Instead of Treasuries, Investors Are Buying Foreign Stocks - Ep 1017

Visit me at the Benzinga Trading Conference, NYC tomorrow Fed Tweaking Language to Officially Adopt Easing Bias Keeping with its tradition of having a tendency to act incrementally, the Federal Reserve Open Market Committee today announced that it was leaving interest rates unchanged - which was the consensus. There was an 80% probability that the Fed would leave interest rates unchanged.  The other 20% was that they would cut rates. So there was a zero percent probability that the Fed would increase rates.  But before delivering an official rate cut, what the Fed wanted to do was to prepare the markets in advance and take one step in that direction, which was to tweak its language to officially adopt a bias toward easing, which is exactly what the Fed did. Fed to Sustain "Expansion" The Fed basically acknowledged that the economic data had been weakening and that they wanted to do what was appropriate, or that they were willing to do what was appropriate to sustain the expansion. Now, they didn't come right out and say that the economy is headed for a recession; even though that is exactly what is happening. They said they wanted to see more data before they moved. But after they failed to cut rates, the probability for a rate cut in July, which is the very next time the Fed meets, rose to 100%.  So they took the 20% probability for the cut in June, since we didn't get it, the markets added that to the 80% probability of a cut in July. Looking Toward Negative Data Which means the markets are convinced that whatever data the Fed sees between now and the July meeting in going to be bad. It's not going to be good (positive) data. Of course, it IS going to be bad data. The data has been bad.  The economy has been weakening. We've been seeing a series of weakening economic data.  The economy is not just slowing down, it is headed to a recession. That is something that the Fed will never admit. Our Sponsors: * Check out TruDiagnostic and use my code GOLD20 for a great deal: https://www.trudiagnostic.com Privacy & Opt-Out: https://redcircle.com/privacy

20 Kesä 20191h 7min

Recorded June 14, 2019 Gold: Up Today When I recorded my podcast last Friday, I speculated that the price of gold might gap up the following Monday above $1350/oz., but that didn't happen because over the weekend Donald Trump managed to tweet out a face-saving way in which to not impose the tariffs on Mexican products that may have gone into effect on Monday.  The markets breathed a sigh of relief. So, instead of gapping up. the price of gold went the opposite direction and gapped down. Fourteen Month High This morning, we got the gap. It was on the last day of the week, not the first day of the week, but gold gapped higher on the day.  It was actually trading as high as $1356 or $1357 earlier this morning. That was a 52-week high in the price of gold.  In fact, it was a 14-month high.  We were actually up even before we got any economic data.  I think the high of the day might have been before the U.S stock market opened, when we were up about $15 or so. The Key is Above $1350 What happened was, at 8:30, prior to the opening of the U.S. market, we got some economic data that was a bit stronger than expected.  And that stronger than expected data rained on the gold rally parade, sending the price of gold down on the day. It only closed down about a buck or so, but we did not hold above $1350.  Now the key level is not really $1350 - it's a little bit higher up, because the price of gold has been above $1350 twice before, I think, in the last six years, not counting today. But it wasn't able to hold. That's the key. We need to see the price of gold get higher.  Maybe close above $1375. Gold the Favorite Trade for the Next 12-24 Months There's a lot of noise.  That's where all the resistance has been coming in - between $1350 and $1375. But nonetheless, I think, as I said in the last podcast, the more times we knock on this resistance door the more likely it is that the door is going to open. In fact, the buyers continue to come in to the price of gold. I was listening to an interview with Paul Tudor Jones.  He was asked what his favorite trade was for the next 12-24 months, and his answer was gold. And a lot of smart people are now coming out and saying that, "Yeah, gold's going higher.  Gold's got everything going for it, and they want to be involved.  And of course I think if the price of gold does what I think it is going to do, and what some other smart people think it's going to do, well then the price of gold stocks are going to do even better. Our Sponsors: * Check out TruDiagnostic and use my code GOLD20 for a great deal: https://www.trudiagnostic.com Privacy & Opt-Out: https://redcircle.com/privacy

