The Red Sea and Denial

The markets took a whipping yesterday. Is this the beginning of the end? August 02, 2024 [WEBSITE]( | [UNSUBSCRIBE]( The Red Sea and Denial SEAN RING My colleague Alan Knuckman, Paradigm’s options expert and eternal optimist, would chastise me for even suggesting this could end the market rally. And Alan’s worth listening to because his Panglossian outlook has made his subscribers mucho dinero. The Fed is Now Political Because They Didn’t Listen Shall we start with the premise that The Powers That Be would not let the market crash during an election year? I think that’s appropriate. After all, there’s a reason we hang onto Jay Powell’s every word. And the Federal Open Market Committee, the wise people who set our interest rates, has some dry powder ready for the first time in ages. They can cut rates quite a bit before painting themselves into a corner again. Sure, the FOMC left rates too high for too long. But that’s part and parcel of a team of “analysts” who get stuck in the weeds and cannot quickly decide on anything. They seem like the kind of people who annoy dinner companions and waitresses the world over by asking if the chef adds heavy cream to the Spaghetti Carbonara. Hurry up and pick something already! On Wednesday, I interviewed Jim Rickards, the man himself, about the state of things. He, too, agreed the Fed should’ve cut ages ago. Before you think we’ve lost our Austrian minds, remember the national debt is north of $35 trillion, and interest expense is the second largest line item in the U.S. budget. Powell simply can’t raise rates; the USG cannot afford it. Not only do I stick to my story that Jay Pow should’ve cut rates in June, but it seems I’ve got a couple of journos who’ve jumped on the bandwagon. Yes, I paid for a Wall Street Journal subscription to tell me that. Who’s dumber: them, for being so far behind? Or me, for paying to read what I wrotete months ago? NikiLeaks, try to keep up! Yesterday’s Economic Maelstrom In yesterday’s Monthly Asset Class Report, all was shiny and happy. But before the market opened, the economic numbers came out. They certainly frightened a fair few. Initial jobless claims, which we don’t want to see tick up, ticked up. The consensus was 236,000 new claimants, but the actual was 249,000. Last month, it was 235,000 claimants. You would’ve seen this in Monday’s [Rude](. In it, I wrote: When a recession is about to kick off, the yield curve steepens, and jobless claims pick up. Jobless claims have risen since the beginning of this year. Well, that uptrend is maintained. Continuing jobless claims came in at 1,877k, while only 1,860k was expected. June’s number was 1,844k. In short, more people are claiming unemployment, and more are staying unemployed. Then, the manufacturing PMIs came out later in the day. To refresh your memory, courtesy of [Investopedia]( The Purchasing Managers' Index (PMI) indicates the prevailing direction of economic trends in the manufacturing and service sectors. It is a diffusion index that summarizes whether market conditions are expanding ( >50), staying the same (=50), or contracting (<50), as viewed by purchasing managers. The purpose of the PMI is to provide information about current and future business conditions to company decision-makers, analysts, and investors. Both the S&P Manufacturing PMI and Institute of Supply Management (ISM) Manufacturing PMI not only came in worse than expected, they came in below 50, indicating a contraction in manufacturing. (S&P’s was supposed to stay above 50, but came in at 49.6.) As for the ISM, it was supposed to be a dismal 48.5 but came in at a dreadful 46.8. The reason why the PMIs matter so much is that they have some predictive power. That is, we’re probably already in a recession. If not, we’re on the edge of one. [Urgent Buy Alert - Monday, August 5, 10:00 A.M. Eastern]( This coming Monday morning at 10:00 a.m. Eastern, our #1 trader will release an urgent buy alert to his readers using a unique and potentially extremely profitable trade setup he’s been tracking which could double your money FAST. This one idea could hand you a huge windfall in record time. [Click here to learn how to get this urgent buy alert on Monday.]