Author: Smart Investing

Commodities

Kitco: Trade Tensions Drive Gold to New All-Time High

Posted on by Smart Investing

Stocks have now been trading in a range for the past two months, even as they remain near all-time highs. However, one asset is breaking higher: Gold.

The metal topped $2,800 per ounce last week, and had a high of over $2,870 this week. And held strong amid the tariff tantrum and latest trade war fears. Part of that move is the weakening of the dollar, coming off of a recent strengthening trend.

The latest tariff news creates uncertainty in the markets. So, it’s increasingly likely that there won’t be significant moves higher in the U.S. dollar. That bodes well for gold.

The metal had been climbing in dollar terms in recent weeks. Even as the dollar remained strong relative to other currencies.

So far, the latest tariff drama seems like a repeat of 2018. However, this time, President Trump is looking to move faster, and on a bigger scale.

Economists note that a tariff is a tax. And one that could reduce global trade. And drive up prices for many goods, fueling inflation. These uncertainties can likely drive gold higher.

Currently, central bankers remain large buyers of gold. That’s especially true for China, Russia, and Turkey. All three are nations that may be left in the proverbial cold in terms of U.S. trade.

These trends all point to a continued rise in gold as it continues to mark new highs.

 

To see the full analysis, click here.

 

Economy

The Compound: Profits Are Up 10% and Everyone Is Beating Estimates

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Amid the tariff drama this week, investors were largely distracted by positive news coming out of the market. It’s still earnings season, and several large-cap companies were reporting this week.

Over time, growing earnings tends to be the best indicator of a stock’s success. Rising earnings across the board are a good sign that markets are in a healthy place for now. Conventional valuation may be a bit stretched, particularly with the tech stocks, but the earnings trend is bullish.

That may not translate into an immediate profit right away. For instance, tech giant Google (GOOG) managed to beat earnings expectations by 1%. Shares sold off heavily on the news, especially since the company’s cloud-related revenue was on the weaker side.

Chipmaker Advanced Micro Devices (AMD) also managed to beat earnings estimates. But investors are still rethinking the valuation of chip stocks following the launch of the DeepSeek AI.

Intelligence company Palantir Technologies (PLTR) soared to new all-time highs, jumping nearly 25% after earnings. Palantir is in a sweet spot given its software, its unique moat in the services it provides, and its push to profitability over the past year.

Generally, earnings are beating estimates. Especially for the big tech players that many thought would slow down. While stocks may be down after reporting earnings for various reasons, an earnings beat remains a long-term bullish sign.

 

To watch the full podcast, click here.

Stock market strategies

Elliott Wave Investor: It’s Been a Wild Week!

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Stocks kicked off the week taking a dive, thanks to the latest tariff tantrum. Investors generally expected President Trump to increase tariffs and fulfill his campaign promise. However, the overnight declaration of universal tariffs against America’s neighbors was surprising.

Fortunately, those tariffs are on pause while agreements are reached. It’s possible that further tariff news will come out in the years ahead. Investors should approach the market with some caution going forward.

Notably, Trump’s tariff announcement came over the weekend. Markets were closed globally, and liquidity was light. As a result, the most liquid markets available were the cryptocurrency markets, which traded 24/7. Those markets bore the brunt of the news while waiting for further details.

So far, the market reaction looks similar to the 2018 period, during Trump’s last trade war and tariff threats. As long as the actual implementation of new tariffs is gradual rather than sudden, however, markets may be able to bear tariffs for longer than expected.

Given the new reality of uncertainty, traders may want to rethink their positions. That includes trades held overnight or longer, especially leveraged positions.

And when markets do drop on the news of a new tariff, the actual impact on markets appears short-lived for now. That may not always be the case, but traders who make contrarian buys during fearful panics may see some good short-term profit opportunities.

 

To look in more detail on the market’s volatility this week, click here.

Tech stocks

The Pomp Letter: Why Most People Are Wrong About DeepSeek AI and The Impact on Financial Markets

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Tech stocks sank on Monday, following the release of the DeepSeek AI. Based out of China, the AI program claims it performs as well as ChatGPT. But, it does so at a fraction of the processing power and energy needed.

