Gold Though!

Daren:
[0:02] All right well we're back uh it has been another week in the market and let's say hello to stimulus right um as always there's a lot to talk about on the markets uh gold showing an interesting signal though we'll want to look at that closely today and uh then talk about the stimulus coming out of China that has certainly given the market a fun ride the last few days.

Daren:
[0:31] All that and more right after this. We'll.

Music:
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Daren:
[1:08] We'll see you next time. all right so uh a little bit of nvidia to start the day chris.

Chris:
[1:16] Yeah i thought this chart was pretty wild where the thing that stuck out the most to me was 15 of the top 20 market cap swings were in 2024. So when you say market cap, that means the value that the stock market is putting on a company altogether. And so NVIDIA happens to take up most of the biggest swings in the positive direction and in the negative direction so the old adage right there's there's always a trade-off if you're going to be in in for the up you got to be in for the down as well

Daren:
[1:56] Yeah for sure i think it's easier to only remember the up sometimes and to quickly forget the downs and i think we've seen that with all these big stocks right uh, i guess the last few weeks though it's there's been a lot of up for nvidia.

Chris:
[2:13] I remember that down day in Meta. That was when Zuck announced the Metaverse. The market did not like that idea at all.

Daren:
[2:22] He strategically has let that one go.

Chris:
[2:25] Yeah, I was going to say, it turns out actual consumers didn't like it that much either.

Daren:
[2:32] It turns out, unless you're Mark Zuckerberg, who's a multi-multi-billionaire and owns Hawaiian Islands and thinks the rest of us actually like our lives and don't really want to be in the virtual Metaverse.

Chris:
[2:42] I Yeah. So another one from Visual Capitalist this week, and we showed, I think it was last week, where people have their money. This one is by generation of the $156 trillion in U.S. Assets. About half of that is held by the baby boomers, followed by Gen X. It's just south of 30%. And so um you know it's it's fun it's i i mean it makes sense right that the the folks that are at a near retirement the ones that have been saving the longest um at this point would have had the most although i guess the silent generation would actually be have saved in the longest there's just fewer of them than the baby boomers um so and then you can see the breakdown of where that money is held. And I thought this was actually pretty balanced compared to what I would have assumed, which is I would have assumed most of this wealth was in real estate. However, it looks to be pretty balanced between the different buckets available.

Daren:
[3:51] Do you see that stat this week, Chris, that like I think it's 40% of homeowners in the United States, their house is paid off.

Chris:
[4:00] Yeah.

Daren:
[4:00] It's pretty wild when you think about it.

Chris:
[4:02] Yeah, it really is. And it probably tells you why the inventory hasn't really been turning much, despite the higher interest rates. I just want to

Daren:
[4:16] Stick mortgage mortgage applications haven't been this low. Like there hasn't been, we're back to where we were looking all the way back to 1994. It's the lowest level buyer demand in over 30 years.

Chris:
[4:36] And yet prices really haven't seen that much of a drop, you know, thanks to so many factors in the housing market. What a weird, what a weird market. So bullishness continues. And now we've got all three of the indicators in the greed zone. We've got the AAI sentiment indicators here. The CNN fear and greed index is up to 72, which is up from 63 last week. And the Bitcoin fear and greed index up to 61 greed. It was 54 neutral last week. And it was extreme fear. What I feel like was not that long ago. And at least on the short term, it turns out that would have been a good contrarian buy signal at that time. In hindsight, of course. um so we got the pce the the year-over-year price uh um uh the uh what is it the price super are

Daren:
[5:37] You saying the pce.

Chris:
[5:39] Yes um i always forget what it actually stands for but it's what consumers are paying basically personal consumption expenditures there you go obviously right? So you can see on the long-term chart, what I think is interesting here is that you typically don't see drop-offs like we've just gone through without a recession.

