Officially In Bear Market

Are we now about to face the mother of all bear markets, which is following the daddy of all bull markets? Apparently with the Dow losing again on Friday, May 20, it is facing the longest losing streak since 1932! And in the view of many Austrian-economic thinkers, it is just the beginning because for every action (massive money expansion) there will be a reaction (an implosion of the money supply), which means prices have to decline. Wall Street hopes it will be commodities that decline, but commodities are not the assets that have become overvalued. Stocks, bonds, and related derivatives have become overvalued dramatically, which is what always happens when central bankers distort capital markets with massive amounts of money that is fraudulently created out of computer keystrokes. With the value cheapened by legalized counterfeit money from the keystrokes of central bank computers, all manner of crazy ideas like SPACs, Stable Coins, and NFT’s end up sending huge amounts of mal invested capital to money heaven. I think that is what we may have started to see this week. As noted from Key Market Metrics shown above, the S&P lost 3.05%, sending it officially now into a bear market. But some sectors like Retail really got hammered. Wal-Mart, which is in my IDW, lost 19.49%. The Housing Index lost 2.09%, Real Estate was down 1.96%, and Autos (Toyota) lost 1.65% on the week. Bitcoin continues to trade as a risk asset as it continues to be closely correlated with stocks.

 

Yes, some of the money that flowed out of stocks flowed into US. Treasuries as a safe haven, as evidenced by TLT’s 2.18% gain. But gold was also a safe haven this week and you have to think with inflation showing no sights of abating, commodities in general are starting to be viewed as such. Other items in my IDW, like the Rogers Raw Materials Fund, Oil, Copper, and Silver, all registered gains this week, suggesting that rising interest rates are starting to strip some of the foolishness out of markets.

 

Despite all those commodities rising in my IDW, it lost about 1% because of the massive decline in the financial assets, most notably Wal-Mart. Rather than displaying my IDW this week, I chose to show you the chart above that shows the historical relationship between energy stocks and tech and commercial services weightings in the S&P 500 because I think it shows just how distorted financial type assets have become relative to the things humanity really must have to stay alive. Nothing is more essential than hydrocarbons for the existence and prosperity of humans. This chart, which was published last week by the Fielder Report https://thefelderreport.com, shows that despite oil and gas stocks rising considerably this year, they are still far below their historical relationships. Given all the political and supply chain dynamics, and a move toward the commoditization of money started by Putin in his requirement that Russian gas be paid for in gold or rubles, I believe the move toward big gains in energy stocks is still in the early innings. As such, I am adding the following energy stocks for coverage in this issue.

About Jay Taylor

Jay Taylor is editor of J Taylor's Gold, Energy & Tech Stocks newsletter. His interest in the role gold has played in U.S. monetary history led him to research gold and into analyzing and investing in junior gold shares. Currently he also hosts his own one-hour weekly radio show Turning Hard Times Into Good Times,” which features high profile guests who discuss leading economic issues of our day. The show also discusses investment opportunities primarily in the precious metals mining sector. He has been a guest on CNBC, Fox, Bloomberg and BNN and many mining conferences.