Is The Bear Market Over? - Bizarro World 181

Stocks have been rallying since June. Is the bear market over? We discuss why there may be more pain ahead in the market. The irony of the FBI raid on Mar-a-lago, and the partisan politics of it all. An update on the copper market. The beginning of uranium bidding wars as the world continues to turn to nuclear energy as a clean source of baseload electricity. The humor of civil disobedience as New Yorkers shut down a tip line meant to snitch on their neighbors for COVID violations. And an update on bond yields and stock market volatility. It's all in episode 181 of Bizarro World

1:39 Is the Bear Market Over?
7:40 FBI Raids Trump’s House
15:51 Copper Market Update
19:43 Uranium Bidding Wars
24:03 The Humor of Civil Disobedience 
26:32 Bond Yields & Market Volatility 

Gerardo Del Real: The Trumpster back in the news. I think we may have called this one, Nick. The FBI may be listening to Bizarro World. Everything is awesome again. You got Bitcoin. Everything is awesome. You're in the S&P. Everything is awesome. You own an ETF. It's okay, bro. Everything is awesome. Everything's going back up, baby. You have nothing to worry about. That's the spoiler alert. You can turn this off now. A lot to get to as always. I am Gerardo Del Real along with Mr. Nick Hodge. This is therapy session, otherwise known as Bizarro World number 181. Mr. Hodge, how goes it?

Nick Hodge: Don't turn it off just yet. That might have been facetious and/or sarcastic. You should listen to the whole thing.

Gerardo Del Real: Me? Whatever word you used to describe me, sarcastic, facetious, me? Never, no. Let's get right into it, Nick. We talked a little bit off air, just catching up a bit on a personal note. We've been championing lithium and uranium names here, I think the past month, month and a half. I think we really started digging into the sector, some of our favorite picks, and the reason why we thought, regardless of what happened in the broader indices, those sectors were going to be relatively safeguarded. I don't think it's a coincidence that companies like, again, Patriot Battery Metals (CSE: PMET)(OTC: PMETF), which just made new 52 week highs, Lithium Americas (NYSE: LAC), which was just $20 two months ago is back to the $30 range, a 50% move. Nevada Sunrise Gold (TSX-V: NEV)(OTC: NVSGF) has been up over 50% in the last week and a half.

Is the Bear Market Over?

I don't think it's a coincidence that the lithium names are ripping. I don't think it's a coincidence that Goldman Sachs was dead wrong on their lithium call. We talked about that a bit last week. But I want to get into the broader indices. Is this a bear trap? Is this a head fake? I think it's a head fake. It feels too easy. Everything isn't awesome. I'm looking at earnings. I'm looking at multiples. I'm looking at buybacks. I'm looking at debt levels. I'm looking at interest rates. Then we're sitting here cheering an 8% CPI print as if everything's hunky dory now. How are you feeling?

Nick Hodge: I'm not a permaƒbear, Gerardo, but I am a pessimist by my own admission. I've been writing for weeks that this was a bear market rally, that this was a bull trap for a lot of reasons. Maybe I'll go through a couple of them. You have rises like this that can be 20% before they turn themselves around. If you go back and look at 2008, you'll see that from October to November, the stock market bounced 20% in a month and then proceeded to give all those gains back by the end of November, inside a three week span. Then it turned around and went up another 25% to January from early December 2008 to January 2009. Then it gave back all those gains again through March when the true bottom was in.

You can have 25%, one month rallies inside significant draw downs that suck people in. It's also very interesting to me that nobody who called this crash, who told people to get out, they're now saying that it was the bottom. They weren't saying it was the bottom back in June. It's only the bottom after stocks go up for a month. Be careful who you listen to. There were some of us who sold tech stocks back in December and sold oil stocks before they started to go down, and were telling you this selloff was coming. You still got to look at earnings. Tech earnings have been horrible. Layoffs are mounting. Nvidia guided down. Google ‘layoffs’ and see the companies that come up. It's big multi-billion dollar companies that are laying off thousands of people.

