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It’s a brave new world and I’ve been fiddling around with using artificial intelligence programs.  When ChatGPT, the popular artificial intelligence, was asked to explain what a market correction is… this is the answer that it gave (but I had to fix its grammar):

MARKET CORRECTIONS PREVENT MARKET BUBBLES

• When stock prices rise too quickly, they can become detached from fundamentals (earnings, revenue, economic conditions).
• Corrections help to deflate excessive speculation before it turns into a full-blown bubble and subsequent crash.

THEY SHAKE OUT WEAK HANDS

• Corrections often drive out short-term speculators who may have entered the market for quick gains.
• This allows long-term investors to buy quality stocks at better prices.

THEY PROVIDE BUYING OPPORTUNITIES

• Many investors view corrections as a chance to buy fundamentally strong stocks at a discount.
• For long-term investors, buying during downturns can improve portfolio returns over time.

THEY HELP RESTORE MARKET BALANCE

• Stock prices can become overextended due to investor optimism or momentum-driven trading.
• Corrections help reset valuations closer to fair value.

THEY ARE A NATURAL PART OF MARKET CYCLES

• Historically, the stock market experiences a correction of 10-19% roughly once every 12-18 months.
• While they may feel unsettling, they are expected; corrections do not necessarily indicate a prolonged bear market.
• Corrections play a crucial role in maintaining a healthy, functioning market.

THEY REINFORCE INVESTMENT DISCIPLINE

• Investors who stay disciplined during corrections (rather than panic selling) often see long-term gains.
• Corrections serve as a reminder to maintain a diversified portfolio and to stick to a well thought out plan.
• Long-term investors who stay focused on fundamentals, rather than short-term price movements, are usually rewarded over time.

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I’d like to personally thank ChatGPT for that since s/he somehow seems to be alive.  And I’d like to close with this chart that shows the pullback frequency that we should learn to expect throughout our entire investing life… and yet the stock market still has a distinct & strong upward bias. (Chart courtesy of NDR Research):

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How does the stock market respond AFTER the correction bottom?  This final chart shows the historical percent of profits 3, 6 and 12 months after the correction bottom; complete recovery of all losses within two months (or less) and then ongoing profit gains over the next 10+ months.  (Chart courtesy of LPL Research):

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That’s it… thanks for reading!  Sorry, but no correction details this month as we are reserving this information for clients only via our regularly emailed MarketCycle Updates.

MarketCycle manages investor’s portfolios.  The process is easy and affordable.  There is a contact tab at the top of our website.

Our paid subscriber service, The REPORT, can be reached via the link on this website.

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MARKET CYCLE  —  HEDGE FUND  —  TREND FOLLOWING  —  RELATIVE STRENGTH  —  INVESTMENT MANAGEMENT

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We currently live in a “Disinformation Bubble.”  People get their false “facts” from false sources and then strongly hold onto them as a sort of anchor.  But anchors are heavy and we are already drowning.

Before I start my rant, I’d like to repeat what I stated in our prior blog: this is not a political rant, it is just a rant.  It is my responsibility to see what is actually, factually, happening in the financial world using minimal prejudice; this is because our clients deserve truth and no less than truth.

For almost two decades now, I have been predicting that the final years of this current decade would evolve into the biggest and most profitable investing BUBBLE in history.  (Now, what follows from here will sound counter intuitive.)  This parabolic stock market would require someone to come along, a President, that would “issue decrees” to deregulate all financial instruments and that would eliminate all of the independent watchdogs that normally stop corporations from committing fraud and even international bribery.  The parabolic bull market that I see coming would require a libertarian type of investor enthusiasm that can only result from literally all restraints being removed from private corporate business.  This predicted scenario was speedily accomplished by President Trump during his first 4 weeks back in power, as his first order of business, and all regulation is now, already, removed from business. 

So, your investment account is now free to go crazy high over the coming few years because nothing can stop unrestrained corporate growth.  Owning stock “shares” gives one the ability to “share” in the profits of these now unrestrained corporations and everyone will make piles of money… until they don’t.  Turns out that there is also an eventual price to pay.  Like a powerful arm throwing a baseball straight up in the air, it’s eventually gonna’ briefly pause and then come back down at an equally fast pace.  Right now, the ball is still going up.

U.S. citizens have literally been promised a new “Golden Age.”  It’s likely that we, instead, get a new “Gilded Age.” 

So, President Trump’s very first order of business was to deregulate (set free) the entire financial and business sectors and to remove fraud protections and to fire fraud and waste watchdogs.  Any Federal employee that investigates financial fraud has been fired.  Already fired.  Any agency that investigates fraud, such as the Consumer Financial Protection Agency, has been totally shut down.  Departments at the FBI that investigate financial fraud have all been closed down.  Non-political Inspectors General at all sections of the government that investigate for fraud and waste have ALL been fired.  IRS tax collection employees, the ones that look for fraud, have been fired with many more on the way to being fired.  The lead person in charge of stopping the giving and taking of international financial bribes, a Republican, was fired.  On February 18th, President Trump issued an Executive Order taking powers away from the independent Federal Reserve in controlling bank holdings and he put the control solely under Trump’s own command; this isn’t legal, but that no longer matters.  On February 19th, he issued an Executive Order that allows him to personally control the consumer-protective functions of The Commodities Futures Trading Commission, The Federal Housing Financial Board and the Securities Exchange Commission (SEC).  Importantly, he is also lowering corporate tax levels which can only further increase corporate profits (and the investing shareholder’s profits).  This has all taken place in a span of only 4 weeks.  And yes, this has all been fact-checked and no, I’m not a “liberal”… I manage investment accounts from a neutral stance and again, I MUST understand what is actually, factually going on in the financial world with as few biases as possible. 

Folks, what I do know is that:

1. It is easy to break things, and things are already breaking.
2. For the next few years, it may be party time in corporate (and investing) America… but this ultimately isn’t going to end well for most investors (or for a “U.S. Sovereign Wealth Fund”).

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As I stated in my prior blog, to understand financial bubbles and the deregulation and fraud that helps to create them, I would suggest that everyone watch the movie (extremely well done and with a star-studded cast):  The Big Short 

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Financial deregulation always leads to hidden fraud & hidden danger and a profitable market bubble.  Market bubbles always end in a crash.  Market crashes offer highly discounted assets, but investors are always too fearful to get near them.  Not to sound callus because I’m willing to help anyone that wants help… but for investors, money can be made during the entire process.

Below, the ORANGE line shows roughly where we are today… the BLUE line shows the route of where I currently believe we are headed if we do repeat the Dot.com bubble and subsequent bust.  Of course, the new (orange) AI spike would be projected further to the right on this chart.  So potentially, you are looking at enormous investor profit potential.  (Chart source unknown.)

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If I am correct, we are already in the third and perhaps the last of three giant technology bubbles:

1. The Roaring 1920’s, named after the roaring stock market that was centered around the newly created radio and moving/talking pictures.  This giant technology BUBBLE ended in the Crash of 1929 (actually a slow-motion bear market).  The crash was followed by The Great Depression where many people didn’t know where their next meal was going to come from.  The crash was created by financial deregulation and the firing of watchdogs.  In subsequent years, massive fraud was discovered and regulation was placed back on markets.
2. The Dot.com BUBBLE of the second half of the 1990’s was centered around the creation of the Internet.  During just the final 6 months of 1999, e-commerce internet stocks went up by 400%.  Please note that a simple 100% gain doubles your money.  This Dot.com period was a giant bubble that was created by financial deregulation and the firing of watchdogs.  It ended in the Dot.com (slow motion) crash that lasted for two years.  Again, massive fraud was later discovered and regulation was placed back on markets.
3. And today, and if I am correct:  My prediction is that we have now already entered the beginning stages of the third technology bubble… the AI and Innovative Technology BUBBLE.  We likely have somewhere around 4 years remaining to this parabolic stock bull market that might form into a truly gigantic BUBBLE… before popping into a 1929 or 2000 style slow motion crash.  [I will be watching every single day for impending signs of a coming pop.]  Is there anything that could alter my thesis?  Yes, too high of inflation from Trump’s tariffs and by the deportation of millions of eager, but possibly illegal, workers… AND by the possibility that Trump makes a MAJOR mistake since he so often acts without reasoning out any of the potential negative consequences of his impulsive actions.  I now subscribe to a 2x-daily service that searches for every possible action from the White House or Congress that might affect investments (at $2500 per year).  MarketCycle’s job is to stay on top of this at all times, to be ever-watchful, and to respond appropriately.  Remember that 100% of my own money is invested exactly like my client’s money and that gives me great incentive to stay on top of everything, 24/7.

