Is Cash Still King? with Mish Schneider

0:00Hey, everyone, today's Real Vision Daily Briefing is sponsored by Crane Shares. Learn about their KRBN ETF at craneshares.com forward slash KRBN forward slash Real Vision. Now to the top analysis of today's markets.

0:25Is cash still king? Hi, everyone. Welcome to the Real Vision daily briefing. With me today is Mish Schneider, Chief Strategist at Market Gauge. Hi, Mish. I'm always so happy when you're on with us. Oh, thank you. That's so sweet, Maggie. I'm so happy when I'm on with you all, too. I mean, we've got some history here now. I know. And we've got sort of, I think, a fantastic time to be discussing this because we had a big day yesterday, an ugly day. Today, we saw stocks rebound, some recovery for bonds, but it kind of feels like we're churning ahead of this big payroll number, government payroll number coming on Friday.

1:01How are you feeling when you look across the markets? What's top on your radar? Well, what's top on my radar is always going to be pretty much the granddaddy of my modern family, the Russell 2000, the small caps. And so even though they rallied a little bit in the last 15 minutes or so of the day, they actually closed to slightly red. So that is my major focus, because I think that's really where we're going to see first what's going to happen from an economic standpoint. Are we going into a recession? Are we going to more stagnate? Can we possibly have a soft landing? It all really will stem from what the small caps do, because that spread between the small caps and the gold stocks right now is so wide.

1:46You know, those crocodile jaws that you see charts show that we know it's not sustainable. So they either hold here and close the gap that way, or the queues come down to meet it. And that's kind of where we're at right now. Yeah, that's so interesting. And of course, the Russell, I guess, representative of all those smaller companies. And we always hear that the small, medium-sized enterprises are kind of the engine of economic growth. I mean, we focus on the really big caps, but those smaller businesses are really key to economic growth here in the U.S. Absolutely. And since it is U.S.-centric, the whole small cap space, whether you look at IWM or you look at the S &P 600, the chart is pretty much the same.

2:25You have to say the interest rates, the dollar, all of the shenanigans have gone on with the whole, I mean, everything that's going on in this country right now. That's really where it's going to be reflected. I think the most would be in the small cap. Second, of course, to that would be probably the retail sector. and then we can kind of wrap it up with the transportation sector because that's what Druckenmiller calls the inside of the market. And those are also three of the key members of our economic modern family to assess. They really are very reliable, those areas. Great point about getting a clean read on the US too, because we know multinationals, somebody's exposure someplace, we saw it happen with Apple in China.

3:09So it's not always a clean read, and then they are so dominant in the other indices. We're so lucky because you look at everything, Mish. So I want, and we always say like, we don't have enough time. We'll barely scratch the surface here. So I want everyone listening to help us prioritize today. Go ahead and drop your questions in the live chat boxes. Let us know what's on your mind, what you're worried about. And then we'll try to get through as many as we can. If we don't get to all of your questions, or if you want more in-depth trading strategies from MISH and Market Gauge, there is a 20 % discount for the Real Vision community.

3:44Just head over to realvision.com forward slash MISH, and you can check it out and get all the information. I love that you have your own forward slash list, MISH, as is appropriate. So while everyone drops their questions in, I noticed in the note that you sent me, and I think you just sort of touched on this a little bit. So you mentioned that you've gotten out of a lot of risk. Your quants have gotten out of a lot of risk. But you have a plan, as you always do, and you're sort of waiting for some key signals. You just mentioned, I think, that sort of retail, Russell, transports as one of them.

4:16What else are you looking at in order to sort of figure out? So it sounds like you're still pretty cautious, first of all. And then what are you looking at that will give you a different signal? Well, first of all, and we'll get back to those sectors because I want to talk a little bit about the monthly calendars and the monthly moving averages. And I sent you guys charts of that. But let's start with our risk gauges. So we have this product called BigView, which essentially measures not just the individual bond trades, but how certain bonds relate to certain bonds or bonds relate to the S &P 500 or how wood is performing relative to gold or how gold is performing relative to SPI.