That's not even talking about the small mom and pop shops that don't make it into those headlines. If you look at the small business sentiment survey from the past month, the small business owners have the worst sentiment they've ever had, even lower than 2008. Everyone's talking about the Fed's going to pivot. The Fed's not going to continue raising rates like they have been. I'm not so sure. You've got fed governors, whatever, fed board members out saying, "No, we're still going to raise here." In August, they'll be in their enclave later this month, they're going to Jackson Hole. The topic of their forum is reevaluating constraints on the economy. I think they've got a lot of constraints to reevaluate. People expect them to do the right thing.

Why would you expect them to do the right thing in a recession when they've been doing the absolute wrong thing thus far? Telling you that inflation wasn't transitory, that they weren't going to cause inflation, and that there was no recession. All of those things were the exact opposite of reality. I continue to position defensively. Of course, there's always a bull market somewhere. You mentioned lithium. I'm sure we'll talk about uranium. But I'd be careful about going headlong back into broad based equities and certainly into crypto, with Bitcoin here at $25,000. I just closed out a short of Bitcoin here before we recorded today. I do that with ETF BITI. I continue to be short the NASDAQ in my personal account. I don't think we're in for a sustained bull market. I certainly don't think the bottom was in in June.

Gerardo Del Real: My infantile brain thinks dumbass things while you're giving the smart analysis. I couldn't help but thinking during that great, very factual spot on analysis about head fakes, recessions, CPI prints, fed governors, fed decisions and pivots, and all of that, which was great, by the way. I'm thinking, "You can't fool me into thinking we're still not in a bear market because I saw a recession video on PornHub the other day, which is the ultimate contrarian indicator." I'm not calling a top, but I'm not calling a bottom, pun intended.

Nick Hodge: Lots of inflated assets on that website, Gerardo.

Gerardo Del Real: And tops and bottoms, but onto...

Nick Hodge: Hold on, even the president tweeting this week that there's 0% inflation in July, which I get it. I get why you can say there's 0% inflation because on a month over month basis, it went from 9.1% to 8.5%. But to tweet from the president's account that there's 0% inflation is one of my favorite words, disingenuous. You know what you're doing. You've got inflation at a 40 year high. To tweet that there was 0% inflation when American families are out there struggling, when small businesses are struggling, it's like, "Come on, guy." Then you've got the perma-bull puppets, from Bloomberg and other outlets, who go out there and defend it, "He's tweeting the facts. Month over month, there was zero inflation." It's like, "Get the fuck out of here with that bullshit, man."

Gerardo Del Real: Lap dances are still 20 bucks though, 40 years running inflation proof. If I could buy an ETF that was based on the price of lap dances, that would be the ultimate hedge. That would be the ultimate wealth preserver.

Nick Hodge: It's stable. Make sure you still own a little gold.

FBI Raids Trump’s House

Gerardo Del Real: Clearly, I'm in a silly mood today, everybody. This might not be the most insightful podcast from me, but usually the insight comes from Nick anyway. I want to get right into the Trumpster. There's so much irony in the FBI raiding him. Last week when you asked me if I thought he was going to run again, I said, "Don't forget that he's still under investigation for a host of potential crimes that everybody is desensitized to now." I also said, "Don't discount the fact that he's an overweight man in his seventies. He isn't the most active, healthy person on the planet." When I look at all that and then I see the FBI raid on Mar-a-Lago. I thought it was a skit. I thought it was an Onion headline, as many things that surround the Trumpster come off as. I looked at it and then...

Nick Hodge: Surreal.

Gerardo Del Real: Then I look and I'm like, "Oh my God, this is actually on credible news outlets like The Guardian. Then I'm looking at it and I'm like, "This is really happening." But then I'm going through Twitter and everybody's got an opinion. Then some of these opinions were hilarious. I want to talk about the Republican reaction in a second. But I started looking and then I thought, "This one's got to be a skit," because somebody said that he put out a statement, and the statement included him saying, "They even searched my safe." I'm sitting here going, "It's the fucking FBI. What did you think they were going to do? Did you think they were going to come, ask you for the password, ask you for the code, and just tell you to have a nice day, bring you a milkshake and some fries?" The disconnect is just insane to me.

First off, the irony. Let's get to the irony. It turns out they're there because allegedly, he may have taken some documents that he was not supposed to take. Allegedly, they have asked for these documents back. He took them from the National Archives and Records Library, which he wasn't supposed to do. A lot of this stuff supposedly is classified. We'll find out soon enough. But supposedly, he took them and he didn't want to give them back. They said, "We're going to raid you."