SUMMARY:  In my opinion and from a purely financial perspective, there will be an incredible, once in a lifetime opportunity to make money during the coming parabolic run-up as well as during the subsequent slow-motion crash.  And at the end, good assets will be offered for 10-cents on the dollar.

Is this good news?  Is it all bad news??  It just is what it is… almost as some sort of strange and fickle Manifest Destiny.  Mark Twain was correct when he said:  “Life is just one damned thing after another.”

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Thanks for reading!

MarketCycle Wealth Management is in the business of navigating your investment account through rough waters.  My personal money is fully invested exactly like my clients, which is rare in this industry.  We work hard to earn our keep.  The process is affordable and easy.  There is a contact tab at the top of our website.  I’ve had numerous blog subscribers tell me: “I have been reading your monthly postings for 5 years and now I am finally ready to become a client.”  

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MARKET CYCLE  —  TREND FOLLOWING  — RELATIVE STRENGTH  —  INVESTMENT MANAGEMENT

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In this article, we cover:

1. How much longer will this bull market continue, and what happens at the end of the bull?
2. Is government debt a problem?
3. Is inflation going to come back?
4. Did President Biden cause our first spike in inflation?
5. How will President Trump affect the economy and your pocketbook and will he cause a second (and even larger) spike in inflation?
6. How to pay half price for your house and why a mortgage is an investment vehicle that is your best friend.
7. How will President Trump affect investment portfolios?
8. Is crypto currency heading even higher?
9. Is the USDollar in trouble?  Is gold going to the moon?
10. MarketCycle has been generally bullish since April of 2009… are we STILL bullish?
11. “Hippopotomonstrosesquippedaliophobia”… why did they pick that word to mean “the fear of long words”?

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I’ve been attempting to write shorter articles, but this one is long; perhaps too long to read on your little phone.  I feel that it is important for clients to read this particular posting; it covers a wide range of topics and yes, it is easy to understand if taken one sentence at a time.  There is a PDF generator and a print function at the bottom of this article, so that you can read it at your leisure (an extra benefit is that if you read it just before bed, it will help to put you into a deep sleep!).  So, printing this out is a good solution and you can just think of it as your “next book to read.”  I put a lot of work into this one; there were a lot of revisions over a period of several weeks; in the final revision, I removed half of the text, believe it or not.  Part of that effort went toward an attempt to not offend anyone; I ended up just offending everyone equally and so, I ask for absolution in advance.

December of 2024 was very weak, with a stock market and bond and commodity drawdown to end the year; not many expected this.  Much of this selling had to do with professional money managers taking profits or booking losses for tax reasons, possibly with the intent of eventually repositioning assets toward the new Trump Presidency policy changes that start on January, 20 2025.  At the time of posting this article at 11:00 AM EST on 01/07/24, the stock market is down in order to back-fill the price chart GAP that occurred yesterday.  Chart gaps are almost always (fairly quickly) back-filled before the market can resume its path higher.  MarketCycle’s system of proprietary indicators suggests that a stronger January is possible.

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What is a “market cycle” and where are we in the cycle?  The stock market cycle has a fairly repetitive pattern that Wall Street calls a “market cycle.”  The profitable bullish period of a market cycle climbs ever higher for a 5-6 year period and then it falls into a bearish period that lasts for 1-2 years.  The complete market cycle is usually 6 to 8 years in total.  We tend to get three multi-year stock bull market cycles in a row over a longer secular period; we are currently in the third and final of those three cyclical stock bull markets.  This third cyclical bull market is usually the strongest one.  At the very end of this current bull market, we will get the normal prolonged bear market, but this may still be about 4-5 years from now, so it is too early to worry.  Both the up and the down portions of the market cycle, the entire market cycle, can be profitable with the simple switching of a few portfolio assets every few years.

Throughout history, the cyclical pattern, as shown above, has repeated over and over and over again.  During each market cycle, investors seem completely surprised by the process.  The trick is in knowing when to switch the assets within one’s portfolio based on the stages of the market cycle, and then to be patient.  This is why “MarketCycle” was created.

The current market cycle began its rising bullish period in October of 2022 and the new bull market was confirmed in October of 2023.  If you count out 6 or 5 years from the start, it indicates that the current bull market is scheduled to come to an abrupt halt sometime in the Fall of 2028 or possibly in 2029.  Of course, this date could change because on January 20th we will begin an experiment in the abrupt and pervasive alteration of the normal workings of the U.S. economy.  Details of this experiment are outlined further down below.  There is still a good chance that the remaining 4 years of this current (technology centered) stock bull market will be SUPER-STRONG…  a new “Roaring 20’s.”

This next chart shows what happened during the last period that was similar to today, 1995 to 2000.  Like now, it was the third cyclical bull of three and it was technology-sector centered, like today.  I do not know if we get a copycat version of this prior market between today and late-2028 or 2029, but it is quite probable and with the relative strength behind artificial intelligence (AI) and Crypto, it contains the workings of being even stronger… as long as our “fearless leaders” don’t muck up the gears of both the markets and of the economy.

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BELOW:  The economic cycle itself (BLUE) always lags the stock market cycle (ORANGE).  This means that stocks will react to what is about to happen even before it shows up in the economy.  In investing, you have to learn to make your move BEFORE any economic confirmation lets you know that your bet was correct.  This takes decades of experience and a lot of patience.  The image also shows that stocks and the economy are not the same things, simply because they are so totally out of synch with each other. 

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From Moody’s Analytics, U.S. stock & bond rating agency, via CNBC:

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What is “inflation” and is it coming back again, only worse?  I believe that MarketCycle was the very first to predict the recent spike in inflation, before anyone else saw it coming.  We wrote about it in 2020, but the Fed didn’t see any inflation until March of 2022.  Inflation was directly caused by massive money printing, all as a response to Covid.  Trump/Pence initiated $2-Trillion in “relief” checks and Biden/Harris initiated another $2-Trillion.  Biden liked the idea so much that he tried to put his name on the project.  Every dog & cat in the country received an assistance check.  I have a doctor friend whose income went way up during Covid and yet he received a “free” check for $1.5-Million in the mail.  Since Covid didn’t kill the economy and there was no economic hole to fill (no USDollar destruction), the massive extra money printing instead increased the U.S. debt by a truly gigantic amount and it caused a mountain of inflation.  

MarketCycle, besides being the first to call the recent inflation spike, also called the peak of the spike correctly, almost to the day, and we said that the drop in inflation would be gradual and then stall at around 3%, and it has.  This wasn’t all that difficult to predict.  How could both Presidents and their advisors, and the entire U.S. Treasury, and the powerful Federal Reserve NOT have known that if there is no economic hole to fill, then any extra printed money causes a mountain of inflationary debt.  It is difficult to fathom how so many analysts can be sitting at these major institutions with none of them holding an understanding of the basics of finance.  If there is no hole, then there is nothing for you to fill; if there is no money destruction, then you don’t need to replenish it.

This chart shows the amount of debt added just during the past two President’s terms:  Trump’s first term followed by Biden’s only term.  The nation’s debt almost doubled in 8 years.

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And this chart shows the government’s rapidly rising interest payments on the above debt.  This is directly tied in with excessive spending and money printing.  Can you imagine if this were the way that you ran your home or your business?  What would the end result be?