15 Kesä 20191h 5min

Recorded June 10, 2019 Tariffs Off, Gold Gapped Down On Friday's podcast, I speculated that potentially we could see a gap up in the price of gold, gapping above the $1350 resistance level that has capped every gold rally for the past 6 years.  But gold actually gapped in the other direction.  It gapped down about $13 and it was down all day - never filled that gap. Catalyst for Sell-off The catalyst for the gold sell-off was Donald Trump calling off the tariffs that were supposed to go into effect today.  The five percent across the board tariffs on Mexico.  That announcement came out on Friday, pretty much right after I finished recording my podcast, we got the news.  So I immediately knew that that forecast probably was not going to come to fruition, or that speculation, potentially. Because I knew the markets would react positively to this news. After all, everybody was rightly worried about the negative impacts that those tariffs would have on the U.S. economy, in particular.  They weren't as worried about Mexico, at least when it comes to the gold market, but they were worried about how it would impact the U.S. economy. One Less Thing for the Fed to Worry About And of course, one of the reasons (of course there are many) that the Fed is talking about cutting rates is because of all the uncertainty that is being created because of tariffs. If there aren't going to be as many tariffs, if the Mexico tariffs aren't going to actually happen, well then that's one less thing to worry about, and maybe that's one less reason for the Fed to cut rates. Mexican Tariffs are a Sideshow Of course, cutting rates is part of the reason that people have been buying gold; the reason we had that big 8-day rally, which came to an end today. What's been powering the gold rally is the talk of Fed rate cuts. Now I don't think today's sell-off is going to be significant.  It's just one more time we knocked on that resistance door and it didn't open, but it is ultimately going to open. Because at the end of the day, the Mexican tariffs are a sideshow. The main event is that the U.S economy is going into recession anyway, and the rate cuts are coming. Our Sponsors: * Check out TruDiagnostic and use my code GOLD20 for a great deal: https://www.trudiagnostic.com Privacy & Opt-Out: https://redcircle.com/privacy

11 Kesä 201958min

Recorded June 7, 2019 Dow Finished the Week with a 4.7% Gain The Dow Jones soared 263 points today, although at one point the index was up better than 350 points. But it managed to finish the week with a 4.7% gain. That is the best showing for the Dow Jones Industrials in 6 months and in fact we snapped a six-week losing streak this week.  All of the major averages had positive weeks.  The NASDAQ -  the best gainer on the day; up 1.7% - not quite as strong on the week because it took a shellacking on Monday with the FANG stocks leading the way down - but up about 3.7% on the week.  Similar gains for the Russell 2000, the Dow Transports, the S&P 500 not quite as strong as the Dow - I think up about 4.2% on the week. What was the Catalyst? But why? What was the catalyst for this big move up in the U.S. stock market? Was it better than expected earnings? Not really.  Some companies beat estimates. Take a look at some of these recent IPO's like Zoom Video. Zoom Video was up 18% today because it earned 3 cents a share instead of the one cent that Wall Street was expecting. Now, 3 cents per share is not a lot of earnings when you're a $94 stock, but that's where the stock is. Beyond Meat to Infinity and Beyond Even more ridiculous is Beyond Meat, which is beyond sanity as it's going to infinity and beyond. Now, Beyond Meat was up almost 40% today, $138.65.  The high was $149.46.  This stock is already more than tripled its IPO price - or quadrupled, I can't really tell.  Now they're still not making money at Beyond Meat, so they still haven't moved beyond losses.  The company lost $6.6 million on the quarter; that's 95 cents per share. But it is an improvement, because a year ago, in the same period, they lost 98 cents a share. If you adjust it, if you back out a lot of other stuff, like stock-based compensation and things that nobody likes to count, then they only lost 14 cents per share, which was better than the 15 cents a share loss that Wall Street was expecting.  So clearly that's worth an extra 40% on the price of the stock.  I forget what this thing is trading; 100+ times revenue.  It is a crazy multiple, but at least the stock has a viable product. Our Sponsors: * Check out TruDiagnostic and use my code GOLD20 for a great deal: https://www.trudiagnostic.com Privacy & Opt-Out: https://redcircle.com/privacy

