Is a Soft Landing Possible? I Argue No…

I put the meme above together in Twitter this week, to illustrate something I’ve been contemplating about Federal Reserve policy. I’ve been following Jeff Snider for quite some time now, and he regularly questions the efficacy of central bank policies.

The summary of ideas I’ve gleaned from Jeff Snider’s work at https://alhambrapartners.com/commentaryanalysis/ is as follows. Please note that this is just my take from reading his work as well as other bond market/Macro takes from other sources in the RealVision crowd.

Basic background with QE and the fed funds rate:

  1. Central banks do not create money. Money is created by commercial banks in the banking system.
  2. Interest rates at the long end (US Treasuries) reflect the current rate plus growth expectations. Inverted yield curves such as the famous 2 year vs 10 year reflect negative growth expectations, predicting recession.
  3. Interest rates at the short end (US Treasuries) merely reflect predictions of the federal funds rate in the coming months.
  4. Quantitative Easing is merely an asset swap where banks exchange top tier interest-bearing collateral such as US Treasuries and Mortgage-Backed Securities for Bank Reserves on the federal reserve ledger. These reserves do not pay interest, and can’t be withdrawn, they can only be transferred to other banks with accounts at the federal reserve and they show up as a cash-like asset on their balance sheet.
  5. Central banks such as the fed spend a lot of time discussing perception of policy rather than reality. They never predict recessions. Their goal is mainly to convince people that the economy is doing great and they’ve got everything under control in order to bolster “animal spirits,” kind of like glorified stock market cheerleaders.
  6. QE works by convincing enough investors that they are “printing money” so that they pile into assets such as housing and money spills over into the real economy. This creates a virtuous spiral (aka asset bubble) where money is borrowed and plowed into assets which gain value, allowing more money to be borrowed against them to boost asset prices even more. This sounds a lot like what happened in Japan.
  7. Lower fed funds rates encourage banks to expand loans to credit-worthy borrowers at lower rates. This includes lower mortgage rates, as mortgage-backed securities are guaranteed by the federal government. Corporate bonds are also bid up both by investment banks and by investors reaching for yield. Deposits to the general public are cut because banks have less use for them, and private loans, credit cards, and small business loans don’t go down much. One of the biggest effects here is that liquid bond portfolios go up in value as these rates drop, so investment funds re-balance this money into the stock market to keep their stock/bond allocation ratios at their target levels.

Tightening policy with rate hikes and QT (fed balance sheet reduction):

  1. When the federal funds rate increases, it has a number of effects including:
    1. Reduces the value of liquid bond portfolios, requiring target funds to sell stocks and purchase bonds to re-balance.
    2. Feeds quickly into higher mortgage rates. These rates moved from a 2.8% average in July 2021 to 4.2% today. This puts pressure on housing prices by limiting what homeowners can pay and making investors wary of price action.
    3. Makes it more expensive for corporations to roll over their debt. This doesn’t seem to effect much as long as this debt can be rolled over. The danger is that rising yields my spark solvency concerns, shown by widening credit spreads, which can quickly snowball if it prevents this debt from rolling over, leading to defaults and reducing junk bond liquidity.
  2. When the government reduces the size of it’s balance sheet (QT), it has a number of effects probably best described here: https://fedguy.com/quantitative-tightening-step-by-step/
    1. Bank reserves are mechanically reduced. Here’s roughly how that works:
      1. Interest and principal payments on treasuries held by the federal reserve deducted from the treasury general account or the account of the mortgage broker.
      2. Banks transfer that money to the federal reserve in the form of “bank reserves” which are credited back to the federal reserve, and the quantity of bank reserves on the federal reserve ledger declines.
    2. Normally, these payments going to the federal reserve would immediately be replaced by new treasuries held by the bank. Short-dated treasuries still need to be rolled over, and the bank still needs tier 1 capital, so the banks end up purchasing these treasuries from the treasury general account.
    3. If the federal reserve decides to sell assets from their balance sheet to reduce it faster, these are purchased directly by the banks in exchange for their reserves.
    4. These banks can either build up treasuries on their balance sheets, sell them on the open market, or use repo transactions to lend them out or borrow against them.
    5. There is a psychological impact here as investors who were piling into assets such as housing due to fears that QE was highly inflationary money-printing start to worry about these assets declining in value.

In short, my view here is:

  • QE/QT is mainly psychological and doesn’t otherwise affect much. Essentially nothing much happens until investors start to worry about declining asset values enough to spark an avalanche of selling.
  • Rising interest rates increase the danger in the financial system by making it more expensive to borrow on assets: mortgages, margin debt, repo operations, and other forms of leverage. This is initially absorbed by the system with little direct effect until it finally starts an avalanche effect as assets are sold to reduce leverage, then more are sold because they are going down, then margin calls hit and values drop like crazy.
  • Both of the effects above are roughly binary. They do nothing until a threshold is met, then they do a lot. The federal reserve has a history of tightening until something breaks, and that is what they will do again.

Finally I should mention a few things about the CPI:

  • When people or the federal reserve talk about “inflation,” they generally mean the latest CPI reading.
  • CPI can spike higher due to supply shocks such as oil shortages, demand shocks such as one-time stimulus checks combined with a rush to fix up home offices, or excess money supply.
  • Supply and Demand shocks are generally considered “transitory” because a free market will adjust to produce more of what is demanded while people with crimped budgets will spend less elsewhere.
  • If free markets are not allowed to adjust because we are not allowed to drill more oil or mine more metals and we can’t produce the fertilizer to grow more food, then the costs of these items grow fast by crimping demand.
    • As prices rise, people heat their homes less, businesses shut down because they can’t afford the input costs, poor people get less to eat, and so on until demand is reduced enough.
    • This is the dreaded stagflation where the economy is terrible and everyone has to adjust to having less. Essentially this is where we are now.
  • Monetary inflation is quite different. Currency becomes plentiful and easier to get leading to rapid demand-driven growth in pretty much everything. Companies want to expand production, they have the power to charge more and they can pay more, it becomes more difficult to save, everyone wants to borrow and no one wants to lend so interest rates are pressured higher especially at the long end. With 30 year treasury yields at 2.4%, this is clearly not the case.
  • Hyperinflation is different than all of the above. This is when the government is pumping money into the economy like crazy to pay for everything. Government employees, businesses, etc. are paid ever higher sums as the economy deteriorates and people lose faith in the currency altogether. You see poor people burning physical cash for heating, that sort of thing. This is definitely not the case.

Now its time for some charts. The federal reserve is raising rates and conducting QE to reduce the high CPI after all, so here’s how that typically works:

Here’s my latest portfolio allocation:

  • HEDGES (7.4%)
    • 7.0% TLT Calls
    • 0.4% SPY Puts
  • PRECIOUS METALS (40.8%)
    • 7.0% AG (Silver), calls
    • 2.8% SAND (Gold, Silver & others), calls
    • 6.0% EQX (Gold), calls & shares
    • 3.7% LGDTF (Gold)
    • 4.2% SILV (Silver)
    • 4.0% SILVRF (Silver)
    • 3.2% MTA (Gold & Silver)
    • 2.9% MGMLF (Gold)
    • 1.8% RSNVF (Silver)
    • 2.2% SSVFF (Silver)
    • 2.2% HAMRF (Gold)
    • 0.7% DSVSF (Silver)
  • URANIUM (22.7%)
    • 10.8% CCJ, mainly shares & some calls
    • 3.4% UUUU
    • 3.6% UEC
    • 1.8% BQSSF
    • 1.7% DNN
    • 1.4% ENCUF
  • US CANNABIS (14.6%)
    • 1.7% AYRWF
    • 1.9% CCHWF
    • 1.9% CRLBF
    • 2.0% CURLF
    • 1.8% GTBIF
    • 1.7% TCNNF
    • 1.9% TRSSF
    • 1.8% VRNOF
  • BATTERY METALS (1.9%)
    • 1.3% NOVRF
    • 0.6% PGEZF
  • CRYPTO (1.1%)
    • 1.1% XRP
  • OTHER (0.5%)
    • 0.4% OGZPY
    • 0.1% ATCO calls
  • CASH (11.1%)

It’s been a big week, though my portfolio value ended up flat. I had been planning to build up a lot more cash this week, which I often do by selling covered calls.

I was happy to find that all of my covered calls had landed in the money, reducing my precious metals exposure by 3% and my Uranium exposure by 9%. Meanwhile, I added a bit to TLT calls (which lost value) and made my first jump into Battery Metals.

I had originally planned on waiting a year or so before putting much into battery metals as I was worried about an enormous reduction in demand from China as their property sector de-leverages as well as a potential recession here. What changed my mind was the catalyst of the fallout from the Russian invasion of Ukraine. Commodity production is already highly concentrated from severe underinvestment in the west combined with increasing demand to for ESG projects like wind, solar, and electric vehicles. Just like the Sprott physical Uranium fund became the catalyst to drive the chronic undersupply forward in that market, the enormous disruptions from Russia and Ukraine are catalysts for a number of other commodities already in chronic undersupply, including Nickel. I saw some of these battery metals names, with production in North & South America, still trading at severely beaten down prices compared to a year or two ago and I decided I’d better get a starting stake now.

