If you want to know how to trade this market...

Don't look at just the headlines

Really Good Clickbait

Is there such a thing?

There have been movies and series that use the name.

They involve abduction and kidnapping. Nothing good, in other words.

The standard definition is a headline that promises something it doesn’t deliver.

Let’s look at these headlines from a podcast source I often listen to: Thoughtful Money by Adam Taggart.

Adam has a prodigious output—every two days. He is a good interviewer who makes it all about the guest instead of using his guest as an excuse to launch into his own script.

1. JUL 18, 2024 Michael Green: The Stock Market Is Now A Giant Ponzi Scheme

2. JUL 16, 2024What If A Coming Recession & Bear Market Are The LEAST Of Our Worries? | John Rubino

3. JUL 14, 2024Michael Pento: Stocks "Running On Fumes," Risk Of A 30-80% Crash

4. JUL 13, 2024 Fed Fears Too-High Rates Are Starting To Crush The Economy | Lance Roberts & Adam Taggart

5. JUL 11, 2024 "It Will Feel Like A Recession" When Unemployment Hits 4.5% By Year-End | Bloomberg's Anna Wong

6. JUL 9, 2024 Luke Gromen: Expect Market Turbulence Ahead Due To Tightening Dollar Liquidity

7. JUL 7, 2024 Tap Into The Same Advantage That Hedge Funds Do | Andrew Beer

8. JUL 6, 2024 "Massive Deviation" Between The Markets & The Economy | Lance Roberts & Adam Taggart

9. JUL 4, 2024 Chris Whalen: The Economy's At A Tipping Point

10. JUL 2, 2024 Common Ways To Protect Your Portfolio Using Option Hedges | New Harbor Financial

11. JUN 29, 2024 "Beneath The Surface The Market Looks Terrible" | Lance Roberts & Adam Taggart

12. JUN 27, 2024 John Hussman: It Sounds Nuts, But Stocks Could Crash 50-70%

13. JUN 25, 2024 Too-High Cost Of Living Is Destroying Consumer Confidence | Joanne Hsu

14. JUN 23, 2024 Rick Rule: "We're In A Real Sweet Spot" For Investors

15. JUN 22, 2024 We're Due For A Correction | Lance Roberts & Adam Taggart

It's a pretty depressing parade of headlines, right?

You can listen to them all if you have the time. I usually do that in the gym. Most of the time, I manage to concentrate. Most of the time, I listen at 1.5x speed.

The sessions with Adam and Lance Roberts are priceless - they occur at the end of every week.

Adam gets depressed by all his guests and has a dark-ish view of the economy.

Lance, on the other hand, is much more data-driven and, I suspect, does not listen to all the guests who come on Thoughtful Money.

Lance runs money. He needs to be invested and knows that bull markets climb a wall of worry.

He knows the truth set out in the following picture:

Time-in the markets is more important than time-ing the markets.

Two Outliers

The headlines, or episodes' titles, are not optimistic, with two notable exceptions: Luke Gromen and Rick Rule.

Let’s dig into what they have to say and see how this might help navigate this crazy market.

Luke Gromen

Luke’s publication is called Forest For The Trees. He publishes weekly on Fridays and, if you want to buy his full report, also on Tuesdays.

Full disclosure: I subscribe.

He aims to pick the ten most interesting things he and his team have seen in the previous seven days.

These are the things that look between the lines, and while out there in the public domain, they may not have made the kind of headlines that grab attention.

His takeaways for the past year or so are:

1. The $36T of debt the US owes is a problem because:

   1. compounding is growing it at $1T per 100 days

   2. it is now 80/20 short-term vs. historically 80/20 medium to long-term because the appetite for medium to long-term bonds is stressed

   3. the audience of buyers overseas is shrinking

   4. it now exceeds defense expenditures

   5. it is crowding out private investments

2. It is dysfunctional and historically anomalous that the deficit is growing at a time of relatively full employment.

3. The strong USD and high interest rates are making it harder for foreign holders to keep holding their debt- they need to sell to generate the USD to buy the USD-priced commodities their economies need

4. We are conflicted about China: we want to reshore and punish them for dumping their exports and out-competing our companies…but we need their stuff.

5. We are conflicted about Russia: we want to punish them for Ukraine but need them to keep the oil flowing.

6. The Fed and Treasury must keep the stock and housing markets inflated to generate tax receipts to service debt and pay for defense and entitlements.