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Inflation under Biden/Harris?  November 2022 CNBC snippet, two years ago:  While the stock market remains profitable, the economy and the consumer are harmed by inflation spikes.  Investment account profits generally help to hedge the direct consumer losses caused by higher prices on everything that we buy… another reason to reallocate savings toward investment accounts, and this will become even more important as time passes.  Buy stocks, not stuff.

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How will President Trump affect the economy and your investments starting in 2025?  I have written that the inflation spike that we just lived through is going to repeat again towards the end of the current super-bull.  Originally, I didn’t know how or by whom the second spike would be caused, but I knew that it was coming.  And then President Trump was re-elected.  It is estimated that Trump’s policies, even with any DOGE cuts, will quickly add another $8-Trillion to the U.S. deficit, and this amount alone would rapidly increase the debt by another 25%. 

In my opinion, initially we will experience a two-year battle between Trump’s many deflationary policies and his much stronger inflationary policies.*  Interest rates will continue to move lower in 2025 and perhaps in 2026, but by 2027 we are likely to see rising inflation once again starting to gain a foothold.  Ultimately and at the end of this bull, high inflation & high interest rates may be what finally chokes off this current stock bull market.  But that is not now, and it is not soon.

*     And it may be a bit more complicated than just deflationary and inflationary policies waging a battle.  The following brilliant comment about “the dog finally caught the car, and now what?” was extracted from a late December Fox News article.  The words of Jonah Goldberg, a well-known conservative commentator:

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Trump’s DEFLATIONARY policies:

1. Deregulation of corporations is mostly deflationary.
2. Reduction in government spending is deflationary, although it will be VERY difficult to find legitimate things to cut that won’t harm either people or the environment.  Eliminating the proposed $2-Trillion from the nation’s debt level may take ten years to accomplish rather than one, and it is likely to cause palpable pain.
3. Trump’s immediate halt to Biden’s push for forgiveness on already existing student loans will save $550-Billion, and this savings is also deflationary.  Other areas discussed by Democrats and shot down by Trump:  It would cost $3.5-Trillion+ per year to give “free Medicare and drugs for all”… so it turns out that it isn’t actually free.  And “free college for all” would cost only $70-Billion per year, a low enough cost that the figure actually surprised me.  The cost differences probably mean that we are more often sick than we are smart.  Yes, these are good intentions, but it turns out that the government actually must also have the ability to pay for the “free” things that it gives away or the entire economy will eventually implode.
4. Increased energy production is deflationary (although the U.S. is already producing oil and natural gas at record levels).  Commodities are finite.  Peak oil production and extraction occurs sometime during the next 15 years and then it is all rapidly downhill for carbon-based energy use, so it is unfortunate that clean energy and EV’s are about to be chopped off at the roots (to wither on the vine) since they would take about 15 years to ramp up.
5. Productivity boom from robotics and artificial intelligence is deflationary in a major way.

Trump’s INFLATIONARY policies:

1. Deporting millions of (illegal or migrating) workers out of the country, especially at a time when the U.S. basically has full employment, will result in increased food production costs, increased industrial & building costs and increased “consumer services” costs, etc.  This will prove to be very inflationary.
2. Tariffs can be highly inflationary.  The idea is that tariffs slowly force manufacturing to return back to the United States, however, we likely have only 4-5 years to accomplish the mission before the next (big) recessionary bear market takes over the economy, so it’s unlikely to actually happen except on a small scale.  President Trump’s tariffs will be paid by U.S. importers (not by the foreign exporter) who will then pass the entirety of these costs on to the U.S. consumer.  Trump has promised 25-60% tariffs “on day one” and he would be hard pressed to go against this oft repeated campaign promise.  He recently stated that the Tariff Executive Order was already written and ready for his signature.  That item that you want to buy on Amazon, the one that was made in China and that cost $100 today, may soon cost you $160.  The salad that you eat may soon cost twice the price.  The car part that you need, the one that was made in Mexico, may soon go from $400 to $500.  That $10000 bundle of lumber that you need, the one from Canada, may soon cost you $12500.  Your new Ford truck, the one that you need for work, may go from $40,000 to $50,000 overnight.  As inflation builds, the costs will only float higher.  Inflation feeds on itself.  Again, tariffs are highly inflationary.
3. Constant and continual money printing to pay for President Trump’s oft repeated campaign promises:  A massive round-up & deportation process (estimated cost at $600-Billion, but likely much, much higher than this)… or to pay for building giant detention centers (estimated cost at $175-Billion)… or to pay the astronomical costs associated with building “The Wall” (just in Texas, it will take 30 years and cost $22-Billion to build)… or to subsidize corporations (and oligarchs like Elon Musk) in general… or buying Greenland, relatively cheap at an estimated $1.2-Trillion (the Greenland government  actually told us to “F**k off “), a project which the President-elect recently called:  “An absolute necessity”… or to cover the cost of $10-Trillion in tax cuts where 40% goes to people earning more than $732,000 per year while Americans earning less than that would receive only $1300 in tax savings (more than offset by big tariff costs).  Americans earning less than $50,000 per year get nothing, but they will still have to pay much higher prices on almost everything that they buy, via tariffs.  And President Trump’s oft repeated “concept” of eliminating all income taxes and replacing them with tariffs is just plain silly-talk.  Honest, I’m not suggesting a political bias in saying any of the above since I am “offending everyone equally.”  I am just pointing out that, if implemented, these new policies would all require constant & continual & non-stop money printing and that this is the very definition of “the cause of high inflation.”  Our debt will eventually harm us and both Biden’s free-hand spending and the costly planned programs proposed by Trump will both combine to do the job… of eventually doing major damage to the U.S. currency and to the U.S. economy and ultimately to the people of the United States.

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From the highly respected (and very expensive!) Ned Davis Research… tariffs and deportations ultimately will give us both weaker growth and stronger inflation, a double whammy:

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Snippet extracted from FactCheck.org:

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Recent thought provoking headline from CNBC:

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During this coming second inflation spike, certain assets will continue to run up into a profitable market bubble; not all assets will join in, but artificial intelligence, automation and innovative technology assets are likely to bullishly bubble up since they will be fairly immune to inflation.  They will likely not join in with the “renewed growth of inflation” thesis because, at their heart, they are all deflation causing assets.  I say this because during all prior inflationary periods, technology excelled as an investment asset.

On December 18th, 2024, Fed Chairman Jerome Powell said the following to the Press (about Trump’s proposed tariffs) and he ended up causing the Dow stock index to fall 1200 points in a span of less than two hours.  He understands how inflationary Trump’s policies and tariffs might be.  One can tell by the confused speech pattern that he is being boxed into a corner; he already knows that inflation may eventually get beyond his control.  To gain control of inflation this second time around, the Fed may even be forced to orchestrate a recession at the end of this decade just as Paul Volker did during the early 1980’s big inflation spike (that occurred via massive money printing to pay for the Vietnam War).  And even that may not permanently work this time around because we may inherit stagflation during the 2030’s decade.

Jerome Powell:

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January 2026 news story:  From The Onion about the recently proposed defunding of National Public Radio that was suggested by the GOP:

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CLIENT ACCOUNTS and THE MARKET:

MarketCycle was forced to make some recent portfolio changes because of the multi-faceted Trump regime plans & policies and the fact that it will all cause the Fed to lower interest rates less than previously expected.  In fact, actual interest rates (as set by the Fed) may even jump around a bit in the future rather than following a clearly defined up-or-down trend.  Higher inflation and more chaotic interest rates require an alteration in portfolios.

A summary of what the 100 biggest institutions and most respected analysts are PREDICTING for 2025, and yes, this took me many hours of searching and reading to assemble below as 9 simple bullet points. 

