half of the year [6] - The firm has been bullish on Japan for a number of years due to strong improvements in corporate governance and better returns for shareholders [7] Currency & Economic Factors - The dollar index was down 11% in the first half of the year, marking its worst performance since 1973 [7] - The firm anticipates potential dollar weakness, especially if the Federal Reserve reduces rates by 100 basis points over the next year [8][9] - A softening dollar is seen as a reason to be overweight in developed markets outside the US [10] - Fiscal stimulus in Europe, particularly in Germany, is expected to be beneficial [6] Sector Analysis - There was a rotation out of higher multiple sectors like tech and AI into lower multiple sectors like consumer discretionary [2] - Financials are favored due to the prospect of less stringent regulation and potential capital returns [15][16] - The firm believes that progrowth policies and less regulation will benefit small and mid-cap companies more significantly [13] Risk Factors - Headline risk related to tariffs, particularly with Japan and China, remains a concern [16][17][18]

Interest Rate and Bond Market - The market anticipates potential rate cuts by the Federal Reserve, influenced by Powell's testimony, which outlines paths to rate cuts, contingent on factors like tariffs [3] - Without tariffs, rates could potentially be 100 basis points lower, influencing bond yields [4] - The Fed might consider a smaller rate cut in September, followed by a potentially larger cut, depending on upcoming data [4] - Faster and sooner rate cuts by the Fed could lead to rising yields [5] Treasury Market and Foreign Buyers - Concerns about foreign buyers stepping away from treasuries have diminished amidst the equity rally [6] - There's still pressure on the long end of the yield curve due to the budget bill, energy shocks, and tariffs, potentially leading to higher yields [6] - The current counter-rally might be driven by domestic players and technical factors, but the underlying story of pressure on the long end hasn't fundamentally changed [6] Dollar and Currency Dynamics - The dollar is near a three-year low, potentially due to relief in markets benefiting other currencies [7] - Currencies benefiting from tariff or geopolitical relief tend to rally, while the dollar weakens [8] - If treasuries face more pressure, the dollar is likely to weaken [8]

Fed Policy & Interest Rates - The CNBC Fed survey projects the Fed funds rate to be at 389% by the end of the year [1] - The base case expectation is that the Fed will cut rates one to two times this year, aligning with the Fed's communication [2] - The Fed's policy statement is expected to remain unchanged, with any news potentially emerging from the statement of economic projections [3] - The Fed is expected to maintain its current stance, awaiting further data to clarify inflation expectations [7] Economic Uncertainty & Geopolitical Factors - There's increased uncertainty due to the Middle East situation, reciprocal tariffs, and unclear US-China relations [4][5] - Geopolitics is playing a bigger role in inflation expectations [6] - The Fed's tools are limited in addressing changes in trade policy, the political environment, and geopolitical factors [6] US Dollar & Treasury Market - The dollar has shown weakness, with a temporary rebound as a flight to safety [8] - Foreign buyers have reduced their holdings of US Treasuries, decreasing from 50% to 30% over the past decade [8] - Dollar depreciation is anticipated to continue marginally, with treasury market volatility expected, especially in the long end [13] Investor Sentiment & Market Dynamics - Investors, including sophisticated institutional investors, are questioning their geographic allocation to US assets [10] - The depth and liquidity of US markets, including treasuries, the dollar, and private assets, remain robust [11] - There is still no alternative to the US dollar [12] - A transition is occurring that matters for flows and valuations, but it is marginal from a geopolitical perspective at the moment [12]

There's the dollar melting away below 98. It's now at its lowest level since March of 2022, and it's down about 10% against a basket of currencies year to date, as you can see there. Outflows fueled by the president's trade policies, rising odds of a Fed cut, and more.Our next guest, though, knows it's good news for another asset class, the rise of crypto. Mike Novagrath is founder and CEO of Galaxy Digital. They also had an IPO lately, Mike.Uh, it's good to see you again. I think what was the high we hit o ...