The Dominoes Are Starting to Fall

Editor’s Note: What follows is the introduction to the October issue of Junior Resource Monthly. I cover the current macro picture, including central bank action and the mortgage market. And I discuss what the end of the year will look like for the market. The full issue covers all my recommendations, including thousand-percent lithium winner, as well as tax loss season selling and buying guidance. Get the full issue here. 


We live in interesting times.

War. Protests in Iran, Colombia, and Peru. Inverted yield curves. Pandemics. Rampant inflation (caused by central bankers). A recession (caused by central bankers). The dollar and yields are at a 20-year high. And central bankers overseas are starting to panic.

Heck of a 2022 bingo card.

On September 27, 2022, the Bank of Japan purchased 550 billion yen of 5-10 year notes, marking the second time in weeks – and first time since 1998 – the BOJ has had to intervene in an unscheduled manner.

A dollar index at current levels – flirting with 115 level as of this writing – exports inflation to foreign countries not tightening into a global recession. 

We are in the midst of an engineered currency war.

Mortgage rates are at 7%, which is the highest in 20 years and likely going to 8% during an engineered economic slowdown.

What does our mortgage market look like in these next few months?

According to the Atlanta Fed, as of today (7.08% 30Y mortgage), the median US household needs to spend 50% of their income to afford the payment on a median-priced home, double from two years ago, and the highest on record. Ever.

Across the pond in England, central bankers canceled a speech on balance sheet reductions because it’s hard to reduce the balance sheet when your currency is being pounded into the ground. 

The Bank of England followed that by carrying out temporary purchases of long-dated UK government bonds.

Starting to notice a trend?

But fear not, Janet Yellen says she sees no signs of disorderly market volatility. I can’t make this stuff up. You wouldn’t believe me.

Want to see what an orderly drawdown in equity and fixed income looks like, Janet?

Drawdown in the total market capitalization of US equity & fixed income.

How about a chart of the 10-year yield the first nine months of the year?


U.S 10 Year Yield Curve graph.

Bond volatility continues to surge. And let me be clear, while the Fed fights with the bond market and traders are trying to get on the right side of the Fed put, it will always be the bond market that wins. Winning in this case may result in foreign economies collapsing.

Here’s a fun fact about drawdowns. Never in history (that’s a long time) have treasuries gone down more than stocks during a drawdown. 

When it’s all said and done the Fed is going to need to do QE just to pay for the interest expense from higher rates on government debt. Higher rates it inflicted. 

Here’s what tech stocks have done since hitting new highs when everything was awesome.

Apple: -16%
Microsoft: -30%
Google: -33%
Tesla: -33%
Amazon: -38%
Uber: -43%
Airbnb: -49%
Adobe: -58%
Facebook: -60%
Nvidia: -61%
Netflix: -67%
Etsy: -68%
PayPal: -69%
Spotify: -70%
Zoom: -74%
Docusign: -81%
Shopify: -83%
Snapchat: -87%

Those aren’t speculative juniors; those are supposed to be the pillars of retirement plans globally.

Gold, meanwhile, has broken short-term support at $1,684/oz and looks primed to flirt with the high $1,500s soon if it doesn’t reclaim that long-term support. It will, just a matter of when.

You won’t care that in light of the sell-off gold has held up well as an asset class — but it has. And now that QT is off the table in other countries and QE is slowly but surely making its way back, gold looks like it’s positioning to rally in all currencies.

The thesis has always been gold making new all-time highs alongside the dollar and the overall indices. The dominoes are starting to fall. The dollar is still the cleanest dirty shirt in the laundry basket and as a result the U.S. will be last to reverse course.

It will but there’s more volatility to be had in the short term.

Click here to get the full issue, including all my current resource recommendations and end-of-year tax loss selling and buying guidance.

Gerardo Del Real

Gerardo Del Real
Editor, Daily Profit Cycle