A Cancelled Christmas

Going into this holiday season, I was concerned that COVID infections would rise, especially after Thanksgiving.  Unfortunately, the infection rate is way worse than I expected.  There is some evidence that Omicron is less deadly than other strains.  However the exact figure of less deadly is not known, is it 10%, 50%, 75% less deadly?  While 10% is good news, I am not confident enough to go back to normal.

The infection rate of Omicron is 400% (r0 = 10, 1 infects 10 people) more infectious than the original COVID strain (r0=2.5), so even if less deadly the number of cases at the same time should wipe out the benefit "per day of deaths".  Its hard to appreciate the exponential growth impact.  But graphs can show the effect of exponential growth, for example the graph in NJ below shows the rate of infection occurring:

12/23/2021

Notice the STEEP rise on the right, and how materially higher infection rate is growing RIGHT as we hit a cherished holiday.  Next week will be an epic pandemic infection rate like never seen before in human history.    Lets take an even CLOSER look.

December 13th there was 3,279 new cases reported, 10 days later we are reporting 11,906 cases.  After the holidays what is your estimated number of new cases per day? 24,000? 50,000? If we are to believe r0=10, then we should easily hit 100K new cases a day in NJ alone.

This should be the epic final hurrah of COVID, with the peak hitting in the weeks ahead. Post this event I believe we will finally be rid of COVID as an all consuming concern, it will remain with us forever, but we will finally reach enough resistance to slow the spread in the year ahead.  Further by mid next year we should finally have a drug available to minimize the chance of being hospitalized.

The Challenge - Passing through the Eye of the storm

But right now, the challenge is what will be the effect on personal health if you get COVID when the hospitals are completely over-run?  Will patient care result in better or worse outcomes than we been observing the last few weeks?   In my opinion with hospitals over-run, we will run out of ventilators, drug shortages, and worse yet, tight on nurses/doctors to help the sick.  (Talking to a nurse, she said one hospital in NJ, all their ventilators are taken by vaccinated people.)

This is my primary concern, to get COVID and the wrong time, and not get the care needed to ensure a positive outcome.

But people aren't dying like before....

Lets assume death is a much lower probability (it lags infection rate by 20-30 days), what else is there to fear?  Long term COVID!  There is yet any reliable date about percentage of people who have long term COVID, and Omicron is no exception.

Love takes Action!

If we can make it to the spring, alive, and in good health, I believe we will be FINALLY can move on with COVID being an all consuming topic.  For my family, that means a cancelled Christmas, and I hope to see you for many Christmases to come.  If visiting people not from your immediate household, I recommend everyone wear genuine masks.  (Prefer N95 provides self protection)

Take care and have a happy holiday season with your immediate family.

Update on Federal Reserve post

 I watched another video that rounded out my thinking about what the federal reserve is doing, it took 3 different youtubers to complete the picture.

If you read that post, please scan it again for updates, I marked it in Italic.

https://websurfinmurf.blogspot.com/2021/12/federal-reserve-market-influence.html

Federal Reserve Market Influence

UPDATED: 12/8/2021 - Refined view in italic

Today I have three great videos that summarizes the effect of Quantitative Easing.

First is from the YouTuber Bond King, what is QE, and what they are doing in the marketplace.

Many think QE is 'money printing', in effect like a banana republic just printing money and injecting it into the economy.  The first question I have, how can the Federal Reserve "give" money it creates out of thin air into the monetary system?   There is no method it can do so currently.  (I suspect it will eventually with a crypto dollar issued by the Fed, but that's years off.)

What it is doing is "swapping assets", specifically swapping out US bonds with Federal Reserve Assets.  The reasoning is to try to suppress interest rates and strengthen the dollar.  Lets take a look at bond rates and dollar valuation since 2009 to see if this is indeed the result.  US Bond Rates are down and dollar is up.  This supports it isn't going Banana republic and printing money like Weimar republic.  (If you believe different, please add in comments the rational and data to support!)

The Video that explains the mechanics of QE is below, interestingly this video says the fed gives an impression to suppress bond rates, but he doesn't say it is actually effective. After this video, below is another that shows the fed doesn't actually suppress bond rates, but gives an illusion it does. 

If the fed is able to suppress bond rates, then market signals cannot be trusted.  Historically the financial system uses bond rates to indicate risk on-risk off in investments.  My personal belief is QE helps stabilize rates by reducing the potential volatility of bond selling, but the actual rates are in fact reflective of what the market is willing to support.   It reduces volatility by putting the asset in control of the Federal reserve, out of the hands of institutions that could someday in the future engage in mass selling of federal bonds.  By becoming the 'buyer of last resort' for federal bonds, they can prevent a meltdown of US bonds, and therefore a collapse of USD valuation in the future.

What this does do is help banks with confidence in lending, and this is a market psychology rather than 'free money'.  Banks can at will create millions if not billions of dollars with no reserves, they are the TRUE creators of money/debt/credit out of 'thin air'  And unless banks lend, there is no money growth.

The video that walks through how QE has NOT rigged the bond market rates.

Net result?  Federal Reserve bank, even if it cant suppress rates, or print money, it presents itself like it can.  It supports the market  Psychology that it is somehow 'rigging the market'.    That helps create debt/credit creation by banks which does in fact inject new money into the system.  But it isn't banana republic money creation, people have collateral against this debt, and banks could liquidate customer assets as required.

But there is another angle, WHAT assets does the Federal Reserve buy?  US Treasuries AND distressed assets.  For the moment we will count US treasuries as reliable, but distressed assets?  These are assets no one wants to buy, unless there is a deep discount.  But the fed buys distressed assets without ANY discount.  Further if these assets lose money or implode? It doesn't matter, the fed can print as much money as it wants to stabilize those assets.   THIS is inflationary!  Because if the federal reserve didn't buy these distressed assets there would be a deflationary price to dump them, and a likely cascade of deflation as it helps kick off a chain reaction of deflation. (margin calls, banks raising more capital to cover losses, etc)  THIS is the leaking of money into the economy, through bad loans having no consequences. And when you remove consequences from actions, you are destroying the strength of capitalism.

To learn more, watch this:

Generally speaking majority of new debt is created by those who have collateral.  Those people tend to have assets like houses, stocks, and yes bonds.  They are the ones who don't take a huge hit on the failed assets, and are able to continue to benefit more of wealth growth.  They can then add to their assets more loans to buy houses, stocks, and even bonds.  The vast majority of money creation by the banks therefore is slanted to make the rich richer without the larger consequences of deflationary events.   Its is ponzi like, as the system depends on growth to sustain asset appreciation of those who already have assets.  Now is there any way to prove this is the result of QE? At the bottom is my final chart, you be the judge.  

As long as the world demands dollars (USD is the world reserve, 'gold standard' holding), I don't know when this dance ends.  I suspect US Treasuries hit on average about zero across 1, 5, 7, 10, 20, and 30 year holdings.  For at that point asset investments may seek a new store of value.  As this unfolds, together we will learn more about a breaking point.

