My Expectations For 2023
Current Situation
As we finish 2022 and roll into 2023, here is where we stand, in a nut shell:
Since January 1st:
Nasdaq is down 32%
Bitcoin is down 65%
Gold down 2% - looks like gold DID do well in this environment! For those of you who hold gold, you beat the S&P 500, Nasdaq, Bitcoin AND the purchasing power of the dollar. (side note, gold has been making all time highs in all other currencies)
Silver is FLAT…yes, flat on the year. Amazing. Love it.
For those of you who actually read the Tobin Report, you know I’ve stayed away from Bitcoin (often telling my friends to sell every rally!) and tech. In fact, I’ve profited nicely buying inverse ETFs. (thus, making money on their downfall).
If you recall, I wrote a report a few months ago telling you how to do so and at what levels. If you need a refresher, click HERE.
This was the chart used in that article back in August…and if you look at the next chart down, you’ll see price moved exactly as predicted. This is why I love charts. My opinion means nothing…but the chart’s opinion is everything!
I STILL am not touching Bitcoin or tech stocks. No, we have not hit a bottom. No, things will not go back to normal. (solely my opinion)
I’ve been pounding the table on commodities…energy…precious metals…uranium…for good reason. Are some of them down in recent weeks? Yup. Has uranium been beat up? Indeed. For those of us who bought last year, we are doing nicely in many positions. Great time to re-evaluate if you don’t own any.
None of this is investment advice, of course. Just my thoughts.
More Of Those Thoughts…
The Fed is still raising interest rates, albeit at a slower pace - NOT good for financial markets, i.e. your retirement account (unless you’re sitting in cash like me)
Fed stated they will keep rates higher for longer - NOT good for financial markets
Labor market pain has not yet been felt - just wait until 2023…
Fed needs labor market to weaken…WANTS labor market to weaken to keep inflation down. Yes, they need people to get laid off. Sad but true.
We are still in a down trend. Charts do not lie…and when charts talk to me, I believe them. Why fight it? See chart below…
Chart of the QQQ (Nasdaq - tech)…down sloping trendline…cannot seem to break above. Several bounces…significant rallies…but ultimately DOWN.
Classic bear market. No reason to think otherwise. Definitely not any sort of bottoming pattern formed.
Sooooooo….where are we headed in 2023?
My Expectations in 2023
Fed has raised rates faster and more aggressively than they have in 40 years.
2022 was the year of rate hikes and tight policy.
2023 will be the resulting shit storm in the economy. It will also be the year the Fed stops hiking rates. Maaaaaaaaybe reverses…if something breaks.
Here are my expectations for 2023 and investment implications:
Lower corporate profits - companies will start reporting lower earnings
Lower overall market prices (S&P 500, Nasdaq, Dow Jones)
Recession - negative growth, layoffs, etc
Inflation continues subside - but finds a new base well above 2%
De-globalization - The US will need to depend more on the US, which is inflationary
Energy shortages - oil, uranium, precious metals - this too is inflationary.
Once the unemployment rate starts to really climb…the Fed will pause and ultimately reverse rates - I will not predict when - I am not that smart
If you believe, like I do, that the Fed will eventually pause and stop hiking rates, and you are wondering what investment opportunities will exist, then you might want to look at the chart below. (According to BofA)
The asset class that does the best after the Fed stops hiking is the Materials Sector.
What is in this sector?
Commodities. Metals and mining. Gold. Silver.
You know, all the stuff you’ve been reading about in The Tobin Report.
This chart also tells you that free cash flow and value are the places to be once the Fed pauses.
The Next Market Leaders
Themes likely to lead into the next bull market.
I believe we will see new ‘leadership’ in transitioning from a low rate environment to a higher rate environment - money will rotate into new sectors
My research indicates that companies that are cash flow positive and paying dividends will be winners
Resources companies - energy security and de-carbonization goals require money to flow into this investment theme - metals, mining, nuclear, energy. Keep an eye on the following ETFs: XLE, XME, URA.
Don’t just listen to me…
Look what Bank of America’s Global Research team forecasts for 2023.
Long Story Short
Long story short, I like cash flowing, small-cap, value companies in the materials sector for 2023.
Could I be wrong? Of course. Am I just a guy on the internet with an opinion and no special degree in finance whatsoever? Yes.
I let history guide me.
I let the charts tell me.
I conduct extensive research to see where this could be wrong.
But I keep coming back to the same conclusions…so I stay long.
Finally, I’ll leave you with my favorite chart from this last week.
Favorite Chart From This Last Week
Below is a chart of a company I have been accumulating since September.
Bear Creek Mining (BCEKF) is an explorer, developer, and producer of gold & silver in mining friendly jurisdictions. Current market capitalization after the recent run up is $125 million.
I’m up over 100% in just a few short months as the chart has been forming a bottoming pattern. The entire gold and silver mining complex has been doing the same. This is just one of many in the junior mining complex that have been outperforming the broad markets.
This is the decoupling I have been waiting for. Money is rotating OUT of high flying tech companies and INTO value.
You can literally see it…look at the volume bars on the chart. This is also on NO NEWS.
It’s happening across the space. I am WATCHING money roll into these junior mining companies in recent weeks.
The time to buy these companies was when nobody else was. I am no longer adding to this position as I’ve already doubled my money.
However, any new money here should be allocated on weakness…do not chase.
I repeat…do not chase.
With all this said, gold and silver are both due for a correction. How big and how deep? I don’t know. Silver is up 40% in a matter of weeks. It needs a break. It needs a breather.
However, it is my opinion that these corrections…these breathers are the new ‘buy the dip’ opportunities.
That’s all for this week. Hope you enjoyed.
Eric