Author: Andrew Packer

Cryptocurrencies

Simply Bitcoin: Debunking White House Report on Bitcoin

Posted on by Andrew Packer

While prices are showing one of the largest drawdowns in the cryptocurrency market in the past year, there are some healthy signs for the space. Adoption continues to grow. And companies are investing at a faster pace in the first three quarters of 2022 than in all of 2021.

It’s clear that crypto is here to stay, no matter what wild moves it makes in price. And as the space grows, there are growing calls for a regulatory framework.

That’s why the White House released a report on cryptocurrencies last week.

Cryptocurrencies can offer a way to separate money from governments. Governments prefer to have a monopoly on money. Government prefers to have ways to control the flow of where that money goes. That’s on top of being able to create money at will.

So it’s no surprise that the White House report has come out in favor of cryptocurrency polices that favor proof-of-stake over proof-of-work.

Proof-of-stake can be more environmentally friendly. And it’s being sold that way in the report. But it’s also easier to centralize and control. That goes against the ideas that led to the creation of cryptocurrencies in the first place.

The framework also sets the stage for a CBDC – central bank digital currency. Rather than have users choose from the myriad of cryptos available today, it would simply be the creation of a digital dollar, which could be controlled by the government at will.

Overall, the White House report is a game plan for how governments could try and control money in the digital era.

 

To watch the full episode, click here.

Commodities

Wall Street Silver: Buy Gold & Silver When Everyone Hates It

Posted on by Andrew Packer

Historically, precious metals have fared well during times of high inflation. Despite a bump higher in prices during 2020, the precious metals have given up much of their gains in the past two years.

The space looks ugly, and unloved, even as inflation remains high. That makes it an asset worth considering from a contrarian perspective. That’s because ideas that are out of favor with the market trade at a much better value than those in favor with the market.

That’s similar to the trend that’s occurred in uranium in the past few years. Two years ago, uranium was hated and out of favor with the market. Now, it’s a popular trade as investors have clamored for any energy-related investment.

A combination of rising interest rates and a slowing economy are sending investors away from precious metals and small-cap projects in particular. That’s allowing astute players to get their best deals in years in the resource space.

We may be entering a narrow window where small-cap projects can deliver fantastic returns in a short period of time. The best returns could come from those in the precious metals space, given their prices and valuations today.

With investors looking for hedges now, precious metals do stand the test of time. While they may not seem to work well in the short-term, the value relative to price right now looks attractive.

 

To listen to the full podcast, click here.

Stock market

Natalie Brunell: Double Digit Inflation in 2023?!

Posted on by Andrew Packer

While the past few months have showed a slowing rate of inflation, consumer prices are still rising at their highest levels in over 40 years. Most traders see inflation heading down in the months ahead. The real question is how quickly it will come back down.

However, there are a few factors that could point to inflation rising into the next year. Prices could even start rising at double-digit rates, close to the worst levels of the 1970s and 1980s.

So far, inflation has been blamed on everything from poor weather to Vladimir Putin, rather than the government’s creation of large amounts of money.

But inflation could come roaring back next year. The most likely culprit would be a further market or economic drop that causes central bankers to pivot. And, if combined with more fiscal policy, it’s likely that we could be back to an era of money printing.

As that happens, we may move back to a situation seen in early 2020, when the uncertainty of a global pandemic caused a big drop in stocks. But a rapid change in interest rates back to zero and the printing of trillions of dollars saved the stock market.

While we’re still dealing with the inflationary costs of that today, a further move towards more stimulus would simply add to today’s high inflation rates. That suggests markets could be in for more turmoil in the months ahead.

 

To listen to the full and wide-ranging conversation, click here.

Economy

Animal Spirits: Is a Recession Bullish?

Posted on by Andrew Packer

Every recession is different. But many investors know that buying during a recession can create a lifetime of wealth. Does that make a recession bullish? Potentially.

However, there are a number of risks involved. One is the risk of buying too early, and sitting on early losses for some time until markets turn around. Plus, with inflation running so high right now, a loss could be compounded by a loss in purchasing power.

