Bizarro World Podcast,
with Nick and Gerardo
July 25, 2022
This bear market in stocks could get worse as corporate earnings slow, companies slow hiring and layoff workers, and GDP comes in negative for Q2. Gold prices remain subdued amid continued strength in the US Dollar. Crypto is bottoming with the Mt. Gox settlement due next month. The uranium market fundamentals are as strong as ever. And we’ve got an investment blueprint for any market that all investors should check out. This is episode 178 of the Bizarro World podcast.
1:34 Bear Market in Stocks: Earnings, Layoffs, Recession
4:02 Gold Prices and Dollar Strength
6:45 Crypto Cycle Continues to Bottom
9:03 Bear Market Bottom Fishing
11:02 Uranium Stocks for the Nuclear Energy Resurgence
15:52 Problems Caused by Central Bankers, Political “Leaders” and the Media
23:47 An Investment Blueprint for Any Market
Gerardo Del Real: Polio's back, Europe is burning, Sri Lanka collapsed. The Secret Service is deleting texts. Germany's pivoting on nuclear. We'll talk gold, we'll talk the dollar, we'll talk Elon and Bitcoin. A lot to get to. It's good to be back everybody. I am Gerardo Del Real along with Mr. Nick Hodge. This is therapy session, otherwise known as Bizarro World number 178. Sorry to miss last week, everybody. As some of you know, my father passed away unexpectedly last Wednesday night, so dealing with that, but it's good to be back, Nick. How are you doing?
Nick Hodge: I'm doing good, Gerardo. Continued condolences about your father. I know that's obviously a rough thing to go through so I'm glad you're back at it and are pushing through and was happy to hold it down last week. I'm doing quite well. Just watching the markets, biding my time until later in the third quarter or fourth quarter until it's actually time to buy things. It's not time to buy things now and I'm sure we'll talk about that.
Gerardo Del Real: Biding your time. I know it wasn't a pun intended but Biden's got COVID, I forgot to mention that. I mean, I kind of don't blame dad for tapping out at 72 given the condition of the world right now. There's a lot going on and so I appreciate the condolences. Tough hit but let's get on with it.
Bear Market in Stocks: Earnings, Layoffs, Recession
Let's start with the markets. You put out a note to subscribers earlier today. I don't mind highlighting the note because of the fact that this podcast won't go out until early next week. It's Thursday the 21st today, people should get this on Monday or Tuesday of next week. But you're shorting tech so that kind of gives me an indication of where you think this market is headed. Tell me about it.
Nick Hodge: Well, we just had a one or two week rally across the board. If you remember, June was pretty abysmal for the S&P and it was trending down. Even days that it was up it was reversing course and ended up closing negative. That changed in the past week here, the second week of July. People started getting giddy, calling earnings ‘not as bad as expected,’ which is easy to do when you lower the expectations the week before.
Gerardo Del Real: To zero?
Nick Hodge: Yeah. Right? I mean, the earnings are quite bad. Profit margins are shrinking, costs are up, banks are ceasing to buy back their stock, companies are laying people off. Ford's going to lay off 8,000 people, Google has paused hiring, Apple has paused hiring and is looking to cut costs and we're not even a little bit of the way through earning season yet. Next week, you'll get a peak at McDonald's and Google and Apple and Meta and I think this rally that you're seeing right now is going to turn out to be a bear market rally. And so I've told you and I've said on this podcast a couple times that I've shorted to tech. I haven't put it out in the ether there and to the public. I was content to do that this week. I think people are getting ahead of themselves. I think they're looking for any reason to go bullish.
I think the buy-the-dip mentality has not been entirely erased yet and people need to get that out of their minds. As I've been saying, it's not time to buy the dip yet and people just want to buy, they're ready to speculate. But I think this market's got a bit lower to go. The dollar took a bit of a pause and that's allowed some things to go up. Bitcoin got above $24,000 this week but quickly pulled back to $22,000. And I haven't even mentioned the fact that next week we'll get a negative print on the Q2 GDP that comes out July 28th. So quite a few negative catalysts ahead in the next week that gave me the confidence to short tech which is an easy thing to short relative to other sectors and. So that's the reasoning for that.
Gold Prices and Dollar Strength
Gerardo Del Real: Well said. Gold pulled back briefly to the high $1600s before rallying here today to I believe the $1718 level. You cited a little bit of the dollar weakness. I did an interview earlier this week with the network and we'll post it here over the next week or two once it's published, but she asked about the dollar strength and whether I thought it would continue given that the dollar has started to pull back. My response was I absolutely expect the dollar to continue to strengthen in light of capital flow, in light of PE multiples that are no longer sustainable, and in light of the fact that I think the dollar will continue to be the cleanest dirty shirt in the laundry basket. So I say all that to say, do you think this little brief blip back higher above $1700 is sustainable for the gold price and do you believe this dollar rally is over?
