Market Outlook for 2021 in Charts - Live with Peter Brandt (w/Max Wiethe)

Market Outlook for 2021 in Charts - Live with Peter Brandt (w/Max Wiethe)

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MAX WIETHE: Hello, everyone. Welcome to Real Vision live for Vision I'm Max Wiethe. I'm joined today by Peter Brandt, who's making his return to Real Vision after I don't know how many appearances now. Peter, if you haven't heard of him, which I can't believe, he's the president and founder of Factor Trading.

And he can be found on Twitter at-- what is your handle these days, Peter? PETER BRANDT: Peter L. Brandt @PeterLBrandt. MAX WIETHE: Yeah, well, Peter is extremely generous with his thoughts on Twitter. And you can find him there, with lots of great charts. We're going to go through about 15 charts today, and I know people will have some questions. So I want to jump right into them, Peter. Let's start with the eurocurrency.

PETER BRANDT: Yeah. And hey, by the way, it's always great being on Real Vision. I love Real Vision, and just you guys have something special, and it's always, always great for me to be part of it. But we're talking the euro currency. There's a couple of things that I see that I just want to point out, without necessarily-- and maybe I can be lucky enough to sidestep a prediction, but at least point out some things that people should be aware of. I mean, the main thing to me is, sure, we've been up since last March in the euro currency against the dollar.

And we are now building into the market the fact that we have historically large commercial short positions. The commercials are short. Well, some of that's hedging. But the big boys, the big companies, the big trading operations, commercials are short. In the eurocurrencies, speculators are long. Now, that doesn't mean that you automatically come to a bearish conclusion, and you just assume that specs eventually are going to be wrong, commercials are always right, because they can hold their position.

But basically, it's pretty dangerous to bet against commercials and in favor of spec, when we have [INAUDIBLE] extremes and commitments from traders. That's where we are right now. Commercials have loaded up on the short side of the euro currency, despite the fact-- and during this rally we've had since March. And so that leads me to say, OK, maybe not all is well in euro currency land, that we have to start thinking about the fact that we are going to see some liquidation. We're going to see some scoring the positions that will put downward pressure, especially now that maybe we have interest rates heading back up. The other thing to consider is on the other side of the coin-- well, on the same side of the coin is the world is always short dollars.

I mean, the world financial system always sits in the short dollar positions. And so if you see a turn in the dollar back up, because the US dollar is now back testing the-- I think it was the February 2018 low. So it's a good point for the US dollar to find support where it is right now.

So we have the US dollar back into a very strong area support on its longer-term charts. We have the euro currency, which has been rallying since March-- and in light of that, we have big commercial shorts in New York currency, historic long positions on the part of the specs. We have historic long positions in the US dollar index by commercials, historic shorts by specs in the US dollar. And so we may be finding the fact that there is an historic tendency for the eurocurrency to either find a top or bottom in January or the first two weeks of February. I've talked about that almost yearly, in fact. It's been my privilege to talk about what I call the January effect in the euro currency, the tendency to have -- JASON ZIEMIANSKI: What we're showing you here on our YouTube channel is just the tip of the iceberg.

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PETER BRANDT: almost yearly, in fact. It's been my privilege to talk about what I call the January effect in the euro currency, the tendency to have a major turn or a major low or major high in the month of January, the first two weeks of February. So I'm thinking that's what I want to be geared to right now as a trader. It's way too late, I think, to be short the dollar and long the euro currency. We're late in the game. That's trade that's worked for 10 months.

Time to really start looking for opportunities going the other way. On the euro currency, we could go back to last year's lows. There's a major 50-year trend line that we bounced off of last, in March, in the eurocurrency. So we head back there.

So that's what I'm thinking in eurocurrency. Just in terms of the charts, when we look at euro currency, it's, hey, maybe it's time to start scoping out a short position, at least to be aware of it. So that's where I am as a trader.

I'm thinking I want to look for shorting opportunities in euro currencies, a buying opportunity in the US dollar index. MAX WIETHE: OK. So I have here the long-term chart that goes back into the '70s, really actually before the euro existed. So for anybody who's confused to see a 1970s euro, why don't you explain what that is. And then we have that long trend line. And then I want to go through that second euro chart, too, just specifically.

PETER BRANDT: Yeah. Well, sure. Your currency hasn't been around 50 years. That's the first thing people say. But what we do here is we have that chart that can go back, because prior to the euro currency, what we do as a proxy is take the trade-weighted basket of European currencies that existed at the time-- French franc, deutschmark, Italian lira, and so forth. And we create a proxy that really preexisted the euro.

And therefore, we can create a chart that goes back into the '70s. And that's what we have there. And so that's how we create that chart, Max. And so that's where we get a 50-year trend line. MAX WIETHE: OK.

And then we have the euro futures, a little bit shorter-term chart here. What are you seeing in this chart? PETER BRANDT: Well, I mean, it's possible to look and say, we have a six-year continuation, head and shoulders top. And I think that's the chart you're looking at. MAX WIETHE: Yeah.

PETER BRANDT: Is that we take the price action over the last six years, and we say, this looks strangely like a head and shoulders top. It could come to be. I mean, the question I asked some very, very sharp macro traders today is, how do you get an $0.80 euro currency? Their answer to that is, you have to break up the euro.

You have to break it up. I mean, you have to have Italy, or you have to have Spain, collapse and pull out of the euro currency. You start doing that. You crumble the euro currency, and that's probably the only way it takes place. so might that big six- year head and shoulders in the euro currency come to pass? Probably not.

But you can create a macro scenario where it could. MAX WIETHE: OK. And then, so with that in mind, when you think about if somebody does want to take a short position in the euro, what are the ranges that you could see? PETER BRANDT: Well, I mean, I think we're nearing the top-end range now. But I mean, for right now, that trend line comes in $1.05, something like that. But I mean, when you go back, really, over history, the euro currency, even though we had a big move last year, is in really a rather dull, narrow range, relative to what has happened over the last 20 years, I'd say.

And so it's pretty tame. So to talk about maybe we have $0.15 on the downside of the euro, that's a big-- it seems like a big percentage. But if you look at the euro currency trading, really going back into the '70s and the 8-- well, you'll go back on the proxy back into the '70s. But over the last 20 years, $0.15 range in the euro currency does not really take it in to wild and crazy territory.