A very large Black Bear ahead

 According to media, year over year black Friday sales are down 28%.

Without free money from the government, it seems like purchasing is down.   Who could have guessed?

To add fuel to the fire, small businesses panicked and over ordered inventory, creating a potential economic disaster ahead.   What if people just don't spend?  What will happen to businesses with merchandise that doesn't move?

I see an epic price deflationary shock ahead, beating Black Friday sale prices as small businesses try to avoid bankruptcy.

To learn more of what small businesses are doing with inventory check out the link below, and economic data showing inventory RISING by a full 1% last quarter as the popular story is exhausting inventories.   The reality is the world shifted consumption patterns, and the just in time production line is in chaos.   Items being scarce is a reflection of we are eating home, buying things at home, causing strain on those items.   Debt is rising at a historic rate.  

Save you $$$, fire sales ahead.

Supply Chain Problems Have Small Retailers Gambling on Hoarding https://nyti.ms/3FZ3T0t

It is the ultimate game of chicken to ride the bull before the bear takes over.

https://websurfinmurf.blogspot.com/2021/11/ultimate-game-of-chicken.html

More BULL ahead!

 The new Covid variant is a great way to get another leg up in the market.  Sound counter intuitive? Look at the results with the last variant.   The threat will give the central banks cover to ease more, and the variant is likely to not be worse than before (for now) so more good news to goose the market.

If you are bullish and have spare capital, you can look for an entry.

How do we know when the bull is dead?

S&P 500 close below 4300

QQQ close below 387

I am most bullish on bitcoin, next stop 85K

I still see a market top between now and Q1 2022, the market could still run into end of year at a new high, or the high is in.  I really don't have any opinion, just in the short term, this will be a buying opportunity with the BULL news cycle.

Good luck!

Ultimate Game of Chicken

 

I have been concerned about this moment since 2009, when I realized the Federal Reserve and the government would not hold to capitalism and tip the scales to accommodation.    Back in 2007 the Federal Reserve owned about 850 billion in assets, now its 8.5 Trillion.  Talk about accommodation!  In the last 8 months the US government ran through 8 Trillion dollars, mind you this money was all approved under Trump.  The Biden administration has yet to pass any spending, and I have to imagine they will try to beat previous administration in deficit spending.

But can they?  We have seen the consequences of free money at the wrong time.  The actions of world governments during a pandemic has disrupted the just in time production.   Between US fracking going bankrupt in 2020, crippling US oil production and China decided to punish Australia by stop buying coal, kicking off a ripple effect of a fuel shortage across the globe.

Energy prices are soaring, and in the US natural gas prices are soaring due to rising natural gas prices jumping 30% (so far!).  Higher energy means higher costs on food, good, and services, at a time that US consumer debt has shot up the quickest in history after free money checks ended.

At this point, there is no way to stabilize the system, the participants just want an excuse to blame 'someone else' for the largest debt collapse in history.   China is fighting for the pole position as the largest real estate ponzi scheme in history collapses.

Oddly, their troubles are causing a shortage of US dollars, and the only way to fix that is to pass very large debt spending bills in the US, and the Republicans are fighting it.  With a US dollar shortage it threatens to create a dollar rising triggering a cascade of company failures to repay debt in US dollars back across the world.

Interest rates are near all time lows, with 30 year rates below 2%!  When this thing blows, we may see a collapse that makes 2008 look like an opening act.  The trouble is what to put your assets in?  Pure cash is best unless the Federal Reserve, in a panic, makes a policy error trying to staff off this collapse spooking the world on the dollar as a reserve.  

For me, I may dump a portion of my bitcoin between 80-85k, and sit in cash or look for scaling in, yet again, short positions.  That didn't work out so well for me the last time I tried that, I was of course a bit early.  And that's the trouble, we can see the market go 100% higher from here, some sort of epic crack up boom like the world has never seen.  Then something happens and its crack down like the world has never seen.

For me, my core will remain Bitcoin. Some physical gold is good too.  Good luck with riding the market up, and down, just let me know what floor is best to get off. I cannot tell until everyone sees it.

To truly understand how distorted US assets are read this post.   IMO The stock market will crack 50-75% lower and the US may have a 5-15 year depression.  The only exception of that can be if a new, even more massive intervention occurs.  I believe that will be AFTER the collapse giving the excuse for the Federal Reserve and world banks issuing their own crypto currency.  With it, they can control you money with every move, and even expire it, the final attempt at ultimate central control to 'fix things'.

WARNING: If US federal bonds gain meaningful momentum for rising rates, its game over for the dollar.  As people dump their US bonds for dollars, we will see a tsunami of dollars unleashed and a rapid rise in borrowing costs causing the entire system to unwind.  I think this is VERY LOW probability of happening in the next 5 years.  But it does highlight how the FED cannot meaningful raise rates as it could trigger the end of their reign.

For now, party like its 1929, for we are in the middle of the fourth turning, enjoy it before the long winter sets in.

Macro and Chart Videos

I share these select videos to help you understand what shapes my view, I welcome you sharing a video that refines these views or counters them, enjoy!

We are in the Fourth Turning, this video explains it.  World history and how every ~60 years the entire economic model hits  a crisis period that lasts about 20 years.  Our crisis period is 2008 though 2028.  It is my obsession to be 'ready' for the next boom.

This video also lays out how we each fall into how this plays out.  I am part of the Awakening type.
My role is to fix the messes, left by others.  Boy does that ring true!

A very high level video of the power of Defi (which I completely believe in) on how it will help the world.

A good chart analysis comparing our current situation to the 1929 era, and the similar trap the Federal Reserve finds itself in.

A reading of an essay from a global macro analyst, talking about mechanics of global monetary policy.
This one has a focus around China and CNY currency and its future devaluation.

A good video explaining the current valuation of Bitcoin, and the setup towards 100K

A reading about the global financial system and how critical bank loans are to the world economy, and lack of lending will not lead to a growing economy.

The final stock blow off, and lost economic decade ahead

 In my post All Easy Buttons pressed, the top is near, I believe the USA is near a stock market top.  The timing is impossible to spot the exact top, I think it will be January.   But the top is relative to actions taken, so its impossible to target the exact level or date.

What I can say with complete certainty the stock market got here due to government and Federal Reserve Bank intervention in an attempt to 'avoid pain'.   In a capitalistic market, you WANT pain, for pain helps the market regulate investment.  For example, if oil companies have profit challenges and price problems, it could accelerate investment in alternative energy.  However it is very unpopular to allow capitalism yield higher cost energy.  So the can is kicked by any way possible.  Now take this action and apply it to the entire US economy.

Does anyone believe the US economy is at the healthiest it has ever been in US history?  Not only that, that the years ahead will yield much better economic results?  If so, then the stock prices are well deserved.

In my opinion the free money bonanza that accelerated under President Trump, doubled down with the pandemic.  The year 2021 spending was approved by Trump and Republicans.  The 2022 spending will require Republican approval, but will block free money with a Democratic president.   

