Ticking Time Bomb

Estimated read time: 2 minutes and 26 seconds

In this week’s newsletter:

1. Market recap

2. Top holdings: what I am buying & selling

Market Recap

YTD returns:

• S&P 500: +6.4%

• Nasdaq: +12.62%

• Russell 2000: +10.43%

• US Dollar ($UUP): +1.01%

• Gold ($GLD): +0.%

A lot of data this week so let's jump right into it:

1. January CPI Report: +6.4% YoY vs +6.2% expected

Oh boy.

Let's not focus on the "miss" part of the CPI (i.e. inflation report), although it always is funny when the moronic Wall Street economists get something wrong.

They continued to bet that inflation would fall; and fall it did...but not by enough.

Inflation remaining high and sticky just means that the Fed has even more reason to continue raising interest rates and/or shrug off any notion of a "soft-landing" or "pivot".

The Fed Funds Rate has already priced in higher rates..for longer...

2. January PPI Report: +6% YoY vs +5.4% expected

Oof. Another swing and a miss from Wall Street.

PPI (Producer Price Index) is thought of as a leading indicator for the CPI. If the prices of raw materials used in manufacturing are decreasing they can pass along those savings to the end user's price (i.e. CPI).

Yes, PPI continues to fall and the CPI is falling alongside it. But again, not fast enough. These levels of inflation are still as historical levels - the Fed is determined to keep driving these inflation numbers down.

They do that by *drumroll* RAISING INTEREST RATES.

3. Housing Starts: 1.309MM vs 1.356MM expected

Housing Starts fun facts:

• Just hit a 31-month low

• 9th straight month that the 12-month average has declined. Longest streak since 2009.

• Home buying activity increases in low interest rate environments (we ain't in that environment, Chief).

Yes, the market continues to rip. Quite frankly I see this as a result of the derivatives market spiraling out of control (extreme options buying activity).

The data continues to signal slowing growth and slowing (albeit not fast enough) inflation. That continues to be the worst economic setup for stonks. This setup is expected to last for the 1H of this year.

For me it's not a matter of IF, but WHEN this red hot market will correct.

And correct rather meaningfully if I'm being honest...

In The Account | my top holdings 

1. Gold & Gold Miners - $GLD and $GDX

   1. Pros: Gold volatility ($GVZ) continues to trend downward. That's bullish for Gold.

   2. Cons: Long term rates (10y & 30y) continue to tick higher which is negative for Gold.

   3. My bet is long term rates will sniff out slowing economic growth and trend lower. Because that's what makes it go lower.

2. CHINA

   1. Should be buying on red: $KWEB, $PDD, $EWH, $CHIQ

3. BONDS

   1. Bond volatility continues to trend lower = good for bonds

   2. $IEF is my only position (7-10yr bonds). Longer duration plays like $TLT (20yr) I removed from my portfolio as longer term rates inched higher.

On The Radar | positions I want to build / sizing up

1. NOTHING

Off The Grid | removed positions / short selling opportunities

1. TECH - $XLK, $QQQ, $GOOGL, $TSLA

2. RETAIL - $XRT

3. HIGH BETA - $SPHB

4. CRYPTO - $BITO, $MSTR

5. HIGH YIELD - $HYG

Until next week....

-BW

DISCLAIMER: None of this is financial advice. This newsletter is strictly educational and is not investment advice or a solicitation to buy or sell any assets or to make any financial decisions. Please be careful and do your own research.