As for my hedges, I think I’m going to stick with TLT calls for the most part. The way I see it, TLT will slowly decline until recession hits (not when its announced; they are always announced and dated by NBER a year or so later) and then it will spike higher. TLT calls tend to be cheaper for the move and you lose less money waiting for them to expire worthless. Puts will exhibit a similar spike effect but the timing isn’t as reliable and you burn more money waiting for them to expire worthless. However, I do think shorter-dated SPY puts can be valuable in playing technical or sentiment-driven market moves. This last week, I purchased a 1-week put prior to the fed meeting in case of a 50bp hike, then sold it the next morning when that didn’t happen for a $120 loss, then purchased a 2-week put end of day Friday assuming that the bounce was temporarily done. I plan to sell it before expiry and it is more of an attempt to follow the market than a hedge, but it still functions as a hedge when it’s on and it costs less to run it that way.

I do think a recession this year is pretty much a given, seeing as how consumers will have to crimp spending due to hefty increases in gas, food and rent so I don’t see how consumer demand is supposed to make up for the enormous reduction in fiscal spending as stimulus checks and unemployment boosters are a thing of the past. This is reflected in the extremely low yields of long bonds, despite the high CPI readings, and the inversions building on the curve. The 20Y-30Y, 7YR-10YR & 5YR-10YR have inverted, but the famous indicator is the 2YR-10YR which hasn’t inverted yet. Once it does, I think I should pile into a lot more TLT calls. Until then, I want to be patient and slowly accumulate long-dated TLT calls because it could easily head lower.

That’s all for now, good luck and happy trading!

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The long-awaited Fed hike

Mar 15-16 is the next meeting at the Federal Reserve, where they are expected to make their first 25 bps rate hikes. How much they hike and how the market reacts will determine a lot.

IMO, the fed will hike 25bps, announce a slow rolloff of their balance sheet (QT), and try to sound hawkish.

I expect front end rates to rise a decent amount afterward, bringing TLT to its next inflection point where it will trend steadily higher as interest rates invert, leading economic indicators struggle, and the economy slows as CPI remains sticky. The sticky CPI will be due to the lagging nature of the large housing measure and the stubbornly expensive oil as the administration makes token gestures to lower it will refusing to complete the gulf auctions or allow for new fracking wells. This will result in significant shortages such that the economy would have to fall back to covid lockdown levels in order to curb demand enough to reduce the price. Meanwhile, emerging markets will really struggle as commodity shortages (particularly food & fuel) combine with dollar shortages and cause major problems.

The chance of a serious deleveraging event this coming month is significant. At the same time, blind money flows should continue into US stocks from corporate buybacks and 401k flows into passive funds. The S&P 500 will not go flat, it’ll be more like the elevator down then stairs up we saw in March 2020.

I’m not confident at all how it will move really, so I’m leaning towards Jan 2023 TLT calls as my primary hedges – with the added benefit that the best time to add to them will be after the fed spooks markets to the hawkish side. It’s possible that the Fed comes out too dovish, in which case my gold, silver & uranium miners should do very well, but my current plan is to have a significant amount of cash on hand by the end of the week.

Here’s my current portfolio. It’s been a fantastic month for it to be honest, up 2.9% on the week, 23.8% since February, but only 5.4% on the year (January was rough).

  • HEDGES (7.3%)
    • 7.3% TLT Calls
  • PRECIOUS METALS (43.6%)
    • 2.7% AG (Silver), shares
    • 6.8% AG (Silver), calls
    • 3.0% SAND (Gold, Silver & others), calls
    • 5.8% EQX (Gold), calls & shares
    • 3.7% LGDTF (Gold)
    • 4.2% SILV (Silver)
    • 4.0% SILVRF (Silver)
    • 3.1% MTA (Gold & Silver)
    • 3.0% MGMLF (Gold)
    • 1.9% RSNVF (Silver)
    • 2.4% SSVFF (Silver)
    • 2.4% HAMRF (Gold)
    • 0.8% DSVSF (Silver)
  • URANIUM (32.0%)
    • 15.5% CCJ, mainly shares & some calls
    • 7.4% UUUU
    • 3.9% UEC
    • 2.0% BQSSF
    • 1.8% DNN
    • 1.4% ENCUF
  • US CANNABIS (12.4%)
    • 1.6% AYRWF
    • 1.6% CCHWF
    • 1.6% CRLBF
    • 1.6% CURLF
    • 1.4% GTBIF
    • 1.6% TCNNF
    • 1.5% TRSSF
    • 1.5% VRNOF
  • CRYPTO (1.1%)
    • 1.1% XRP
  • OTHER (0.6%)
    • 0.5% OGZPY
    • 0.1% ATCO calls
  • CASH (2.2%)

I’ve been slowly selling down my precious metals exposure the last 2 weeks, mainly just selling off some of my Jan 2023 call positions to lock in some profits. I think these will be great positions this coming decade, but I am a bit nervous about a deleveraging event. Still, the price action looks remarkably bullish as gold takes a shot at the highs following a long ~18 month basing pattern. The miners are lagging of course. May seems to be a great month for the miners, so maybe I could go to all shares/no long calls around then.

For Uranium, I’ve been much more aggressive about selling covered calls into the move. I have a lot of covered calls expiring March 18th, which I’m expecting will boost my cash position next week. In total, I have 4 covered calls in CCJ and 5 in UUUU which I expect to expire in the money this week, 4 in AG and 5 more in UUUU which might expire in the money this week (they are close), and then another 5 UUUU and 11 UEC covered calls which expire in April. If price really rockets this week, I might sell all my long dated CCJ calls. I’ll still have plenty of uncovered upside exposure, and I’m still very bullish on the sector, but I am trying to play it a bit safe and have plenty of excess cash this next month to prepare for a pullback without selling everything.

With US Cannabis, I just intend to buy more shares to a limited extent every time they make new lows to make the market value stay about even and then let them fly once they move higher. A stiff recession will make the anticipated “safe banking” type legislation more likely as our congress can use the anticipated tax gains from that to offset something they want to spend money on.

Aside from the above, I’ll probably add to my collection of TLT calls this week as I expect it to hit new lows. I added a couple last week, sticking with the Jan 2023 calls. I really do expect a significant move higher in TLT over the next year as something breaks in the financial system and long-dated treasury yields once again test toward the downside, but it is a very slow market. The way I see it now, I could lose 7.3% of my portfolio value if they expire worthless, but if a Russian default combined with the Evergrande Chinese property defaults and general emerging market weakness causes another LTCM-type blowup then we could see TLT spike to 170 on a risk-off move. If that happens, that small 7.3% portfolio allocation I have gives me (28) TLT calls, which would provide quite a hedge. Perhaps I should up that allocation to 12% and get some serious upside potential.

If Crypto tanks end of month, which I kind of expect, I am planning to increase my XRP exposure a bit. Anyway, that’s my current plan. Hard to make any moves in this crazy environment where volatility is high, liquidity generally low, and valuations make no sense whatsoever.

All I know for sure is markets will move a lot and I’ll need to make some significant bets if I ever want a chance of winning a decent retirement or maybe even an early one. Besides, win or lose, it’s fun to write about. Happy trading everyone, and good luck with the crazy month ahead.

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End of Cycle

I’ll start with a relative rotation graph of the major sectors. You can create one at stockcharts.com:

By far, the best performer is the energy sector, XLE. Next in line you have the biggest dividend safety plays, consumer staples & utilities. This feels a lot like 2008 when everyone was talking about oil hitting $150/barrel; classic end-of-cycle behavior before high priced commodities and negative real wages put a serious crimp into consumer demand and push us into recession.

I’m still predicting we start to see a serious stock market breakdown around the last week or two of the month. I’m fine calling it a hunch. There are plenty of reasons for a coming slowdown, including the fiscal cliff as the massive stimulus propping up markets in 2020 and 2021 is gone, mortgage rates are going up, the ban on foreclosures and evictions which helped keep the housing market artificially tight is gone, and the negative real incomes crimping sales growth.

There are plenty of signs of a coming slowdown, such as the inverted eurodollar futures curves you can see here: https://alhambrapartners.com/2022/03/03/the-rate-hikers-are-not-serious-people/

You’ll likely hear about the wonderful jobs numbers, but there are problems with those as well:

  1. Employment is a lagging indicator.
  2. The high numbers posted encourage more aggressive actions by the federal reserve this month.
  3. The crazy revisions make this latest data point useless. Read this for details: https://alhambrapartners.com/2022/03/02/bls-need-to-smooth-payroll-data-adp-hold-my-beer/

Anyway, I believe end of cycle is coming as we switch from inflationary boom to inflationary bust to disinflationary bust. My plan is still to wait until the fed actually announces the end of quantitative easing, initiates the first rate hikes, and talks about future balance sheet reduction. When will that be?

“Fed Chairman Jerome Powell on Wednesday said the central bank intends to raise its policy interest rate following the end of its two-day meeting on March 16”

Once that actually happens, I intend to load up on hedges which will most likely be more TLT calls, but may include puts in SPY or QQQ. Most likely I’ll stick with TLT calls as I expect that to be the inflection point before long dated treasury yields feel serious downward pressure, and I expect that the trade won’t be crowded.

Puts can get quite crowed on the other hand, and the structural dynamic of price-insensitive cash flows from payrolls into passive funds and corporate share buybacks are powerful forces to fight. I wouldn’t be surprised if puts purchased then actually lost money because they were overpriced and the market didn’t move down enough to cover the premiums.

