PPI inflation comes in soft… can Bitcoin break triple-top resistance?… waiting on “altcoin season” … be careful about heading bearish warnings… keep your eye on private credit
Another day, another soft inflation report.
This morning, we learned that the Producer Price Index (PPI), which measures wholesale prices, rose just 0.1% in May, coming in below forecasts.
Core PPI, which strips out volatile food and energy prices, increased a mild 0.1% last month, also below expectations.
Let’s jump to legendary investor Louis Navellier for the takeaway. From this morning’s Flash Alert in Growth Investor:
Well, the mythical inflation bogeyman has not materialized, folks…
This is great news. The Federal Reserve has been anticipating higher inflation once the tariffs kick in, yet it continues to come in well below expectations…
The bottom line is the Fed is going to have to say something at its meeting next week. And while I don’t expect them to cut key interest rates, they’re going to have to give us some guidance.
They keep imagining an inflation bogeyman that hasn’t materialized.
Louis’ reference to “next week” is the Federal Reserve’s June FOMC meeting that concludes on Wednesday.
As he noted, no one is anticipating a rate cut, but with inflation failing to materialize, we’ll be looking for Fed Chair Powell’s rationale for waiting.
We’ll also be eager to review the new Dot Plot that will include the Fed members’ updated forecasts on inflation and the fed funds target rate as we look ahead to the coming months.
Can Bitcoin break through resistance to reach $150,000?
As I write Thursday, the crypto trades just above $107,000 – that’s about 4% below its all-time high of just under $112,000, set last month.
Bitcoin has pushed above $110,000 three times since Tuesday, only to fall back, creating a “triple top” of resistance.
Are we about to see a resistance break, followed by a new all-time high? Or will $110,000 prove too strong, resulting in a meaningful pullback where Bitcoin will have to regroup and lick its wounds for a few weeks?
While it’s anyone’s guess what happens over the next few days, our crypto expert Luke Lango believes a handful of bullish factors mean Bitcoin will be materially higher by Labor Day.
Let’s go to his latest issue of Crypto Investor Network:
What we’re looking at here is a textbook case of macro bark shaking out weak hands while fundamentals remain steadfastly bullish.
In fact, we’re still targeting $150,000 on Bitcoin by late summer and an altcoin surge higher over the next few months.
Luke points toward a few tailwinds to fuel a bullish push.
First, the U.S. Labor Department reversed a Biden-era ruling that warned 401(k) plan issuers against using cryptos in workplace retirement portfolios. The move is part of a broader push from the White House to introduce cryptos into 401(k) portfolios.
But the more impactful move from the government comes via new legislation. Here’s Luke:
A new – and better – crypto bill is now making its way through Washington, D.C.
The newly released Digital Asset Market Clarity Act, known as the CLARITY Act, promises to bring transparency on rules and lower legal risks for platforms like Coinbase and Robinhood.
The bill outlines which agency (SEC or CFTC) has jurisdiction, how firms should register – potentially as an alternative trading system (ATS) or as a digital commodity exchange, broker or dealer – and when a token should be considered a security or a commodity.
The bill also gives the CFTC authority over crypto spot markets.
Congress’s continued work on crypto regulation is a welcome step. For years, the industry has faced a hostile and uncertain regulatory environment, pushing many innovators to seek clearer rules abroad.
A well-crafted legislative framework could finally resolve the awkwardness of traditional securities laws being applied to decentralized crypto networks. And that’s likely to clear the way for higher prices.
But if Bitcoin at $150K gets you excited, hang on for Luke’s fall forecast:
Inflation expectations are cooling. Rate cuts are back on the table. And we’re still tracking a post-halving pattern that points to $150K Bitcoin by late summer and $200K by fall.
Bitcoin at $200K would mean an 87% gain from here.
Keep on the lookout for “altcoin season”
In crypto markets, “altcoin season” refers to a period when alternative cryptocurrencies – anything that’s not Bitcoin – start to outperform Bitcoin.
Normally, the granddaddy crypto dominates the market and sets the tone, pulling most investor attention and capital. But eventually, when Bitcoin’s rally slows or consolidates after a strong move up, risk appetite shifts.
Investors begin rotating into smaller, more volatile assets (like Ethereum, Solana, or meme coins), hunting for bigger returns. When this happens, the returns from leading altcoins can be enormous, putting “87%” to shame.
To be clear, we’re not there yet.
We can see this by looking at the CMC Altcoin Season Index. This shows us the performance of the top 100 altcoins relative to Bitcoin over the past 90 days. If 75% of the top 100 coins outperform Bitcoin in the last 90 days, it’s Altcoin Season.
As I write, we’re only at 31. However, we’re moving in the right direction. On April 25, the index clocked in at just 12.
We’ll keep an eye on this and will alert you as the index heats up. After all, love them or hate them, few things can make you as much money – in as short a period – as altcoins when they get hot.
Here’s Luke’s bottom line:
[Even though altcoins remain subdued right now], that’s how things started in every previous cycle. Altcoins lagged, seemed dead. Then they erupted.
The catch-up trade is real, and it happens fast. We still believe we’re in the early innings of that move.