1. All relative strength is with the United States.
2. Small-cap and mid-cap stocks start to excel as the market begins to broaden out.
3. Interest rates move lower in 2025, but they move less than was previously expected.
4. Inflation is going to eventually come back to haunt us.
5. USDollar (USD) gyrates sideways.
6. Hold gold over commodities.  Hold stocks over bonds.  Hold cyclical stocks over defensives.
7. AI and crypto lead the markets higher for longer.
8. Best intermediate-term sectors:  technology, financials, industrials, REITs, utilities.
9. Many of them predict that we will hit an air-pocket in 2025, perhaps in the second half of the year, that brings a very temporary 10% pullback… that quickly recovers… and it should be used as a buying (adding money) opportunity.

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MarketCycle bought a small amount of crypto (Bitcoin and Ethereum) for client accounts a couple of years ago when it was below $15,000 per Bitcoin.  It is now at roughly $100,000 and we will see it go much higher. It is not safe for us to hold a large allocation to crypto, no matter how enthusiastic one is, because crypto is just way too volatile for a larger positioning within an investment account.  Effective as of late-November, there are now two ETFs that brilliantly move to protection when crypto-currencies start to experience a price drawdown, so they will likely prove to be substantially less volatile while having the ability to lock in profits (with no tax consequence).  So…

Considering that it is just a bunch of computer digits, Bitcoin is a scarce ‘thing.’  The scarcity somehow gives it value.  3.7-million individual Bitcoins have already been permanently lost.  One grown man in the USA lost $181-Million when his mom cleaned his room and tossed out the trash on his desk, including the drive that held his Bitcoin wallet… another guy in the UK lost $527-Million when his mom did the exact same thing… and in Norway, you guessed it, mom struck again to the tune of $500-Million.  There must be a moral hidden in this somewhere?  Maybe move out if you are 35 and a multi-millionaire?  Perhaps, don’t make your mom clean your room?

I do believe that President Trump will, as promised, attempt to sell some of the country’s gold in order to buy actual Bitcoin for the new Bitcoin Strategic Reserve.  In my opinion, this is an extremely dangerous idea because of Bitcoin’s inherent volatility (in both directions), but it is an idea that will likely keep driving the price of Bitcoin higher because of a continuous supply of “buy the dips.”

Our 8% position in actual physical gold (held for us in the secure vaults of the Royal Canadian Mint) is still on a tear higher… very profitable.  Our allocation is a high one; most professional advisors and hedge funds hold a 0% allocation to gold… they “don’t believe in it” and they call it “a relic of the past.”  Gold is very much less volatile than is Bitcoin.  In my opinion, gold will eventually prove to be much more important than is Bitcoin because it is not volatile (it is a more stable storage of money) and because it offers powerful protection against the future debasement of the USDollar via the non-stop money printing.  Gold cannot be ‘printed’ into existence (or created by a computer programmer).  

Gold?  I subscribe to the (cheap @ $90) newsletter that the much-respected Dr. Jim Paulson puts out each week, Paulson’s Perspectives.  It is available via Substack.  Being retired but still holding a wealth of knowledge coupled with a hefty dose of humility, Paulson is finally able to let loose in his publicly released analysis.  He gives somewhat generalized advice and makes no asset suggestions.  He gave me permission to share the following…

This short snippet was taken from his recent 12/09/2024 posting:

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I’m suddenly ultra-cautious about US Treasury-bonds, especially since they do not perform well in an inflationary regime, and inflation is our future environment.  After 40 years of holding them, this was a difficult thing for me to let go of.  We now live in a world where Treasury-bonds have almost no buyers of consequence and this will prove to be an increasingly inflation causing problem going forward.  Can anyone picture China or Canada or Mexico or Europe or Russia continuing to buy US Treasury debt?  I can’t.  Who would want to buy US Treasuries (loan the US money) when the US government moves toward protectionism, routinely seizes the assets of other countries and continues to grow gigantic deficits.  Bonds have already entered into a 15-year secular bear market.  They may now get a bounce in the near-term, but a drop longer-term.

Awhile back, in order to get in early, MarketCycle bought some diversified, innovative artificial intelligence and robotics stocks and we recently added an equal amount via a particular dedicated AI & robotics ETF.  Like crypto currencies, these are also showing great strength now that the U.S. Presidential election is decided.  Technology stocks in general, despite having an occasional weak day, are showing great strength in their market internals.

In client accounts, MarketCycle is currently positioning client portfolios toward artificial intelligence via:

1. Small utilities that supply energy to artificial intelligence (AI) facilities
2. REIT (giant warehouse) facilities that are dedicated for AI data storage
3. Large AI chip makers
4. Small AI software companies
5. Technology sector momentum stocks
6. Multi-cap momentum positioning (which will increasingly pick up on AI stocks)

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Regionally, all relative strength is still with the United States and I expect it to remain there for another 5-ish years, at which point Asia will likely take over leadership within the context of a generally weakened and stagflationary global economy (stagnant economy with high inflation… not a good combination).  The US is currently the generator of the majority of innovative technology ideas.  Europe is still generally economically weak.  China is still a mess.

I found this visual chart to be interesting; it compares the United States to the European Union countries:

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Growth (strong) stocks, and momentum stocks, are now clearly beating value (underpriced) stocks and I also expect this to continue.  The exception would be in financial sector stocks, which are currently value stocks that took over leadership when Trump was re-elected (because of his proposed deregulation of banks and corporations).  We have to remember that it was bank deregulation that actually caused the Crash of 1929 AND the Crash of 1987 AND the Technology Crash of 2000 AND the Financial Crash of 2008.  The only thing that we got each time was rampant fraud and too high leverage.  We never learn. 

To meld in with the theme of deregulation, the SEC has recently approved the two riskiest ETFs in the history of the universe, and I promise you that they will eventually blow up:  MSTX and MSTU

The conservative publication, The Wall Street Journal, is reporting that President Trump is, behind the scenes, talking about actively working to eliminate the government’s FDIC bank insurance that protects your savings and checking account, but that he plans to keep the SPIC brokerage account insurance intact.

Financial deregulation combined with inflation will likely cause the already crazy high credit card interest rates to soar to ridiculous loan shark levels in a relatively short period of time.  20%-30% now, but eventually a 70% (adjustable rate) interest payment on credit cards by 2030 on those with even the highest credit rating?  Believe it or not, this seems probable to me.

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I’ve watched The Big Short movie at least a dozen times and it is also one of my wife’s favorites.  She teaches dance & movement & exercise classes (NIA) for a living, so if she likes it, it must be very entertaining and well done.  The Big Short clearly shows the results of bank (and general financial) deregulation.

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There are currently so many potentially ultra-bullish assets to invest in that MarketCycle is highly diversified. With Trump coming into office in January, a broader spectrum of stocks might become ultra-strong, particularly small-cap and mid-cap sized stocks.

Some assets such as crypto, managed futures, gold, bonds, REITs, utilities and even select long-short hedge fund type ETFs all can help to protect some during bear markets.  MarketCycle’s client accounts hold all of these assets. 

Managed futures, crypto, gold and silver, tech stocks, plus home ownership*… can also help to counter inflation.  Owning silver in an investment account is inferior to owning gold because it is much more volatile and it offers less protection during stock downturns.  

*     When buying a home during a prolonged, secular inflationary regime, it is critical that one gets a (I currently suggest a 15-year fixed rate) mortgage rather than paying cash.  A mortgage is your friend, it is an investment vehicle; it doesn’t cost you money, it makes you money.  If you buy a $500,000 home with cash, you have a $500,000 home.  If you buy a $500,000 home with a fixed-rate mortgage, the BANK essentially buys your house for you, because with a mortgage…

• You still get the $500,000 home, but you are paying for it with future inflated money and taking tax write-offs on the interest payments in most countries (if the mortgage is under $750,000 in the U.S.).  So with a fixed-rate mortgage, you are essentially buying the $500,000 home for somewhere around half price, and perhaps less than that.  The higher the inflation, the stronger this concept.
• The mortgage tax write-offs may kick you into a lower tax bracket, an added big bonus.
• BUT the home is going up in price because of inflation, so you are perhaps buying a $500,000 home that is eventually worth $1-Million, but you are paying perhaps a $250,000 equivalent for it slowly OVER TIME.
• AND the money that you might have (upfront) paid cash for the home with is earning MUCH MORE in an investment account… and the account profits can help to pay off the mortgage with money to spare.
• SO, you get the house cheap (and inflating in price), plus you get the investment account profits, plus you get the tax write-off, when you lock in a fixed-rate mortgage on your home purchase.  YOU GET ALL THREE.  Inflation sometimes has a good side.
• Fixed-rate mortgages may reach their lowest interest rate level by mid-2026.  Lower in late-2025; lowest in mid-2026(?).