( Yesterday’s Market Melee Then, the Red Sea didn’t part, it arrived: Credit: StockCharts.com The markets opened and got hit in the face with a frying pan. Everything got hit. It was “Sell, sell, sell” all day long. Then, good friend and Paradigm colleague Bob Byrne wrote this in our editorial Slack channel right after the market closed: “INTC just died. Ouch.” Right now, for Intel (INTC) investors, medicinal cannabis wouldn’t go amiss. INTC was having a bad day as it was, down 5.50% during market hours. Then, their results came out after the close, knocking a further 18.90% off the stock price. Intel CEO Pat Gelsinger plans to lay off thousands and suspend INTC’s dividend. Is this a dead company or an excellent buying opportunity? I hate this company so much right now that it may just be a good buy. Blood on the Street, right? The hardest-working man in the newsletter business thinks so. Dan Amoss wrote this: Doing the right thing - being in rehab from over-financialization, as Gelsinger is - is costly in the short run but worth it to rebuild a great American company in the long-run. What’s Up For Today? We’ve got nonfarm payrolls and the unemployment rate. Barring any massive deviations from the consensus, we should close the week in relative peace. That said, as of writing, Japan’s stock market is down 5.8% on fears of a global sell-off and another BoJ rate hike in October. In the U.S., SPX is on its 50-day moving average, the Nazzie is slightly below that, and the Russell 2000 is still well in its consolidation range. The VIX, a measure of the SPX's volatility, is still below 20. So, while we’ve sold off, we’re not at panic stations yet. Wrap Up Right now, I’m with Alan Knuckman. Stay positive. There’s no reason to sell as yet. That day may come soon, but it’s not here yet. U.S. stock futures are down as of writing. Let’s get this week over this already! Have a wonderful weekend! All the best, Sean Ring Editor, Rude Awakening X (formerly Twitter): [@seaniechaos]( Rate this email Like Dislike Thanks for rating this content! Looks like something went wrong. Please try to rate again. In Case You Missed It… I Love You 3,000! SEAN RING July 2024 Monthly Asset Class Report If you watched Avengers: Endgame in 2019, you’d remember Tony Stark’s daughter saying to her daddy, “I love you 3,000!” This line was ad-libbed in the movie as a tribute to Robert Downey Jr.’s real-life children, who say that to him while they get tucked in at night. Luckily for us, we’ll get to say that to gold in less time than we think. Jay Powell didn’t cut rates yesterday, but the message was bullish: the Fed will cut rates… soon—maybe not in September or November, but soon. And that was enough for a vast swath of the market, including gold. Silver, alas, is sluggishly trying to catch up. But that’s fine. Copper, however, has ended its sharp rally for the time being. The other bright spots are equities and debt. I get the equities bit. I’m still a massive stock market bull. But bonds? Why, with all this inflation hanging around, are they rallying? Once you see the charts, you’ll know what I’m talking about. Let’s not waste time, then… To the charts! S&P 500 ***New Closing High of 5,522.30.*** Ok, we had our pullback. But there’s nothing to indicate a large correction is imminent. Though Jay Powell and his FOMC didn’t cut rates yesterday, they’ve signaled they’re more willing to do so in the future. One rate cut this year will suffice, barring an unexpected enormous drop in the stock market. We still target 6,000. Nasdaq Composite The Nazzie had a much rougher month, thanks to the whipping of the Mag 7. NVDA, AMZN, and MSFT all got hammered in July. NVDA has been down nearly 25% since its crowning as the world’s biggest company in terms of market capitalization. It was a short reign. Still, I think we’ve got a way to go on the upside. Nothing in the chart above screams, “SELL!” Russell 2000 (Small caps) I’ll have what Russell’s having! We’ve had a few huge upthrusts this month that smacks of a new bull market. It took this year to break out of that 190-210 range, and it’s finally done. Is it a false breakout? Maybe, but I doubt it. For now, this confirms the thesis that equities are one of the places to be. The US 10-Year Yield I was right about the direction but wrong about the reason. Powell didn’t cut yesterday, as I thought he would when I wrote June’s MACR. However, the 10-year yield is down over 40 basis points (0.4%). As the 10-year yield is the discount rate (with adjustments) by which we value most long-term assets like stocks, bonds, and real estate, asset prices should continue to rise. 3.80%, here we come! Dollar Index The dollar index was slightly down this month. How? The euro and sterling had a solid start to the month but faded. The yen, however, rallied hard because the [Bank of Japan raised rates for the second time this year](. Japanese rates are the highest they’ve been since 2008. I’m not sure where we go from here, to be honest. USG Bonds Again, right on the direction. Despite what common sense may tell you, you’ve got to watch the charts. We picked up three points this month; the next target is still 99. Investment Grade Bonds From last month: If we clear 109, we can retest the 132 level. Scary, but possible. That still stands. Up, up, and away. High Yield Bonds Again, from last month: Junk continues its ascent. I’m looking at 79 as the next upside target. That still stands, too, but our new upside target is 85. Real Estate Well, there’s our pop after a dull prior month. If you didn’t bet on the downside, I’d now target 113 to the upside. [Nearing Retirement? Claim This Exclusive $1 Book Offer Right Away!]