The ironic part to me is that this now may actually be a felony if he did indeed do it and it's proven, which is clearly what they're trying to do. But the reason why this now may be a felony is what's hilarious to me in an ironic way. I don't wish prison on anyone really, other than sex offenders and violent assholes. We can get into the list of people. But I don't want to see President Trump in prison for taking some records or falsifying some records. Much more serious crimes have been committed by many presidents. But it's funny that it's a felony because when Hillary Clinton was under investigation by the FBI, he made it a felony in hopes that if they found something on her...

Nick Hodge: That's funny.

Gerardo Del Real: ...she would go to prison. The irony is just rich. I am dying for a John Stewart, a Dave Chappelle, a Bill Burr, or a Ricky Gervais, one of the brilliant minds of comedy to take this all, package it beautifully for me, and deliver it to me in my television room upstairs because it's just gold. It's comedy gold. You can't make this stuff up. Thoughts on the raid, thoughts on what's going on? This Fourth Turning stuff is, they're hitting the gas on it. It's turning.

Nick Hodge: I didn't pay too close of attention. I try to, as you know, sterilize myself from some of that. My thoughts would be, I think, more broad and not necessarily specific to the case or the raid. To me, it's just the inverse of the Hillary Clinton emails and Benghazi. They attacked her for so long. Now you've got a Democrat in office, an upcoming election, and now it pivots to the other side. I think there's a lot of politicization going on there. Then my thoughts immediately go, correct or incorrect, to Epstein. Maybe we should raid some of these folks who were flying around raping little girls. But the irony is wonderful. I didn't know that he had changed the law to make it a felony. That is pretty rich. But other than that, I got to be honest, I didn't read a single article about it.

Gerardo Del Real: More irony. Again, more comedy gold. Marjorie Taylor Green, who is, again, just dumb as a box of balls, baseballs, just a total nutcase. She tweets, "Defund the FBI immediately." She doesn't even know why they're there. She doesn't know if there's a body in Mar-a-Lago. There is because Trump buried his ex-wife there for the tax break. You read that one, right?

Nick Hodge: Oh yeah.

Gerardo Del Real: There is a body there. That's not what they were there for. He's not getting in trouble for that one. That was just for the tax break. I don't know why you guys listened to this guy. He buried his ex-wife on the golf course to get a tax break, folks. This is the kind of man that you are dealing with. But to each, their own. No judgments, no judgment at all. But she tweets, "Defund the FBI," and immediately all the Republican talking points start coming out. It's, "We have to do something about the FBI. Defund the FBI. We need accountability." What happened to the party of law and order? If you didn't back the blue and you didn't support the FBI during the last administration, prior to Trump, you were a traitor to your country. You were a traitor to your country.
One raid, y'all don't even know what it's about yet. You don't know what's going to be turned up, what they're going to get from it. It's, "Defund the FBI." This is coming from an elected official, not a local one, a national one. The hypocrisy, the comedy of it all, I can't wait for the skit. Again, I don't want a Saturday Night Live skit. I want a real good one. I want it to get all packaged up by one of these brilliant minds and comedians that we have out there because it's absolutely hilarious to me.

Nick Hodge: These are the same folks, Gerardo, who think that the Gadsden flag and the thin blue line are the same thing. What do you expect?

Gerardo Del Real: Oh God, don't tread on me. America!

Nick Hodge: It's total, complete politicization, as I say. They'll say anything, which is why you shouldn't believe the things that come out of their mouths and why you shouldn't get caught up in partisan politics. Like you say, one day it's back the blue. One day, it's defund them. What is it? It's whatever suits their narrative at the time. I'm really not much on narratives. We're trying to discern what the centerline truth is.

I go back to the economy. You've got the Democratic side saying things are getting better, that inflation's getting better. What are the Republicans saying? Inflation's eating away at the middle class and this and that. It was the exact opposite. I was reading something from back in the seventies when the inflation was super high and Ford was an office. Back then, you had the Democrats saying that inflation was killing the middle class and was rampant and this and that. It's whatever suits them at the time, which is why you should do what suits you at the time, try to find the truth, or find someone who tunes out that noise and could deliver some of the truth to you.