MAX WIETHE: Yeah. And then moving on to just this chart of the dollar here, often, when you talk about being long euro, your short dollar, because the dollar index is made up so much of the euro, but there are other aspects in there-- so just to focus specifically on this chart of the dollar. PETER BRANDT: Yeah. I mean, when you look at the chart of the dollar, basically we're back, and we're holding that February 2018 low, right around $88.15. And here's my comment. I don't know if I can name somebody who is not bearish for the US dollar.

I mean, my experience as a trader is, when you get an idea that has such conventional-- it becomes really gospel. You go out-- it's really easy to say, the dollar is going to dump. The US Fed continues to print money. The US dollar is garbage. The US dollar is worthless. US dollar goes down.

The US dollar is bearish, and so forth. Social media is filled with dollar bear. I mean, you cannot find dollar bull. I mean, you can in Real Vision.

You can find, certainly from time to time, Raoul has certainly been a dollar bull. At least he likes to drift there. But he's a flexible trader. But generally speaking, when you look out into social media, all you see is the dollar is garbage. And yet, you have historic long positions in the dollar index by commercials.

You're down in an area of very, very strong historical support. And you basically have the world banking system in real commerce system short dollars, in a short dollar position. And so you can create a scenario, that if we start to see the daily chart bottoming down in this area, be on the alert. Perhaps we've got a long trade coming in the dollar. I mean, I'm not long.

I'm not short the eurocurrency and a lot long the dollar. But that's what I smell as a scent that's coming into the air. MAX WIETHE: OK.

Well, here's a scent that is definitely in the air, but has not received nearly as much attention as the euro, and the dollar, other currencies, or cryptocurrencies, like Bitcoin, that everybody's talking about, is the Nikkei. The Nikkei just had a massive breakout of a-- god, what is that? A 30-year range? PETER BRANDT: Yeah, a 30-year range. I tell you, everything I look at in terms of financial markets, in terms of stock markets, I can't find a stock market that's not been on this big terror and is either at all-time record highs or close to record highs. You look at what's happened-- and we'll talk a little bit about the S&Ps US market, other markets. And it's easy to forget that the Japanese stock market's all-time high was in 1989. That's 31 years ago.

We were in a bear market for decades in the Japanese market. And you can't find another market that can say it's all-time high was 30 years ago, especially a strong economy, a viable economy, like Japan. And so we created this massive, what I call a bowl or a base, in the Nikkei Dow.

We've broken out decisively. I think we've run back. We've run back to that, the all-time highs, at least in the Nikkei. So we had back a 39,000, which was the high we made 31 years ago.

So I'm long the Nikkei. I trade the Nikkei through Osaka. So I trade Osaka futures.

That's my position. It's one of those. I like that story, and I'm sticking with it. I mean, I think we are in a multi-year bull trend, and we have been in a multi-year bull trend. But part of that bull trend was still down in the base. It was still down in the bowl of the chart.

And so we've blasted off. And so I think we go to at least new all-time highs in the Nikkei, probably go much higher than that. And so I like Japan.

I like the Japan indexes. I like individual stocks over in Japan-- Sony, Toyota. You can go stock after stock.

You can buy many, many individual stocks over in Japan that really are now entering bull market territory. So I like Japan. I'm way overweighted in Japan. MAX WIETHE: OK, wonderful. Well, the Nikkei has broken out.

As well, we have Chinese equities as breaking out. So there is some strong bullish trends in Asia. Are you as bullish on China as you are on Japan? PETER BRANDT: Yes. China is such an interesting story. For years, I've been saying, you had the 1800s.

1700, 1800s were the centuries of Western Europe. Then we had 1800s, 1900s, the centuries of North America, that we are entering a century of Asia. And people want to dispute that. People want to argue that. Well, you can argue it all you want, but just look at the facts.

You have strong economies over there. You go over to Asian countries. You see modern cities. People want to argue against China and say, Oh, you can't trust their numbers.

They're corrupt. You know the whole thing-- shaky. The reality is, I think, China is going to emerge here and be recognized as the strongest economy in the world. You look at the Chinese. And I trade that China 850.

That's the futures contract that I trade. That's traded in Singapore. I like it.

I'm long it. I'm overweighted it. I think China's got a long way to go. It's broken out of this massive, ascending triangle on the charts, multi-year ascending triangle. The ascending triangle is a powerful pattern.

It's really one of the most powerful patterns. And so we're really early. We're early in the bull market in China, have a long way to go in China.

I think the 850 goes-- I mean, the first target is 21,000. But I mean, I think we start there. And so I like China.

I like the 850, and I like the Chinese economy. Sure, their numbers may be corrupt. But I think time will prove that they're well-poised. And you can get into the whole politics of Chinese trade and all of that.

But I think people who are long China will be well-served. MAX WIETHE: OK. We did get a question on the Nikkei. Vincent asks, who will buy the Nikkei ETFs if the Central Bank starts selling? My response would be, what's going to make them start selling? PETER BRANDT: Yeah, I mean, of course, what you've done is, in effect, federalized the stock market in Japan, right? I mean, it's been their way of monetizing their debt-- is just to own all other stocks.

And there will be a point where maybe they have to sell stock markets. You look at the demographics of Japan, and it's getting older. But I look at the charts, and I go, it's not going to happen right now. It's not going to happen in this trade.

And it may happen down the road, yes. But as a trader, I don't want to respond. I don't want to get way out in front of myself, and look at the strong trend and the reason to be long in the market, and doubt myself based on conjecture.

And the whole idea of Japan's central bank selling that, that's conjecture at this point in time. It's not happening. MAX WIETHE: Yeah. Well, and in a don't fight the Fed way, it's more of a bull argument than a bear argument. It's the central bank-- PETER BRANDT: Oh, sure, yes.

MAX WIETHE: yeah, central bank buying. Well, I want to go to an old favorite of yours. I know it's something you've probably been trading longer than almost anything else-- corn. So corn has broken out, and it has been talked about really as evidence that the inflation trend is real and that it's kicking in. So I want to get just a pure chartist view from you on what you're seeing here with corn. But also, are you buying ag commodities as signaling the coming inflation, or is this more supply disruption that we're seeing work its way out in prices, but short-term stuff? PETER BRANDT: Yeah, I mean, there's an inflation story to be told, Max.

