by Ivan Martchev

June 22, 2021

One could argue that the real drama was not on the day of the FOMC statement and Powell’s press conference (Wednesday), but when St. Louis Fed President James Bullard ran his mouth on CNBC’s Squawk Box last Friday. That’s what caused the most severe repercussions in stocks, bonds, and commodities. Retail investors favorite index – the Dow Jones Industrial Average – was down 533 points on Friday, while the institutional investors’ favorite index – the S&P 500 — was down 55.

What did Bullard say that upset the markets so much? Here are some excerpts from the June 18, 2021 Bloomberg story (“Fed’s Bullard Says High Inflation May Warrant 2022 Liftoff”):

“Inflation risks may warrant the Federal Reserve beginning raising interest rates next year, St. Louis Fed President James Bullard said, backing an even-earlier liftoff than penciled in by many of his colleagues. ‘I put us starting in late 2022,’ Bullard said Friday during a TV interview on CNBC, referring to interest-rate projections published Wednesday by the U.S. central bank …

“’The chair officially opened the discussion at this past meeting and now we’ll have a chance to have more in depth discussions coming ahead,’ said Bullard, noting that it was a complicated debate, and it would take ‘several meetings’ to iron out the various components involved. These include deciding the timing and pace of the taper, whether it should be placed on an automatic pilot or be adjusted as economic conditions shift, as well as the balance between Treasuries and MBS.

“’I’m leaning a little bit toward the idea that maybe we don’t need to be in mortgage-backed securities with a booming housing market,’ Bullard said. ‘I would be a little bit concerned about feeding into the housing froth that seems to be developing.’”

I doubt he was being a loose cannon, saying what he said on his own. While this is certainly a possibility, I believe it is more probable that “they” sent him there to say what he said. “They” (as in Jay Powell & Co.) likely believe that if it comes from Bullard’s lips the damage to the financial markets will be more limited. If that is indeed their theory, it surely will be tested this week as I saw major disturbances in all kinds of volatility metrics for all major markets – stocks, bonds, currencies, and commodities. USD Cash Settle Chart

Graphs are for illustrative and discussion purposes only. Please read important disclosures at the end of this commentary.

This was not about rising long-term rates and inflation pressuring the tech sector. This was about when the Fed will start to taper, plus a flattening yield curve (rising 2- and 5-year yields and a falling 10-year yield) and a financial sector under pressure. Late June should deliver a tumultuous week or two.

Bitcoin is About to Crash?

Other than chopping below its 200-day moving average, bitcoin – the retail investor’s favorite speculative digital asset – In my opinion is not acting well. If this chart combines two head-and-shoulders tops juxtaposed on top of one another, it suggests that bitcoin will fall under $10,000 and into the single-digit (thousands) category. BITStamp USD Chart

Graphs are for illustrative and discussion purposes only. Please read important disclosures at the end of this commentary.

Since we made it from $5,000 to $65,000 after March 2020, going back to something like $5,000 will wipe out a lot of individual investors. I have personally spoken with many investors who (each) have several hundred thousand dollars in bitcoin. When I asked why they invested in bitcoin, more often than not their answer boiled down to “I bought it because it was going up.”

If they bought it just because it was going up, they are also likely to sell it because it is going down. I think a break below $30,000 will lead to major downside, as the vast majority of trading in 2021 was done above that level, leading to what traders call “overhead supply.”

It has come to my attention that there is also leveraged trading in bitcoin outside of futures exchanges, in some cases 100:1 leverage. If this leverage begins to unwind, it will likely lead to what traders refer to as a crash – say down 50% in a single week or month.

Crashes are impossible to forecast with precision (to the day), but they can be seen ahead of time, sometimes within days or weeks of the event. I think we will see a major downside in bitcoin in the next 30 to 60 days, based on unwinding leverage and quickly cascading losses.

Bitcoin has had many 70% to 80% declines in the past, but back then it was not yet mainstream. When it crashes this time around, it will be more brutal due to the large number of individual investors involved. I have told every owner of bitcoin that has asked my opinion of this “digital asset” to get out ASAP.

I am telling you the same again. This topping pattern signifies significant downside to the single thousands. As of this writing (June 20, 2021), bitcoin trades at $34,603.

All content above represents the opinion of Ivan Martchev of Navellier & Associates, Inc.

Please see important disclosures below.

