The Crash of ’24 Has Been Postponed
The Everything Rally of 2024
“2024 is going to be the most unpredictable year in my career,” says Paradigm’s venture capital veteran James Altucher.
And James is no youngster anymore — an early-wave Gen-Xer, he departed the 25–54 demographic last winter. He was already in his 30s by the time of the dot-com bust and 9/11… in his 40s for the 2008 financial crisis… his 50s for COVID.
And next year could be even more tumultuous?
It’s not quite true that the Chinese word for “crisis” incorporates the concepts of both “danger” and “opportunity.” Nonetheless, that’s the spirit that animated Paradigm’s 7 Predictions Summit yesterday. We gathered all of our leading experts for a Zoom call that more than 7,000 of our readers watched live.
If you couldn’t join us, here’s a link to the replay on YouTube — where you can scroll back and forth. (You’re welcome.) And we’ll share highlights with you over the next two days here in these 5 Bullets.
Next year will bring a simultaneous “melt-up” across several major asset classes — stocks, bonds and gold — according to our recovering investment banker and Rude Awakening editor Sean Ring.
Obviously, Sean prepared his talk and his slide deck well in advance. But as he spoke around 3:15 p.m. EST, it was surreal watching his forecast start to unfold in real-time after the Federal Reserve issued its final policy statement of 2023. The Fed left the fed funds rate at 5.5% and projected cuts to 4.75% by the end of 2024.
The reaction across the board was euphoric — the Dow industrials setting an all-time high over 37,000, Treasuries resuming their furious late-year rally and gold vaulting well over $2,000 again.
Going into next year, “I think the Fed and the White House will be working a lot more closely than they usually do,” says Sean.
Although Fed chair Jerome Powell is a longtime Republican, Sean believes Powell has no desire to deal with Donald Trump again. Thus, “Powell will tacitly agree to help the Democrats retain power” — whether the nominee is Joe Biden or someone else.
To be sure, there’s already pressure on Powell coming from the White House — to wit, this Bloomberg headline last Friday…
And as Sean spoke and the Fed delivered its decree yesterday, a corner of the financial Twitterverse began seeing the same thing he sees…
Heh… That’s a reference to Arthur Burns, the Fed chair who opened up the monetary spigots to ensure Richard Nixon’s reelection in 1972 — an act that set the stage for the near-runaway inflation of the late ’70s. Asked by a reporter why he took such a reckless step, Burns said a Fed chair has to do what the president wants or else “the central bank would lose its independence.”
With the S&P 500 now only 1.5% away from its all-time high of 4,796, Sean sees the index rising modestly to “at least” 5,000 by Election Day.
But he sees bigger gains in gold, approaching 25% — from just over $2,000 now to $2,500. Don’t expect gold to take off right away, though; the big move will come only after Powell officially starts a new rate-cutting cycle.
Treasuries will rally too — with TLT, the long-term bond ETF, rising nearly 20% from yesterday’s close of $96.85 to 115.
Yes, Sean thinks the economy will roll over — but that realization might not hit Mr. Market until after Election Day.
As he sums up in today’s Rude, “There’s such a disconnect between the real economy and the stock market it would be foolish to short now. In fact, you want to be quite the opposite.”
“Boring” Bonds for Big Payouts
Speaking of a rally in Treasuries… that’s the highest-conviction 2024 forecast of Paradigm’s income-investing maven Zach Scheidt.
Back in Zach’s hedge-fund days, bonds were considered “widows-and-orphans” investments — safe vehicles where the risk-averse could park their money for steady if unexciting gains.
But now? The environment is volatile enough that “there are tremendous ways to make money.”
Recall that bond prices rise as their yields fall — and bond yields are tumbling at a dramatic clip right now. The yield on a 30-year T-bond peaked in October at 5.1%. By earlier this week, it was down to 4.2%.
But Zach says that’s just the beginning. “Long-term Treasury bonds are going to rally significantly,” he says — with the yield on the 30-year falling all the way to the 2–2.25% range.
That translates to a price gain of anywhere between 30–50%. Best of both worlds — guaranteed income and substantial capital gains.
Yes, you can buy TLT, the long-term T-bond ETF. But TLT’s price fluctuates as interest rates rise and fall.
All else being equal, Zach prefers real bonds. That way, you’ll know exactly when your coupon payments will hit your account and when your bonds will mature.
T-bonds come with a face value of $1,000 each. You can buy them in nearly any online brokerage account — just look for “fixed income” or “bonds” in the drop-down menu.
By the way, Zach reminded the audience that falling long-term interest rates will be a tailwind for growth stocks and gold — syncing up nicely with Sean’s forecast above.
It’s the 1970s Again (for Investing in Commodities)
The commodity complex is poised to play catch-up with stocks going into 2024 — it’s got “price-pop potential,” says Paradigm’s Alan Knuckman.
Alan cut his teeth trading commodities on the Chicago Board of Trade over 30 years ago. These days he’s our eyes and ears at the Chicago exchanges that are the epicenter of the options markets.
As Alan sees it, the next “commodity supercycle” is underway — an era comparable to the 1970s and the 2000s, when energy, metals and agricultural commodities all staged huge rallies.
At present, the CRB index of commodities is at 304 — far, far below its 2008 record of 450. Simply adjusting for inflation, the CRB would have to rise to 640 to equal the 2008 highs — that’s more than a double from here.