Let me explain to people how I look at it. I started at the Chicago Board of Trade as a corn trader in 1975. You look at the price of just about everything else in the world. Corn right now is priced where it was in 1975, even though we've had a big run up. I traded corn in 1975, 1976, at current prices.

That's not adjusted for inflation. And so relatively speaking, agricultural prices have gone nowhere. They are right where they were in the '70s, in the '80s, in the '90s, in the 2000s. Now, the tendency of raw material markets is you have bull markets, and you collapse. Yeah, it's like popcorn. It bounces up to the top of the kettle, and then it goes right back down to the bottom of the pan.

And so you have popcorn markets and the egg markets. But from time to time, you have a whole re-evaluation of price structure. In the early 1970s, we had a bull market agricultural goods. And it took prices to a whole new level from where it was in the '50s and the '60s. That may be happening again.

I mean, we've come out of a magnificent rectangle base in corn, that I think brings markets up. But the story in the agricultural, at least right now, is supply and demand. It's supply pressures coming out of South America. It's demand pressures coming out of Asia. It's not really an inflationary story.

It could become an inflationary story. But right now, it's a pure supply and demand fundamental story, is that what happens in the grain markets is you renew your fundamentals. Your fundamentals change, in effect, every year, because you put new crop in the ground. You have a new crop.

You have a whole new set of supply and demand statistics that you look at. But we're in a crop year that does not end for another 10 months, and we have 10 months to get through. And the pricing mechanism of grains is to assure that there is crop left in the pipeline, that we don't run out of grain, that there's enough grain to fill the pipeline, to keep elevators at least somewhat full, to keep supply going to users, to keep supply going to hog farmers, cattle farmers, into the export channels. And price performs that mechanism. Price will, in effect, be the governor that we do not run on the grains.

That's what's happening in the corn market. At what price does that happen? I don't know. We don't even have a corn crop in the ground right now. Well, what happens if we have weather problems this year? I mean, there is a whole lot that can happen between now and the time that we bring another corn crop in, out of the field, in October, November. And so I look at that and say, buy the dips. Buy the big dips.

Could we become an inflation story in raw materials down the road? It'd take all grains to a whole new level and create a whole new price zone for grains down the way. That could happen. But for right now, it's a bull market. It's based on fundamentals. We have a lot of crop year left.

With a lot of weather to get through. We haven't even put a corn crop in the ground. The dips have to be bought. The grain prices are down the day.

Beans have been down close to $0.30. Corn's breaking. But you buy $0.30 breaks in corn. MAX WIETHE: OK, yeah. I think that's really interesting what you're saying about how it could become inflation.

So it's that re-evaluation that could come from just a hard year that might push the industry and really the market, in general, to rethink where the investment that's being put into ags at the moment. PETER BRANDT: Yeah, I think that's exactly right. I mean, you also, you look at the price of the equities relative to real things, whether it be copper or gold. I mean, you look at crude oil. Maybe we'll talk about crude oil. MAX WIETHE: Yeah, we'll talk about it.

PETER BRANDT: You look at the price of raw materials, versus equities. It's way out of whack. I mean, as an asset, stock prices, you just can hardly justify where they're at relative to the real things in the world.

And we've seen that cycle in the past, where really, you go through a period where real goods, where real items, things that really exist, appreciate in value against assets like stocks. And we could be entering a period like that again. I mean, over the years, I remember, way back when, people would look at the price of equities, versus wheat. Or how many bushels of corn does it take to buy a Dow point? And things like that. And if you look, over time, that's very cyclical. And so we could be entering a period where markets like soybeans, like corn, like cattle, like gold, like silver, and so forth, will go through an appreciation against other asset classes.

MAX WIETHE: Yeah. Well, you never know, though, when those metrics change over time. I used to look at the old '30s edition of securities analysis, and they priced the stock market in price to dividend.

And unless that ratio-- or is in an 80-year cycle, it hasn't really mattered for 80 years. So these things do come and go and fall out of favor, and it's always a question of how long the cyclicality will last. Because sometimes things do change.

I'm leaning towards you that I think this one will probably have another cycle. But I always worry that maybe things have changed. I mean, look at the importance placed on technology in the world today. And that really fits into that cycle.

And so there is a narrative that can be put into the argument, that this cycle won't repeat. And you innovate over time. It gets easier to pull things out of the ground. We're going to get better at growing corn probably as technology improves, and whatnot.

And so maybe it makes sense why corn is at the same price it was in the '70s, because we've gotten so much better at producing corn than where we were in the '70s. PETER BRANDT: Well, that brings up a really interesting point, because-- and I'm going to switch over to another market. Then I'll come back to corn. And you hear people say, silver prices can't be where they're at, because the cost of production is x.

You hear that story all the time. To that, I say that's nonsense. Because historically, raw materials-- silver is a raw material, corn is a raw material-- end up getting priced at the cost of production of the most efficient producers, not the average producers, not the silver mine that's marginal, not the corn farmer that's marginal. It's the corn farmer that's the most efficient. It's the silver mine that's most efficient. That's how it works.

And over time, of course, the efficiency in producing corn-- corn yields today are far, far higher than they were 40 years ago, 45 years ago, when I started. It's a whole different world. The way people farm, it's a whole different world. The hybrids they grow is a whole different world. So to that extent, yeah, I mean, raw materials tend to sloop back down, slump back down, to the cost of the most efficient producers. That's what's happening.

But nevertheless, farmers will tell you, even efficient farmers, that they've been losing money on their corn. They've been making money on their dirt, but they've been losing money on their corn. And so maybe we'll go back to a period where farmers really start making money on their production itself.

MAX WIETHE: So OK, all right. Well, let's go on to Bitcoin here, and we can come back to some commodities later. So we have the big-- it's a long-term chart for Bitcoin, less than 10 years. But with the chart with all of the different parabolic advances on there, I see you have marked the current one we're in right now.

What are your views on Bitcoin? I'm sure everybody is interested here. PETER BRANDT: Yeah, what a crazy market. I mean, I almost pinch myself when to think that I'm still trading, as an old guy, and I was privileged enough to have the first big major bull market in grains and metals at the front end of my career.

