The Morning Line

The Herd Is Even More Fearless than in 1929

Skittish about the stock market’s manic climb?  Consider moving some of your savings into T-bills, which are currently yielding around 4.25%. You could do worse. Some of my friends are reluctant to take e ven a little money off the table because 2024 was such an incredible year for them.  One is a retired lawyer who racked up a nearly $500,000 gain in Nvidia.  She sold enough shares to buy a condo in Palm Beach, but her portfolio is otherwise unchanged and showing a return of about 40% for the year. She and her financial advisor are confident her portfolio will do equally well next year.

Both of my siblings had a similar experience, but they have since moved most of their nest eggs into Treasury bonds and bills.  It has been an extraordinary year for them, and for millions of Baby Boomers who owned stocks, real estate or both. Who could blame them for thinking that the bull market begun in 2009 might have another year or two left in it?

On the other hand, valuations are at their highest levels ever, and a real estate downturn seems all but certain because mortgage rates are stuck at levels too high to attract first-time buyers. And few would deny the stock market is out of its mind, a beast on steroids; we all sense this in our bones. Consider the way speculators have shrugged off ominous tariff news. Trump has threatened our two biggest trading partners, Mexico and Canada, with protectionist levies that would punish U.S. auto manufacturers in particular and cause grocery prices to surge anew. The President-elect also seems hell-bent on implementing immigration restrictions that would tighten the supply of workers, particularly for unskilled jobs.

He’s Bluffing, Right?

Toward the end of the Roaring Twenties, when Congress was debating passage of the Smoot-Hawley Tariff Act of 1930, investors grew increasingly obsessed with headlines concerning the bill’s odds of becoming law.  When it appeared to pick up support on Capitol Hill, stocks would fall; but when the protectionists seemed to lose ground, shares would rise. This time around, facing tariff measures that make Smoot-Hawley look benign in comparison, investors remain not merely unconcerned, but giddy. Stocks rise on most days regardless of tariff news and despite the strident efforts of economists and editorialists to convince us that Trump is about to goad the world into a trade war. Investors must think he’s bluffing, and perhaps he is. If not, don’t be surprised to see the broad averages, along with Bitcoin, get nuked a few months after he takes office.

Cut $2 Trillion from the U.S. Budget…or What?

Let’s hope Musk and Ramaswamy have been paying close attention to David Stockman’s ten-part series on how to cut the U.S. budget before America spends its way into bankruptcy. Stockman was Reagan’s budget director in 1981-85 and eminently qualified to spell out the tough reforms needed to force the U.S. to live within its means. He is no fan of Trump, to put it mildly, but he sees the Musk/Ramaswamy ‘DOGE’ project as America’s last chance to get spending under control. Musk famously asserted during the campaign that he could cut $2 trillion annually from a total federal budget of around $6 trillion. Although we’ve come to expect big things and even the impossible from Musk, in this case, even with the intrepid Ramaswamy aboard, DOGE may have bitten off more than it can chew.

Ironically, it is Stockman’s long, detailed list of cuts that makes Musk’s goal seem farfetched if not impossible. Stockton admits that eliminating nearly every U.S. department and agency you can think of, and laying off more than half-a-million government employees at the outset, would scarcely dent deficit spending that’s been pushing the national debt toward $40 trillion at a rate of more than $3 trillion per year. The list of 16 agencies Trump should axe as soon as he takes office in January includes the FBI, DEA, BATF, NHTSA, Legal Services Corp. and the Department of Education.  Additionally, says Stockman, DOGE should shoot for 50% staff reductions in these fat cows: the SEC (2,250 workers, for savings of $360 million); FCC (750 workers, for savings of $120 million: FAA (22,500 workers, for savings of $3.6 billion); IRS (41,500 workers, for savings of $6.64 billion); National Labor Relations Board (800 workers, for savings of $130 million); Office of Personnel Management (1,250 staff, for savings of $314 million); Environmental Protection Agency (8,500 staff, for savings of $1.36 billion); NASA (9,000 staff, for savings of $1.4 billion); and the General Services Administration (6,500 staff, for savings of $1.04 billion).

Why Bother?

Total savings would amount to $264 billion, or just 0.33% of the $8.0 trillion of Federal spending projected by the Congressional Budget Office for 2029, DOGE’s target year. So why bother, especially when the political fallout from these relatively ‘modest’ cuts could trigger all-out war on Capitol Hill? Here Stockman states the obvious: If we can’t make it through a first round of serious reductions, America is doomed financially and economically.

