Author: Andrew Packer

Stock market

Rebel Capitalist: You Won’t Believe This … Meme Stocks Are Back

Posted on by Andrew Packer

It’s been three years since retail investors pushed the price of video game retailer GameStop (GME) higher. Hedge funds had shorted more than 100% of shares, leaving the stock vulnerable to a short squeeze.

The squeeze took the stock from around $5 to a peak over $250 before settling down. Part of stopping the squeeze included brokerages turning off the buy option for retail buyers. This week, shares have surged higher, then collapsed, once again.

The move started in the prior week. However, massive jumps higher on Monday and Tuesday sent shares to multi-year highs. Later in the week, shares gave back most of their gains.

And, yes, shares were somewhat heavily shorted compared to the average stock. But it was far lower than last time at 24%.

As GameStop surged higher, other “meme stocks” from the 2021 era also joined in.

The move could be a sign that markets are getting overly bullish. Typically, late market cycles see a number of stocks soar higher on little fundamental news.

However, it could also be a sign that investors are keeping an eye out for stocks that are heavily shorted. These stocks tend to perform well in a bull market.

That’s because as shares go up, the pressure rises on hedge funds to close their short position. That creates more buying pressure.

 

To get the latest on what’s going on with the meme stock mania, click here.

Commodities

DollarCollapse: Gold Family Heirlooms: The ATM Americans Never Thought They Had

Posted on by Andrew Packer

Gold prices continue to remain near their all-time highs. After setting new highs in most other currencies last year, gold closed in on $2,400 per ounce before pulling back.

The fundamentals are in place for a continued gold rally. Inflation remains stubbornly high. Central banks continue to be large buyers. They’re looking to diversify their holdings and reduce exposure to the U.S. dollar. Smaller buyers around the world also continue to buy gold on a regular basis.

Amid that background, there are some signs that the all-time highs are bringing out sellers, too. There’s been a rising demand to bring in old family heirlooms for the value of their gold content.

Pawn shops are seeing an increase in first-time sales of gold-related products.

That could be a sign that gold prices may be at a near-term peak. But it may be a sign of something else.

Consumer trends indicate that the pandemic-era savings boom is over. Consumers have burned through that excess savings. And credit card debt has soared higher.

So it’s possible that consumers are treating family heirlooms as another source of short-term income now.

The bigger trends pushing gold prices higher are outside of this consumer trend. So it’s likely that gold will keep trending higher. And with it, gold mining stocks may be a winner here. But it could also be a sign that consumer-related stocks may stumble.

 

To read the full analysis, click here.

Income investing

Dividend Growth Investor: Fourteen Dividend Growth Stocks Raising Dividends Last Week

Posted on by Andrew Packer

Stocks are trending back to all-time highs. Investors remain somewhat bullish, but even small market pullbacks can lead to a jump in fear. That’s why employing multiple investment strategies can prove beneficial for investors.

One strategy is to buy and hold companies with a history of growing their dividends. Dividends are cash payouts that go to shareholders. And studies show that dividend stocks can provide excellent returns over time. Even in a jittery market, many companies still increase their payouts.

For instance, consider the freight and logistics company Expeditors International of Washington (EXPD).

They just raised their dividend payout for the 29th consecutive year. And the payout increased by 5.8%, well above today’s level of inflation.

While the current yield is low at 1.2%, today’s buyers can get an increasing cash payout each year. And as that payout increases, it’s likely that earnings and the share price are trending higher too.

Another dividend growth company is ManpowerGroup (MAN). The staffing and employment services company raised its dividend by 4.8%. And it’s the 13th straight year of increased cash to investors.

At current prices, Manpower pays a 4% dividend. That’s far higher than the average stock. With continued dividend growth, could mean a far bigger payout well into the future.

 

To view the full list of companies that recently raised their dividends, click here.

 

Economy

Heresy Financial: How the US Will Inflate its Debt Away (and you can too)

Posted on by Andrew Packer

With interest rates at their highest level in 15 years, those who are undertaking new debt today are paying a hefty price. However, inflation also remains above average.