And now I get this crazy Bitcoin market as the bookend on the other end. How crazy is that, that here, I'm in my mid-70s, and I'm involved in a market like Bitcoin? Which, by the way, is fascinating, because I was alerted to Bitcoin by Raoul Pal, who, in 2016, sent me a chart of Bitcoin by email and said, Peter, what do you think? And at that point, I'd heard people talking about Bitcoin. I didn't know what it was. I just thought it's just some computer money that's out there floating around. And so Raoul sent me this chart.

And one look at this chart, I went, oh my goodness, it's just classically a beautiful chart. I didn't even know how to buy Bitcoin back then. Raoul had to line me up with the exchange that he was using at the time.

It's still the exchange that I opened an account with, in March 2016, at Raoul's introduction. But the chart that you're looking at shows that we're in the third parabolic advance. And really, if you go back prior to that, to the initial-- to the inception of Bitcoin, through what you show is the first parabolic advance, there was another parabolic advance. We're really in the fourth parabolic advance, which is amazing.

Because that chart is a log chart. It is hard to find a single parabolic advance on an arithmetic chart in most markets. And here, we have parabolic advances on a log chart, and we have the fourth one. I mean, this is history.

I mean, this does not happen in normal markets. And so right now, parabolic advances have tended to be pretty reliable in Bitcoin. It's a horse that's at least one placed or showed. And so it's a horse we're betting on. And you look at the Bitcoin chart. And from the December 2017 highs, back until September of last year, we formed this massive symmetrical triangle, what we call a symmetrical triangular coil, on the chart.

And then we broke out of that last year. And then we retested the upper boundary of that in August, September. And then we rolled back up.

And of course, as they say, the rest is history. And so we're in a strong or bull market in Bitcoin. I am fully long Bitcoin. As a matter of fact, it's my single largest holding within what I do.

Yeah, I own more stocks in value than Bitcoin, but I'm talking about individual stocks. And so yeah, I'm fully committed to Bitcoin. I like Bitcoin. I think the burden of proof in Bitcoin is going to be on the bears. I mean, you look at social media, and Bitcoin gets bashed, and it gets trashed, and it's going to 0, and so forth.

And you've got governments challenging Tether, which is whole another story. But so you have people who go out there and create the narratives for Bitcoin to roll over and die. I think the burden of proof is on that.

I mean, right now, you have very strong ownership of Bitcoin. I mean, people have pointed out, if every millionaire in the world owned one Bitcoin, there's not enough Bitcoins to go around. That's a true statement. And so the bet here, of course, for the bears, if Bitcoin is just a big joke, it's the Beanie Baby, Pet Rock of the 2020s.

That remains to be seen. But the narrative for the bull is it's a true store of value. It's a true means for settling global, international global commerce, that it's the real thing, that it will, some degree, become a global currency, global reserve currency, that is, the currency of the people, not the currency of a Fed. I mean, that's the bull narrative. And I think there's something to that bull narrative, quite frankly. I think that there's something real to that, and especially when I combine that, look at the history of the chart, look out chart construction's put together, and even watch the way that this market has rallied.

This has been a unique, fun market to watch as it's gone up here, because it hasn't gone up on what people traditionally call FOMO. It's the fools rushing in and buying the string. If you look at the ladder, the bid offer ladders of Bitcoin, it hasn't gone up by bids chasing the market.

It's gone up every time somebody puts an offer out there on the table. It's just quietly consumed. And so it's gone up by buyers just taking offers off the table. That's the nature of the bull move.

And when you see that, when I've seen that in all other markets, usually it's very constructive. Now, here's the caveat in Bitcoin, is when you look at the 2015 to 2017 bull market, we had nine corrections of 30% or more. Actually, they averaged right around the mid-30s, between 32% and 38%, 39%. This current bull market, when you take it from the March low of last year, we had that wash-out, COVID wash-out low. And you take it from that point. We've had two corrections of 20% only and a few corrections of 10%.

So we haven't had the traditional 30% correction in Bitcoin. I'm not predicting it's going to happen. But it could happen. I mean, it would be certainly natural for it to happen. And so I think those who are not in Bitcoin, and they're wondering, how do you get in Bitcoin? Well, we recently had a 20% correction.

Now, if we go down, and we take out the recent lows, it's going to be more than a 20% correction. And so might we then approach a 30% correction? Could. And so again, I think the burden of proof are on those people who want to claim that Bitcoins a Beanie Baby, a Pet Rock.

But I'll accept the narrative that there is hope that Bitcoin can become some form of global reserve currency or at least a basket, that in a new world order, combined with gold, crude oil, whatever, becomes a special drawing rights and in effect, gets collateralized as a So for right now, I want to remain long. A 20% correction didn't blow me out. I don't think a 30% correction is going to do much damage to me. And I think they're strong. There's strong support underneath the market.

You're starting to see commercial interest being willing to hold Bitcoin as an asset. When you start to see Fortune 500 companies list in their annual report a line item, and instead of cash equivalencies, they list cryptos, crypto will have arrived at that point. Once we get to that point, people who are declaring crypto to be dead meat will be proven wrong.

MAX WIETHE: OK. Well, I don't think we have time here to debate the narrative or the fundamentals. But I do have questions about trading parabolic advances.

So we got a question from bears who said, about timing parabolic markets, is there any way to time them? Or at least, how do you approach parabolic advances as a trader? PETER BRANDT: I mean, hey, it's like a rocket, right? You strap yourself into a rocket. You strap yourself into a rocket. It's not a calm ride. I mean, it's white knuckle.

This is white-knuckle flying. And the reality is that eventually, you will break a dominant parabolic. Parabolics have the tendency to morph a little bit. You can draw a parabolic advance on the daily chart in Bitcoin, but there's a longer parabolic advance, which I think is the dominant parabolic advance, on the weekly chart.

That's the one that's going to hold. We're a long way from retesting that parabolic support, a long way. I mean, there you have a 40% correction to do that. But the reality is, like in 2017, we knew what the parabola-- we knew where it was drawn. And once you break a parabola, you usually get at least an 80% correction.

The previous three parabolic advances in Bitcoin all corrected 80% plus. Eventually, we will correct 80% plus in this parabolic advance. Maybe it's from 150,000.

I don't know, or 100,000. I don't know. But eventually, you will correct it. But in the meanwhile, you don't use the parabola as your stop loss. I'll tell you that, because by the time a parabolic advance is broken, usually, you've already had a 40% to 50% correction. So you've given back half your money by the time you can say, wow, we're in trouble.