Gerardo Del Real: Did you see the video of President Biden, where he comes out? Chuck Schumer is there, Joe Biden is there, Dr. Jill Biden is there, and several other members of the Senate are there. Chuck Schumer comes over and he shakes the president's hand. He shakes Joe Biden's hand, Dr. Jill Biden's hand. He shakes a couple of other people's hands. Then Joe looks at him and he's confused, "Are you going to shake my hand?" Everybody's looking at him like, "He just shook your hand." He forgot that he had just shaken his hand. If you haven't seen it, just put it up on Twitter. It's five seconds. It's worth a good laugh if anybody wants a good chuckle? Forget the politics, whether you like the guy or not, just it's a phenomenal laugh. It's absolutely hilarious.

Copper Market Update

Let's get back to the market because I know you have a site visit that you need to get to here soon. The dollar below 105, the dollar index below 105, briefly, it's back above it now. Gold is holding well, right around that $1,800 level. Copper has made a pretty strong move. It's flirting with 370 a pound as we speak. We talked lithium. I won't get too much into uranium because I kind of batch them together. They have incredible fundamentals. I think they're inflation proof sectors that are going to do very well. If you can pick half a good stock, you're going to do phenomenally well with those two sectors. But I want to get your thoughts on copper. Head fake there? I know midterm and long term, the fundamentals are excellent.

I don't think it's a coincidence that there was a bid for what's a very low grade asset earlier this week from BHP (NYSE: BHP) for OZ Minerals (OTC: OZMLF). It's a $5.8 billion bid, folks. If anybody is unclear about how serious the potential copper deficit is, look no further than that BHP bid for $5.8 billion for what's a marginal asset at best. A big one, yes, but a marginally economic one at current prices. Clearly, BHP is forecasting much higher prices to be willing to allocate that much capital to a marginally economic asset at these price levels. Near term, is it head fake, still bearish-trendish, breaking out, does it matter?

Nick Hodge: I honestly don't know. You asked me the same question last week. We record this on a Thursday and then I typically edit over the weekend. I told you last week that copper could consolidate around $3.50, that it depended on how deep this recession got in the US and how severe the China slowdown was, which there is a slowdown in China. They have put their numbers out as well. But I was wrong. I told you that I sold Rio Tinto (NYSE: RIO). I did that at $60. It went up to $62 this week. I had some Ero Copper (NYSE: ERO) in my personal portfolio that I sold at $10. It went up over $11 this week. I got it wrong in the past seven days. That's not the problem, but that's sort of what happens on a weekly podcast. You got to define your timeframes. Are we talking about five trading days? Are we talking about a month? What is it?

I'm giving you a non-answer because the short term is tough to discern right now. I'll stick with my long term, bullish thesis on copper, which I continue to hold a lot of copper developers, producers even. I own and have in the foundational profits portfolio. I guess I'll take the last thing you said, is that it doesn't matter. Pick and choose your spots. You've probably got time to get back in the Eros and the Rios of the world, if you want to, and to stick with your long-term speculative positions, which I haven't sold, which I know you follow too. I won't give it away, but there's one that's raising $14 million this week with two major mining backers, and then a major hedge fund backer that own 70% of the company. That stock is up strong in the past week. No, I'm content with copper. If copper's at $3.50, if copper's at $4, it really doesn't make a difference to me.

Gerardo Del Real: Agree, dollar drop. I think it's a head fake.

Nick Hodge: It's inverse of the market. The dollar's coming down just like the market's going up. It would be the same answer I gave you at the beginning of this podcast for the market. A pull back in the dollar, the DXY to 105 is the same as the stock market going up 15% in the past month or two. It's a head fake. I think you see both of those things reversed, the broad based equities come back down and the dollar regain strength.

Uranium Bidding Wars

Gerardo Del Real: I like it. I said I didn't want to dig too much into uranium, but I did mention M&A in the copper space. I couldn't help but notice Amir and UEC (NYSE: UEC) duking it out with Denison (NYSE: DNN) to acquire UEX (TSX-V: UEX). I believe this is going to be the first of many bidding wars for quality assets in the uranium space. If you know anything about Denison or anything about UEC, Amir, and that team there, you know those are very well run companies by very intelligent people that look ahead and position well. I think they clearly see the runway that the uranium price and the uranium space has. I don't think it's a coincidence that two very competent teams are going at it for what amounts to a very good asset that they both want to own.