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I’ve added a new sign over my desk and it is really the underlying message in this blog posting:

“All roads lead to inflation!”

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Inflation favors investors and harms spenders; inflation transfers money to people with investment accounts. 

What does it mean: “All roads lead to inflation”?

• The USDollar (USD) is not backed by anything at all other than the U.S. just saying that it has a good currency; it officially stopped being backed by gold in 1971, but we have had the ability to print money at will since 1933… and we have printed.  Since 1933 the USD has lost 97% of its value (slow motion inflation).
• If you print money (or borrow money from overseas that is exchanged into USD), you increase the total amount of USD in existence.
• If you increase the total amount of USD in existence, then each USD is worth less because they are less scarce.
• If each USD is worth less, then it will take more of them to purchase a service or an item than it would have taken prior to the money printing.
• If everything costs more, then this is inflation… prices are inflated.
• Seeing prices moving steadily higher results in panic buying on a large scale and this leads to scarcity and a further increase in inflation.
• Salaries cannot keep up with the higher prices, so the consumer is eventually crushed.
• Inflation makes things eventually cost so much that it breaks the back of the economy, which then crashes.
• The crash destroys money and resets the economy, but at a great expense that some countries have a terrible difficulty recovering from.  In Germany, before World War II, their currency was so devalued by money printing and debt (to pay for World War I reparations) that people were actually burning their paper money instead of buying firewood because their paper money was worth less than was a stack of wood.  This is ultimately what led to Adolph Hitler’s rise to power… his promise that he alone could fix everything and bring Germany “back to greatness.”
• So, unless you are printing money to make up for an equal amount of money that was destroyed during a financial crash (as in the Financial Crash of 2008), then you are ultimately creating destructive inflation, which then leads to a new financial crash.
• “All roads lead to inflation.”

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I am a patient bull in a clearly bullish environment that currently contains just ‘average’ risk and with a stock market that may become quite strong and perhaps even parabolic at the end. 

I am constantly watching measurable risk levels.  When in a strong stock bull market, we don’t want to be jumping in and out of the market because that creates actual losses.  When the stock market drops, one still owns the same number of shares, so any “loss” is not real if it is not realized by selling the position.  We want to buy low and sell high, not the reverse.  We want to eventually sell into enthusiasm, not panic.  We actually want to buy during panic, not sell during panic.

And of course, people panic over even the smallest of market drops and they want to run away when they should want to run towards.  We should not listen to our internal fear & panic because it is not clear-headed.  And we should often do the opposite of what the noisy crowd is doing; they are almost always wrong.

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From the original Star Wars movie, a motivational quote from Darth Vader:

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I stated in MarketCycle’s prior blog that there is one thing that the market hates and that is “uncertainty.”  We may get more than a bit of that during the remainder of this super-bull because there is the definite potential for periodic disturbances in The Force, so we’ll be ever watchful.  We might even get one temporary 10% correction during 2025, which would be a buying opportunity, not a selling opportunity.  Every day we have to say to ourselves:  “Is this ‘new thing’ just temporary & passing and is it more of a mental & emotional threat rather than an actual event… or is it something that actually changes markets and our current thesis?”  Most things are just temporary and passing; something that we have to ride out but ignore.  And we have to remember that stocks and the economy are NOT the same things… they don’t even cycle in unison, as per the image that we started this article with and that is reproduced again below.

This technology centered stock bull market might be one for the record books.  There are reasons to be excited!

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PLEASE EMAIL THIS FREE BLOG TO YOUR FRIENDS along with a brief note.  I’ve never asked any reader of this free blog to literally help to spread the word.  I don’t have to do any of this; I do it as a service to others.  I don’t advertise or actively promote myself and I currently live as a hermit of sorts, so frankly, I rely on others to spread MarketCycle’s message.  My primary goal is to help as many people as I can to prosper and to thrive through the coming changes that I clearly see heading our way.  And because of MarketCycle’s incredibly sophisticated trading platform, additional clients in no way detract from the attention needed by current clients.  In addition, any client that contacts me knows that I always reply within minutes and I follow through immediately.  I’ve tried hard to set everything up to be a win-win-win scenario for all involved.

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Thanks for reading!

MarketCycle Wealth Management is in the business of navigating your investment account through the expected future that is outlined above.  There is a contact tab at the top of our website.  It is an incredibly easy process.

Our weekly updated REPORT site can be reached via the connecting link on this website.

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MARKET CYCLE  —  MOMENTUM  —  TREND FOLLOWING  — HEDGE FUND

MarketCycle Wealth Management

 

170,000,000 U.S. citizens did not vote in the recent election; that is 50% of the country.  Roughly 25% voted for Harris and 25% voted for Trump.  I was concerned about the conclusion of the U.S. election possibly being dragged out.  200 lawsuits were filed even before Election Day, but the election did not drag out.  Several ballot boxes were fire-bombed and bomb threats were called in around the country, but it could have been worse.  Hedge Funds were very heavily hedged and in protection mode.  When the winner was same-day announced, the market instantly calmed down and jumped up to new record highs.  The market truly hates only one thing and that is “uncertainty.”  And so it goes.

Starting in January, President Trump is going to do a lot of things very quickly, perhaps signing 100 Executive Orders during his first week in office and immediately starting to implement his promised government, retirement, judicial, environmental, educational and social altering changes.  President Trump repeatedly told us what he will do and there has even been a 900-page book written about it that shows the “4-Pillars” and the “10-Key-Proposals.”  Again, the only thing that the market cares about is “uncertainty” and all of this has literally been put into print.  And if what I am saying sounds biased, please trust me, I am taking a neutral stance and looking at everything from a central point… I am attempting to see only facts.

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Trump’s financial/business actions and results:

1. Lower corporate taxes plus drastically reduced oversight and regulation (rules) will allow corporations to generate very high profits and this will drive the stock market higher and higher for the next 4 years.  Further impetus created by AI and robotics will offer additional corporate profits via productivity increases (think “Elon Musk”).
2. Trade tariffs (as high as 60% on China and 25% on Mexico) will be paid by the American consumer, not by the country that has the tariff imposed on it, and this will eventually cause high inflation in the U.S. (and there is not enough time to move production to the United States).
3. Deportation of 11-million workers will also cause eventual inflation in the United States.  The taxpayer cost alone will be $88-billion per year and it is estimated to take 10 years.  And your groceries, for instance, may double or triple in price.  That garage that you want to build may easily cost $200,000 rather than the current $100,000.
4. A parabolic stock market plus corporate deregulation comingled with eventual high inflation levels (inflation arrives closer to the end of this current bull market) will combine to cause the economy to eventually crash and burn, but as I stated, this crash and burn is likely to be 4-5 years away.  Every major stock market crash in history has been caused by this three-prong combination.  (Both inflation and crashes can be exploitable & rapidly profitable and I am willing to help anyone through this coming abyss.)  I reserve the right to be wrong, but I am fairly certain about what I’m saying.

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One financial asset that may be about to go to the moon over the next two years (because of item #1 above) is small-cap stocks.

Back in 2022, I wrote that gold had completed what is called a “cup-and-handle” chart formation.  Most readers yawned.  This is an extremely bullish chart pattern, mostly because, when technical traders see it, they get very bullish and they start buying and then keep buying.  MarketCycle has a large gold bullion position, held in the vaults of the Canadian Mint.  Gold has moved up $1000 per ounce since I posted that “cup-and-handle” article just two years ago!

