Author: Andrew Packer

Cryptocurrencies

Bitcoin Magazine: The Conundrum of Central Planning

Posted on by Andrew Packer

The global financial system is centrally planned. A big part of that planning comes from central banks. They decide how much of a currency is in circulation. And they have tools such as interest rates that can be manipulated at whim. That’s why fiat money is called what it is – it’s decided by order, or fiat.

This monetary policy can move quickly. That’s a powerful feature in a crisis. But the flaw is that it’s monetary policy that often leads to a crisis.

In contrast, the rise of bitcoin stands outside this process. It’s a piece of code that can be run by anyone. It’s already planned out. More features can be added to the bitcoin network. But it then has to be approved by a majority, not by fiat.

As a result, bitcoin has significantly depreciated against the U.S. dollar. And the dollar remains under inflationary pressure. Politicians have been able to spend more than they would otherwise, thanks to helpful central bankers.

While inflation’s growth has come down, prices continue to increase in dollar terms. That’s a structural part of the fiat system. It means that inflation is unlikely to ever go away. And that central planners will have to continue to deal with another crisis.

As this process continues, the case for owning bitcoin continues to grow.

 

To read the full interview, click here.

Commodities

Kitco: Gold Has New Momentum as its Utility Grows in Global Trade

Posted on by Andrew Packer

Investors have many reasons to make gold a core portfolio holding. Over time, gold tends to hold its purchasing power against inflation. Investors who buy gold at the low of a price cycle can fare even better.

However, there is another trend at play right now that could allow gold to continue to lead higher. Central banks are increasingly buying gold as a holding for their portfolios. That trend has continued strong.

Gold remains a monetary asset. While not used in daily trading, it could be accepted the world over.

And since gold doesn’t have the inflationary potential of fiat currencies, it’s attractive. Governments looking to diversify their currency holdings like gold.

Because central banks buy in scale, they can be the biggest driver of demand. Governments are looking to diversify because the U.S. dollar isn’t as attractive anymore.

The U.S. can cut countries out of dollar payment systems, as they did with Russia. And the high level of government spending in the U.S. could create a dollar crisis down the line.

Gold could even become used for settling global trade, particularly in exchange for other commodities such as oil. That could reduce other countries printing so much money, and lower their inflation.

While this doesn’t mean the end of the dollar as the world’s reserve currency, it’s a sign that it will trend lower. And gold, and gold-related investments, are likely to move higher.

 

To read the full analysis, click here.

Economy

Heresy Financial: Why Does the US Borrow and Tax When It Can Print Money?

Posted on by Andrew Packer

During the pandemic, the U.S. government printed trillions of dollars. Much of that money went to keep companies operating. Some of it went out in the form of stimulus payments. Along the way, the government continued to accrue new debt.

The moves have led to an interesting policy question. Why is the government borrowing money for its needs when it can just print it? And why tax your citizens to raise money for government spending?

The answer to that can be seen in the massive jump in inflation over the past few years. More money chasing the same amount of goods will lead to higher prices.

In this way, one could view borrowing money as inflationary, but with a twist. Because that money has to be repaid with interest, it should only be used for worthwhile goals. Especially when those goals could lead to further economic growth.

Taxes can also fund the government. But they also reduce the amount of potential inflation. That’s because money that’s taxed is money that’s not going into the consumer economy.

In short, governments have a variety of ways to obtain and spend money. How they do that could lead to inflationary effects.

Investors who see their governments printing money or greatly increasing their debts may want to move to inflation-resistant investments. That includes dividend growth stocks, commodities, and cryptocurrencies.

Real Estate

Bigger Pockets: High Interest Rates Are Forcing Big-Time Investors to Cut Their Losses – Is a Bust Coming?

Posted on by Andrew Packer

Interest rates went from historic lows to their highest level in 15 years in the span of 18 months. Meanwhile, hybrid and work-from-home trends changed how much office space companies need.

