Nvidia Earnings: Buy, Sell, or Hold?

Answer: Yes. [Morning Reckoning] August 27, 2024 [WEBSITE]( | [UNSUBSCRIBE]( Nvidia Earnings: Buy, Sell, or Hold? Baltimore, Maryland August 27, 2024 [Greg Guenthner] GREG GUENTHNER Good Afternoon Reader, I’ve been thinking about throwing my laptop out the window and sailing away to a deserted island this week to skip the NVDA earnings circus. That’s probably not a practical idea. I can try to run — but there’s no way to avoid the most popular tech stock on the market revealing exactly how much the AI boom has grown over the past three months. It’s going to be another noisy week as the three-ring financial media kicks off wall-to-wall NVDA earnings coverage — the greatest show on Wall Street. Step right up to witness AI chip madness! Revel in the aftermarket reaction! Listen to the amazing conference call! Unfortunately, there’s no cotton candy (unless you make your own). But CNBC will gladly treat you to plenty of performative hype surrounding the earnings event of the year. We might as well embrace the chaos. Before I get into the numbers, I want you to watch [this urgent message from Jim Rickards.]( You see… I’m following the Nvidia earnings closely, but Jim has a prediction that when Nvidia reports on Wednesday… it could trigger an even worse selloff than we saw earlier this month. While 99% of Wall Street seems to be counting down to Nvidia earnings as the chance to strike it rich… According to Jim’s research, we’re actually in the final countdown to a crisis no one is expecting. If this was just a normal Nvidia earnings release it would NOT be as important as we’re making it out to be. After all, they report earnings quarterly on a regular pre-published schedule. But this might just be the most important Nvidia earnings announcement of the past two years. And Jim believes it’s going to create chaos in the stock market for years to come. But you can get prepared AND position yourself to profit… [>>CLICK HERE FOR DETAILS<<]( It’s already been a wild month. Just a few weeks ago, we were watching the market fall apart and the VIX spike to levels not seen since the Covid crash. Investors panicked and started selling. But then the selling stopped almost as suddenly as it began — and stocks ripped higher for two straight weeks. If that wasn’t enough excitement, Jerome Powell stepped up to the mic in Jackson Hole on Friday and promised rate cuts in September. The good times rolled right into the afternoon as the averages went out near their weekly highs — and less than 1% from all-time highs set a little more than a month ago. In the span of just a couple of weeks, we went from the end of the world to the beginning of the next great bull run, spinning the heads of just about every trader on the planet. If this incredible recovery felt unusually fast, you’re absolutely correct. My friend Michael Batnick over at Ritholtz Wealth [ran the numbers]( and it turns out that the Nasdaq takes 32 days on average to rally 10% after falling into correction territory. This time around, it took only eight. As Michael notes, this is the fastest 10% rally ever following a corrective move. The bulls are back in town — and we need to adjust to this lightning-fast recovery as the final week of summer trading looms large. [3X Bigger Risk Than Dot-Com Crash]( [Click here to learn more]( On Wednesday, August 28, after 4 p.m., one announcement is happening with 100% certainty that could shock investors, triggering wild volatility and a massive market drop. By one measure, it’s expected to be almost 3X bigger risk than during the dot-com crash. [Click here to learn the three steps you can take right now to position yourself ahead of it for a shot at rare potential gains of 300%-733% in a matter of weeks.]( [LEARN MORE]( Update: “The Dip” Strikes Back! Two weeks ago, I highlighted the S&P 500’s short-term downtrend and the idea that it would need to close the Aug. 2 gap and extend to approximately 5,450 to break out of its funk. If a sharp rally does materialize here, I noted, plenty of buyers should gobble up shares and shove the markets back to all-time highs. To be clear, I didn’t expect it to happen so fast! I figured a retest of the Yen panic lows was probably in our future. The 200-day moving average near the April swing lows at 5,000 looked like a reasonable landing area, which matched up well with the bottom of our downtrending channel. As we now know, the market wasn’t as vulnerable as it appeared. Instead of choppy, volatile conditions, we were treated to a near-perfect “V-recovery” that effectively erased the early August drop in just two short weeks. Assuming we’re out of the weeds for now, here’s our unofficial drawdown tally: The VanEck Semiconductor ETF (SMH) fell almost 30% from its July highs. The Nasdaq 100 dropped 15%. The S&P 500 fell nearly 10%. And the Magnificent Seven stocks — measured by the Roundhill Magnificent Seven ETF (MAGS) — dropped 22%. Despite the sheer speed of the recovery, we could argue that these drawdowns were all deep enough to induce plenty of anxiety amongst the “stocks only go up” crowd. They also offered significant momentum resets that can potentially set up the next big move higher. But right now, I’m much more interested in what certain groups aren’t doing while the averages inch