That news hit markets hard. After several years of big-tech stocks soaring, they now carry a hefty market weighting. What’s next for investors?

First, the news should be approached with some skepticism. There’s no independent verification of DeepSeek’s performance. And China has been less than honest sometimes about various developments.

Plus, claims about how little the development cost may not be accurate depending on how the AI sourced its data. Also, China is coming into its New Year. The country often likes to announce positive news going into the holiday.

In the meantime, it’s clear that there’s a global race for AI. And that AI programs will likely get faster, better, and cheaper. The big winner may not be investors in big tech companies going forward.

Rather, the winners will be consumers themselves. And as other companies are able to utilize AI programs, they can increase their productivity. That could allow other companies to flourish amid the AI boom.

Either way, it’s clear that the AI boom is just getting started. And that there will be more AI tools in the future.

 

To read the full analysis, click here.

Commodities

Lead-Lag Report: The Gold Strategy For 2025

Posted on by Smart Investing

After beating out the stock market last year, gold prices are poised for further gains. The metal has topped $2,800 per ounce this week for the first time. More impressively, that move has occurred as the U.S. dollar has been strengthening in global markets.

Investors are generally bullish, but several risks remain. A potential increase in tariffs could increase the cost of goods, and create further inflation. Under that scenario, gold’s returns could accelerate.

Meanwhile, governments continue to run deficits, even in a growing economy. A crisis of confidence could erupt in debt markets, which would likely send investors to gold. That crisis could take multiple forms, from a failed bond auction to a credit crisis.

The bond market continues to flash warning signs for investors. Bond yields have trended higher. That reflects rising uncertainty. Bond yields rising while most economic indicators are calm suggests that the market anticipates more inflation.

A rise in inflation tends to benefit gold prices as well.

Meanwhile, gold prices continue to outperform other assets such as lumber. That’s another historical sign that investors continue to see caution. Lumber prices tend to rise when the real economy is in growth mode, and gold tends to rise when inflation pressures remain strong.

Gold miners have underperformed during gold’s recent rally. That trend could change on a further rally in gold this year.

 

To watch the full interview, click here.

Technical Analysis

Tastylive: How We Trade 0DTE With 90% Less Capital

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Traders have flocked to zero-day, or 0DTE, trading with their options. Since these options started trading nearly two years ago, they’ve grown substantially. 0DTE trades now account for nearly half of all options trades.

Investors have plenty of strategies that they can employ with 0DTEs. Some of these strategies can be costly. But there are several tools available to allow for profitable 0DTE trading with substantially less capital involved.

One strategy is to use a strangle. A strangle involves buying and selling an option with different strike prices, but the same expiration date. In essence, the trader is looking to make a small profit. At least as long as a stock or index trades within a certain range.

A short strangle can have higher risk, but can be built at a lower cost of capital compared to directional options bets. Plus, far out-of-the-money options can avoid capital restrictions. That also allows for traders to use less capital.

Typically, a 30-delta strangle option would carry a huge cost for investors. They may need to put up over $100,000 in capital. But by using more out-of-the-money trades, investors could make a similar return while risking just 1/10th of the capital.

So, investors should look to buy cheap options and using strangle trades. That will help maximize returns and lower capital costs on 0DTE trades.

 

For the full study behind this trading strategy, click here.

Private equity

A Wealth of Common Sense: Margin of Too Much Safety

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The data for 2024 is out. Most hedge funds managed to earn returns of around 15-20%. For most years, that’s a good return. But buying the stock market index would have generated returns of nearly 25%.

It’s just one more year of hedge funds generally underperforming the overall stock market. And that doesn’t even factor in costs. Hedge funds typically take 2% of assets and 20% of returns.

That fee remains much more expensive than the 0.1% fee that investors might face buying a market index fund.

With thousand of hedge funds still around today, their real issue is that these funds may be too hedged.

They simply have too much downside protection. While a hedged fund may fare better than stocks during a market meltdown, such meltdowns are rare.

