The Fed says tapering is coming “soon” … a mathematic comparison of crypto and stock wealth-creation … and Chinese drama weighs on the battery metals trade

 

Today, the Fed held its benchmark interest rate near zero, but indicated that hikes could be on the way sooner than some had expected.

As to tapering its bond purchases, Fed officials didn’t make any changes, but said a tapering is coming “soon.”

From the FOMC’s post-meeting statement:

If progress continues broadly as expected, the Committee judges that a moderation in the pace of asset purchases may soon be warranted.

Expectations are now for an official tapering announcement in November, with reductions to begin in December.

What’s more interesting is the new information on potential rate hikes. Fed officials signaled we could see six or seven hikes by the end of 2024.

From Yahoo! Finance:

The updated forecast now has the committee split on rate hikes in 2022, with 9 members seeing the case for no rate hikes next year but the other 9 seeing the case for at least one hike. By the end of 2023, the median dot projects three to four total rate hikes.

Through the end of 2024, the median FOMC member sees six to seven total rate hikes.

This was an important Fed announcement, with the potential for volatility in its wake. But the markets liked the Fed’s messaging, and morning gains extended after the announcement and held through Powell’s live remarks.

As we go to press, the Dow is down from earlier highs on the day, but is still up 1%.

Earlier this week, Louis Navellier and Luke Lango both predicted the Fed would give the market what it wanted, leading to a rally. So far, things are playing out exactly as expected.

***Meanwhile, the crypto sector appears to be finding its footing

After suffering a steep pullback beginning two weeks ago that intensified with Monday’s market drop, crypto prices are stabilizing.

As I write Wednesday afternoon, bitcoin is trading above 43,000, well off recent lows. And Ethereum has pushed north through $3,000 again.

As we’ve noted many times in the Digest, this heightened volatility is the price of admission for being a crypto investor. But let’s make sure you’re aware of the potential payoff for this cost.

Last week, our crypto specialist, Luke Lango, provided some fascinating statistics on the wealth-generating capacity of select top-tier cryptocurrencies.

From Luke:

About 25 cryptos have risen more than 1,000% in value in 2021. That’s 25 different opportunities in the crypto market for you to turn $10,000 into over $100,000 in just nine short months.

Meanwhile, over on Wall Street, just two stocks have accomplished the same: Destination XL Group (DXLG) and AMC Entertainment (AMC)…

That’s a huge difference.

And it’s even more shocking when you consider that the crypto market includes about 6,600 cryptos, while the stock market has around 8,300 legitimate stocks.

In other words, 25 out of 6,600 cryptos have risen more than 1,000% in value in 2021, or about 0.4% of all cryptos. Meanwhile, two out of 8,300 stocks have done the same, or about 0.02%.

The difference is approximately 20X – meaning crypto investors chances of earning 1,000% returns on a single investment are 20X that of stock investors.

I’m a math guy. I follow the numbers. And when the math is that obvious, I cannot ignore it.

And so, I repeat: If you want to make big money in the markets, you need to be invested in cryptos.

***If we track crypto money-flows, it echoes Luke’s conviction

On Monday, we learned that cryptocurrency investment products and funds saw inflows for the fifth consecutive week.

Just over $41 million flowed into the sector for the week ending September 17. Bitcoin received the most, at just over $15 million.

But to what extent might Monday’s China-based selloff alter this?

From Reuters:

Blockchain data provider Glassnode, in its latest note on Monday, acknowledged the current macroeconomic backdrop that featured growing uncertainties in Chinese credit markets.

But it noted that even amid this landscape, “bitcoin price action, and on-chain investor responses appear relatively robust.”

Glassnode believes bitcoin is forming a “consolidation trading range.”

By the way, Luke will release a new altcoin recommendation in his Ultimate Crypto portfolio tomorrow. It’s a way to take advantage of the cutting-edge, next evolution of the internet – the Metaverse.

To join Luke in Ultimate Crypto, click here.

***One of our favorite long-term trades is taking it on the chin thanks to the Chinese Evergrande drama

Regular Digest readers know that we’re very bullish this decade’s copper and battery metals trade.

From electric cars, to solar energy, to large-scale battery storage, to cutting-edge tech products…tomorrow’s technology requires battery metals. This is a heightened demand that didn’t exist to nearly the same degree decades ago. And it’s paving the way for multi-bagger returns in select commodities and commodity miners over the coming years.

But the latest drama with Chinese real estate developer, Evergrande, is serving as a temporary headwind.

From MarketWatch:

Prices for some commodities, including iron ore and copper, took a hit on Monday, as the potential collapse of one of China’s biggest property developers fueled worries about the economy, and potential declines in construction and demand for raw materials.

The “festering fears” around China’s Evergrande are “raising concerns about a bigger economic crisis in China that could put downward pressure on a lot of the commodities that China consumes,” said Phil Flynn, senior market analyst at The Price futures Group.

Though Monday intensified pressure on copper’s price, efforts by Beijing to curb commodity prices have been weighing on the metal since earlier this summer.

From the Wall Street Journal back in June:

China said it would begin to sell major industrial metals from state stockpiles, an effort to squelch factory-gate price increases that have hit a 13-year high and are stoking fears of global inflation.

As the world’s biggest buyer of a range of industrial commodities, China is using its market heft to try to quell the sharp rise in global metal prices over the past 12 months, including a 67% surge in copper, a bellwether for macroeconomic health.

China might be able to temporarily take pressure off of soaring commodities prices, but – to borrow from the Fed – that would be “transitory” …a bit like trying to block the spray from a firehose with your hand.

As the world transitions to green energy over the coming years, the demand for copper and base metals is going to be massive. One country’s reserves – even a country as large as China – can’t stop that.

We believe that weakness in copper and other battery metals should be seeing as discounted-entry-price opportunities for long-term, patient investors.

Bottom-line, this decade will be defined by technological innovations – and those innovations demand battery metals.

Wrapping up, as Louis and Luke predicted, the markets are happy in the wake of today’s announcement.

Look for stocks to continue getting back on solid footing as move we into October and the final quarter of the year.

Have a good evening,

Jeff Remsburg