5:02So all of these give you an idea of risk on, risk off, risk neutral. We have five gauges utilities against SPI being one of them. Of the five gauges right now, we have still junk bonds outperforming the TLTs. Why is that important? Even though they both have declined, in the rate of decline, as long as the junk bonds continue to outperform on the rate of decline to the long bonds, that's actually risk on. Why? Because people will, in a risk-on environment, go to high-yield debt. Now, we've seen quite a spectacular drop in junk bonds this week, of course. And today, the TLTs or the long bonds actually closed about 1.5 % higher, where the junk bonds only closed 0.5 % higher.

5:53So what's so interesting about that one stat right there is that people are so much cheering for the TLTs to rally and the yields to fall. But I always say, be careful what you wish for in this case, because that would actually flip if somehow those long bonds started to outperform the junk bonds. That would actually be a risk-off scenario and could be a signal of recession. And with that close right now, it's actually, in some ways, as a person who talks about this, not great because I can't say definitively one thing or another, but also as a person who loves to trade, it's a great thing to talk about because it means step back and get ready depending on if this happens versus that.

6:40So that's a really key relationship. The other key relationship that we're watching here would be how the SPY performs to the long bonds and you want the SPY outperforming. It still is, but that too is kind of maybe narrowing if we get any kind of further rally in the TLTs. And then the third one, even though utilities is one of the ones that's saying risk off, by the way, because they are outperforming right now, the SPY. And also gold, believe it or not, even with its drop, is slightly outperforming the SPY. Those are the two risk off. But I really want to keep my eye on that SPY versus the gold, because gold has had this also spectacular particular correction here and how that performs versus the SPY over the next couple of weeks could really be telling along with everything else that we just mentioned.

7:31Yeah, this is why we hear about it being a kind of critical time. And this is when you really want to dig into some of this macro because not everyone looks at the relationships between these different markets as something that you really have to watch out for. But we need to, obviously, based on what you're saying. So before we hit the charts for some of this, we have a payroll number out on Friday. And it seems like the direction of bonds and what happens from here is really going to depend on getting that call on the economy right. Christopher is asking, how do you feel about today's sharp drop in oil?

8:14Is it reflecting a sharper economic slowdown than expected? Great question. And so basically, well, first of all, I last week wrote about, tweeted about, I guess we don't say tweet anymore, posted about, and actually mentioned on several media stations that I thought that oil would not get to$100 and that would probably see a correction to$85 first. And I was basing that on a few things. One, my natural contrarian tendencies when everybody's crowding into a trade and expecting the same result. Generally, that means to me that that result won't happen, number one. And number two is a lot of the fundamentals that you heard about the supply and our own reserves being so low and OPEC probably keeping the production cuts and all that stuff, I felt was kind of baked in and seasonally the demand would fall.

9:08And then, of course, with the move that we saw in the yields up so high yesterday, that now spooked the oil market even more into demand destruction, potential of recession. So the question is, that happened. But does that mean that oil is done? And I think we have to really look very closely now at the correction of where it went to. If you look at WTI futures, futures spot futures. It went to about$85,$84.50 a barrel. There's a 50-day moving average there. I love when the fundamentals and the technicals meet. And in this case, it could be that this was just a natural technical correction of an overcrowded space and week-longs getting out, with the fundamentals not really much different.

9:55And of course, depending on what happens with yields and what happens with the market and what happens with unemployment and all this other stuff, So if the market gets any sense that we're not going to get into a recession, at least not yet, I think oil will bounce. Hey, everyone, we're going to take a quick break right now to hear a word from our partners. We'll be right back with more of the day's top analysis on the Real Vision Daily Briefing.

10:31you'll be able to trade it in just two clicks. Feel ready? You can move to real money with as little as$100 once your account is approved. And the great thing is that in addition to crypto, Plus500 gives you access to a wide range of instruments. S &P 500, NASDAQ, gas, and much more. Explore equity indices, energy, metals, forex, and beyond. With a simple and intuitive platform, you could trade anytime, anywhere. Experience the fast, accessible futures trading you've been waiting for with Plus 500. With over 20 years of experience, Plus 500 is your gateway to the markets. Visit us.plus500.com to learn more.