And so a trader just has to be alert. Hey, I have no problem taking profits on the way up in a trade, putting cash in the market. I created an account to become involved in Bitcoin. I have taken profits, so that I have completely covered my initial investment in Bitcoin. I'm playing with house money. And I'm willing to take a risk and give the market room on house money.

I've reclaimed my investment. And if we get up to, let's say, 50,000, I will take a little bit more off. So I don't want to be chasing rallies here. I want to be wise, have a base holding, which, in my mind, is about 1/3 to 1/2 of what I own now.

And be willing to ride that back to 0. And so I think that's how one has to approach this, is really, it's a change in mentality. Here in the US, largely, we have measured our wealth in US dollars. How much are you worth? You explain to somebody, it has dollar sign on it.

It is your base, right? You buy stocks. You return to your base. You buy real estate.

You return to your base currency. Well, if the narrative is correct, Bitcoin becomes someone's base currency. So if, let's say, in the case of x, y generations who have made that mental change, that they're not going to measure their net worth in terms of dollars, that they've made a generational change that Bitcoin is their currency. What do they care that Bitcoin goes down? It doesn't matter that Bitcoin goes down. That's their base currency. That's their home currency.

And so they're not worried about what Bitcoin is doing against the dollar, because Bitcoin is their home currency. It's how they measure themselves, is where they want their wealth. Where do you want your wealth? A farmer wants his wealth in land and dirt. They measure their value-- MAX WIETHE: Acreage, yeah, is he's got a lot of acreage.

PETER BRANDT: Acreage. A real estate guy measures his net worth by commercial buildings, number of floors, number of square feet. MAX WIETHE: Yeah, square feet. PETER BRANDT: Yeah. So why can't you measure your net worth in Bitcoins? Periodically, you take a chance, and you sell your Bitcoins against Ether. But then you come back to your base currency, because that's how you measure yourself.

And so I'm not there. At my age, I'm probably not going to make that leap. But I see the narrative.

I see the mentality that somebody can have to be there. MAX WIETHE: All right, well, I'm a different generation. I'm not quite there either. But I want to move on to gold. So we have a chart here of gold.

It looks like it's gold futures. And then you say, in parentheses, with the cost of a roll. So you're rolling the futures and taking that out here in price.

And what are you seeing in gold? We had a big, big breakout earlier in 2020. And it has not been fun for gold bulls over the last few months. PETER BRANDT: Yeah, I mean, gold's gone higher, of course.

I mean, you look at where it was in June, July of 2019. We've had a big run in gold. We've made new all-time highs in gold. It depends on how you measure the cost of the roll, and so forth.

But the trend's up. I mean, I'm not in gold right now, but my inclination is to want to be a gold buyer, to be a buyer. I want to be long gold. I don't want to be short gold. Now, you get into a whole subject of is gold a store value? Gold versus Bitcoin. We can get into that whole debate.

I'd rather not get into that debate. In my mind, gold is a commodity. And silver is a commodity.

Gold is a commodity. Soybeans is a commodity. Copper is a commodity. Lumber is a commodity. And so I don't look at gold as my own currency. Some people look at gold as their home currency.

Right? I mean, gold is how they measure everything. I'm not there. And I think history shows that you shouldn't be there. I mean, if you go back to the early '70s and measure it against the early '70s, the annualized rate of return of holding gold is probably negative. If you take out insurance and storage cost, it's negative.

You haven't made any money. If you hide it and bury it in your backyard, maybe you can say you've annualized at 5% or 6%. Stock markets clean the clock on that one.

Stocks have been a far better investment than gold. Now, of course, Bitcoin's been a better investment than gold, but we're only talking about a 10- year duration there. So I don't look at gold as this something special, precious-- you call it a precious metal.

For me, it's something that you get out of the ground. And if you go into the center of the earth, of this earth, there's more gold than what anyone can know. And we just scrape in some of the gold that's come up through the cracks. And I think if somebody came here from another planet, an intelligent being, they could not figure out why us human beings are going around thinking gold is something special. But nevertheless, the trend's up. When the trend's up, I basically want to look for opportunities to own it.

And that's where-- and in gold, we've had a good correction in gold. There will be an opportunity, at some point, I think in the next year, to own gold again and maybe pull out $300 or $400 an ounce. So that's my attitude toward gold. MAX WIETHE: All right.

Let's move on to oil. So we have oil futures here. And you can see that ridiculous move that we had when oil went negative. How does something like that screw up a chart? As a chartist, I got to ask. How do you deal with a commodity going negative? Do you have to erase it from the chart? Can you work around it? PETER BRANDT: Yeah, you just ignore it.

I've had people send me charts that have these big spindle spikes and say, where do I draw a line from that? It doesn't happen. It doesn't exist. I mean, we went to $45 on a fluke, and it had to do with oil, deliverable oil, and who could take, and who could deliver it.

And it was a fluky deal. But even at $53, I mean, we may be as a world transitioning to renewables. And of course, there's a big run in stocks on solar, and so forth. And it's been a hot space, people saying, you-- but here's the reality. I'm not prepared to get on a jet plane with 300 other people and fly to Europe on a jet plane that's just got solar panels and windmills up on the top.

Sorry, but I'll fly in planes that burn in jet fuel. And so we have a carbon-based energy system. Now, will we transition to more nuclear? Yes.

Will we transition to solar? Yes. You look at the crazy story going on with electric cars, Tesla-- unbelievable move in Tesla. We've got countries that have announced a time table-- California, a timetable for basically phasing out of carbon-based automobile energy. And so we're going to see more of that, but there's still going to be a demand for energy. And here's the reality.

As demand goes down, we're going to shut down marginal production at 53, 54, or 55 gallons a barrel. If you look at history, crude oil is cheap. We've got cheap crude oil. We're cutting off production like crazy, up at $80, $90.

We're producing all kinds of crude oil from North Dakota. I mean, oil production in North Dakota, to think that the US is the net exporting country of oil, well, that can happen at a certain price, not at this price. And so you choke / you choke off supply. And I don't see the day, and perhaps tree-huggers do, that there's not such a thing as burning carbon. But I think, in my lifetime, and certainly yours, and certainly the lifetime of anybody who's alive right now, carbon-based fuels are going to be a reality for certain uses.

