There’s Only One Market Story

👀Looking at the long end of the curve, Powell may have lost control.👀 [The Rude Awakening] August 21, 2023 [WEBSITE]( | [UNSUBSCRIBE]( There’s Only One Market Story - While on holiday last week, I snuck a peek at the market. - Still… there is only one story. - How that story ends will dictate what equities do until the end of the year. [Make This ONE Money Move Before BRICS Meeting August 22nd]( Quick warning: you’re running out of time to watch Jim Rickards private interview before it’s taken offline.. [Click here or the play button below to watch it right now.]( [Click here to learn more]( During the interview Jim outlines something he calls “currency contagion”… Including THREE new recommendations to take advantage of the coming chaos and volatility. This cannot wait... You must act now to prepare for the new market altering announcement by the BRICS August 22nd. [Click here to watch before it’s too late]( [Click Here To Learn More]( [Sean Ring] SEAN RING Good morning on this fine Monday morning from Amsterdam. By the time you read this, I’ll be either on the train to Brussels or in Brussels already. It’s the final stop on our Family Grand Tour. It’s been a hoot so far. Thank you for indulging me. The Rude has become almost a travelogue over the past three weeks. But today, I want to return to the markets because I’ve had a cool five minutes to look at the charts. Let me show you what I see. The USD is Still The Story First, this simple truth: If it takes more USDs to buy something, the price increases. (Notice I didn’t say “value.”) That is, if the dollar weakens, you need more of them to buy anything that’s priced in dollars. That could be stocks, bonds, commodities… anything priced in USD. My friend and colleague Alan Knuckman has been a dollar bear for a while. That’s also the reason he was so stock market bullish. You’d need more weakened dollars to buy stocks. Sitting in Europe, where German deindustrialization is occurring, I couldn’t be more dollar bullish. The euro, which accounts for 57% of the dollar index basket, is utter crap. But what does the market think? Here’s the daily chart of the dollar index: [USD] Let’s zoom out to the weekly charts: [USD chart #2] From the weekly charts, this latest upswing could be yet another sucker’s rally, the third in the last year. And each successive peak has been slightly lower than the last. So there’s a possibility that we may be heading down again soon. We can’t discount that. What’s one of the main drivers of a dollar rally? Rates. Let’s look at them next. Rates Are Going Up? If we look at the CME FedWatch Tool, the markets are not pricing in a hike [Rates going up?] According to the Fed Funds futures contract, the market currently assesses the risk of a 25 bp hike at 11%. The thing is, this is only the short end of the curve. Here’s the ten-year yield: [USD10yr] And here’s the 30-year yield: [USD30yr] Both the 10Y and 30Y have nearly broken out past their most recent highs of 2022. And that means even if the short-end (Fed funds) isn’t tacking upward, the long-end seems to be heading up. That’s usually known as a bearish steepener. And it means that inflation expectations are increasing rather than decreasing. Not great. Why “bearish?” Because this kind of move is usually bearish for the stock market. The big question is, “Has Chairman Pow lost control of the curve?” [Attention! Before You Read Any Further…]( Before you read any further in today’s issue, an urgent situation needs your immediate attention. If you don’t plan on [claiming this new upgrade to your Strategic Intelligence subscription,]( you’re missing out on a huge opportunity. Right now is your chance to grab one of the biggest (and most valuable) upgrades our company has ever made to a newsletter. I’m taking Strategic Intelligence to an entirely new level and I’d hate to see you left behind. [To see how to claim your subscription upgrade, click here now.]( Once you’re done with that, read on to see today’s issue. [Click Here To Learn More]( Equities Will (Probably) Head Down From a daily perspective, the SPX looks weak, but not terminally so. [Equities Will (Probably) Head Down] Last week was an up week, but it started far below the prior week’s close. We’re well below the 50-day moving average but well above the 200-day moving average. If we get below the prior low of 4,340 from June, the SPX may need the 200-day MA as support. Tech stocks look slightly worse, as they’ve broken through their prior June low of 13,320 already: [Tech stocks ] But what does increasing long-end rates mean for commodities? Commodities Will (Probably) Head Down Gold has had a terrible August: [Gold] It’s been pretty much straight down since August 1st, shaving almost 100 points. Silver has been awful, as well: [Silver] The same goes for copper: [Copper] Oil has been hit as well: [Oil] As has natural gas: [natural gas] For the latter two of oil and gas, it’s not been that hot where I am. I never have the AC on at night, and that’s part of the reason prices have fallen. But another reason, which affects all commodities, is carrying costs. If rates are increasing, it’s more expensive to own commodities. As commodities don’t produce dividends, carrying costs play a large role in how they’re priced. The question is this: how much are you willing