- Zach Scheidt: The market no one seems to be watching
- When safe strategies turn harmful
- Jay Powell’s stubbornness, inflation and your retirement
- Ray Blanco on one sector “in full-blown buyout mode”
- Eavesdropping on Jim Rickards’ mail
- Social media tightens the Nord Stream noose… Elon Musk’s mercurial backpedaling… Like weed for chocolate… And more!
“There’s a battle raging in the market right now. But not the market you’re probably watching,” says our income-investing ace Zach Scheidt.
“I’m not talking about the new banking crisis, company earnings or even the stock market,” he says.
Instead: “One of the safest investments you could possibly make — an investment that millions of retirees are currently holding — is about to be a casualty of this high-stakes battle.
“Today, I want to show you what’s going on behind the scenes in the bond market… and make sure you’re protected from what could be a catastrophe for your retirement.
“Higher rates are the Fed’s only effective weapon against inflation,” Zach continues.
“At the last Fed meeting, Jerome Powell and his colleagues raised interest rates by another 0.25% and indicated that the Fed would keep rates high until inflation is under control.
“Here’s a chart of the federal funds rate,” he says, “a good proxy for short-term market interest rates…
“The Fed keeping rates high to fight inflation is one side of the battle. On the other side, we’ve got Wall Street traders who are looking further into the future.
“Wall Street expects the U.S. economy to enter a recession soon.” Conventional wisdom reasons “the Fed will flinch (you’ve probably heard about the Fed’s ‘pivot’) and allow interest rates to move lower.
“Here’s the thing: Fed chair Jerome Powell has plenty of resolve to keep rates high,” notes Zach.
“Over and over, Powell has referenced the period of the 1970s, telling Americans that he will not repeat the mistake of cutting rates too quickly and allowing inflation to return.
“Whether you agree with him or not, it’s clear that the Fed chair has absolutely no intention of wavering from this stance.
“As investors, we have to wonder what will happen to 10-year rates if we enter a recession and Powell does not immediately cut rates.
“Wall Street is in for a big surprise and will have to adjust its stance on long-term interest rates. Here’s why that should matter to you and your retirement…
“When long-term interest rates are revised higher, bond prices will trade lower,” Zach explains.
“If you’re holding long-term Treasury bonds in your retirement account, those bonds will be worth less, possibly for years to come,” he reiterates.
“Yes, if you hold these long-term bonds until they mature in 10 or 20 years, you’ll get your money back and the interest you’ve been promised along the way.
“But there are two major drawbacks to this approach…
- “First, if you need the money in the interim, you’ll be out of luck,” he says. “You’ll have to sell your bonds at a lower price and realize a loss on your investment
- “Second, while you’re holding your long-term bonds and waiting to get your money back, inflation will continue to degrade the value of the money you will eventually receive.
“So in 10 or 20 years,” says Zach, “that $1,000 per bond may not be worth all that much!
“Instead of holding bonds and waiting for Powell to flinch, here’s what I suggest…
“Sell your long-term Treasury bonds at what is currently a relatively attractive price,” Zach suggests. “Then use the cash to buy short-term Treasuries that mature in six months, 12 months or 18 months.
“You could use bank CDs as well, as long as you don’t have more than $250,000 at any one bank.
“When those investments mature,” he adds, “chances are good that long-term interest rates will be higher, which allows you to buy bonds at a lower price and get better long-term returns.
“Today’s interest rate battle requires you to take action to protect your wealth. I hope you’ll adjust your retirement savings so you’re not caught in the crossfire!”
[Ed. note: Zach and his team have been working on an entirely new income-investing strategy — and, this time, it’s seriously different. Here’s why…
In the past, for legal reasons, Paradigm editors were barred from investing their own money in their own recommendations. But Legal recently revamped the rules, and Zach will be taking full advantage of it, putting a not-so-small sum of his own money on the line.
Like I said, Zach’s been working on this for about a year now, seeing how things would play out. And his average return, following his own market research and instincts, has been fantastic! A very robust 190%.
Zach will be sharing his strategy — one that allows him to close income-generating trades in 10 days or less — during his FREE online event on Thursday, April 27 at 7 p.m. EST. RSVP here and now.]
As we close out the week, the U.S. stock market is struggling in the red. But not by much… The Dow is down 0.13% to 33,740 while the S&P 500 and Nasdaq are both down about 0.05% to 4,125 and 12,055 respectively.
Also in the red? The commodities complex, with oil down 0.80%; a barrel of West Texas crude, in fact, is priced around $80. Gold and silver, too, are slumping, down 1.55% and 1.25% respectively. But gold’s still within spitting distance of $2,000 per ounce, and silver’s hanging tough above $25.
No relief in the crypto market. Bitcoin’s down 0.65%, under $28K, and Ethereum is down 1.6% to $1,894.
A nice earnings beat reported for consumer staples giant Procter & Gamble (PG) — accordingly, shares have popped about 4% at the time of writing. CNBC notes: “As of Friday morning, 76% of S&P 500 companies reporting earnings so far have beaten analyst EPS estimates.”
The big economic number of the day: S&P Global’s “flash PMI” seems to be going from strength to strength, from 52.3 in March to 53.5 in April. “It was the third straight month that the PMI remained above 50,” says Reuters, which suggests expanding economic activity. Plus, it’s the highest reading since May 2022.
Culling through the “hard data,” however, Reuters reports: “The labor market is cooling, retail sales are declining and manufacturing output is slumping, leading most economists to forecast a recession as early as the second half of the year.” Which sorta jibes with Zach’s take, no?
