Turn! Turn! Turn!

A time for stocks, a time for gold... a time for bulls, a time for bears... a time to buy, a time to sell...

(Source: Getty Images)

Bill Bonner, reckoning today from Normandy, France...

Global warming: Siberia struck by a wave of exceptional cold; temperatures of -50C.

~ Headline news in France today (20 Minutes)

It gets hot. Then, it gets cold. Markets heat up too. Then, they cool off. Yesterday was the Martin Luther King holiday in America. Stocks didn’t trade. We will have to wait until later today to take the market’s temperature.    

But we see no purpose in guessing about whether stocks will go up today or down tomorrow. The real money is not made by checking stock prices every day. It is made by getting on the right side of a major trend – and staying there for years.

For the 39 years – 1982 to 2021 – that meant buying good stocks…and just holding on. As long as interest rates were falling, the Primary Trend was towards higher and higher asset prices.  

We were reluctant to participate in the last part of that boom. Our model called for us to bail out of stocks in the late ‘90s. Then, we bought gold.

High After High

The plan, then and now, was to stick with gold until the Dow falls below 5 times the price of an ounce of gold. That hasn’t happened. Instead, after the dot.coms led the market down in 2000, the Fed came to the rescue, lowered interest rates, and the correction was aborted. So, we never switched out of gold, never got into the techs...never seriously bought crypto (our sons experimented with it on our behalf)...

Instead, we sat it out. Was this a good idea? Depends on when you wanted to ‘cash out.’ We had no intention of getting out, so we didn’t mind waiting. And it was a long, humbling wait! After hitting a peak in 2011, gold went nowhere for the next 9 years – just when the stock market was hitting new high after new high. There’s nothing more galling than watching your friends and confederates getting rich...while you miss one of the greatest bull markets of all time.

Then, in August 2020, interest rates finally bottomed out. It was the beginning of something new. Bonds turned down (yields went up), signaling the end of the bull market era. Then, it took more than a year for the stock market to get the news. But it finally did, in January 2022. Since then...well...you know; investment assets and speculations fell. Gold went up. From a low near $1,000 in 2015, gold finally seems to be catching a bid, trading this morning over $1,900.  

Curiouser and Curiouser

The curious thing about all this, is that despite the embarrassment of missing the Great Bubble Market, 2009-2020…we did just fine. The Dow rose from 11,500 at the end of 1999 to 34,300 today – a gain of nearly 200%. Gold rose from $280 an ounce to $1,900 today – a gain of 570%.

But let’s take the whole bull market, from 1982 to the peak, over 36,000. Gold began the period at $350 and went down for the next 18 years. But by today, it is up 5.4 times. The Dow began the period below 1,000 and rose 36 times. You would be way ahead in stocks.

That’s just the point. In 1982, you could buy the whole Dow for less than 3 ounces of gold – well below our 5-oz limit. It was not the time to buy gold; it was the time to buy stocks.

As we saw yesterday, everything tends towards its opposite. At least in markets. From undervalued to overvalued…from cheap to expensive...from red to green and ask to bid. That tendency can be described as the Primary Trend.     

From Want to Need

Today, most investors expect a repeat of the last 20…30…40 years. Not likely. Why? Enantiodromia. Markets are always seeking to become the opposite of what they are. A bull market keeps getting richer and richer, until it has to become a bear market. In a bear market, prices drop until they are such bargains shrewd investors begin buying; soon it is a bull market once again.  

And here we are...the bond market has already signaled, and confirmed, a major change. The benchmark 10-year Treasury yield has gone from less than 6/10th of one percent...to over 3.6% now.

What is really amazing is that it hasn’t corrected even further. But the Primary Trend takes time to reveal itself. Old habits persist. Old impressions linger. And want becomes need. The investor who bought Tesla on margin at $400 must have even higher prices...or he could go broke. And the US government, back in 1982, when it had less than $1.2 trillion in debt, barely wanted to borrow at all. In 2022, its debt went over $31 trillion; now it must borrow $2 trillion this year alone...and it must have low rates to do it.

But if we’re right, interest rates – which had been at record low rates – are now headed to record high rates. Oh yes...and the world’s safest, most liquid asset – the US Treasury bond – is on its way to becoming one of the worst investments you can make.     

Stay tuned...

Regards,

Bill Bonner

Joel’s Note: Stocks have rallied nicely to kick off the new year, but the Primary Trend, as Bill mentioned, has been down for some time now. In fact, the S&P 500 fell almost 20% last year.

It was a time for prudence, not for profit... a time to be cautious, not cavalier.

And so Tom Dyson and Dan Denning’s call to engage “Maximum Safety Mode” seems to have been the right move.

Over the year, the Bonner Private Research Trade of the Decade (essentially long conventional oil and gas) was up 43.4%...

Bonds, meanwhile, which Tom and Dan warned BPR members to absolutely avoid, turned in their worst year since...well, ever.

As for the Midas Metal, gold remained more or less flat (doing exactly what it’s supposed to do, which is to preserve purchasing power over time...especially through periods of inflationary uncertainty)...

While Tom’s “tactical trades” turned in a solid 8.9% average gain over 17 closed trades...handily beating the broader market, which spent the year firmly in bear market territory, breaking occasionally from it’s precipitous falls to sucker investors back in (then spitting them out) with a couple of juicy bear market traps.

For many investors, 2022 was a great year...to have disappearing in their rearview mirror.

But remember...these big, Primary Trends don’t play out over a few days or months, or even a few years. Instead, like a hulking ship crashing through the ocean, they take time to turn around...and for their effects to reverberate through the wider economy.

“2022 was the year the asset bubbles burst,” as Tom warned members last week. “2023 is the year the broad economic decline begins.”

Right now, Tom and Dan are busy strategizing for the year ahead. 2022 turned out to be a good year to be a Bonner Private Research member. 2023 might be even better. Get on board, here...