Nick Hodge: No, I don't think the dollar rally is over. We had talked recently that gold could break below $1700, it would need to test that $1680 level. I don't think it got a thorough test of that. It was just an ever so brief dip to that level here this week and I think you could see that again. I think people still want to hold dollars and I think that the worst of the selling isn't over yet.
So I guess one more thing about what I was saying earlier, there was a Bank of America survey out, like a fund manager survey talking about how sentiment was dire and capitulation was here. This fund manager survey was the most negative it's been since October 2008, and that's one of the reasons that the market rallied, right? People were saying that basically the bottom was in and that capitulation was at hand. Well, no the fuck it isn't.
I mean, if you look at a chart of the S&P, it went down another 25% after October 2008. It didn't bottom until March of 2009. So sentiment is not a catalyst certainly in these conditions for all the reasons I mentioned earlier. And really that's a further answer to your question of why I think the dollar will strengthen further.
Gerardo Del Real: So the dollar strengthens. Do you think gold pulls back a little bit lower or do you actually think it's continuing to find its footing here at these levels?
Nick Hodge: We'll see when it gets to the high $1600s, that's that $1680 mark. I mean, if it can hold that then it can bounce higher from there. We talked last time you were here two weeks ago how I was writing that you could see a brief dip down to the COVID lows down well below that in that $1500 level. I think that would truly be a flush out but one step at a time, let's see that $1680 level first and what happens there.
Crypto Cycle Continues to Bottom
Gerardo Del Real: Let's talk Bitcoin. You mentioned it rally into $24,000 before pulling back again to $22,000, this amidst some dollar weakness, although again, brief dollar weakness and a brief what you described as a bear market rally in the major indices. That correlation continues to hold up, right? The major indices go higher, Bitcoin tends to follow, major indices break down, Bitcoin tends to come back. Do you see that correlation continuing?
Nick Hodge: Yeah. Well, Chris Curl was talking about this a little bit. We were trying to figure out what was going to break that correlation and he was talking about that in a call in we had for his subscribers last week and there wasn't really anything on the horizon that could break that correlation. He talks about there's this Mt. Gox settlement which you'll remember was one of the largest exchanges or places you could buy Bitcoin back in the day, early in the day, like 2013, 2014. And then there ended up being a scandal where people were redeeming two-for-one Bitcoin because of a glitch or however you want to phrase that. Well, the settlement is here and there's ~141,000 Bitcoins that are going to be offered as payment to those people who are affected. And the thinking is that some of those Bitcoins will immediately hit the market because people just want cash like we were just talking about where they don't want to go through the volatility of the sector, and that could cause a washout in the Bitcoin price that would then allow it to go higher.
I don't know if that breaks the correlation to the S&P or not. What I do know is this: I was buying it below $20,000 and I was shorting it above $23,000. It's like trading around a position, right? I HODL what I have in my wallet, the Bitcoin that I've been buying for the long term because as I've said multiple times, I see that rise to six figures over the course of 5, 10, 15 years, whatever it is — that asymmetric reward opportunity. But in the short term, content to short it because of that correlation that's holding up. So in my personal account, I shorted Bitcoin this week through BITI which is like a short Bitcoin ETF. And so playing both sides, which I guess is not for everyone but you got to do what you got to do in this climate I guess.
Bear Market Bottom Fishing
Gerardo Del Real: Outside of shorting stuff, are you actually buying anything? I know you had some bids in for a couple of names here in the past couple of weeks anyhow and it's been a few days obviously since we caught up, but anything that actually filled?
Nick Hodge: What filled? Revival Gold (TSX-V: RVG)(OTC: RVLGF) filled. It broke down even further as gold dipped below $1700 so I bought some Revival, I bought some Kutcho Copper (TSX-V: PLBY)(OTC: KC) which I did the math on today and at its current market cap, you can buy it's 1.1 billion pounds of copper equivalent for two cents a pound. And what else did I buy? Just a tiny bit more Playboy (NASDAQ: PLBY). I just continued to pick away at that. I'd view that as a three year hold. So at current levels, I think I might have said this on the podcast before, buying it at the valuation they paid for one of their lingerie units without any value being ascribed to any other part of the business and it's one of the most recognizable brands in the world. So those are three things I've been buying.