Chris:
[6:04] So if the Fed is actually able to get these numbers back down to a reasonable amount without a recession this time, it really truly will be quite the accomplishment compared to where we've been historically where you get these drop-offs and it's usually it's usually been into a recession because of that but this is like this is considered what is the Fed's favorite indicator of future inflation is what the personal consumption expenditures is doing year over year.

Chris:
[6:44] So with that, the market is not saying, you know, are we going to get a rate cut? The market is saying we will. It's just how much is that going to be? And right now it's split about 50-50 between a quarter percent cut and a 50 basis point cut or a half a percent on the November 7th meeting. Now note that'll be, I think, two days after the election. And so we have some time to go and obviously a lot of political outcomes to hopefully get by then. But right now, the market's just on the fence between those two.

Daren:
[7:26] I think that's the big question, right? Like the big question is, and probably speaks somewhat to the lack of people taking out mortgages or refinancing. I think the expectations rates are headed lower now that the feds are, um, now that the feds have started cutting, although it's questionable where or not that's truly going to come to pass because, you know, some would argue that now we're going to start seeing a lot of money. inflation kick back up. Certainly, we've had enough fiscal spending, meaning fiscal spending to when the government is running budget deficits in the last year, up 28% year over year. Oddly, it's an election year, but never mind on that. And now that we have Federal Reserve, we have the Bank of China, we've got the European Union doing stimulus, right? So you have more liquidity coming into the system, which in theory should push inflation higher.

Chris:
[8:32] Yeah, there's stimulus kind of going everywhere right now. And while there are signs of possible recession, most of those signs being in the fixed income market with the yield curve inversion and unemployment rate ticking up a bit. But this is not showing any sign of slowing down. And remember this chart, it almost gives me PTSD because everybody was watching this so closely during COVID, uh the drop off in tsa numbers and uh you know this is from mo has saying

Daren:
[9:06] Um by.

Chris:
[9:07] Way of apollo and he says the tsa has daily data for the number of people scanning their boarding pass with a tsa agent and it continues to show no signs of the economy slowing down so uh this one indicator at least uh would show that hey there's nothing to worry about at this point right

Daren:
[9:27] Yeah i mean it's interesting too though you think about that a lot of these you know if 40 of america has their houses paid off right um that means 40 of america is less sensitive to slowing down economically and i would venture to say that the 40 with this is just anecdotally if 40 of america has their houses paid off those who have their houses paid off those are the ones more likely to be traveling than the ones who don't have their house paid off and they're less economic sensitive. So, you know, there's this been this whole theory economically for a very long time about baby boomers. And as they go through their economic cycles and now they're stepping into retirement, I can't help but wonder if things like travel stay higher for longer, even in compressed economic moments, because there's. That group of people's generally on pensions, fixed income, social security, that whatnot, they know how much they have to spend on their vacations, et cetera.

Chris:
[10:35] Yeah. And that's really been the theory of Ed Yardenny for quite a while. And he's been right to his credit because while it's not, I think it's important to note too, it's not, it would be 40% of those that own their home own it free and clear, right? So not exactly 40% of America, but of the people that own their home, 40% of those people would not have a house payment, would not be very much impacted by interest rates. And then the balance of those people that do have a mortgage, most of them have very low interest rate mortgages and were able to refinance at the bottom in rates.

Chris:
[11:18] So now the other thing that happened this week was the immense stimulation of the markets in China from their central bank. And this is from Mike Zicardi, and this was as of yesterday or maybe two days ago. And he says the China large cap ETF having its best week ever at 18% plus 18% in one week. Now, obviously, you look at the long term chart on this. And well, back when it had its boom in the 2000s going into 2008, we're still nowhere near the height we saw back then. So it's been a long dry spell for the Chinese economy. So we'll see if this one sticks. But a lot of stimulation coming from that central bank now, which is, you know, along with Europe and the United States, one of the biggest economies in the world. And so you got to think there's going to be some impact on the markets from that change of tune in the central banks, because unlike the U.S. and unlike Europe,

Chris:
[12:25] China really didn't do much to stimulate its economy through COVID and kind of just let their economy languish. And they actually, I think, tried to kind of pop the bubble in their property market and just kind of let things fall apart, basically. I mean, you can see where the market was in 2021, and it's just been devastated since then in the Chinese stock market.

