The Most Unexpected Breakout of 2024

Tracking the next great “snapback” bull market [Morning Reckoning] May 21, 2024 [WEBSITE]( | [UNSUBSCRIBE]( The Most Unexpected Breakout of 2024 Baltimore, Maryland May 21, 2024 [Greg Guenthner] GREG GUENTHNER Good Morning Reader, The bulls continue their unstoppable run as stocks launch higher once again this week. The major averages are all fresh off new highs – and the US indexes aren’t the only names on the list. In fact, 14 of the world’s 20 largest stock markets have recently logged all-time highs, gushed Bloomberg shortly after the Dow Jones Industrial Average closed above 40,000 for the first time Friday afternoon. Other notables on Bloomberg’s new high list: Europe, Canada, Brazil, India, Japan, and Australia. The bull market party doesn’t end there. Gold just posted fresh all-time highs above $2,400. Silver has broken above $30 and is hitting prices not seen since early 2013. Copper is squeezing above $5 after gaining more than 30% off its early March lows. And Bitcoin is once again pushing back toward its highs after breaking back above $70K late Monday. Everywhere you look, you’ll find risk assets either logging fresh highs or extending their respective bull trends. Well, almost everywhere… There’s one prominent country that’s lagged woefully behind the US and other nations that are watching their respective indexes fly into the stratosphere. In fact, this country’s biggest indexes were threatening to retest their 2009 lows as recently as January. But something has changed over the past four months. Instead of breaking down, these stocks are beginning to catch higher. They’ve even outperformed the resilient US averages in April and May. This could only be the beginning of a much bigger move. Despite this year’s bounce, most investors have little to no exposure to these stocks – a fact that’s quickly changing as the smart money starts to buy into the move, notably Stanley Druckenmiller and David Tepper. Every major bull run has to start somewhere. As prices rise and the narrative begins to shift, we could be looking at the biggest snapback trade of the year… in China. You have [(1) item]( on hold at our warehouse: Item #: [51987]( Status: On hold Value: Approx. $300 Claim by date: MIDNIGHT TONIGHT To see how to claim yours before midnight, simply [click here]( our Head of Customer Experience will show you what you need to do. [LEARN MORE]( A “Good News” Shortage I don’t talk about Chinese stocks very often. In fact, I couldn’t immediately recall the last time I spent any significant time discussing China at length. So I went through my past columns to try to find out just how often China or Chinese stocks appeared in my notes recently. A quick search of my personal archives found just a few key mentions over the past five years. Most of my attention during the first few post-pandemic years focused on China’s hardline lockdown policies and anti-business tactics that weighed heavily on Hong Kong’s Hang Seng, which by late 2022 had cratered to levels last seen during the Great Financial Crisis of 2009. I also wrote about China’s attempts to squash crypto by banning mining and going after firms that accept crypto payments, and how these actions had failed to produce a sustained selloff (the push to ban crypto seemed to backfire as more wealthy Chinese citizens attempted to protect their assets from the government.) Finally, I found a short passage where I discussed Xi Jinping securing his third term as China’s leader, stacking the government with loyalists – and subsequently sending Chinese stocks skidding lower. That was all I could dig up. As you can see, none of my China research was even remotely positive. That’s not surprising if you pull up a long-term look at the Hang Seng or Shanghai indexes. While US stocks enjoyed a post-pandemic boom, the Hang Seng was chopped in half and trading at 31-year lows, while Shanghai suffered a similar fate. Even the most steadfast optimist would have trouble coming up with a positive spin on this ugly bear market. But a curious thing happened just three short months ago… Chinese shares stopped going down. Now, we’re witnessing the beginning stages of what could be a massive reversal in these ignored stocks… Changing the Narrative China’s market woes go much deeper than its post-pandemic fallout. While shares have rallied in fits and starts over the past two decades, nothing has come close to matching the performance of BRICs mania that began in the early 2000s and peaked with a parabolic move in late 2007. The iShares China Large-Cap ETF (FXI) finally fought back to those highs in 2021, only to get rejected and fall into a nasty three-year bear market that sent shares lower by nearly 60%. This downtrend remained intact until earlier this month, when FXI finally exploded higher, breaking above the Oct.