A Good Place for Dry Powder

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Bitcoin hasn’t done this in well over a decade… “Bad news is good news” in the jobs data… Fed cut expectations shoot straight back up… Louis Navellier has a big plan for the $8.8 trillion wealth transfer…

By Michael Salvatore, Editor, TradeSmith Daily

On Friday morning, bitcoin did something it hasn’t done since 2012.

It briefly soared past $70k… making a new high before the upcoming halving event.

If you’ve been following along with the bitcoin story these past few months here in TradeSmith Daily (and hopefully for you, buying since I first called it out at around $34k), you know that bitcoin halvings are regular decreases in the supply of bitcoin that miners receive. Every four years, give or take a month or two, the supply reduces by half.

The technical details, though, aren’t half as important as the price action that tends to follow.

Whenever we see a halving “cycle” begin anew, bitcoin has this funny habit of shocking the financial world with massive price gains. You can see it easily in this logarithmic, long-term chart of bitcoin prices…

From the first halving to bitcoin’s price peak, it took 371 days and bitcoin ran 6,754% higher.

After the second, it took 532 days for bitcoin to gain 2,777%.

And after the most recent cycle in 2020, it took 553 days and a double top before bitcoin peaked 590% higher.

❖What can we determine from this? A couple things…

For one, the “cycles” of price gains post-halving are getting longer. And for two, the returns are beginning to diminish. Bitcoin gains less and less each cycle – a fraction of the previous one.

Applying this pattern to today, one could roughly expect a bitcoin post-halving cycle to last a bit longer than the previous two – lasting potentially longer than the 1.5 years we saw in the last cycle. Let’s say just over 600 days, to put a stamp on it.

We should also expect another round of diminishing returns. But if bitcoin returns even just half of what it provided in the last cycle and runs 300% from April onward… and assuming its price then is the same as today… we’ll see it peak at a price of about $280,000.

That’s a monstrous return… and would look a little something like this.

Am I saying exactly this will happen? No way. Bitcoin is about as predictable as a handful of 20-sided dice.

And with it making a new high ahead of the halving, something it hasn’t done in quite some time, that makes it even less certain.

Regardless, I’ll continue to say bitcoin is a buy here. Not a whole lot of assets have a history, short as it may be, of multiplying your money on a consistent schedule every few years. It’s worth a bit of dry powder.

And if you’re inclined toward a bit more risk in favor of much more reward, I urge you to check out the research of Luke Lango, a crypto expert I got to know over the past week.

Luke’s an expert on smaller-cap altcoins, which have a history of making face-melting, four-digit-percentage moves during bitcoin bull markets like we’re in now. For more on what he’s researching right now, go here.

❖Back in traditional finance land, the jobs report showed us “bad news is good news”…

Monthly jobs data is always an archaic web to sort through. Lucky for you, I’ve done the sorting.

Short version: it’s complicated, and kinda bad… so buy stocks. There’s your takeaway.

Here’s the somewhat longer version…

Headline numbers showed the U.S. added 275,000 jobs last month. That is, of course, until that number gets revised next month, as has happened with December and January in this latest report.

From Bloomberg:

December was revised down by 43,000 from 333,000 to 290,000, and January was revised down by a massive 124,000 from 353,000 to 229,000.

In other words, a full 167,000 job-gain estimates from the last two months were… wrong. Both of those previously impressive jobs beats are no longer impressive.

The unemployment rate also rose to 3.9%, the highest level since 2022.

Setting aside the question of how anyone can trust government data that proves to be so consistently off by such a wide margin, it leaves us with the question of what to do with this information.

That takes us back to buying stocks.

A slower job market and rising unemployment are, perversely, exactly what stock market bulls want to see. They’re signs of the economy slowing down… which would theoretically make the Fed more comfortable with cutting its key interest rate – and maybe sooner than previously thought.

Adding fuel to this fire was Federal Reserve Chair Jerome Powell’s comments earlier in the week about not needing to see 2% inflation precisely before they consider the fight won. From Barron’s:

While Federal Reserve officials expect their preferred inflation gauge will be at 2.4% at the end of next year, still above the bank’s target of 2%, policy makers will start cutting rates well before it hits that goal, Chair Jerome Powell said Wednesday.

“The reason you wouldn’t wait to get to 2% to cut rates is that would be too late,” he said. “You don’t overshoot.”

That’s because, Powell explained, it takes a while for monetary policy to affect the economy and reduce inflation.

A Federal Reserve acknowledging the lagging effect of monetary policy? That’s a rare thing indeed.

❖It’s changed the stance of investors looking out to the rest of the year…

All this produced significant swings in the fed rate futures markets, which we can use to gauge the odds of a rate cut and when.

Expectations for the key rate to be 25 points lower by the June meeting — which we’ve been eyeing as a likely time for the first rate cut here in TradeSmith Daily — have jumped from 41% a month ago to more than 60% today.

The middle of the yield curve also saw some buying pressure, with yields falling as much as 0.5% in three-year Treasurys.

It makes sense; traders are trying to lock in intermediate-term yield on Treasurys as yields continue to fall.

But that brings me back to my “short version” takeaway… to buy stocks.

Falling rates, while the economy isn’t in major trouble, is exactly what stock investors have been hungry for since the start of the year. Small-caps especially, as we’ve shown you before, have a tendency to perform well once the Fed cuts rate.

So while we’re starting to see softness in the employment data, and 9 out of 10 everyday Americans would tell you that’s a bad thing, we as investors know to interpret that as a buy signal.

And no one will tell you that more than Louis Navellier…

❖Louis sees an $8.8 trillion wealth transfer fast approaching…

And as it does, Louis believes that money will naturally migrate to where it can find the best returns: the stock market, and by extension high-quality small-cap stocks.

You see, as I write, there is roughly $8.8 trillion in cash parked in money market accounts and certificates of deposit (CDs). And despite the incredible performance of the stock market last year, this number only grew throughout 2023.

Investors are sidelined in a major way, even with stocks at all-time highs. Greed has not yet overtaken the overwhelming fear folks have felt since 2022.

But if you ask Louis, that shift is coming… and soon.

And as we covered today – with falling yields and interest rates – we’re starting to see the first innings of that shift manifest.

This Wednesday at 1 p.m. Eastern, he’s going live with his findings on the epic, $8.8 trillion wealth transfer he sees coming. He’ll share his guidance on how to make the most of the coming shift of cash out of safe-yield instruments and back into the stock market.

You should know that Louis specializes in what he calls “breakthrough” small-cap stocks. And he’s set to recommend five of these stocks to his readers in a brand-new special report.

If you’re sidelined from the market and kicking yourself about it, don’t be.

According to Louis, there’s plenty more money to be made if you make the moves he’ll recommend later this week.

To your health and wealth,

Michael Salvatore
Editor, TradeSmith Daily