My current portfolio allocation:

  • HEDGES (10.2%)
    • 10.2% TLT Calls
  • PRECIOUS METALS (45.9%)
    • 2.6% AG (Silver), shares
    • 6.5% AG (Silver), calls
    • 5.3% SAND (Gold, Silver & others), calls
    • 6.0% EQX (Gold), calls & shares
    • 4.2% LGDTF (Gold)
    • 4.6% SILV (Silver)
    • 3.4% SILVRF (Silver)
    • 3.2% MTA (Gold & Silver)
    • 3.1% MGMLF (Gold)
    • 1.8% RSNVF (Silver)
    • 2.3% SSVFF (Silver)
    • 2.1% HAMRF (Gold)
    • 0.9% DSVSF (Silver)
  • URANIUM (29.2%)
    • 14.1% CCJ, mainly shares & some calls
    • 7.1% UUUU
    • 3.3% UEC
    • 1.9% BQSSF
    • 1.6% DNN
    • 1.2% ENCUF
  • US CANNABIS (13.6%)
    • 1.7% AYRWF
    • 1.8% CCHWF
    • 1.8% CRLBF
    • 1.7% CURLF
    • 1.6% GTBIF
    • 1.8% TCNNF
    • 1.8% TRSSF
    • 1.6% VRNOF
  • CRYPTO (1.0%)
    • 1.0% XRP
  • OTHER (0.6%)
    • 0.5% OGZPY
    • 0.1% ATCO calls
  • CASH (-0.5%)

I actually had a good week, as my portfolio value climbed by 7.4% bringing me into positive territory for the first quarter this year. I hate to say it, but the crazy Ukraine invasion and aftermath actually did a lot to help my gold, silver, and uranium miners. When I bought Gazprom (OGZPY) early into this, I didn’t think that Russia would move past the Luhansk and Donetsk regions or that we would sanction Russia so heavily. That’s down 80% and may end up worthless, but now many western nuclear utilities need to scramble for uranium supplies and enrichment facilities outside of Russia. Meanwhile, energy independence is becoming a political rallying cry as commodity prices soar.

The news for my Uranium miners is insanely bullish, and money has been pouring into the ETF’s which will need to purchase the mining shares. Despite this, I am really nervous about a potential end-of-cycle market crash so I sold a lot of Mar & Apr covered calls on my Uranium miners this week. Then last night I saw tweets about Russia attacking Nuclear plants and blowing them up, so I came in an hour or so into Friday’s trading and picked up another Jan 2024 CCJ call which put my cash allocation back in the negative. On the March 18 options expiry, I should lighten up on Uranium miners considerably as many of the covered calls I sold expire, some of which will expire in the money unless the sector really tanks before then.

My strategy on gold and silver miners is wait and see at this point. Gold and Silver are acting wonderfully as risk-off hedges, showing inverse correlations to the overall stock indices, but the miners have been lagging considerably and I am still quite negative on a lot of my holdings there. If the federal reserve is perceived to be too dovish, these should soar, and if the federal reserve is perceived to be too hawkish, I expect them to fall less than the overall stock market. I’m nervously bullish on these, but if we are approaching end of cycle, then they will come under pressure and they won’t really soar until the beginning of the next cycle gets started.

For US Cannabis, there’s a reason I’m not pushing my allocation much higher than it is. The sector is still bottoming, and my trading strategy here is to buy the bigger dips just enough to keep my individual holdings above a fixed market valuation and then wait for the big legislation. That strategy did have me buying more shares this week as they fell in a general risk-off move. Ultimately, I think these will pay off handsomely if I can keep this strategy going to ensure that I’m buying at the absolute bottom, but that requires an amount of ready cash that is fairly easy to manage at a 15% allocation but becomes extremely difficult to manage if my allocation grows much higher.

Good luck, and be careful out there. Market liquidity is fairly low leading to very choppy moves, including days which see markets plunge 1-2% after open only to close 1-2% higher. These moves will chop up bears and bulls alike.

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Geopolitics & Trading

I’ll start by saying that a big part of the reason I can’t stand legacy news, like that on typical television, is that I can’t stand hollow emotional narratives. To me it just feels manipulative and divisive. The reality is we aren’t individually in control of anything except our own interactions with others, and whether those are civil or not. That being said, the nuggets I have gleaned from the situation so far are as follows:

  1. As of yesterday, the Russians have moved in from 3 fronts, but they mainly focused on regions near their borders which have little resistance.
  2. The Russians seem to be targeting airbases and air defenses to ensure air superiority on their side.
  3. The goal seems to be regime change, hence the focus on Kiev. This is why Putin says that far-right neo-nazis have taken control of Ukraine, in order to justify that move. The current leadership is too pro-Western, and he will not allow certain border countries he deems critical to join NATO.
  4. Russian dominance of its key border regions – Kazakhstan, Georgia, Ukraine & Belarus – is not new and unprecedented, it has been the case for hundreds of years from the Russian Empire, to the Soviet Union, and continuing through the period following Soviet dissolution. I’m not saying this is right, I’m just saying that this is the case and it does not mean we’re on the eve of world war 3.

It’s been an insane week in the markets, with lots of chop. Before the invasion, I actually thought that things would settle down. Russia is a critical supplier of fuel and food to the rest of the world, and consequences of abruptly ending that trade would be devastating. At the same time, the West made it clear that they would not interfere militarily, so I thought it would force a private agreement between Purin and Zelenskyy to give the Russians the assurances that NATO couldn’t give.

I was not alone in this view, and two nights before the invasion I decided to look at some Russian stocks as a gamble for peace. I came up with the ETF’s LETRX & RSX as well as OGZPY. Ultimately I decided to go with the higher dividend play on Gazprom, so the next day I bought some OGZPY. Before the end of the trading day, I also bought 2 well out-of-the-money calls in SPY, betting that the deeply oversold stock market would shoot higher.

The next day I was certainly surprised by the invasion. Partly due to stubbornness, I added a bit more OGZPY at super-cheap prices that morning figuring that the US and Europe could not afford to cut off Russian oil and natural gas anyway. That turned out to be a decent bet so far, though I’m still down in the position overall, but I’m not adding more because it is currently a high risk/high reward play. If we prevent US ownership of Russian stocks, I could lose most of what I put in there. If things settle down geopolitically, then its current price of $5.30 sports a P/E of 2.8 when our S&P 500 has a P/E ratio of 24, and a dividend yield of 6.4%. In other words, Gazprom is crazy cheap because of the risk that you could lose nearly everything you put in, but you could earn multiples if geopolitical events settle, so I plan on holding my small position to see how things play out.

On Friday, we surprisingly got that oversold bounce I was looking for on the S&P 500 and I managed to sell off my SPY calls for a near double. The choppiness here is insane. I still refuse to speculate on puts until mid March, as I see the risk of a low-volume melt higher as bigger than the risk of a market crash before the Federal Reserve really turns from easing to tightening.

Back to Russia … when looking at the potential geopolitical consequences of cutting Russia off from Swift and banning their oil & gas exports, consider the following:

This chart below shows what really led to this crisis. Russia has been planning to re-assert its influence on the Ukranian government since 2014, and hoping to do it with minimal international repercussions, but this is the opening that caused them to make a big move now. https://tradingeconomics.com/commodity/eu-natural-gas

This spike in European energy prices has led to unprecedented CPI spikes which make CPI in the US look tame. Either way, they are enormously unpopular as they force reduction in power by pricing the lower end out of access to home heating and destroying their industrial jobs such as manufacturing which require a lot of power usage. Could you imagine blackouts & brownouts throughout Europe throughout the entire winter? The humanitarian consequences could be devastating, and it piles on top of the critical worldwide shortages of fertilizer which will create a major food crisis starting this coming fall.

As you can see, the problems here became clear back in September. Has the west taken any of this seriously? Not really. Germany went ahead and shut down 3 of its last 6 nuclear power plants last year, with the last three due to shut down this year. They built plenty of wind and solar, but aside from the intermittent nature of this production requiring a large natural gas and coal power backup, it only produces about 1/4 of it’s rated capacity on average. The solution, more of the same peppered with asset bubbles driven by QE – as if raising the cost of housing would somehow help their situation.

How about the US? We don’t take it seriously either. Just 2 days ago we delayed any leases of US land for oil drilling, after the auctions we had last year were cancelled in court. We produce much less oil and natural gas than we did in 2019, and we won’t allow the expansion of LNG facilities to export more of it. Meanwhile, we still have environmental groups targeting key critical infrastructure and pipelines to force shutdowns with no replacement available. I often wonder what their real goal is here. Do they really think it helps the environment to import high-energy manufactured goods and fuel from countries overseas which don’t have our environmental and labor restrictions? Do they really think that they can starve the bottom of our society of basic needs such as food, shelter, heating and transportation for the good of the environment without serious geopolitical ramifications both domestically and internationally? I don’t know.

My favorite read on these subjects here: https://doomberg.substack.com/ likes to say “energy is life.” He’s right.

Anyway, I’ll sum up by saying that cutting off energy supplies from Russia would cause a humanitarian crisis in the West with limited gain as they would just accelerate their pivot to exporting primarily to China.

Anyway, here’s where my portfolio wound up:

  • HEDGES (7.7%)
    • 7.7% TLT Calls
  • PRECIOUS METALS (43.3%)
    • 2.6% AG (Silver), shares
    • 5.7% AG (Silver), calls
    • 4.4% SAND (Gold, Silver & others), calls
    • 5.0% EQX (Gold), calls & shares
    • 3.9% LGDTF (Gold)
    • 4.4% SILV (Silver)
    • 3.6% SILVRF (Silver)
    • 3.3% MTA (Gold & Silver)
    • 3.2% MGMLF (Gold)
    • 1.9% RSNVF (Silver)
    • 2.2% SSVFF (Silver)
    • 2.2% HAMRF (Gold)
    • 0.9% DSVSF (Silver)
  • URANIUM (29.4%)
    • 14.0% CCJ, mainly shares & some calls
    • 7.3% UUUU
    • 3.3% UEC
    • 1.8% BQSSF
    • 1.6% DNN
    • 1.3% ENCUF
  • US CANNABIS (15.6%)
    • 1.8% AYRWF
    • 2.0% CCHWF
    • 2.1% CRLBF
    • 1.8% CURLF
    • 1.9% GTBIF
    • 2.0% TCNNF
    • 2.0% TRSSF
    • 1.9% VRNOF
  • CRYPTO (1.1%)
    • 1.1% XRP
  • OTHER (2.6%)
    • 2.5% OGZPY
    • 0.1% ATCO calls
  • CASH (0.3%)

My overall portfolio value didn’t change much and I didn’t trade much this week either. My Uranium miners went up while gold & silver miners consolidated, US Cannabis retreated a bit along with my TLT calls. Be ready for more choppy behavior and fierce rotations under the surface these coming weeks. I still think it’s too early to be bearish.