The inflation we are experiencing in my opinion is a result of economic shock combined with Just in Time manufacturing, and innovation over the last twenty years.  This will force the Federal Reserve to make a policy mistake, triggering the market decline, just like 1929.  To learn more, watch this video here.

We have conditioned the US economy that the public and companies are NOT the engine of the economy, but the government and Federal Reserve is.  So with the next decline the entire country will ask for more quick fixes, the next round should really crush the US economic dream.  

The intervention will 'require'...(click for video that explains these items)

Lower interest rates (real rates may even go negative!)
MORE free money by aligning the Federal Reserve bank and US treasury resulting in corporate and direct to people (universal Basic Income)
Expand and accelerate federal reserve buying private assets including banks!
Try to fix things with higher taxes on the top 0.01%, but eventually top 5%...
Issue price controls as the problems are blamed on the 'greedy corporations'.

This will result in massive shocks to the US economy, that I don't think will yield good results. 
Peoples investments must be defensive for an ever increasing stock market may not be in the USA future in the decade ahead.  The cracks are many, from China's energy shocks, the largest ponzi scheme in history blowing up in China real estate,  price shocks in natural resources,   Amazon and Apple issuing earnings warnings in the year ahead, and threats to extended US supply crisis.
I am working to create the right mix of investments for me, and I will share my view when I am ready.  For now, that's why I am in Bitcoin, India ETF's, and revenue stream ETFs.

All easy buttons pressed, the top is near

I fully believe a generational market top will be between Sept 2nd through January 2022.  With a 13 year bull run, it is immaterial which month the ultimate top is in.  The only reason I am not stating the top is in is first, I cannot know, but second the fear indicator is high, this leaves room for a rally to resume.

Feel free to click on links when provided to learn more.

Inflation or Inflation?

Consumer cost inflation is very high, and likely to continue.  Cheap goods come from China, and they are in an energy crisis.  That means ALL goods from China will have costs go up and export higher costs to the world.  Pair that with transportation skyrocket costs and local production disruptions, everything is destined to go up.    I actually do think some of it is transitory, but most things will never return to 2019 pricing.  Higher prices will cause economic negative impact to profits and growth.

People are demanding higher wages for SOME jobs, and other jobs will see pressure for higher wages to adjust for cost of living.  This will force some jobs to be outsourced or reduce company hiring.

Asset inflation of houses and stock market will be under pressure as people have less money to put into these assets.

China exporting inflation, then deflation.

China is the second largest economy in the world, and their entire country is pinned on the most epic ponzi scheme the world has ever seen, real estate.   Evergrande is the tip of a huge iceberg as we see a domino effect of failures.  The west in pursuit of returns has invested in China's real estate ponzi schemes, and China deflationary collapse will hit world.  Pair these woes with China having rolling power outages and an exodus of foreign companies causing millions to lose their jobs, China is facing one heck of a deflationary collapse.  

Oil, coal, and natural gas.

Fossil fuels are rising in price worldwide.  Europe is facing a crisis on not having enough natural gas to make it through the winter.   While some like to blame 'green power' for this, there is also many countries forcing higher prices for their gains.  Russia is using their natural gas supply as a weapon to Europe, and OPEC is taking advantage of the lower gas production from the USA due to the collapse of fraking.  Further coal China shortages is forcing coal prices outside of China higher as China is ordered to secure fuel "at any price".

USA - All Easy buttons pressed

The US has pressed all the easy buttons to goose the economy since 2008.  Low interest rates, trillions of free money, under Trump very low corporate tax and low tax to 'pull US money' from overseas.  As a result, there is very little easy buttons to press to goose more out of the economy.  Does anyone really think if we enter a recession, lowing 30 year borrowing rates from 3% to 1% will spur material growth?

US dollar IS the global reserve currency

The global reserve currency status is very much mis-understood.  If the US cut back issuing new dollars, it will have the effect of every other currency experiencing a rising dollar value.  This will force other countries to also reduce their spending to keep their currency in a 'trading range' those countries find acceptable for pricing in the global economy.  In effect, when the US cuts new dollars, so goes the world.  If the US increases dollar creation, others are more able to increase their currency creation due to currency pricing compared to dollar valuation.  Countries that fail to curtail a rising dollar, will pay a huge economic price as debt priced in dollars will crush companies in that country.

So if America cuts spending due to fears of debt creation, the world will also cut spending, this means a global slowdown.

US Stock markets are at extreme historically high prices

US stocks are priced for perfection for the years ahead, any realization of missing perfection jeopardizes stock valuations.   Using stock market data between 1928 and 2021, stock are priced for -6% returns over the decade ahead.  

The only way to kick the can, more - Free Money & demand pulled forward.

January 2021 I wrote "So we have a Democratic leadership, free money for everyone.  As long as ... Free money to the people will flow, heavily, to gambling, ala Gamestop style or the market in general.  It will also flow heavily to Bitcoin."

My concern is the free money train is finally going to be over, and there will be a multi-year hangover to deal with.  We have heard the hard line Republicans are taking over debt, and the Democrats I don't think have the will to blow past their objections.  So we are repeating my concerns on January 2021 "I expect Republicans to enforce fiscal discipline much more than they did with in 2016-2020 during 'good times'.  With a crippled economy they will double down the pain in hopes of winning elections."

With free money ending, the fake demand ends, and the poverty stricken America hangover can resume.

If I get this wrong, as I did in January 2021, approval of a  large enough free money bonanza could kick the market out for continuing highs until the free money isn't large enough to sustain the new day traders of 2020.

Conclusion

We are very close to a multi-year high, potentially 5+ years, with a 50% market cut (potentially 80%, but I doubt it)   However monetary action does matter.  if the US resumes free money for everyone the market high is likely quite a bit out.  China stops the worlds largest ponzi scheme from collapsing and resumes inflating the bubble, or OPEC and RUSSIA provide maximum energy output my view would change.

Barring these actions, it is not a great time to buy for a 20% gain, but instead good to take some risk off.

Risk off can be US bonds or diversifying into growth countries like India. Alternately take a chance on a deflationary asset like Bitcoin which may do very well in a deflationary collapse.  Good luck!

What is next?

As you know by now China is having potentially a cascading failure in their property market.  China has many cities the size of New York City without people living there.  It is quite the epic Ponzi scheme.  Evergrande has been selling houses "it will make in a few years", pulling in cash now and essentially creating the worlds largest Ponzi scheme.  US investors unfortunately put money into China, including Ever Grande.  UBS is the number two foreign bond holder of Evergrande.

If China doesn't simply give Evergrande 300 Billion, and the other companies right behind it money, then the financial bomb will go off.  It may be China's plan for this to play out this way, as a way to weaken the west.  So I am not so sure if they will stop it.

And lastly, even *IF* they do a stick save, I assume we have seen the switch flipped from risk on to risk off.  So any counter rally maybe the last time to get out of longs for potentially a decade.

The US economy is not nearly as strong as before January 2020, yet the market is much higher.  The US has replaced this economic downside with free money.  The USA has debt ceiling limit in October-November that must be raised, otherwise for the first time in US history America will default on its debt.

