Has the World Gone... Sane?

(Hint: No) Plus an update on our Trade of the Decade, word on the Silvergate-Gate, where to for 2023 and plenty more...

(Source: Getty Images)

Joel Bowman, checking in today from Buenos Aires, Argentina...

“All good things come to an end,” observed Dan Denning, from his far-flung post up in Laramie, WY. “And bad things too...”

We’ll return to Dan’s lyrical musings... and the Bonner Private Research Trade of the Decade... in a moment. First, a quick look at the markets...

Major stock indices all gained for the week, snapping a four-week losing streak, their longest since late last year. The Dow Jones Industrial Average ended 1.2% higher Friday, helped by strong earnings from Salesforce, which jumped 11.5% for the session. The S&P 500 and the Nasdaq also closed higher, up 1.6% and 2% respectively on the day.

The Dow closed up 1.75% for the week, the S&P 500 ended higher 1.9% and the Nasdaq gained 2.6%. It was the first weekly gain for the S&P since February 3... and the first for the Dow since January 27. 

All in all, that puts the Dow back in the black for the year, just... up 0.8%. The S&P 500 is up 5.8% and the Nasdaq 12.5%. 

Silvergate-Gate

As for the Midas Metal, gold mostly traded sideways for the week, ending up around 0.5%. It was last seen lurking around the $1,845/oz mark.

Over in the crypto world, meanwhile... never a dull moment in Bitcoinlandia. No sooner had the crypto bulls waded back into the market after last year’s SBF/FTX scandal when another crypto bank is making waves for all the wrong reasons. CNBC has the wrap...

Shares of Silvergate Capital plummeted Thursday after the bank delayed the filing of its annual 10-K report as it evaluates events that have happened since the end of 2022.

The company, which provides banking services to crypto businesses, ended the day lower by 57.72%. That pushed its year-to-date loss to 67%. It’s lost 95.7% in the past year.

Silvergate said in a filing Wednesday that it needs additional time for its accounting firm to complete certain audit procedures and that it’s “currently analyzing certain regulatory and other inquiries and investigations.”

Astute readers/listeners will recognize Silvergate Capital as the company highlighted by guest Edwin Dorsey of the Bear Cave, who joined us on the Fatal Conceits podcast last month to talk about short selling and corporate malfeasance. Edwin’s timing couldn’t have been more accurate. (H/T)

You can listen to our entire conversation – or read the transcript – gratis, here...

Edwin Dorsey's Bear Cave

Top dog in the crypto world, Bitcoin, was trading for about $22,400 last we checked, down ~5%. It’s still up a whopping 34% year to date.

Meanwhile, back in the world school world of greasy, tangible “stuff,” crude oil rose steadily on the week. A (WTI) barrel of the world’s preferred energy source goes for just under $80. 

On other news, congresswoman Alexandria Ocasio-Cortez has gone nuclear and Greta Thunberg was arrested protesting at a wind farm. Has the world gone... sane?

Our best guess: No. 

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While we’re on the subject of energy, let’s check in with Bonner Private Research’s macro analyst, Dan Denning, for an update on the BPR Trade of the Decade...

Our Trade of the Decade – long ‘old’ energy and short the US dollar by default – is chugging along. So, what’s going on with oil?

For one thing, earlier this week, the Biden Administration’s Department of Energy (DOE) said it would like to start re-filling the Strategic Petroleum Reserve (which it drained to bring gas prices down for last year’s midterm elections) sometime in ‘the next year.’ Details, including the price it would like to pay, were not provided.

The SPR can only be topped up at the rate of 685,000 barrels per day, according to the DOE. And you may remember that I mentioned before that Congress had previously mandated the sale of additional 26 million barrels of oil from the SPR to pay for spending programs which were unfunded. Those sales won’t be complete until June 30th of this year.

A lot can happen between now and then. Like a recession (bad for oil demand) or the end of the war in Ukraine (good for oil supply). We’ll keep our eye on events, especially bi-lateral deals between oil producers and consumers which don’t involve US dollars .

By the way, Iraq’s central bank (it has one) recently decided to allow trade with China to be settled in Yuan. But that decision did NOT include the oil trade. That’s still denominated in dollars (the Petrodollar, long may it reign). And incidentally, according to data from the US Treasury Department, Iraq’s official holdings of US government bonds and notes have almost doubled in the last year, meaning oil-producer dollar proceeds are still being recycled into US Treasuries for now. 

All good things come to and end. And bad things too. The petrodollar will have its day of reckoning too. But not this week. 

For readers following along at home, the Bonner Private Research Trade of the Decade is up just over 110% since Dan and Tom recommended it to readers back in January of 2021. It’s one of eight open positions in the BPR Official Stock Watchlist, with average gains of over 30%. (Tom closed out one position yesterday - a play on the global tanker trade - for a ~44% gain. Holding time: about 3.5 months.) 

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Speaking of Tom, let’s check in with BPR’s Investment Director to see where we are so far for 2023.

Here’s a snippet from his note to members this past Wednesday...

The thesis behind our strategy for 2023 is simple. The financial authorities–the Fed, the US Treasury, the Congress, the President, the banks–blew up a gigantic credit bubble by suppressing interest rates, incentivizing bad decisions, forcing cheap liquidity into the system and promoting speculation. Every time the bubble started to deflate, they doubled down, with even bigger interventions. 

Now the game’s up… and we’re in the stage now where massive losses need to be recognized… and digested. We’ve speculated that these losses will be processed partly through falling prices and partly through currency debasement, a process we call “inflation volatility.” 

I expect a lot more pain to come in the stock market, the bond market and the real estate market – always observed in terms of gold for an accurate picture – as higher interest rates send cap rates and earnings yields much higher. I’m not expecting a crash… more like a long, grinding path lower.

Our strategy here is simple. We’re in preservation mode, which means we’re more focused on keeping our capital than we are on growing it. I’ll be very happy to get through this deflation with our purchasing power intact… and hopefully collect a little income along the way. It sounds a little meek, but as we’ve said many times, in a bear market, he who loses least, wins. 

If you’re not already enjoying all of Tom and Dan’s research, including twice-weekly market notes, a growing archive of investment reports, Zoom calls with Bill’s private network of money managers and industry insiders and access to the Official Bonner Private Research Stock Watchlist, you might consider joining us today. Find a membership plan that works for you, here...

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And now for Bill Bonner’s missives from the past week...

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And that will just about do it for this week’s market wrap, dear reader. We’ll return with your regular Sunday Session tomorrow, when we’ll take a look at the unending havoc wrought by our better angles in public office.

It’s a thankless task, yes, but that’s why Dionysus brought us wine…

See you tomorrow.

Cheers,

Joel Bowman