During the first week of November, post-election, small-cap stocks finally completed their own “cup-and-handle” chart pattern and immediately executed a one week leap higher.  This means that millions of other traders have also now seen it.  This particular chart pattern might send the Russell-2000 small-cap stock index (as shown below via the ETF of IWM) up towards (or past) 300 within a two year period.  Unless something side-tracks it, this would be an extremely profitable move.  Small-cap stocks are one area where “stock picking” or “ETF picking” is of critical importance… a correctly chosen small-cap ETF could run up much higher than does the general Russell-2000 small-cap stock index.  (The following chart was originally created in November of 2023 and posted here on November 11, 2024, one year later… it was amazing how the stock market slowly followed and filled MarketCycle’s pre-drawn markings.)

IWM as representative of the Russell-2000 small-cap stock index:

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That’s it, we’re bullish on the stock market, and thanks for reading!

MarketCycle Wealth Management is in the business of navigating YOUR investment account through rough waters.  The process is simple and we work hard to earn our keep.

Our REPORT daily site can be reached via the connecting link on this website.

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MARKET CYCLE  —  MOMENTUM  —  TREND FOLLOWING  —  RELATIVE STRENGTH  — HEDGE FUNDS

 

This posting is going out just as many millions of anxious Americans head to the polls today to vote.  “There will be weeping and gnashing of teeth.”

The Wall Street Journal:

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The President of the United States, or his/her political party, does not and cannot control the multi-year bullish PRIMARY TREND direction of the stock market.  Negative geo-political news events always turn out to be mere (temporary) speed bumps along the way; they can slow, but they cannot stop.  The primary trend of the market is like a powerful freight train that refuses to fully stop until it reaches its destination.  By its very self-generated power, it eventually moves everything and everyone out of its path.  A bullish primary trend, like we have currently, normally lasts for 6 years and the most recent one started in the Fall of 2023, just one year ago.  So, do the math.

A bull market tends to go up regardless of the controlling party or what actions those in control might take.  Stocks are naturally biased toward the upside.  Stocks are not politics and they are not the economy and they are not one’s emotions or opinions.  Owning stock shares in your investment account gives you a ‘share’ in the profits of corporations.  If corporate earnings are going up or if they are expected to go up, then stock share prices go up.  Yes, it is that simple, and U.S. corporations do especially well with generating profits and passing those profits on to their investment partners, their ‘share’-holders… and this means YOU.

This chart shows from the year 1900 to today; it also shows why stocks are much less dangerous than many investors believe because the market has an obvious upward bias over very long stretches of time… sometimes sideways, mostly up.  [Chart courtesy of Ritholtz]

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Another view of the same thing.  [Chart courtesy of Charlie Bilello]

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But the stock market does hate uncertainty; the chaos around the 2024 election has caused stocks to move higher at a slower pace, but they have moved higher.  Likewise, the chaos of a negative Presidency might also slow the pace, but not the direction of the bull.  After the election winner is officially announced, which in a worst-case scenario could take weeks, stocks will move higher again (see the red line to the right of the vertical dashed line).  [Chart courtesy of Goldman Sachs]

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We are in a self-directed, double-strength stock bull market: concurrent cyclical and secular bulls.  Overlapping secular bull cycles last for approximately 18 total years and this one started in the Fall of 2011.  Again, do the math.  In my opinion, while no President or political party can derail the direction of a bullish stock market, they may be able to somewhat alter the strength of the market, at least initially.  But a bull market eventually acclimates to literally anything & everything and it just keeps moving forward without actually getting derailed.  So, I remain very bullish for the coming 4-5 years:  earnings are great, the Federal Reserve and most Central Banks are very stimulative, low current margin use levels, consumers still flush with spending money and $7,000,000,000,000 (just in the United States) sitting on the sidelines waiting to come back into the markets… and that is all very powerful fuel to keep the bull market chugging along.

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Please remember to vote today.  DEMOCRACY = VOTING = DEMOCRACY

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Thanks for reading!

MarketCycle Wealth Management is in the business of navigating your investment account through rough waters.  It’s easy to do and we always attempt to earn our keep.  There is a ‘contact tab’ on our website.

Our paid member REPORT website, with in-depth weekly updates, can be reached via a link on (this) our main website.

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MARKET CYCLE  —  TREND FOLLOWING  —  SECTOR ROTATION  — FACTOR INVESTING  — HEDGE FUNDS

MarketCycle Wealth Management

 

The past is often prologue.  History does not repeat, but it does rhyme.

As I’ve been saying for many years now, the 5-year period from 1995 to 2000, which was one of the strongest bull markets in history (the Internet Bubble), will likely produce a rhyme with the coming 5-year period of 2024 to 2029 (the AI Bubble).  And then 2029 may rhyme with the slow motion ‘Crash of 1929’ (or perhaps rhyme with a combination of the big bear markets of 2000 & 2008).  This coming bear market will be centered around pervasive credit & debt defaults, severe currency devaluation and the collapse of the coming ‘way too high’ technology sector valuations.  I plan to be totally and completely prepared for such an event because it will be fully exploitable.  These fearful bear markets can offer gigantic and rapid profits to anyone that is willing to position accordingly.

History’s past stock bear markets:

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But remember, we likely have five more years left to this current SUPER STRONG bull market.

This chart shows the path of the last two secular stock bull markets, with one secular bear market in-between (2000-2008).  I highlighted the two important 5-year periods via two yellow lines.  The left yellow line is the ‘Internet Bubble.’ The far-right yellow line runs from September of 2024 until late 2029, so we are just now at the start of what I believe will become a parabolic AI centered SUPER BULL.

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This final chart shows another view of what I expect to happen between today and late 2029.  I believe that we will eventually break out of the current 15-year long bullish trend channel and create an entirely new and higher bullish trend channel.  The purple dashed arrow on the right side of the chart shows my 2029 target; the line is labeled #3 because it would be the third and final leg up to the current secular bull market that started at the bottom left-hand side of this chart.  This period will be a time when “stock pickers” excel and just buying the S&P-500 will definitely underperform.  It won’t be a straight line higher because markets zig-zag on their way up.  As always, this bull market will “climb a wall of worry” and when literally everyone is finally euphoric, it will truly end.

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MARKET SUMMARY:  The stock bull market continues.  The United States still leads in relative strength.  No major signs of impending risk.  Volatility may continue until election day.  The year likely ends on a strong note; the S&P-500 naturally wants to go toward 6000. Gold remains strong.  Bonds are bullish but not super strong.  Most commodities are weak.  Energy prices are low enough to offer a stimulus to the markets.  The USDollar likely gyrates sideways over time, in big up and down swings.

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Thanks for reading!

MarketCycle Wealth Management is in the business of navigating your investment account through rough waters.  Our goal is to earn our keep.  There is a contact form at the top of our website.

Our PAID member (REPORT) website can be reached via the link on our main website.

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MARKET CYCLE  —  TREND FOLLOWING  — GLOBAL MACRO  —  DUAL MOMENTUM  —  HEDGE FUND

MarketCycle Wealth Management

 

MarketCycle, in private client updates, predicted the recent pullback, stated that it would be a “V” bottom, and that the market would recover in a more generalized manner rather than merely large-cap mega tech stocks leading the charge.  All correct.

In my opinion, this current bull market will be the biggest in history and it is still in the very early stages.  This new bull market started in late October of 2023, just ten months ago, but it is now picking up its pace and broadening out.  It likely has FIVE MORE years to run, with the final 2-3 years (2027-2029?) going parabolic and being extremely profitable… and I do mean extremely profitable.

When it finally reaches its ultra-euphoric stage, it will end.  The bull will then collapse under its own weight, but that is not now and that is not today.

Our proprietary SECULAR (long term view) indicators just went from strong to super-strong.  Strength on top of strength.  

The bell will officially ring when the Fed finally starts its ‘two year’ program of interest rate cuts, beginning on September 18th… roughly three weeks from today’s Musings publication.