11:07Trading in futures involves the risk of loss and is not suitable for everyone. Not all applicants will qualify. Plus 500, it's trading with a plus.

11:21Interesting. So, and one thing I want to point out too too, is it does seem like it's all about the Treasury market right now. They're really leading a lot and taking their cue from a lot. But if you all remember a couple of weeks ago, for those of you who have been watching the content on our platform, a lot of people have been talking about the disconnect between the bond market and economic fundamentals, right? We have a lot of other dynamics that are driving there, too, issuance and the like. So trying to piece this all together has been a little bit complicated, and you've seen a lot of volatility in bonds, which has made it tough to sort through what's going on.

12:03All of you have been following our trials and tribulations with this. We're so excited about the new platform. It's awesome. We try to give you a sneak peek all the time, but part of the beta as we go, not yet, Brian, as we go is that we are migrating people over. So some people coming up in the chat as like a sequence of numbers, they keep calling it their crypto account, joking around. And so I don't know who's putting this in. If it's let's call him Jen, let's call him Steve, if that's you, Brian and Nick, or if they're actually putting it in themselves, but I'm going to run with it. So apologies if that is not your name and they're just having fun with me.

12:40But number, number, number, let's call her Jen is asking, can commodities still outperform if we're into a recession? Well, that's another big question. Commodities mean a lot of things. Right. So one of the relationships, you said I sent you in the notes three relationships, and we really just focused on the bonds. And then of course, the economic modern family characters, because, and I just want to take a quick, quick, quick moment to explain that was so spectacular right here. And I think I probably used the word spectacular several times already. So I'll try to increase my thesaurus here in my brain.

13:21But essentially the IWM, if we look at that, landed right on the 80-month moving average. All right, wait, let's put that chart up, right? IWM. Yeah, let's put that chart up. That would be awesome. So if you see that green line there, that's the 80-month moving average. I didn't give you a lot of history because I really wanted you to see the price movement. But I came on this show in the beginning of the year all about the 23-month moving average because it was a two-year business cycle within a bigger business cycle. And a lot of things broke out of that 23-month in the very beginning, of course, NASDAQ being and semiconductors being the ones that led the way.

13:58And IWM never really got one month, spent one month of July above the 23-month, which is the blue line, and then immediately in August fell. And so that was a clue that we were coming to the top of the rally, number one. Number two, and more importantly now, is that green line there. That's an 80-month. If you extended that back to 2010, you would see that there's only one time it broke. And that was, guess what, two months during COVID, March and April. And then it went right back through, obviously, with all the stimulus money that came out. So here we are with no disaster other than a bond disaster to look at as we're sitting right there.

14:42Today, we took a little bit of a bounce for a half a second. It looked like, oh, maybe it's going to hold. But that's another one of those, gee, I wish I could tell you what's going to hold or it's going to fail. I don't know just yet, but we'll know real soon. And that's the exciting part. If it fails that business cycle low, that six to seven year business cycle, even though it's been above it for 13 years minus COVID, I don't care what anybody says. I'll be looking more recessionary. So that leads me to the question about commodities. Stagflation is also a possibility. And I know I'm not the only one saying stagflation.

15:20I was for a while, but now I hear other people saying it. So what does stagflation mean? Does it mean that we necessarily go into a horrible recession? Or are the small caps telling us that we're going to definitely slow, but not necessarily crash in terms of economic growth? Especially since right now, if you look at the other side of that chart, which is XRT, which is granny retail, it's not quite down there yet. Which means any stabilization of retail or transportation, which is even doing a little bit better, could mean that we just stagnate. Right. What makes the inflation situation in commodities so interesting is that everybody thinks that demand destruction is going to kill the commodities.

16:02But what we have to remember is that might be true in certain pockets. But we have still supply issues and we're not just the only consumer of raw materials. materials, we have China, which right now is on a big old holiday. But when they come back, they already were showing that they were accumulating and will stockpile raw materials, particularly when they get cheaper, because they still have 1.4 billion people that they have to take care of. And even though we here in the United States like to think, oh, China's done, they have a much longer term view than we do. So what would happen, I think, would be, A, We'll still have supply issues, particularly with some of those commodities that are really needed, you know, even for the whole EV thing, which, of course, would be lithium and uranium and copper and silver.

