Stephen Aust MarketCycle Wealth Management

Stephen Aust MarketCycle Wealth Management

Covid, Money Printing and Gold

MarketCycle Wealth Management

 

 

This month’s blog will entail some odds & ends, but it is mostly about Covid-19 resulting in endless “money printing” and the resultant rise in the price of gold.

COVID-19.  We’ll start by offending everyone.  Covid-19 is the 2019 version of the common mammalian coronavirus… a virus that wears a crown of spikes.  The common cold is a coronavirus.  This particular strain is worse because it likely jumped from a bat to a human (96% similarity between the strains).  It is more contagious than usual because it has developed sticky spots on its spiked crown and this allows it to more easily attach to a human cell.  And because it likely jumped from a bat to a human, it was also more lethal because it was fairly unrecognizable by the human immune system.

A virus is not alive… it is sort of like an un-manned space probe.  It contains genetic instructions but it has no life in it until it lands on a mammalian cell and enters and takes over the cell’s operation; only at this point does it become “alive.”  In March I stated that the virus did not want to kill its host, its only goal was to reproduce. I felt that it would become even more contagious but less lethal.  This is exactly what has happened.

The sticky spike recently developed a hook on it for easier attachment to its host’s cell membrane.  The number of new cases is obviously (and temporarily) going up, especially in the United States (and it is actually going up based on a percentage and has nothing to do with extra testing) but the percentage of people dying from Covid-19 is currently way below its peak and still falling.  It is more contagious but it has less strength with each passing day.  Currently, greater than 50% of the people that contract Covid-19 have zero symptoms.  Life is a gamble, but the odds are now moving in our favor.

I’ve written that actual death is caused by the human’s own immune system causing a cytokine storm that ends up destroying lung tissue (dead lung tissue stops the ability to breath) and that an emergency medical treatment would be found in the steroid family of drugs.  This is proving to be correct.  So, while a coronavirus vaccine has never worked and it will likely not work in the future (because the coronavirus mutates constantly and yearly), if one lands in the hospital, the simple solution is for the doctor to give common (inhaled and oral) steroids to stop the cytokine storm.  This easy and cheap solution (that MUST be done under a doctor’s care) is already showing its high success rate. It may take many doctors awhile yet to fully catch on to this mechanism of cause and treatment.

Do masks help?  Despite people’s strong political or philosophical opinions (and the willingness to come to fisticuffs in the aisles of stores and restaurants) the short answer is yes and this is because, while the virus itself is small enough to pass right through any mask, it is usually attached to a droplet and the droplet is too large to pass through the mask (in either direction).

Nuts?  Some of our global readers may not fully appreciate this, but the widespread acceptance of conspiracy theories in the United States is fairly robust.  Sinclair Broadcasting owns 40% of the television stations in the United States and this includes 40% of all local news outlets.  It is actually the leading provider of local news to Americans.  Sinclair Broadcasting, next week and across all of its stations, plans to air a 30 minute prime-time segment showing that Covid-19 was cooked up by Dr. Fauci, the well-known director of the National Institute of Allergy and Infectious Diseases.  Apparently, as a member of the “Deep State,” he developed Covid-19 in his kitchen and then flew the disease to Wuhan China where he released it into the air in order to attain world domination.  The footage has already been permanently banned from YouTube, Twitter and Facebook because it is obviously fake, but Sinclair Broadcasting is choosing to show the program as a factual documentary to its large audience.  Under protest, Sinclair is now being forced to add a casual disclaimer; perhaps at the last minute they will come to their senses and just block the showing.  And no, I’m not making this up.

What did I recently get incorrect?  I felt that Covid-19, like all other yearly coronavirus versions, would become dormant in the hot summer months.  I failed to consider that a huge number of people are staying indoors in air conditioning.  I take this as a personal reminder to consider all angles when developing an opinion and this applies to investing too.