As companies downside, commercial vacancies are on the rise. And some office buildings are selling at steep discounts to their last sale. That could be a sign of further stress ahead for commercial real estate. And investors may want to pick and choose carefully in the space.

Rising interest rates are a bigger deal for commercial properties than for homeowners. While homeowners can lock in a rate for 30 years, commercial properties tend to be shorter.

As a result, the payments behind many financed properties has soared. Combined with rising vacancies, and it’s likely there’s more downside ahead.

Vacancy rates for commercial properties is now at 17%, higher than after the housing crash in 2008. A smaller business footprint also means lower revenues for cities, which means less services.

Even worse, local and regional banks tend to hold a large amount of debt related to commercial properties. These companies could continue to struggle, and may see some steep drops in their share price.

Further bank failures or shotgun mergers with stronger companies could be likely. And office-space-related investments such as REITS will also remain out of favor with the market for some time.

 

To view the full analysis, click here.

Stock market strategies

Game of Trades: The Only Time THIS Happened Was in 1987

Posted on by Andrew Packer

Investors and traders alike rely on market signals. While no signal is perfect when trading, rarely-occurring signals with a high level of accuracy are worth watching.

One of the most followed signals is the yield curve. It is currently inverted. Typically, that’s a sign of economic stress. When the yield curve comes out its inversion, it has historically been a sign that a recession underway.

Today, a similar market warning signal has come out. It’s based on the Maclellan Oscillator. It’s recently soared to a reading of 50, last seen in April 2023 and October 2022.

The positive sign on the oscillator indicates that the market breadth continues to rise. In other words, more and more stocks are going along with the current rally.

Market sentiment indicates that investors have gone from being overly pessimistic to overly optimistic. That’s a sign markets will continue higher for the next 60 days.

However, several times this signal has indicated a short-term rally before a big drop lower. That includes the one-day market drop in 1987.

If this signal holds, stocks have a strong chance of rallying as much as 10% in the next 60 days. After that, there could be a sharp, sudden pullback. For now, this signal remains bullish.

 

To see the full analysis, click here.

Stock market

A Wealth of Common Sense: No, the Stock Market Is Not Rigged Against the Little Guy

Posted on by Andrew Packer

The recent resurgence of “meme” stocks, and their quick drop back down, seems to indicate something is awry in financial markets. Video game retailer GameStop (GME) soared over 100% in just a few days on no real news, then came back down again.

Some see that as signs of retail investors run amuck. Others may see it as signs of manipulation by sophisticated funds and traders to extract money from retail investors. Where do things stand?

Chances are, markets aren’t rigged against the little guy. But the little guy is at a significant information disadvantage.

Full-time traders and analysts have a network and capital to tie into when looking for investment opportunities.

Historically, investors who simply stay the course will come out ahead over time.

Investors who hold onto a broad index of stocks for a seven-year period have seen gains 100% of the time. For one year, it’s just 79%. And on the daily level, it’s just 54% of the time.

Investors who feel burned may simply be suffering from the challenge of trying to outsmart the market.

If anything, since sophisticated traders need to make profits daily, retail investors may have an advantage. By thinking long-term, they have a higher likelihood of better profits.

 

To view the full story, click here.

Personal finance

DataDrivenInvestor: Use These 5 Simple Ways to Build Generational Wealth

Posted on by Andrew Packer

There are many roads to successfully investing. There are just as many dead-ends. It’s important for investors to find an approach that works for them.

Some may enjoy swinging for the fences on a trade. Others may prefer slow-and-steady wealth. For those looking to grow generational wealth, the strategies may not need to change too much. But the focus needs to move towards the long-term. Thinking generationally can create an improved investment approach.

First, for most investors, investing comes down to stock ownership. That’s simply a fractional ownership stake in a business.

From there, it may make sense for those thinking generationally to start or acquire a business outright.

That’s because owning 100% of a business can lead to more control. That includes board member positions, the payment of dividends, and other tools for wealth.

Another strategy is to invest in real estate. The up-front costs are expensive. And taking out a mortgage can mean a property has debt against it for a long time.

