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VRA Investing Podcast: Inflation Trends, Market Insights, and the Botched Bitcoin ETF Announcement

We got a bit of a turnaround Tuesday (in the wrong direction) today, but it wasn't all bad out there. Tune into today's podcast as Tyler covers the upcoming inflation reports and the factors contributing to the declining trend in ...

Posted On January 09, 2024Episode 1306
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About This Episode

We got a bit of a turnaround Tuesday (in the wrong direction) today, but it wasn't all bad out there. Tune into today's podcast as Tyler covers the upcoming inflation reports and the factors contributing to the declining trend in inflation. Tyler also discusses the developments in the SEC's approval of bitcoin ETFs and the potential impact on the market.

Transcript

Don’t look back because the market is closed. Good Tuesday afternoon, everyone. Tyler Herridge here with you for today’s VRA investing podcast. We hope you all had a great day out there today. A little bit different action today than we saw yesterday is yesterday was one of the best rallies that we’ve seen for some time now. Nasdaq up over 2%, semis up big as well today. A little bit of the opposite from yesterday, got a little bit of a pause, but we did still see some bright spots today, namely that today was certainly not as bad as yesterday was good, which is really good to see the semis continuing to lead the way and tech leading the way, as well as both of those finished positive on the day today. Nvidia hitting another all time high as well.

So certainly some bright spots out there today. And some of this might have been just a little bit of a pause ahead of some big news still to come this week. So let’s jump into a little bit of what we can expect coming up later this week. First, we’ll get the latest look at inflation data this week. We’ve got the December CPI report coming out on Thursday and the December PPI report coming out on Friday as well. Now, when it comes to inflation, it is very tough to predict the individual numbers, sometimes the month over month numbers. What you really want to see is the trend. You want to zoom out a little bit and see what direction we’re heading in, much like trend following for stocks.

[00:01:44]:
And what we have seen from the last year’s worth of inflation data is that we’ve established a declining trend in inflation, not quite all the way to deflation, where we really would like to see it honestly for consumer prices. But in today’s debt based economy that we live in, that’s not as much of an option as we would like. So we’re not quite to deflationary yet, although with the increases we see in technology it’s certainly possible. But right now we’re seeing disinflation getting back down to that 2% number. I’ll cover some of that here today as well at the end of the podcast. But that said, we do think that this Thursday’s report is going to be a friendly report here, and for a number of reasons. Brian Rich pointed this out in his piece last night as well. One of the main factors here, so core CPI doesn’t include food and energy, but for the overall number, energy prices have been down significantly, whether it is the price of oil, whether it’s the price of gas or natural gas for heating homes all are significantly lower from what we have seen from last year and especially from where we were at the peak on inflation.

Prices all trending lower right now. We don’t think that’s going to be the case over the long term. We do remain bullish on the energy sector, but that’s what we’ve seen for right now, and it’s a good case, at least on the inflation front. Then. We also had Costco’s CFO coming out saying that their inflation had fallen to the zero to 1% range, with some items falling as much as 20% to 30% in stores. Some of it was due to low freight costs. So on some fronts, that’s the average of zero to 1%. So that is, you could say deflationary there, at least for a lot of factors that go in to make up what Costco is looking at.

That’s a massive move lower in inflation. Then add in there as well that we’ve also seen rent prices come down significantly from their peak. Rent and shelter are a big portion of the inflation data, but that is falling nationwide as well. So all that said, we do expect a good number on Thursday. But to zoom out one last time, the bigger theme is the important part here. Outside of Thursday’s number, we do see inflation trending in the right direction, and it’s never going to be a straight line down. Just month after month of better numbers, you’re going to see peaks or little pops every now and then of inflation. Just like with stocks, trees don’t grow to the sky overnight.

[00:04:35]:
Inflation isn’t tamed overnight either. What we want to see continue is disinflation trending in the right direction. So then after that, as I mentioned, we’ll get December’s PPI report coming out on Friday. We’ll be reporting on both of those after the closes here on Thursday and Friday. And then Friday will be the kickoff of q four earnings as well. We’ve got the big banks reporting later this week, so some of the action that we’re seeing right now might be a little bit of a wait and see approach as we’ve got a lot of news coming out later this week. And there is one more piece of news here that we’re expecting this week that seemed to come in a little early today. There’s a plot twist in here, a very interesting story so far, just coming out in the last hour or so.

