Codebreaker Profits January 2021 Video Call

Hello, and welcome to our January video call. Big week for America, big week for the markets, lots to cover. We've had a very interesting month in the stock market. We've had some great options. Some great, great triple digit gains we've taken lately. So, I've put together a presentation here. I'm going to share my screen with you, and we're going to dive into everything that I'm looking at, what we need to be looking at going ahead. And if you stick around till the end, I've got some interesting research I want to tell you about.

So, let's dive in, I'll share my screen and we'll get started. I want to look at just a few main, really macro indicators today. We're going from one administration to another today, a big important day in American history. And with that, brings a lot of sentiment changes.

We've got Janet Yellen coming over to the Treasury. Fortunately, at this point, we don't have a change at the Federal Reserve, which is important, but we're going to have some different tax policies, different regulations. There's some executive action coming probably today, if not today, tomorrow. So, investors have to be aware of that. But what I'm looking at is almost above that. We have a 30,000 foot, and this is probably the 90,000 foot view. And I think it's a much safer, much smarter place to be looking right now. So, let me get into that, show you why that's important, and really what I'm looking at and how we can use that to maximize our profits, trading stocks going forward. So, here's what we got. We got interest rates. Stimulus is a huge one. We're at record highs and volume, volume, volume. I'm a big fan of volume.

We don't really get into volume too much at Codebreaker Profits, but it's a huge thing. We can talk about that at the end and why that's important, but let's start with interest rates. I've said time and time again, these are the hormones of the economy. Where interest rates go, everything else goes. It's where we have our Modern Asset Portfolio, if you're a Manward Letter reader, you understand the Modern Asset Portfolio and how it moves around with interest rates. I know of no other strategy like that. I mean, I'm biased, but I think it's the very best way to allocate your money based on where interest rates are at right now. And then as they move, higher or lower, we change our allocations. That's why interest rates are so important. I'll show you exactly what they do to stocks and the overall economy in a couple of slides here.

But stimulus. So, in the macro world right now, we have interest rate stimulus and we have just freshly printed helicopter money stimulus. Both of those are very important. Interest rates stimulus, the power of it, I don't know if it's waning, but it's certainly flatlined. Again, I'll show you a chart that kind of shows that idea, but now we're getting into much more helicopter money. Biden has talked about, I think it's what, a $1.9 trillion stimulus, more mailbox money for the average American. And so, that absolutely has an effect on speculative assets certainly. Small caps, I saw an article today, small caps are more popular than ever. According to the Bank of America, the most crowded trade on Wall Street right now is Bitcoin, pushing tech aside. So, that's all this stimulus dollars looking for somewhere to go. Speculative assets are definitely the place to be right now.

And of course, interest rates, record low interest rates, and record high stimulus, and money printing has led to record highs on the stock market. I don't have to tell you too much about what we've seen there. The charts, the numbers are just off the charts. We've hit Dow 31,000. We're headed for Dow 100,000. I think by the time Biden leaves the White House, whether it's in four years, eight years, who knows, I think we're going to be at 100,000 here sooner than we think. And again, that ties into interest rates and all that stimulus that's out there. So, let's move on to a chart here. Interest rates, I've said it 20 times now. And if you're looking in the short term, this chart may be a little bit worrisome and it's a very interesting chart to study, because all this has shown us is of course the 10 year treasury is at near term highs.

We're over 1.10 on the 10 year Treasury from where we were just in August at about 0.5. So, some folks will say interest rates have doubled. And I guess in a nominal sense, that's true. But it's like looking at a thermometer and one degree versus two degrees. Did the temperature really double between one degree and two degrees? No, even 10 to 20 degrees, it's still really, really cold. And so, that's what I want you to consider here with interest rates. Yes, they're rising. I don't think the fed is going to let them get much higher. They can't. They're going to start buying more and more bonds. They're going to do more stimulus effects to push those rates down, because we're already hearing tricklings, I'm hearing tricklings from the mortgage industry that rates are starting to climb.