closer to their respective all-time highs… A Magnificent Letdown During the fastest snapback in history, one might expect the mega-cap leaders to retake control of the market. But that hasn’t been the case. In fact, the Mag 7 stocks have trailed the broader S&P 500 so far this quarter, according to BMO’s Brian Belski, via MarketWatch, who notes the mega-cap kings are set to underperform the index for the first quarter in almost two years. For the record, this data is nearly a week old. But we continue to see this trend playing out as NVDA’s earnings creep closer. Semiconductors failed to gain traction on Monday as the VanEck Semiconductor ETF (SMH) finished the day down more than 2.3%, compared to a drop of just 0.3% in the S&P. While its comeback off the August panic lows was impressive, SMH would need to rally more than 16% from Monday’s close to top its July highs (Remember, the S&P is now less than 1% from its all-time highs). It’s the same story for the Mag 7 names. Yes, they’ve rallied off their respective lows. But the Roundhill Magnificent Seven ETF (MAGS) still needs to run up another 11% before challenging its August highs. For the record, I don’t believe this semiconductor/Mag 7 underperformance is tipping NVDA’s hand. In fact, it will probably have no bearing at all on the earnings reaction we’ll witness tomorrow afternoon. On the flip side, I also don’t think the market’s short-term performance will live or die by NVDA’s results. But I do think we’re seeing the resurgence of that pesky rotation trade we’ve discussed this summer. While mega-caps and semis are underperforming, the rate-sensitive names are popping higher, including tech-growth names, small-caps, and biotechs. The Yen panic acted as a hard reset for this rotation theme. But these stocks are now roaring back to life as September approaches. The best part? You don’t have to make any wild bets on NVDA earnings to make a buck off these trends. Instead, bet on these rotation trades remaining in play as the bulls continue to pile back into the market leading up to the September cut. Best, [Greg Guenthner] Greg Guenthner Contributing Editor, Morning Reckoning feedback@dailyreckoning.com [Warning: Could Massive Civil Unrest Come To U.S. Cities?]( [Click here to learn more]( The streets are mayhem… Everyday supplies at the grocery store are cleaned out… In the parking lot outside, you see a large guy yelling at an elderly man… The big guy has something in his hand, and rage in his eyes... Things look like they could get out of hand at any moment. Is this disturbing scenario set to play out in U.S. cities across the country? [Click here now for an urgent warning from a former advisor to the CIA and Pentagon](. [LEARN MORE]( In Case You Missed It… Clown World: Gold v The Trillion Dollar Coin Sean Ring, Editor [Sean Ring] SEAN RING Hi Reader, Did you ever get that feeling when you think you know something, and then someone unlocks a whole new level of understanding for you? My friend and teaching mentor Simon once told me, “The only thing I care about when teaching a class is seeing one student—just one—widen his eyes and gasp for air. It's the a-ha moment. I live to create those moments for my students.” I’ve just experienced one of those moments, thanks to a great piece Chris Powell wrote for Money Metals that [Zero Hedge]( up](. There are two things I thought I understood but didn’t. - Why the idiotic idea of minting a trillion-dollar coin isn’t as ridiculous as it seems. - Why the US government doesn’t revalue gold to get out of its financial hole. In this edition of the Rude, I’ll cover both and how they’re related. Remember When Jon Stewart Called Out Krugman? Before I get into this, let me be clear: minting trillion-dollar coins in the hope of evaporating existing debt is ludicrous. It’s just that there is an obscure Treasury statute that allows it. I remember when, in early 2013, the Obama administration floated the idea of minting a trillion-dollar coin. To anyone with a modicum of common sense, this was a ridiculous solution to the problem of government overspending. But what I remember even more than that stupid idea is the spat between Jon Stewart of The Daily Show and Paul Krugman, the Nobel Prize-winning blogger at The New York Times. Luckily, [Marc A. Thiessen over at the American Enterprise Institute chronicled the kerfuffle]( In the Washington Post this week, I noted that if the president could really create a trillion dollars out of thin air simply by minting a magic coin, why would he stop at one? He could mint 17 and eliminate the national debt — or 18 and have a trillion-dollar surplus. Well, apparently Jon Stewart had the same reaction, declaring on his Comedy Central show, “If we’re going to make shit up, I say go big or go home. How about a twenty-trillion dollar coin?” That did not go over well with the magic coin’s chief proponent, New York Times columnist Paul Krugman. Krugman blasted the comedian for “a lack of professionalism” in mocking the magic coin idea, adding, “Those people look dumb to me… he’s ruining his own brand.” Last night, Stewart fired back, declaring, “First of all, I’m pretty sure that is my brand. And second of all, if somebody is ruining their brand with a trillion-dollar coin idea, I don’t think it’s the non-economist.” Why isn’t