Right now, all across the globe, people are still refusing to leave their house, but the coronavirus will likely never go away (although it is likely to become weaker over time).  Never is a long time to remain house-bound.  And hopefully people will gain the courage to leave their homes before their favorite businesses disappear from a lack of support.  As for me, I’m out & about and even back in the gym… and I do wear a mask whenever appropriate.  Every day of life is a risk, both before and after Covid-19, and with the recent mutation (of weakening), the odds are now moving in our favor.  

 

 

Chart gaps?  I recently wrote that the S&P-500 price chart had produced two gaps and that the lower one would be filled within 30 days, which it did, and that the higher one (created in February 2020) would be filled within one year.  It now looks like it will be filled before Christmas.  This is very bullish for stocks.  I expect to see the S&P-500 @ 3550 by early in 2021.  I keep telling clients to put this on their refrigerators:  “Dow 80,000 by 2029.”

 

What asset is undervalued and leading in strength relative to the United States stock market?  China.  Because of the extreme level of accounting fraud in Chinese companies, I would only suggest large-cap Chinese stocks that trade on exchanges outside of China.  I have my eyes on a very particular Closed-End-Fund that also pays 9.5% interest on top of price gains and we will likely move our clients into an allocation of this when our Treasury-bonds finally show signs of cracking.

 

Unemployment (initial claims) is steadily falling from truly horrible levels (chart courtesy of CNBC):

 

A mini-bubble formed in technology stocks?  In our prior blog, MarketCycle suggested that tech would either drop or move sideways as other sectors of the economy played catch-up.  The next day and right on cue, tech stocks began to lag (and they continue to lag as I post this article).  However in my opinion, longer-term (along with innovative healthcare) tech stocks will ultimately lead the stock market higher over the next 9 years.

 

 

Covid-19 leads to economic weakness… which leads to money printing… which leads to inflation… which leads to a rise in the price of GOLD:

 

Gold is in a bull market of its own.  One year ago, in June of 2019, gold broke out of its 6 year sideways trading range because it anticipated a coming rise in inflation some 10 months later; assets are always forward looking and they price themselves based on what they see on the horizon.  Near the breakout, MarketCycle bought a 6-7% allocation to physical gold.  We entered the trade via a Canadian Trust that holds actual gold in its vaults and that creates capital gains taxes that are half the amount of those created by the ETFs centered in the United States, and this trust has no complicated K-1 tax form to deal with.  Now, everyone is touting gold and people are suddenly pouring into this trade.  Some are moving into silver, which has been called “the poor man’s gold.”  This is all centered around the “too much money printing” mantra.

“Money printing” to pull us out of the 4 week pandemic crash is now 3x higher than it was with the year long financial crash in 2008.  More (digital) dollars in circulation means that each individual dollar (USD) is worth less because dollars are less scarce.  Since gold is priced in USD, it then takes more dollars to buy each ounce of gold.  Ultimately, more USD in circulation causes inflation to rise and inflation causes the gold price to rise.  Gold cannot be printed.  However, there is more to the story.  Inflation is actually caused by the VELOCITY of the money that has been injected into the system.  If a lot of USD are created, but they are not moving through the economy, then there is no real inflation and this is actually where we are today.

Gold is extremely volatile.  The swings both up and down can be excessive.  Traders delight when it rapidly moves up and then panic when it plummets down.  As with stocks, most investors buy high and then sell low, losing their hard earned money in the process.  Before buying an asset, investors must always ask themselves:  “Am I one of the first people to think of this idea, or is it common knowledge that is already built into the current asset price?”

Right now, gold is extremely overbought, pushing up against overhead resistance and it is ripe for a bigger pullback (see the chart of gold above).  The pullback may not be immediate, but it is certainly coming.  Longer term, we are fully bullish, but we will maintain a smaller 6% allocation until inflation actually heats up… and this might take years.

Gold is a much better portfolio diversifier than is silver.  Physical gold is also a better portfolio diversifier than are gold mining stocks since gold stocks more closely follow the general stock market up and down.  A stock always acts like a stock.  I am not saying that gold stocks are bad (especially the junior miners), I am just saying that they offer less portfolio diversification than does physical gold (right now, gold stocks are less overbought and they offer more leverage).  Physical gold hedges market risk better than do gold stocks because physical gold can and often does act counter to stock market moves.