Folks, there's only a handful of quality companies out there with quality assets that make any kind of sense at $60 or $70 uranium, which is what's going to be required to incentivize uranium production to come back online. I've gone on the record, and I'll hold myself to it, saying that before this uranium bull cycle's over, we're going to see an overshoot to $200 a pound spot price in the uranium space. Whether or not that happens, if I'm half right, if it just goes to $100 and stays there and that's the new floor, we're going to do phenomenally well. We're already doing phenomenally well. I think most of the uranium positions in the portfolio are up at least triple digits, or pretty close, or have been. But do you see continued M&A in the uranium space? Any thoughts on that specific battle?

Nick Hodge: You've got to. It's not just in the explorers and developers. Look at the fuel cycle, which we haven't talked much about. Look at the Centrus Energy’s (NYSE: LEU) of the world. There's a company called SILEX that has a laser process for refining and purifying uranium into UF6 and the components that are necessary to make the fuel rods. Those stocks have doubled in the past month here. I was writing about it this week. Cameco (NYSE: CCJ) owns half of that SILEX company, or at least half the license for the laser technology that they have. They have an option to buy 75%. There's many more deals that are going to happen. The other thing I was reading this week is there's only 11 in-situ uranium processing plants in the entire United States of America.

We just got the passage of this Inflation Reduction Act, which we should talk about. It might be ill named. But as we've said, there's some good things in the bill. There's up to $30 billion in nuclear tax credits in there, production tax credits based on the kilowatt-hours that come out of nuclear plants. There's funding to keep nuclear plants alive. You mentioned a long runway. These nuclear plants are long life, high cost assets. We're turning back to them in a big way, not just here in the US. We've talked about Diablo Canyon on this podcast, where the Democrats are on board. You've got Gavin Newsom, the liberal of liberals in California, saying, "We've got to keep this thing going." They're securing funding to do that. There was $6 billion for that in the infrastructure bill that passed last year. As I just said, the Inflation Reduction Act has even more money for that. Then you look overseas and it's the same picture. I'll give you my Olaf joke because that's the snowman in the movie Frozen.

Gerardo Del Real: I love Olaf.

Nick Hodge: It's also the Chancellor of Germany's name, Olaf Scholz. He's out there saying, "We got to keep these nuclear plants on." You talk about a pivot. That's a pivot saying, "We're going to freeze to death this winter if we don't keep these nuclear plants running." They still got three reactors up in Germany providing 6% of their electricity. They want to keep them running. They're burning lignite and they're burning coal. Someone said they should throw the solar panels in the fireplace. Then you look at Japan and they're saying the same thing. The prime minister there wants to have nine reactors restarted this winter. Everything that the uranium bulls have said for years is sort of culminating. That's why you're seeing the equity prices being buoyant and why the buyout wars are starting.

The Humor of Civil Disobedience 

Gerardo Del Real: I like it. I know you have a site visit to get to, Nick. But I have to ask you, and I know you probably haven't seen it because I'm the one that watches silly shit all day. Did you see the one with Bill de Blasio and the tip line social?

Nick Hodge: No.

Gerardo Del Real: The social distancing tip line. New York official, former Mayor de Blasio, Bill de Blasio, who I am no fan of, ordered New Yorkers to essentially snitch on each other for violating social distancing rules. He set up...

Nick Hodge: I remember talking about that awhile ago.

Gerardo Del Real: He set up this line and he said, "You guys just text 'NYC 311' if you see your neighbor, if you see your fellow citizen violating social distancing rules. We will enforce it." Immediately, because it's New York, he started getting flooded with dick pics. Somebody sent a picture of a sign that says, "Eat a bag of dicks." It was so bad that they had to shut down the service temporarily because there were so many dick pics coming in. I think it's a really, really, really funny act of civil disobedience. It's a first amendment right. It's not violent. It's not abusive. It is what it is. That's it. That's all I got.