Also In This Issue

A Look Ahead by Louis Navellier
Commodity Inflation is Coming Under Control

Income Mail by Bryan Perry
Confusion is a Major Market Nemesis

Growth Mail by Gary Alexander
The Grand Experiment in “Funny Money” Continues

Global Mail by Ivan Martchev
The Fed’s “Untaper Tantrum”

Sector Spotlight by Jason Bodner
Why I Am Ignoring Last Friday’s Market Mess

View Full Archive
Read Past Issues Here

About The Author

Ivan Martchev
INVESTMENT STRATEGIST

Ivan Martchev is an investment strategist with Navellier.  Previously, Ivan served as editorial director at InvestorPlace Media. Ivan was editor of Louis Rukeyser’s Mutual Funds and associate editor of Personal Finance. Ivan is also co-author of The Silk Road to Riches (Financial Times Press). The book provided analysis of geopolitical issues and investment strategy in natural resources and emerging markets with an emphasis on Asia. The book also correctly predicted the collapse in the U.S. real estate market, the rise of precious metals, and the resulting increased investor interest in emerging markets. Ivan’s commentaries have been published by MSNBC, The Motley Fool, MarketWatch, and others. All content of “Global Mail” represents the opinion of Ivan Martchev

Important Disclosures:

Although information in these reports has been obtained from and is based upon sources that Navellier believes to be reliable, Navellier does not guarantee its accuracy and it may be incomplete or condensed. All opinions and estimates constitute Navellier’s judgment as of the date the report was created and are subject to change without notice. These reports are for informational purposes only and are not a solicitation for the purchase or sale of a security. Any decision to purchase securities mentioned in these reports must take into account existing public information on such securities or any registered prospectus.To the extent permitted by law, neither Navellier & Associates, Inc., nor any of its affiliates, agents, or service providers assumes any liability or responsibility nor owes any duty of care for any consequences of any person acting or refraining to act in reliance on the information contained in this communication or for any decision based on it.

Past performance is no indication of future results. Investment in securities involves significant risk and has the potential for partial or complete loss of funds invested. It should not be assumed that any securities recommendations made by Navellier. in the future will be profitable or equal the performance of securities made in this report. Dividend payments are not guaranteed. The amount of a dividend payment, if any, can vary over time and issuers may reduce dividends paid on securities in the event of a recession or adverse event affecting a specific industry or issuer.

None of the stock information, data, and company information presented herein constitutes a recommendation by Navellier or a solicitation to buy or sell any securities. Any specific securities identified and described do not represent all of the securities purchased, sold, or recommended for advisory clients. The holdings identified do not represent all of the securities purchased, sold, or recommended for advisory clients and the reader should not assume that investments in the securities identified and discussed were or will be profitable.

Information presented is general information that does not take into account your individual circumstances, financial situation, or needs, nor does it present a personalized recommendation to you. Individual stocks presented may not be suitable for every investor. Investment in securities involves significant risk and has the potential for partial or complete loss of funds invested. Investment in fixed income securities has the potential for the investment return and principal value of an investment to fluctuate so that an investor’s holdings, when redeemed, may be worth less than their original cost.

One cannot invest directly in an index. Index is unmanaged and index performance does not reflect deduction of fees, expenses, or taxes. Presentation of Index data does not reflect a belief by Navellier that any stock index constitutes an investment alternative to any Navellier equity strategy or is necessarily comparable to such strategies. Among the most important differences between the Indices and Navellier strategies are that the Navellier equity strategies may (1) incur material management fees, (2) concentrate its investments in relatively few stocks, industries, or sectors, (3) have significantly greater trading activity and related costs, and (4) be significantly more or less volatile than the Indices.

ETF Risk: We may invest in exchange traded funds (“ETFs”) and some of our investment strategies are generally fully invested in ETFs. Like traditional mutual funds, ETFs charge asset-based fees, but they generally do not charge initial sales charges or redemption fees and investors typically pay only customary brokerage fees to buy and sell ETF shares. The fees and costs charged by ETFs held in client accounts will not be deducted from the compensation the client pays Navellier. ETF prices can fluctuate up or down, and a client account could lose money investing in an ETF if the prices of the securities owned by the ETF go down. ETFs are subject to additional risks:

  • ETF shares may trade above or below their net asset value;
  • An active trading market for an ETF’s shares may not develop or be maintained;
  • The value of an ETF may be more volatile than the underlying portfolio of securities the ETF is designed to track;
  • The cost of owning shares of the ETF may exceed those a client would incur by directly investing in the underlying securities; and
  • Trading of an ETF’s shares may be halted if the listing exchange’s officials deem it appropriate, the shares are delisted from the exchange, or the activation of market-wide “circuit breakers” (which are tied to large decreases in stock prices) halts stock trading generally.

Grader Disclosures: Investment in equity strategies involves substantial risk and has the potential for partial or complete loss of funds invested. The sample portfolio and any accompanying charts are for informational purposes only and are not to be construed as a solicitation to buy or sell any financial instrument and should not be relied upon as the sole factor in an investment making decision. As a matter of normal and important disclosures to you, as a potential investor, please consider the following: The performance presented is not based on any actual securities trading, portfolio, or accounts, and the reported performance of the A, B, C, D, and F portfolios (collectively the “model portfolios”) should be considered mere “paper” or pro forma performance results based on Navellier’s research.

