I am writing this before the Fed meeting this afternoon. Today the S&P 500 bounced back on the idea that the Fed will signal a cut in September. The talking heads are saying that the market has priced in three cuts before the end of the year.
Nvidia (NVDA) the bellwether company that has been pushing the market higher over the last two years is up 11% today. The stock has sold off over 25% over the past few months and was due for a dead-cat bounce.
Gold is up today to $2,474 an ounce which is an all-time high. Silver is up to $28.93 an ounce which isn’t a new high but it is moving in the right direction. Today an investor would be hard-pressed to find a market segment that wasn’t trending higher.
Everyone believes that the Fed will save the day with rate cuts despite history saying that the exact opposite is true. The rate cuts always come too little, too late. It takes 18 months for rate cuts to move the economy and by then it will be too late to stem the tide in unemployment.
Every day I read about some company firing people. Today it is Intel that will lay off 10,000 people. There are also plenty of anecdotal evidence of the bottom quintile of code monkeys getting laid off due to AI. Not to mention all of those retail stores that have closed.
If you think credit card and car loan delinquencies are bad now just wait a few months. Heck, even McDonalds reported a decline in same-store sales.
Buy Gold
The gold chart is breaking out. You should be buying in gold, silver and bitcoin and selling large caps – though I still maintain a large position in Microsoft (MSFT) and I will continue to be long MSFT until the chart or the story breaks down.
They reported earnings yesterday and beat in 11 of 12 categories. Annual revenue was more than $245 billion, up 15% year over year, and Microsoft Cloud revenue surpassed $135 billion, up 23%.
Their ROI on AI was off by 3% while capex was up huge. The market sold the stock down 7% in after-hours trading. It came back today and is only down about 2% as I write this to $415 a share. This follows the Google miss on AI last week. You can read the great Brit Ryle’s take on that here: https://www.outsiderclub.com/the-big-ai-lie/
Bad News is Bad News
It would seem that the market sentiment has switched from “bad news is good news” to “mostly good news is bad news.” What happens when companies start canceling their Nvida chip orders when the AI boom doesn’t create revenue?
The NVDA share price gets slaughtered is what happens – and takes the rest of the market down with it.
We have already passed the turning point. The market peaked on July 16, 2024. We are seeing new houses rollover in price. There are parts of Florida and Texas where half-finished houses are sitting.
Banks are in a stealth crisis already and when the office space starts to default next year they will be in real trouble.
The smart money is buying precious metals.
It was disclosed yesterday that Micheal Burry of The Big Short fame has increased his gold position to 7.37% of his portfolio which is in Sprott Physical Gold Trust (PHYS) . He’s not a traditional gold bug so it sticks out a little bit.
The real wild card is the U.S. dollar. It has been forming a base for the last 18 months and the flag pattern is getting tight. It will break out one way or the other, the chart isn’t clear but with the U.S. running $2 trillion in deficits, $35 trillion in debt, and entering a rate-cut cycle I would be shocked if greenback gained in value.
Keep a weather eye on that trouble bubbling up in the Middle East and Europe. The war hawks are circling and we still have a long hot August to get through.
Buy gold, buy silver,
Christian DeHaemer
Outsider Club
https://www.outsiderclub.com/trump-backs-crypto-btc-hits-69000/
https://finance.yahoo.com/news/big-short-investor-michael-burry-102200192.html