8 Kesä 201944min

Recorded June 5, 2019 Volatility Led by NASDAQ There's been a lot of volatility in the stock market since I recorded my last podcast on Friday.  In fact, on Monday, the tech stocks in particular got beaten up.  The NASDAQ dropped by better than 150 points, led lower by the so-called FANG stocks (Facebook, Amazon, Netflix, Google).  Google and Facebook, the biggest drop - I think it was something like 6-8%.  Part of that had to do with the Justice Department investigating Google. Enlisting the Power of Government in the Marketplace Of course, I don't think that we should be involved at all in anti-trust.  Almost all of the companies that have been broken up or that had been put through the ringer by the U.S. government achieved whatever type of market dominance they had based on just being good competitors, delivering the best quality at the lowest price. And government just came in and really what they were doing was advocating for competitors that were having a problem competing.  It wasn't because the consumer was getting ripped off; in general the consumer was being rewarded with low prices and high quality.  But companies that couldn't compete, since they couldn't win in the marketplace, enlisted the power of government to work for them.  So government, really is not about preventing monopolies - they create monopolies. The government comes into a market and legally gives a company a monopoly and uses the power of government to make sure that nobody competes. This is all a bunch of nonsense that we need government to "keep the markets free". Moving Away from Risk But, in general, if you look at what was happening to the markets on Monday, there was a huge movement from growth stocks, momentum stocks, speculative stocks, riskier stocks, to defensive stocks - value oriented stocks. The Dow Jones was actually positive on the day - it wasn't up a lot, but it was up, even though you had a 150 point drop in the NASDAQ. I think that is an important key, because this is something that needs to happen and it is long overdue, that investors start to get more defensive in anticipation of a weakening economy. Dividend-Paying Stocks More Attractive You have all of these high-multiple stocks, their P/E's are going to have to come down to earth.  And, of course, people are looking at a slowing economy, they are looking at lower interest rates - they believe they are going to get lower interest rates, so it makes sense that dividend-paying stocks would be more attractive in a falling-rate environment. Our Sponsors: * Check out TruDiagnostic and use my code GOLD20 for a great deal: https://www.trudiagnostic.com Privacy & Opt-Out: https://redcircle.com/privacy

6 Kesä 201954min

Sell in May and Go Away U.S. stocks closed out the week and the month of May with heavy losses; the DJIA down 354.84 points.  Pretty much going out near the low of the day. That's a drop of 1.4%. NASDAQ also getting killed - 114.57 down - that was a 1.5% decline on the day.  The Russell 2000 continues to melt down.  That index falling 20 points - down 1.35% on the day.  But the biggest losses continue to be in the Dow Jones Transports. That index was down almost 2% - 1.9% - 188.4 points.  This is the worst May for U.S stocks since 2010. The Dow is down about 7% just in the month of May. Remember, "Sell in May and go away"?   Well it hasn't worked in a while, but this was a great time to sell May first! Russell 2000 and Dow Transports Weakest Indexes Again, I told everybody that I thought the bear market rally was over based on the Fed not being as dovish as the markets expected, and it's been down hill from there.  If you look at the Russell 2000 and the Transports, these two indexes did not make new highs. Remember the Dow and the S&P, the NASDAQ made new highs. Now, they're all down considerably - the Dow is 8% off those highs now. But the Russell 2000 and the Dow Transports did not make new highs, and now they are the weakest index and now the Russell 2000 is down just under 16% from its peak, and the Transports - over 16%.  So both of those indexes are about 4% points away from being officially back in bear market territory, which means 20% from the highs.  We could easily be there next week,  on these stocks. Debacle du Jour: Gap Now the other indexes have further to go, I mean the NASDAQ is only down about 9% from its peak.  So 1% away from what Wall Street would officially call a "correction".  The retailers continue to also be hammered.  The Debacle du Jour was Gap, which gapped down by about 15% on the day on weaker than expected sales. The stock managed to rally most of the day, so it only closed down a little over 9%.  But still, it closed better than 47% below its 52-week high. Domestically Focused Stocks Weakest But, when you have the Russell 2000 and the Transports the weakest part of the market, those are the most domestically focused stocks. Those are the stocks that are the weakest.  So everybody who keeps talking about how great the U.S. economy is, if they look at the market, the market is telling you a different story. Our Sponsors: * Check out TruDiagnostic and use my code GOLD20 for a great deal: https://www.trudiagnostic.com Privacy & Opt-Out: https://redcircle.com/privacy

