Good news, Gold, Ukraine, Magnificent 7, Oil
ET not home yet
The last several months has been very painful for metals and energy investors. I am happy to report what is shaping up to be some good news for us in the metals and energy. On July 4th, I pointed out a Morning Doji Star reversal pattern on the gold chart. This bottom has held with a retest and a stronger move up today. Probably on lower inflation news hence an expectation of lower interest rates ahead caused a plunge in the US$. I don't necessarily agree with this, but my focus is not on short term market moves. It looks like the timing to buy gold the gold stocks July 4th and even now may be perfect.
The BRICS countries are planning to introduce new trading currency backed by gold at their August summit. A Gold standard will be a great benefit to strengthening the single currency. Also note that 41 countries have applied for BRICS membership. This is the most pronounced public challenge to the U.S. dollar on the global stage since the 1970s when the U.S. abandoned the gold standard or the Brenton Woods agreement. In the following years, gold went up about 20 fold.
Although the US$ had a huge devaluation to gold back then it survived because it was the reserve currency and oil prices soared. All world oil trade was settled in US$ and it became known as the petrol dollar. This go around, that is going out the window too because the U.S. weaponized the dollar with the war in Ukraine. Many countries took note and are and more so will abandon the US$.
The next thing I’ll be looking for will be cooperation from the Saudi’s, because of their dominance in oil markets and if they accept this new BRIC currency over the US$, gold will soar more and the US$ will plunge.
If you wondered why Central Banks have been buying gold more than ever and record amounts? They’re front running and don’t care about the technicals on charts. They have been using the Western suppression of gold prices to de-dollarize. What is the value of the US$ and gold when the world sheds dollars because they no longer need them to buy oil?. I can tell you one is much lower and one much higher.
These countries are going to bail on the US$ like never before because they know they will be defaulted on with their US$ based debt. It is already happened as the U.S. defaulted on U.S. debt held by Russia. They can call it sanctions, but it is actually a default with a different name.
The war in Ukraine is going to go down in history as the major turning point of the U.S. relinquishing it's number one world order status. Weaponizing the dollar for this was a huge mistake. And president Biden will go down as the worst president in US history with a botched pull out from Afghanistan and then an epic failure in the Ukraine war.
Despite what you hear in the news that is just propaganda, Ukraine is losing badly. My sources reveal the so called counter offensive was destroyed by Russia by day 6 or 7 and they only advanced about 5 miles. Russia has hardened their defensive lines over the newly claimed areas while Ukraine has been getting military aid in spurts, dribs and drabs.
The west and the propaganda went along the lines that Russia would run out of ammunition, missiles etc. as the NATO inventory was so great. Sorry folks, the exact opposite has happened and that is why there was such a fuss on defence spending at this weeks NATO summit. Russia has been preparing for this a long time and went on a war footing about a year ago. NATO is still arguing what to do on defence spending.
Ratheon built the stinger missiles and they have had to hire 70 year old retired engineers back to get the assemble lines running again. Now that inventory is about depleted by Ukraine, nobody knows how to build them. I think they tried Chat GDP and it came back with a large wasp, LOL. The blueprints are 40 years old and the old guys will have to come back to make them again. Oh, but a problem, as it will probably take over 2 years to get the assembly lines running again. In May 2022, the US Army ordered 1,700 Stingers, but delivery is not expected until 2026, according to the Pentagon. By then, Ukraine will be long done.
For any military buffs interested in the stinger missile see on this youtube video.
And one more thing, the NY Times reported, Yevgeny Prigozhin and other Wagner mercenary leaders met with Vladimir Putin days after they rebelled, the Kremlin said. This plays along my theory that the Wagner group will attack Ukraine from the north.
The Magnificent Seven, Great Bear Trap
I want to put out a strong warning not to get sucked into this general equity rally. In 2002, after the initial 2000 collapse I wrote a report called 'The Great Bear Trap', because there was a bear rally much like this but it collapsed and the markets went to new lows. The same thing is going to happen again. The consensus expects a -7.5% decline in S&P Q2 earnings and the economy is not even in recession yet. I have been predicting a recession for 2nd half of the year and it is coming, just might be quarter late.