If you look to the far right on the following chart of CPI inflation levels, which are near historic lows, it may make the case that the recent extreme run up in the price of gold may be based more on herd behavior than on actual economic conditions.  And we also have to remember that gold is currently overbought and ripe for a sell-off.  Again, gold is an inflation loving asset.  MarketCycle’s proprietary inflation indicators show that inflation began to pick up in April, four months ago, but from such extreme low levels that markets currently still embrace deflation risks.  (Chart courtesy of Charles Schwab):

 

 

With all of the worry around Covid-19, what are the steps for setting up an ESTATE PLAN?

  1. Set up a LIMITED ‘power-of-attorney’ for both financial and for medical (using two different people) so that decision making will proceed when you cannot do it yourself.  Do not let a court proceeding do this for you.  You can get templates online.  As my friend Virginia slowly taught me some years back, a Google search is a wonderful thing.
  2. Write a ‘living will’ in order to provide end-of-life medical guidance.  You can get templates online.
  3. Write a ‘last will and testament’ in order to clarify your estate and to predetermine the guardians of any minor children.  You can get templates online.
  4. Consider setting up a ‘trust’ if your estate is large; the cost is normally several thousand dollars (and with some ongoing costs).  Do not do this online.
  5. Review your estate plan every 3-5 years and after any major life event such as marriage, divorce, birth of a child, or a home purchase.

 

A recent short email reply to a reader about creating a will online:

 

NOTE to clients:  Any new clients, or established clients that have recently sent additional money into their accounts, this new money will be allocated to positions when we get a sell signal in our Treasury-bonds.  We are using a ‘GTC sell-stop-limit’ just below rising support on these Treasuries in order to lock in our gains, so this is likely to happen sooner rather than later.

 

If you like what we do, then please pass a good word along to your friends and family!  We do not advertise and exclusively depend on your referrals.  Our clients can be found all across the globe.  We do turn away some people that are not a good match, but when we add a new client it in no way alters our level of effort toward our current clients.  The goal is that everyone gets 100% of our effort.

When I was in practice and in an extremely busy clinic just outside of Boston Massachusetts, people would commonly ask me how many patients I see in a typical day.  My factual answer was always the same:  “I see only one person… when I am in the room with someone, they are my only patient.”  That may sound egotistical, but a number of former patients are now current clients of MarketCycle and I believe that they would concur.

 

 

 

MARKET CYCLE  —  DUAL MOMENTUM  —  LOW VOLATILITY  —  TREND FOLLOWING  —  HEDGE FUND

 

Beware of the Tech Bubble

 

MarketCycle Wealth Management

 

Published on July 10, 2020

When the March bear market reached within a couple of days of its panic bottom, MarketCycle sold a chunk of the protective assets that it had purchased in client accounts (purchased several weeks before the March drop) and we wanted to make use of the resultant freed up money.  We saw two strong options:

  1. Closed-End-Funds (CEFs) that were selling at an historic discount to their net-asset-value (they were priced extremely cheap) and that represented particular types of assets that would take advantage of the coming stock rebound (preferreds, convertibles and high-yield) and that paid extreme amounts of interest (as in 8-15% interest).  [Very few investors use CEFs because they don’t understand how to exploit the CEF’s complex nature.]
  2. Technology stocks, especially innovative technology and the FAANG stocks of Facebook, Amazon, Apple, Netflix and Google (now named Alphabet)

MarketCycle strongly believes that technology stocks will lead the overall stock market higher over the next decade, so we were tempted to put our new money into this.  However, in our final analysis, the CEFs offered just too great of an intermediate-term opportunity to pass up So, we ultimately chose the CEFs.  In early 2009, off of the Financial Crash bottom, we held these assets for several years as they proceeded to make 4x what the stock market did and with much less risk.

As far as stocks are concerned, technology stocks did lead the market advance off of the recent March lows.  Currently, the general stock market is not overbought, however technology stocks are now extremely overbought.  Overbought assets eventually fall… even mini-bubbles pop.