- Nov. swing highs near $26. FXI is now up nearly 14% on the month, nearly doubling the performance of the Nasdaq Composite (+7.25%). And while the stories surrounding China and its economy remain overwhelmingly negative, we’re beginning to see a few glimmers of hope and a few brave fund managers swooping in to buy shares of their favorite Chinese names. Remember, price moves first – not the stories told in the financial media! Most of the stories you’ll dig up on China right now involve the property crisis, snowball derivatives, and a general lack of confidence in its economic prospects. The situation had gotten so bleak that foreign investors reportedly pulled out almost 90% of the money they put into Chinese stocks in 2023, according to the Financial Times. Even as Chinese stocks have started to bounce, the only positive stories you’ll find related to China right now are about how stocks are currently a value play as world markets extend their respective rallies. This will change once some FOMO kicks in. If Chinese shares continue to push higher, we’ll witness a drastic narrative shift as the herd begins to buy into the move. For now, we’re still in the early innings. There’s still time to take a shot at these “cheap” stocks – before the rest of the world catches on. Best, [Greg Guenthner] Greg Guenthner Contributing Editor, Morning Reckoning feedback@dailyreckoning.com [Elon Musk’s NEXT Billion-Dollar IPO Revealed by the end of 2024?]( [Click here to learn more]( First, Paypal’s IPO made him a multi-millionaire… Then Tesla’s IPO made him a billionaire… Now, his NEXT big IPO could make him a TRILLIONAIRE. And for anyone who knows how to follow Musk as he potentially takes this new company public… The gains could be life-changing. [Click here to find out how](. [LEARN MORE]( In Case You Missed It… Are We Enjoying The Scam Yet? Sean Ring, Editor [Sean Ring] SEAN RING Good morning Reader, As I watch from afar, I wonder how Americans can take it. Seriously, American taxpayer largesse pays for untold amounts of charity, though it’s coerced from them through tax. I don’t know who said it, but he was right: the profits of capitalism pay for the follies of socialism. How do we measure such things? It seems that deficits still don’t matter to most; in fact, too many people profit from them to force the government to be fiscally responsible. Even if The Donald gets back behind the Resolute desk after the election, he certainly won’t make Congress behave with America’s money. He almost certainly will prove Milton Freeman correct. Freeman once wrote, “Nothing is so permanent as a temporary government program.” As Obama’s programs became Trump’s, Trump’s programs became Biden’s (and then some). I suspect a Trump 47 presidency will return the favor. This won’t stop until the American people force their government’s hand. And, quite frankly, the people aren’t angry enough yet. So, the goal of today’s piece is to get you angry. And then, I’d like you to pass this piece along to get your friends angry. And then they can pass it to their friends and so on. You’ll sit there in astonishment as you read and ask yourself the same question I’ve been asking myself: What’s the diameter of the American taxpayer’s cornhole? How Dare You? It’s a fair question, though not as bad as asking a woman how old she is. It's harsh but fair. The way it should be. The last time someone got bent over this hard, Chevy Chase was singing Moon River. And it’s the entire country’s tax base! Take, for instance, this peach of a piece that’s no longer available on Ukrainska Pravda: Credit: [@Liz_Churchill10]( Luckily, a website called [The Intel Drop]( got to the article before it was unceremoniously taken down. It reads: Military and civilian authorities in Ukraine’s Kharkov Region paid millions of dollars to fake companies for the supply of non-existent building materials to construct defensive fortifications, the newspaper Ukrainska Pravda reported on Monday. With no fortifications built, Russian forces have advanced rapidly through the region. Russia has seized dozens of towns and villages in the northern part of Kharkov Region after launching an offensive last Friday. According to the latest update from the Russian Defense Ministry, Russian troops had captured the village of Bugrovatka on Monday and are inflicting losses on Ukrainian manpower and hardware near Veseloye, Volchansk, and Liptsi, the latter of which is located just 20km from the outskirts of Kharkov city. Writing in Ukrainska Pravda on Monday, Ukrainian anti-corruption activist Martina Boguslavets explained that Kharkov’s Department of Housing and Communal Services (ZhKG) and Regional Military Administration (OVA) had been given 7 billion hryvnias ($176.5 million) to build fortifications to hold back this advance. The article continued: Much of this money was embezzled, Boguslavets claimed. For the supply of wood, the ZhKG and OVA signed contracts worth 270 million hryvnias ($6.8 million) with five companies that were set up immediately after the contracts were announced. No bidding process took place, and at least two of these companies were owned by the same person, Boguslavets wrote. “Moreover, the owners of these firms do not resemble successful businessmen and businesswomen,” she