China’s stock market is down 30% since its 2021 peak, with the all-time high having been hit back in 2007.
Think it can’t happen here? Think harder.
Think about history. It repeats.
At some point there will be a true bear in western markets. Something lasting and profound. Not a relative flash-crash with a mania melt-up to new all-time highs, or to double the previous all-time highs, within weeks, months or a few years, as has been the case the past few decades after markets briefly plunge.
The real thing happened in Japan when their economy and stock market was the envy of the world. Now, over 30 years later, the Nikkei has finally risen to its prior peak. For about half those lost decades it remained down 50% or more from the top.
It’s likely happening in China now. It’s happened before in the west and is arguably overdue to happen again.
There’ll be plenty of stellar opportunities along the way though, so don’t worry. Just don’t be lemming-like complacent.
I’m no doomer. I’m not even a bear. I’m a realist. Pragmatist. Prudent opportunist.
Historian?
When I started this substack last January I was virtually a lone bull in tech, while the experts running hedge funds had a record net short position. Of tech at the time I stated, “It’d be nearly impossible to manufacture a more bullish backdrop.”
After a historic parabolic run in the sector over the past year, those same experts have a record levered long position in tech. That’s why I’m now short. When the situation changes, I change.
In fact although I am admittedly a goldbug, some of my best scores have come from shorting precious metals. That’ll happen again in due time, but for now I can’t get long enough. More on that below, in the form of something actionable.
I was virtually a lone bull in crypto when this blog was launched. Even zealots were glum and cashing out. My suggested long positions, like those in tech, skyrocketed.
Same with uranium but, while tech and crypto have become extremely crowded trades making front-page news, it’s still tough to find people who understand uranium and the inevitable truth about nuclear energy. That’s why I remain very bullish.
Uranium is up over 100% since my call last January, and it’ll be another 50-100% higher before this sector gets crowded.
Who else was very bullish banks and buying during the “crisis” 11 months ago, and at the panic-selling lows along the way? Very few were.
Here’s a chart of BNKU, an ETF for U.S. big banks. Green arrows at dates I bought, red where I sold as per posts in real time or in advance for all entries and exits:
While I do retain some bank positions, for purposes of this publication I’ll be back into banks heavily when the timing’s right. Next time I’m hoping to hold much longer for far greater gains after a legit washout in the sector… perhaps sparked by contagion due to commercial real estate and related loans collapsing?
Point being, if anything I’m consistent and today I’m still super bullish; that total bullshit will come apart at the seams and collapse as it always does. I fully defer to Newton's Law of Universal Gravitation, with every awareness it totally applies in matters of mass psychology… which is to say in matters of markets.
One man’s margin call is another’s opportunity of a lifetime knocking, so I’m super excited for what’s next. Nothing to be afraid of.
And truth is, if you measure in real money - gold - instead of Big Bro’s Official Meme Coin, western markets from equities to real estate are already well within a multi-decade bear, while China is down far more than 30% and the Nikkei remains nowhere near its previous highs, so who cares how people choose to define that?
I only care that cycles churn as history repeats, and I care to be positioned opposite momentum-chasing day-flailers and shameless commission-churning touts while preparing to ride the next wave instead of waiting to get wiped-out by the current one.
If you think the same way, and even if you don’t, I strongly suggest revisiting this important post from 4 months ago, and by the way GROY is up over 27% since then:
In the post above, of particular value is the chart of the Dow to gold ratio. It hasn’t much changed since then, so for variety here’s a chart of the Dow to silver ratio:
It’s essentially similar to the Dow to gold ratio. Vertical scale is logarithmic, and lines of matching colors are exactly parallel.
My reasonable expectation is for the purple trend channel to be violated by a crash in the Dow to gold (or silver) ratio.
It can happen by precious metals appreciating faster than the Dow, by metals appreciating while the Dow drops, or by both dropping while metals decline at a slower rate.
We’ll see.
What we do know now is that it’s a prime time for metals - all commodities, really - to rip moonward vs. equities. That’s why I’m long reality (energy and metals) while increasingly short hyper-valued tech fantasies and widespread complacency.
We are at an extreme, and that’s not an opinion.
The Wall Street Journal recently published these stats on the S&P 500 Index:
Price to earnings above its 10-year average
Price to book value above its 10-year average
Price to earnings growth above the 20-year average
Premium over 10-year Treasurys near most expensive point in two decades
Cyclically adjusted price/earnings ("CAPE") ratio higher than 96% of the time since 1881, below only its 1990s and 2021 peaks
In the line immediately above, “1881” is not a typo. It’s a strident warning of danger and a clarion call to sanity.
In statistics there’s a key concept called “reversion to the mean”.
Don’t worry, it’s coming.
The S&P charts I posted last week make good visual companions to the WSJ stats above:
To the current basket of precious metals holdings, One And Done #4 - Gold, I’m adding a levered silver position.
AGQ is the ticker for ProShares Ultra Silver 2x levered bullish ETF.
It closed the week at $25.76
I’ll buy when it crosses above $26.40, up to a limit of $27.70
No stop.
“This ProShares ETF seeks daily investment results that correspond, before fees and expenses, to 2x the daily performance of its underlying benchmark.”
More AGQ info: https://www.proshares.com/our-etfs/leveraged-and-inverse/agq
If you’d prefer no leverage, look into ticker SLV.
Neat:
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