Free eLetters

July 2020

The Market is Moving On From Intel

July 27, 2020John Banks

With all of the top-down influences on markets these days — from central bank policy to COVID-19 realities to smartphone trading apps — it’s nice to remember that fundamentals still matter sometimes. Then, too, there isn’t really a monolithic “market,” per se. Different areas of the market are behaving quite differently and showing wide divergences in performance. The tech juggernauts have been on fire, for example, but so have precious metals stocks. The energy sector, meanwhile, is trying to recover

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Why Silver is Taking Off Like a Rocket Ship — and Should Keep Going

July 24, 2020John Banks

In TradeSmith Decoder, we nailed the 2020 silver move thus far. And it looks like there is much more to come. We took a super-sized position in a bellwether silver ETF on March 23, two days after the low. Then we added a second leg (again substantially sized) on July 9, noting the upside move could accelerate. In addition to that, TradeSmith Decoder picked up substantial exposure to silver equities, and published a special report titled “The Triple-Bullish Case for

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Valuation Multiples May Not Matter Anymore — but Only Up to a Point

July 23, 2020John Banks

When someone says U.S. equities are historically expensive, what do they mean? It depends on the measurement being used. Different yardsticks will measure different things — and come back with different results. For example: It has been pointed out that, in 2020, there were 28 stocks in the S&P 500 trading above 10 times sales. That is a staggeringly high valuation. In the heat of the dot-com bubble, prior to the year 2000 bust, there were only 29. One could

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DENIAL: Deflation Exists Now, Inflation Arrives Later

July 22, 2020John Banks

In terms of a multi-year, big-picture forecast, there is a simple acronym to remember: DENIAL, as in, “DENIAL ain’t just a river in Egypt.” DENIAL stands for “Deflation Exists Now — Inflation Arrives Later.” Today the U.S. economy — and the global economy, too — are subjected to powerful and persistent forces of deflation. There is a combination of moderate deflationary forces that, when all put together, create a very strong force. The forces of deflation are so strong right

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How to Quickly Calculate Real Yields (Which Are Currently Negative)

July 21, 2020John Banks

In a June 1 TradeSmith Daily, we explained why, in a deflationary environment, the price of gold tends to go up. You can read that piece here. The short version is that, when things turn deflationary, the real yield on Treasuries turns negative. A negative real yield, meanwhile, is worse than a zero yield. If you are earning a negative amount, it is like going backward instead of forward. In these conditions, a yield of zero is better than a

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Copper is Heralding a Rise of FDR-Style Public Works Projects

July 20, 2020John Banks

Copper, like many other assets, has been on a tear lately. From the March 2020 lows through mid-July 2020, the copper price (as represented by Comex front-month copper futures) rose almost 50%. There is a widespread belief that rising copper prices are a signal for global growth. This makes sense historically because of copper’s natural role in the world. Copper has a nickname, “Dr. Copper,” because it is “the metal with a Ph.D. in economics.” The idea is that copper

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The Spectacular Twitter Hack is a Harbinger of Cyberwar

July 17, 2020John Banks

Twitter fell prey to a spectacular hack on Wednesday, July 15. It appears to be an “inside job,” with the hackers using a form of employee access to break into Twitter’s main database. The hack was spectacular not due to the amount of money stolen — a little more than six figures as of this writing — but rather the celebrity nature of the accounts compromised. The hackers sent out false tweets from, quite literally, some of the world’s most

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Bank Earnings Confirm What We Already Knew (About the U.S. Economy and Federal Reserve)

July 16, 2020John Banks

Earnings season is underway, and we heard from some of the largest U.S. banks this week. The reporting confirms what we already knew: There is no V-shaped recovery whatsoever, and the Federal Reserve is doing a lot for Wall Street (though not Main Street). Among the four banks we heard from — Goldman Sachs, JPMorgan Chase, Citigroup, and Wells Fargo — performance ranged from excellent to terrible, and the deciding factor was trading-desk activity. That is to say, if the

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Boom-Time Memories of a Bust Gone By

July 15, 2020John Banks

Try to guess the visionary entrepreneur we are thinking of based on the following clues: He is especially fond of the letter “X,” including it in things he has named. His net worth — at valuation in the tens of billions — put him on among the top 10 richest people on the planet. He once vowed to take the mantle of “world’s richest man.” He is a flamboyant showman who sells dreams — and has a global army of

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There is Plenty of Bullishness Here

July 14, 2020John Banks

On Monday of this week, your TradeSmith Daily editor was accused of being a “permabear.” Normally we don’t mind insults. Sticks and stones and all that. But the “permabear” label feels odd when, in truth, we are aggressively bullish right now, and have commentary and portfolio positions to prove it. In terms of TradeSmith Daily commentary, we have pounded the table — hard enough to break it at times — for Bitcoin and precious metals stocks in these pages. As

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How Silicon Valley Engineered a Retail Trading Mania

July 13, 2020John Banks

2020 will be remembered for kicking off a global pandemic. But it will also be remembered for a market mania, driven to a surprising degree by bored sports gamblers, millennials taking a flyer with stimulus checks, and day-trading retail investors new to markets overall. We know the Federal Reserve provided psychological support (through an implied promise to support markets no matter what). And we know the U.S. government provided fiscal support, what one might call “helicopter money,” via the first

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Lockdown-Related Market Risk is High and Rising

July 10, 2020John Banks

The U.S. stock market has benefited, tremendously, from a belief that the Federal Reserve will support the market at all costs. It has also benefited from a belief that, whatever happens next with the pandemic, the worst is over from an economic perspective. Investors are eager to put COVID-19 behind them. What happens, then, if multiple U.S. states implement new lockdowns, as hospital systems threaten to be overwhelmed (again) as COVID-19 fatality rates rise? “Up until now the U.S. has

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