So if there’s more updates on this by the time that this podcast hits your inbox, just know I’m working with the most current news here because this is just bizarre. We’ve all been waiting for this week as the SEC is set to announce the launch or the approval or non approval of bitcoin etfs. Now, ArC’s ETF is the first up for approval, which is tomorrow. So it’s expected that when they announce whether Arc was approved or disapproved, that if they do approve it, they would approve all of them, probably together. If they don’t approve it, it could be either because Arc missed something in their paperwork that somebody else got. So there are other reasons why they may not get it tomorrow and others might on Thursday or Friday when their deadline approaches. But today. So again, mostly expected to come out tomorrow.

But at the close today, right at the close, the SEC’s Twitter account mentioned or came out and said that bitcoin etfs have been approved within 10 minutes. Gary Ginsler had to come out and say that the SEC’s Twitter account had just been hacked. Could this be more ironic in a way that the SEC is trying to regulate technology in investments and can’t even get their own technology right? Kid was just telling me before our podcast, on our daily call, before the podcast as well, that Gary Gensler just tried to put a thread out on Twitter earlier this week and botched that as well, put them in individual posts. So you had about 500 comments in between each one, making it really messy. So this guy can’t figure out technology either, yet we’re supposed to trust them in regulating these assets? Just another snafu along the way for the SEC. They’ve already made a number of these. And at some point you do have to wonder whether or not it is intentional. Right? There’s a number of lawsuits going on right now, a lot of these that you don’t hear about in the mainstream media.

[00:07:51]:
That is whether it’s the ripple lawsuit against the SEC, basically saying that the SEC was favoring bitcoin and ethereum and trying to knock ripple back while members of the SEC, or former members of the SEC who are working on regulating these products just so happened to own bitcoin or ethereum. Right? When they’re basically shitting on all the other coins out there, they’re holding the ones that they want to see do. Well, we know a lot of that happens in politics. Why wouldn’t it be happening at the SEC as, don’t even get me into it here, but what a joke of a government organization this is. So stay tuned. We’ll keep you posted on this as well. No real news yet on whether or not the ETF approval is here, whether or not they will this week. That’s all still the same as yesterday as far as we can tell so far.

But what we’ve said here for a long time now, really, over the last year or so, when they started talking about the reality that these bitcoin etfs would finally be approved or disapproved, I mean, they’ve been trying to do this for years, but now it’s looking like we’re reaching the finish line. But over the medium to long term, we remain very bullish on bitcoin. And the number one reason for that is that there’s plenty of money out there, whether it’s retirement accounts, hedge funds, or other areas where they have not had access to crypto investments because it wasn’t regulated yet. Right. So they couldn’t put their clients money into these assets. Well, an ETF changes the game on that. The approval legitimizes bitcoin, allows those investors to now invest in crypto assets. So, yes, we might see a bit of a buy the rumor, sell the news event.

It’s always tough in the short term to chart out bitcoin. You like looking longer term as trend followers. That’s what we like to do at least. So, yes, this might still be a buy the rumor, sell the news kind of event, as bitcoin did sell off a little bit after the fake news came out, after the SEC was hacked. But we don’t plan on changing anything here. We are long and strong bitcoin in the VRA portfolio. And this short term volatility here that we might see around the approval would not dissuade us from owning it again. With all this money that now is going to be able to find its way into crypto assets.

[00:10:28]:
We think that that is a very medium to long term bullish story here, but we could see a bit of a buy the rumor, sell the news event. Something else kip and I talk about here often is what would gold be doing right now? What would the miners be doing right now without bitcoin? Think about how much money has gone in, whether it is bitcoin miners. Right? There are some of those that are publicly traded companies or just the asset in general, if people would be buying more gold without bitcoin out there, just something interesting to think about. In many ways, these are complementary, and I’ll get to that. I have something interesting to cover on our commodity watch, as well as to why these alternative assets are so attractive, so attractive in this day of government regulation money printing mania with the Federal Reserve and Jay Powell, the money printing rockstar out there. Just why gold and bitcoin are so valuable in that kind of an environment. So stay tuned until the end. I’ll cover that as well.

