Author: Andrew Packer

Commodities

Kitco News: Central Banks Put a Floor Under the Gold Price In the Face of Outflows From ETFs

Posted on by Andrew Packer

Gold has been a strong player year-to-date. And after a recent pullback, prices are on the move higher again. Investors have several reasons to be attracted to the metal now. Most arguments boil down to the simple logic of supply and demand.

And demand remains strong, even if it’s been shifting. Retail and institutional buyers were bullish a few years back. Today, it’s central banks that are doing the buying.

And that buying is heavy lifting. Central banks tend to buy in tonnes, not ounces. In the most recent quarter, Turkey, India, and China were big buyers of gold. China in particular has been a steady buyer for the past 18 months. That covers gold’s runup over the last year.

Meanwhile, don’t count out retail investors yet. Warehouse retailer Costco (COST) reports that its old out of its first delivery of 100-gram gold bars. Those bars were priced at just under $7,600. They’ll likely sell out just as rapidly in the future.

Gold is best known as an asset that can hold up relative to inflation. While inflation has come down significantly, it still has a ways to go.

With demand looking strong, and supply difficult to change over the short-term, investors may want to buy some more gold or gold-related positions before a potential move higher.

 

To read the full opportunities in gold right now, click here.

 

Income investing

Dividend Growth Investor: Buffett on Ignoring Stock Price Fluctuations and Thinking Like a Business Owner

Posted on by Andrew Packer

With markets hitting new all-time highs, it’s easy for investors to get caught up in the excitement. That could mean turning a blind eye to market dangers, and being blindsided by the next market pullback.

That makes now the time to step back from the market price action and look at the fundamentals. That means that investors could step back from thinking of the market as delivering ever-higher prices.

One strategy that can help investors during periods of market greed is to think in terms of investing in a business. That’s an approach value investors employ.

For instance, investors know of Warren Buffett’s expertise for value investing and owning shares of great companies. But he also owns entire businesses. And holding those businesses over decades allows them to become valued at multiples of what they were originally worth.

As that happens and the business grows, the cash payout related to those businesses can grow as well. That’s why Buffett’s investment in Coca-Cola (KO) over 35 years ago now pays about $776 million in cash each year.

But that rule can also apply to a private business, or a piece of real estate. Bought right, investors can hold a great investment nearly indefinitely. Or, in other words, if you don’t look at the price too often, it will take care of itself over time.

 

To read the full examples of Buffett businesses that have provided great returns, click here.

 

Cryptocurrencies

The Pomp Letter: The Fear & Greed Index Flashed Another Sign Over the Weekend

Posted on by Andrew Packer

After a roaring start to the year, cryptocurrency prices have languished in recent weeks. They’ve even trended lower. Bitcoin, the leader of the space, topped $70,000 earlier in the year. But in the past week, its prices have declined closer to $55,000.

Investor sentiment is now also moving to its lowest levels since late 2022. That’s right around the time bitcoin bottomed around $17,000 before starting to trend far higher. Sentiment also marked the March 2024 peak.

What does this mean for investors now? With sentiment looking bearish, it may be a counterintuitive time to buy.

In the crypto space, sentiment includes factors such as social media, surveys, and search engine trends.

These trends suggest that investor interest has moved elsewhere. While that could mean an explosive move off of pessimistic levels, it would take a bigger shift to mark a new bull rally.

Until that happens, patience is likely the name of the game. Typically, bitcoin soars a few months after its halving period. So far, it’s on track for a post-having decline that comes first, as it has in prior cycles.

Once bitcoin starts to trend higher, other cryptos will likely start to take off too. Interested investors should look for opportunities to accumulate now. And to have a plan in place to take some profits off the table when sentiment gets overly bullish.

 

To look at the full methodology behind bitcoin’s fear and greed index, click here.

Economy

Rebel Capitalist: Next Phase of the Commercial Real Estate Crash Is Here

Posted on by Andrew Packer

Commercial real estate has struggled in recent years. First, retail spaces saw a decline in demand as buying shifted online. But the pandemic led to a structural change in how people live and work.