It's starting to scare people. And that will absolutely be a drag on the economy that the incoming Biden administration for sure does not want. But again, it's like saying the temperature's gone from one to two. If we look at the longterm, we're not seeing this. So, this is a five-year chart, even five years ago at 3.2%, that was a little rate historically. And if we got back to that, it would be a monumental shift in thinking and the overall economy, just to get back to where we were in the end of 2018. So, we're over here at 1.11. And we might get to two, but I highly doubt it. Again, that would be a big change. I think the barometer or the benchmark that the fed and everybody in Washington is watching is that 1% level. Below that, we're super accommodative above that. It's starting to get a little bit tighter. And where we're at right now is we're in the margins, the noise side of things.

I think we're at the equivalent of 1% or so. Okay. And I mentioned long-term chart, and this isn't even that long if you went back to the early 80s, the mid-80s, you'd see it just rates three times this, but you've surely seen the trend. It's been almost a straight line down. And that's what we're seeing here. I've written so much about the depth of interest rates. What we've seen over the last two weeks does not change any of that. You can see all throughout this 20 year period, rates have gone up and down and up and down, but overall, the trend has been significantly down. That's where we're at. The economy simply can't survive as interest rates rise, not when the fed is printing this much money. So, this is the fed balance sheet. You've probably seen this in the news.

If you're not familiar, this is just basically when you call it a balance sheet, it's the tally. It's the nice way of saying a tally of all the money the federal reserve has printed up. So, you can see in 2008, we were going into some trouble, the crisis hit. And so, we went from about just under a trillion dollars on the balance sheet. We doubled it to over two trillion and then it just didn't stop. And it kept going, and kept going, leveled out. And then 2018, kind of dipped down. And then we got to where we were in March last year and it spiked up. We did as much in the last nine months as we did in the last, well, really the last nine years, which is scary. And there's more on the way, but what's fascinating about this and what investors absolutely need to know, which ties directly into our modern asset portfolio is the idea that this balance sheet is directly correlated to the S&P 500.

So, we go in here, this is where the money printing started, went up and up and up. And then if you go back here, we'll go back to the chart, take a look at this, these dips here. And you can see that here where the money printing slowed, because the Fed, the Treasury thought the economy was getting better. So, they stopped borrowing, stopped the printing, and it didn't work so well. You can see the market didn't react well to that. And then of course, we got to the COVID crisis, then all this more money printing pushed things right back up. So, as long as we're printing money, I'm going to be extremely bullish for the stock market. It's inflationary. It's ultimately not good news. We all know that it's kicking the can down the road, but we can dig our heels in and say we don't agree with it and get steamrolled by inflation and higher asset prices, and higher prices at the grocery store or we can be smart and get ahead of it and take advantage of what's coming and really just protect ourselves.

It's our duty to protect ourselves from anything that's odd and staying invested in the stock market. And right now, getting pretty speculative with our investments is the best form of protection. It sounds again, we're not traditionalists here, it sounds counter-intuitive to the rhetoric or the literature of the last 50 years, but the last 50 years are not today. We are in uncharted territory. We're printing money, got all sorts of crazy things happening. The best way to protect ourselves right now is certainly by investing in stocks. And if you've been following what I've been writing, in crypto as well. Okay. So, getting a little more focused into what we do here, specifically at Codebreaker, I love KI channels.

They're the guardrails of the stock market. And they tell us so much with just a few little lines here on the chart. And this formation that we're seeing from November through now is just beautiful. And I don't say that too lightly, because it really has treated us well, but anytime we're bouncing above this mid channel line, you'll hear me talking about that so much and bouncing off that and this upper guardrail here, this upper channel, now that's when we really get to this bullish action, but you know these are the buying opportunities. So, the more we see a concerted trend like this and then these breakdowns below that, that's where the buying opportunities erupt. We really need to take advantage of that. It doesn't mean we can't be buying up through here, we're crazy not to.