If one Democrat votes against raising the debt ceiling, and not a single Republican votes to raise it, the US will default.  A default on the world reserve currency will be also a first.   Technically AAA assets, a US bond becomes a much lower quality.  If banks around the world reflects this reality it would be a cascading disaster.

But fear not! I am confident the world banks will treat US treasuries that are in default, as not in default.  

Between now and January, I am inclined to think the top is in, and USA will see at minimum a 5 year deflationary backwind.  However, if USA can get Republicans to back free money for everyone, then it will halt the deflationary forces.

If Bitcoin can get as low as $20k a coin, it will be the buy of a lifetime, I will put material assets into it.  Bitcoin may not break $30K, and become the new 'safety play'.   I can't say what the bottom is, but it changes nothing with my view $100K to 1M a coin ahead.

Gold I assume will get routed, as China is a big gold holder, and there will be forced selling.  I also have a hard time seeing gold ever recovering to the point its attractive, as Bitcoin is the new alternate play.  With that said, if Gold one day is 'insanely cheap', its a good way to diversify.

I am in bonds, but I will dump without notice.   For its a race between deflation and eventual US potentially defaulting. Cash is king right now.

A decent "short" ETF is DOG & SRTY, and long bonds is TLT.

Good luck!

Why Bitcoin is best positioned for storing future value

I am asked frequently how certain I am that bitcoin will hit 100K, 500K, 1 Million or more a coin.
In my opinion, over next 10 years, 100k is 99.99% certain, 500K is 80% certain, and 1 million is 60% certain.
Those are really good odds! 

But that's with current information, taking into consideration that technology changes.  If there is no new 'technological bitcoin' to emerge, then my certainty goes to 99.99% for 1 million a coin.

Below is a video that I found did a great job of exploring the forces that is bringing all of this to reality.  It isn't since 2008, but really since 250 years ago.  I highly encourage watching.

COVID and vaccinating

 I wrote early about the coming pandemic.   Fast forward a vaccine created in record time with incredible 95% efficacy.  5 months after being more widely available, we do not have enough people who took it.   I am a skeptic, and did my own reading for real statistics on the vaccine.   I am concerned about it being a new vaccine technology.   However here are the facts I weighed.

I am over 50, overweight, and near zero exercise.  We know statically I am in higher risk for death or long term consequences.   Those who smoke, or have other pre existing conditions have equal or more risk.   People who are athletes and under 25 can still die or have long term consequences. 

These are undisputed facts.  Even if you can calculate your risk of death or long haul COVID to be 1 in a 100, would you take that chance with a gun with 99 empty chambers and 1 bullet?   If you would, then accept your consequences.

For me the math with current knowledge is it’s lower risk for taking the vaccine.   

I read something interesting today about those who don’t want to take something experimental.   If you get COVID requiring hospital treatment, the hospital will give you experimental treatments.   So if you are against a new vaccine, and go to the hospital, you should also be against any experimental treatment.   Denying such treatment will dramatically increase chances of death.    So if you choose to not vaccinate, be sure to understand your commitment and consequences, and stick to your convictions.

I read an article from a doctor that struck me, triggering my desire to write this post.  If you are not vaccinated, consider reading.

“Well,” I said, “I can pretty much guarantee we would have never met had you gotten vaccinated because you would have never been hospitalized. All of our COVID units are full and every single patient in them is unvaccinated. Numbers don’t lie. The vaccines work.”

This was a common excuse people gave for not getting vaccinated, fearing the vaccine because the Food and Drug Administration had only granted it emergency-use authorization so far, not permanent approval. Yet the treatments he had turned to, antibiotics, monoclonal antibodies and hydroxychloroquine were considered experimental, with mixed evidence to support their use.

The only proven lifesaver we’ve had in this pandemic is a vaccine that many people don’t want.

Fir

Educate yourself on trading stocks, bonds, and crypto

I try to watch a wide variety of people who have a methodical approach to the market across a broad spectrum of methodologies daily.  I have my own opinions but calling a top is pretty foolish at this point.  Instead I am watching the analysts daily to help me understand when changes in investments are appropriate.

Each of these YouTubers have their own methodology, and I watch them all to get a cross-view of the market.  Rarely do they all agree.

The Bond King - Steven Van Metre  has done an EXCELLENT job educating me on US Bond investments and why.  He expects US bonds to go 'negative' in trading terms, will sell, and invest back into stocks.  His view applies to 6 month to 4 year horizon, a medium to long term trader.

MyStagicForecast - David Frost , his view is pure technical trader, its really only valuable for day traders, week, and a feeling for month.  His vision past the 2-4 week mark is near zero.   An active trader for decades he knows stock technicals.  If/when market cracks he would be very good to see when to get back in.  A short term trader.

AskSlim - Steve Miller,  Steve provides cycle trading, not pure technicals.  Its a pretty arcane way to view the market, but when he shows his odd cycle charts, I have to admit, it does seem to line up to market moves.  A medium to long term trader with views  1-3 month, 3-6 month, 6-12 month, and over years. He explains this arcane way in this video.

Heresy Financial - Joe Brown, by far the youngest of the group,  he provides a 18-30 year old perspective on the markets including bitcoin.  He does quite a bit of opinion pieces and is less methodical.  I do find his videos entertaining and educational.

J Bravo - By far the most entertaining, great to play a video game to is Johnny Bravo.  He does light technicals, and does mix news with his views.  He can be a bit over the top, which makes for good entertainment!   He aligns somewhat to The Bond King on macro view, but not on investment strategies.  He is in a long time bitcoiner!

George Gammon - He does a great job of breaking everything down to "3 easy steps!" lol!  He does NOT do stock predictions at all, but more on macro operations of Bitcoin, world banks, US Federal Reserve items (like the new Reverse Repo operation), and conspiracy 'light' videos.  I find 1/3 of what he published required watching, 1/3 questionable, and 1/3 probably too out there for me.  But he is entertaining.  A good conspiracy video is on the IMF, Bitcoin, Gold.

Real Vision Finance - Open a beer, get a snack, and get read for some in depth chats on macro crypto, currency, banking, and gold.   You need to cherry pick the information you consume, there is just too much on this channel.  I have watched some people who are extremely well versed in world markets guest on this channel, I highly recommend swinging by on occasion. A great starter video is Lyn Alden's Macro Masterclass

Lyn Alden - Lyn Alden is often a guest speaker on podcasts, but her views I find make great macro sense.  The best video to start is here, but its good to catch a few chats when you can.

Game of Trades - The reason I watch this youtuber is when he does technical analysis on bitcoin.  He also does stocks but people above are better.

Harry Boxer - Chart of the day - This guy is ONLY for day traders, you would need to pay to get real value.  But good to watch to learn the power of technical day-trading.  I rarely watch his videos as I have a full time job and really prefer medium to long term investing.

Well I hope one or more of these youtubers helps you!

