Global Financial System

A good video explaining the global financial system and challenges.

Up before down?

I have to say, I am completely underwhelmed by any downside action.  I sold majority of index shorts, but do have shorts on 'weak' companies.  And perhaps the issue here, maybe the market leaders are pulling the index up while weak companies go down.

My puts on individual companies are doing fine, and I'll let that ride. I am long gold, GBTC, and some nuclear companies (SMR).
If we break above last Fridays high, then we will likely go up to retest the all time highs.
That puts us into July-August for any material weakness.

The backdrop of lower USD, higher interest rates, and some international bond issues still exist.  If other countries, like Japan, have bond issues, that HELPS American bonds.  So perhaps as the world has increasing pressure on their debt, it will kick the can for USA for a bit.

I still like international as a long term investment and I am looking to add.

I'll take the long weekend and rethink how to deploy.

Enjoy the ride!

Recessions, US Dollar, and Interest rates

This post covers some indicators of US recessions, that typically negatively affect stock market valuation, US dollar valuation, interest rates, and implicitly real estate.  

For details on my concerns see American Assets declining ahead.

Fed Funds and Recessions

 

The chart above shows with the red lines when USA had a recession.  The blue line is when the Fed Funds rate.  Notice each time before a recession the Fed Funds Rate moves higher.

This is yet another indicator of a recession approaching.  I do think AI/Robotics will be the sector to purchase in next upswing.  While a recession isn't guaranteed, as we see from raising rates in 1995, it has a pretty good track record.

US Dollar Valuations

Below is US Dollar valuation as per DXY.  If the USD breaks below 96, we will have broken an up trend in USD since 2010.  The next levels of support is 78 and 70.  A break below 70 is an unknown target.  DXY is not a complete picture, as its about half Euro and other currencies, not including Asia.  Currencies are valued against other assets such as other currencies, gold, bitcoin, or other assets.  So even though DXY is weaking, its not a full picture, but does indicate vs major currencies like the Euro its weakening.

Holding above uptrend 2011 line will show USD is maintaining value relative to 2010 to now.
I think at minimum USD will lose 20 of value from it's high in 2022.

10 year US bond Yields

10 year treasury is linked to US mortgage rates, which in turn affects real estate prices.
The US interest rates bottomed in 2020, and marked a breakout of the 38 year downtrend since 1982.
A break above 5.25% indicates we are likely to see much higher rates in the years ahead.

US Stock Market Destination

 

US Stocks

The chart above is not meant to be literal, but those are the levels for the S & P 500 may find some strength.  A break below 480 will yield a new low of TBD level.  I would not be surprised if we S&P 500 go from high of 6100 down by 50% cut to 3000.  Sound impossible? The market would be valued  at October 2019 level, less than 5 years ago.   That is not too far fetched for a correction.

US Bonds

Today the US Treasury market for 10 year bonds took a beating.  From April 4th to now interest rates have moved from 3.8% to 4.6%!  If you own US bonds, your portfolio took a beating.

Real Estate

Mortgage rates are typically based on 10 year treasury rate plus a spread (risk premium).  If US 10 year bonds yields continue to rise, mortgage rates will too.  That will apply pressure on real-state costs.

I can't stress enough to consider hedging assets outside the USA.

Read more at American Assets Declining Ahead

After market adjusts, I think core AI & robotics will be the next leaders, replacing older tech giant leaders.  However legacy stocks will remain suppressed.  Key is capital preservation and deployment.

USA Credit Downgraded

 

Moody's was last credit agency to downgrade USA credit, first time in 100 years we are not AAA rated. 
The current administration wants to devalue the USD, so I would expect President Trump to be happy we are enabling his vision.  Careful what you wish for!

Posted on April 7th a short term bottom, and that proved correct.
Started looking April 23rd for "next push" to make an extended high and we got it March 11th.

We will see next week if Friday was a gift.  We should make a new low over the months ahead.  I am actually a little optimistic beyond that low for a mega rally unlike humanity has ever seen.  The advancements of AI should create an explosion of discoveries and productivity in shortest period humanity has ever experienced.  I will be watching for a bottom around Q4, with some chop into 2026 before we gain traction.  The next rally will likely be very bifurcated, as sectors who benefit from AI will not be universal.

I am interested in when the USD will be stabilize into a "new world order" valuation.