The burden of “timing” for bears
Yesterday, CNBC reported that JPMorgan’s CEO Jamie Dimon suggested the economy is headed for a slowdown, saying, “I think there’s a chance real numbers will deteriorate soon.”
This is certainly a possibility, and it’s one we track regularly in the Digest.
However, we must take this warning with a grain of salt since Dimon appears to be growing into a permabear.
In 2020, he warned of “a bad recession.” In December 2022, he doubled down, saying that we could face a “mild or hard recession.”
Since that second warning – December 6, 2022 – the S&P has surged 51%.
Then, on February 27, 2024, Dimon was back at it, downplaying the overall positive investor sentiment and market gains. He said, “markets change their mind pretty quickly,” followed by:
Remember, in 1972 you felt great, too. And before any crash, you felt great, and then things change.
Since that comment, the S&P has climbed 19%.
This underscores something we’d be wise to remember today…
Bearish forecasts are only as useful as the accuracy of their timing.
After all, what benefit is there in being right about a bearish forecast if it comes to fruition on the other side of a monster rally you missed?
Even if the market crashes 30% tomorrow, your portfolio would still be higher for having ignored Dimon’s warning back in 2022 before the market’s 51% ascent.
This is why my cautious Digests in recent years always urged readers to abide by their stop losses and be mindful of position sizing, but with those safeguards in place, stick with bullish momentum.
Let’s recall the wise words of the legendary Peter Lynch:
Far more money has been lost by investors preparing for corrections or trying to anticipate corrections than has been lost in the corrections themselves.
This is why we urge investors to learn how to trade volatile markets rather than trying to time a bear.
On that note, if you missed him yesterday, master trader Jeff Clark held a live presentation detailing exactly how he’s trading, and profiting from, volatility today.
Jeff – like Dimon – believes we’re in for some market pain. But Jeff sees opportunity in this, confident that there are big trading profits to be had, whether markets are falling or soaring.
To illustrate this bi-directional opportunity, here are the trades Jeff recommended at his live trading blog, Delta Direct, going back to the end of March.
Notice how he’s making money in both long and short trades – as well as how quickly Jeff is in and out of the market.
If you missed Jeff’s presentation, you can catch the free replay right here.
Circling back to Dimon, there was one part of this latest interview that caught our eye…
His warning on private credit.
Be careful about jumping into private credit today – and consider skimming some profits if you’re already in it and up nicely
While private credit has historically offered attractive yields, several factors (and Dimon) suggest that now may not be the best time for new investments. You might even want to take some money off the table.
To make sure we’re all on the same page, private credit involves non-bank lending to companies, typically through direct loans or private debt funds. Unlike public credit markets, these loans are not traded on exchanges, offering investors higher yields in exchange for reduced liquidity.
Currently, private credit yields are at a four-year high. The upper middle-market loans are offering yields around 10.15%.
That might sound attractive, but there’s a catch: The spread, or extra compensation you get for holding these less liquid, private loans instead of similar public ones, has collapsed.
Today, the yield premium over comparable public credit is only around 226 basis points (or 2.26%). That spread is narrow by historical standards. In other words, you’re not getting paid as much of a premium for assuming the added risk.
In fact, that 226 basis-point spread is almost twice as tight as the average we’ve seen since 2021.
Remember the old market truism: The more you pay today, all else equal, the lower your returns will be tomorrow.
Here’s Dimon from yesterday:
Do I think that now is a good time to buy credit if I was a fund manager?
No. I wouldn’t be buying credit today at these prices and these spreads.
Circling back to Louis, he’s warned investors to be careful of excessive leverage in private credit
Here’s Louis from one of his past Growth Investor Flash Alerts:
What has happened in America is that we’ve become like China. We have an official bank lending system, then we have an unofficial lending system, controlled by the private credit industry.
Now, private credit is exploding everywhere. This is what you can buy at Morgan Stanley and almost every broker/dealer and financial advisor.
And you can – right now – get an 11% yield, and you’ll get your money back in two years. But the question is “how are they getting an 11% yield?”
What’s happening is it looks like they’re starting to leverage.
It’s time to be especially cautious about this leverage.
Let’s go to Bloomberg:
The companies that get private credit loans are looking increasingly wobbly and banks are among those that could eventually be on the hook for losses.
Many companies getting direct loans from private lenders are struggling to produce cash, by at least one key measure: At the end of 2024, more than 40% of borrowers had negative free cash flow from their businesses, the International Monetary Fund warned in a report this past week. That’s up from closer to 25% at the end of 2021.
Borrowers that aren’t generating enough cash flow are at greater risk of defaulting, a particular concern as trade wars lead to fears of economic stagnation.
Turning to your portfolio, a handful of companies that have exposure here are Apollo Global Management (APO), Ares Management Corporation (ARES), Blackstone Inc. (BX) (Disclaimer: I own BX), and Blue Owl Capital Inc. (OWL).
To be clear, we’re not predicting an imminent collapse. But prices are toppy, spreads are shrinking, and caution is warranted.
We’ll keep you updated.
Have a good evening,
Jeff Remsburg