And so I think crude oil is cheap. I'm not long on crude oil. I missed buying crude at minus 45. I couldn't have anyway-- or at 30. But yeah, I think we'll see $70 crude before we see $25 or $30 crude again.

MAX WIETHE: OK, all right. Well, we'll get into Tesla a little bit. But before we do that, let's talk about interest rates and eurodollar futures that you have here. PETER BRANDT: Yeah, I mean, I think the chart-- and keep in mind, that's not eurocurrency.

Right? Eurodollars are the interest rates of dollars that are being held offshore. They're dollars that are sitting in Europe. I mean, that's where we get it.

Euro-- it's eurodollars. It's dollars in Europe. And what's the interest rate? And it's really the equivalent of Treasury bills, right? We get Treasury bill interest here.

You get eurodollar interest, euro [INAUDIBLE] interest, in Europe and elsewhere. And so that's what that is. But if you look at that chart, basically you can see that we've gone to US interest rates measured by eurodollars of 0.

We went to the world of ZIRP, Zero Interest Rate Policy, here in the US. That's where we took the short end of the yield curve here-- two-year notes, five-year notes, just about 0. We're not much above that. So you have to look at history.

We had higher interest rates in the world in the 1960s, in the 1970-- or in the 1900s, in the 1800s, in the 1700s. These interest rates, we're going to go through a cycle where we're not going to see these interest rates again, at least in anybody's generation who's alive today. It's crazy. You look at interest rates in Switzerland-- minus 70 basis points, minus 7/10 of 1%. You want to hold money in Swiss francs? You pay the government for the privilege to do that.

Same thing in a lot of European countries-- it's a negative interest rate. You have negative interest rate policies. And so we've scraped the top.

We're not in the US going to go negative interest rate policies. Or if we do, it's going to be a fluke. We're going to go to higher interest rate. I don't want to get into the inflation story. I just want to get into the fact that I don't think there's anything unhealthy about going into higher interest rates. I mean, I purchased a home back in 1983 at a 14% mortgage rate.

And I didn't think anything of it at the time. I mean, I had money in T-bills that were earning 17%. And so I mean, that was unusual.

That was the high end of yields. I mean, that was the high in the cycle. So I just think that my mind right now is basically the game to lower rates is done. I mean, that's over.

We've had that trend. It started in the early 1980s with the 40-year trend to 0 interest rates in the US. That's done. We have to look forward.

We're going to have a trend of higher rates. Now, we'll probably get there, two steps forward, one step back, two steps forward, one step back. It's not going to be a huge surge. But we're going to get there.

My advice to young people to get these kind of mortgage rates right now is buy the most expensive home you can possibly afford. Take as much money out as you can possibly pay back, and you'll be well-served over time. MAX WIETHE: OK.

All right, well, I do want to let the audience know. We got some questions that I just want to save to the end. Peter, can you do a little bit over time today, go a little longer than the hour? PETER BRANDT: Yeah, we will-- always for Real Vision. You know that.

MAX WIETHE: All right, well, I appreciate it, Peter. I do want to get through all these charts, though. So we have here the long-term chart of the S&P 500. And man, you cannot even see what happened in March of 2020 on this chart. PETER BRANDT: No.

I mean, I think that's a log chart. I think I gave you a log chart, not a linear chart. So yeah, the trend has been up. I mean, again, you go to Peter Schiff and say, tell me how gold has been such this great investment over stock. It doesn't exist. I mean, stocks have been the place to be.

Common stocks have been a fabulous investment for US investors. Unfortunately, we have a lot of people in the US who do not own common stocks. They may, of course, have retirement funds and pension funds, and so forth.

But it's been a great place to be. We have these permabears out there. All they want to do is talk about the top of the stock market.

And hey, I can create a story with charts that does suggest that maybe we could be approaching this top. I mean, we're in a lofty territory here. We're into some high territory here, and you can argue, based on traditional valuations, price versus PE, price versus sale, price versus national debt. And you can create all of these global macro arguments that say the stock market shouldn't be at the current level, at the level it's at. But the reality is we are at the level that we are at.

And common stocks have been a fabulous investment. Of course, not all categories of stocks-- for a number of years, it was tech stocks. It was a tech show. Here, more recently, we've seen small cap stocks be on a tear.

We've seen different category of stocks. We see alternative energy. We've seen, of course, during COVID and things like Zoom, ways to pay bills online, that sort of thing. We see that. But that's been the history of the stock market.

You have a hot category, it cools off, hot category, it cools off. The important thing is there has been rotation. And so we've seen rotation to a new thing that'll be the lifeboat and carry the market until it solidifies.

So I don't want to bet against the US stock market. Here's the problem with that-- and we talked about that a little bit in Bitcoin-- is when you say that you want-- a person says they're super bearish to the stock market, what they're really saying is they're super bulls in the dollar. Because you get out of the stock market, guess where your money goes? It goes into US dollars. And so the stock market is a bet against the dollar. US stocks are valued in an expression of US dollars. And so any time you buy stocks, you go short the dollars-- Long stock, short dollars.

You go short stocks, you're long dollars. You're best long dollars. And so there's two sides to this trade. And people have to remember that. For the time being, maybe there's a point at which there is a top of the stock market. I don't see it yet.

Yes, it's stretched out. Yes, it wants to be cautious. I'm about 55%, 60% committed now in retirement money to US common stocks. And so that's where I'm at now. If someone wants to take the chart that they're seeing and create a bearish story about it, what you do is you say we have a big Broadening Top, big Broadening Top.

You have a high. You have a low. You have a high. You have the low.

One of the lows is the March 2019 low. And so you can create that. You can go back to Richard W. Schabacker, 1934, Technical Analysis on Stock Market Profits. You can go to 1948, John Magee, Robert Edwards, Technical Analysis in Stock Market Trends.

You can read all about Broadening patterns. It is that classical pattern. It's a classical chart, and it's recognized by classical chartists as the real deal, as a real recognized pattern.

And so we have that right now in the stock market. One could say, if stocks collapse from here, and let's say we have a 50% correction in stocks, you're going to be able to look at the chart and say, we topped with a Broadening Top. But a top is not a top until it's completed. You cannot declare a chart pattern to be a chart pattern until it's a chart pattern. Until it's a chart pattern with completion, it's only a possible chart pattern.