Doubters may not have much time to dither about whether this is true, since even under the best circumstances, Medicare and Social Security will go belly-up long before the fiscally nettlesome Baby Boomers are safely in their graves. If you believe otherwise, you are implicitly arguing that Millennials and Gen-Xers who are living in their parents’ basements will somehow be able to pay the doctor bills of Boomers who live into their 80s or 90s, and to keep sending them inflation-adjusted Social Security checks every month. Both of these gargantuan programs are propped up precariously by asset inflation that will reverse when the stock market’s long bull-run ends.  In such circumstances, the budget catastrophe Stockman says is all but inevitable could be upon us not in a few years, but in mere months or even weeks.

Let’s Execute a Few Internet Scammers!

Have you heard from “Cleo Kenmille” or “Caroline Johnson”? If not, consider yourself fortunate. Those are pseudonyms used by a crew of shitbags who work out of bucket shops that lie beyond the reach of international law. Their job is to steal money from you or anyone else who is familiar with PayPal, the online banker. Paypal itself is unconnected to the scam, although their familiar logo is used to entice the unwary (see above). The header on the scammer’s email — “A small reminder from Cleo Kenmille” — should arouse the suspicion of anyone who is even slightly wised-up about phishing scams. Since when did banks start sending out emails featuring in the headline the specific name of an individual to whom you or I supposedly owe money? This email did, though, explicitly identifying “Cleo Kenmille” as the aggrieved party. The implicit message is: “Pay her now!”

Or…what? Although that question begs a stupid answer, someone might absent-mindedly fall for this grift, since the email cautions the recipient to call 888 232-0407 if he or she doesn’t recognize Cleo’s name. A friend of mine dialed the number and was connected to a surly man with an Indian accent. He somehow persuaded my friend to download an app that promised to “get this mess straightened out”. Next thing you know, she was logged onto a phony PayPal site that listed several bitcoin transactions, including one for $98,000. Nervous and distressed, she hung up. But not before she’d given the thieves enough information to enable them to generate a very real message in her Charles Schwab account concerning a “pending” $130,000 wire transfer of her savings to a bank in Dubai. My friend immediately instructed Schwab to lock the account, changed a bunch of passwords, then waited for the other shoe to drop. It didn’t, presumably because the scammers would have needed one more phone conversation to trick her into releasing the funds.

Global Crime Wave

If you are a frequent internet user, you’ll alreaady know that the World Wide Web has helped spawn a global crime wave so pervasive and persistent that one might suspect there are many millions of scammers in our midst. Search the retail sector, for one, and you’ll be challenged to find more than a handful of categories that are not dominated by crooks, cheats and liars. Craig’s List seems to attract the worst of them, including actual rapists, robbers and murderers. Online dating services are filled with phony profiles, and even Amazon is wholeheartedly on board, lending their coveted ‘Amazon’s Choice’ endorsement to shady companies that sell shoddy merchandise made in China under a score of company names. The makers will typically offer a 30-day guarantee, which of course is when Amazon’s guarantee ends. I discovered after ordering a high-intensity flashlight that stopped working after 30 days that Amazon didn’t even have contact information for the company they had rated so highly.

It is nearly impossible to catch internet scammers, let alone bring them to justice. I offered investigative help to the local police when a scammer advertised a South Florida apartment with a pay-in-advance deal that sounded too good to be true. This was a potential $14,000 con, but the chief of detectives was too busy to be bothered.

The only way to mitigate the 24/7 orgy of fraud on the Internet is to arrest, try and execute a few dozen perps. I’m convinced there would be strong bipartisan support for this — not just among voters, but on Capitol Hill. Track down a slew of these sociopaths and sentence them to die in the electric chair. When enough of them have taken the hot squat, their shitbag colleagues will get the message. The world will be a better place without them.

Bitcoin Leaps Above the Hubbub

The headline on last week’s commentary asked whether it might be morning in America, but the left’s combative reaction to the drubbing they received on November 5 suggests we could be closer to high noon. We may know soon, since the forces of darkness are going full-tilt against Matt Gaetz, Trump’s choice for Attorney General.  Wikipedia, while discreetly neglecting to mention Hitler, trotted out a laundry list of dubious citations implying that Gaetz, a Florida Congressman, is a right-wing crazy, sex pervert and a deadbeat. In their dreams, perhaps, for he is actually an avenging angel, intent on rooting out every rat and cockroach in the Justice Department and ending the U.S. Government’s increasingly common practice of arresting and imprisoning people because of their conservative political views.