Chris:
[12:53] So we'll see if they're changing their tune. and uh this is why it matters because when you look at the world's wealth um you know second to the united states china is the second largest holder um at 18.4 percent of global wealth so if their market turns around and if their economy turns around that's going to have a big impact on global markets um and you've already seen it start to spill over into the european markets because the European markets also did very well, given that they sell a lot of their goods.

Chris:
[13:31] Germany specifically sells a lot of their goods to China. And so if the Chinese market turns around, that's going to be good for Europe as well.

Chris:
[13:44] So along with these lower interest rates, there's been a shift in the market leadership. And this is also from Mike Sicardi showing the equal weight S&P. Now, this is from July 1st, which was, I believe, pretty close to the Fed meeting where they strongly hinted that rate cuts were going to start to come. Basically, the market started pricing in these rate cuts. And you can see that all the laggards have started to lead now, which is the equal weight S&P, the value index, international stocks, mid-caps, All the sinkers have started to do well, while the leaders, specifically the semiconductor index, has really seen a drop-off since the summer. And so maybe we're starting to see a change in the trend, the overall trend of the market underneath the surface.

Daren:
[14:44] Man, I'll bet this chart made you happy, Chris.

Chris:
[14:47] It did. It did. But like, like Charlie Brown trying to kick the football while Lucy holds it for you. You know, like, Hey, Hey, I'm not getting too excited yet. Let's just put it that way. Now, this is from Bespoke, which I think they have the best looking charts, by the way. They're showing that the equal weight S&P, so that means that instead of weighting the stock holdings by market cap, meaning that the bigger stocks get a bigger holding, if you just equal weighted the top 500 stocks in the S&P, that chart is finally starting to show some strength, which since the beginning of the year and really coming out of COVID was not the case because there was just a handful of technology stocks really leading the way. As the rally broadens out and as some of these other areas of the markets are doing well that haven't recently, the overall S&P is still doing well because the stocks under the surface have kind of started to bring up the rear, right? And so overall, I would say that a broader market participation is healthier than being concentrated in just a handful of stocks.

Chris:
[16:12] And we've kind of been talking about that for the last couple of years where it's like, is the market going to deteriorate from those concentrated stocks to even fewer stocks to where the market can't hold itself up? Or does that rally start to broaden out across the rest of the sectors and create a healthier market? And I think we're getting the latter right now. So revised numbers, speaking of the market kind of always giving a signal of what's around the corner. Remember when we were getting those GDP numbers in 2022 that the market was behind? So this is from Ben Castleman. He says, remember the technical recession, two quarters of negative GDP growth in early 22? Turns out it never happened. Annual revisions now show output grew slightly in Q22, 2022, and that growth coming out of the pandemic was faster than previously believed. So the market, of course, did awfully in 2022, but then it started to take off not too long after that.

Chris:
[17:18] And everybody was kind of questioning, what is the market seeing? What is going on? And I think you could say the same thing about gold right now. What is the market seeing that nobody's noticing? Well, it'll only make sense in hindsight. But I think other than a few pockets here and there, the market's pretty efficient overall in that you should listen to what the market is saying.

Chris:
[17:42] And if you disagree with that, you should question yourself, are you right or is the market right? Because usually the market's right.

Chris:
[17:55] Now, Druckenmiller says, Stan Druckenmiller, one of the, you know, top traders of our time, basically says the best economist is the inside of the stock market. So until the inside of the stock market starts to worry about this, I'm not going to be worried about it yet. But this is credit card delinquency rates and uh it's a percentage of current outstanding balance and um and then you've got auto loans and subprime auto loans ticking back up to you know areas that we really haven't seen in quite a while um so uh so there are some things under the surface it's like hmm what's going on here is the equity market just taking a while to catch up and just burying its head in the sand? Or is this nothing to worry about? I don't know the answer to that yet, but market definitely doesn't seem to be too worried about this at this point.