We just had to pick our stocks, which we've been doing and try to buy on these short term dips. It's been working very well for us. So, every month we talk about the Fear & Greed Index, this is published by CNN. I think it's just a good overview of where things are and kind of gets our head on where the rest of the market is. And right now, believe it or not, things are pretty moderate. We're showing in the greed category, certainly not fearful, but they're less than... I think last time we talked, we were actually over in the 90s, close to the extreme greed. It says greed here, but I remember us being higher, but really this is where we should be. This is a good spot. Keeps things moving forward, but not too overheated, worried about a lot of volatility.

The VIX is pretty tame lately and behaving itself. So, we're in a pretty good spot. This is a chart that I show from that index quite often, the S&P 500 versus 125 day moving average. And we're in a really good spot here. I expect to see some convergence coming down, but you can see just how straight of a line this is in an up direction for the S&P 500. So, I expect the moving average to actually do the converging here and move up. So, we'll keep seeing that, again it's 125 days, so it takes some time for that to happen, but you can already see it starting to tighten up a little bit. I don't think the S&P 500 is going to come down and dip to it like we saw here in early November.

I think that it's going to be opposite, the light blue line is going to start curling upwards. This is a really important chart, especially for option investors. This just shows the put to call ratio from the CBOE, how many puts are selling to how many calls. Right now, kind of going back to that earlier greed chart, we're in the moderate zone. I'd say historically, the moderate area would be right in the 0.6, 0.7. Anything above 0.8 is getting a little bearish. We're a little bit below that right now, but we're not as bullish as we were in November and December. So, really we're still seeing several times more calls being sold for every put, which is bullish and it's what we'd expect for a healthy market that's not looking for any problems. Back here in February and March, that's when we saw more put selling happening or put buying happening.

And of course we saw some problems in the market. Since then things have teamed down and are looking really nice. Okay. So when we add it all up, when we get specific, we have interest rates that are ultra low, and we have stimulus all over the place, more and more investors, volumes kicking up. We have good opportunities. We have overall broad market, the KI channels are doing really well. So, what does that mean? It means we're going to get some really good opportunities. And here's one CEVA, this is one of our older plays. We got in it in April and it did well throughout that period. A little bit of a dip in September, but man, I hope you've been watching the action for the last... Or so far this year, and especially yesterday, it was up almost 20%.

We're up, I think about 160%, 170% on this play in well under a year. It's been fantastic. And you can just see anytime if you would have bought under these dips, it would have been a great time, under this mid channel marker here, it would've been a great time to buy. And here's a classic setup, if you bought in here, man, you've been greatly rewarded. Of course, we bought way back over here on a big dip and did well. Again, we're approaching 200% on this play. So, if you have it, great job, great job for holding onto it. It's rewarding as well. For newer subscribers or folks that just got in on Terex. We got in on this one, I think it was September 22nd or 26th. It was, I believe right... I don't think it was this dip.

It was this dip in here. So, maybe earlier September. This would have been another great buying opportunity, but we got in just below on a... It was fairly sizable, one of the biggest dips in months below the mid channel line. And it rewarded as well. We got a quick spike, and then sold off, and then it's just been taking off ever since. I think we're up about 70% or 80% on this play since September. So, again, very, very good. This system is working well. And again, Terex is a heavy earth company, lots of infrastructure speculation out there with the new administration. Again, it's a big recipient of... While low interest rates, absolutely treat it well, because most companies don't go out and buy a million dollar machine with cash. They finance it with debt and that debt is really cheap right now. And of course, stimulus through infrastructure, spending that sort of thing, that's definitely on its way.