7. The Fed and Treasury will ensure sufficient liquidity in the financial markets, including buying more Treasury debt if no one else will.

8. Gold and Bitcoin are strong and will get stronger because:

   1. the market senses that all fiat currencies are gradually being debased by the $350T of debt that will never be repaid

   2. the only way to manage the debt is to inflate it away

   3. non-US central banks, taking note of the way the US sequestered Russian foreign exchange reserves after the invasion of Ukraine, have begun diversifying away from holding Treasuries and are instead buying gold

9. The only way out of this, other than inflating away the debt, is to have an (energy) productivity miracle.

10. He recommends investing in companies that profit from the expansion of the electric grid.

His interview with Thoughtful Money reiterated all these themes but made one more critical point: the combination of the growing deficit and growing interest expense means the government is now approximately 23% of GDP and, largely because of elevated interest rates, is growing fast enough to drive 5.1% GDP growth on its own.

With that kind of anchor, it is hard to see the basis for a recession.

He is also skeptical that these trends will change whether the next administration is Republican or Democrat.

So:

1. Buy gold

2. Buy Bitcoin

3. Buy industrial equities profiting from building out the electrical grid

4. Don’t buy government debt longer than 6 months duration.

Rick Rule

Rick Rule is the other outlier from the headlines above but for a different reason.

It is not a totally different set of reasons. He would acknowledge everything that Gromen says, but his focus is different.

Rule is a natural resources investor.

He believes the world is at the start of a commodity supercycle. That is his investment focus.

He analyses individual stocks and businesses and dives deep into the company's specifics.

Every year, he puts on a symposium that gathers leading minds and seasoned investors to present their views on the economy and specific companies, including the following:

• Inventa Capital Group – Vizsla Silver, Vizsla Copper, Cosa Resources Corp. & Targa Exploration Corp.

• GoldMining Inc., U.S.GoldMining Inc & Gold Royalty

• Uranium Energy Corp. & Uranium Royalty Corp.

• Miles Franklin Ltd.

• Centaurus Metals Limited

• Fission Uranium Corp.

• Hot Chili Limited

• Empress Royalty Corp.

• American Gold Exchange

• Aya Gold and Silver

• Surge Battery Metals

• Seabridge Gold Inc.

• G Mining Ventures

• EMX Royalty Corp.

• AbraSilver Resource Corp.

• First Majestic Silver Corp.

• Asset Strategies International

The entry price, ex-the hotel, for late registration was $799 for 2024. The event has just finished - July 7-11, but you can still buy the live stream recordings for $349 until December 31, 2024.

Live attendance comes with a money-back guarantee. If you are dissatisfied, you can apply for a no-questions-asked refund within a week of the event concluding.

I did not attend, though I might buy the livestream.

Commodities and the commodities supercycle drive his investment perspective.

This supercycle is indifferent to whether a Republican or a Democrat occupies the Whitehouse.

What About The Other Headlines?

The other headlines are less depressing than they are reassuring. The point where we need to worry is when everyone is convinced the bull market is here to stay

A famous Sir John Templeton Quote:

“Bull Markets are Born on Pessimism,

Grow on Skepticism, Mature on Optimism

and Die on Euphoria”

There are worries that the societal divisions between the asset holders and the asset-light will worsen if the market continues to rise and interest rates stay elevated.

That may be true, but it does not predict the stock market.

Election years are a phenomenon in analyzing market performance.

The incumbent tries to make sure everything is done to get re-elected. This trend, though, holds in cycles where the incumbent is not up for re-election.

According to Bank of America research - sourced from Morningstar - the market performance tends to breakdown between quarters as follows:

So, expect a strong 3rd quarter.

And If Trump Takes Both Houses?

Markets generally prefer a split result, with Congress and the Senate being one color and the White House another. A split between Congress and the Senate is preferable to a unified House, Senate, and White House.

The chart above shows gridlock delivers. Washington can’t interfere too much and companies can get on with business.

So, root for gridlock.

Takeaways

1. The media loves to dramatize political conflict and doomsay the outcomes of elections.

2. The reality is that the US is a vast supertanker that doesn’t change direction that quickly.

3. The factors either president would face would be very similar and constrain both.

4. The odds are stacked in favor of a strong stock market performance in 2024, especially in Q3.

5. Gold, Bitcoin, and industrial equities focused on the electric grid should be featured in your portfolio.

6. If in doubt, stay in T-Bills.