Gerardo Del Real: I like it. I see Elon, the best billionaire troll on the planet, saying everybody called him fat so he sold all his Bitcoin.
Nick Hodge: I don't know what to make of that guy.
Gerardo Del Real: Say what you say about Elon, he's entertaining as all hell man. He gives it as well as he could take it. And if you're willing to look in the mirror and laugh at yourself a little bit, I think it's healthy, right? These are obviously interesting times. He tweeted again about four hours ago. He said, "To be honest, it's good motivation to work out, eat healthier, and maybe take my shirt off outside more than once a year." I mean, you can't knock the style. You can knock a lot of lack of delivering stuff on time or lack of delivering stuff at all sometimes, but he's entertaining as all heck.
Uranium Stocks for the Nuclear Energy Resurgence
Uranium. I listened to a couple of conference calls this week amidst my travels and I mean, the fundamentals are as bullish as I think I've ever seen them in my relatively young life. Any thoughts there, Nick?
Nick Hodge: Just that everything the long term uranium bulls have said over the past 10 years is starting to play out, right? I remember saying when Germany shut down their nukes, that's not the best idea, right? And here you have them not only they've re-fired up their coal plants which I mean, what do you want to do to meet your climate goals? That's not going to get you there. They've had to do that. And now they're saying that the three nuclear reactors that remained online, they're going to have to extend their lives because they're worried about the Russian gas supply, right? And we're headed into winter here in the Northern hemisphere. I mean, I know it's a hundred degrees right now basically everywhere-
Gerardo Del Real: It's 190 in Europe.
Nick Hodge: That's crazy, right? But it'll be cold there soon enough believe it or not and they're going to need more energy to heat their homes and so they're turning to things that they once turned their back on, and it's not just them. Here in the states, we're extending Diablo Canyon in California and the Democrats are on board with that. The Japan energy minister was talking this week that they're going to try to get some nuclear plants back online as fast as possible to provide electricity for the winter that's coming. And if you want to talk about capitulation, it's not in the stock market, it's in the energy market. People are capitulating and realizing that they're going to have to turn to nuclear energy to bridge the gap, right? I was even looking at some places in Europe that's so hot and so bright that the solar panels are malfunctioning, right? And so they're designed to work from the sun and so that's ironic, right? And anyway-
Gerardo Del Real: Should have kept the solar roads.
Nick Hodge: That's right. Maybe they would've melted too, who knows? And uranium still sits below $50 a pound. I mean, it hasn't been able to catch a bid either and the fundamentals couldn't look better like you say. But I've certainly not sold any uranium positions. I like the ones I'm in. I had recommended Denison (NYSE: DNN) maybe a month or so ago when it was below $1 US and it's back over a $1, $1.10 US, and they're starting to firm up a little bit. So I mean, what are your thoughts on the space? You listened to the conference calls you said.
Gerardo Del Real: Everything you said. Everything you said. I mean, I absolutely think this is a time to accumulate, not to sell. I interviewed Stephen Keith earlier from Labrador Uranium. That's one of my favorite uranium speculations out there. I'm a biased shareholder, wrote a check at lower prices, continue to hold every single share. And look, there's bargains all over the place. You just have to decide where you want to make your money and you have to decide how long you're able and willing to hold those positions to get those types of returns. And I know we said that two weeks ago the last time you and I were on here together, but I think that continues to remain true. If you missed the first leg up in the uranium space, I think the next one's right around the corner and could it take two months? Sure. Could it take four? Sure. Will it matter at the end if you're able to hold through? No, I think it's going to be extremely profitable.
I have similar sentiments in the lithium space. A lot of companies are doing some really good work. A lot of companies that I think will be hitting inflection points here very, very soon, right. Everybody knows I think by now because I keep saying it over and over, my largest two personal holdings are Nevada Sunrise Gold (TSX-V: NEV), which is onto a lithium discovery in Nevada of course, and Patriot Battery Metals (TSX-V: PMET) which should start seeing some of the fuel work results from the sampling that the team has done over a lot more of that 50 kilometer trend than it's ever explored before. We should start seeing results there. And I can tell you this, Nick, if they find a similar trend to the current two kilometer trend that I believe holds already at least a hundred to 150 million tonnes of roughly 1% lithium, then watch out because that has the potential to turn into an absolute monster and this market cap and these prices aren't going to hold despite the tough bearish markets.
So no, I continue to be excited about the same things I was excited about. I think uranium, lithium are going to be the first two sectors to deliver gains before the overall indices and gold eventually turns.