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One way to judge the strength of a bull market is to look at MARGIN DEBT.  Margin debt is money that investors borrow from their brokerage (like Interactive Brokers) in order to increase the amount of money that they have in investments.  If they have $100,000 in their investing account and borrow another $100,000… then they have $200,000 in investments.  They pay daily interest to their brokerage for the privilege of borrowing and using this money.  The brokerage can call back the loan at any moment and they sometimes do so at the absolute worst time possible.  Frankly, I don’t know why people would borrow on margin when there are leveraged ETFs on the market that are dramatically safer, but people do borrow in order to invest and this won’t change in the future.

When MARGIN DEBT is very low, like now, it represents the best possible time to invest for the long term.  History teaches us that margin debt is always low at the BEGINNING of major new bull markets… and then, years later, the amount of borrowed margin debt becomes (too) euphorically high just as the bull becomes fatigued and stops running.

Margin levels will become too euphorically high when investors themselves reach crazy levels of euphoria over stocks.  This process normally takes years.  On top of margin debt, investors will even start taking out second mortgages on their homes in order to buy additional stocks.  This all happened in the late 1920’s and again at the end of the 1990’s… and, in my opinion, the late 2020’s will be a re-do.  Just after the (stock market’s) “Roaring 20’s” and immediately before the “Crash of 1929”, Joseph P Kennedy of the famous USA Kennedy family stated that “when the shoeshine boy starts giving stock tips, then the smart money should finally sell.”  Riding the stock market up during the roaring 1920’s and selling at the ultra-euphoric top and then shorting the market on its way down, only to re-buy at the panic bottom is what made the Kennedy family (and other prominent U.S. families) a permanent financial dynasty.

Right now we are looking at extreme lows in the margin debt levels.  On the chart below, I expect the margin level to, once again, rise WAY above its top trendline (above the yellow line).  This journey should take about five years, ending some time around 2029.  And yes, home prices and mortgage rate levels will likely collapse at the same time.  Late 2030-ish may prove to be a once-in-a-century chance to buy an underpriced house for anyone with the patience to wait and with the courage to invest when the world is in panic.  The next (giant) bear market as well as the entire 2030’s will require highly specialized investing and I am already preparing (in my mind) for that scenario.  Any situation can be profitable if one can move relative to what is actually happening.

So, the takeaway is that one should invest in very particular stocks and bonds and gold and cryptocurrencies NOW and then practice patience.  Certain assets will beat the general market by huge amounts, huge amounts just like at the end of the 1990s, and this is how MarketCycle’s client accounts (are and) will be positioned.  This is how MarketCycle will earn its keep.  

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I’m predicting that by 2029, the blue line shown below will be WAY above the yellow line, with margin debt reaching, perhaps, 4.5% of the S&P-500 market cap and topping out at a greater than +2 standard deviation.  A SUPER-BULL.

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MARKET SUMMARY:  MarketCycle is bullish on stocks in the near-term, intermediate-term and longer-term and we see risk levels as being below average.  Since (hard to know ahead of time) negative news events often move stocks in the very near-term, Middle East volatility could cause some stock market volatility over the next couple of weeks (bonds and gold would likely go up if stocks briefly moved down).  But any brief (multi-day) pullback would allow MarketCycle an opportunity to invest new client money, so there is always opportunity within any chaos.

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Thanks for reading!

MarketCycle Wealth Management manages investor’s accounts… people just like you.  We strive hard to earn our keep.  There is a contact form on the website.

Our REPORT (paid subscription service) can be reached via the link on our website.

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MARKET CYCLE — TREND FOLLOWING — RELATIVE STRENGTH — DUAL MOMENTUM — HEDGE FUNDS

MARKETCYCLE’s

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The U.S. Federal Reserve publicizes its intentions via a “DOT PLOT” which is a chart that shows when and where they expect interest rates to be in the future.  It is how they communicate with investors and the government.  Their most recent “June 12th” Dot Plot suggests 1-2 interest rate cuts of 0.25% each for the remainder of 2024… and 4 rate cuts of 0.25% each in 2025… and 4 rate cuts of 0.25% each in 2026.

The first interest rate cut might come in mid-September with the stock market reacting BEFORE the cut arrives.  Regardless and if nothing changes in their Dot Plot, then this would be a total of 9-10 individual interest rate cuts of 0.25% each over the coming 2.5 years… very stimulative for both the bond market and the broad stock market.

If the Fed actually follows this path, it would likely cause a roughly 50% gain in extended-duration Treasury bonds (the 30 year T-bond) over the same time frame even if there is no weakening of the U.S. economy.  If the economy weakens, then these particular bonds could generate profits of perhaps 65% over the next 2.5 years.  Of course, the 30-year Treasury bond will also pay 10% in tax free interest over the next 2.5 years, so this has to be added to potential gains.

MarketCycle’s client accounts hold tax free 30 year Treasury bonds and 20-25 year (highest quality) U.S. corporate bonds… and our IRA & Roth & SEP-IRA retirement accounts hold similar bonds, but in a form that pays roughly 18% ‘tax free’ via a BuyWrite strategy (plus 25% of the client’s retirement account portfolio pays roughly 60% ‘tax free’ interest via low-risk ODTE stock options).

Below is the most recent Federal Reserve DOT PLOT that was released on June 12th and it suggests continued fuel for the stock and bond bull markets during the next three+ years: 

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MarketCycle’s CURRENT THOUGHTS:  

• It is important to see where we are in the traditional “market cycle” and to then determine what’s different about the market cycle this time.  It appears that “momentum investing” is making a very early appearance in this relatively young stock bull market.  Momentum investing is the buying of strong stocks (in any corporation size from small-cap to large-cap) rather than buying cheap & undervalued stocks.  When it becomes evident to investors that the Fed will finally be lowering interest rates, then we might get VERY broad stock participation.  This means that, while early stage assets such as REITs will likely perform well, momentum stocks may actually outperform the rest of the market.  So, perhaps one should hold a barbell approach of both early stage undervalued stocks as well as holding the strongest momentum stocks.
• As we’ve been saying for years now, 2024-2029 may resemble a merged combination of the incredibly bullish 5 year periods of 1924-1929 and 1994-1999.  Both prior instances offered incredibly profitable, speculative and parabolic stock markets… and the coming 5 years may offer the same.  If I’m correct in my current thinking, the next 5 years might prove to be the most profitable bull market in history with the S&P-500 surpassing 13,000.  And at the end?  The next bear market will offer the opportunity for us to generate extremely rapid & low risk profits, just as I pulled off in the similar big bear markets of 2000 & 2008.

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I came across this old photo of me, taken when I was just starting to see patients in an earlier career incarnation.  Doug Flutie’s father took this photo of me.  Doug, the famous professional quarterback, used to throw footballs to me (actually, sort of at me) in the hallway of our local gym… like trying to catch a missile.

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CLIENT INFORMATION:  Quarterly paper statements will arrive at your home by mid-July.  If you have moved, you must notify Interactive Brokers of the address change and this might require sending in paper proof of your new address, like a utility bill.  The SEC requires a proper physical address.  Interactive Brokers can be reached via:  1-312-542-6901

Our portfolios keep moving higher.

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Thanks for reading!

MarketCycle manages investment accounts and we earn our keep.  There is a contact tab on the top banner of our website.  I always reply on the same day and usually within one hour. 

Our paid member REPORT site can also be reached via the link on this website.

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MARKET CYCLE  —  TREND FOLLOWING  —  RELATIVE STRENGTH  —  HEDGE FUND

MARKETCYCLE WEALTH MANAGEMENT

Estate planning is the process of arranging for the management and distribution of everything that one owns or controls both during and after their lifetime.  This includes such things as cryptocurrencies, art, cars, homes, investment accounts and owned businesses, as well as guardian directions for underage children (and possibly even pets).  It also includes one’s liabilities such as mortgages, loans, credit card debt, etc.  Without pre-planning for this, one’s estate can get caught up in legal entanglements that can drag on through the courts for years.  For clients that might be reading, the below pertains to the United States, but it isn’t that much different globally.

