Today, more than ever before, I feel confident about the economy and, more importantly, my understanding of where it is going, how it's going to effect people, and how specific markets are going to react.
For background, I've been a writer since I was five years old. I was actually publishing my own magazine when I was six. I've owned newspapers, and I've been publishing on the internet since 1999. I started writing about economics, finance and markets in 2003. I'm 67, so, I think I've got the credentials, finally, to offer reasonably good information (not advice) on stocks, bonds, real estate, financial markets, maybe even a little about cryptocurrencies, particularly Bitcoin. On that last point, I have to thank Max Keiser and Stacy Herbert of the Keiser Report most of all, but also Michael Saylor, CEO of Microstrategy.
Max Keiser and Stacy Herbert have been pounding the table on Bitcoin for over a decade. With Bitcoin at $50,000, I believe it's safe to say that they're right. Bitcoin is the future of money and the savior of wealth. Michael Saylor took the Bitcoin meme to a new level recently, investing his company's cash into it, to the tune of $4.45 billion.
But let's get to the heart of the matter. I'm looking at stock market futures and other indicators here at roughly 7:30 am ET, and I'm seeing what looks to be a continuation of the recent sell-off in tech stocks, now spilling over into mainstream stocks. Futures were down a bunch just a few minutes ago, but they're quickly heading toward positive territory. As I write, S&P futures are down 8.50, Dow futures off 34, NASDAQ futures off 31. No big deal, right?
Wrong. Big Deal. This market is diving headlong into a correction. Futures are full of fakery, maybe even moreso than the equity cash market, the COMEX, or unemployment statistics. There's my first prediction. The NASDAQ is right on the verge of a correction, of which the Dow, S&P, and NYSE will soon follow.
Wednesday's massive losses on the NASDAQ were scary enough, but investors and the general public are going to get even more agitated in coming days. I'm not saying it's going to happen today or tomorrow or even next week, but it's probable that the NASDAQ will fall another 400-800 points in short order, dragging down the other indices into a 10% correction.
Charts are telling the whole story very clearly. There was a correction in September of 2020 when the NAZ fell from 12,074 to 10,519. It nearly did it again in October, dipping from 11965 to 10822. Both times, the index fell below its 50-day moving average, but never got even close to the 200-day moving average.
What happened next? The NASDAQ zoomed higher at a nearly 45 degree angle, left to right, all the way to a top tick at 14,175.12 on February 16, the Tuesday after Martin Luther King Day and one session after reaching the all-time closing high of 14,095.47 on the 12th. The index closed lower on the 16th, down nearly 48 points and it's been lower ever since.
To get into correction territory (-10%), the NASDAQ has to dip below 12,757.61. That's about 250 points. It could do that at any time since it's already closed below the 50-day moving average as of yesterday. It will. It's almost a done deal. With the coronavirus scare fading fast, the media and the powers that be need something else with which to scare the public and the economy is always good for a quick fix.
Scare enough people and they will sell their stocks, which is the intention, to shake out the weaker hands. A little rough patch in the stock market is also good for the political class and their $1.9 billion stimulus package which is now in front of the Senate. Nothing like a weak stock market to justify spending a couple trillion dollars.
Now that I've gone and stuck my neck out on a correction, I'm going to stick it out just a little bit further and predict that the correction will not last long. The NASDAQ will go down to maybe 12,400, maybe even a little below 12,000 before the PPT or the Fed or Janet Yellen or anybody with a loud enough voice tells the world that stocks are cheap. It might even be at the next FOMC meeting (March 16-17), which means stocks get whacked down today, tomorrow, next week, then Jerome Powell and his merry band on central bankers ride to the rescue and stocks go straight up because they're there to support the markets and the economy and they see no inflation threat and look, the government just passed the stimulus bill, and so, all is good, we have spoken.
That's how it works. It'a all rigged, a con game gone wild and I've finally seen it enough times to maybe make a few bucks off it. Don't short this market. You could have on the 16th or the 18th, but, if you did, you should be getting ready to cover.
OK, so stocks are going to go down some, then right back up. Everybody's going to get $1400, cities and states are getting huge wads of cash, and thanks to the video with George Gammon below, we know that Janet Yellen is going to release another trillion dollars worth of additional QE over the next four months (he says so at about the 18:30-minute mark). And, that's confirmed thanks to this Bloomberg report detailing some of the intricacies of Yellen spending down Treasury's cash horde of $1.6 trillion to about $500 billion by the end of June. There will be tons of money sloshing around and much of it will go straight into stocks.