Market direction

 The stock market indexes are strong, we could be building for a new leg higher or a top.  The trend is your friend until it dumps you.   I have been long bonds, but I lightened up a little on Monday.  I think bonds go much higher, so I kept a core position.  However, there have been some great gains since March and I didn't want to give it all back.

TLT went from a low of ~133 to a high of ~150, thats an ~12.5% rise in a few months.  

TMF went from ~22 to ~31, a 40% gain in about 5 months.

Obviously if the market tops right now, selling will miss the big move up in bonds.  But if the market makes one more epic push higher, TMF will likely move down materially.

Its a risk.

Until congress signs an extension to the federal budget debt ceiling, no new US bonds are being issued.  Therefore bond interest rates WILL move lower, and therefore bond value higher.  To learn more about how this works, read my post How bonds give bigger returns (or losses) than you expect.

I expect a return to the yellow line.  Good luck!

How Bonds give bigger returns (or losses) than you expect

 I posted on March 3rd, I am buying bonds!  I am 52 years old, and been an active trader (on and off) since 2006.  Until recently, I didn't see the upside value to bonds.

People hear that a 30 year bond yield is 2.4%, and say, that's a terrible deal to lock up all that cash for 30 years.

The trick is, you don't have to hold bonds for 30 years, you can sell them at any time, just like a stock.  This matters as the value of a bond can materially increase or decrease based on current interest rates.

Let me give you an example I bought $31,595  at a rate is ~2.4 % for a 30 year payoff. Terrible right? Such a terrible deal! Lets look closer!

So assuming I never sold, my total net paid back would be $64,632.23 in 30 years.

On 7/19/2021, the going rate for 30 year bonds was 1.81%  If you purchased $31,595 worth for 30 years, you would get $54,247.48 , that is a $10,384.75  difference!

So lets take a look at what happened to my bonds.

Above is the stands on my purchase, below is the current 'market value'

Up 18.5% from March 3rd to July 19th, a gain of 18% in 5 months, not bad!

So why did the value change?  Well since new bonds go at 1.81%, and what I purchased had a yield around 2.4%, My higher rate yields a premium to buy my bonds.  If I was to sell the bonds at $32,000, since I have held them only 5 months out of 30 years, you are getting a great deal! As going to buy from the government pays only 1.81% vs what I have at 2.4%

When you buy bonds the value of the bond today either yields a premium price or a discount based on current rates.

Lets say I sold this to you for $37,463.40, and you held it for 30 years at a rate 1.81%,  you would get $64,323.31.   That is Pretty darn close to what I would get after 30 years quoted above, $64,632.23 in 30 years.  its only off by 300 bucks!   The difference has to do with 'spreads' when buying bonds on the open market, you don't get the exact price that its worth.

So there ya go, I can sell these bonds, pocket 18% interest in 5 months and go buy stocks if I want.  Or I can hold for 30 year to go to 1%, which I think it may.  What will this be worth? It depends on when.  if rates hit 1% 29 years from now, the value won't change.  if its tomorrow, then the value will be up an additional $6,000, for a total of up $11K on a $31K investment, up 34%.

As you can see, when the stock market is topping, and we have a 'risk off' event, if you are in bonds early enough, you can get material gains when everyone else is down materially in investments.  At that point you can sell your bonds and buy stocks (or crypto) at a huge discount.

An alternate to buying bonds is buying TLT, and ETF that mirrors most of the valuations I showed here.
TLT is based on 20 year treasury, not 30 year, so the 'compound valuation' isn't as long as buying a direct 30 year bond.   I think TLT will hit a new high in the next year, at the same time the stock market will lose 10%-40% of value.  

In March the low was 134, its now at 150, and the high is 170.   From low to high will be a 26% gain.  From here a 13% gain.

Lastly, if your are a crazy gambler, TMF is a leveraged ETF based on bond yields.  In march it was $21.83, Monday it was up to $31, basically a 50% gain.  Since its leveraged, it will lose some value over time due to the multiplier costs.  So its a bit better for a trade of 1-3 months than years.

Good luck, I hope you now understand that Bonds are not as boring as you thought, there is risk of up or downside based on interest rates.

Market action 7-19-2021

The Russell 2000 has broken the uptrend in place since March of 2020.

If it breaks below 2034 on a closing basis, the Russel will have broken out of the trading range in place since January 2021.

The expected low points to buy for a turn around is at 2042, 1834, 1666, 1498.

My gut says we will get a bounce around 2042-2034, and come close to new highs before failing down to 1834.  But quite a bit depends on Republicans allowing free money to flow to the people with the debt ceiling deadline of July 2021 and various spending bills proposed by the Democrats.

Target is 10% loss in market

 The chartists I follow expect 10% loss here through August, a potential rally thereafter.   

My conclusion  is the same as last week.  We have severe headwinds for continuing free money.  The Republicans will tank raising the debt ceiling, and fight against extending free money.  If all free money ends, I do not believe full employment is possible back to circa January 2020 simply due to all the failed businesses.

Therefore the real economy is worse off than the stock market valuation shows.

The market  last week hit the most extreme distortions on many fronts never seen in the history of the US stock market.   If those indicators predict future returns accurately, we will see negative returns in the market in the decade ahead.

I don't think it will pan out that way, simply because the central banks and US government will step in.   But to step in, we need hard times to justify new powers of meddling in the tatters of capitalism.  Buckle up.  I hope bitcoin hits close to 15K, as I will re-load the boat.   Gold is not good until we get the next leg up in free money at earliest.  

Bonds, cash is king.  If your selling your house, get er done!

The euphoric market

 The market will continue to advance, until it doesn't.  If history repeats, there will be a correction.

Money Creation

First, lets get straight how money gets into the USA economic system. Money is created exclusively by the banking system, not the government.   Banks can create money by creating credit.  How does the government get money? By banks buying US government debt notes, US treasuries.

If money is created by credit, how do banks finance bank notes?   When there is cash in the system (deposits and can be money markets), banks record cash as a liability.   To offset this liability it purchases US treasuries to offset these liabilities.

Therefore the only way more money is created is via banks.  Therefore if the banks slow down in credit creation, there is a slow down in money expansion, and usually money velocity slows.

Is there any bank warning signs?

Revoking Private Credit lines

Well Fargo is revoking all private credit lines.  In a growing economy with a year of boom ahead, this would not make sense at all.  It only makes sense if the bank has concerns over credit lines being repaid.

Bond Rates

In an inflationary environment, bond rates rise, however bond rates are falling.  Why do rates fall? Rates go down when buying debt at a lower rate is a 'good deal'.   If the future outlook is great, then money flows to better returns.  In the Federal Bond market, there is a distortion however, as the US government has not been issuing new debt, but instead spending its 2 trillion dollars created in 2020 through bonds issued then.  

Federal Reserve reverse Repo - up 1 trillion in ~3 months

Even so, there is an appetite for bonds, so much so, that the US federal Reverse Repo market has shifted from 3 billion over night in April 2021 to recently 1 trillion.  See the Fed's graph to appreciate how dramatic this is.