Investors evaluating any of Navellier & Associates, Inc.’s, (or its affiliates’) Investment Products must not use any information presented here, including the performance figures of the model portfolios, in their evaluation of any Navellier Investment Products. Navellier Investment Products include the firm’s mutual funds and managed accounts. The model portfolios, charts, and other information presented do not represent actual funded trades and are not actual funded portfolios. There are material differences between Navellier Investment Products’ portfolios and the model portfolios, research, and performance figures presented here. The model portfolios and the research results (1) may contain stocks or ETFs that are illiquid and difficult to trade; (2) may contain stock or ETF holdings materially different from actual funded Navellier Investment Product portfolios; (3) include the reinvestment of all dividends and other earnings, estimated trading costs, commissions, or management fees; and, (4) may not reflect prices obtained in an actual funded Navellier Investment Product portfolio. For these and other reasons, the reported performances of model portfolios do not reflect the performance results of Navellier’s actually funded and traded Investment Products. In most cases, Navellier’s Investment Products have materially lower performance results than the performances of the model portfolios presented.

This report contains statements that are, or may be considered to be, forward-looking statements. All statements that are not historical facts, including statements about our beliefs or expectations, are “forward-looking statements” within the meaning of The U.S. Private Securities Litigation Reform Act of 1995. These statements may be identified by such forward-looking terminology as “expect,” “estimate,” “plan,” “intend,” “believe,” “anticipate,” “may,” “will,” “should,” “could,” “continue,” “project,” or similar statements or variations of such terms. Our forward-looking statements are based on a series of expectations, assumptions, and projections, are not guarantees of future results or performance, and involve substantial risks and uncertainty as described in Form ADV Part 2A of our filing with the Securities and Exchange Commission (SEC), which is available at www.adviserinfo.sec.gov or by requesting a copy by emailing info@navellier.com. All of our forward-looking statements are as of the date of this report only. We can give no assurance that such expectations or forward-looking statements will prove to be correct. Actual results may differ materially. You are urged to carefully consider all such factors.

FEDERAL TAX ADVICE DISCLAIMER: As required by U.S. Treasury Regulations, you are informed that, to the extent this presentation includes any federal tax advice, the presentation is not written by Navellier to be used, and cannot be used, for the purpose of avoiding federal tax penalties. Navellier does not advise on any income tax requirements or issues. Use of any information presented by Navellier is for general information only and does not represent tax advice either express or implied. You are encouraged to seek professional tax advice for income tax questions and assistance.

IMPORTANT NEWSLETTER DISCLOSURE:The hypothetical performance results for investment newsletters that are authored or edited by Louis Navellier, including Louis Navellier’s Growth Investor, Louis Navellier’s Breakthrough Stocks, Louis Navellier’s Accelerated Profits, and Louis Navellier’s Platinum Club, are not based on any actual securities trading, portfolio, or accounts, and the newsletters’ reported hypothetical performances should be considered mere “paper” or proforma hypothetical performance results and are not actual performance of real world trades.  Navellier & Associates, Inc. does not have any relation to or affiliation with the owner of these newsletters. There are material differences between Navellier Investment Products’ portfolios and the InvestorPlace Media, LLC newsletter portfolios authored by Louis Navellier. The InvestorPlace Media, LLC newsletters contain hypothetical performance that do not include transaction costs, advisory fees, or other fees a client might incur if actual investments and trades were being made by an investor. As a result, newsletter performance should not be used to evaluate Navellier Investment services which are separate and different from the newsletters. The owner of the newsletters is InvestorPlace Media, LLC and any questions concerning the newsletters, including any newsletter advertising or hypothetical Newsletter performance claims, (which are calculated solely by Investor Place Media and not Navellier) should be referred to InvestorPlace Media, LLC at (800) 718-8289.

Please note that Navellier & Associates and the Navellier Private Client Group are managed completely independent of the newsletters owned and published by InvestorPlace Media, LLC and written and edited by Louis Navellier, and investment performance of the newsletters should in no way be considered indicative of potential future investment performance for any Navellier & Associates separately managed account portfolio. Potential investors should consult with their financial advisor before investing in any Navellier Investment Product.

Navellier claims compliance with Global Investment Performance Standards (GIPS). To receive a complete list and descriptions of Navellier’s composites and/or a presentation that adheres to the GIPS standards, please contact Navellier or click here. It should not be assumed that any securities recommendations made by Navellier & Associates, Inc. in the future will be profitable or equal the performance of securities made in this report.

FactSet Disclosure: Navellier does not independently calculate the statistical information included in the attached report. The calculation and the information are provided by FactSet, a company not related to Navellier. Although information contained in the report has been obtained from FactSet and is based on sources Navellier believes to be reliable, Navellier does not guarantee its accuracy, and it may be incomplete or condensed. The report and the related FactSet sourced information are provided on an “as is” basis. The user assumes the entire risk of any use made of this information. Investors should consider the report as only a single factor in making their investment decision. The report is for informational purposes only and is not intended as an offer or solicitation for the purchase or sale of a security. FactSet sourced information is the exclusive property of FactSet. Without prior written permission of FactSet, this information may not be reproduced, disseminated or used to create any financial products. All indices are unmanaged and performance of the indices include reinvestment of dividends and interest income, unless otherwise noted, are not illustrative of any particular investment and an investment cannot be made in any index. Past performance is no guarantee of future results.