Author: Andrew Packer

Commodities

Wall Street Silver Official Podcast: Silver Premiums Are Crazy, Here Is What to Buy & Avoid

Posted on by Andrew Packer

Interest in the commodity space remains strong. Investors worried about the high inflation numbers of the past few months have been buying physical gold and silver. Exchange inventory data shows a massive drop as a result.

However, while the price of precious metals has been volatile but overall flat in the past few months, premiums have soared. That can make it challenging for buyers to obtain physical gold and silver without overpaying.

Rising investor demand to buy and hold silver could lead to a move higher in the metal. It could be akin to the spike higher in nickel prices, according to James Anderson of SD Bullion.

Increased investment demand has also caused the US Mint, among other organizations, to drop products. The lack of raw silver inventory makes it impossible now.

This lack of inventory means lower production volumes on remaining products. That also means more premiums between the spot price of physical metals and the market price.

With supply chain disruptions, rising inflation, and concerns about the Fed raising interest rates too much too quickly, investors looking to park some wealth outside the traditional financial system might want to consider precious metals here.

Investors can find the best deals with South African Kruggerands and Austrian Philharmonic coins in the silver space right now among the government issue coins.

To listen to the full podcast, listen here.

Cryptocurrencies

Simply Bitcoin: Michael Saylor & Jack Dorsey Just Destroyed Bitcoin Climate FUD

Posted on by Andrew Packer

Two contradictory trends have been at play in the last two years. The first is the rise of Bitcoin as a decentralized monetary alternative. The other has been the rise of the ESG movement. That places a considerable emphasis on the environmental friendliness of investments.

With Bitcoin’s proof-of-work model, it’s come under fire for its hefty energy use. However, Bitcoin mining uses far more green energy in its mix than compared to the overall economy as a whole.

Now, the Bitcoin mining council, led by MicroStrategy (MSTR) CEO Michael Saylor and Block (SQ) CEO Jack Dorsey, has released more data on the subject.

Their conclusion? That Bitcoin’s proof-of-work model is not only green, but encourages more green energy use.

The alternative method for cryptocurrencies, proof-of-stake, uses less energy to secure the network, but also makes it easier for one or a few small parties to control.

And, fossil fuel companies are turning to Bitcoin mining as a way of utilizing energy that would otherwise go stranded or to waste. The end result is more wealth creation rather than destruction.

As with many Bitcoin fears over the years, this latest concern is likely to fade out over time. Expect it to be replaced with a different one.

To listen to the full podcast, click here.

Stock Picks

Money For the Rest of Us: Is It Time to Invest in Big Tech or Medium Tech Stocks?

Posted on by Andrew Packer

Most tech stocks are down at least 20 percent from their 52-week highs. Many are in far worse shape. One such example is Netflix (NFLX), which has managed to shed over 70 percent in value from last year’s highs.

That said, tech stocks have been big winners over time, particularly big tech names. That’s because they’ve had above-average growth, whether internally or through acquisitions. That’s also led to a high valuation, making them susceptible to a decline.

Given this latest drop, is it time to “buy the dip?”

Perhaps, but not necessarily. Having a diversified portfolio means owning both tech and non-tech stocks. Investors looking to scale in might want to look at medium sized tech stocks, not the largest.

That’s because studies have shown that only 4 of the top 10 big tech names outperformed the market. That means 6 underperformed, and heavily.

Plus, every decade, markets tend to shift sectors that lead the markets higher. Following tech’s big run, it may come from another sector, such as consumer goods or energy.

Does that mean that big tech stocks have been in a now-bursting bubble? Given the excess valuation, yes. And the top-performing tech stocks could continue to fall.

That said, given the extreme negativity in tech stocks right now could point to a buy.

Ultimately, that suggests that investors can outperform the market in tech from here, but they need to look at the most profitable companies in today’s environment, not necessarily the largest.

To listen to the full podcast, listen here.

Stock market

Game of Trades: THIS Will Trigger an SP500 MOVE We Have Not Seen in 13 Years

Posted on by Andrew Packer

A confluence of economic data suggests that we’re entering into a full-blown bear market. Between trends like employment, inflation, fuel prices, and other measures, the data is overall looking very negative.