Problems Caused by Central Bankers, Political “Leaders” and the Media
But I think in Q4 of this year everything's going to be back to the races because I don't think that fed rate hikes are going to be sustainable past another 100, 150 basis points. I think after that, there will be enough data for the Fed to say, hey, midterm elections are on the way, we don't want to meddle. Inflation's coming down, housing prices are stabilizing, inventory is rising, all the bullshit that they fed you on the way up they'll feed you on the way down. It is what it is. You can either make money from it or you can complain about the fact that we have central bankers that are literally imploding countries around the world, right? I look at what happened in Sri Lanka and I feel horrible for the people in Sri Lanka, right? Inflation hit 59% in the month of June, annual inflation.
Nick Hodge: Is that all?
Gerardo Del Real: 59%. Those are official numbers so you know that the real numbers are much, much higher. And look, they're out of medicine, they're out of food, they don't have access to foreign currency. China's got lockdowns and they have the military out there preventing people from withdrawing their own money. I look at Europe, they had the busiest fire station response since World War II. I mean, these are just unprecedented times in so many ways and look, the Fed isn't responsible for the fires and the climate and other things that are going on there, but it sure in the hell is responsible for the inflation that's been unleashed and the lack of accountability that has come with that. And so no, look, interesting times. We talk about fourth turnings on this podcast often and I think they're all just converging, right? Politically, economically, socioeconomically. There's 14 prisons in Texas that don't have air conditioning units. And you can feel however you feel about prisoners, but it should not be acceptable that in 2022 one of the wealthiest states in the union has prisons without AC units.
Nick Hodge: It's the reason that the US life's expectancy went down recently. I'm sure you saw those headlines over the past year or two. One of the main drivers of that is people dying in prisons at a young age. Isn't that crazy?
Gerardo Del Real: Insanity.
Nick Hodge: And you talk about the bullshit that they fed you on the way up. I mean, I was writing about it recently and talking about it in last week's podcast about the lack of leadership and not just the transitory stuff, but I think you had the White House press secretary stand up last week or two weeks ago talking about ‘the American economy is the strongest it's ever been.’ It's like, what planet are you living on? Did you go out with the James Webb telescope? Where are you looking at? I think that the "leaders" both politically and financially and in the media world are realizing that their bullshit is being seen through. You had the New York Times this week, for example, had all their editorial board write mea culpas basically about all the stuff they were wrong about. Paul Krugman had to write an article about how he was wrong on inflation, right?
Gerardo Del Real: People that listened to him should have to write an article too because fuck-
Nick Hodge: It's crazy.
Gerardo Del Real: I mean, come on. It's not like he's never been wrong before. I don't know why he will continue to give stock and attention to these PhDs that have never traded a market in their life.
Nick Hodge: He's the guy that said that the internet was never going to amount to anything, right? The Onion had an article this week, one of the best media outlets in the country, about how the New York Times announces a new editorial board member who will contribute nothing to society three times a week.
Gerardo Del Real: That's absolutely hilarious. The Euro has reached parody with the dollar briefly, the BOJ because this isn't just the fed here in the US, the Bank of Japan, it says they'll continue to ease as long as and as much as they have to to achieve whatever it is that they're looking to achieve now, whatever today's line is. Now look, it's absolute madness out there. While we're on the social commentary, I can't help but see and mention the first fucking case of polio in 2022 that we've had in a decade in New York of all places. I mean, this is 2022. What are we doing? What are we doing?
Nick Hodge: Yeah, the COVID is coming back. COVID-19's about to turn into COVID-23. I mean, you've got this BA.5 variant running rampant. You mentioned the president is infected and things definitely aren't going the right direction. I guess two other things that I wanted to mention is, you've got these midterm elections going on now and you've got these people who are in office running on things like, oh, we're going to lower prices.’ It's like, wait, well why the fuck did you let them go up? If you can lower prices, where the fuck were you for the past two years, right? Oh, that's right. You were the one signing the bills to send out the checks that caused the inflation you fucktards.
So you look at the polls and the majority of people now don't want either Trump or Biden to run, right? It's like 75% of the country or something like that. Well, let me read it, I got it up. 71% don't want Biden and 64% don't want Trump. Those are large numbers. Meanwhile, Biden's approval rate just continues to go down and to the right man, it's lower than Trump was at any point in his presidency and people are feeling it for sure. It's a hot summer and we called that a while ago and I think people are starting to see through some of this political bullshit.
Gerardo Del Real: We talk about the collapse in our institutions and I continue to give these fuckers way too much credit, right? I couldn't believe that the Secret Service actually deleted texts from January 5th and January 6th.