It would look suspicious if Deep State were to take a potshot at Gaetz after failing twice to bring down Mr. Trump with bullets.  Whatever their plan, they’ll have the pathetically diminished but as-yet-unhumbled voice of the New York P.O.S. Times to cheer them on. Here’s the editorial page with a delusional take on the election that makes clear why the Gray Lady might not even be around in ten years:  “Many Democrats were considering how to navigate a dark future, with the party unable to stop Mr. Trump from carrying out a right-wing transformation of American government. Others turned inward, searching for why the nation rejected them. They spoke about misinformation and the struggle to communicate the party’s vision in a diminished news environment inundated with right-wing propaganda.”

 Humble Beginnings

On Wall Street, Trumpmania experienced a mild setback last week. However, because investors are too revved up to have second thoughts about anything, the feeble decline over five consecutive days should be attributed to the pull of gravity. Stocks were due for a correction, and they obliged as innocuously as possible. If there was anything to worry about, it was Bitcoin’s deranged leap to a record 93,495. Speculators holding out for more — perhaps much more ($1 million?) — shouldn’t let greed cloud their judgment. My technical forecast, viewable on the Rick’s Picks home page (see below), calls for a potentially important top at either 107,670 or 119,253.  Not too shabby, considering this still-valueless form of supposed money traded freely for a dime before engaging the proletarian mind in mid-2011.

What If It Really Is Morning in America?

I’ve been confidently anticipating the Mother of All Tops since, like, around 1975, but this week I decided to go wholeheartedly with the flow. The result, technically speaking, is a robustly optimistic S&P target at 7644.50. This might not be what permabears want to hear, but it will leave bulls sufficient room to deal with their psychotic delusions once and for all before boom turns to bust. The rally would amount to 1600 points, or 27%, and come on top of an extraordinarily steep rally begun two years ago that has pushed valuations to near-record levels.

Some would say the relentless uptrend has discounted whatever miracles Donald Trump could conceivably produce for the economy. Putting that question aside, his bullish impact already on the mood of America cannot be underestimated. For starters, Trump’s plan to dismember Deep State sounds do-able, especially if Republicans retain control of the House. Click here to read all about how heads are actually going to roll.

There is no precedent for taking on the embedded bureaucrats who have worked tirelessly for decades to wreck everything that is good about America. Sending these traitors to the gallows, so to speak, promises to be at the heart of Trump’s domestic agenda. It will be interesting to see whether the ideologues who invent the news at the New York Times and the Washington Post eventually concede that Deep State even exists. They purport that it is a creature of right-wing paranoia, even though they have aggressively supported Deep State’s reign of terror editorially for decades.

Term-Limit ‘Bonus’

The President-elect’s ten-point plan even includes full-on support for term limits. This issue should have become a bipartisan favorite, but for the fact that the left has been too busy hating Trump to get behind it. Now, it would seem, the years-long effort to add term limits to the U.S. Constitution will be unstoppable. Arguably, it has always been the single best way to keep influence peddlers from becoming entrenched on Capitol Hill, as they always have been. The opportunity for decent Americans to throw the rascals out is probably worth a thousand S&P points, so don’t be shocked if Wall Street delivers that and more.

A Canny Silver Bull Trades Ingots for T-Bonds

[The author of this week’s commentary is an old friend who worked his way up from exchange-floor clerk to commercial real estate mogul over the time I’ve known him. He has demonstrated remarkable timing, courage and patience as an investor, buying commercial real estate at the bottom of the 2007-08 crash and holding it until two years ago, when an even bigger crash that shows no sign of abating began. He also started accumulating a large position in physical silver as it fell from around $30 in early 2021 to $17 a year-and-a-half later. He recently cashed out his entire position at upwards of $33 an ounce, roughly doubling his stake. Now he is striking out in a radical new direction, deploying a large portion of his sizable gains in the most unpopular investment of the day, Treasury paper. Although no investor is infallible, my friend has never had a misstep with a series of all-in bets.