In real terms, high inflation can reduce a debt burden. That’s because investors are paying back borrowed money that has a lower value compared to when they bought it. However, this trend may see more popularity in the years ahead.

That’s because debt levels are soaring, particularly government debt. The U.S. Treasury will pay out more than $1 trillion in debt for the first time in history this year. Low-yield debt from the past few years is now rolling over at a much higher rate.

Plus, ongoing deficit spending poses a challenge. The U.S. is closing in on reaching a high level of debt compared to its GDP. When debt levels become too high, the incentive rises to print money instead.

That could mean the U.S. may move towards measures designed to inflate away the debt. That would mean higher inflation, which weighs on assets such as stocks.

However, you could also benefit from this trend, as debts such as a mortgage become cheaper in real terms. And inflation would increase the value of assets bought with borrowed money, such as a home.

 

To understand how debt could be inflated away and how to profit, click here.

Economy

Game of Trades: This is the Single Biggest Threat Today

Posted on by Andrew Packer

While most investors may focus their investment ideas on the stock market, financial markets are driven by something more fundamental.

That something is the U.S. dollar. America’s currency is a powerful financial tool that has been at the centerpiece of the global economy for over 70 years. However, a number of trends have formed that are weakening that position. It may not end soon, but it does point to a more challenging future for investors.

Historically, the dollar has had some of the lowest inflation among the world’s currencies. That’s made it an excellent reserve asset. The dollar has also been key for settling international trade. Even between two countries without that trade passing through the United States.

However, rising inflation and soaring budget deficits mean that the dollar is no longer the attractive venture that it once was.

The overall purchasing power of the dollar has slid by 20% alone in the past few years. That’s thanks to the money printing from the pandemic and beyond. A further decline could have major consequences, as other countries look for alternatives to their dollar holdings.

If the dollar becomes less popular in international trade, it will be more difficult for the United States to print money without feeling the full brunt of the inflation that comes with that.

That could mean higher inflation overall, which tends to bode poorly for stocks but stronger for commodity markets.

 

To view the full details on the threat today, click here.

Commodities

Blockware: How Debt Spiral Makes $1,000,000 Bitcoin Easy

Posted on by Andrew Packer

Interest rates remain near their highest level in 15 years. That’s good news for savers, as today’s rates can offer a real return after inflation. However, one consequence of this trend is that debt costs are soaring.

While consumers are scaling back on debt at today’s rates, governments don’t have that luxury. The costs to finance government debt have now also soared. In the United States, the Treasury is now paying more than $1 trillion annually just on interest payments on the debt.

This trend could result in a debt spiral. That’s when debt soars parabolically due to the rising costs of financing that debt.

For instance, much of the short-term Treasury debt from the pandemic era had yields near zero percent. With rates now over 5%, the costs to finance the same debt have soared by thousands of percent.

In some instances, the Treasury Department has had failed bond auctions. That means they’ve had to adjust prices lower and yields higher to sell needed debt.

If a debt spiral occurs, there could be a major financial crisis. Governments may try to avert a debt crisis by printing money and covering up the problem.

If that happens, inflation could soar again. That could be good for assets such as gold, and could even help fuel further rises in bitcoin.

 

To listen to the full dangers of a debt spiral, click here.

Income investing

Dividend Growth Investor: 15 Dividend Stocks in the News

Posted on by Andrew Packer

A dividend is not set in stone. It’s determined by a company’s board of directors. And many factors go into the decision. That includes a company’s earnings, growth needs and prospects, and other potential uses for that capital.

As a result, a select number of companies have become dividend growth stocks. They have a history of raising their payouts over time. That tends to attract long-term investors. However, if the company has to reduce its dividend, the trend can reverse.

For instance, 3M (MMM) recently announced a dividend cut, by changing its dividend target to 40% of adjusted free cash flow.

In fairness, 3M recently spun off its subsidiary Solventum (SOLV). That company will pay dividends in time as well. However, the overall payout for 3M shareholders will likely be lower, making this change a stealth dividend cut.