wrote. “They have dozens of court cases, from whiskey theft to domestic violence against a husband and mother; some of them are deprived of parental rights and have had enforcement proceedings for bank loans.” Boguslavets described these business owners as “avatars,” placed in charge of the companies either for a small fee or without their knowledge. One of the supposed CEOs, whose firm was paid 52 million hryvnias ($1.3 million), is an agricultural laborer, according to Boguslavets’ documents. “The naked eye can see how a government official mercilessly registers new companies, using for this purpose people who, due to the circumstances, may not be aware of this,” she wrote. “And this someone continues to make money on blood.” Ah, it’s only $175 million of the $61 billion the House sent to Ukraine, $26 billion for Israel and $8 billion for Taiwan. As Senator John Blutarsky might have said, “$95 billion down the drain.” But let’s not even worry about the money going out of the country. What about the money staying in the country? The List of Offenses Redistribution. The Left loves it. The Big Government Right pretends not to. The Small Government Right and every American breadwinner hates it. My good friend and ace copywriter at Paradigm, Mohan Garikiparithi, put together a list of all the perks the undocumented migrants get. You know, those people who illegally invade America through the unprotected southern border. Mohan lives in Kanada, so he’s just an innocent bystander taking notes. In case you're wondering, he entered Kanada by plane. Let’s get into it. New York City The former Greatest City on Earth™ pays over $300 per night for budget hotel rooms to house migrants. According to Bloomberg, the cost of housing migrants is an estimated $4.3 billion between April 2022 and July 2024. Mayor Eric Adams says he must cut city services to afford it. On the bright side, Adams would like these migrants to become lifeguards. “How do we have a large body of people that are in our city, our country, that are excellent swimmers and at the same time we need lifeguards — and the only obstacle is that we won’t give them the right to work to become a lifeguard. That just doesn’t make sense.” Mayor or Village Idiot? You be the judge! Michigan Governor Whitmer is offering homeowners $500 per month to host illegal immigrants so those new people can vote for her in the next election. Colorado The state of Colorado is purchasing a gym for $4 million to house immigrants. Colorado is also giving stipends of up to $2,000 to host migrants. This is what happens when too many Left Coast skiers invade your polity. Minnesota Minnesota introduced guaranteed basic income for migrants in HF 2666 in March. It provides $500 monthly payments for 18 to 24 months to help support an undocumented immigrant’s basic needs. I’m sure the residents of Little Mogadishu are pleased as punch, as they won’t be paying for it. Other Here’s a list of other crimes against common sense: - In 45 states, police don’t have the authority to ask for immigration status. This is utter lunacy. - Twenty states allow illegal immigrants to attend public college at regular in-state fees. (Normally, aliens pay 3x to 4x the in-state fees.) - Ten states allow illegal immigrants to get a driver's license even though they don’t have a Social Security Number (SSN). Americans must show an SSN to get one. - Asylum seekers can get an SSN even if their papers aren’t processed after 6 months. - 4 million illegal migrants will get work permits and protection against deportation. This isn’t some naive bit of compassion or pity. This is bribery, pure and simple. But the Democrats are bribing the invaders, not the natives, for their vote. And you wonder why Democrats are against voter ID? Wrap Up Of course, this is The State redistributing your money to some stranger who came into America without an invitation. You didn’t get asked, but you’re paying for it. I hope the country comes to its senses. From Ukraine to Israel to Taiwan and back to America, citizens are parted from their Treasury. It’s your money. You must decide what to do with it. If you keep leaving the allocation decisions to the government, you won’t have much treasure left. As for your cornhole, keep it tight! All the best, [Sean Ring] Sean Ring Contributing Editor, The Morning Reckoning feedback@dailyreckoning.com X (formerly Twitter): [@seaniechaos]( Thank you for reading The Morning Reckoning! We greatly value your questions and comments. Please send all feedback to [feedback@dailyreckoning.com.](mailto:dr@dailyreckoning.com) [Greg Guenthner] [Greg Guenthner, CMT,]( is chief strategist at Forge Research Group. He has spent the better part of the past two decades developing long-term and short-term strategies with a single goal in mind: to help everyday investors generate outstanding returns and control their financial futures. Greg’s charts, analysis, and insights have appeared in Marketwatch, Forbes, Yahoo Finance, and many other financial publications. 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