The prognosticator of prognosticators strikes again! Last week’s Federal Reserve announcement of pushing back interest rate hikes from 2024 to 2023 has instantly put assets in freefall into the negative. The FED’s actions brought instant gains into the U.S. dollar to a 2 month high. Prices of commodities also took at hit with this announcement. But crypto was the biggest loser after already been beaten down by Elon Musk’s Dogecoin nonsense.
Since I’m taking a small break from the show, people have been e-mailing pleading for me to provide some commentary on these new financial conditions. Before I begin, I just want to say, once again, that I predicted this was going to happen for over a month. That’s why I’ve stated many times that cold hard cash dominated my portfolio leading up to last week’s FED announcement. So feels good man. Now to some market commentary.
Right now we’re witnessing a repositioning of the market for anticipated future conditions by institutional investors. At some point prior to 2023, unless the FED shocks the market by pushing back the date of interest rate hikes even sooner, we’re going to see a bottom of this contraction in the short term. Now given the current investor environment (meme stocks, short squeezes, etc), its hard to calculate when this bottom will be. An indicator of a potential bottom, in my opinion, will come when enough retail investors lose their capital from the recent meme stock and short squeeze craze, and the market begins to react on fundamentals more then hype and/or pump and dumps (which may be sooner than many are anticipating). When this bottom hits, which yours truly will be actively monitoring, there will be some opportunities in equities for long term and short term acquisition.
Commodities are now reacting to the conditions of the current and future gains of the U.S. dollar. This price readjustment is rapidly bringing down prices to all commodities. Grains commodities instantly saw red in this price readjustment faze of the market. Lumber, which recently reached all time highs, dropped 41%. Gold and silver were making generous gains prior to the FED announcement, now they’re are contracting majorly thereafter.
Commodities markets, unlike stocks, are solely dependent on the U.S. dollar value. Commodities traders trade contracts of commodities that have a finite date of delivery of the commodity within said contract. So current and anticipated U.S. dollar values are the foundation of commodities pricing. The antithesis to this rule is scarcity. While most commodities decline under this price readjustment, OIL has continued to climb because of many different factors (Biden’s ending of domestic production, Iran, OPEC, potential war, etc), but the most important is scarcity. The price of OIL is almost $72 a barrel as of the writing of this report, and many analysts are anticipating $100 a barrel by the end of the year (which is what I predicting on the show last year when it looked like Joe Biden was going to be President in Nov. 2020; when OIL was $35 or so a barrel). Scarcity will yield big profits in a high interest rate environment, and may also be a positive or negative indicator of stock within a commodity’s industry.
Unfortunately, crypto is taking the worst of the losses. There should have been no reason, given the rate of inflation and dollar value, that crypto wasn’t at all time highs prior to the FED’s announcement. But Elon Musk with his Dogecoin/crypto scam contracted the crypto market artificially. And since the the FED’s announcement, crypto is now contracting because of the U.S. dollar gaining in value at the artificially induced levels by Musk and his legion of financial morons; which is causing cryptos going into deep into negative territory. This with the crack down on Bitcoin miners in China, future crypto regulation and the overleveraging of the crypto market as whole has made me very bearish on crypto for the short term and (depending on the extent of the previous) long term. The potential profits that seem to come from crypto (with exceptional risk) in this environment is the old saying, “buy on hype, sell on news,” when it comes to cryptocurrency IMO.
Now that I’ve given you all the bad news, there is a sliver of hope; this current contraction is an “anticipation” sell off that will eventually find a bottom in all markets. If the FED keeps its word and doesn’t touch interest rates until 2023, then this anticipation contraction will end. The FED will still be printing money at the same rate until then, which is why this short term anticipation/price readjustment will find a bottom at some point within 2021 in all markets. One indicator of a potential of a market bottom is when the dollar begins losing value again at a similar rate it was prior to last week’s FED announcement.
I hope this helps my fellow Capitalists profit and prosper. I will be making an announcement on about the show later this week on Ghost.Report. So stay tuned!