But over time, the debt is paid off. And the property is likely worth significantly more.

Minimizing the impact of taxes and inheritance can also play a key role in building generational wealth. Taking advantage of tax-deferred investment tools can significantly increase wealth over a generation and beyond.

 

To view the full list of ways to build generational wealth, click here.

Commodities

Kitco News: 4 Major Catalysts That Will Push Gold Above $3,000

Posted on by Andrew Packer

Gold prices continue to trend higher, with the metal moving over $2,400 in the past few days. Gold is now up over $600 per ounce in the past few months.

The trend looks likely to continue, which should push the metal as high as $3,000 per ounce. Several factors are at play that bode well for higher gold prices, and investors still have an opportunity to profit from this move in the metal.

The first major catalyst behind gold’s move is soaring debt and debt costs. The U.S. government has managed to grow its deficit by nearly $1 trillion every 100 days. That’s thanks to having the largest peacetime deficits in history.

Meanwhile, that debt comes with a higher interest rate cost than in previous years. Rather than issuing debt near 0%, it’s at 5% or more.

Consumers have also added to their debt levels. Since the pandemic, consumer debt has grown by $3.4 trillion.

Next, gold demand remains strong. Overall global demand rose 3% year-over-year, to 1,238 tons in the first quarter of 2024. That’s the strongest first-quarter performance since 2016.

Central banks remain big net buyers of gold. But coin and bar demand is also up 3%, indicating retail investors remain interested in the metal. Buying gold allows banks and individuals to get out of any currency, even the dollar.

 

To view the other two catalysts pushing gold to $3,000 per ounce, click here.

 

Stock market

Trader’s Insight: Why Did VIX Close at Long-Term Lows Last Week?

Posted on by Andrew Packer

For years, traders have used the market volatility index, or VIX, as a tool for measuring the jumpiness of markets. When markets are calm, and generally trending higher, the VIX declines and stays low.

When markets start seeing bigger daily swings, the VIX tends to rise. The end result is a chart that looks much like an EKG. And investors have tried to trade this trend for some fast profits.

Last week, markets hit new all-time highs. And the VIX closed at its lowest level since November 2019. That means markets aren’t just calm, but complacent. That’s because the VIX exploded higher just a few months later as the Covid crash started.

To some extent, the move in the VIX, reflects supply and demand. Traders don’t expect much market volatility in the next 30 days. That leads to a low VIX.

And the options market is betting that markets will also trade calmly. Investors can likely expect a pretty slow few weeks ahead in the market. That may include a few down days.

For the most part, that reflects stocks calming down as earnings season ends. And it reflects the recent inflation data, suggesting that while high, it may be starting to crack lower.

Investors may want to reassess market conditions later in the summer, especially as September and October tend to be the market’s most volatile months on record.

 

To read the full insight, click here.

Economy

FX Evolution: Wall Street’s Biggest Bear Just Gave Up

Posted on by Andrew Packer

Markets move in cycles. From their lows, investors start off skeptical. Many miss out on the early part of a rally. As the rally continues, more and more join in.

Finally, when markets get incredibly bullish, even those who were the biggest bears all the way through the rally give up on their view. Typically, when the last bearish investor is in, the markets are more prone to decline rather than rally substantially further.

This week marked one of the last bearish market analysts, Mike Wilson at Morgan Stanley (MS), throw in the towel. Wilson no longer sees a big market decline, although small pullbacks remain likely.

His previous forecast called for a 15% decline in stocks by year-end. His new target for 5,400 on the S&P 500, is right near current levels.

While that upgrade isn’t the most bullish out there, it is a sign that bearish analysts don’t see any immediate downside to markets.

That overlooks some of the wild swings in the past few months. Those were caused for a variety of reasons. That includes geopolitical events to inflation remaining sticky, and some company earnings.

With investors focused on a bullish outcome for stocks, it may be a good time to take some profits. That’s especially the case with growth stocks that have crushed the market recently.

 

To view the full analysis, click here.