That caused a massive reduction in demand for office properties. So far this year, several office buildings have traded hands as much as 90% lower than their last sale price. And since commercial real estate has significant debts behind it, there could be further dangers.

One sign that commercial real estate’s trouble is getting worse is the rise in fraud. Building owners are overstating financials and looking to obtain larger loans than their properties can support.

This practice is reminiscent of the so-called “liar loans” that occurred in the housing market in the mid-2000s. Essentially, loans were passed without going through the due diligence of determining the creditworthiness of the borrower.

While the commercial real estate market is smaller than the housing market, a decline poses some risks. Many debts related to commercial holdings could collapse. Or at least come under severe scrutiny.

As further fire sales are made, more risks could be exposed. And that could lead to systemic problems in the credit markets. Real estate-related stocks should be examined exceptionally closely right now.

 

To see the full analysis, click here.

Commodities

Game of Trades: A Once in a Financial Lifetime Event Is Here

Posted on by Andrew Packer

Between 1968 and 1980, stocks traded flat. However, adjusted for the waves of inflation that occurred during the 1970s, real returns were close to -70%. So far this decade, we’ve seen one massive inflation wave higher.

That wave has largely, but not entirely, subsided. And conditions are in place for another potential wave higher that could mimic the 1970s. In that event, markets could see big losses in real terms, even if they head higher in dollar terms.

With the economy apparently heading towards a soft landing, today’s economy has been engineered. Government spending has remained massive since the pandemic. As a result, the U.S. debt alone is rising by nearly $1 trillion every 100 days.

This may not mean we’re at a crisis yet. But we could see trends take place over the next few months that sends inflation creeping higher.

For instance, supercore inflation this year has started to trend higher. That’s all items less food, housing, and energy. It’s given back some of those gains, but remains elevated.

The good news is that energy prices have been moderate. And food inflation has declined to its 20-year average close to 2%. That’s a good sign that inflation is coming down, but could still trend higher, especially if the Federal Reserve cuts interest rates.

If we get another wave higher, bonds could take another hit as interest rates rise. But commodities should hold up in real terms.

 

To understand how inflation could start to soar higher again, click here.

Cryptocurrencies

Bitcoin Magazine: Spot Bitcoin ETFs Saw Largest Inflow In a Month

Posted on by Andrew Packer

2024 has been a strong year for bitcoin. The cryptocurrency hit new all-time highs, and went through its fourth halving cycle. Both point to strong price returns from here. However, prices have been consolidating over the past few months.

That doesn’t mean the party is over. Looking at investment capital, the bitcoin ETFs that were approved earlier this year are seeing a strong inflow. That bodes well for further gains.

Plus, bitcoin tends to struggle a bit in the immediate aftermath of a halving.

However, unlike any other asset, bitcoin are issued every 10 minutes. The rate of issuance can be slightly adjusted based on the bitcoin network’s performance. But the total maximum supply remains fixed.

That means that any change in demand will have no impact on price. And bitcoin’s fixed supply suggests that it will continue to advance in price for decades to come.

However, bitcoin is prone to sharp pullbacks. It doesn’t move in a straight line.

With money continuing to flow into bitcoin investments, a future price increase looks likely. It may take time to play out, and will be prone to pullbacks like the one underway now.

But with more capital flowing into bitcoin, it’s an asset that could soar in the second half of the year. It doesn’t matter if that happens via direct investments or if bought by an ETF on behalf of investors.

 

To read the full article, click here.

Stock market strategies

Elliott Wave Options: Pro Trader Tip: Follow Your Trading Plan and Manage Your Losses!

Posted on by Andrew Packer

The market uptrend has slowed down in recent weeks. For traders, that may mean that it’s time to shift strategies. That could include adjusting your specific trading plan to a more neutral market over the coming weeks.

Part of any investment plan is to contend with losses. While an inevitable part of investing, managing losses is crucial. That keeps investors from blowing up a portfolio, and keeping the capital needed to prosper.

First, traders can avoid losses by having the patience to wait for the right setup. Traders who try to  get into a trade in a shifting market may not get the ideal price. By paying the wrong price going in, traders may make it more difficult to make a profit.

