Ride the Blue (and Gold) Wave

Hey There Income Hunters,

What a way to end a wild week!

The day started off with a very poor jobs report and equity markets exploded

Why? Because, if needed, the Dems will just send more free money, Oprah-style. (You get a stimulus! And YOU get a stimulus!)

The Blue Wave is rolling now.

Senate Dems pushed through the $1.9 trillion stimulus blueprint and Vice President Harris holds the first tiebreaker vote on the real thing.

House Speaker Nancy Pelosi predicts passage by March 15. (Beware the Ides??)

Nothing shows the massive fiscal lift all this has given stocks more than the chart below.

The cumulative amount of fiscal stimulus in the past 12 month is $5 TRILLION.

Three portions of $2.2 trillion, $900 billion and the forthcoming $1.9 trillion is really incredible …

I’m not really going out on a limb here, but I need to make sure you understand … 

I think gold put in lows this week and we should be starting a new bull trend shortly. 

Today I added to my Barrick Gold (Ticker: GOLD) position, I bought First Majestic Silver (Ticker: AG) and bought 100 shares of Sandstorm Gold (Ticker: SAND), the latter of which I really like.

Here’s why …

Enter Sandstorm
Sandstorm owns royalties from 201 mining operations and projects. Of which, 24 are in production, 21 are in the development stage, 22 are in an advanced exploration stage, and 134 are in earlier exploration stages. 

Sandstorm expects 120% growth in only 3 years. The company also holds cash of $125 million, and has credit facilities of $300 million at its disposal.

It all means that Sandstorm is well funded to acquire additional royalties streams and to further boost the projected growth.

GOLD, SAND and AG each report earnings in the next two weeks … and I think they should all beat estimates…

I’ve written a lot recently about my respect for the Relative Strength Index (RSI) — a very helpful momentum indicator — when it diverges from the price trend.

Well, SAND experienced a textbook RSI on Friday:

  1. SAND made a low at 6.26 

  2. It was confirmed with a low RSI of 38.59

  3. Then it set a new low today at 6.18 

  4. The RSI closed at 41.84, hence the price/RSI divergence

Price/RSI divergences (in this case price down, RSI up) are great indicators of reversal patterns.

SAND also made a new intraday low on Friday and then closed above Thursday’s close … This pattern is called a rounded bottom and is a short-term bullish indicator. 

Bring It Home

One last insane indicator of the amount of stimulus coming to the market …

In the past year, nominal GDP totaled $21 trillion, so the cumulative injection of fiscal stimulus amounts to almost 25%

The only problem is this:

Every dollar of stimulus is another dollar of debt, because the Government is responsible for borrowing every dollar it spends … 

We will never pay down our debt, so all this spending just kicks the can down the road until inflation picks up … which is getting closer by the day.

Once that happens the stimulus spending will stop, the music stops and then everyone left with stocks and bonds will start selling …

So be long metals, commodities and real estate and when inflation is around the corner (and that time is coming soon), it will be time to buy puts on stocks and bonds.

Finally, now the most important pick of the week … 

Tampa Bay will flip the score on KC from their Week 12 loss — and the BUCS will win the Super Bowl 27-24 over the Chiefs … as Tom Brady wins his fifth Super Bowl MVP!

Live and Trade With Passion My Friends,


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