Now, we turn to another Paradigm editor for his take on one hot sector…
“The biotech industry is in full-blown buyout mode,” says our tech-stock expert Ray Blanco.
“Following the pandemic, many large biotechs (Pfizer, Johnson & Johnson, etc.) are sitting on large sums of cash and looking to put that money to use.
“One of the best ways for a large biotech to put your cash to work is to buy a smaller biotech that has promising research or drug potential.
“In the last month alone, we’ve seen some pretty huge buyouts go down,” Ray says. This past weekend, for instance, “Merck agreed to acquire Prometheus Biosciences Inc. (RXDX) for $10.8 billion, effectively doubling RXDX’s market cap.
“Naturally, news of the buyout sent Prometheus stock higher by over 70% on Monday.
“Then, a few weeks ago, we saw an even bigger buyout,” says Ray. “The news hit the tape that cancer drug developer Seagen Inc. (SGEN) would be acquired by Pfizer for around $43 billion.
“And although it didn’t get as big of a boost as Prometheus, Seagen is now up over 50% YTD.
“I believe we’re going to see quite a few more buyouts before the year is over,” Ray adds.
“On top of loads of dry powder, some of these big biotechs are approaching patent cliffs, meaning their bestselling drugs are going to be off patent soon, opening up the doors for generic versions.
“With deadlines approaching, the race is on for these companies to develop new and effective drug pipelines to bolster their bottom lines. Finding these lesser-known biotech firms developing the world’s next blockbuster drug will likely prove to be massively profitable.
“This creates a great environment for biotech investors,” Ray concludes.
“While there’s a lot of data to sift through trying to find specific biotech buyout targets, anyone can get involved via the SPDR S&P Biotech ETF (XBI), which is up about 12% since the end of March.
“ETFs are one of my favorite ways to play broad tech trends: You get exposure to an industry without having to do painstaking research on speculative plays.
“While the broader market continues to trade sideways,” says Ray, “the biotech industry looks to be like an outperformer now and in the months ahead.”
“Do states have the power to block CBDCs?” asks a subscriber at Paradigm’s service Jim Rickards’ Strategic Intelligence.
It’s a topic we touched on late last month when Florida’s Gov. Ron DeSantis proposed legislation to ban CBDCs under “Florida’s Uniform Commercial Code.”
Back to the reader’s question, Jim replies: “Probably not, although the matter has never been litigated. Article 1, Section 8 of the U.S. Constitution gives the U.S. Congress the exclusive right to ‘coin Money, regulate the Value thereof, and of foreign Coin, and fix the Standard of Weights and Measures.’
“One legal question is whether the launch of a CBDC is an act of coining money,” continues Jim. “A CBDC is not really a new currency. It’s a new payment channel and ledger.
“The money will still be a dollar, but it will be moved and recorded in ways that allow digital surveillance of citizens without a warrant. It’s not clear if a state can block that without violating the coinage power.
“What states can do is to permit new payment channels of their own such as cryptocurrencies or to allow gold or silver to be accepted in satisfaction of certain state obligations such as taxes,” he says. “States might also use state laws to regulate retail merchants to prevent them from accepting CBDCs even if they are created by the federal government.
“There is enormous legal uncertainty here because digital technology has blurred the meaning of ‘money’ as it was used in Section 8,” he concludes. “The best approach is to assume CBDCs are coming while at the same time prepare to use alternatives such as gold and silver.”
Mainstream media already tried to throttle award-winning journalist Seymour Hersh’s Nord Stream exposé. Now social media is tightening the noose.
More to the point, Meta’s Facebook “black boxed” Hersh’s pipeline-bombing account on its platform, citing “False Information.”
Then, this morning, Facebook partly relented…
No clarification on which part of Hersh’s account is false. (Shrug.)
This is juicy: Notice Elon Musk responding to Michael Shellenberger’s tweet? Shellenberger is one of the journalists — including Matt Taibbi — handpicked by Musk for the “Twitter Files” project.
The project made Twitter CEO Elon Musk appear to be an anti-censorship icon… until Twitter decided to censor links to Substack articles (host platform for Shellenberger, Taibbi, Hersh, etc.) about two weeks ago.
Since that time — ahem, much like Facebook — Musk seems to have had his own change of heart. “A six-day row between Twitter and Substack has come to an uneasy truce after the social media site stopped censoring links and searches for the [Substack] platform,” The Guardian says.
“However, the spat appears to have put an end to Elon Musk’s ‘Twitter Files’ project.”
Since we failed to mention 4/20 yesterday…
A recent MJBiz Factbook study finds Americans spent more, in 2022, on legal weed ($30 billion) than they spent on craft beer and chocolate combined. Or even prescribed opioids and pain relievers combined.
Source: MJBiz Factbook, Daily Mail
Interesting — though not surprising — marijuana’s U.S. black market is valued at $60 billion, estimates cannabis-tracking company New Frontier Data.
Meaning, two-thirds of the $90 billion cannabis industry is still illicit. Which sure seems like a lot of outstanding tax revenue, from a state’s perspective.
We’ll dispense with any cannabis puns as we close today’s issue.
You all take care; enjoy the weekend! We’ll be back tomorrow with the week’s highlights — including an intro about a Fed governor who seems to fess up to the inherent dangers of CBDCs. Hmm…
Best regards,
Emily Clancy
The 5 Min. Forecast