Basically what this means is that there may soon be a better opportunity to purchase these technology stocks after a mild pullback (possible pullback during July?).

To answer a client’s recent question as to why the recent big March stock market bust recovered so quickly:  “It is difficult to keep a strong secular stock market bull held down, and it still has a lot of run left in it.”

So, while technology and the tech-heavy Nasdaq-100 might even fall as much as 6% in the very near term, it will, in my opinion, grind much higher over the next decade.  Regardless of any pullbacks, we are in a very strong secular bull market for stocks.

 

 

Thanks for reading!  If you like what we do, then please help to spread the word.  We do not advertise; we completely depend on direct referrals from people like you.

MarketCycle Wealth Management is in the business of safely navigating your investment account through rough waters.  We have clients all across the globe; our fees are low; the first 3 months are at no charge.  We earn our keep!

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MARKET CYCLE  —  DUAL MOMENTUM  —  LOW VOLATILITY  —  TREND FOLLOWING  —  HEDGE FUND

A Brand Spankin’ New Bull Market

MarketCycle Wealth Management

 

PUBLISHED on: June 26, 2020

Good things are happening in the economy.  There has been unprecedented bullish stimulus from both the Federal Reserve and the U.S. Government (and this is being duplicated across the globe).  Businesses are now re-opening.  The market climbs a Wall-of-Worry and right now consumer sentiment and investor positioning are cautious, which is bullish.  Market internals and breadth are getting stronger each day.  Almost all of MarketCycle’s system of risk indicators have flipped to bullish.  And a temporary weakness in the USDollar has been giving a boost to large-cap U.S. stocks.

We got a “V” shaped stock market rebound and we are likely to get a somewhat “V” shaped economic recovery as well, although it may struggle to reach full strength until sometime after the coming U.S. Presidential election:

 

Election jitters?  In the near-term, the U.S. market might remain a bit volatile as it attempts to come to terms with a Biden Presidency, and Biden is now leading by double digits in the polls.  The market will eventually become numb to this news just as it does to every other bit of news.  The worry is that a Biden win might mean tougher conditions for corporations (thus stocks) because he would raise the business tax rate from 21% to a still very fair 28%.  On the positive side, he would stop the trade war with the rest of the globe while President Trump definitely plans to accelerate it if he wins a second term (the trade war is why the stock market basically just went sideways during 2018 and 2019).  And historically and despite popular belief, the market generally performs better under Democrat Presidents (with Republican President Ronald Reagan being an exception).

Wall Street opinion poll:

 

Leading Economic Indicators:  The U.S. economy is moving in a positive direction ahead of the normal timetable.  The incredibly important Conference Board Leading Economic Indicators (of fundamental economic data) tells us what is coming because they predict future economic conditions.  May’s numbers are now in and they are shouting:  BULLISH! 

 

INFLATION?  Inflation is when the cost of everything that we buy rises in price because the value of the USDollar decreases, requiring more Dollars to buy whatever we want or need.  The value of the USD decreases because of continuous ‘money printing’ and near zero interest rates and both are embraced in order to continuously stimulate an economy that can’t stand up on its own two feet.  Why do we hold an allocation to GOLD bullion in our client portfolios?  Gold protects against inflation, now and into the future.  In the past four months the U.S. deficit has become a real problem and it will eventually (in 15 years?) cause massive inflation, or at least that is what I predict.

Courtesy of Bloomberg Business.

 

Summary:  The economy always lags the stock market, and it is now improving as shown by the Leading Economic Indicators (above).  Stocks may need to gyrate sideways or even pull back a bit before they can then proceed higher.  But in my opinion, we may have just entered into a brand spankin’ new bull market that may slowly grind higher for the next decade (but with some of the usual bumps in the road because we don’t want it to be boring).  As I continually repeat, even in a strong bull market the stock market zig-zags in its upward trajectory and sometimes it pauses (consolidates sideways) in order to catch its breath.  It takes two steps forward and then one back… and then three forward and then gyrates sideways… and then two steps forward and one back.  And every time the market takes that temporary backward step we all become filled with confusion and fear because it always seems like a new and unusual event to us.  Unless the event is really prolonged and catastrophic, as in the Financial Crash of 2008, we are prone to eventual forgetfulness.  It is this forgetfulness about nothing moving in a straight line that gives me something to write about each month. 