Good luck, and please don’t get carried away with emotional narratives. Be especially wary of any stance which lacks the ability to tolerate dissenting views.

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Gold breakout continues as stocks struggle

It’s been an interesting week. Gold continued higher, silver started to join, but the junior miners pulled back Friday to end the week roughly flat. Meanwhile, stocks are still chopping lower. A month ago I mentioned that I really needed to reduce precious metals a bit, and for weeks I’ve been talking about reducing my margin to zero and my cash balance to positive. This week I finally got that done. Next reduction will be in Uranium miners if I get that risk-on rally between now and mid-March.

The chart above is a 2-month candle-glance view (free tool at stockcharts.com) of the benchmark SPY index and my overall sectors. Today I’ll go over my outlook for each.

S&P 500 (SPY):

I’m still expecting violent chop going for the next 2 months with wild swings in both directions. We might see a new peak like the NASDAQ in March 2000 or we might see a chop lower like the S&P 500 in 1994. Either way, I’m expecting that the market won’t take a serious move to the downside until mid March after the fed tightens. At that time I might load up on “Hedges” which would be TLT calls and/or SPY puts, but I don’t want to risk loading up on them too early.

At the same time, if you look at the Nikkei 225 in 1990, it peaked around Christmas 1989, consolidated a leg lower through Feb 18, then plunged never to return. I still think the seasonal forces in the US market seasonal tend to favor crashes in March-April or September-October due to our peculiar buying, tax, and regulatory patterns, this does remain a distinct possibility. That is why I don’t want any exposure to the S&P 500 at this time and why I want to keep a positive cash balance in my trading account.

Last thing I’ll note here is that positioning and sentiment seem to be overly bearish in the S&P 500, at a time when liquidity is fairly low (smaller buys cause bigger swings in price). At the same time, the fed is still easing. I expect this to morph into a significant rally in coming weeks as short positioning is forced to change. The last leg in a bull market isn’t necessarily euphoria or fear of missing out, it’s more of a final flush of bearish positioning as investors who saw the signs and decided to make money on the downside are forced to cover those positions.

US 20+ year tresuries (TLT):

As you can see on the chart above, the overall trend for TLT is still lower despite the recent bounce. At the same time, we can’t see interest rates go markedly higher because of our enormous debt levels, particularly in the US Corporate market. Right now everyone is preparing for tightening policy by the federal reserve once the QE program stops in mid March. They are expected to follow the end of QE with immediate rate hikes, and then steadily hike rates and possibly reduce it’s balance sheet (QT) in following months.

Note that TLT tends to spike in a risk-off period. When money is drying up in the system, investors start worrying about the capability of corporations to roll over their maturing debt, and they start to sell stocks. There is always money looking for a home in the financial system … if stocks sell into money market funds, then those invest in treasuries to provide a yield. You get a combination of things happening as treasuries become the only safe and liquid instrument with positive nominal returns while funds who are short bonds have to buy back in, the regulatory demand remains, and treasuries shoot higher. US Treasuries are also the only market that the Federal Reserve can act in immediately without petitioning the government for new tools.

Right now, we are not seeing a risk off period yet. Stocks are not at the peak, but the main indexes aren’t much lower either. Many are worried about inflation as stocks and bonds struggle, and they are looking for defensive sectors and even precious metals as a result. In a real risk-off event, like we saw in March 2020, everything goes down against the US dollar. We seem to be firmly at the late stage of final rotations as people contemplate high oil prices which show no signs of abating despite a weakening economy. This will change, but I just expect the tipping point to come next month.

Precious Metals Miners:

This sector remains my biggest holding partly because its defensive. When we enter a recession and everything slows down, base commodities can really dump while gold and silver are more resilient. I am not convinced that these will rocket higher this year, and I fully expect them to drop in a true risk-off event, yet I remain bullish over the next 5-10 years for the following reasons:

  1. Mining is highly cyclical, and the amount of investment into mining anything has plummeted during the decade starting in 2012. Modern ESG investing makes it even harder to allocate money into building new mines. In addition, it takes many years for investment in a known mineral field to become a producing mine. This goes for the entire mining sector including base metals as well.
  2. Gold is getting much more difficult and costly to mine, as newer mines have to be deeper or work in thinner zones (less gold per ton of processed rock), which exacerbates the problem above.
  3. Trade is balancing away from the US dollar. This is done for a couple of reasons; many countries do not like the boom-and-bust cycle of foreign investment that goes with a dollarized world, and many countries see the US using the dollar as a weapon with sanctions against countries like Iran. No currency is capable of replacing the US dollar in this role, so it is primarily done with bilateral agreements in different currencies such as between Russia and China. As this progresses, gold will gain some promenance as the only liquid central bank asset which does not hold the same kinds of country risk. Every country that has actively worked to reduce it’s dependence on the US Dollar has increased its gold reserves.
  4. Silver has unique electrical uses in small switches and such which has rapidly growing industrial uses, especially regarding wind & solar, batteries, smart devices, etc. A typical iPhone holds around 0.34g of silver, and that adds up.

My plan is to keep holdings in this sector over the next decade while trading around it by increasing my allocation with long-dated call options and such at perceived low points and reducing my allocation by selling these for shares and selling covered calls at perceived high points.

Uranium Miners:

This sector is set to see significant growth over the next 40 years. Check out this inteview here if you want to go over the basics and some of the exciting developments in the sector:

Some of the developments:

  1. Increasing trend of extending the life of existing plants in countries such as the US and Europe.
  2. Japan is slowly but steadily returning its nuclear power plants to use.
  3. Nuclear and Natural Gas are considered sustainable in the EU now, and France has announced a plan to start building 6 more 650MW reactors.
  4. China is rapidly building nuclear power plants.
  5. SMR’s, which are set to deploy around the end of the decade, will revolutionize energy. Some things under development here:
    1. Capacities from 50-500MW. Some have scaling power ability by storing extra heat in the liquid sodium coolant to allow a 350MW reactor to give off up to 500MW power for up to 5 hours. This makes it much easier to scale nuclear with intermittent solar and wind power – we rely on natural gas, oil and coal power for that today.
    2. Factory production capability, as these reactors can be produced offsite and then shipped to location like large airplanes or ships, which will streamline production and regulatory approval per unit.
    3. Coal plants can be shut down with the power units replaced by these modular reactors, using that existing infrastructure to link to the grid and produce power without the emissions.
    4. Safety features such as passive cooling systems which make these units much safer than any previous reactors.
    5. Long fuel life, as many designs use ~20% enriched fuel which can produce power steadily for 20 years without replacement.
    6. Many SMR designs are made to use recycled fuel like some of the French reactors in order to reduce nuclear waste.

Right now, the biggest catalyst for Uranium miners has been the Sprott fund taking physical Uranium off the spot market to drive it’s price higher. They already have $1.9 billion in assets, they are already being added as holdings in major uranium ETF’s, and they are set to list on the NYSE in the 3rd quarter this year (2022). This should produce a monster move in the sector, hence my high weighting.

Uranium miners are very volatile and are dominated by retail investors, so you can expect high volatility and massive swings. Similar to my strategy with precious metals miners, I plan to increase my exposure at perceived lows and decrease it after rapid moves higher.

Unlike precious metals these stocks have fairly high beta – meaning they are a risk-on play which goes up and down when the rest of the market does. As such, I plan to reduce in coming weeks if we get the major risk-on rally I’m expecting – which should give me serious room to get longer if we get the later risk-off move I’m expecting.

US Cannabis:

The US Cannabis sector is extremely high growth, yet it is barred from most banking services and many large investment firms are not allowed to invest there. Many US politicians are building up investments and pushing legislation which would allow these companies full access to the banking system and NYSE. This is an issue that has increasing bipartisan support, as they eye the potential tax revenues and they lack the immediate indignation seen during the “war on drugs” era. I see this as a chance to buy into major alcohol producers just before the end of prohibition, a high-growth non-cyclical money machine.

As we wait for this legislation to happen, the stocks are heavily driven by the sentiment of heavy retail investors which drove the sector to a lofty peak in Feb 2021 from which it has been falling ever since. Meanwhile, the companies continue their rapid growth, more states legalize sales, and more pressure continues.

My approach here is quite different from that of the miners. From the moment I entered this sector I treated it differently, more as a slow but steady dollar averaging into a falling asset in a mechanical price-based way. I’m not looking to play the swings here, and I don’t intend to reduce any of my positions until after institutions plug in, yet I want to be able to add in periods of extreme weakness. I accomplish this by keeping a smaller weighting in this sector.

I actually haven’t purchased any US cannabis shares since the last low on 1/24, and I don’t plan to add any more shares unless we see those prices again after a major risk-off. I never reduced or sold any US cannabis shares either. I think of this sector as a falling knife looking for a bottom, with catalysts in place to shoot it to incredible heights once that bottom is in. I don’t expect to be able to time this right, so I am using a much more cautious buying approach without the trading.