Coincidentally, or perhaps not, Comex Gold has fallen nearly $60 after coming within $1.60 of a 2803.40 target I started drum-rolling in September, when prices were $300 lower. Is the top in?  It’s too early to tell, but even if higher prices are coming, anyone who has held bullion during its steep run-up since last October could not go far wrong by taking a partial profit at these levels. RA ] 

Each time a massive wealth transfer occurs, it is caused not by an upward explosion in asset prices, but by crushing deflation such as we experienced in 2007-8.  It’s about to happen again, and not with a puny, garden-variety bear-market or recession, but with the epic crash that we have all known was coming sooner or later. The list of possible catalysts boggles the imagination, to wit: a politically wrenching transition to a second Trump term; a full-blown, bloody civil war that pits neighbor against neighbor; World War III, featuring the detonation of an electromagnetic pulse weapon over the Middle East; a Chinese blockade of Taiwan; a massive solar flare that extinguishes life on Earth; Buffett raising cash to record levels; Musk cutting Federal outlays by $2 trillion; a Covid die-off. That’s a lot of deflationary bullets to dodge, and the list is hardly complete. Who knows which of these dreadnoughts is about to throw the world into chaos? I’m betting ‘something’ is about to happen simply because stocks have been soaring for no good reason for too long, and because an event that will shock investors back to their senses is long overdue.

Never Fade the Sage

If you’re still reading this, whether for belly laughs or because you enjoy doomsday porn, let me get to the point: I’m selling many thousands of ounces of gold and silver that I’ve accumulated over the last decade and putting the proceeds into Treasury paper. That’s right: I’m liquidating a large hoard of Silver Eagles and bars, along with all of my gold, and going to Full Faith & Credit in preparation for the black swan’s arrival.

What will it look like? No one knows, as I acknowledged above. But I’m betting that the renowned Sage of Omaha might be the tell. He’s sitting on more than $250 billion in cash, and punting B of A stock like it’s fourth and 20. Additionally, Elon Musk, who by all accounts benefits more than nearly anyone from Government handouts for his space program, has literally bet his freedom on a second Trump term.  During recent campaign appearances, Musk said we are broke and need to reduce fiscal outlays by $2 trillion, or a third. In case you forgot, Musk bought Twitter, fired 90% of the employees, and recently proposed lending his ‘shitcoin’ acronym DOGE to create an accountability division of the Federal government.

Realize that most crashes occur at the start of new presidential administrations.  Before you put me down as a political partisan,  though, let me note that I see almost no difference between Democrats and Republicans — aka donkeys and elephants. They are all feral animals that inhabit the Washington jungle, as far as I’m concerned. Politics aside, I believe this is the perfect opportunity to rebuke the reckless behavior that has powered the bull market since the Covid era.  I hope I’m wrong, at least about the magnitude of the coming bear market, but I am convinced that the sky really is about to fall.

An Election Week Scenario

You can always tell when portfolio managers are hard at play, immersed in an epic circle jerk that has become more tediously familiar with each passing week. And so it went on Friday, as money migrated for no discernible reason from certain, temporarily disfavored stocks to flavor-of-the-day hotties.  It seemed almost as though the chimpanzees who purport to manage everyone’s money were on a conference call that morning, scripting a narrative simple enough for Jim Cramer to shill to the legions of widows and pensioners addicted to his show. The Dow was down more than 300 points at its lows, even as the lunatic-sector stocks — you know them as the idiotically misnamed ‘Magnificent Seven’ — winked at the thrashing their poor cousins were getting on less sexy exchanges.  The Naz was borne aloft as always by light volume and timid resistance. Bears evidently were too gutless to resist the uptrend, which in recent weeks has become increasingly confident of a Trump victory.

4% Above Sits Trouble

Even so, there is a palpable feeling that the stock market has been nutso for so long that it’s overdue for a sea change. That could mean irrational exuberance will peak on or around election day. But Mr Market could also surprise with a rally that turns even steeper than the one that has prop-washed the flesh from sane observers and skeptics.

So which? The chart above makes a compelling case for something in-between. The 6102 S&P target lies 256 points, or 4.4%, above Friday’s close. It would not be as large a gain in points as occurred in August or September. However, if the top were to coincide with the November 5 election, the entire gain would have occurred in just seven trading days. That looks like a good bet, but I would not recommend sticking around for the rest of the week as toga fever rages on Wall Street. The chart says clearly that a big move into election day could be a bull trap and therefore a time for extra caution. Please note that the target will not likely work precisely because it comes from a blended, continuous chart. Even so, it can be expected to show stopping power at or very near 6100.