Nick Hodge: It's amazing, right? And they might not be able to recover them.
Gerardo Del Real: The gall. The way the American public is treated by its institutions that are supposed to protect it is damn near... No, not damn near, it is criminal. It is absolutely appalling. I don't care what party you believe in or if you believe in a party, if you believe in a God, whatever you believe in, everybody should be absolutely appalled. I mean, every week it seems to just get more and more bizarro.
Nick Hodge: And I don't see a lot of good options. I got my little midterm sheet for the state of Washington the other day-
Gerardo Del Real: Your spreadsheet.
Nick Hodge: And I was looking at who I had to vote for and I was checking out their websites and their platforms and I was like, you've got to be kidding me. I can't vote for any of this crap. Right? So the one thing I voted for was they had this levy up for new taxes. I voted no and sent the rest of the thing in blank, man. I mean, fuck.
Gerardo Del Real: The Hoover Dam had an explosion.
Nick Hodge: I didn't see that. Oh, I did see. There was a fire burning on one of the turbines. I saw that.
Gerardo Del Real: I mean, the fucking Hoover Dam had an explosion. It's been a heck of a week, man. There's monkeypox. I mean, I don't know what to say, Nick. I see a Coinbase manager was arrested for insider trading. I see Nancy Pelosi and her husband are still all good. Wonky world out there.
Nick Hodge: He was buying chip makers before Congress voted to support the chip makers. Surprise, surprise.
Gerardo Del Real: Absolutely bonkers out there. Anything on your mind that you really want to get off your chest, Nick, other than what we've discussed?
An Investment Blueprint for Any Market
Nick Hodge: Oh man, I've got to talk about this blueprint, I've got to lay a foundation for that. So in the next week or two here, by the end of July we're going to have out a new report for my monthly service which is Foundational Profits, and it's going to be a blueprint for any market, including the bear market that we're in. And what that means is really what I've been preaching for the past 10 years in other services and other newsletter divisions that I founded, and that's maintaining your individualism and your personal sovereignty and doing that by managing your own investments and how to do that. The accounts to set up, the tax strategies to pursue, and why you can manage your own whatever, house, family, portfolios, better than a professional can for you. And it comes with a library of reports. There's five reports we're offering that cover a lot of those topics that I just went over there and again, that you can use in any market.
So what comes to top of mind is how a financial advisor will tell you've got to stay invested for example. And if you would've done that for the past seven months year to date, you would've lost 20% of your money or more. And I'm not saying it's possible to time the market every time, but I am saying that it's possible to avoid to a large extent some of the draw downs, certainly when the writing is on the wall. It will cover how to do that. There's a 35 minute long video that we'll be putting out and people will have the chance to sign up and get those five reports which again, I'm calling a Blueprint for Any Market. So there probably won't be a link for that in this podcast but certainly you'll start seeing the advertisements and the emails for that in the next two weeks here.
Gerardo Del Real: I like it. Listen, everybody, I know it's hot outside figuratively, literally. The world is getting crazier by the day, I realize that. Hopefully we provided a little bit of insight on how you can continue to play the long game in the market and to be able to preserve and enhance some of that wealth or some of the growth in your bank account. But it's the summertime and I encourage everybody, get outside and spend some time with family and go do some fun things and make some fun memories. There's many, many things that I'm very at peace with as far as my dad's passing despite the fact that it was really sudden. And with us, there was really nothing left unsaid and really nothing left undone. Of course, I would've loved more memories with the guy but it feels really good going to bed and waking up knowing he knew how much we cared and how stable we were and how much my siblings and I took care of each other and how supported he was until the very end, despite the fact that we didn't know he was going.
So it's not a bad way to live everybody. If we just did more of that with each other I think we'd have a better planet, better city, better community, better world. And man, when it happens and you get a couple of tough hits like we have with my mother-in-law a few months back and now my dad, it brings a lot of comfort knowing that you told people you loved them and you gave them hugs when you could and you made all the memories that you could make with them. We all have a date. So I think that's probably a good place to leave it unless you have something to add to that, Nick.
Nick Hodge: No, that's it. You nailed it. The allocations that you make in life aren't just in the market so you allocate to family and loved ones and patience — all that stuff is an asset class as well.
Gerardo Del Real: Absolutely, absolutely. Appreciate everybody's time. Sorry for missing last week everybody. I'm Gerardo Del Real along with Mr. Nick Hodge. This was another well needed therapy session, number 178 of Bizarro World. Take care of each other out there everybody. Go make some fun memories, man. It's worth it.
Nick Hodge: See ya.