CRYPTO/OTHER:

I don’t talk about crypto much, but I view it as a highly speculative risk-on play. As such, I would expect to see it soar higher along with the S&P 500 in coming weeks, and to crash hard along with the S&P 500 in the mid March-April timeframe. This sector is extremely volatile, and I don’t trust it for a long-term hold, but it provides fantastic opportunity for exposure to risk-on upside at key points. My holdings in XRP are along with friends who are speculating that once Ripple’s court case finishes it will be easier for US investors to hold again as they are once again allowed to purchase through easier onramps such as Coinbase and Robinhood. I see it as a high risk/high reward play which could go up 10x or drop to near zero and stay there, so I have a small allocation.

As for ATCO, that is simply a speculation using highly out-of-the-money August calls based on a RealVision interview which was very bullish on shipping based on higher rates being sticky as these companies sell below book value of their ships.

I like to throw in some high-risk, high-reward bets like this from time to time. Many of these go to zero, like my 1-month calls in AG and UEC expiring in January as I expected it to be a good month for commodities, my calls in meme stonks like SDC in November as that is a seasonally strong month for the S&P 500 and I thought we could get another meme squeeze. Some of these win, like the $300 in XOM calls that turned into $2000, or $500 in CCJ calls last August that turned into $5000. I expect I’m losing on these bets overall, but not by much. I also feel like I’m getting better at picking them, and I like the feeling that I have a chance of an outsized win.

Anyway, here’s where my portfolio ended up. I’m very happy to have a positive cash balance back as it takes the pressure off … it allows me to potentially wait through a downturn or even buy at a crazy oversold low like I did on 1/24.

  • HEDGES (8.8%)
    • 8.8% TLT Calls
  • PRECIOUS METALS (44.2%)
    • 2.7% AG (Silver), shares
    • 6.3% AG (Silver), calls
    • 4.1% SAND (Gold, Silver & others), calls
    • 4.7% EQX (Gold), calls & shares
    • 4.2% LGDTF (Gold)
    • 4.4% SILV (Silver)
    • 3.9% SILVRF (Silver)
    • 3.4% MTA (Gold & Silver)
    • 3.3% MGMLF (Gold)
    • 2.0% RSNVF (Silver)
    • 2.1% SSVFF (Silver)
    • 2.4% HAMRF (Gold)
    • 0.8% DSVSF (Silver)
  • URANIUM (25.9%)
    • 12.6% CCJ, mainly shares & some calls
    • 6.3% UUUU
    • 2.8% UEC, shares & some calls
    • 1.7% BQSSF
    • 1.4% DNN
    • 1.2% ENCUF
  • US CANNABIS (17.4%)
    • 2.1% AYRWF
    • 2.1% CCHWF
    • 2.5% CRLBF
    • 2.2% CURLF
    • 2.2% GTBIF
    • 2.3% TCNNF
    • 2.0% TRSSF
    • 2.2% VRNOF
  • CRYPTO (1.2%)
    • 1.2% XRP
  • OTHER
    • 0.1% ATCO calls
  • CASH (2.3%)
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Another Nervous Gold Breakout

You’ve probably heard about the rough week in markets from the perspective of the tech-heavy indexes, but it’s actually been fantastic for precious metals and Uranium. I can’t help but wonder though whether that geopolitical spike we saw on Friday will fade like all the other attempted rallies or if it’s really getting set for a breakout.

It has actually been a fantastic week for my portfolio performance. With my heavy allocation of small cap stocks peppered with large swaths of long-dated call options, my volatile portfolio is actually up 12.5% on the week. Don’t get me wrong, they’re still way down on the year. In fact, I was disappointed to find that my portfolio value 2 weeks ago was about the same as it had been when I started logging it back in October 2019, despite all of the money I’ve been plowing in from paychecks in the interim. Still, I like to think that patience will eventually pay off in these unloved sectors, and that outsized gains are ahead.

The way I see it, I need to pile on serious risk if I want to get anywhere. Logging about it, tweeting about it, and writing about it helps me beat down emotions and navigate this minefield of risk with an optimistic outlook. You really have to be nimble with your thinking to survive the world of investing. The dot-com crash followed by the great financial crisis taught me that you need to look for money-making opportunities on the downside as well as the upside. That lesson proved devastating post 2020 when the bear market turned into a parabolic run higher.

My new lesson is to look for gains on the upside, and trim risk to prepare for the downside but don’t short. Don’t bother with over-priced puts in anything – TLT calls can be a good enough hedge. I just need to find the next sectors with bullish promise, buy the dips, lever up with long-dated calls when I see a big oversold dip, and reduce the rallies to get leverage back down, and make sure at overbought tops I’m only holding shares and mostly with covered calls sold on them. In fact, this strategy has done really well for me while most of my losses have been from buying puts in stocks, then indexes, then piling into too many TLT calls at the wrong time.

Here are my current thoughts on my holdings:

Right now I still see a recession as inevitable when you combine a worldwide reduction in fiscal stimulus with a worldwide focus on tightening financial conditions to combat CPI inflation. I still don’t think tightening will work very well when the prices are driven by chronic shortages. We still haven’t been investing in keeping up our fracking wells or any new oil production, so the costs have been soaring despite Omicron crimping world travel and the construction slowdown in China. Nor have we been investing in mining even though copper, nickel, and others have been breaking out while the biggest producing countries discuss raising taxes on the sector.

The only way to balance supply and demand in the future without increasing production is a prolonged recession. This seems to be our favored course of action, with central banks stepping in when asset prices react too much. So, I see interest rates ultimately hitting the floor again while money rotates into undervalued hard assets. Public anger is palpable in many countries as the wealthy overclass demands continual sacrifice to fulfill their environmental dreams. This won’t last; sooner or later they’ll finally have to ramp up production of hard assets, especially as this artificial scarcity leads to geopolitical tensions and wars. Unfortunately I see this as a likely outcome as our energy scarcity has led to an enormous shortage of fertilizer which will lead to a shortage of food in next year’s harvest.

Here’s my latest allocations after this crazy week:

  • HEDGES (9.1%)
    • 9.1% TLT Calls
  • PRECIOUS METALS (48.1%)
    • 7.2% AG (Silver), shares
    • 6.8% AG (Silver), calls
    • 3.6% SAND (Gold, Silver & others), calls
    • 4.5% EQX (Gold), calls & shares
    • 4.3% LGDTF (Gold)
    • 4.4% SILV (Silver)
    • 3.6% SILVRF (Silver)
    • 3.3% MTA (Gold & Silver)
    • 3.4% MGMLF (Gold)
    • 1.8% RSNVF (Silver)
    • 2.0% SSVFF (Silver)
    • 2.4% HAMRF (Gold)
    • 0.8% DSVSF (Silver)
  • URANIUM (27.9%)
    • 13.6% CCJ, mainly shares & some calls
    • 6.8% UUUU
    • 2.9% UEC, shares & some calls
    • 1.8% BQSSF
    • 1.5% DNN
    • 1.3% ENCUF
  • US CANNABIS (17.5%)
    • 2.1% AYRWF
    • 2.1% CCHWF
    • 2.4% CRLBF
    • 2.1% CURLF
    • 2.1% GTBIF
    • 2.5% TCNNF
    • 2.0% TRSSF
    • 2.2% VRNOF
  • CRYPTO (1.1%)
    • 1.1% XRP
  • OTHER
    • 0.2% ATCO calls
  • CASH (-3.9%)

I reduced a bit more this week, selling a few things like AG calls and MTA, 1-month covered calls on some of my CCJ and UUUU, and so on. Next week my cash balance should be back to at least zero after options expiry. That puts me right on track where I need to be – the market could crash at any time, so I don’t want margin debt, but I think it will top within the next month and it won’t crash until late March, so I don’t want to sell everything. Besides, I really do have long-term bullish views on Gold, Silver, Uranium and US Cannabis.

My base case on the market right now is as follows:

I believe we will see a significant rally over the next month which could hit a new high in March. Then markets will correct hard between late March and early April. This is my Q1 2000 model. My primary alternate is the Q1 1994 model, with a volatile chop to lower highs in March before a hard correction between late March and early April.

During this last rally, I expect a furious rotation beneath the surface which further hurts meme stonks and junk tech while money goes towards perceived safety in the big names, utilities, commodities, and value stocks.

My primary goal right now is to get my margin balance back to zero. This should happen next week after options expiry as the bulk of my AG shares get called.

If this gold breakout is just another fakeout, I’ll ride through the March/April disaster without selling anything. However, if this breakout really moves, then I’ll slowly reduce into it and build up my cash position. I won’t sell everything, but if the rally moves enough by next month I’ll probably sell a good chunk of my long-dated calls in gold and silver miners while I sell more covered calls on my Uranium shares. By mid-March I could sell off a good chunk of my Uranium position if the slightly out-of-the-money calls I sold on them expire in the money. I might cycle some of that into long-dated TLT calls but I probably won’t bother with puts unless they’re stupid cheap.

Well, that’s my outlook and my strategy. Good luck and happy trading!

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Wild Swings in Mega Cap Stocks

The swings we’ve seen in the top stocks of the S&P 500 are truly astonishing. In just the last month, the S&P 500 went from a 4800 peak to a 4320 trough, followed by a wild bounce. It’s even more interesting when you dig beneath the surface to see the moves of the top holdings.