Waiting for a gift

I am wishing for a gift, a market rally into Friday's close, and a gift will be over-extending past S&P 500 5,900.  A perfect gift will be touching S&P 500 at 6,000 into Friday's close.  If my wishes can come true by EOD Friday, I will over-extend myself into shorts into the close.

The push is here!!

Trump administration announces a China trade deal! 

If this is a 'done deal' and 'a big win' for USA, we will hear the details ASAP!  However, if we don't, then this is the push I was waiting for.  

I am assuming THIS is Waiting for the Push I posted on May 2nd.

So I expect a top in the week or at max first week in June for the next leg down.

We will go higher and I am completely wrong if the deal details show a MATERIAL amazing turn around for America.

For now, enjoy the longs, and look for the short.

What if America gets more than it wants?

This administrations goals to achieve a 'more balanced' budget includes US dollar valuation changes.

Trump administration aims to "reengineer the dollar to be depreciated" to boost U.S. exports and manufacturing (Stanford GSB, Insights). Former economic advisor Judy Shelton noted, "If the dollar's strong, it makes it very difficult for our exports to compete in foreign markets" (Fox Business).

"the dollar must depreciate to allow for U.S. reindustrialization" (El Pais, April 7, 2025) and that President Trump "wants to ensure that the US dollar can trade at a weaker value compared with other currencies while not undermining the centrality of the currency" (Al Jazeera, March 13, 2025).

The President does understand that Americans will pay materially more for imported good, as indicated in this statement its not just a small cost increase to US citizens.  After all, 2 vs 30 is being able to afford 90% less than today.

"Well, maybe the children will have two dolls instead of 30 dolls, you know. And maybe the two dolls will cost a couple of bucks more than they would normally."  YouTube

What we are aiming for America to not have a financial privilege of being world reserve currency.  Being the reserve currency everyone else 'games' the system to their advantage putting America at a net disadvantage when it comes to debt.   The word privilege indicates we get goods cheaper due to this position at the cost of a future currency debt.    No one knows in 10 years if the debt will matter or not as we advance society and tools like AI, but we are assuming it is an issue and forcing dealing with it now.

If America succeeds at devaluing the dollar, and dethroning itself as the world reserve currency, be careful what you wish for, as its a one-way trip.  This is why everyone should consider diversifying some assets outside of USA.

A great video explaining some of the potential challenges.  This concern drives my thinking of international investment as part of a diversification strategy.

Global Investment Tracker

My 2025–2028 investment bias is laid out in “American assets declining ahead” If you don’t share my POV, feel free to skip my posts.

Below is a concise stock screener with focus on global ETF's, currency related investments, select countries and U.S. tech names.  Click the “CHATGPT” link to pull up any ETF and ask questions.

Red-highlighted columns flag areas of heightened risk following the U.S. tariff scare on April 7. Bright-green items are where I’ll deploy new capital, timing purchases around the expected summer downturn (July/August) based on dividend yields, April 7 resilience, and international growth potential.

Always seek a professional investment advisor. For educational purposes only.
Good International Investments seem to be DWX, SHLD, MOO, and in next leg down XAIX , ROBO.  See below Analysis of how much was lost on Tariff Scare and the upside YTD.

Direct access to the live document, with short-term screener: [click here]

Waiting for the push

The SPY is at 5560, the target I called back on Monday April 7th, when the market gapped down and found a local bottom.   So does this mean today is the exact top? Potentially.  But what makes me think not is there has not yet been a 'big news' event to push and extend beyond an organic top.

We may have the FED do an emergency rate cut, or some sort of Trump announcement.  When that occurs THAT is a "sell on good news" event.  I will be reloading my shorts then.

The market can float around here through May, but ideal turn is in the next 1-2 weeks.  SPY should NOT break 600 on a weekly close.  If it does, I do have to question the POV I currently have. I think the more realistic high will be SPY 575-585 range. (SPY is S&P  500 ETF)

Enjoy the market counter rally, I am looking for opportunities for the next leg down into July-August.

This is all SHORT TERM conversation, on LONG TERM front, US market is going lower. For Long Term, looking for SPY 370-450 bottom.  as we get closer, happy to tighten the range.

If we move to 370, it will bring us back to Jan 2020 levels.  Currently I consider that THE lowest target, however, USA is changing the rules, and the target can change.