Hot Off the Press - The Latest Insights From an Experienced Hand

We've disgorged the latest from on of our long-term Brain Trust sources, experienced hands at interpreting the markets, with some reasonable ability to forecast. You'll see the specifics in a bit.

Warning: None of our sources are perfect. If they were we'd be rich. In the case of this source, we followed their consistent recommendation to hold on to our long bonds (in the form of a couple of ETFs. They reliable Indicator they followed for decades consistently presented what looked like a bottoming pattern. The natural interpretation: Bonds would bottom, then turn around. 

The timing looked good. Historically (mostly), long bonds served as a great counter-weight when the stock market tanked. And, of course, that's just what's been going on. And we've entered the historical time of year when big crashes have occurred. So, logically, you'd want those long bonds as stock crashed.

But that hasn't happened. It seems that Powell's decision to keep raising rates - a departure from typical Fed policy. The last Chairman to do it was Volcker. When he goosed interest rates, the economy tanked. Fed Chairmen don't like to be in the position to be fingered when the economy tanks. So the Volcker solution has been out of favor since. But now, it seems it's back. And our source stuck with the idea that the Powell wouldn't dare go Volcker.

Well, whether he relents as the economy heads for the toilet remains to be seen. But he's not backed off so far, and it looks like he's going to keep at it. And that means the Indicator will simply show that bottoming continuing for who knows how long.

In any case, our folks finally threw in the towel, along with us. We booked our losses on our long bonds. Painful.

Meanwhile, we did as an Inverse ETF (unleveraged) to further hedge our stock positions (which already were somewhat hedged). Had we sold the long bonds months ago, the combination of that hedge without the losses from the long bonds would have feathered our portfolios quite nicely. Alas, it was not to be.

So we forge ahead into the abyss, along with all of you, hoping to mitigate losses best we can.

Not that any of this should really interest you that much. But it was sure therapeutic to write it all down.

Now for our notes taken from our Brain Trust's latest Issue. Aside from Bonds, you'll see that there's not bottom for Stocks yet. Indeed they may have quite a distance to fall before we get a real Bear Market bottom. That means that any upward bounce correction will be just that - a correction in ongoing Bear Market. 

As for Gold and precious metals, including their mining shares, it's looking like they may be consolidating, preparing for another upward thrust in their long-term bull market. But "looks like" leaves plenty of room for that occurrence being pushed into the future for a bit longer. Then again, in 2008, when Gold tanked along with all other assets, it did begin its dramatic rise in November. Will history repeat?

Here' are the Notes:

-   Fed has two choices: “Inflate or Die” (Richard Russell’s famous phrase) or the Volcker solution. Powell says he’s pursuing the Volcker solution
-   Whichever way the Fed goes, it will take the markets and the economy with it.
-   Average decline for bad Bear Markets over last 100 years 56%. So far S&P down 24% - has a lot farther to fall.
-   Stocks still expensive: near the that coincide with the Tech bubble in 2000 and the crash of 1929
-   Dow Theory just confirmed the Bear Market: Both Industrials and Transports failed to exceed previous highs during recent correction, then turned down and exceeded previous low.
-   Downward momentum will accelerate as the bear picks up steam – Will continue until “exhaustion.” Exhaustion arrives when stocks reach “bombed out” levels.
-   Other stock indexes are following on the way down
-   Tech weaker than Dow – NASDAQ has been weaker than Dow since 2021
-   All stock leading indicators pointing down for both intermediate and long term.
-   Interest Rates/Yields on Bonds: Mega-trend in place since 1981 has now changed from down to up – Once a new trend takes hold, it remains in place for years.
-   Interest rates, along with mortgages, personal loans, credit cards, etc. will now all go up – something that hasn’t happened since the 1980s.
-   USD still soaring – But look at long-term trend and you see that it has lost 80% over past 50 years, with trend consistently down. This will continue – just don’t know when the downward trend will resume
-   When the prevailing money turns down, the ruling country follows it – true for all of history.
-   Another money system has begun to replace the USD
-   Metals, Natural Resources and Energy: All have had corrections at various times/various lengths, but all remain desirable sectors.
-   Gold commenced a mega uptrend in 1969 and remains securely in this mega-trend. It has held near the high part of this trend since it peaked in 2011
-   Specifics to watch re Gold: Must stay > 1745 for D Decline to come to an end. Will turn up when surpasses 23-week MA.
-   Gold/Silver Ratio at high. Once it turns lower, silver will eventually surpass Gold in strength.
-   Gold/Silver mining shares consolidating and showing strength.
-   Resources look like they could continue to outpace stocks in coming years – Hold positions – Specifically touts Uranium
-   Oil could remain weak: Below 89 remains vulnerable to further decline.