Hello Outsiders, it looks like we have a perfect bounce-back day. After all major indexes were in the red yesterday, they are all in the green today — with the notable exception of precious metals.
This is part of the topping process. It should be noted that the S&P 500 hasn’t fully recovered from yesterday’s drop, but the Russell 2000 has. It looks like the rotation to small-cap stocks continues.
Brit Ryle explained this yesterday in a great article regarding Google’s earnings miss. Here is what he wrote:
The Big Lie
“Right now it is businesses that support Google’s ad business. We pay Google to let us appear in search results. Google is a middleman, it owns the market where companies and customers connect.
But now, Google is actually making it harder for companies to connect with customers. Businesses are losing customers and traffic to their websites. Companies aren’t paying Google as much anymore, so Google’s ad revenue is under threat.
To make matters worse, Google has ramped up its CAPEX spending for AI. It is spending more, to make less. Seems like a bad plan…”
It’s Brit so read the whole thing here: https://www.outsiderclub.com/the-big-ai-lie/
IBM Beats
The point is that Google drove down the market as its results raised questions about the viability of AI.
But today, that scrappy underdog in the blue suit, IBM (IBM), beat earnings. That’s right, the used-up, has-been of tech companies beat Q2 on both top and bottom lines. Its generative AI business roughly doubled sequentially to $2 billion. On the conference call, CFO James Kavanaugh pointed to: “our largest first-half free cash flow generation as far back as I can go and count.”
IBM is up 6% on the day and 46% over the past year. IBM! It is now at the same price it was in 2012. That said, they have a P/E ratio of 9 and pay a 3.63% dividend so maybe they are worth a look.
Bitcoin
Bitcoin is down 2.32% today and the chart is putting in lower highs and lower lows. That’s a bearish pattern so I wouldn’t buy it here. Better to wait for the chart to put in a bottom.
That said, gold and silver are also down. These are assets that tend to go up if a recession is in the offing. I am long gold, silver and bitcoin and believe I will be correct by the end of October. These things take time and today’s surprisingly strong GDP number didn’t help.
Still, stocks are overvalued by almost any metric, and reversion to the mean happens. Sometimes it happens in a crash, and sometimes, like in 2017-2019, it happens when the market moves sideways and earnings catch up with expectations.
But I digress. I wanted to point out this handy chart that showed up the other day. Could it be that buying Bitcoin is this simple?
The colored dots correspond to “Months Until Next Halving.” As you can see, during the last three halving, when the blue dots turn red it is time to buy.
After the first halving (Nov 2012) the price peaked in late 2013 or about 12 months later. After the second halving (Jul 2016) the price peaked in Dec 2017 or 17 months later. In the third halving (May 2020) the price peaked about 18 months later.
The last halving happened in April of 2024 which would put the price pike somewhere between April 2025 and October 2025.
The runup after each halving, from the halving date, has been half as big as the one before…
And the last runup was 8x, we could estimate that the next runup will be 4x. The price in April, 2024 was $64,000. That would give you $256,000 per Bitcoin.
It seems like a fair speculation.
All the best,
Christian DeHaemer