With the chances of a bear market rising – as stocks close in on a 20 percent drop from all-time highs, there are a few counter trends potentially lining up that could also send stocks higher.

For example, a rising put to call ratio shows that traders are bearish and have been for some time.

But there’s been a spike in this activity in recent days. Historically, that means that traders tend to brace for a further market decline just before it surprises to the upside.

The Nasdaq high-to-low ratio also shows that most stocks have already fallen as a whole.

Typically, when a high percentage of stocks are hitting 52-week lows, that can also signify a bottom in markets. Such a ratio occurred in late 2008, although it wasn’t until early 2009 when markets began to rise in earnest.

Other indicators also show that there’s a high level of pessimism in markets. It doesn’t mean markets are set to rally yet, but that we could be closing in on the end of the latest selloff, with one more drop likely in the months ahead.

To view the full video, click here.

Real Estate

BiggerNews May: What the Media Isn’t Telling You About a “Housing Crash”

Posted on by Andrew Packer

Following two years of record-high price increases, housing is one asset that many see potentially crashing in the months ahead. We’re already seeing what appears to be a peak in year-over-year data from pricing to mortgage applications.

And with mortgage rate stating to rise, some see housing as a bubble that’s now about to burst. Following 122 consecutive months of home prices appreciating relative to the prior year, such a selloff looks likely.

However, notes Rick Shargra on the BiggerPockets podcast, there’s no indicator that we’re in a full market bubble.

Some housing markets may be prone to a correction following the big runup in the past few years. But other markets are still seeing strong demand in excess of housing supply.

Overall, that points to a housing market that is softening. But given the recent price rises, we could see a plateau in home prices for some time to adjust to the big recent changes, rather than a full-blow drop in housing prices nationwide.

Thanks to rising prices and now rising interest rates, the payment cost for the average home has no risen around 27 percent over the past year.

But even with that rapid increase, it appears that it’s leading to fewer bids on homes and more time on the market as opposed to lower prices.

In other words, the overall housing market doesn’t appear to be in a bubble. But it is overdue for a slowdown.

You can listen to the full podcast here.

Commodities

What Bitcoin Did: Is There a Moral Case for Fossil Fuels?

Posted on by Andrew Packer

The past few years has seen an explosion of interest in combatting climate change. For investors, the biggest drive has resulted in the ESG movement. With the E standing for environmental, reducing carbon emissions has been a key component of the plan.

However, given how green technologies aren’t ready to replace fossil fuels at the needed scale, many investors are still turning to fossil fuels to meet existing demand.

On the What Bitcoin Did podcast, guest Alex Epstein attempts to answer the question as to whether or not fossil fuels are moral.

With many focused on the environment, fossil fuels have been noted for providing cheap, and reliable energy for a growing economy around the world. It’s been key for reducing extreme poverty in recent decades.

We’re also reaching a point where many starting to question the data and modelling behind climate change projections.

If the data is wrong, we may be making costly mistakes to shift to green energy without needing to. If we’re right, it may already be too late. Either way, it seems that fossil fuels will still have a place for decade to come given strong global demand.

Looking at both the pros and cons of continued fossil fuel use, it’s clear that it still has a place today. The debate may not be over. But for now, the markets are speaking in favor of utilizing all the energy resource society can muster.

Stock market strategies

Morningstar: The Verdict on Wide-Moat Stocks

Posted on by Andrew Packer

Value investing has a number of tenants. One of the more popular items that value investors look for is a durable competitive advantage over peers. This term has been popularized as a “moat.”

A moat can come in a number of ways. A strong brand can offer a moat, as consumers will be willing to pay a slightly higher price compared to a non-brand name. Or a company may have a legal or cost advantage.

For investors, moats tend to offer a slight edge that can lead to much higher returns over time as returns compound.

However, investors need to be aware of a number of potential shortcomings. For instance, a moat is not a guarantee. Changing market conditions could mean that a moat is lost over time. It may even happen quickly depending on how fast an industry changes.