to forego to own a commodity? When rates are at zero, you’re not giving up much. But when rates are at 5-6%, you’re giving up a load of yield to hold on to them. It looks like many investors have bailed on commodities for now. Wrap Up So there you have it. Chairman Pow may (or, likelier, may not) raise rates this coming September Fed meeting. But the long end of the curve has taken on a life of its own. If he’s gotten behind the curve, we may have some big, big problems down the road. The long end is the part of the curve we use to price assets like stocks, bonds, and commodities. Increasing rates means we’re discounting those cash flows at a higher rate. And that drags down asset prices. The opportunity cost of holding commodities is much higher than a year and a half ago. This is the part of the presidential cycle where the market flattens out. So I won’t call “panic stations” yet, as we need more evidence. But we’re probably going to have a bumpy next couple of months. Prepare accordingly. Have a great week ahead. All the best, [Sean Ring] Sean Ring Editor, Rude Awakening Twitter: [@seaniechaos]( In Case You Missed It… 🏋️‍♀️ Here’s How Jim Rickards’ “Banker” Invests His Own Retirement Funds [Sean Ring] SEAN RING Good morning from the Thalys train heading from Paris to Amsterdam! One of the most interesting questions we get is “How do you invest your own retirement funds?” Luckily, Zach Scheidt, Jim Rickards’ “Banker” has already written out his answer. Not only that, but he’s given me his kind permission to reprint it in the Rude. In this piece, you’ll learn about Zach’s “barbell approach” and what kind of aggressive trades he uses to quickly expand his wealth. Take it away, Zach! All the best, [Sean Ring] Sean Ring Editor, Rude Awakening Twitter: [@seaniechaos]( [New “WiFi Crypto” Token is Going NUTS!]( Only a handful of crypto investors know about this… But there’s a tiny, affordable device… That’s paid investors real crypto – every day, with zero work… Just for having a working WiFi connection! It sounds crazy, but it’s true… And [this 3:28 video]( explains everything. [Click here to view it NOW](. [Click Here To Learn More]( Here's How I Invest My OWN Retirement Funds [Zach Scheidt] ZACH SCHEIDT Back when I was a hedge fund manager investing millions of dollars for clients, there was one question I got asked over and over. It's the same question I get these days whenever I attend a conference or start talking with friends about the markets... "Zach, how are YOU investing your family's money?" It's a reasonable question. After all, my hedge fund clients of old and my current readers alike want to know that I'm putting my money where my mouth is. So am I really investing alongside my readers, customers and clients? Back in the hedge fund days, the answer was pretty simple. I kept the majority of my wealth invested in the funds that we managed. So when our clients did well, we also profited. Today, the answer isn’t much different. I also invest my own money in the same areas that I recommend here at Rich Retirement Letter. Let's peel back the curtain and take a closer look at how I implement these ideas with my investment accounts. Starting With a Balanced Barbell Approach At its most foundational level, I think of my investment approach like a balanced barbell with two very important sides. On one side, I keep my conservative, income-generating investments. The positions on this side of the barbell are designed to build wealth slowly and steadily with a minimal amount of risk. On the other hand, I also keep a portion of my investments in much more aggressive trades. These carry more risk but also have the potential for significant gains — often in a short time. At this point in my life, I have about two-thirds of my investments in conservative positions and the other third geared more aggressively. For reference, I'm 46 years old with a reasonable income that covers my day-to-day expenses. So I can afford to take a bit more risk with my retirement accounts. But as I get closer to retirement, I’ll shift more of my investments into the conservative side of the barbell so my risk is more balanced toward the season of life that I'm in. Each quarter, I take a look at the gains (or losses) on each side of the barbell. And I make adjustments so that neither side of the investment process gets too heavy, causing me to become too cautious or too aggressive with my investments. Once I make this strategic allocation for my overall investment picture, it's time to look at the positioning on each side of the barbell. Allocating the Income Portion of My Barbell The conservative side of my investment account is heavily focused on generating income. And I have two favorite ways to generate investment income. The easiest (and most low-maintenance) way is to invest in dividend stocks. These stocks typically pay quarterly dividends which flow directly into my investment account. And since I don't need these cash payments for my day-to-day expenses, I can have the payments automatically reinvested into new shares. This way, I continue to accumulate more shares, which then pay more income every time a new quarterly payment is sent out. I love this set-and-forget type of investing. But since I'm an active student of the market, there's an even better way to collect income on the