Quickly here, though, let’s go through our market action on the day today. As I mentioned earlier, Nasdaq did manage to finish positive, our only major index higher on the day today, up 0.9% to 14,857. As I said earlier, semis also managed to finish positive on the day today. Up slightly more there. Zero point 27%, just below its all time high now. And then after that we had really pretty flat day. The SP down zero point 15%. So not much to 4756.

Next up, the Dow Jones down just over four tenths of 1% to 37,525. And lastly, the small caps were our laggard on the day down over 1% to 1968. Next up here, taking a look at our internals on the day today. Not a good day today, but going back to what I led off on with this podcast, the plus side today, especially in the internals, they were not nearly as bad as yesterday was good. So no concerns for us here. It’s a great day yesterday. Strong in the internals as well. So today we did have declining stocks, beating out advancing stocks.

[00:12:50]:
Over two to one negative on the NYSE. A little bit better on the Nasdaq. Under two to one negative than our bright spot on the day. 52 week highs to lows coming in just under two to one positive on the NYSE and just barely managing to get a gain today for the Nasdaq. Coming in with one more issue, hitting a 52 week high than a low today. So hey, doesn’t matter whether you win by an inch or a mile, we’ll take that today. That was our bright spot. Lastly here, volume was probably the opposite, the weak spot on the day today coming in just about four to one negative on the NYSE.

Fairly light volume compared to yesterday, though, and just over two to one negative on the Nasdaq. So certainly not a great day out there. But again, not as bad as yesterday was good kind of the theme of today’s action, and we’ve talked about this a lot as well. Sentiment does remain very bullish here, other than the put call ratio today was elevated. But given the rally that we had to see a pause at those extreme overbought readings that we saw last month, we haven’t gotten to extreme oversold levels here. Now, we may not get to those levels this is the kind of environment where we like having the positions that we have and kind of a wait and see approach, although we have been a little bit more active in our options portfolio. So if you’re not with us already, not for our options, that’s a regular program. If you signed up on our list, you’ll get it.

We open it up about every four months. But for our everyday investors, you can check out our positions, everything we have to offer@vraletter.com. Right now we have a 14 day free trial. Come and join us. You’ll also get a free digital copy of Kip and I’s latest book, the Big Bribe. A lot of that in there has still coming into play today. Released it just over a year ago, it outlines our game plan for the 2020s as a whole. So still as relevant today as ever.

[00:14:56]:
Next up here, let’s take a look at our sectors on the day today. We finished with four out of our eleven s and P 500 sectors higher. On the day, we were led by tech, just what you want to see, followed by consumer staples, communication services and healthcare. And then our laggards on the day to day, energy, materials and utilities. I always like to cover the ten year, if I haven’t already, with utilities, because they’re the largest borrower in the nation. They’re very rate sensitive. The ten year was up slightly today by four tenths of 1% at a 4.1 right now. So still staying below its recent highs.

I believe that was about a 4.1, maybe just a little bit over that, but we’d like to see that top hold there. Ultimately, our view remains unchanged. Yields will continue lower, although we’re not in the camp of saying there’s going to be six rate cuts this year, that would be less than ideal. In my view, it means that something went wrong and that the Fed is having to rush to cut rates. Ideally, maybe we’ll get one or two this year just as preemptive rate cuts. That would be one of the better case scenarios. You don’t want to have to start seeing the Fed. Oh, we’re going to cut 50 basis points.

We’re going to cut 75 basis points. We’re going to cut a full percent. That’s when something has gone wrong. It’s usually not good for the stock market. And so finally here for today, our VRA commodity watch. I was looking forward to touching on this one, especially with the bitcoin news lately. Although it would be really good to see an ETF get approved for bitcoin it is an asset. As I said earlier, we remain long and strong here.