Meanwhile, some companies prefer to reward shareholders with massive buybacks rather than dividends. Apple (AAPL) made history last week becoming the first company to announce a $100 billion buyback.

While massive, investors hoping to profit from gains as the company reduces its total shares will have to stick with a slow-growing 0.6% dividend.

Apple’s dividend growth has significantly slowed over the past few years. It still remains more tax-efficient for companies to buy back shares rather than reward their owners with cash from the business.

 

To see the full list of companies making dividend changes now, click here.

Economy

QTR Fringe Finance: Modern Monetary Theory And Boiling Frogs

Posted on by Andrew Packer

Financial markets are still reeling from the recent bout of inflation. That inflation resulted from a number of factors. But the largest and most important was the printing of trillions of dollars during the pandemic.

That event demonstrated the costs of just blindly printing money. While many see the danger of repeating that experiment, another group sees an opportunity. This poses a potential danger to your investments to watch out for.

The danger is known as Modern Monetary Theory (MMT). It works under the assumption that printing money as needed to pay for goods and services should be normal. And, in fact, it may even be better than simply borrowing money as we currently do.

MMT has picked up some interest in recent years. The idea of printing money sounds more attractive than borrowing it at interest, as many governments do. And in theory, governments could simply print money as needed rather than tax their populations.

However, we’ve seen from the MMT-like policies during the pandemic that the result is surging inflation.

If MMT ideas were to take hold, higher inflation would likely become far more normalized. Investors would have a more challenging time investing in the stock market. And defensive assets from inflation such as gold and bitcoin would likely see further massive gains.

 

To get a full sense of the dangers posed by MMT, click here.

Economy

Blockworks Macro: The Bond Market Will Take the Stock Market Down With It (Here’s Why)

Posted on by Andrew Packer

While most traders gravitate towards stocks or options on stocks, the bond market tends to drive other asset classes. That’s because the bond market’s moves can impact interest rates, or the cost of money.

Plus, the bond market tends to represent capital that investors want to put at as little risk as possible. Right now, the bond market is enjoying its highest levels of interest rates in 15 years. But dangers may lurk ahead.

Today so much of the bond market, particularly government bonds, are bought and sold by central banks. Consequently, the yields on those bonds may not represent the true demand for investment dollars.

That could also set up the potential for a sudden move in the bond market that spills over to other asset classes.

One such move could be a repricing for higher inflation expectations. The bond market yields peaked last October.

However, since then, it’s been clear that inflation has remained sticky. Bond investors may want higher yields to compensate for that risk of persistent inflation. That means lower bond prices.

But as bond yields move higher, capital is attracted to bonds. The idea of a steady return at a high enough rate can even drive investors out of stocks.

 

To understand the full dangers that could lead to trouble in the bond market, click here.

Stock market strategies

Game of Trades: They Sold the Top (Again)

Posted on by Andrew Packer

Looking for a sign that markets might be overbought and ready to trend lower? Simply take a look at whether or not billionaire owners of major companies are selling off their shares.

In March, as markets hit their recent peak, a number of billionaires made some big sales. That includes Amazon (AMZN) founder Jeff Bezos, who has been selling off billions of dollars of shares in recent years. But more current insiders have also been sellers.

That includes Meta Platforms (META) founder and CEO Mark Zuckerberg, who sold some shares in March.

While the March selloff wasn’t huge, a mere 6% decline, that knocked out $2 trillion in total wealth. And it saved big insiders millions of potential losses.

These big insiders can be a good indicator in and of themselves. But investors can also look at the ratio of total insider sales to buys.

Typically, when the ratio of selling to buying is under 12, it’s bullish. Insiders are often given stock options, and have many reasons to sell, from diversifying and cashing out.

During March, the ratio surged, indicating time to take some speculative positions off the table.

Remember, insiders have only one reason to buy. That’s because they see their company’s shares as massively undervalued.

With the ratio coming back down, it may be a sign that investors are safe from a sizeable market decline in the coming weeks.

 

To see the full analysis, click here.