 

 

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A concise reply to a recent emailed request for an online will suggestion:

 

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MARKET CYCLE  —  DUAL MOMENTUM  —  LOW VOLATILITY  —  TREND FOLLOWING  —  HEDGE FUND

 

Natural Supplements That May Fight COVID-19

MarketCycle Wealth Management

 

 

PUBLISHED on:  May 16, 2020

This is an EXTRA posting about natural supplements that might fight against COVID-19; no financial information.  People are easily upset when discussing COVID-19, so I apologize in advance.  Although I am still licensed by the Virginia Board of Medicine (and others), I am NOT giving healthcare advice and NOT guaranteeing any success and you must follow the instructions of your doctor over anything presented here.  If you are not interested in this topic, then please just bypass this extra mid-month posting.

 

The novel coronavirus disease 2019 (COVID-19) is an acute infectious disease caused by infection with severe acute respiratory syndrome coronavirus 2 (SARS-CoV-2).  Coronaviruses have been infecting mammals, including humans, for millennia.  The ‘common cold’ is caused by a coronavirus.

What makes this coronavirus different is its long sticky spikes (the crown of the coronavirus) which allows it to easily attach to mammal (human) cells.  This makes it both more successful and more easily transmitted and this causes the cases to be bunched together, which overwhelms hospitals.

Millions more people have contracted COVID-19 than are represented in the statistics; I believe that I had it back in February.  The global death rate is 0.004% of the total population, a small number that puts it in line with other contagious respiratory diseases, but that is of little solace to anyone who has lost a friend or family member, where one’s grief is 100%.

No virus wants to kill its host, it merely wants to enter a mammal cell, take control and then to survive long enough to reproduce.

So, what is killing people?  New research shows that it is not always COVID-19 directly.  Death is often coming from the person’s own immune system deliberately destroying lung tissue in an effort to also destroy the virus within the lung tissue.  This is death via an autoimmune response mediated by our innate and natural cytokines.  And this is why most ICU patients show other autoimmune symptoms such as a psoriasis like skin rash.  So, death by means of a ‘cytokine storm’ where lung tissue is overwhelmed and destroyed in a self-created autoimmune response.  The destruction of the lung tissue means that the person can’t breath and therefore cannot sustain life.  This is the same mechanism that resulted in loss of life during the H1N1, SARS, MERS, and 1918 flu epidemics… cytokine damage such as lung blood clots, leaking vessels in the lungs and depleted oxygen and resultant damage to heart, kidneys and liver.

The most up to date research is showing that COVID-19 is not directly killing the majority of people, in many cases it is our own immune system that is doing the dirty deed.

Cytokines are normally good, but in the presence of COVID-19, they can kill.  They are the body’s first line of defense against either invaders or injury and they arrive on the scene before any white blood cells and antibodies do.  They are produced mostly in fatty tissue, so obese people routinely make too many cytokines.  Obese people are the most likely to die with COVID-19 because they produce the most cytokines (and smoking and vaping obviously doesn’t help).  In the United States, 37% of people are overweight and 27% are obese.  Our spoon & fork are killing us in too many ways to discuss here.

So, what can be done when someone is actually experiencing the early symptoms of COVID-19?  Scientists are searching for a new wonder drug that doesn’t have the severe side effects of the popular anti-cytokine drug, Actemra (which has the side effect of destroying lung tissue and causing flu-like symptoms, which is obviously counterproductive for COVID-19 patients).  But there are already natural compounds that can shut down the cytokine response in COVID-19 patients.  We can assume that they are safer than Actemra because people take them on a daily basis all across the globe and they report no negative side effects at all.  We must remember that the words “natural compounds” makes them sound weak, but they are not.  Would anyone think that natural compounds such as digitalis, aspirin and morphine are weak compounds just because they originate from plants?