[00:16:38]:
But I saw a tweet today that really got me thinking that I wanted to talk about it here on the podcast, showing just how gold has actually kept up with inflation. And it was kind of playing off one of the old gold bugs saying, which was early, 19 hundreds, one gold coin would buy you a very nice suit today. One gold coin will still buy you a very nice suit, right? So it is kept up with inflation in that regard. The tweet was showing that, I think it was like a gold bar, and it said something like, a few of these could have bought you a house 100 years ago, it’d still buy you a nice house today. So similar vibe there. Kind of old gold bugs adage. And that is still true today. While our dollar has been inflated into nothingness, right, the US dollar has lost something like 97 98% of its value since the Federal Reserve was created in 1913.

While gold continues to appreciate, or at least keep up with inflation. And that’s the whole goal behind gold, right? Is at least keep up is an asset that cannot be inflated away. And what I really liked was Luke Groeman’s take about gold, where he said something along the lines of this, that that is the exact reason why when people say gold isn’t used for anything productive, or he also pointed out that bitcoin isn’t used for anything. Exactly what we just said about gold. Keeping up with inflation is exactly why Luke Groeman says he laughs at people who say that what gold and bitcoin do is a store of value. It prevents the governments, it prevents the state from stealing your hard earned money through inflation, right? It prevents this theft, the unwritten theft that is inflation, because inflation really only hurts the little guy out there. So you see how gold has really held its value, and then you really realize the biggest advantage to owning these types of assets are simply that they won’t be inflated away like the dollar. And that problem isn’t going away when the Fed thinks they have inflation under control.

Because remember, their 2% inflation target, basically your value of your dollar is getting cut in half every 50 years, right? 50 years, that’d be 100% less, right? Of course, it doesn’t go down 100% and working exactly like that with the percentages. But as they say in the tech world, that is a feature, not a bug. The wealthy use this to their advantage. That is how our system works. Now, in a fully debt based economy, we are reliant on debt and printing money, basically stealing from our future to pay for today. And with interest rates a little bit higher right now, those payments are only getting bigger. They’re going to have to print more money, more money constantly stealing from the future to pay for today. This is the financial engineering that we’ve talked so much about, and we talk about in the big bribe.

[00:19:59]:
And our system at the end of the day is just so manipulated that they will pump whatever cash they need into the system to hold it up. They have no problem with inflation. You remember, for just about all of the Fed’s biggest concern was not having high enough inflation, even though you were consistently losing value of our dollar. So how do we prevent for being taken advantage of, being taken advantage of with inflation by owning hard assets, whether that’s gold, silver, owning stocks, owning real estate, and yes, even bitcoin is in that list for us as well here to prevent the theft that is inflation. So that said, I really liked that tweet earlier today and thought it was worth mentioning here on the podcast. But looking at our commodities on the day, gold up one 10th of 1% now to $2,036 an ounce. Silver down on the day by six tenths of 1% to $23.16 an ounce. Copper down bigger 1.26% to $3.76 an ounce.

And oil up on today, still hanging out in that lower 70s trading range where it’s been for some time now. Gold up 2% at $72.23 an ounce. Finally here, bitcoin, as I mentioned earlier. Oh, sorry, I have one more bonus commodity here today, uranium. As the uranium ETF hit a 52 week high today, up a big 4%. We do have a position here at the VRA. So again, check out the full VRA portfolio@vraletter.com. And last up here, Bitcoin, as I mentioned earlier, did sell off a little bit after the fake news that the ETFs were approved.

It hit a 52 week high earlier in the session today. Now lower by 2.6% at $45,816 a bitcoin folks, that’s all that we have time for here today. Please be sure to subscribe to receive our VRA podcast every day at the market close. You can sign up@vraletter.com we are still working on a new sign up for directly on the page. If you sign up for the 14 day free trial there, we’ll make sure that you receive it as well. So thanks again for tuning in until next time, we’ll see you back here tomorrow for the close. Bye.

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Time Stamps

00:00 Inflation trending downward, not quite deflation.
05:31 SEC to announce bitcoin ETF approval status.
06:30 SEC Twitter hacked, bitcoin ETFs briefly approved.
10:28 Long-term bullish outlook, consider Bitcoin's impact.
13:29 Stock market sentiment remains generally positive.
17:40 Gold, bitcoin as protection against inflation theft.
19:59 System manipulated, prevent inflation by owning assets.

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