The risk here is if the Fed changes the Reverse Repo arrangement, there will be a dramatic run on US bonds, further driving down rates.

Most money losing companies in US history, coupled with highest market in US history

In 94 years, largest percent of companies losing money annually with an historic high in the stock market.

Projected future market returns

Given current over-valuations, if we use financial history over the last 94 years as a guide, the normal expectation is the US stock market to yield -5% in market value in the 12 years ahead.  If this does come to pass, it is quite logical the market goes materially lower (50% or more?) before we return to new highs.  First here is the distribution chart expectations.

Second, if we use Japan as a guide for trying to use the government and central banks to 'expand the economy' through quantitative easing and accommodative banking, lets look at how their market did. Over 30 years with a lower stock market.

Who is buying all the stocks at this level?

The number of new trading accounts in the past year set records.  Did you know that 'margin' trading has been given to many of these accounts?   It is thought many people who lost their jobs, been handed free money, have 'found' a better job, trading.   Margin can double or triple your earnings....or losses!  None of these trader experienced a market freefall.

To keep Margin rates adjusted for the size of the US economy over time, John Hussman graphed it as a % of GDP, right now US Stock market is 3.5% of the US GDP! Quite impressive and concerning if people are forced to sell due to margin calls.  While this isn't a problem with a market rise, it is fuel for a  market panic if the market takes a hit.

Did you know the stock market hasn't touched the 200 DMA since June 2020?  The market must lose 11% to hit this.  Nice video on this.

Free money to the people

I stated in this blog back on December 2nd, 2020, "If the government decides to resume mailing checks directly to Americans, then all best are off, the stock market will be fine and the economy recovers in record time.  "

And although I doubted Republicans allowing the free money train to continue, I was wrong, it did!  And look at the result, the stock market did quite well.  The question of course is, has the economy recovered?  If you go to NYC or any large US city and walk around its not even close to the way it was in 2019.  Further small businesses have failed in record numbers, with new jobless claims still in the 400K range for any given WEEK!  

I know that the jobless claims are blamed for the free money checks creating a society unwilling to work.  Even if true, do you really believe if the free money train ends, that all the people who are living off of the free money will immediately find a job paying equal to or more than the free money quickly?

If not, no matter how you cut it, our rosy economy depends on free money to make it look good.  If it ends, the reality hits, and if it continues all we are doing is kicking the can.  The market will stop levitating if the free money ends.

What could end the free money train?

There are two areas that weigh on me trying to believe a smoother market heat.

First requires believing that the Democrats requiring Republican votes will lead this nation to a robust economic recovery.  The US debt limit suspension ends July 31st.  Unless 10 Republicans vote to raise the debt limit or continue the debt limit suspension, the US government will start a very quick march to a default.   There is some wiggle room, but if pressed, we could see the first US default in world history.   I don't think Republicans will hold out and force a default.   But I can't rule it out, further I expect they demand ending the free money train to approve the government spending limit suspended or raised.

Second is to have faith that the Federal Reserve board made of 6 voting members can steady the global economic ship into smooth sailing without a mis-step.

If the free money train zooms along, I am not convinced we will see a major market correction.  Once the free money ends, its on the table.  A 10% isn't major, we are talking 33% or more.

What to do?

Pay off debt, diversify, and having 25-50% in cash to weather a potential storm.    

Investing in US bonds/ETF  TLT (US government bonds).  Rates typically plummet in a run from risk to safety.  TLT can easily rise another 20% from here.  A gambling play is TMF, which could double these returns.

For income stream "JEPI" etf promises to seek high dividends by actively managing underlying investments.  I particularly like also diversifying to India, there are many ETF's.  One of the larger ones is INDA.  However I expect INDA and JEPI to devalue with the market, but I have hope they recover much quicker.

Other ways to diversify is Bitcoin/gold, but both of these should see materially lower levels before higher levels. 

Why the Global Monetary system has problems

Financial System - just another industry

People take for granted institutions formed generations ago as something we can rely on well past our generation. The world constantly evolves, and technology has been accelerating this change. We have seen entire industries rise and fall purely on innovating new approaches to old paradigms in the last 20 years at an ever accelerating range of impact. People forget, the financial system is simply another industry, like music. 

They are selling a service, using FIAT currency as a facilitator of business and investment, to make the world a better place. The center of the financial world like it or not is the USA, with the dollar being the world's reserve currency. The short take on what this means is everyone tries to 'peg' their currencies using the value of the USD as the gauge. For example, if China allowed their currency to rise to parity with the USD, their cost and goods to USA would be come MORE expensive than if we made it locally. This is due to shipping, taxes, and other costs with remote delivery of products. 

You could theorize 'so what, China hates the USA, they could just sell to the rest of the world'. But the rest of the world would NOT all allow the USD to devalue relative to their currencies for the same challenges. It becomes a game of chicken, who will allow the dollar to devalue and brace for potential economic disaster for that country in the transition? Is it reasonable to expect the free world to peg their currencies to a dictatorships like China, Russia, or a basket of currencies rules by non-democracies? The wealth of those countries would become at the whim of dictators. 

The Federal Reserve Bank

So here we are, everyone clinging onto a system that was birthed in 1913 created on Jekyll island. There it was decided that all US banks would be subject to an entity called the Federal Reserve Bank, and the US Government cannot issue new currency, but instead must issue a request for debt bonds and the Federal Reserve Bank creates these debt instruments. The US government gets the proceeds from these debt bond sales. Therefore we live in a democracy, that cannot create new money, but instead must subjugate to the US banking system for the mechanism to get debt based funding. 

I have zero problem with the system historically, well at least through 1987, then Allan Greenspan took office. A model of appeasement took shape and here we are, the natural evolution of appeasement. The issue at the heart of the system is the Federal Reserve Bank with 7 voting members that decides the Federal Reserves policies and actions. None of these people have lived through a currency failure or are experts in every aspect of the global economy effects of Federal Reserve actions. Further the measurements of the economy are using large grain indicators such as "money velocity, money support, debt to income ratio, inflation (take your pick on the definition), deflation, employment, interest rates, and other measurements. 

Federal Reserve intervention

Simply put the world is much more complex of the effects of US fiscal policy with the world attached through global reserve status, than any 7 people can truly understand. The result is, seven people trying to do their best to set a tone, to stabilize the system when something looks out of whack, and to innovate on what else they can do with their limited toolset. I say limited toolset for they can't tell the government what to spend money on, or influence changing world culture, or to understand how dissolving the fed and 'hoping' a decentralized model will work out well. All of these items are out of their control or responsibility. So they push it along. Each bubble, and pop has been a result of the Federal Reserve policies that I assume are with best intentions that eventually yield unintended consequences.

Looking ahead the numbers, the magnitude the Fed must take, and the reduced effect each action has on the system is accelerating.   Back in 2008, the Fed created 700 Billion for the financial system to loan out to save it, and the Fed assets on the balance sheet was ~800 billion, (before the 700B created), now the total is 8 trillion dollars!  Please keep in mind the story is in January 2020 the US economy was strongest ever at a debt rate of 1 trillion a year and a Federal Reserve assets at 4 trillion!

