In his Daily Market Notes report to investors, while commenting on the problem with gold, Louis Navellier wrote:
Q1 2021 hedge fund letters, conferences and more
Let’s face it, there is a lot of chaos in the world. Israel in now under siege from rocket attacks and the violence in Jerusalem has escalated. Russia’s DarkSide criminal group was apparently responsible for the cyberattack on the Colonial Pipeline that serves the East Coast and collected almost a $5 million ransom. Interestingly, DarkSide wanted its ransomware to be paid in a Cyptocurrency. Speaking of Crypocurrencies, according to The Wall Street Journal, at the end of April, the Cyptocurrency market is now worth more than all physical U.S. dollars in circulation.
Tesla Suspends Taking Bitcoin For Vehicle Purchases
Speaking of the Cyptocurrency market lost as much as $365.85 billion according to CNBC on Wednesday after Elon Musk tweeted that Tesla suspended taking Bitcoin for vehicle purchases due to environmental concerns associated with Bitcoin mining. It is widely known that Bitcoin miners were setting up operations in Wyoming to take advantage of cheap electricity, approximately 80% of which is derived form coal according to the Energy Information Administration. Elon Musk said “We are concerned about rapidly increasing use of fossil fuels for Bitcoin mining and transactions, especially coal.”
The cynic in me finds it hard to believe that Elon Musk did not know about how Bitcoin was being mined and I suspect that he may have tweeted about Bitcoin mining to mask the news that Tesla’s April vehicle sales in China were disappointing. I also found it interesting that Elon Musk said Tesla wouldn’t sell any Bitcoin and would resume using the cryptocurrency for transactions “as soon as mining transitions to more sustainable energy.” Interestingly, since the Cyptocurrency market was hit hard this week, it appeared to trigger a stock market recovery on Thursday, so at least Elon Musk helped Tesla stock recover a bit, despite its $1.5 billion Bitcoin investment.
[Navellier & Associates does own Tesla (NASDAQ:TSLA), for one client, per client request in managed accounts. Louis Navellier does not own TSLA personally.]2Q GDP Estimate
Confused? We all are. The inflation bubble moving through the U.S. economy was exposed this week. I mentioned on a podcast that the financial markets will want to hear from the Fed now that its 2.4% threshold has been breached. Fortunately, the U.S. economy is booming and according to the Atlanta Fed now growing at an 11% annual pace in the second quarter. Key economic data, like Friday’s retail sales report will cause the Atlanta Fed to revise its second quarter GDP estimate.
On the heels of Friday’s employment report, there was wild trading in Treasury futures, as the 267,000 new jobs missed badly on the million-plus estimate for a rise in non-farm payrolls.
Looking at the 10-year Treasury yield action last Friday purely from a trading perspective – bonds closed up on the day after yields dipped well below 1.50% on the shocking payrolls news – indicates that there are big sellers of Treasury bonds lurking beneath the surface, trying to take any advantage in price spikes.
I think the Nasdaq Composite will trade to its March 2021 lows by the end of the second quarter as interest rates rise in the U.S. Bull market corrections to a rising 200-day moving average are healthy and we are overdue for one. Many technology stocks ran up into their good earnings reports and then sold off, which feels like a “tired tape” to me – to use some trading terminology.
Due to rising interest rates, similar to what we saw in 2018, we should see volatility with an upside bias in the stock market by the end of 2021. The problem in 2018 was that the Fed was pushing long-term rates higher. These days, the bond market is pushing them instead, which should bring a more benign outcome.
The Problem With Gold
When gold bullion traded under $1,700 per ounce at the end of March, it generated quite a few phone calls from investors asking if they should “get out” of gold. My answer then, which is still the case, is that I expect to see a fresh all-time high for gold bullion by the end of 2021.
The problem with gold in the first quarter was that rising interest rates and a firm dollar were pressuring gold bullion while many industrial metals were surging. Industrial metals are still surging, and interest rates may rise some more, but I think “real” (after inflation) Treasury yields will remain negative and may actually make new lows in real (after inflation) terms, as inflation will rise faster than long-term rates.
If the 10-year Treasury goes to 2.5% this year and the U.S. inflation rate goes to 5% or 6%, then real rates will make a 52-week low, which is bullish for gold bullion. Any Treasury yield spikes above 2% should make trading in gold bullion and equities messy, but I think we’ll see an upside bias by the end of 2021.