And so you can't be bearish, based on Broadening Top, because we don't have a Broadening Top yet. We have a possible Broadening Top. And so I don't want to predict markets. I want to respond to markets. I don't want to be a predictor. I don't want to take a chart and start drawing all kinds of fancy lines on the path that I see a market taking.

I think that's a fool's game, quite frankly. I want to know where a market is. I now want to know where it's vulnerable. I want to know, if I want to take the other side of my position, I want to know what that argument is from a classical charting point of view.

For me, the argument is not PE ratios. It's not price to sales. It's not all that kind of stuff, although I'm not saying those things are illegitimate. I mean, you work for a guy who's brilliant in looking at markets-- Raoul. He has all my respect in the world.

He and I may differ on how we view markets. We may differ on there 180 degrees. But I respect that he comes to conclusions based on common sense and procedure. So if I were to say I'm going to become a stock market bear and start drawing lines into the future, I'd draw based on the Broadening Top. It's not Broadening Top yet.

And so I'll be looking. Now, quite frankly, based on instinct-- and I got to tell you, my instincts are not the best. I mean, my strong convictions on a trade are not necessarily positively correlated with outcome. But my hunch is that we're going to see a big, broad trading range in US equities in 2021. We had the big rip-off from the March lows, especially when you look at NASDAQ, but even S&Ps, even Dow.

We've had the big run up. Is that sustainable? Is that sustainable as we transition to a new government? I kind of don't think so. We're going to see tax law changes. We're going to see uncertainty of a new government.

I think that those are fundamentals. Now, I trade on charts. I don't trade on them. So what I'm telling you is what I think could be the environment of the stock market in the coming year.

And so in the back of my crawlspace here, I'm thinking, don't be a dogmatic bull in the US stock market. Be cautious. That doesn't mean I am not long on stocks like Micron, Johnson & Johnson, IBB, and ETF on health care. I'm going to be long things like that.

Cigna Insurance, looking to be long. I'm going to look at those opportunities. But in terms of the general market, I guess I'm preparing to see a two-way market.

MAX WIETHE: OK. Now, what about some of these rotations that have worked, the things that have been the life boats? You talked about solar and renewable energy as being a narrative that the market is clinging to, as well Tesla a subset of that narrative, but perhaps a beast of its own, to even be separated again as its own narrative all in itself. Those have seen miniature parabolic advances this year. When you look at this chart of Tesla, and we'll take a look at TAN, the solar ETF, in just a second.

Now, what are you seeing? And as a chartist, how do you trade that? PETER BRANDT: Luckily, there's been-- I'm a chartist. And so I trade patterns, and I trade setups. I'm a setup trader.

And that's how I trade it. And luckily, in the case of Tesla, I cannot claim that, Oh, I saw the story. I own Tesla. I mean, I've seen YouTube videos that are fabulous. I know of people, younger people, that bought Tesla automobiles, absolutely believed in it, and put their life savings in Tesla stock four or five years ago, and are now millionaires, yeah, retired from working.

Kudos, congratulations. Yeah, I bow to you. That's brilliant.

I love the story. I think those are wonderful, wonderful, wonderful stories. But I'm in and out. I'm a swing trader. And there, luckily, have been some really, really, really nice patterns at Tesla on the way up. There's been a couple-- MAX WIETHE: Yeah, I see those little pullbacks on the way up.

PETER BRANDT: Yeah, there have been. There's been some nice places, where a person's been, I've been able to take out $200 or $300 here, and then you get a split, and you start over again. I haven't ridden the whole thing up, but I compare myself, as a trader, to my American football.

I know people from Europe aren't going to get this, because they don't think American football is really football, because you use your hands. But the reality is, I play football. My training would be compared to playing football between the 30-yard lines. That's where I want to play that game, not end zone to end zone.

I don't want to run back 105-yard touchdowns. That's what's happened in Tesla. It's been a 120-yard touchdown-- back of the end zones to the back of the end zone.

But they even extended the field, and the runner ran out of the stadium. But I'll take 30 yards and a cloud of dust. And so that's how I'll continue to trade it.

But there's been a lot of naysayers. Elon Musk has had a lot of naysayers. And he's going to continue to have a lot of naysayers. But my contention from the very beginning was something somebody told me four or five years ago, when they said, buy a Tesla, and you won't be bearish the stock. And I heard that.

And I had more than one person tell me, it's tough to own a Tesla car and be super bearish the stock. And the little things like that, you'll hear from people. You'll go, ah, ah, ah. That means something. And I think that's what's happened.

And people have looked at Tesla and said, Oh, my goodness, how can the valuation of this car company, electric car company, be equal to the entire valuation of every other car company in the world? [CUCKOO CLOCK CHIMING] I've got a cuckoo clock going on. That's my ode to Germany. So yeah, in any case, I think the story is Tesla hasn't been-- I'll wait for cuckoo to be done. Tesla has not been a story of an electric car company. Tesla has been a story of energy, alternative energy, a whole way to think about things. It's an ushering in.

You can say the same thing about Apple, 7, 8 years ago, 10 years ago. The price is overvalued for a stupid telephone, a little thing you carry around and you talk on. It's overvalued.

Well, good luck on that one. And so to a certain degree, you have the same thing. It's a legend.

You have legendary stocks-- Walmart, McDonald's, Microsoft, Apple, Tesla. You have stocks like that-- Goldman Sachs. They're legendary stocks. Tesla has joined that list.

It's a legendary stock. Now, that doesn't mean to say that we may not have a correction. But Tesla is just not an investment. You can't look at it and say, yeah, but they only sold so many cars this year. MAX WIETHE: Well, until the rest of the market starts saying that, until the narrative that has been driving it has been violated, there are some charts, though, like in Europe, the most mature electric vehicle market.

As a percentage of the cars that are sold, if you look at that as a symbol of what we can expect for the rest of the world, Tesla is no longer the dominant car being sold. And people are noticing. And that hasn't mattered to the market yet. But as it starts to matter to people, and as people start to buy other electric vehicles, it could change. But it's really the narrative changing and the market appreciating that narrative that is when it's going to play out in price.

And as of right now, that's not a narrative that anybody really cares about. And so until that has been violated, it sounds like you're going to be buying dips. PETER BRANDT: Yeah, well, I'm not going to be buying dips. I'm going to be buying setups. I mean, do I think Tesla is overvalued? I think it's crazy. I think the valuation of Tesla is absolutely insane, to tell you the truth.