this as dumb as it sounds? I hope you’re sitting down. The statute that allows the U.S. Treasury to mint platinum coins of any denomination is 31 U.S.C. § 5112(k). This section of the United States Code grants the Secretary of the Treasury the authority to mint and issue platinum bullion coins in any denomination, quantity, specifications, designs, varieties, quantities, and inscriptions as the Secretary may prescribe. The key text from the statute reads: "The Secretary may mint and issue platinum bullion coins and proof platinum coins in accordance with such specifications, designs, varieties, quantities, denominations, and inscriptions as the Secretary, in the Secretary's discretion, may prescribe from time to time." 31 U.S.C. § 5112(k) was enacted as part of the Omnibus Consolidated Appropriations Act of 1997, which President Bill Clinton signed into law on September 30, 1996. Here’s the onion: the provision was originally intended to give the U.S. Mint flexibility in producing platinum coins for collectors and investors. But its broad language has since become the basis for discussing other potential uses, such as a stupid, hypothetical trillion-dollar coin. It’s utterly ridiculous, isn’t it? But what's worse is that printing trillions of dollars in platinum coins allows the USG to retain hegemony in a way that revaluing gold doesn’t. Why Gold Revaluation May Be a Pipe Dream As always, it’s all about power. He who owns the most gold controls the world. And the United States won’t call the shots if it’s all about gold holdings. Credit: [World Gold Council]( Yes, Europe has more gold than the United States. Those intelligent Europeans repatriated their gold from the U.S. once they realized the USG printed far more paper than the gold bars they had. This position terrified the USG, especially the lately unlamented Henry Kissinger. But he asked the right questions. Koos Jensen (the then-pen name for gold researcher Jan Nieuwenhuis) found the minutes of an extraordinary meeting in the State Department archives in Volume 31 of "Foreign Relations of the United States, 1973-76." Secretary of State Kissinger wondered why we wouldn’t want gold in the monetary system. In an April 1974 exchange, Assistant Undersecretary of State for Economic and Business Affairs Thomas O. Enders [explained the situation to him]( Mr. Enders: It's against our interest to have gold in the system because for it to remain there it would result in it being evaluated periodically. Although we have still some substantial gold holdings -- about $11 billion -- a larger part of the official gold in the world is concentrated in Western Europe. This gives them the dominant position in world reserves and the dominant means of creating reserves. We've been trying to get away from that into a system in which we can control ... Secretary Kissinger: But that's a balance-of-payments problem. Mr. Enders: Yes, but it's a question of who has the most leverage internationally. If they have the reserve-creating instrument, by having the largest amount of gold and the ability to change its price periodically, they have a position relative to ours of considerable power. For a long time we had a position relative to theirs of considerable power because we could change gold almost at will. This is no longer possible -- no longer acceptable. Therefore, we have gone to Special Drawing Rights, which is also equitable and could take account of some of the less-developed-country interests and which spreads the power away from Europe. And it's more rational in ... Secretary Kissinger: "More rational" being defined as being more in our interests or what? Mr. Enders: More rational in the sense of being more responsive to worldwide needs, but also more in our interest. ... And there you have it. [Ben Bernanke lied to Congress after the Great Financial Crisis when Congressman Ron Paul (peace be upon him) asked him why we hold gold instead of diamonds.]( The real reason is that gold is indeed money, and whoever holds the most controls the world economic system. Wrap Up This is why a trillion-dollar platinum coin is a more likely outcome than revaluing gold in our ridiculous Clown World. If the USG gets away with the platinum coin solution, only they will have increased reserves. But if gold is revalued, every government holding gold will increase its reserves, and that’s not what the USG wants. Do we still think the people we call Deep State or The Swamp are the good guys anymore? Have a great week ahead! All the best, [Sean Ring] Sean Ring Contributing Editor, The Morning Reckoning feedback@dailyreckoning.com X (formerly Twitter): [@seaniechaos]( Thank you for reading The Morning Reckoning! We greatly value your questions and comments. Please send all feedback to [feedback@dailyreckoning.com.](mailto:dr@dailyreckoning.com) [Greg Guenthner] [Greg Guenthner, CMT,]( is chief strategist at Forge Research Group. He has spent the better part of the past two decades developing long-term and short-term strategies with a single goal in mind: to help everyday investors generate outstanding returns and control their financial futures. Greg’s charts, analysis, and insights have appeared in Marketwatch, Forbes, Yahoo Finance, and many other financial publications. 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