And Terex is going to do very well because of that. And another one, Sallie Mae or SLM holding. This is the student loan originator. It's been on an absolute tear since the polls started to predict that Biden was going to win and since Biden took the election in November. And it's doing well largely because of all the student loan talk about loan forgiveness. That doesn't sound like it would be great news for a bank or somebody that is originating these loans, but it means the repayment issues that they're seeing are going to go away at least temporarily, or at least be mitigated, or minimized. If Biden goes out and signs an executive order today and gives every borrower $10,000 in loan forgiveness, that's $10,000 per borrower that Sallie Mae is guaranteed to get.

They're not just wiping that off the books. The government's going to kind of write the right to check for those. And that's great news for Sallie Mae. So, this is another one. We got in on this one just before the March lowest, I think March 20th. Again, you could see just a big dip below the lower KI bound. And then the kind of the volatile period through the summer, some dips here. And now it's gotten into that beautiful trend where anytime it hits that midline, it's a great buying opportunity. So, we're above that right now. Probably got a short-term pullback, but look at that chart, it's just going to keep going and going. Okay, and it's not just stocks. A lot of folks have been writing to me about Bitcoin. I've been writing a lot about Bitcoin and just released some research this week on cryptos and the opportunities there.

And the same charting patterns work. You can see it here. This chart really blows out at the end here with Bitcoin, as you know, because Bitcoin prices, unlike other cryptos, Bitcoin has been fairly flat in the last week or two. But look at these dips. Again, if you buy on these dips, you're getting rewarded with quick short term gains. Ethereum is probably the better one to look at right now, because it hasn't... I wouldn't say topped out, it hasn't slowed down as much. It's gaining momentum right now. And these KI channels are just widening, which means the volatility is rising, but the short-term opportunity is absolutely increasing with each day and just massive, massive amounts of money and volume are going into the crypto market.

And so, really when I look at a crypto this year over the last, since December, but really in 2021, just look at the volume we're seeing. I saw a report from one exchange, they saw, I think it was 420% more volume in a single day than they did for the average of all of last year in trading. European exchanges or groups based in Europe are seeing huge volume. We're seeing $60 billion, $90 billion a day, just record volumes from individual exchanges on Bitcoin, and altcoins, and just crypto in general. So, huge amounts of money, MassMutual just put a $100 million dollars in. Bill Miller, the famed value investor is putting a ton of money into Bitcoin. Paul Tudor Jones. So, we're seeing all these institutional guys, pension guys putting money into Bitcoin. That's really showing up in the volume charts.

And so, that's where I'm focused with crypto right now is watching the volume. In alpha money flow, we have something called the Liberty Indicator where we track trading volume over the last 20 days. It gets complex and we're trying to narrow it down. It's a really simple system to use. It's more of a complex formula, but that's on my end, but it looks at trading volume over the last 20 days and basically tells us whether it's more buying pressure or more selling pressure. And when we see that switch from selling pressure to buying pressure, kind of like, you can see as sort of in these bars. But this is all really strong, positive, even this big red bar, that means there is as many buyers that day as sellers. But when we see that switch, that's when things really light up, especially in smaller altcoins.

So, what I'll do is I'll put up a link to my research. We can put that up right now. And this is my latest research, it talks all about the Liberty Indicator, what I'm seeing in Alpha Money Flow, why I think you should get into cryptos right now, why they're so important. And I even detail how you can get more research on three coins that I think are going to do really well this year. This is the year of Bitcoin, this is the year of crypto, for sure. I think Bitcoin is going to lead the charge, but I think other...

I think Bitcoin is going to get all the headlines, but I think other alternative coins, other cryptos are going to do even better this year. So, those are the ones to watch. And again, we do it by tracking volumes. So, I'll put that link below, give that a click, check it out. And I hope you take advantage of that opportunity. For now, that's it. Again, as always, if you have questions, comments, send me an email at mailbag@manwardpress.com. I read everything that comes through there. I can't always respond to everything, but I read everything that comes through there. So, send me those emails and click that link below. Check out more on crypto and why I'm so excited. And check out the details on those three altcoins that are poised to do very well in the year ahead. So, thanks for tuning in. Talk to you next time.