They have even named a market trap but unwittingly. They were called the FAANGs stocks and have recently evolved into the Magnificent Seven. According to Seeking Alpha, The Magnificent Seven and their stellar performance in 2023: Alphabet (GOOGL) +31%, Microsoft (MSFT) +39%, Amazon (AMZN) +48%, Apple (AAPL) +51%, Meta (META) +136%, Tesla (TSLA) +149% and Nvidia (NVDA) +195%. Putting things in perspective, without the big gains of the gunslinging gang, the S&P 500 would be slightly underwater for the year.
If you know the movie and it's remake, 'The Magnificent Seven', The seven gunslingers laid a trap and disposed of a huge number of their adversaries when they attacked. In this case we know the seven stocks and the advisaries are mostly the retail investors that have been sucked into the trap.
Data from Goldman Sachs' prime brokerage reveals that hedge funds currently have the lowest exposure to the U.S. stock market since 2013, while simultaneously increasing their investments in European stocks to record levels. The first half of the year witnessed an impressive surge in the tech-heavy Nasdaq Composite (COMP.IND) (QQQ), marking its best performance in the first half since 1983, with a substantial gain of 31.73%. What a trap!!!!
July 6 (Reuters) - Retail traders raised their exposure to U.S. stocks in June encouraged by healthy returns. They poured in $1.4 billion per day on average in U.S. equities in the month, closing in the all-time record of $1.5 billion a day in March, Vanda Research said.
Retail trading activity as a percentage of total market volume jumped to 21.9% as of July 5, highest since Jan. 24, and up sharply from 14% on May 31, according to J.P.Morgan data.
The setup is in and the trap is going to be triggered within the next 3 months. I would be a seller of general equities and mutual funds.
The next positive news is the oil price. I have been commenting for a while that we need to see a higher high, a solid close above $75. Today's trading is not over yet but looks like the move is happening. There has not been a big change in fundamentals other than the plunge in the US$ this week. However, as I have been saying, the oil market was way over sold with record short positions so there is some short covering going on as well. The next key level to hurtle is around $82, but I am really not expecting that until this fall, other than hurricane season is approaching.
Last year I indicated a strong Gulf of Mexico Loop Current could spell bad news for hurricanes and there was a dandy one but it hit Florida and missed all the oil infrastructure. This year there is an El Nino that normally subdues hurricanes but record warm water in the Atlantic ocean spells danger. An update released last Thursday by the Colorado State University tropical forecast team calls for 18 storms, nine of which are expected to become hurricanes and four of which will reach at least Category 3 status.
Below is a very steep sell off in the US$. A close below 100 would be very bearish and I believe that is coming this year, but lets see if it happens in the next week or so. Maybe traders are reading some of the same tea leaves I presented above.
Our oil & gas and other energy stocks are starting to rebound and I am highlighting -
Energy Transfer - - - - NY:ET - - - - - Recent Price $13
Entry Price $14.10 - - - - - - Opinion – strong buy
I was watching because it was closing in on the $13 resistance area. However when you look at the chart and the fact they had very strong Q1 and very strong operations, the stock is still cheap, cheap, cheap. Even at current prices, the dividend yield is a whopping 9.5%.
During the first quarter of 2023, Energy Transfer’s assets continued to reach new milestones, with volumes increasing across all segments compared to the same period last year.
NGL fractionation volumes were up 18%.
NGL transportation volumes were up 13%, setting a new Partnership record.
Midstream gathered volumes increased 14%, setting a new Partnership record.
Intrastate natural gas transportation volumes were up 5%.
Interstate natural gas transportation volumes were up 11%, a new Partnership record.
Crude terminal volumes were up 6%.
Energy Transfer exported record NGL volumes out of the Nederland Terminal and record ethane volumes out of the Marcus Hook Terminal in the first quarter.
During the first quarter, Energy Transfer completed the optimization project on Oasis Pipeline, adding more than 60,000 Mcf/d of natural gas takeaway capacity out of the Permian Basin.
It is just unbelievable that you can buy a rock solid company giving a 9.5% yield and the stock price has not even recovered back to pre Covid levels. Just proves how out of whack this market has been. There is no reason this stock cannot get back up into the $30s again. The stock is below our original buy price of $14.10, but during that period since 2019 we have collected about $5.00 in dividends.
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