Using the past experience to gauge the future can improve accuracy, but new events can change the outlook.  Historically when economic measurements hit extreme levels, such extreme levels will force a reaction back to the 'mean'.  This will happen to the consequence of the extreme values, for example the US stock market valuation.   Think of it this way, if the US stock market appreciated each year, every year at 10-30% per year for the next decade, would there be any negative consequences?  If so could the negative consequences be the catalyst for stopping the market advance?

Whatever the next catalyst, the Federal Reserve will react, and try to stabilize.  They may succeed until a new challenge emerges in a 'whack a mole' game of stop the system from popping.  Then, once there is a pop, the Fed switches mode from stopping the pop to minimizing the damage.  

The Problem

The question is, why didn't the federal reserve takes these types of extreme actions before 2007, what changed?   On August 5th, 1971 the US government switched from a gold backed currency to a Fiat currency.  Before that day, you could exchange USD for gold backed by the US Government.  I actually support this move, for gold is not money, but it has proven an effective way to be the 'reserve' across all countries for 1,000's of years.  When a fiat currency fails, it historically provided a vehicle of retaining wealth and kept countries from abusing printing too much fiat currency.

But I DON'T view this event as THE problem.  In 1971 US GDP 1.1 Trillion, this was more then the Eurozone, China, and India combined.  As a percent of world GDP, the US was a little under 35%, in 2018 it was 24%.  I do think there is distortions here as the US get a bit of a boost as a world reserve currency in its valuation in the world GDP, compared to 1971 when there was a 'neutral' value of gold underpinning these valuations across countries.

So as the world becomes a greater contributor to GDP, and America GDP is reduced compared to the world, this is the reasons why we see the issues being magnified.  The creation of new wealth right now is tied to the USD as the world currency, FORCING the US government and the Federal reserve to issue more and more debt to keep the world financial system growing.

When the US had a solid 35% (no valuation games) of world GDP, the US creating more currency in the world system was not a distortion, but a reflection of reality.   So if the US decided to become rigidly fiscally responsible, the world financial system dance would stop.  It maybe a better world on the other side, but the transition would be very, very painful.

End Game

As I see it, we have 3 options in our future, or some combination of them.

The Good

One end game is the system keeps evolving and the distortions are reduced, and we gain back equilibrium.  The USD may be allowed to float around more than it does today, and the US can become one of the countries in the world rather than a peg everyone else jockeys to measure their currency against the USD.

The Bad

The US currency system is forced into a new 'innovation war' pitting the US against challengers like China for the future of the financial system.  China may promote their currency using their ever increasing gold holdings to show how you can trust a dictatorship that has gold backing their currency.  The US will be forced into greater risk taking in a model that has stood for 100+ years, my expectation is they will issue Federal Reserve Crypto and transition to using a more centrally controlled crypto currency.  The idea will be to nudge towards decentralization of wealth movement (transactions) while keeping a central control for new crypto coin creation.  I believe this model will in essence model the Eurozone, when no one country is free to issue new currency.

The crypto part will enable the system to reduce financial system operating costs and to allow new ways of injecting currency into the system.  One possible outcome is the Federal Reserve issuing new dollars to individuals, with restrictions on how quickly it can be (or must be) spent and on what.

To get here however, we need another disaster, so the Federal Reserve can use the crisis to advance new innovation into the system.

The Ugly

Buy your gold bars, bitcoin, buy some guns, and buy property outside the US!  For the system can't adapt, public trust evaporates, and we go into a chaos mode.  The government, not the fed, will mandate innovation upon it's citizens.  These maybe good, or a series of failed attempts.  Having wealth invested in other countries, gold, or things like bitcoin will be a cushion for those holding wealth outside the US ecosystem.

Synopsis

My bet is on option "The Bad" above. I believe in more extremes in our future, with a more chaotic route to get back to stability.  If you think "The good" is in our future, simply continue to invest into the system and you will be rewarded just as everyone has since 2008.  If you think "The Bad" is viable, you can invest in the system but be nimble.  Invest in some alternatives such as bitcoin/gold.  I think the crisis is needed for real change, hence why I am in bonds.  Bonds have potential to rise 30% or more in a crisis, and then convert the cash there to investments.

There is quite a bit to digest.  I will do a post on the current crack being shown in reverse repos spiking very quickly this past week to all time highs!  Throw on many assets bubbling to extremes, I continue to believe another crisis is brewing, the key is to maintain wealth and deploy in the next bottom.

The money velocity issue

 This does a GREAT job of explaining money velocity issue.  The trillions locked up on the banking system is not OVERALL inflationary, it is inflationary in purchasing assets. (Real estate, stocks, etc).

Hence why any sustained inflation I think is in the future, not in 2021 and not until 2023 at the EARLIEST.  We are in, and will continue to fight, the great depression 2, most don't realize we are in it.

One Chart every trader should watch

 Recently I watched a trader's Youtube video, and he showed what I considered a very interesting chart.

The overall stock market, in my opinion is disproportionally valued compared to what value American Companies provide the world.    For example, in 2000 .com crash, I do believe America was ahead on automation and providing explosive leading value to the world, yet the market valuations of today in the S&P 500 tower over the market value then.

You can say inflation, but inflation in government terms does not cover assets like stocks or houses, but instead living expenses.  So using inflation adjusted dollars the market is still much higher.

The question is, how can we adjust for the Federal Reserves meddling with US currency?   The youtuber showed me simply take the Stock index and divide it by M2, the total money supply.

Below is two comparison charts, the S&P 500, and S&P 500 / M2, then NASDAQ and NASDAQ/ M2.

I found this quite interesting to show the stock market valuation in terms of the money supply as a better representation vs USD adjusted for interest.

Once again, a deflationary coin like Bitcoin I think in the decade ahead will fair well, as long as the central banks keep the parabolic increase in M2.

As for market, I think we will have a pullback to below SPX 4000, then a counter rally, then into the July-September a material decline.  This will depend on if the Dems can give out free money or not directly to people.  My assumption is they can't, and the decline will come.

S&P 500

S&P 500 / M2
NOTE: If the quantity of money is used to adjust the S&P 500, it is at 2007 highs.

NASDAQ

NASDAQ/M2

This chart I do think illustrates how tech companies did better in the pandemic with more rapid adoption of technologies.

M2 Money supply

Market Bull is ALMOST back

 Since January 25th I got cold feet in the market, since then the stock market has been trading in a range, but recently the NASDAQ hit new highs.

Taking a look, at how things stand.

Nasdaq - the star of the week, new highs!  Not by alot, but it finally has!
S&P 500 - Has been making new highs for a while.
DOW - new highs!
Russell 2000 - The party pooper, not making new highs, its the only major indicator that needs to hit new highs to get a unified bull market.

XLF - Financial sector - new highs!
XLU - Utilities - New Highs!
XLI - Industrial - New Highs!