Nick Hodge: It's amazing that they want you to snitch on your neighbor. That's a whole other conversation, talking about this Fourth Turning and the encroachment on your rights that we probably won't get into today. But good for the New Yorkers for giving it back to him. We've seen that essentially mandates didn't work. There's been reverberation against even... I still see to this day, there's people running on platforms. What was I reading the other day? This guy that won the primary to run for governor in Minnesota is running on a, "The vaccine didn't work," platform. That stuff is still top of mind for many people. A lot of people are still bitter about being locked in their houses and having their businesses shut down. Anyway, it's all very interesting to me. I still see a lot of people wearing masks, but to each their own, I suppose.

Gerardo Del Real: I saw somebody with a mask on in her car by herself.

Nick Hodge: I love those people and the people outside walking with masks on. I love them.

Bond Yields & Market Volatility 

Gerardo Del Real: I love the people that walk outside with masks on next to someone with no mask, that then get in a vehicle together. No judgment. It's funny to me. I don't know what to tell you. Anyhow, Nick, anything else that you want to get off your chest? What are you watching for this week, other than the usual? Any thoughts on the tenure before you go and the volatility index? I always ask you about those two.

Nick Hodge: First conferences, at the end of this month, August 30th and 31st, there's The Silver Symposium here in Spokane. If you happen to be traveling through the inland Northwest or you live in the area, come on out. It's at the Northern Quest Casino. There's some companies there that we have in our portfolios and some companies I'm hoping to learn a bit more about. I'll be giving a talk as well. It's funny, you know who will be there, is the Economic Ninja. My talk is titled "To the Moon? Let's Start With $30." That's the name of my talk. We'll see if we ruffle any feathers at the silver symposium. Then we'll have...

Gerardo Del Real: Is he a real ninja?

Nick Hodge: I don't believe he is a certified ninja, no. After that, we'll be at Beaver Creek. Not speaking, but we'll be there meeting with companies, and then the New Orleans Investment Conference coming up in October. We'll start putting links out to that stuff. On the ten-year, continues to break down. It has had a couple of spiky days here, but it has come down from its peak of a month or two ago as you see longer term duration bonds starting to firm up. The curve, which we haven't mentioned, is still inverted, more inverted than it has been at any point so far this year, which I should have mentioned at the top of the podcast as another reason for bearishness. The market is pricing in more economic rough patches ahead.

I think it’s minus 0.4 is the inversion. It's worse than it was ahead of the dot com crash. It tells you a couple of things. Investors and the market expects a rougher economy ahead. They do expect the Fed to cut rates in the short term because they think that those rates in years two through 10 are going to be lower than the rates they can get on investing in a bond here for the next two years. That points back to the Fed saying that they can continue hiking and have massive layoffs or they can pivot and have high inflation. They’ve backed themselves into a corner, really. Then volatility is another head fake. The VIX has fallen down to around 20, if memory serves. It's not going to stay there for long if what I was saying earlier comes true. That's the other reason that stocks have been able to rise. They play off of each other. But you get a VIX going from 25 or 30 down to 19 or 20 and people get real comfortable, real fast.

Gerardo Del Real: It's going to be interesting when everybody comes back inside, gets back to the office, and the kids back in school, which is coming up. It's going to be really, really interesting in September. I think it's going to be profitable in September, October, November, December. But I think you're going to really have to know what you're doing or have someone that does because it's not going to keep being this rosy in the broader indices on a day to day basis for much longer. We'll see if that plays out or not. Anything else, Nick, watching anything else?

Nick Hodge: No. I'm getting dialed in. I got three tuitions to pay for this Fall. The youngest is headed into pre-K. We got to make that moola.

Gerardo Del Real: My 19 year old heads back for her sophomore year of college. It's not getting cheaper, everybody. Inflation is everywhere. It is what it is. It's been a blast as always, Nick. This was episode 181 of Bizarro World. Have a great week. I want to wish my beautiful wife, a happy, happy, happy birthday. I am literally the luckiest guy on the planet. She's not only my best friend and an amazing woman, but a phenomenal mother and friend to everybody. I just want to give a little birthday shout out to her. Have a great week, everybody. Be nice to each other, do something fun, make some memories, and be safe out there.

Nick Hodge: I hope she's watching. Happy birthday. See ya.