Author: Andrew Packer

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.

Commodities

CME Group: Why Is the Gold Rally Leaving Silver Behind?

Posted on by Andrew Packer

Year-to-date, gold prices have soared to all-time highs. However, silver has lagged. In fact, on a nominal price basis, silver trades at about half of its all-time high.

That’s a significant gap. But it’s also one that reflects a number of unique conditions to the markets right now. Investors who understand those conditions can make better decisions on known when to trade gold and when to trade silver.

First, gold prices tend to move opposite to interest rate expectations. With investors still expecting interest rates to move lower, gold prices tend to trend higher.

That move explains why gold prices trended lower when interest rates first started moving higher. Investors expected gold to move higher at the time given rising inflation rates.

Currently, gold has continued to rally, even as rate cut expectations have dropped.

Part of that is driven by supply and demand dynamics. Central banks remain massive buyers of gold. That is keeping pressure on supply. And it’s a sign of why gold is gaining right now while silver isn’t.

However, silver could rise along with gold amid geopolitical fears. Soaring fears have seen both metals spike higher in price. However, those price spikes tend to wear off quickly when the geopolitical fears decline.

Silver is historically undervalued relative to gold. But soft growth for silver’s industrial demand could be weighing on silver relative to gold right now. Either way, with positive trends underway for gold and silver prices, mining companies could see big returns from here.

 

To view the full analysis, click here.

Stock Picks

The Average Joe: Intel’s Multi-Billion Dollar US Foundry Expansion Is Killing Its Stock, But It Could Also Save Its Future

Posted on by Andrew Packer

Semiconductor manufacturers have been a big hit with the market over the past year. While most of these companies aren’t profitable, they’re positioning themselves to sell AI chips. With soaring demand for all things AI, the future looks bright.

But then there’s Intel (INTC). One the leading semiconductor manufacturer in the 1990s, it’s moved to the wayside. Other competitors have fared better.

Intel just reported a $400 million loss, even as revenues rose by 9%.

The good news? Intel’s Gaudi 3 AI chip has better specs than Nvidia’s (NVDA) H100 chip. It’s currently clocking in at 50% and also 40% more power efficient.

Plus, in 2026, Intel plans to open the first US fabrication plant in over four decades. And it has plans to build as many as six more. That will make it the world’s second largest fabrication maker.

However, while this fab plant buildout is playing out, they’re unlikely to be profitable.

If this plan pays off, shares could start trending far higher. Investors could simply buy Nvidia, or another big chipmaker that’s already trending higher.

But Intel is a speculative play today on the potential future of the chip space in the coming years. That could make it a far better investment in the chip space today, especially compared to competitors.

 

To read the full analysis, click here.

Income investing

A Wealth of Common Sense: Hedging Your Portfolio With Options

Posted on by Andrew Packer

Market volatility has been on the rise. The past few months has seen stocks trade sideways overall. Most investors hope to buy low, grab an uptrend, and sell high. However, markets don’t always work that way.

That’s why it’s important to have tools that can help hedge your portfolio. Following a big run higher, a stock may need to trade sideways or pullback before the trend continues. That could be an optimal time for a hedging strategy.

The simplest strategy is to use covered call options. An investor can sell one call option on a stock for every 100 shares they own. That’s what makes the trade “covered.”

By selling a call option, a trader is willing to sell their shares at a set price in advance.

Say a stock rallies from $10 to $15 quickly but then slows down. A trader can earn extra capital by selling, say, a $16 call option from the trade.

While it’s not quite the same as earning a dividend, it can add extra income simply from owning a position.

Traders should look to sell covered calls after a stock has had a big move higher. That should translate into higher call option premium. Since option premium always goes to zero, selling calls after a big run gives traders a slight edge.

 

To listen to the full strategy for hedging your portfolio, click here.

Commodities

David Lin: We’re Entering “Greater Depression”: Brace For War, Sovereign Defaults

Posted on by Andrew Packer

Markets have seen some increased volatility in recent months thanks to geopolitical events. While Russia’s invasion of Ukraine drags on for a third year, escalating conditions in the Middle East could result in a wider global conflict.

That means that any market selloff we’ve seen so far could pale in comparison. And if war does break other, the reaction among asset classes could result in the economy teetering over into a recession.

That’s especially true is oil prices end up soaring.

While prices have been calm in the past few weeks, soaring oil prices have tipped the economy into a recession several times. That includes the oil shocks of the 1970s, plus the early recession of the 1990s, and in 2008.

Currently, the economy is still recovering from the pandemic. While the private sector has taken off, government spending has led to soaring debt levels.

Now, those debt levels pose a problem as interest rates soar. Debt from two years ago is rolling over at significantly higher rate. Governments face soaring costs to finance their existing debt, while still running massive deficits.

That increases the possibility of a financial shock. And at some point, governments may simply decide to print money rather than go into debt. That would be a de facto debt default.

Even worse, it could create another massive wave of inflation. Investors may want to allocate some capital to gold to protect from these potential dangers.

 

To watch the full interview, click here.

Stock market strategies

FX Evolution: Retail Investors Are Getting Squeezed Again

Posted on by Andrew Packer

Following the market’s selloff and bounce higher, investors may think that markets are back in bull market mode. With companies like Tesla (TSLA) soaring 40 points higher in a matter of days on positive news, it’s easy to see how things look bullish.

The good news? The options market looks bullish as well. Stocks are moving back to positive gamma with the S&P 500’s return to the 5,100 range.

With many investors expecting a market pullback, the 5% drop in the past few weeks may have been sufficient. In total, that small selloff took $2 trillion in value out of the markets.

Plus, with earnings season kicking off, companies are reporting better-than-expected data on average. This positive earnings surprise could help keep stocks moving higher.

The best positive earnings surprises have come from earnings and consumer discretionary stocks. However, energy has been an underwhelming sector.

With stocks performing well on a fundamental basis, there’s room for stocks to head higher. That’s good news for investors focused on growth stocks. And for companies that can grow during periods of higher inflation.

The downside to this trend is that companies that have missed on earnings have taken a much heavier hit. Going forward, markets will likely want to see more growth coming from the bottom 490 stocks in the S&P 500. That still makes the current market one where investors need to pick and choose carefully.

 

To watch the full video, click here.