On old player - Gold miners - GDX - Breaking up!  I turned bearish around the GDX low of 31.  Ironically, I called a GDX low back in August 2020 would go down to as low as 30.  China has announced they are a buyer of Gold.  This puts me at odds with gold, the anti-democracies such as China are going to try to undermine the Dollar power with Gold.

Bitcoin hit new highs, but over the weekend the US is starting to take a harder position on Bitcoin.  Perhaps this will help gold.

The USD hit a recent low in January, but hit a local high on March 30th.   The S&P 500 bottomed around March 25th and started to rebound.  So if the USD starts to go up, I get concerned on the market may be sensitive to this.

US Bonds have been seeing interest rates go lower, TLT and other bonds have been rallying.  I do think this is being caused by a 'trick' that the FED and the Federal government started in 2020.  In 2020, the government issues 1.9 trillion of bonds, and put the cash into a 'savings' account.  The government has announced they are going to start using that cash and NOT issue as many bonds.  This will create a bond shortage, forcing a bond shortage, forcing rates down.  So I think we will see rates continue to go down.  I suspect this will keep the dollar from falling AND prevent rates from Rising.

If above is correct, we are likely entering into a final, epic, blow off top in the market.  With interest rates going lower, free money from government programs, bitcoin (until recently) hitting new highs, rates going lower, gold strengthening, the dollar steady, we are going to see a stronger market.

So what's the catch? I can only see three to watch.

1) The dollar strength.  If the dollar gets stronger (not a range), too much strength may cause the market to trade sideways or lower. (not a crash).   

2) Leverage hitting a top.  As I quoted on January 25th "I am tapping out", leverage is higher than ever before, but can it can keep going higher.  We saw a crack in the system with ONE hedge fund failure with too much credit caused over 20 billion in losses. Stocks involved lost half their value.

3) An existential event.  We had one last year, a pandemic, next we could have an international crisis involving China or some other event.   Such an event could have a market panic kicked off.

I am having a very difficult time going hard-core long the market, but I will continue to hold bonds, some crypto, diversify to India, JEPI (7% dividend)

For lottery ticket plays:

HVBTF (3.5), its RIOT but with material earnings before Bitcoin exploded, so I think they may have a massive surprise to the upside. 

COIN - I am not a big buyer, but I do have hope it will go up much more before a top.
JEPI - an ETF that pays  a target of 7% dividend.  It just keeps getting a higher value, a rock solid ETF.

Good luck!

Leverage - It works in both directions

As you likely heard, hedge fund Archegos could not maintain margin requirements.  The result is their creditors, primarily Credit Suisse and Nomura are expected to lose billions.  The market is still in an epic bull run and stocks are near an all-time high, so what could have possibly forced the banks to do a margin call?   

I suspect the pending expiration of the SLR rule forced banks to return to expected margin requirements for their loans.  This would have forced the banks to request Archegos to become stricter with margin requirements.    The question I have for you is, how many highly leveraged positions if unwound would cut stocks by 50% like Archegos did?  Are there any other positions out there that will have new margin requirements by its lenders after this event or with the SLR rule expiring on the 31st?

This is NOT a moment like 2008 failure of Lehman Brothers, but sometimes history repeats in a similar manner.   To learn more about The Macro market considerations, click here.

I view this event as exposed to what I have been concerned over since January 25th.  Even if we have no market downside, I have a hard time understanding the catalyst for a material upside in this environment.  There is likely now more than ever upside in Bitcoin as younger people will exit market games and go to the 'safe bet'.  This of course won't be safe, but it may provide a counter play to the markets for a bit before that also hits a maximum.  Buying Bitcoin right now is a calculated risk that may pay off very well.

To hear more about why Archegos failure is potentially a systemic risk, watch this video, he does a great job to explain.

The MACRO market considerations

 I want to understand the macro environment in hopes that any short term investments eventually align with the macro view.  For example, if you purchased Apple at the iPhone announcement, although that day didn't yield epic Apple earnings, the macro view changed and eventually stocks align to this new reality.

So lets take a look at the MACRO environment.

1) When COVID hits, USA alone shed 20 million jobs, and a year later its about 19 million unemployed.  It is going to take 5 to 10 years to get back to employment levels in January 2020.  If you have a good analysis, not flippant opinion, to the contrary PLEASE post in the comments!

2) Due to the reality of #1, the entire US economy is trading off of free money, easy loans, near zero loans, and a falling US dollar.  Part of the free money was the suspension of the SLR rule that is set to expire in March 31st.     This is what rallied the market over the past year.  The question is if these factors change, would you expect the same market acceleration over the past year?

3) Interest rates have been seeing pressure, and odd things have been happening like the REPO market yielding negative interest rates.  

4) As posted in January 24th, the amount of leverage in the stock market is staggering, this is great to advance prices but if things turn it will caused sustained pressure on the downside. An example of a hedge fund failure due to leverage was announced.  This is potentially one of many leveraged accounts.

5) The leading FANG stocks are all off their highs, and have been in a flat-ish trading range for months.  the NASDAQ is materially off it's highs.  I don't think an overall market boom can happen with tech going lower.

6) Insiders are selling is at high levels. On aggregate level the current selling level is what is a normal peak in selling, and has been relatively sustained in 2021. 

There has been large selling by Bill Gates Foundation in Q4 2020,  selling 100% of their UBER stock, 100% of BXP Boston Properties, 100% of Ali Baba, 50% Goog and 50% of Googl, 50% of Amazon, 50% of AAPL, 50% of Liberty LILAC, 10.6% of Berkshire.

Warren Buffet has sold 117 Billion of Apple stock, 3 billion of GM, 58% reduction in Wells Fargo,  sold off last of his JP Morgan,   

Buffet was a buyer into medical ,insurance, and some consumer companies in Q4 2020. buying into Merck, AbbVie,  Kroger,  Marsh & McLennan,  Chevron,  and Verizon.

In my opinion the first 5 items is pause for concern, what the market position in end of January to today, there is no new news expected.  Everyone knew with Biden elected free money is coming.  We are waiting for new taxes and other drags on businesses that have shed 19 million workers.  Its simply on a maco level looking pessimistic.    Until I see NASDAQ hitting new highs, I am a skeptic of going long this market.

Bank Statutory Liquidity Ratio (SLR)

 This video does an excellent job at explaining the change in the financial system that will occur on March 31st, due to the Federal Reserve has stated they cannot extend the SLR exception put into place 1 year ago.

The important aspect is banks that are a GSIP (Globally Systemically Important Banks) must become compliant to normal GAP accounting.  The SLR rule was suspended for a reason, to enable banks to have more ability to loan money in the downturn.

However, now that the SLR rule is being put back, people are questioning how to do do accounting related to this rule.  Depending what is determined to be the right way to enforce the SLR rule, it could have substantial consequences for bank liquidity.

The theory is the banks will take cash deposits and buy treasuries to improve their balance sheet.  Assuming this is true, it will drive bond rates down, which by the way may help markets appreciate.

Another view is banks refuse to buy treasuries, causing rates to spike hard.

Skip to 36 minutes in to see the potential impacts.