The Primary Thrust Behind Record Stocks & Cryptos

by Nick Hodge

I wanted to start today with the weather, because there's an arctic blast coming, and I spent part of this morning putting a heat lamp out for our chickens in the coop.

It's supposed to get down to seven degrees here in the Pacific Northwest tonight — with a wind chill well below zero.

And it got me thinking about the consumer price index (CPI), the government inflation numbers that came out this morning.

It's like looking at the weather. Even though it says it's one temperature outside, for example, I live in a cold valley and the app on my phone might say it's 15 degrees outside, but on my garage it's showing eight degrees, right?

I just know it's colder than the official data is telling me.

So, relating it to inflation, if you look at the CPI numbers that came out today...they’ll tell you there's no inflation. That everything is under control.

You know that's a flat out lie, right? You know that data is wrong.

If you've gone to the grocery store, certainly if you own assets, lots of things are inflated.

Lumber’s up significantly over the past year, cryptos are ripping, cannabis stocks are ripping.

Copper remains at or near eight year highs.

And the primary thrust behind that is inflation.

We can talk about the supply and demand drivers behind each of those individual sectors, but at the end of the day, what's in control here is a weakening dollar and rising rates.

And so we have a stock market that continues to be at record highs, whether that's the Nasdaq or the S&P.

And you should have been making a lot of money.

I was telling you two weeks ago, when the market was down several days in a row, that it wasn't the end. That we were going back to new highs. That volatility was going to fade. And that I hadn't seen anything major break.

All that has panned out now, just two weeks removed from that spike in volatility and the madness of the Wall Street Bets stuff.

One small word of warning would be that we're starting to see some fundamental drivers to be cautious about.

I heard on Bloomberg earlier this week, they were talking about Swiss bond yields starting to tick down.

If you look here in the United States at the 10-year bond yield, for example, it's been ticking down for the last few days.. It's been really strong since August, with the 10-year bond yield going all the way up to 1.2% from essentially zero.

And that's really what's been keeping a lid on gold prices as everything else has been inflating along with those rates.

So now that we have a pullback in rates, what we have to look at now is if that pullback in rates is temporary, and if the correlations are going to maintain.

What I mean by that is, if rates are really going to pull back, is gold going to go up now, and are stocks going to go down? Or are the correlations going to reverse and stocks continue going up, even if rates reverse. Those are the things I'm looking at now.

But as it stands though, the Russell has been very strong, which means small-caps are strong.

I've got buddies texting me about penny stocks, artificial intelligence stocks, and crypto stocks.

So the froth is out there. The bubbliness is out there. But that doesn't mean that it can't get frothier and more bubbly. And I continue to keep an eye on what's going to change that.

Energy has been really strong — oil inflating to $60 for the first time in some time. And I've had readers in the energy sector since December, when I said that, "Okay, now utilities and things are going to cool off and oil prices are going to start inflating, so let's get in the XLE,” for example.

As we stay at record highs and everything is awesome, and commodities continue to inflate, I'm going to stay the course. I'm going to watch those rates, and I'm going to take profits in select sectors that I was contrarianly established in.

I hear people talking about, "Oh, you've got to buy copper now." There's one mining blog that has it on the homepage today, "It's time to buy copper." No shit, we've been in Rio Tinto in Foundational Profits for a year now.

So the time to buy these things is, if you're contrarian, before the herd comes running to them, right?

Like I told you I was selling silver stocks last week.

Now, I'm looking for the next pocket or sector of the market that is going to inflate next. And I'm starting to look at other metals, and things like other cleantech stocks and plant-based stocks, which have been doing really well lately.

And then I'm going to start focusing on cleantech stocks as this administration gets underway, and comes with its first stimulus, and then we get an infrastructure bill. I think cleantech stocks and the raw materials that fund them are going to be in for a heck of a run here, as long as the entire bottom doesn't fall out of this market, and that's something I'll be keeping an eye on for you.

The February issue of Foundational Profits is out this Friday. It comes out the second Friday of every month.

We'll be looking more at cannabis stocks, we'll be looking more at copper stocks, and we'll be chuckling a little bit at the mainstream trying to figure it out as we continue to see it very clearly.

Call it like you see it, 

Nick Hodge
Editor, Daily Profit Cycle

Nick Hodge is the co-owner and publisher of Daily Profit Cycle and Resource Stock Digest. He's also the founder of Hodge Family Office, the umbrella organization for his three premium services: Hodge Family Office, Family Office Advantage, and Foundational Profits. He specializes in private placements and speculations in early stage ventures, and has raised tens of millions of dollars of investment capital for resource, energy, cannabis, and medical technology companies. Co-author of two best-selling investment books, including Energy Investing for Dummies, his insights have been shared on news programs and in magazines and newspapers around the world.

*Follow Nick on Twitter.