conservative side of my barbell approach. You may already be familiar with the strategy of selling put option contracts for income. This is how I invest the majority of my capital on the conservative side of the barbell. When you sell a put contract, you're entering an agreement to buy shares of stock — but only if the stock is trading below your agreement price on the expiration date. Best of all, you get paid upfront for entering the agreement and you can collect payments on your favorite stocks multiple times a year! Just like any other type of investing, this strategy involves risk. But it’s actually less risky than a typical buy-and-hold approach. And I love the reliable cash flow this strategy generates. If you're willing to spend a bit of time reviewing your favorite stocks each week, I highly recommend trying this strategy out! Consider starting small with just one or two contracts until you get the hang of the process. Once you complete a few trades, I'm confident that you'll want to add this trading approach to your investment toolbelt. The Best Aggressive Trades for Reliable Profits I'm willing to take some bigger risks with the aggressive side of my barbell strategy. But I want to make sure my potential reward is worth the risk along the way. Over the last two-plus decades, I've been refining my approach to aggressive trading. I've found that my best returns come from buying in-the-money call option contracts from stocks I expect to trade higher and in-the-money put option contracts for stocks I expect to trade lower. These contracts work well when a stock moves in my favor, giving me nearly a one-for-one profit while muting my losses if the stock moves against me. Bottom line, these option contracts tend to give you more profit when your picks are correct and generate smaller losses when picks move against you. No one gets every stock idea right. But if you can trade in a way that gives you more profit when you're correct and smaller losses when you're wrong, it can go a long way in helping you grow wealth over time. In today's market, I'm placing some aggressive bullish trades on energy stocks, some healthcare plays, and a few select (and profitable) tech stocks. Meanwhile, I'm placing a handful of bearish bets on long-term Treasury bonds and unprofitable tech stocks. In-the-money option contracts give me a great opportunity to profit from the trades I get right while protecting my capital when things don't work out as planned. Find the Right Balance for You I'm not currently licensed to give individual investment advice. And that's not the business we're in here at Rich Retirement Letter. But here are some general principles that can help you use this barbell approach effectively to give you the income you need to enjoy this important time of your life. First off, if you've got several years left until retirement and an income that covers your day-to-day expenses, you can afford to be more aggressive with your investments. I still think it makes sense to have a large portion of your investments in income-generating strategies. But you can swing for the fences with a bit more of your capital if you've got your day-to-day expenses covered. Remember, the aggressive side of your investments can decline quickly if too many trades move against you. So don't get too concentrated on these trades and risk losing your investment capital! As you get closer to retirement, it makes sense to shift more capital to the conservative side of the barbell. That way you don't wind up with a nasty surprise if a few trades move against you. Preserving your capital in this stage of life is much more important than growing your wealth aggressively. Finally, don't forget to review your barbell periodically. A handful of winning aggressive trades could quickly double this portion of your investment capital. If this happens, you may want to move some of those profits into the conservative side of your account. That way, your profits are protected so you won't have to worry about giving them back. Incidentally, this barbell approach is a big part of the inspiration behind my Income Alliance trading program. The Income Alliance includes two real-money portfolios, each covering one side of this balanced barbell. Members get real-time notifications any time I make a new trade in my investment account. And they can decide if the trades make sense for their investment accounts. Stay tuned for more information about The Income Alliance in the weeks ahead. In the meantime, I highly encourage you to consider adopting this balanced barbell approach to your retirement investment accounts. Regards, [Zach Scheidt] Zach Scheidt for Rude Awakening feedback@rudeawakening.info [Paradigm]( ☰ ⊗ [ARCHIVE]( [ABOUT]( [Contact Us]( © 2023 Paradigm Press, LLC. 808 Saint Paul Street, Baltimore MD 21202. By submitting your email address, you consent to Paradigm Press, LLC. delivering daily email issues and advertisements. To end your Rude Awakening e-mail subscription and associated external offers sent from Rude Awakening, feel free to [click here.]( Please note: the mailbox associated with this email address is not monitored, so do not reply to this message. We welcome comments or suggestions at feedback@rudeawakening.info. This address is for feedback only. 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