Yellen's spending spree may have already begun. The main buyer is the Federal Reserve, which will add to its already bloated balance sheet. That would also help explain the inordinate rise in the 10-year yield, which really started taking off in February, around the time Yellen made her announcement. It was all there to see, but few understand the implications. I certainly cannot claim to understand how all of this works. It's extremely complex, as stated in the Bloomberg article. Maybe nobody understands it exactly, but surely well less than one percent of the public does, and probably a small number of traders do. What everybody does understand, or will come to understand, is that these huge sums of money changing hands at the top of the financial food chain will have major downstream effects to the markets and the economy.
Moving on to a more obvious subject for prediction: What's the price of sirloin steak? To be honest, it's been so high for so long, I don't even bother to look any more. I'll take a stab that it's about $18 a pound. I'm here to tell you that it's going to be higher this summer and even higher by fall. At my local Ruth's Cris Steak House, a 16 oz. New York strip steak is $53, and a similar size Ribeye is $59. I happen to remember a time - not that long ago - when you could have a full dinner for two with those items on them, appetizers and tip for that price.
So, I predict there will be inflation, and it will be rampant by fall. That's probably a no-brainer.
Incidentally, and this should not go without notice, even though nobody in the financial media mentioned it, but the national debt (federal government debt) ripped past $28 trillion on Tuesday. It happened so fast, sooner than I had thought it would, I missed it too.
How about silver? Well, since the reddit-inspired silver short raid a few weeks ago, the COMEX seems to be in a particularly nasty payback mood. Silver hit $30 on the ask on February 22nd and it's been straight down since, dropping to the low $26 range and briefly with a $25 handle overnight ($25.81). It wouldn't surprise me one bit to see silver on the COMEX at $23 or even lower. There's quite a bit of support in the $22-24 range, but even at today's price - if one were actually able to buy silver at spot or even spot +10% - it's a solid buy.
I'd buy it now and buy more in coming weeks and months. The COMEX has silver rigged to the gills along with gold. They will go higher some day, when the Fed is trashed and the US dollar is absolutely worthless. We're close and getting closer, but that day is not today, and it’s probably not for some months if not years from now.
So, OK, it's getting closer to 9:30 am, before which I intend to publish, so I'm going to move along, but first, note that initial unemployment claims hit 745,000 this morning, just announced at 8:30 am by the Labor Department. While on that subject, I think it's an easy call to say that unemployment is going to stay above five percent for a long time. There's no reason to work if you're collecting unemployment checks, and the politicians are making sure those still at home in their underwear most of the day are well supplied with cash.
Bitcoin: It's going higher. At a trajectory that will be lower than the one from November, 2020 to February, 2021, Bitcoin will next rise to $70,000, before heading to $150,000 by September. If it does that, it's likely to double before the end of the year. So, on January 1, 2022, we all may be Bitcoin millionaires, with the price of one Bitcoin at $300,000 or higher. I'll be doing more on the logical limits to the price of bitcoin in future posts. (Hint: it's still very cheap. Buy some).
On the matter of Bitcoin. If you know anything about it and you hopefully have some in your possession, ask your friends the following two questions: Do you have a PayPal account? The answer is likely to be yes. Then, ask, "do you own any Bitcoin?" Wait for the answer, and it it is no, ask them "Why not?" Fun for the whole family.
Finally, interest rates and real estate: The yield on the 10-year note is going to stay put at around 1.45% to 1.55%. The Fed can't allow it to go much beyond that because it would not only affect stocks, but the mortgage market as well. Look for some volatility, but they'll tamp it down pretty soon. If they don't, my projections on stocks are going to be wrong. A yield of 1.65% on the 10-year would likely lead to a bear market in stocks and would also kill the housing market via rising mortgage rates. These things are inevitable, but just not imminent, in my view. Housing it vastly overpriced, by the way. I would not touch any real estate right now. It's all too expensive and due for a reversal on the scale of that which was seen in 2008-09. That will come later in the year or in 2022. There are too many people not paying on their mortgages or not paying rent for real estate not to crash.
There you have it. I'm long stocks (soon), silver and bitcoin. If I could, I would sell real estate. I'm not a broker and currently have just enough real estate for myself, so I'm holding. I don't do fixed income. See my post titled, "Bonds. No Bonds." for reasons why. Overall, the timing is good to buy hard assets, including gold and silver, crypto, and then prepare to purchase real estate at bargain prices with the gains.
Have a great day and week, and don't miss the video below.
--Fearless Rick (FR)
It doesn't get any better than than this video: George Gammon, the Rebel Capitalist, with the Robin Hood of Wall Street, Gregory Mannarino. Amazing insights from two of the leading investment and finance minds of our time.
At the Close, Wednesday, March 3, 2021:
Dow: 31,270.09, -121.43 (-0.39%)
NASDAQ: 12,997.75, -361.04 (-2.70%)
S&P 500: 3,819.72, -50.57 (-1.31%)
NYSE: 15,199.19, -77.83 (-0.51%)
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