Daren:
[18:52] You cut out for a few minutes, Chris. I don't know if it came through on my end or on those watching, but run this slide two seconds. Tell us what this slide was one more time.

Chris:
[19:03] So this is credit card and auto loan delinquencies, which is ticking up. And although that is concerning, as Stan Druckenmiller says, and you're hearing me now?

Daren:
[19:18] Yeah, we can hear you now. Okay.

Chris:
[19:20] So Druckenmiller says, who's one of the best traders of our time, says, hey, the inside of the stock market is the best economist out there. And so until the stock market starts to worry about this. I don't think it's concerning yet, but it is worth noting that you're seeing an uptick in these delinquency rates under the surface.

Daren:
[19:42] Fair point, fair point. All right, so let's take a look at the S&P 500 for the week. So as usual, we bring up the S&P 500, generally what people see as the stock market quote unquote um we're not affiliated with any of these advertisement pop-ups that keep coming up so i apologize about that um and you can see these um each of these squares represents what's called the capitalization weighting of the s&p 500 those particular squares represent how much how large that company is in juxtaposition to the other companies in the S&P 500. You can see NVIDIA, Microsoft, Apple, Google, all being the big ones we've talked about. Some interesting news came out today out of China. China was encouraging companies in China to stay away from NVIDIA as a solution for creating their products.

Daren:
[20:46] Which obviously will stimulate the semiconductor industry in China, which is quite a bit less sophisticated than NVIDIA produces and some of those coming out of Taiwan.

Daren:
[20:57] So that's kind of an interesting piece of news coming out at us. So when we take a look at the overall market, let's take a look at SPY, which is an index fund that tracks the S&P 500. And you can see we're floating higher. Although yesterday we closed at an all-time, I guess, yeah, we could say we closed at an all-time high yesterday. It came back in today, and that's kind of a bearish look on that candle. Uh, there's a lot of stimulus, as we mentioned earlier, coming out of the governments from around the world. And that's playing positive into the markets overall. Um, interesting though, when we look at things like the ag and like gold, which are more conservative investments, you're seeing this move up. That's really strong. So today we titled gold though, as the presentation, because gold just keeps ripping higher. It looks like it today closed. That would be called a bearish engulfing candle. I'm telling us that's probably a short-term top, and now we'll want to see it check back in with these important moving averages before it resumes higher.

Daren:
[22:11] It's quite a bit overbought at this point, the gold market. What we suspect is happening is various governments from around the world are hoarding gold. I mean, heck, you could buy gold at Costco now. So, um, Certainly some concern about the viability of the dollar with the U.S. Debt going through the roof, people looking to gold as a potential solution for long-term wealth accumulation, wealth protection, viability. Interestingly enough, though, you can see the Bitcoin is moving up. It's up at 65. It doesn't close till 5 this afternoon for the day, but then it starts opening right away. And i'll point out just some structure here that i see and you can see this kind of double bottom look with a neckline there and it looks like it's going to break through if it breaks through.

Daren:
[23:02] And holds that can be really interesting if that's a double bottom pattern and if that continuation happens uh you could look at it from a again this is just probabilities right So this isn't for sure going to happen, but if that is in fact a double bottom and that's a structure and that's a neckline breaking,

Daren:
[23:24] you can see that moving all the way up into $75,000 per coin. Um that's interesting also because seasonality of bitcoin is once we get through this september which is historically a more volatile time during a presidential election we're don't see quite the volatility because all the stimulus that typically comes at the market uh you, tend to see this run higher and faster and you start to see these monster moves by it so So we're right getting into that period of time where if the seasonality of Bitcoin continues, we would expect for there to be quite the run coming up for Bitcoin.