No, that won’t all unfold in the next year. Shorter term, Alan likes the gold-mining stocks — GDX is the big ETF in that sector — because they’re set to play catch-up with the metal itself.
He also likes call options on Freeport-McMoRan (FCX), the copper-mining giant — based on the buying activity of connected insiders in the options markets. “I like to follow the smart money,” says Alan.
When we last held an online event like this one two years ago, he recommended FCX calls that doubled in value. You can watch the replay of yesterday’s event right now — this link will take you right to Alan’s segment — to see his specific buying instructions on those FCX calls as well as calls on GDX — and one additional recommendation of call options on the aluminum giant Alcoa (AA).
The “Magnificent Seven” Will Get Cut Down to Size
The stock market story of 2024 will not be a rerun of 2023’s massive rally in the “Magnificent Seven” stocks, says Paradigm trading authority Greg Guenthner.
As we’ve told you all year, most of the gains in the S&P 500 have been fueled by only seven big tech-adjacent companies — Apple, Microsoft, Alphabet, Amazon, Meta, Tesla and Nvidia.
Nvidia rallied an eye-watering 225% in 2023. It won’t happen again in 2024, says Gunner: “I think NVDA stock is absolutely priced to perfection right now.” As evidence, he points to NVDA’s earnings report last month — which was terrific, but the share price sold off afterward. “Everybody who wants to be in this name is in it.
“Rotation is the lifeblood of bull markets,” Gunner says — and he sees big money starting to move out of those megacap tech names into smaller companies in a variety of sectors. “Small caps are going to beat large caps in the first half of 2024, playing catch-up in a really big way.”
We already saw that in yesterday’s melt-up action — the small-cap ETF IWM closed 3.5% higher, while the rallies in the Nasdaq and the S&P 500 were more modest.
If you’ve got big profits from the Magnificent Seven, Gunner suggests taking some of those profits off the table and plowing them into IWM — or even IWN, which is the small-cap value ETF.
“I also like gold,” Gunner says. For gold to post a monthly close over $2,000 at the end of November was “a big deal.”
Looking ahead, “a small gold miner could provide a nice double in the first half of the year,” he adds — and he served up a specific name and ticker symbol for your consideration. Here’s the link to Gunner’s portion of yesterday’s event.
We’ll have plenty more highlights tomorrow from the 7 Predictions Summit — although I have to say it won’t be as cheerful as today’s fare.
We’ll hear from Jim Rickards about a recession that might already be underway… James Altucher on an AI-powered surveillance state… and Byron King on the end of an arrangement that’s underpinned American prosperity for 50 years.
We’ll also hear from Ray Blanco, who rattled off several names and ticker symbols in the tech and biotech space that will thrive no matter what happens in the broader economy.
Or if I’ve whetted your appetite and you just can’t wait, for goodness’ sake go and watch the replay of the event right away.
The Markets and the Mailbag
The big economic number of the day turns up further evidence of a phenomenon called “doom spending” — people splurging instead of saving even if — or especially if — they’re feeling apprehensive about the economy.
The Wall Street Journal first identified the phenomenon in early October: “A tough housing market has more consumers writing off something they’d historically save for, while the pandemic showed the instability of any long-term plans related to health, work or day-to-day life. So they are spending on once-in-a-lifetime experiences because they worry they may not be able to do them later.”
But it was a survey by Intuit Credit Karma last month that gave the trend this memorable moniker — finding 96% of Americans concerned about the economy, but 27% of them “doom spending” to cope with stress.
Which brings us to the November retail sales number out today: The typical Wall Street economist was expecting a drop of 0.1%. Instead, the number rose 0.3%.
If you factor out auto sales (volatile month to month) and gasoline sales (falling gas prices can skew the number lower)... the number massively surprised to the upside, jumping 0.6% in contrast with expectations for a tiny 0.1% bump.
Numbers like these underpin the narrative — be it right or wrong — that the Fed has pulled off the proverbial “soft landing,” containing inflation without wrecking the economy.
Thus, yesterday’s stock rally is carrying into today.
All the major U.S. stock indexes are up a third of a percent, give or take. The S&P 500 is at 4,726 — about 70 points below the record close set in early 2022. All-time highs by year-end remain a distinct possibility.
Treasury yields continue to tumble, the 10-year now under 3.9% for the first time since July.
Gold continues to rally, the bid in the spot market up to $2,038. Silver is back above $24. Crude has rallied nearly 4% to $72.09. In contrast, crypto looks tame — Bitcoin up hardly at all to $42,613.
We got one more email from a reader on the subject of Taylor Swift and the 2024 election…
“Any high-riding pop star would do well to stay out of politics,” he writes. “I'm old enough to remember the Dixie Chicks.
“This says it all…
Dave responds: I was unaware until now, but yes, she did back Biden in 2020. Not sure if that’s because she’s a hard-core liberal or if, like more than a few normie Americans, she was worn out from four years of Trump drama.
But it does lend credence to the notion that she’ll be “activating” young voters on behalf of the Democrats’ ticket next year.
Tay Tay and Jay (Powell), the Dems’ dynamic duo in 2024? To be continued…
Best regards,
Dave Gonigam
Managing editor, Paradigm Pressroom's 5 Bullets
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