Michael Novogratz identifies the liquidity pump as the main component, which is currently inflating precious metals and cryptocurrencies.

Michael Novogratz, Galaxy Digital CEO and co-founder said the next Fed meeting could be the “juice that accelerates gold and bitcoin”. 

Michael Novogratz has been an early investor in the cryptocurrency space. During Bitcoin’s peak year in 2017, cryptocurrency fluctuated between $7,000 to $20,000. Michael Novogratz, known as the Bitcoin king, in his best year scooped up (while he was holidaying) $250 million in profit from trading in cryptocurrency. But former Wall Street macro trader, Michael Novogratz has also had his share of losses. 

In 2018, when the cryptocurrency bubble popped Michael Novogratz, Galaxy Digital CEO, the biggest cryptocurrency on Wall Street took was nursing a $134 million loss.

“Michael Novogratz, Galaxy Digital CEO, the biggest cryptocurrency on Wall Street was nursing a $134 million loss”

THE WEALTH TRAINING COMPANY

In a post-pandemic economy, cryptocurrencies and precious metals made a comeback and Michael Novogratz identifies the liquidity pump for the current rise in asset prices

“Remember, bubbles happen around things that fundamentally change the way we live” said Michael Novogratz.

Michael Novogratz identifies the liquidity pump, in other words, unprecedented asset purchases by the central banks, dubbed as quantitative easing to infinity, as the hot button topic for investors of our time

The worst public health crisis has proven the central bank’s willingness to stem the crisis by expanding the scale, scope, and riskiness of their balance sheet activities.

A recent annual report by the Bank for International Settlements entitled, A monetary lifeline: central banks’ crisis response, noted that “central banks injected vast amounts of liquidity into the financial system. “For instance, the Federal Reserve purchased over $1 trillion of government bonds in about four weeks. Similarly, the ECB launched a facility to buy up to €1.35 trillion of securities, or around half of the total amount purchased under its Asset Purchase Programme between 2014 and 2018” noted the report.

“Remember, bubbles happen around things that fundamentally change the way we live”

MICHAEL NOVOGRATZ

Michael Novogratz identifies the liquidity pump, courtesy of central banks, as the driving force for wins in the reflation trade

A recent piece entitled, Ray Dalio sees reflation portfolios outperforming going forward highlights the benefit of reflation portfolios in the era of liquidity driven frenzy.  

A reflation portfolio seeks alpha by investing in assets that are more likely to benefit from the expansion in the level of output of an economy by government stimulus, using either fiscal or monetary policy. 

In other words, government stimulus policies will decide which corporate benefits from the liquidity pump inflation and which will not. So, state capitalism, what sounds like an oxymoron, could be deciding tomorrow’s corporate winners and losers.

“Amazon’s an amazing company, it’s doing amazing through COVID, but it’s trading a hundred times earnings on a gigantic multiple,” said Michael Novogratz. Moreover, the policy push for mass electric transport has led to Tesla’s stock pushing past $1,800, after soaring more than 30% in 4 days.

Capital flows are being directed by public policy rather than free-market capitalism. 

“The S&P 500 Index, which fell to its 2020 low in March as coronavirus lockdowns began across the globe, has since surged more than 40 percent” – The Wealth Training Company

Michael Novogratz identifies the liquidity pump as the culprit for the current “liquidity-driven frenzy”. 

The S&P 500 Index, which fell to its 2020 low in March as coronavirus lockdowns began across the globe, has since surged more than 40 percent, spurred on by more than one trillion dollars of central bank liquidity injections. What’s more, a dovish Fed is interpreted as potentially more liquidity going forward. 

Novogratz said he expects the Fed to be “even more dovish” at its next meeting, which could drive stocks higher and push gold to $2,500 to $3,000 an ounce. 

“Those frenzied bubbles normally end with policy response,” said Novogratz, who has described his politics as center-left. “Usually it’s the Fed’s action, but action on raising taxes could end this froth” he added. 

Moreover, cryptocurrency enthusiast Michael Novogratz is also recommending investors to keep their cryptocurrency optimism in check.

Novogratz is a bitcoin investor and told Bloomberg all cryptos besides bitcoin are “still in the venture stage.” He said investors should be careful in the space.

Nevertheless, Michael Novogratz continues to remain bullish on gold.

“New York taxes are certainly as high as they can go and we’re seeing that outflow of human capital” – Michael Novogratz

Michael Novogratz told Bloomberg TV recently that the price of gold could reach up to $3,000 by the end of the year

But here comes the caveat for precious metals investors. 

The Galaxy Digital CEO and co-founder, Michael Novogratz, emphasized that predicting a new high for gold is difficult because it’s already reached its record, and “once you take out old highs in markets it’s really hard to figure out where they could end,” said Michael Novogratz. But when asked for a number, he said, “Could it be $2,500 to $3,000? It certainly could be”.

Michael Novogratz identifies the liquidity pump contributing to the “liquidity-driven frenzy” in the reflation trade, which includes precious metals, cryptocurrencies, and some stocks such as Telsa and Amazon

Like most Wall Street Democrats, Novogratz said he thought Biden and Kamala Harris would be good overall for the financial market. In an earlier interview, he described Harris, a US senator from California, as someone who “brings star power to the ticket.” 

Regarding Bitcoin’s recent surge in price Michael Novogratz said, “Bitcoin has “crossed the Rubicon.” So, Michael Novogratz prefers bitcoin to gold because it’s “harder to buy” and added that bitcoin has a $220 billion market capitalization, while gold is over $10 trillion. So, Bitcoin’s catch-up game is one reason supporting his gold prediction. Michael Novogratz has about 25% of his money tied up in cryptocurrencies. 

Michael Novogratz identifies the liquidity pump as a driver of some assets but he remains bearish on real estate prices, particularly in large metropolitan centers like New York

“New York taxes are certainly as high as they can go and we’re seeing that outflow of human capital” he said. “Services are gonna go down and so it’s gonna be a very tough run for the city.” As for those who left because of coronavirus, he expects it could be six months to a year after the “all-clear sign” before many of them return.