Here is a simplified version of ESTATE PLANNING…

TERMS:

• Grantor… person that creates a Trust
• Testator… person that creates a Will
• Executor… executes the estate plan and protects the estate… they usually require a percentage of the estate as compensation (such as 5% or 10%)
• Trustee… holds the assets after your death
• Person with Power-or-Attorney… your stand-in, can be temporary, limited in scope and/or time, or it can be permanent (durable)
• Probate… court supervised process that distributes the estate (for the ultra-wealthy, trusts can bypass costly probate)

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WILL:  A “will” is your voice after you die.  Without a will the state controls your assets and they will distribute using a one-size-fits-all approach.  A will includes all assets such as jewelry, cars, artwork, cryptocurrency, investment accounts, etc.  All investment accounts can be held in “Joint Tenancy” with one’s spouse so that probate is side-stepped.  (This is easy to do at Interactive Brokers, even on already established accounts.  Unmarried partners should be listed as a “beneficiary” on all investment accounts.)  Every person reading this article MUST have a will, without exception.  Contact an attorney, or use one from online if your estate is small.  All wills should include two witnesses and should be notarized.

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TRUST:  A “trust” is a contract that can protect high worth estates from the government and state.  Most states do not have an estate tax (you should do an Internet search for your state).  I live in Virginia and there is no state estate tax here.  Estates worth less than $23.4-million for married couples and $11.7-million for individuals ARE NOT SUBJECT TO FEDERAL ESTATE TAX, so there is no need to set up a trust for estates below this cut-off.  If the estate that you are to pass on to your heirs is below these $-limits then there are few benefits to setting up a trust, and you may have to pay higher taxes annually on anything that generates income within the trust (such as investment accounts or rental properties).  Some rare trusts are set up in a manner that causes inherited investment accounts to be taxed at higher rates (the “step-up-value” does not work in these rare trusts), so your attorney needs to be made aware of this.  So, a trust offers almost no benefit for almost all people.  Federal tax rates on money that exceeds the above tax-free price cut-offs (of $23.4-million or $11.7-million) are taxed at between 10% and 40%, depending on exactly how rich you are.  .

TRUST TYPES (your assets must be renamed and “transferred” into the trust, a complex and time consuming process):

• Living Trust Revocable…  flexible, for both assets and health directives including life sustaining measures, but it may not help with taxes after your passing… and sometimes a revocable trust can be set up to instantly become “irrevocable” after your passing  (fairly costly to maintain)
• Living Trust Irrevocable… once set up, it cannot be altered… it is for both assets and all health directives and it offers substantial protection from estate taxation after one’s death… it is much like turning all of your assets into one giant life insurance policy
• Spendthrift Trust… protects one from creditors
• Testamentary Trust… established through one’s standard will and this is a good option for most people that desire a trust
• Charitable Trust… set up to benefit charities after your death

SUMMARY:  All people need a will.  Most people benefit from health/death directives in their will.  Generally, only the super rich will benefit from setting up a trust and trusts are difficult and costly to set up and maintain.

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And just a bit about the markets and investing:

High for the year:  A year ago MarketCycle gave its target high for the year 2024 of S&P-500 @ 5200, which at the time was the highest prediction on Wall Street, and we further stated that the S&P-500 might go even higher and that we would have to raise the target as 2024 progressed.  Well, we were correct and we are obviously going to have to raise it since the S&P-500 is currently just OVER the 5200 target and it is only early June.  But to raise it to what??????  Last year we were perfect in our prediction for the high for 2023; we hit it exactly on the mark.  This year, to reach the top of the trend channel would be an impossible feat, so I really do not know where the market will end the year, other than to say:  “HIGHER!”

Rate cuts:  At the same time (during the middle of last year) that we called for 5200 in 2024, MarketCycle also stated that there would be 3 rate cuts in 2024 (when everyone else was still saying zero rate cuts).  When 2024 arrived we lowered it to 2-3 rate cuts (and everyone else raised their prediction to seven rate cuts in 2024).  We are now saying 1 rate cut in 2024 (and everyone else is a mixed bag of predictions).  So, who knows since none of us can control the Fed.  It is likely that the Fed wants to cut rates at least once in 2024 because Donald Trump is calling for himself to be the ONLY person in control of all interest rate decisions (yes, this is true) and, for obvious reasons, it seems like the Fed might cut at least once in the late summer or early Fall in order to strengthen Biden’s election chances.  Even just one rate cut by the Fed would be REALLY supportive of equities, especially early cycle equities.  But the only thing that “has to be true” is that the Federal Reserve absolutely will eventually lower rates.  Yes they will, there is no new paradigm.

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“The uncertainty about where neutral is today creates a challenge for Federal Reserve interest rate policy makers.”

Neel Kashkari, Minneapolis Federal Reserve President, June 3rd, 2024

MarketCycle’s interpretation of the Fed’s comment:  The Federal Reserve doesn’t know what to do and they tell us so every day because they can’t seem to just stop talking.

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I receive a number of comments about small-cap stocks… basically people telling me that I am wrong and that small-cap stocks are never going to rise.  But these stocks have been forming a (sideways launching pad) base over the past 1.5 years and they are anxious to rocket higher.  When they do, and they will, they should outpace the rest of the market by a wide margin… they could make as much as 70% in the first 12 months of their initial move.  MarketCycle’s chosen small-cap ETF has already been beating the S&P-500 stock index over these past 1.5 years and it is the only one to do so.  (Chart courtesy of Topdown Charts and the message is to buy small-cap stocks.)

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The same thing applies to extended-duration quality U.S. bonds (IE, the 20-30 year Treasury bond).  They are like a cat that is coiled and ready to pounce.  When U.S. bonds take off, and they will, the move is going to be long and strong and they will rapidly make up for lost time.

To get in at the start of a big bullish move, even if a bit early, you have to see a no-lose situation with limited downside… and then buy & patiently wait… and you have to do so before the crowd sees the potential opportunity.

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As I keep saying, the United States is the strongest card in the deck and it will continue to be so for the next 5-ish years.  There has been a major change in manufacturing moving back to the United States, as shown below.  (Chart courtesy of Bank of America.)

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And to back that up, construction spending for factories in the United States has gone parabolic, as shown below.  This is SUPER bullish for U.S. equities.  (Chart courtesy of Wolf Street Analysis.)

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I stopped doing my ANNUAL “beginning of the year summary” of the economic and market predictions of the bigger institutions and analysis companies because THESE KEY PLAYERS ARE ALWAYS, ALWAYS WRONG.  I’d say that 95% of all predictions from these big institutional level investors are wrong each and every year, so what’s the point of even listening to their predictions and opinions.

So, the below chart really caught my eye (from the Swiss Finance Institute).  It implies that the more famous the investment professional is, the LESS MONEY THEY MAKE for their clients.  Most famous investors are well known because of their one big trade from many years ago.  Roughly 5% of investment professionals consistently know what they are doing and none of them are famous and they may be extremely difficult to find. They most likely are not on that podcast that we all listen to each week.  Fancy that.  They may also be a “slow motion, learn as you go, but do not repeat mistakes” type of Market Wizard.

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And finally, can anybody guess why almost exactly 50% of Americans wrongly believe:

• That the economy is (recession) shrinking when, in fact, Gross Domestic Product (GDP) is steadily growing
• That unemployment is at a 50 year high when, in fact, unemployment is near a 50 year low
• That the stock market is down for 2024 when, in fact, it is up roughly 12% over the past 5 months

Facts?

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Thank you for reading!

MarketCycle Wealth Management manages your wealth, particularly of investment accounts.  High quality at a fair cost.  We earn our keep.  There is a contact tab at the top of the web site.  Most new investors seem to start with a smaller account and then fairly rapidly add their entire liquid net worth as they watch the process unfold.

Our paid member REPORT site can be reached via a link on this website.

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MARKET CYCLE  —  TREND FOLLOWING  —  SECTOR  ROTATION  —  HEDGE FUND