What natural and easy to obtain compounds can help to shut down this cytokine over-production in an emergency situation?  The short list of supplementation is shown below… a higher dosage is not better…  and your doctor must first okay their use against COVID-19 (but perhaps you should first ask your doctor if s/he even knows what they are).   My favorite supplement company is NOW Brand and it is carried by Amazon.  None of these supplements are expensive.  The combination of all 9 may create a powerful anti-cytokine ‘cocktail.’  The dosage is what someone of my age and muscle mass might take if any COVID-19 symptoms showed up (such as the total loss of smell and taste sensation)… and they would be taken for a total of a 4 week period ONLY if the symptoms progressed to obvious COVID-19 illness.  With any side effects, which would be rare, they should be stopped immediately.

If you are presenting with respiratory symptoms and are interested in a natural approach, write down the list of natural supplements below and ask your doctor if you can take them for a 4 week period and ask if s/he would also monitor the response for any negative reactions.  And please understand that no one can give any guarantee as to safety or effectiveness (have I given enough disclaimers yet?).

  1. curcumin  (roughly 400 MG 3x per day with meals… extremely strong against cytokines)
  2. vitamin D3  (vegan source is from wool oil… 1000 IU 2x per day at breakfast and lunch; if you take it at dinner time, it will keep you awake… and most people are deficient in D3)
  3. vitamin C  (1000 IU 3x per day with meals)
  4. licorice extract drops  (12 drops in water first thing in morning… even the Chinese government uses this against COVID-19)
  5. taurine  (amino acid… 1000 MG at breakfast… all vegans need to routinely supplement with taurine, but at a lower dose)
  6. magnesium citrate  (100 MG 3x per day with meals… and most people are deficient in magnesium)
  7. zinc gluconate  (25 MG with breakfast only)
  8. melatonin  (5 MG time-released, taken just before bed because you will definitely fall asleep… must be time-released)

9. In addition, there is a natural compound that can only be ordered by doctors from ‘www. proenzol .com’ and the product is PhysioProtease.  It is likely the strongest natural anti-cytokine product available and it must be approved by and then monitored by your doctor, just like the other supplements.  It has to be taken on a totally empty stomach at least 30 minutes before breakfast and again at least 30 minutes before dinner for as long as symptoms of COVID-19 persist.  Studies show that this all natural PhysioProtease may be stronger than any of the prescription level anti-inflammatory drugs.

 

What common natural supplements should be avoided by everyone with COVID-19 because they can increase cytokines to dangerous or even deadly levels?

  1. elderberry
  2. echinacea
  3. colloidal silver
  4. chlorella
  5. spirulina

 

06/10/2020 UPDATE:  The information in this article explains the mechanism for why recent research suggests that Dexamethasone (steroid) may be the cure that medical doctors are searching for.  This drug would rapidly shut down the cytokine response, but it should only be used on those who have been hospitalized with COVID-19.

 

Thanks for reading!  Stay safe and stay healthy!!

 

A friend said to clarify that the following is a joke because someone out there is going to believe that it is true… which is equally funny.

 

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MarketCycle Wealth Management | Stephen Aust
MarketCycle Wealth Management, LLC is a Registered Investment Advisor. Information presented is for educational purposes only, is not considered an individualized recommendation or personalized investment advice, may not be suitable for everyone and does not intend to make an offer or solicitation for the sale or purchase of any securities. All investments involve risk and unless otherwise stated, are not guaranteed. Past performance or performance charts are not a guarantee of future performance. Portfolio performance charts are shown net of fees so the management fee, brokerage fees, trading fees and ETF fees have already been subtracted. Current performance may be higher or lower than that shown and differing accounts may show different results. Investment returns and principal value in client accounts will fluctuate. All expressions of opinion are subject to change without notice in reaction to shifting market conditions. Be sure to consult with a tax professional before implementing any investment strategy.