Plus, many funds don’t really hedge intelligently. Some may look to short overpriced stocks and go long undervalued stocks. But overpriced stocks may be momentum and tech companies that could fare higher.

Meanwhile, most fund managers end up becoming large investors in the fund. As their wealth in the fund grows, so does their caution to protect what they do have.

Overall, hedge funds may sound like an intelligent investment for high net-worth investors. But their overreliance on safety ensures underperformance.

 

For the full details on the trouble with hedge funds, click here.

 

Stock market

Beyond The Charts : Reversion Beyond the Mean and the Search for Market Bases

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While most investors and traders are focused on the stock market, the bond market tends to drive financial markets overall. That’s because the bond market represents cautious money.

And shifting trades in the bond market reflect interest rates. Interest rates are the cost of capital. With interest rates rising, it’s clear that bond holders are increasingly cautious. That could mean potential danger for stocks ahead.

Plus, the stock market tends to rise and fall much more on animal spirits. However, the bond market has fewer emotional swings. That means investors should pay attention to the bond market.

With bond yields rising, it’s time for investors to get cautious. That doesn’t mean the market rally is over, simply that the biggest part of the move has already been made.

As long as the 200-day moving average is trending higher, investors can expect risk-on conditions. That’s good for stocks, most commodities, and cryptocurrencies.

However, once markets start to level out and trade sideways, it may be a sign to get increasingly cautious. Once the 200-day moving average starts trending lower, it becomes more challenging for investors.

For now, it’s clear that there’s some caution in markets. But the trends are overall positive, even as the bond market gives an early warning.

 

To watch the full analysis, click here.  

 

Cryptocurrencies

Rajat Soni, CFA: How Much Bitcoin to Retire in 20 Years?

Posted on by Smart Investing

Since the launch of bitcoin in 2009, it has been the greatest-performing asset of all time. With those high returns come high volatility. As the crypto space matures, bitcoin has become easier to buy and hold than ever.

While bitcoin’s massive returns will likely slow in the decades ahead, it still remains a big winner. That’s because bitcoin is the only asset globally programmed with a maximum cap.

Currently, over 93% of all bitcoin that will ever exist have been mined. Today’s investors may balk at an asset trading in the six-figure range. But it likely has more upside given that it’s still in early adoption.

If bitcoin continues to outperform traditional assets, a buy today could fund a reasonable retirement in 20 years.

That’s based on several factors. An investor should first estimate their retirement needs. That includes calculating the cost of living in various cities. Then, add in a margin of safety.

For a high cost-of-living area like New York, it may take about 4 bitcoin to retire in 20 years. That assumes bitcoin averages a 20% return.

That would cost just over $400,000 today. If bitcoin averages a 30% annual return, however, it may take less than 1.5 bitcoin to fund a retirement. Investors who buy today can still get a valuable bargain in the future.

 

To see the full calculations behind retiring on bitcoin, click here.

 

Commodities

Sprott: Top 10 Themes For 2025

Posted on by Smart Investing

2025 starts off as a continuation of 2024. That bodes well for some commodities, particularly precious metals and uranium. Gold just beat out the S&P 500 in 2024, soaring about 25%. That’s the metal’s best annual performance in 14 years.

Meanwhile, the rollout of AI has led to a resurgence of demand for nuclear power. That, in turn, has pushed uranium higher. That’s another trend still in its early stages with more room to run.

Meanwhile, commodities such as copper have a murkier outlook. Copper plays well to global economic growth. But a slowing economy in China, the world’s second-largest economy, should derail copper.

However, the current imbalance between supply and demand still remains in favor of higher prices. Investors can still look to copper stocks as a potential buy during periods of weakness.

Plus, energy was a lackluster sector in 2024. But events continue to shape up in favor of traditional energy assets. One reason why is the concept of energy security.

America is largely energy independent, but has an opportunity to export significant amounts of natural gas to Europe. That could offset a potential price decline that may otherwise occur as American producers are encouraged to drill.

In this scenario, smaller energy explorers and producers could be the big winner relative to the oil majors.

 

To see the full list and details of 10 commodity themes, click here.