16:52And we have another type of inflation to be looking at right now, which is coming from the stirrings of strikes. Social unrest, clearly, the theft that we're seeing, whether it's organized or not, to me, is irrelevant. What's relevant is that people are either taking, not working, or saying, we want more in striking. So there's a movement that you can feel and see towards people going. And we've talked about this, Maggie, right, before. We have, yes. And so has Vincent de Loire, as our regular viewers will know. He's been paying attention to this as well, others as well. Yeah, you have to, because you have to say, at what point do people just go, enough is enough?

17:40I'm being squeezed. They're telling me there's no inflation, but yet prices haven't come down. They're not going to pay me the wages that I want to be paid, yet the CEOs are still making a fortune. You know, the Magnificent Seven still look like they're in a completely different universe. We want ours. We're going to take it, we're going to demand it, or we're just going to stop completely. And that to me is a very inflationary scenario, gets back to the commodities question. That would be bullish, not for all commodities, but it would certainly be bullish, I think, for precious metals, things that will react to chaotic situations, which is kind of what happened in the late 70s.

18:20And there's a lot of analogousness that's over. Because from 74, when we had inflation rate at CPI, it was like 14 percent. In 76, it crashed to below 2 percent. And exactly what could happen now, it was like, ah, recession, commodities are done, oil and bargains are over. You know, Fed, what'd they do? They started doing quantitative easing. The dollar came off. And whammo, supply was still an issue. Social unrest was still an issue. administration was changing. We certainly have a government that people are very suspicious of right now. Government spending was high then with Vietnam War, high now with the Ukrainian War, plus other things.

19:03It's very possible that what happened in 76 was when it went from 2 % CPI by 1980 to 19 % before the whole Volcker thing. So there's so many parallels that I'm not saying I would run in and buy commodities. But the DBA, DBC, those two charts, which I probably didn't give you, but are in my mind, are still well outperforming the SPY. And they've corrected some serious support. DBC has gone down to the 200-day, or maybe it's DBA that's gone down to the 200-day. DBC also failed, but is holding the July lows. So anything can trigger anything right now. You've got to be on your toes and prepared. Yeah, all fantastic points, Mish.

19:49And I think people tend to think of them in isolation. We've had conversations about the shift moving from capital to labor, some of the implications of the social unrest. But interesting to loop it back into the inflationary commodity story as well. I mean, the tentacles move through everything. By the way, remember as well, I mean, Mish's charts are off the chart. But when you want to look up this stuff while she's talking, if you're on the new platform, remember, we have charting on there now. So you can just type in the tickers as she's speaking and get a sense of the price action that she's talking about when she drops those timeframes.

20:27Only Mish can hold all this information in her head. Us mere mortals need some visual cues for sure. We've got some questions about gold, which is coming up and you just sort of touched on. Before we talk about it, Andreas had a really interesting conversation. It just happened today. I was listening to it earlier about gold with two big folks in that area. But it got very interesting at one point. They were talking about its relationship with Bitcoin. Let's have a listen and then we'll talk on the other side. Buying Bitcoin, but also buying gold. it's like a very active decision to leave the fiat money system and i've got it for many people that have never bought um gold but also bitcoin before for them it's like they feel like it's something you know it's like having sex for the very first time you know they they try to read everything and you know inform themselves and they're really nervous but it is i think once you got it, once you understand how our monetary system works, I think gold, you know, for stability, but probably Bitcoin for convexity makes sense.

21:37I said it's like gold is like having this super stable Volvo SUV in your garage, while Bitcoin is like a motorcycle, a Ducati Panigale. And You can have both, actually. Yeah, why not? When it's probably a bit icy, when it's raining, when it's foggy, you want to sit in the Volvo SUV. But it's probably more fun to ride the Ducati. So I'm in the camp that says, well, why not have both? We're going to take another quick break to hear a word from our partners. We'll be right back with more of the day's top analysis on the Real Vision Daily Briefing.