While there are some potential warning signs to watch for, moats have a number of advantages for patient investors. The strongest one in volatile markets is safety. When markets start to drop, companies in financial trouble may face bankruptcy.

But for a strong company with a wide moat, such as Microsoft (MSFT), a market correction can offer long-term investors a solid entry point.

Using wide moats to focus on safety looks like one way to take advantage of the latest market selloff for future profits ahead.

For the full read on the power of wide-moat stocks via Morningstar, click here.

Income investing

The Dividend Guy: Ignoring Yield Below 1% Is Your Biggest Investment Mistake

Posted on by Andrew Packer

With growth stocks out of favor with the market, many investors are turning to dividend stocks. They tend to be less volatile. And their cash payouts tend to provide a great cushion against uncertainty.

While most investors know the value in owning dividend stocks, the challenge comes from the tradeoff between earning a high current yield, or investing in a stock with a history of raising its dividend over time.

On The Dividend Guy blog podcast, the case is made that investors shouldn’t ignore dividend yields below 1 percent to start.

One reason is that low-yielding stocks represent companies that are seeing slowing growth… but are still growing!

The top example is that of Apple (AAPL). The consumer tech company started paying a dividend. And while the yield is low, the stock has continue to outperform the market substantially. Many other great tech stocks pay low yields but can continue to grow.

Many large and stable companies with low dividends can also grow their share price and dividend gradually over time.

Costco (COST) is another great business with a fantastic long-term return. But it often has a sub-1-percent dividend yield at times, although they also pay special dividends from time to time.

Dividends remain important. But they’re just part of the story. Looking at companies with low but growing dividends, or low dividends that still have some growth in shares ahead, could get some great returns in the years ahead.

To hear the full podcast and a more comprehensive list of stocks, listen here.

Economy

Minority Mindset: The Fed JUST Said They WANT To Crash the Market

Posted on by Andrew Packer

The resumed selloff in the stock market has caused indices to retest their February lows. Many stocks have fallen further. But the pain may not be over yet. Not by a long shot.

That’s especially true as Fed officials have come out in favor of stronger interest rate hikes in the coming months. The reason? To crush inflation. The short-term impact? Crushing the stock market.

On the Minority Mindset YouTube channel, investors can find a clear overview of how we got here. The Fed stepped in with money printing to save the stock market in 2020. Interest rates remained too low for too long. And inflation crept up as newly-printed money gradually circulated throughout the economy.

Now, inflation is racing ahead at multi-decade highs. While direct stimulus programs are over, prices continue to rise as supply chains remain constrained. And to keep the growing economy from overheating, the Fed now needs to apply the monetary brakes.

To do so means causing bond yields to rise, so prices will fall there. And higher interest rates mean a higher cost to borrow money. So stocks will likely go down as businesses and traders step back on their most aggressive moves.

A stock market crash may not reflect the fundamental economy. But the Fed’s latest announcement is tantamount to a plan to crush stocks in order to crush inflation.

To watch the full video and see the implications of the latest change in Fed policy, click here.

Economy

The Irrelevant Investor: New Lows

Posted on by Andrew Packer

The stock market’s renewed decline in recent weeks has sent stocks to 52-week lows on average. For some companies, the selloff has been considerably worse.

Those companies that benefitted from the pandemic have fared worst of all. Many are down 80 percent or more from their highs. And some could even be bargains either at today’s level or in the next few months.

While the market decline has been painful for anyone long the stock market, there is some good news thanks to the drop. The price-to-sales ratio of the small-cap heavy Russell 1000 index is back to pre-pandemic levels.

For more value-oriented investors, other metrics are showing signs of getting back to reasonable prices as well.

Most of that change in valuation hasn’t come from a drop in value stocks. Rather, it’s from the rapid decline in tech stocks that have caused this valuation.

While the lows may not be over yet for this current market decline, there could be some good entry points ahead for investors.

The speed of the current decline, particularly in once high-flying tech, suggests investors should hold off on buying growth names right now. It may be more prudent to wait until a more definitive bottom is in. Or even a definitive move higher.

To see the full blog post showing the top charts for this selloff in tech and growth names, click here.