History shows that markets tend to start recovering before the overall economy starts to move higher. That’s a big reason why many see a recession as bullish for stocks.

It allows them to buy a big dip in stocks before the next move higher. And those looking to the future with an outlook measured in years should be fine.

With the US dollar looking so strong right now, the best recession buys right now may come from international companies. That’s because a strong dollar makes other currencies look cheap.

That’s true with the Euro, which has been trading at par with the dollar for the first time in 20 years.

As currencies shift back away from their defensive moves right now, investors can potentially see a tailwind lift international stocks first.

Investors can always find an opportunity, no matter what the market is doing. A recession brings more values out of the market than during a bull market.

 

To listen to the full interview, click here.

Economy

Palisades Gold Radio: The Worst Part of the Bear Market Is Dead Ahead

Posted on by Andrew Packer

A bear market is a process. Just as stocks don’t rally in a straight line, they also don’t fall in a straight line. Investors saw a big move down between December of last year and into June, before a strong rally kicked off.

Now, stocks are trending down again. And we’re seeing signs of the economy continuing to slow, even as inflation remains high and the jobs market remains strong.

Once that starts to change, however, things could move quickly. And markets could move lower as the economy shows an even further drop ahead.

The opening move of this market drop has simply been a drop in prices from 2021’s elevated levels. Now, companies are seeing lower earnings estimates as the economy has started to slow. Traders who follow a stock’s price-to-earnings, or PE, ratio know that the P has already dropped. Now the E part of the equation will drop too.

That means that equities are likely still priced too high to their lower earnings estimates, and markets will drop further. And we’ll likely see the Fed continue to raise interest rates into next year.

Given how inverted the yield curve is at the moment, a steep recession and change in policy looks likely. But not until another leg lower for stocks.

 

To listen to the full interview, click here.

Stock market

Game of Trades: For the 4th Time in 2022, the S&P 500 Is Rejected After Being Wrong About Inflation

Posted on by Andrew Packer

Investors are likely sick of hearing about inflation impacting their investments this year. Particularly as inflation continues to remain strong, as seen at every trip to the gas station or grocery store.

But inflation still matters. As does the move to crush inflation. Year-over-year inflation remains strong at 8.3 percent. There’s little sign of a cool-down yet, and investors will likely be in for more pain before things improve.

On a technical basis, stocks were starting to get support ahead of the latest CPI numbers. But with inflation still going strong, the S&P 500 has once again rejected its attempt to move higher.

In the short-term, that likely means that stocks will continue to trend lower, likely re-testing their June lows. That’s also confirmed by bond markets, where yields continue to creep higher as stocks bounce around within their larger downtrend.

That suggests that investors should remain defensive here, and look for a further breakdown in stocks. But markets are at a pivotal place where the most recent attempt to rally has failed.

Long-term accumulators of stocks can continue to pick up bargains here. But those more trading-oriented should continue to expect more downside. We’ll still need to see further declines in the CPI on a year-over-year basis before we can finally get to the end of the current bear market.

To watch the full video, click here.

Income investing

Money For the Rest of Us: Why Diversifying Your Portfolio Feels Awful

Posted on by Andrew Packer

Diversification is a concept most investors are familiar with. The idea is to own a variety of different assets. More importantly, these assets will behave differently under different market conditions.

This can smooth out a portfolio’s returns by providing assets that perform well, even during poor markets. Today, most investors use ETFs or other funds to diversify into a variety of stocks and even bonds. Even with easy, one-stop ways to diversify, however, the concept can sometimes invoke negative feelings.

That makes sense for a few reasons. First, by diversifying, we’re moving capital away from our highest-conviction ideas. There’s less money to invest in the trades we want to make, out of a sense of “having” to make a trade for diversification.

And, diversification can help lead to portfolio creep, where we keep adding positions even when we already have a diversified portfolio. 20-30 different stocks should be more than sufficient to diversify.