1 Kesä 201958min

Recorded May 29, 2019 The End of the Bear Market Rally Back on May 1, when I did my podcast, I officially called for the end of the bear market rally that so many people had confused for a new bull market, and the impetus for that call was the Fed coming out and not living up to Wall Street's expectations for just how dovish the Fed was. Remember, the market was starting to factor in rate cuts, not just an end to the tightening cycle, but the beginning of the next easing cycle. And Jerome Powell basically threw cold water on that by talking about how low inflation was transitory, and how he expected it to go back up, and all of a sudden the markets were starting to think that the Fed wasn't going to cut rates and the market went down a bit. The Fed Giveth and the Fed Taketh Away I thought that given that the rally was built based on the Fed, that what the Fed giveth by being more dovish than the markets expected the Fed had finally taken away by being more hawkish. Even though I didn't believe that the Fed was as hawkish as the markets believed, I believe the Fed is far more dovish than the markets believe.  But once Powell dashed those hopes, that was enough, I thought, to take the wind out of the sail of the rally. Throwing Down the Gauntlet on Trade And then, of course, Donald Trump, himself, pulled the rug out from under the market when, the following weekend, he basically threw down the gauntlet on the trade war; tweeted out that he was going to be imposing 25% tariffs across the board on Americans who want to buy any Chinese products.  And then the markets really started to fall. Although, I said at the time, that if the markets really perceived how great the threat was, they would have been down quite a bit more. But we now have two back-to-back better than 200-point declines in the Dow. Our Sponsors: * Check out TruDiagnostic and use my code GOLD20 for a great deal: https://www.trudiagnostic.com Privacy & Opt-Out: https://redcircle.com/privacy

30 Touko 201951min

Recorded May 22, 2019 Low Inflation is Transitory Today we got the release of the most recent minutes of the Federal Open Market Committee, and I guess it was a bit of a mixed bag for people who were looking for whether the Fed was going to be more hawkish or more dovish with respect to its next move on interest rates.  One thing that was revealed in the minutes that the governors still maintain, they are still saying that they feel that this "low inflation" that we've been experiencing is transitory.  What that means is that it's temporary and the low inflation is going to go back up toward their 2% target.  This is supposedly a hawkish statement, because if the Fed were worried that low inflation was going to persist, then they would do something about it to save us from the horrors of not having the cost of living rise at a fast enough clip. When It Comes to Inflation Fighting the Fed Is All Bark and No Bite But, as far as I'm concerned, none of this even matters, because a) they are right, inflation is transitory, and b) it's not even as low as they think because the CPI is not accurate. So inflation is already higher than what the official numbers reveal. But even if it is transitory, which it is, and even if the numbers go north of 2%, which they will, the Fed is going to do nothing.  People still don't get it, that when it comes to inflation fighting the Fed is all bark and no bite. "For Some Time" Means Forever But then if you look at what the Fed said in the same minutes with regard to their "patience" with respect to the next rate hike, remember, the Fed went from pretty much auto pilot - they were raising rates, they were tightening - to being "patient", and being "appropriate", and now, if you read what they said, they said that it is going to be appropriate to remain patient "for some time".  Now what does that mean - "for some time"? Basically, it means forever. What the Fed is basically saying by saying that it is appropriate to be patient for some time, meaning, "you don't have to worry about any rate hikes". Our Sponsors: * Check out TruDiagnostic and use my code GOLD20 for a great deal: https://www.trudiagnostic.com Privacy & Opt-Out: https://redcircle.com/privacy

23 Touko 201957min