Daren:
[24:13] Who knows if it actually happens this time, but given you have this kind of flight to gold to things that are scarcer than the U.S. Dollar, there's at least an argument you can make. DXY which is the dollar index it tracks the dollar in juxtaposition to all the other currencies and you can see it's right on this support level at 100 just sitting there. So a weaker dollar will be mean better news for tourism in America, bad news if you've got a trip planned to Europe anytime soon but good news for our exporters for are smaller cap companies, which would play into what Chris, you were talking about with smaller cap companies, um, you know, starting to shine, right. Versus those big dogs. So if you're a value investor, your season might be coming. After all, that 1987 Mercedes-Benz you own, Chris, might actually be worth a dollar.

Daren:
[25:18] All right. So this is the U.S. oil chart, right? And I think this is an interesting chart. So if gold's signaling something, I think you have to argue that so is oil, right? Literally before we got online, Israel dropped a bomb on what appears to be the headquarters for Hezbollah, which is the Iranian-backed proxy force, and killed potentially the head of Hezbollah, this gentleman by the name of Nazarela. Uh you know that could spark major war in the middle east which then would drive up oil in theory but yet we don't see oil going up so it seems to me that oil might be calling the bluff of all that um but it also might be suggesting that maybe there's a larger recession risk on the table than perhaps you see in the stock market right now, or I see in the stock market now. So it's interesting that gold's really struggling to hold. It broke out of this pattern that I've been talking about for a while. And I had talked about how if it goes down, you have more of a recessionary environment.

Daren:
[26:31] If it goes up, then typically that's what happens when you have war, like the war in Ukraine. You can see that moment right here. We're not seeing that yet. But the fact that oil is going down tells you that it's more likely that people are going to be using less oil because the economy is slowing down with gold going up, people feeling more fearful with interest rates going down.

Daren:
[26:57] That could be suggesting that that's a likely outcome. What's not making sense yet is the stock market making all-time new highs, albeit it could be approaching just going up because of the short-term stimulus. The question is, does it get pulled through the whole economy? Is it enough stimulus, et cetera, to keep us out of a recession? Because, as we've talked about, the yield curve is now reinverting and has been inverted for a long time, longest time in history. And when that reinverts,

Daren:
[27:28] then we tend to see those recession moments kick in. We just, no one ever knows how long it will be. One of the ways that they look at the yield curve, you can see from this period of time here to this period of time here. So June, call it June of 2020, I think it was August of 22 when it finally inverted officially. Um, maybe it looks, yeah, so right in that area and then you can see it reinverted here. And so it's this period of time when it reinverts, um, that we tend to see the recessionary moments, um, in history. So we are in that window folks, like we're right there. And if, um, you know, things, depending on how things line up, the big, I don't know is we've got this election. We don't know how that pans out. We don't know if we actually get a winner at the, on November. There's a lot of things to watch coming up we don't see any particularly.

Daren:
[28:26] Expressiveness coming out of the VIX which is a measurement of complacency of those who trade the S&P and the volatility around it and we're not seeing little build today but not much so.

Daren:
[28:38] Overall I think the market continues to go higher with some risk under the hood fairly constructive. Interesting that we got this reduction in rates and we have.

Daren:
[28:52] Mortgages at the applications, the lowest point since 1994. It's pretty significant. So I guess Americans just don't, one, don't feel like the rates are where they want to be to buy yet, or they don't have any money left because their credit cards are all up. And 40% of homeowners have their houses paid off anyway, so they're not likely to be moving or going anywhere. So we see a stagnant housing market at the moment. Well, I think we're going to leave it there for the week. Always lots to cover. We'll be interested to see how next week goes as we creep into October and walk towards the election. We got out of September though, Chris, with some all-time highs. That's something to be said for that, right? Be grateful. yeah be grateful we can't always say that september treats us as good as it did this year uh so here we come october and into the end of the year um we'll see hopefully we can all hope for the the smoothest end of the year um it's typically a good time in the market um from here on out maybe some volatility next couple weeks but things tend to build into the end of the year, but we've got this whole weird election going on so we'll stay tuned and like always we'll be back next week to wrap it up take care have a great weekend.

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