But even investment legend Warren Buffett, who has come out against diversification, has allowed his portfolio at Berkshire Hathaway to grow to 48 positions.

While there are some negatives, diversification plays a crucial role for mitigating extreme moves in a portfolio.

And today’s investors can further diversify not just across sectors, but internationally as well. With the US dollar showing some strength right now, international companies are likely to perform well as it means that other currencies are relatively weaker.

To listen to the full podcast, click here.

Real Estate

Meet Kevin: Forget Recession – The Fed will Crush us into Depression

Posted on by Andrew Packer

The latest inflation data has been a disappointment. After months about talking tough to bring inflation down, we’ve only seen one month drop in July. The number then reversed higher in August.

While August saw a rise of only 0.1 percent, investors now feel that inflation remains out of control. And it will likely stay that way through the end of the year. That suggests that interest rates will continue to rise higher.

Tuesday’s inflation report was so bad that every single stock on the Nasdaq 100 closed in the red that day. The last time such a move occurred was in March 2020 during the pandemic crash.

This time around, however, interest rates are going up, not down. And fiscal spending is more muted. After all, there’s no reason for increased unemployment benefits or direct stimulus payments with the job market looking strong right now.

The data also caused the inverted yield curve to increase, a further sign that economic weakness will continue into 2023. And the Nasdaq has now seen its 7th decline of 4 percent or more so far this year.

High inflation will mean higher interest rates for longer. As interest rates are the cost of money, that rate and its changes can be key to economic growth. With mortgage rates rising to 2008 levels as well, housing prices are set to drop.

 

To watch the full video, click here.

Economy

Animal Spirits: Live From Future Proof

Posted on by Andrew Packer

Every recession is different. However, the data shows that recessions tend to bottom out nearly midway through. The problem? Knowing when that midpoint is.

Given that some don’t even see the US in a recession right now, that’s an argument that the bear market may still have a long way to go. That’s true even after the stock and bond markets have now had their worst 8 month start to a year ever.

Typically, stocks and bonds perform differently from each other. When investors are fearful, they tend to sell stocks and buy bonds. And when investors are greedy, bonds are sold to buy stocks.

This year, we’ve had a stock market pullback from high valuations. And bonds have been selling off as interest rates have started to rise. That’s led to both assets performing poorly. And it’s why traders have largely been buying put options, rather than call options, this year.

In the meantime, the US dollar has seen tremendous strength. It’s hit multi-year highs against a number of other currencies. And it trades at par with the Euro for the first time in nearly 20 years.

The strong demand for US dollars is fueling this strength. But a strong dollar will also weigh on US corporate earnings, particularly for international companies. As long as traders are looking defensively, assets will likely be poor performers.

 

To listen to the full podcast, click here.

 

Economy

Bigger Pockets: Crash or Correction: Are We Repeating 2008’s Mistakes?

Posted on by Andrew Packer

During any market turmoil, history can provide some guidance. While specific market conditions will vary compared to the past, understanding how similar events played out or could have played out differently can be crucial.

Given how quickly markets sold off and recovered from the pandemic, investors are still looking closely at the 2008 market meltdown. That was fueled by real estate’s collapse, as easy lending standards build up a housing bubble.

Today’s housing market is significantly different. Lenders went back to requiring sizeable down payments, and underwriting standards remained high. Home equity is also at a record high today as well.

Yet many see a potential for a housing crash once again.

That’s easy to see why, given rising interest and mortgage rates. Rates are back to 2008 levels, and homeowners now have to shell out 6 percent for a mortgage. That’s a high enough cost to keep some out of the housing market for now.

That could lower demand, which in turn would lower home prices, potentially causing a decline in housing. However, with an overall shortage in housing right now, the extent of a housing market drop should be nowhere near 2008 levels.

More importantly, the 2008 drop led to a wave of foreclosures. With so much home equity around today, lower home prices may simply mean less equity for today’s homeowners, not a major crash.

 

To listen to the full podcast, click here.