( “The Banker” is a hedge fund titan who spent years helping America’s richest families grow even richer. [And today, for the first time ever, he wants to send you his new book – where you’ll find 36 of his never-before-revealed income and wealth generating secrets](. If the potential at steady, predictable income (as well the chance at a few nice, quick windfalls) interests you, then I urge you to act right away. [Click here now to claim this exclusive $1 book offer]( Energy: West Texas Intermediate (Oil) Oil had the rough month I was expecting last month. Still, if the dollar weakens, we’ll probably see a rally here. The targets are 84, 88, 92, and finally 106. Base Metals: Copper Copper had one good week this month, then got beaten like a rented mule. The big downside price target is $2.25. The world economy can’t be that healthy. Precious Metals: Gold ***HIGHEST MONTHLY CLOSE OF 2,473*** Finally, we broke out of the 2,300-2,450 range that’s lasted for a long while. $2,609 is still the next target. But beyond that, we’re now looking at $2,759. With the Fed set to cut rates before inflation has been slain, I think we’re still nearer the beginning of a bull market than at an end. Precious Metals: Silver Silver recovered somewhat from its selloff in the last two weeks. We need to get above $33 to get excited. Cryptos: Bitcoin Bitcoin gained another $3,000 this month. I’m still massively bullish and reiterate my $100,000 target for January 2026. Cryptos: Ether Ether has had a rough time of late, but I still think $6,000 is a good target over the next 18 months, mirroring Bitcoin’s ascent. Trad Asset Class Summary I think this month is one of the most anomalous I’ve seen. In these inflationary times, bonds won the month, gaining 4.69%. The SPX finished slightly positive, up 0.86%. The USD fell 1.64%, while commodities lost 4.61%. As we saw above, copper was hit. Crypto Class Summary We had another lackluster month from Bitcoin and Ether, but Ripple ripped north of 30%. I think crypto will rally hard, thanks to the expected Fed cut in either September or November, though I’d be surprised if Jay Powell were willing to get into the political much before the election. (The November FOMC meeting is after Election Day.) Wrap Up Gold will continue upward after its breakout. Bonds look great, as do stocks. And I stand by my $100,000 BTC prediction as well. Get out there and stack some paper! Finally, let’s take a moment, courtesy of the Twitterverse: Have a wonderful day! All the best, Sean Ring Editor, Rude Awakening Twitter: [@seaniechaos]( ☰ ⊗ [ARCHIVE]( [ABOUT]( [Contact Us]( © 2024 Paradigm Press, LLC. 1001 Cathedral Street, Baltimore, MD 21201. By submitting your email address, you consent to Paradigm Press, LLC. delivering daily email issues and advertisements. To end your Rude Awakening e-mail subscription and associated external offers sent from Rude Awakening, feel free to [click here.]( Please note: the mailbox associated with this email address is not monitored, so do not reply to this message. We welcome comments or suggestions at feedback@rudeawakening.info. This address is for feedback only. For questions about your account or to speak with customer service, [contact us here]( or call (844)-731-0984. Although our employees may answer your general customer service questions, they are not licensed under securities laws to address your particular investment situation. No communication by our employees to you should be deemed as personalized financial advice. We allow the editors of our publications to recommend securities that they own themselves. However, our policy prohibits editors from exiting a personal trade while the recommendation to subscribers is open. In no circumstance may an editor sell a security before subscribers have a fair opportunity to exit. The length of time an editor must wait after subscribers have been advised to exit a play depends on the type of publication. All other employees and agents must wait 24 hours after on-line publication or 72 hours after the mailing of a printed-only publication prior to following an initial recommendation. Any investments recommended in this letter should be made only after consulting with your investment advisor and only after reviewing the prospectus or financial statements of the company. Rude Awakening is committed to protecting and respecting your privacy. We do not rent or share your email address. Please read our [Privacy Statement.]( If you are having trouble receiving your Rude Awakening subscription, you can ensure its arrival in your mailbox by [whitelisting Rude Awakening.](