Second, traders should give themselves more time for a trade to play out. With many investors flocking to day trading, adding in an extra day can help reduce or avoid losses.

Next, investors should look to take trades off the table when they aren’t performing as expected. This can keep trading losses to a minimum.

And, once a trade has been closed, traders should look to the next trade with a neutral eye and not look to “catch up” from any short-term loss. Doing so could lead to making riskier trades.

 

To look at a real-world example of managing a loss, click here.

 

Income investing

Ryne Williams: 3 Deeply Discounted Dividend Stocks to Buy In July 2024

Posted on by Andrew Packer

The stock market ended the first half of 2024 near all-time highs. However, most of that was driven by tech stocks, which continued on their massive gains from 2023.

Several sectors significantly underperformed in the first half of 2024. These sectors could take over leadership in the second half of the year, especially if tech takes a breather. Many of these sectors also offer dividend payments, which pays an investor for their patience.

Part of the reason some sectors have languished is that interest rates have remained high.

Expectations for rates to come down have continued to get kicked down the road.

However, rates could start to come down near the end of the year. That could make income-oriented stocks more attractive relative to bonds.

That’s especially true of real estate plays. One such company is VICI Properties (VICI). The REIT has a major stake in a number of properties  in the U.S. and Canada, focused on gaming destinations.

Shares have dropped nearly 10% in the past year. That’s pushed the dividend up to about 6%. The dividend is well covered by income. And VICI has been able to grow its dividend slightly over the past few years. Most REITs lack the ability to significantly grow their dividends.

 

To view the full list of deeply discounted dividend stocks, click here.

Income investing

BlackRock: Abundant Income

Posted on by Andrew Packer

Investors have had to contend with interest rates going from historically low levels of zero percent to a 15-year high in the span of less than 18 months. That led to a bear market for stocks and bonds in 2022, and bonds further weakened in 2023.

However, stocks have been on a tear. And interest rates have now been unchanged for about a year. And the economy is showing signs of slowing down, but still continues to hold up.

Today’s investors have a tremendous opportunity to earn a high yield on their cash. And by and large, they’ve done so. There’s an extra $1.2 trillion in annual interest payments thanks to today’s high rates.

Those who have stayed on the sidelines may have missed out on the stock market rally. However, they’re far from hurting.

In fact, households as a whole have become net creditors for the first time in 30 years.

Plus, businesses with low-rate fixed debt are now seeing their interest income exceed their interest expenses. Nearly seven out of ten companies report that interest rates have no impact on their spending plans.

With interest rates potentially headed lower later in the year, now would be the time to lock in relatively high rates. Longer-dated bonds could even prove a big winner, as lower rates tend to move longer-dated bond prices the most.

 

To read the full analysis on today’s income opportunities, click here.

Economy

The Maverick of Wall Street: Consumer Stocks Are Crashing As Credit Card Delinquencies Hit the Highest Level Since 2008

Posted on by Andrew Packer

Consumer spending remains the lion’s share of the U.S. economy. The past few years have seen some big shifts in consumer spending trends. During the pandemic, consumers were flush with cash from staying at home. But they spent money on electronics to work at home. And on home goods.

That trend shifted towards spending more on travel and tourism as the pandemic ended. And the excess savings have started to dwindle down. Now, signs point to a further slowdown.

The excess cash from the pandemic era is gone. Credit card balances are on the rise. That suggests that consumers are financing their current lifestyle with borrowing.

Now, credit card delinquencies are trending higher. And companies are reporting that they are unable to pass on further price hikes to consumers.

The result? Any continued inflation will hit the corporate bottom line.

Consumer stocks have already started to show some weakness going into the second half of the year.  That weakness could accelerate should earnings indicate a big slowdown.

In any event, today’s investors may want to get more defensive following the big rally in stocks. But consumer defensive stocks may not be the best place to invest this time around.

Instead, defensive stocks such as utilities might offer the best return relative to today’s risks of a slowing consumer.

 

To watch the full analysis, click here.