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Posted January 20, 2022

Sean Ring

By Sean Ring

The Stock Market Says No

  • Tech stocks are down nearly 10% - in only 12 trading days.
  • Crypto and healthcare are ugly, as well.
  • Time for gold to rally? Maybe Possibly

Its Thursday morning in Cebu, and Im about to grab my java.

Even though the West seems to be lifting its Covid restrictions England will do away with most restrictions, including vaccine passports on January 27th Cebu moved in the opposite direction.

Now, in Cebu, in 2022, children are not allowed out of the house. Yes, you read that right.

In a country of 109,000,000, where only 53,000 died of, or with, Covid, this city is shutting down.

Again.

Quite frankly, even those numbers are questionable. There were quite a few cases of medical fraud here when doctors would put Covid as the cause of death even if it werent.

Incentives matter.

After a major typhoon smacked the economy, this shut it down again policy was the best our idiot-in-chief, sorry, the mayor, could come up with.

Italy cant come soon enough or we cant go fast enough whichever works best.

In the meantime, Ive got a birds eye view of what the market thinks of Joke Biden and its looking bad for him.

Yesterday, I talked about what I thought were plausible scenarios for the 2022 midterm and the 2024 presidential elections.

Today, Ill add some numbers and charts.

Here we go.

The January Effect

This effect is more psychological than logical, but with the ever manic-depressive Mr. Market, that irrationality certainly matters.

The January Effect is the name of a seasonal rise in stock prices during January. An investment banker first noticed it in 1942, when he studied returns from 1925 onward.

While we all recover from our befuddling Christmas punch and goose (or turkey), the stock market gets on with business.

And the business of America is or was business.

Right now, the stock market needs someone to throw the towel in.

Perhaps a reset button is in order

Right now, the major indices are down between 4% and nearly 10%, and were only three weeks in.

Tech Stocks Finally Take a Hit

The Nasdaq is down nearly 10%. In 12 trading days.

Credit: Stockcharts.com

In general, tech stocks dont like inflation. But they benefited from our outsized reliance on communications (Zoom et al.) and logistics (Amazon, for one) to either work or get our stuff.

Now that the market expects the Fed to raise rates soon to fight inflation, theyre dumping their tech shares.

Investors may also be dumping shares that rocketed during the pandemic because the government is signaling a transition to an endemic.

I know its early, but the tech honeymoon seems to be well and truly over.

Crypto Takes a Walloping

Bitcoin is down to $40,000, and Ether is hovering above $3,000.

Only a few months ago, we were looking for BTC to recapture its ATH of $62,000. I also expected ETH to break through $5,000 on its way to $10,000.

Now, the big coins are down double digits since New Years Day.

Hangovers usually dont last that long.

Would I buy crypto right now? Probably not.

But one could easily take the view that this is a temporary sell-off and to load up.

Crypto still forms an important part of your portfolio: insurance.

But it feels much better when its going TTM.

Gold Rises? Maybe Hopefully

JC Parets of AllStarCharts.com sent an email with this chart on it.

Credit: JC Parets and AllStarCharts.com

This chart shows the ratio of the GDX to the S&P 500. It shows that now may be the time to buy gold miners in the form of the GDX ETF.

(Quick reminder: exchange-traded funds, or ETFs, are like mutual funds that trade on stock exchanges. You can buy an ETF for practically any stock index, sector, or basket your heart desires nowadays.)

The Dollar Index (which is the USD weighted against a basket of other currencies) seems to have hit strong resistance for now.

The USD may turn up, but were in a place where a downturn is equally likely.

If the market trades down, thats bullish for gold, which could use a boost.

I still think gold is a binary trade.

That is, the government will reprice it at a higher level like my colleague Jim Rickards says or it wont.

But owning some in your portfolio is a smart move. Its an insurance play, just like crypto.

To be clear, I dont think the heady days of 2001-2011 the roaring gold bull market are coming back anytime soon.

Biotech Is Hurting Badly

My friend Jared Dillian over at the Daily Dirtnap published a chart the other day of the SPX Biotech ETF.

Since its peak in 2021, its been an utter disaster, nearly cut in half.

??

In a month of Sundays, I wouldnt have thought that biotech would be down during all of this. And nearly 50%, at that!

It seems the market agrees with Pfizers CEO, Albert Bourla, whom I wrote about yesterday, who said the pandemic would be over by spring.

Many funds have already offloaded their biotech stocks and are looking for the next big thing.

Healthcare stocks are hurting this January but are still up over the same period.

Go figure. I dont get it.

Whats Up, Doc?

My good friend Ian hates when I bash Biden and his policies too much.

So what sector has been ripping it for the last five weeks, up over 19%?

Energy!

This is superb if you own energy stocks.

Its not so great if you own a car. Or a house. Or a business.

But never mind, Bidens policies have been a boon for big oil.

Im just not sure his Lefty Watermelons (eco-green on the outside, commie red on the inside) will be so pleased with this outcome.

All in all, its not great on the economic front for Sleepy Joe.

And the politics arent going to get any easier for him. In The Wall Street Journal, veteran scribe Gerald Seib wrote:

Still, its hard to imagine a worse stretch than the one the president endured last week. His push for new voting-rights legislation appeared to die in the Senate, where his Build Back Better social-services and climate-change legislation already lies comatose. The Supreme Court killed his administrations Covid-19 vaccine mandate for large employers. Government data showed inflation at the highest level in four decades. Diplomacy to prevent a Russian invasion of Ukraine appeared to stall.

Im thrilled about most of that.

Hes too old to change, so the best we can hope for is a withdrawal.

If he and his leftist cronies get out of the economys way, it may just start up again.

Until tomorrow.

All the best,

Sean

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