I have a 2 month candleglance chart above, comparing SPY with it’s top 10 holdings. BRK-B has the clearest 2-month uptrend, showing some of the rotation from growth to value. JPM went up early in the year as rising interest rates are usually good for financials, but dropped badly after seeing the yield curve flatten and credit spreads start to widen.

The enormous drop seems high given that the company is still wildly profitable with growing revenues, but after the fall it still sports a P/E ratio of 17 which is about the same as BRK. At lofty P/E ratios, it doesn’t take much to cut the price by a lot. By comparison, it’s closest peers seem to have been AAPL with a P/E of 28.7, GOOG with 25.5, and MSFT with 32.6. The highest P/E’s here are TSLA with 188, NVDA with 75 and AMZN with 49, so expect a wild ride with those. That leaves JPM as the closest to a value stock here with a P/E of only 9.9 and a 2.7% dividend yield.

It still seems strange to have such wild swings in such large companies, as it doesn’t seem to make sense if you believe in the popularized theory of efficient market pricing. I like to look at inflection points and think about what changed the trajectory. Here’s a few examples:

For the next era, it’s easiest to explain if I include two support charts with it:

And finally, the current era:

It’s fascinating how most of the eras above saw massive inflection points higher in stock valuations. The 401k era left the previous stock trends in the dust. That trend paled to the internet revolution with the first rise of retail adding to those regular 401k flows. As often happens, bubbles led by retail investors usually collapse as the money can flow out as fast as it flows in.

The government and the federal reserve tried hard to find the winning formula over the next decade that would bring back the big stock gains from the 1990’s, and with changes in a number of regulations after the different crises they managed to do just that. From the elimination of glass-steagall in the 90’s, to the elimination of mark-to-market accounting in 2009, to the curtailing of SEC action against monopolies, to the encouraging of once banned stock buyback programs, to the introduction of hedge funds to the housing market, to the introduction of zero rates and quantitative easing, along with negative rates abroad, they found a winning formula in the 2010’s.

This led stocks to rise just as fast as the 1994-2000 tech bubble era throughout the entire decade, all while bringing back the gains of the housing bubble in the early 2000’s. Even more impressive, these gains did not see significant retail involvement, making them more sustainable for a longer period. Post covid, the rise of retail investing pushed the curve higher than ever before as it piled onto the other trends which continued at a blistering pace.

Well, I hope I left you a lot to think about there. There are many implications to the changes above which are more divisive than ever as we enter are in a time of growing instability in valuations, domestic politics, geopolitics, sociological changes, etc. Our theories are as divergeant as our data as trust in news sources is low and societies fragment into groups with wildly different views of what is going on in the world. My favorite description of it is “Nothing is True, But Everything Is Possible,” which you can hear more about in the Hidden Forces podcast, episode 229 with Dmitri Kofinas and Peter Pomerantsev.

Anyway, here’s how my holdings ended up this week:

  • HEDGES (10.0%)
    • 10.0% TLT Calls
  • PRECIOUS METALS (48.9%)
    • 7.6% AG (Silver), shares
    • 6.9% AG (Silver), calls
    • 3.2% SAND (Gold, Silver & others), calls
    • 4.2% EQX (Gold), calls & shares
    • 4.2% LGDTF (Gold)
    • 4.5% SILV (Silver)
    • 3.9% SILVRF (Silver)
    • 3.8% MTA (Gold & Silver)
    • 3.2% MGMLF (Gold)
    • 1.9% RSNVF (Silver)
    • 2.2% SSVFF (Silver)
    • 2.6% HAMRF (Gold)
    • 0.9% DSVSF (Silver)
  • URANIUM (29.1%)
    • 13.9% CCJ, mainly shares & some calls
    • 7.3% UUUU
    • 3.0% UEC, shares & some calls
    • 1.9% BQSSF
    • 1.6% DNN
    • 1.4% ENCUF
  • US CANNABIS (18.0%)
    • 2.1% AYRWF
    • 2.2% CCHWF
    • 2.4% CRLBF
    • 2.2% CURLF
    • 2.1% GTBIF
    • 2.4% TCNNF
    • 2.3% TRSSF
    • 2.3% VRNOF
  • CRYPTO (1.1%)
    • 1.1% XRP
  • OTHER
    • 0.2% ATCO calls
  • CASH (-7.2%)

My total holdings saw a 1.2% gain, which is welcome after the 9.9% drop last week.

Overall, I expect a volatile chop-fest through March, which I think will end up higher but it could end lower as well, before a potential waterfall in late March/April as the federal reserve stops QE and actually begins to raise interest rates and tighten policy.

Although I am confident in the long-term holdings of my core portfolio, I am aware that any liquidity crisis would cause valuations of potentially everything to plummet. As such, my plan is to sell on rips and be patient on dips with a goal of getting a positive cash balance by early March. That way, if the market tanks like I think it will, then I won’t have any problems from margin debt and I’ll have some money to invest when it stabilizes lower.

However, I am not so confident in impending collapse that I will abandon my holdings – I plan to ride most of them through. It would be really annoying if I dumped everything just to see a fierce re-balancing into my former holdings rather than a crash. On the flip-side, if I keep my core holdings and liquidity-driven crash does occur, I expect to make significant gains from my TLT call hedge position which will backstop my temporary losses elsewhere.

That being said, I made some progress trimming this week. I sold URG from my Uranium portfolio for a 10% gain, and I sold deeper in-the-money Feb 18 calls on my AG shares. If they expire in the money and those shares are called, then my margin debt fall close to zero, and if they don’t then at least I grabbed another 11% of premium out of them on the way down.

I did add a couple things this week though, including a few more TLT calls after it got hammered lower on Friday, and some deep out-of-the-money August calls in ATCO after I heard a Real Vision episode on shipping. I like having some low cost chances of decent gains here and there, and stocks are certainly volatile these days. These can easily lose – I had some calls in AG and UEC go to zero in recent weeks – but I also had a recent gain in XOM calls turning $300 into $2200.

That’s all for now. Good luck and happy trading.

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A Rough Week for Risk Assets

It’s been a rough week for risk assets. My portfolio is down 9.9% on the week, and 18.5% on the month. In a less ominous sign, I drove with a friend up Big Bear yesterday morning only to find the tickets for Bear Mountain resorts were all sold out. We looked online and immediately bought tickets for Mountain High, where we rode the longest run in Southern California.

Going down fast can be exilirating.

Anyway, my portfolio weightings changed a bit this week:

  • HEDGES (11.7%)
    • 11.7% TLT Calls
  • PRECIOUS METALS (49.0%)
    • 7.8% AG (Silver), shares
    • 6.5% AG (Silver), calls
    • 3.1% SAND (Gold, Silver & others), calls
    • 4.0% EQX (Gold), calls & shares
    • 4.3% LGDTF (Gold)
    • 4.5% SILV (Silver)
    • 4.2% SILVRF (Silver)
    • 3.8% MTA (Gold & Silver)
    • 3.2% MGMLF (Gold)
    • 2.1% RSNVF (Silver)
    • 2.3% SSVFF (Silver)
    • 2.5% HAMRF (Gold)
    • 0.9% DSVSF (Silver)
  • URANIUM (29.0%)
    • 13.3% CCJ, mainly shares & some calls
    • 6.7% UUUU
    • 2.7% UEC, shares & some calls
    • 1.8% BQSSF
    • 1.5% DNN
    • 1.5% URG
    • 1.4% ENCUF
  • US CANNABIS (16.3%)
    • 2.0% AYRWF
    • 2.0% CCHWF
    • 2.2% CRLBF
    • 2.0% CURLF
    • 2.0% GTBIF
    • 2.0% TCNNF
    • 2.1% TRSSF
    • 2.1% VRNOF
  • CRYPTO (1.0%)
    • 1.0% XRP
  • CASH (-7.1%)

Stocks dumped big time Monday morning. I tapped into margin a bit more, buying mainly Uranium miners all the way down my list, including adding another one. I also did my thing with US Cannabis, looking for anything that hit below my current market cap value threshold and adding shares to top it off. Then I sold some of my CCJ back at a small gain on the Wednesday morning bounce to reduce my margin back a bit. I also sold off the last of my XOM calls at that time for a decent gain.

As for AG, I did not intend for it to be such an outsized position for this long. I sold barely in-the-money covered calls on all of my shares to get an immediate 5% reduction and still sell them at a reasonable price, but they expired worthless on Friday as AG got hammered enough to put them firmly out of the money. Doesn’t matter too much I suppose, its a great company and there’s no way I’m dumping it at current prices. I ended up selling off my MARA shares to reduce my risk exposure a bit.

Right now markets are very oversold, making me expect a bounce.

Many are saying that we are firmly in bear market territory, which certainly makes sense given this chart:

If we are firmly in a bear market, then we can expect high volatility with huge drops followed by massive rallies that fail to break the new high, oversold conditions will not necessarily correct immediately, and the 200 day moving average should pose significant resistance.

In both the 2000 tech bubble peak and in 2020, we saw a volatile January followed by a run-up in February and a collapse in March. However, someone posted another scenario to consider, which is the 1994 market where the SPY peaked in January, then struggled lower through March before it collapsed. That was also a year where the 10 year yield jumped from 5.5% to 8.0%, which is worth considering given the recent pressure on 10-year rates and the hawkish tone of the Fed.