22:18I love that concept. By the way, you can see that, find that on the carousel. So remember, everything lives in the Knowledge Center now on the new platform. I think Brian's going to show it. So you can jump on there. You can leave your comment, have a discussion. The discussion chat stays up all the time now. So I'd love to know your thoughts about whether you agree with that. And I love the idea. I actually asked a question in the show about what that fund was, But the idea of fun with gold and Bitcoin in it, super interesting to me and really speaks to the mission that we are on here, which is to kind of educate ourselves about all of these asset classes.

22:58And I think that's an example of how you see these worlds. We talked about it with Noel, right? Crypto is macro. It's all the same stuff, right? People are looking for just the best opportunity no matter where it is. So super interesting comment from Ronnie there. If you are not a full member and are only watching us on YouTube, scan the QR code or hit the link, jump on a trial and come join our community so you can see all of this fantastic content. And by the way, also in the Knowledge Center, for those of you who are more on the crypto side, Ash did a deep dive on Solana today. And I know a lot of you have been asking for that.

23:33So that is in response to your request. And I think it went really well. So have a listen to that. So, Mish, really, really interesting to me. I know you look at gold all the time. I know you look at crypto as well and Bitcoin as well as other coins. What did you think about that? It was interesting. He at some point was reading from the white paper of Bitcoin with making the comparison to gold. But the idea of both of them being useful kind of vehicles and having them both in your garage or in your portfolio to use was interesting. Well, first of all, I love anything that's poetic in nature. And that was.

24:10So kudos for that. And we totally agree. We're completely on the same page. So a couple of things I want to say. Number one is I have a Volvo SUV. So you're already ready on that part. So I also own gold. And we may not have the Ducati at our age, but we have a Honda S2000, actually vintage car at this point. That's a race car. So there you go. I expect nothing less. Every time Miss drops something else we didn't know about her vast interest. Yes. Well, Keith has held on to that car for 23 years. And it's still people still stop and go, oh, my God. But anyway, the point is this, that he mentions about getting away from fiat currency.

24:54And that clearly is the direction of the future. There is no doubt. If we just take a look, I want to go back to gold because I actually have I want to say something about somebody that was very dear to candlestick. And we have a lot of questions as well. Yeah, yeah. And I'll get back to it. I just want to say something about and especially Solana. OK, so, you know, we have quant models. We also have our dear Holden Milstein, who is our crypto quant specialist. And he just recently did a whole report where he said that statistically when Bitcoin has a positive end for September, which it did, then it goes on to have a positive Q4, which we're kind of seeing.

25:36And then he goes into this whole analysis. And if you want to find this article, if you just go to CryptoPulse on our website, you can read it. It's free. It's really great with charts. But the two things he mentioned in terms of the altcoins, one would be Chainlink, which we've already been in in the quant, which is up about 18 % already, or at least last time I looked. And we entered Solana this week. So check it out, because I think that'll give you more information. So, yeah, there's that. Now, looking at gold, yeah, gold's frustrating. And you can look at it sort of, and this has been my favorite expression lately, half glass, glass half full, half empty.

26:16Half full, okay, we're at 1830, 1835 an ounce. But still, considering how much we're down, let's say if we're looking at certain areas of the market that have crashed to 52-week lows, it's still outperforming. I just told you on the risk parameters, it's outperforming the SPY. But it has had a lot of damage. Now, here's what I wanted to mention. So candlesticks. I just looked at the chart before I came on. And in honor of, I don't know how many of you know Stephen Bigelow, but Stephen Bigelow passed away. And he was my teacher for candlesticks and lots and lots and lots of people. He's leaving quite a legacy of instruction on candlesticks, Japanese candlesticks.

26:59But he brought it to the American audience. If you look at the gold, so rest in peace here, Stephen. If you look at the gold, we have two doji closes in a row. OK, and so right now with two dojis at a bottom, very oversold, as oversold as it hasn't been since 2018 when it was trading 1720 an ounce. As we know, after that, it went to 2000. So we're oversold. We have two doji candles, which means pause at a very critical level. So to me, if you wanted to add to a gold position, I think you should have some gold, just like the Volvo, as was mentioned in the clip. But if you're not in gold, then I would be looking for these areas to hold right here, maybe get through 1865, just sort of as a confirmation.