I mean, that's my personal opinion. And would I short Tesla if I see a classical chart pattern? No way, no way. Will I buy Tesla if I get a buy setup? In a second.

MAX WIETHE: Yeah, all right. Well, let's move on to the TAN ETF, which encompasses some of this narrative that you're talking about. But it has had quite a run itself. I see it down well below-- was it down 20, 20-something like that, in March? And up well over 100 at this point. You've made more money buying TAN at the bottom maybe than you made buying Bitcoin.

PETER BRANDT: Yeah, well, no, that's not the case. But nevertheless, we've seen a play on alternative energy. I mean that's been a big play. Of course, the story there is we're going to have a new administration, this administration that wants to hug trees and outlaw carbon. And we're going to see it play in any form of alternative energy.

And that's what's happened. And I think, quite frankly, it's probably overpriced itself, compared to what it's going to become a reality. We can talk big about where all the energy space i going. But it's been a good play.

But we've seen other-- I mean, it's not the only one. We've seen a number of other similar stories like that and solar, alternative energy, electric cars, all of that sort of thing. So that's what's going on. I'll be alert for those.

If I see patterns-- I'm not a big bull on solar. I mean, I'm not a big bull on solar. I'm not planning to put solar in my house. I'll probably buy a Tesla. But we're going to continue to see, and people need to be alert for, setups like that, that can offer great swing trades. MAX WIETHE: OK.

What about uranium? It's not in a major breakout, at least on the long-term chart, as compared to, say, Tesla or TAN, and it's really the red-headed stepchild of the green energy trend. I'm interested to hear what you have to say about it as somebody who is a chartist. PETER BRANDT: Well, I mean, I'm going to speak as a global citizen. I think it is crazy that the United States has missed out on this. Nuclear power is clean. Yeah, it's had safe.

But the technology today for nuclear power plants is not the technology that we've seen could give us a problem in the past. Is there always risk with nuclear power? Of course there is. But I think that the reality is it's a clean source of energy. It doesn't pollute the atmosphere. And so I think, will there be sanity by the US to re embrace nuclear power? I certainly hope so.

Of course, Europe did. And Europe is drifting, actually, away from it now. But China is embracing nuclear power. And the problem is American technology was left in the dust, because nuclear power became the hated stepchild of the United States political powers that be, as well as the environmental industry.

Even the environmental industry that's crying for clean power hated nuclear energy, by and large. And so I think that we will see a turnabout here at some point in time. I hope so. I think nuclear power is a common sense way to go. I think the technology is there for safe nuclear power.

And if there is a trend back to nuclear power, certainly uranium will be a good investment. Fortunately, our uranium future, they're not the most liquid in the world. But they're trade-able. And of course, we've seen a lot of these rare minerals. We've seen some rare minerals, ETFs, that have done extremely well.

And so, I mean, I think that's a place to continue to look, is nuclear. It's had a run. I'm not prepared to actually even be long in that space right now. But I think it's a space that I have my eye out there on the edge and say, I'm going to be aware of opportunities that come from that part of the world.

MAX WIETHE: OK. One final chart that you brought with you today that I would like to get to is the BDRY, Breakwave Shipping ETF. So it looks to me, based on what I see from the chart, that you probably are bullish on shipping. And then I want to get in some questions. We got some great questions just about trading. PETER BRANDT: Yeah, I mean, hey, COVID created disaster to global commerce.

I mean, that's the reality. It shut things down. I mean, all of a sudden, the ports are filled with ships, and the ocean's empty. And so we will return to normal shock that we are where we're at right now.

But that's a whole another debate, how the world has responded to COVID. And so shipping companies, the shipping industry stock got clobbered, because the bottom fell out, so to speak, from the shipping industry. So I think that will come back. And so I think it's a space that I have some ownership of. It's a space that I am interested in.

I'm hearing from people who are in that industry. And I hate saying, Oh, somebody in the industry told me to be long, so I'm going to be only. I mean, I don't do that. That's not me.

But when people that I consider to be intelligent in the form tell me that they think their industry is poised for a good run, I'm certainly going to look at the charts and say, what can I find that support what they're saying, that makes sense to me, that give me the trade that I want with the risk management I want? So that's where I see that right now. MAX WIETHE: OK. Well, Peter, thank you so much for running through all these different assets.

And your reputation precedes you. So we did get some questions about how to trade charts. And John wants to know, in your experience, how successful are patterns, especially those with horizontal boundaries, like head and shoulders, right-angled triangles, on lower frames, like hourly charts, compared with longer-term charts, like weekly and daily? PETER BRANDT: Not reliable. I mean, here's the reality, is that charts morph. You see something that you think, OK, this is what I'm looking at. And it has a way of becoming something different.

And the reality is that 1-minute charts morph often than 5-minute charts, more often than 10-minute charts, more often than 1-hour charts, more often than 2-hour charts, more often that 6-hour charts, more often than daily charts, more often than weekly charts. And so there's two parts to this answer. One is you just have a lot more unreliability as you go down the time scale. Does that mean there are not trades that take place on the lower time scale? Of course that doesn't mean that. There certainly will be times when you see a pattern on an hourly chart, and the pattern works. More often than not, you can say-- especially if that pattern occurs in a trend, and you think it's going to reverse that trend on a lower time frame-- more often than not, it's going to morph, and it's going to resolve itself in the direction of the dominant time trend in that time frame.

And so I caution people against that. But that really raises a whole, big philosophical question, and that is to chart patterns for debt. Are chart patterns an accurate, a reliable way, to forecast price? To that, I would say, absolutely not. They're overrated. That chart patterns, in and of themselves, do not provide a big edge to a trader. I'm sorry, they don't.

Now, I've made money trading charts for 45 years. So I'm telling you that as somebody who has been profitable by trading chart construction for 45 years. Chart patterns do not provide a significant edge in and of themselves. But I have to use something to determine when I'm going to buy and sell.

I have to have some way to say, I'm going to be long, or I'm going to be short, I'm going to be in, or I'm going to be out. Chart patterns provide for me a couple of things. They show me what I think is the path of least resistance. They show me levels where there has been support. And it'll suggest the opportunities where I might have an asymmetrical reward to restrain. It's in that trade managem

2021-04-15 01:11

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