For now, here’s my prevailing view…

  1. Bond yields can’t get that high before they cause significant damage to the economy. Our corporations are deep in debt, the vast majority of which is in junk-bond territory. Of the small amount considered investment grade, almost all is at the last notch before junk. If they struggle to roll over their debt as it matures, it could cause a cascade of fire-sales and bankruptcies that quickly spirals out of control. The federal reserve knows this, and significant trouble in HYG and JNK should mark the end of policy tightening. For now, both indexes are at the same level as they were in early March 2020.
  2. Powell is under a lot of political pressure to do something about our high CPI readings. He can’t produce more oil or LNG or fix our supply chains, but he can raise rates and reduce the size of the fed balance sheet to crimp down on risk asset valuations so that’s what he’s doing. As I said above, he knows the dangers, and his preferred method of attack is through “forward guidance,” or warning the market about the above so that they start pricing it in immediately. This gives him maximum flexibility as he can shift views on a dime if financial conditions deteriorate saying that he never even started tightening, while no one will claim he’s easing if the stock market is struggling lower. This will most likely continue, and I still think the big inflection point will be in March when we see the end of QE and potentially the first rate hike. Once that happens, I will want to load up on TLT calls assuming I have any money available to do so.
  3. At this point, I really need to take advantage of rallies to reduce position sizing in order to get my margin back to zero. It is downright stupid to use margin at all during a potential bear market.

That being said, I do still expect that my core holdings will ride through whatever downturn as their products have solid demand in any market. Precious metals are considered a hedge for anyone who is worried about losing value in stocks and bonds, Uranium is a small but necessary cost for expensive base-load power plants that will keep running, and people will buy Cannabis no matter what the economy does – In fact, the long-awaited federal legislation for safe banking (essentially federal legalization of cannabis companies complying with state laws) will only continue to get pressure as the US Government seeks a new source of tax revenue. All of these should see significant upside in the next 5 years. However, they can all go significantly lower in a liquidity crash like we saw in March 2020.

As of now, I don’t think we’ll see a big crash before the end of March. I also believe there is a significant chance we see a big rally in February. If that happens, I hope to reduce enough to get a decent cash position ready. If February chops lower, into March, I’ll need to reduce exposure at that point regardless of price … there’s no way I’m going into March/April with margin debt this year.

Good luck and be careful out there – bear markets have a tendency to hit bulls and bears alike. It will certainly be interesting to see how much the massive retail investor presence will react as big price moves will encourage them to trade, just like they do with me.

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The Forest and the Trees

One crazy thing about trading stocks is that you are hyper-focused on market moves and news events day by day, while looking in on charts that go back years. It seems so easy to point out the tops in these historical charts, but if you zoom in a bit you’ll find all sorts of fake-outs where bears called a top just to get gored by rushing bulls.

Professional traders are amazingly good at reading sentiment. They have their own indicators, often proprietary or paid subscription, and they are very good at using tools like stops to cut their losses quickly or adjust higher to lock in profits while letting the stock run. I don’t trade this way, because it costs money and it can be a lot of work, whereas I’ve got a totally unrelated day job and a portfolio that’s not quite big enough to cover the costs of expensive tools.

My strategy is more along the lines of picking a few sectors that should be solid winners over the next 5 years or so, selling covered calls on big runs, and acquiring more on big dips. I often use shorter-term setups to do option plays that cost little and have a potentially big payoff, in hopes of a win that shoots me toward escape velocity, or a level at which a modest return could fuel my lifestyle without working. I figure that would be around $800k total or so, so I’ve got a long ways to go and work alone will never get me there. That being said, I am happy taking a higher risk approach, and I can sit through years of losses if I can keep the hope of a big win someday.

That being said, I’ll start with my dot-com bubble roadmap from last week:

We are certainly in a very strange environment. The 2000 tech bubble did not include a housing bubble or a bubble in non-tech stocks, and short dated treasuries gave you a 5.5% yield. You could argue that our tech bubble has already collapsed by comparing the highly speculative stocks back then with the performance of ARKK in 2021.

If you look at SPY in 2000, it double-topped in August 2000 before dropping around 45% over the next 2 years. After that, the housing market skyrocketed along with commodities over the next 4 years. This time around, we have a major housing bubble like we saw peaking in 2007. At that time, the 2009 crash was just a correction for many commodities such as gold, silver, and copper, which peaked in 2011 – mainly due to the enormous stimulus and building programs in China.

Where are we today? Many have called it the everything bubble – stocks, bonds, housing all making new highs within the past year. Is it reasonable to expect everything to collapse? Not necessarily. Markets tend to rotate between sectors more than anything. Besides, the federal reserve can do a lot to juice the stock market as we saw just 2 years ago.

So where does that leave us? All I can do is throw some thoughts out about different sectors and decide on a direction to take. Using roadmaps from the past can help, but we have to realize that they are for different roads and be a bit more flexible with our thinking. So here are my thoughts:

  • Interest rates cannot go much higher without seriously breaking something in the financial system.
    • Debt/GDP levels are extremely high in every major world economy.
    • Junk bonds are a $4.7 trillion market vs corporate bonds at $609 billion according to https://www.fitchratings.com/research/corporate-finance/us-ig-market-size-grows-to-4-7-trillion-on-tech-driven-issuance-30-11-2021
    • The biggest fear that the Federal Reserve has is that companies will not be able to roll over their enormous pool of junk bonds and they will start defaulting. That is why the federal reserve made such a big noise about supporting the junk bond market back in 2020.
    • Meanwhile, CPI numbers (a lagging indicator) have been consistently surprising to the upside while the headline unemployment rate (also a lagging indicator) remains strong, and the Federal Reserve is under enormous political pressure to bring down inflation any way possible. Their only real tools are influence over interest rates with the discount window & repo markets, and the size of the fed balance sheet. They will increase pressure on the financial system using these tools until a significant market correction occurs.
    • The questions are how fast will the fed tighten, how much will it take to crash the market and cause a recession, how will the markets react in the interim, etc.
  • Commodities are in short supply
    • Many commodities markets have suffered a decade of poor returns, consolidation, and under-investment. Combine the ESG mandates, the winner-takes-all effect of passive index investing (where 9 companies are worth over 27% of the S&P 500 index), and the miniscule representation of energy and mining companies in the S&P 500 and we saw a serious lack of investment.
    • Supply problems in many commodities are so bad, that in today’s highly covid-constrained economy prices are skyrocketing as they can’t keep up with demand. It takes years of investment to get more mining and oil online, and we don’t see the level of investment needed.
  • Populism is growing
    • Populism often leads to geopolitical risk whether its the uprisings in Kazakhstan, the escalations in Yemen, the potential invasion of Ukraine, etc.
    • People are increasingly pushing for basic needs. Cheaper food, cheaper energy, affordable housing, etc. Meanwhile, governments in the US and in Europe shy away from any major investments in anything they don’t consider environmentally friendly such as the electric grid, mining, oil, nuclear, roads, bridges, etc. This is going to change at some point – but until then, deflation is the major risk.
      • Clarification on the deflation risk: The risk is not that CPI prices will drop, but that asset prices will drop such as stocks and real estate. Deflation in this sense simply means less money traveling through the system to bid up assets and fuel discretionary spending. In this framework, squeezing people on energy, fuel, housing, and food for money they don’t have will cause a nasty recession rather than a crack-up boom.

Basically, I’m loaded up on things I see as undervalued growth sectors for the future. Especially on gold and silver miners because they are more defensive commodities; they can soar when big money is looking for somewhere to hide. How’s that going? Let’s take a look:

The charts above are all 1-year charts ending Friday 1/21/2022 with their 20-day and 50-day moving averages.

Here’s my current portfolio:

  • HEDGES (11.7%)
    • 11.2% TLT Calls
    • 0.5% XOM Calls
  • PRECIOUS METALS (51.9%)
    • 7.9% AG (Silver), shares
    • 7.8% AG (Silver), calls
    • 3.4% SAND (Gold, Silver & others), calls
    • 5.3% EQX (Gold), mainly calls & some shares
    • 4.5% LGDTF (Gold)
    • 4.5% SILV (Silver)
    • 4.0% SILVRF (Silver)
    • 3.8% MTA (Gold & Silver)
    • 3.1% MGMLF (Gold)
    • 2.1% RSNVF (Silver)
    • 2.1% SSVFF (Silver)
    • 2.6% HAMRF (Gold)
    • 0.9% DSVSF (Silver)
  • URANIUM (25.1%)
    • 13.0% CCJ, mainly shares & some calls
    • 6.5% UUUU
    • 1.3% BQSSF
    • 2.5% UEC, shares & some calls
    • 1.1% DNN
    • 0.8% ENCUF
  • COPPER & NICKEL (0.0%)
  • US CANNABIS (15.4%)
    • 2.1% AYRWF
    • 2.0% CCHWF
    • 1.8% CRLBF
    • 1.9% CURLF
    • 1.8% GTBIF
    • 2.0% TCNNF
    • 1.9% TRSSF
    • 2.0% VRNOF
  • CRYPTO (23%)
    • 1.3% MARA, Bitcoin miner
    • 1.0% XRP
  • CASH (-6.5%)

During this last week, I sold off my copper/nickel miner and reduced my gold & silver holdings a little bit. Much of that money was spent on adding to laggards among US Cannabis stocks and Uranium Miners. As a result, my margin debt got a little bit bigger.

Some of my short-dated calls expired at zero, but my March XOM calls did well. I bought 20 of them at $0.15 each and sold half this week averaging around $0.92 each.

I bought back my MARA covered call again, bringing my average buy-in cost down to about $29/share. I’ll sell another covered call on it this next rally.

Right now I’m mainly looking for a serious breakout in my gold & silver miners and/or Uranium miners. I would like to reduce my holdings in both a bit before the end of March, but I do think that we see a significant bounce in both here over the next month so I’m not selling yet. When I do reduce, I also plan to do it mainly by selling covered calls, assuming that they have a decent premium to them. Gold and silver miners have practically no short-term premium on their calls at all right now, so I’m more inclined to want to buy them for a potential lottery win than sell them for a pittance. Next week my covered calls on AG expire and I’ll see if I keep those shares or not. If they do sell, it will greatly reduce my margin debt – which I mainly incurred by buying all those Jan 2024 AG call options to lever up my exposure while it was cheap.

Good luck trading these markets, this year will be a difficult one to trade.

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How I see this cycle playing out

I’ve been thinking that we are likely to see a pattern in the S&P 500 similar to the top we saw in the NASDAQ in 2000. Here’s roughly how that would chart:

Note that I created the above chart by roughly referencing the timeframes of the NASDAQ charts below:

Some rough thoughts on why I favor this approach:

  1. The NASDAQ today is far more concentrated than it was back in 2000, while the S&P 500 is far more tech-heavy. As such, I think that the 2000 NASDAQ is decent fit for today’s S&P 500.
  2. Today’s S&P 500 moved similarly to the 2000 NASDAQ in the year prior, going on a fairly steady up-trend that occasionally fell below the 50 DMA always stayed well above the 200 DMA.
  3. Both the NASDAQ going into 2000 and the S&P 500 going into 2022 saw a choppy market with decreasing breadth, as the more speculative growth stocks began to fall heavily while the biggest growth stocks continued to rise.
  4. Both the NASDAQ in going into 2000 and the S&P 500 going into 2022 saw a hawkish fed. In 2000, the rate hikes even continued one more time after the NASDAQ peaked and started its fall. Today, the political pressure on fighting inflation is enormous and the Federal Reserve sees the stock market as over-valued. They could easily do the same.
  5. Investors are scared right now. Indications people have been posting on twitter such as massive put-buying and record holdings in inverse ETF’s (betting short QQQ or SPY) while the bulls seem more cautious. It may seem strange, but this behavior can easily lead to a scenario where an upturn accelerates as bears losing money start to close out their short positions giving the market it’s final rapid rise.
  6. Seasonality is a real force in the markets. There is a reason that most stock market crashes happen in spring (March/April) or fall (September/October). These timeframes just tend to have less market liquidity. There are a number of reasons for this such as end of quarter portfolio rebalancing, banking adjustments to meet regulations in their holdings of different risk assets, corporate tax schedules, and so on.

On seasonality, one of my favorite measures of market liquidity is that of TLT:

I like TLT because long bonds have more to do with market liquidity than most other instruments, and the seasonality is pretty sharp with some months being very positive and others. It is interesting to note that there are inflections in spring and fall here, where long bonds shift positive in March and shift negative in September – which coincide with struggling times for stocks.

Not only do serious stock corrections start more often in March and September, but both months are low on the seasonality chart above (which only goes back 5 years here).

Market Rotations

Right now, there is a fierce rotation going on beneath the surface of the market. Speculative tech stocks like the one’s ARKK holds are collapsing while certain commodity plays like XOM are rallying. Let’s look at this in more detail here:

The biggest recent moves have been towards XLE (Energy), XLF (Financials), and XLP (Consumer Staples). These moves have been coming out of XLK (Technology) and XLY (Consumer Discretionary).

How am I playing this?

I have been avoiding direct exposure to the SPY and the QQQ throughout this rally. In retrospect that has been a bad move, but I am not comfortable with the enormous amount of concentration in the top sliver of companies. Right now, the top 9 companies in SPY are 27.4% of the index, and the top 9 companies in QQQ are 53.4% of the index. Despite the fact that the top 2 names – AAPL & MSFT – have enormous stock buyback programs, I still don’t like being long the same thing as everyone else. Who’s going to buy when these stocks start to sell off, and at what price? That being said, I’m not planning on going long these vehicles now. However, I’m not going short either, as I’ve found the risk/reward in timing the downside to be miserable. Maybe I’ll tiptoe into some index puts in March if the charts look just right, but that’s not going to be my focus.

The current narratives are high inflation, a booming economy, and rising interest rates. In the next leg higher, I expect energy, financials, and consumer staples to follow higher.

At the moment, I am still using a bit of margin going into February and I plan on building cash as we go into March.

As my portfolio goes, I expect great performance from my recent XOM position, significant outperformance from my Uranium Miners, and decent performance from my copper/nickel miner. If this rally happens, I plan to close out the last of my nickel/copper exposure (I reduced half of it this last rally), sell off my calls in XOM for a decent gain, sell of my calls my Uranium stocks, and sell in-the-money covered calls on most of my Uranium miners.

I also plan to leave my US Cannabis positions completely alone unless they double or something, but I don’t expect them to.

That leaves the big one for me, which is precious metals miners. This is a really tough one for me because it has been consolidating for so long with declining sentiment as many investors exit the sector entirely. I expect great things in this sector, but I expect them to come in quick moves out of nowhere just like 2020 where $12.50 silver raced to $16, consolidated a month, raced to $18.50, consolidated a month, then raced to $28. Needless to say, I’m planning on holding a sizable stake here regardless of what happens, but I am planning on reducing a bit if I get a decent bounce.

What the chart above tells me is that if I get a decent bounce in my precious metals miners by February, I’d better take advantage and reduce. It’ll still be my largest position because I’m a stubborn fool of a precious metals bull, but I can certainly reduce. In fact, I’ve recently sold Feb 4 $10.50 covered calls on most of my AG shares which should force me to divest them if we get that bounce. I’d been planning on selling them for a couple weeks already because I bought a lot of Jan 2024 $10 calls in AG on a big dip and I wanted to cover the margin debt that incurred. Let’s face it, this is my crypto sector where I expect to make big gains by holding junior miners and long-dated calls even though it’s somewhat irresponsible.

On that note, here’s my current portfolio:

  • HEDGES (10.7%)
    • 9.9% TLT Calls
    • 0.8% XOM Calls
  • PRECIOUS METALS (50.2%)
    • 7.4% AG (Silver), shares
    • 6.9% AG (Silver), calls
    • 4.5% SAND (Gold, Silver & others), calls
    • 5.0% EQX (Gold), mainly calls & some shares
    • 4.5% LGDTF (Gold)
    • 4.1% SILV (Silver)
    • 3.8% SILVRF (Silver)
    • 3.6% MTA (Gold & Silver)
    • 3.0% MGMLF (Gold)
    • 2.2% RSNVF (Silver)
    • 2.0% SSVFF (Silver)
    • 2.4% HAMRF (Gold)
    • 0.9% DSVSF (Silver)
  • URANIUM (25.3%)
    • 14.1% CCJ, mainly shares & some calls
    • 6.0% UUUU
    • 1.3% BQSSF
    • 2.6% UEC, shares & some calls
    • 0.8% DNN
    • 0.6% ENCUF
  • COPPER & NICKEL (1.6%)
    • 1.6% NOVRF
  • US CANNABIS (16.4%)
    • 2.3% AYRWF
    • 2.1% CCHWF
    • 1.8% CRLBF
    • 1.7% CURLF
    • 1.8% GTBIF
    • 2.3% TCNNF
    • 2.1% TRSSF
    • 2.3% VRNOF
  • CRYPTO (2.0%)
    • 1.6% MARA, Bitcoin miner w/ covered call
    • 0.5% XRP
  • CASH (-6.3%)

As for recent trades, I bought 20 $80 strike XOM March calls last Monday as a hedge in case of the likely Russian invasion of Eastern Ukraine, and the havoc that would wreak on the oil and LNG markets (XOM is a top LNG carrier). Those calls doubled in value since I bought them as XOM soared this week, but I’m still planning to hold them at least through February. I have to admit, if Russia invades, I’d likely sell the news on it and book gains there. I lump this with hedges, because I expect it to be bad for risk assets in general and I’m nervous about it causing pullbacks in my mining stocks.

I left precious metals and cannabis alone this week, but I couldn’t help buying some of these dips in Uranium. I bought a bunch of cheap 1-month calls in UEC in case that jumps, and some more UUUU shares. I also sold half of my remaining NOVRF into a rally to reduce my margin debt a bit. Paychecks and a Q4 bonus helped with that too.

As for XRP, I have some friends who are really into it. They’re convinved that once the lawsuit with Ripple is over the result will be good for XRP holders as a chunk of the founder’s XRP could be burned and it could potentially be added back to platforms such as Coinbase to make trading easier. As of now, I got a crypto wallet which allows me to exchange crypto and hold XRP – so I can put money into Coinbase, transfer it to my wallet as Bitcoin or Bitcoin Cash, and then exchange it there for XRP. Total fees incurred are about 10% of the money I put in, so it’s not cheap, and the bulk of those fees are from exchanging the BTC (or BCH) into XRP in my wallet. I’ve found that ETH charges insanely high fees, and that USDT uses the etherium network so it also charges high fees just to transfer Crypto from Coinbase to my wallet. To move $100 over, ETH or USDT will charge $12-$15 whereas BTC will charge around $0.08 and BCH even less.

Note that if you expect the 4-year Crypto cycle to continue then it is a horrible time to invest in the space. I’m nervous about it, but I see the case for potential rotation to XRP in the Crypto space after the trial ends and it becomes easier and cheaper to purchase. That being said, I plan to unload MARA in February but I might slowly add to XRP on weakness. I’m not sure yet.

Last note, in case any of you are curios about my charts, I use stockcharts.com for fancy things like seasonality and rotations and I use finance.yahoo.com for all my basic charts with notes added in Paint. These two sites simply have the best free tools for finance.

Good luck navigating this year, and may the odds be ever in your favor!

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