Inflation is real and it’s coming, Canaan (CAN) and Bitcoin

Play episode

Inflation is real and it’s coming, Canaan (CAN) and Bitcoin

03/10/2021

Podcast Transcript


Hey this is Jeffrey with another edition of Stock Smart, the March 10th 2021 edition. Hope you’re all doing well. Let’s talk about the latest CPI that just came out this morning. In fact, when it was published around 5:30, it changed futures as inflation was mildly changed right now. We did again see large price increases in gasoline up another 6.4%, so those going in to the oil stocks and hopefully you’re there already, I don’t think now, I think it’s moved so much. We’re going to see some stabilized prices in oil for the barrel price. So we’ve got a big move seasonally, 6.4 we had 9% it moved in January 6.4 in February.

[00:00:42]
It’s a big move, most of the inflation resides right now in the cost of energy and so we did have a modest increase in inflation, 0.4, but I think later we’re going to start seeing a bigger creep. So it’s something you want to keep an eye on, but the inflation came out, latest CPI shows 4 tenths of a percent increase. And one of the problems with some of these inflation numbers that they bring out is that it it’s a rolling 12-month number. So when you look at inflation, the last 3 months that are going to roll off, the numbers are going to seem more extreme in the next three months and that’s because we had negative numbers in February, March and April of last year.

[00:01:25]
And when the negative numbers roll off, we’re going to start to see greater inflation, it is going to happen because we don’t have negative. All we have is current increases, 4 tenths of a percent, we had five tenths of a percent about six months ago. So you’re going to continue to see this creep up in prices and if you’re going to the grocery store you see it already. Commodities keep going up, the raw materials that are used for things, wheat, feed, all going up

So yesterday, we had a huge huge rally and I want to make sure people understand this. So when you see a rally that big, we had 4% in the NASDAQ approximately when you see a rally that big something’s wrong.

[00:01:59]
So what you need to know is it wasn’t just people saying hey, let’s run into growth stocks. No, it was short covering, lots of short covering, so these hedge funds again and you’re not going to see these numbers probably inside if you look at a short kind of site that has the short information because it takes about two weeks to get that information and this move happened really fast and that’s one of the things too that happens in the market.

[00:02:22]
It’s so fast that data that you get is late or it’s already happened, so those short covering yesterday because there are a lot of stocks that moved way too far including one we really like and you’ll see this in stocks that move parabolically, Futu, which had been, you know, dropping heavily probably because of shorts because it had moved so parabolically to the upside. Futu was up huge yesterday something like 25- 30% or $30 a share and that was because of a lot of short covering. I am sure other stocks that probably were short cover yesterday, trade desk, Shopify. So today’s market did go up early in the day. Probably going to be up a little bit but not big because a lot of people who bought to cover will probably sell those positions if they don’t want to stay in those stocks.

[00:03:07]
So that’s how the market moves when it moves like that you’ll see after you get a big sell-off period like you’ll get two weeks, you’ll get a big push up day and generally that is short covering and that’s why you see a 4% move in the NASDAQ.

[00:03:20]
So if you got in like we talked about last week, I said don’t be all in value stocks be in some of these because when you do get the rip back and that’s when you see when you get big sell-offs you’re going to see a rip back because the hedge funds or the people who are in shorts, will short and then have to cover and that’s why you get 4%, otherwise, it was a good positive day as we start to get more information on maybe Japanese coming to buy the bonds to drop the bond prices, GameStop continues to move up. It makes no sense. There’s a lot of dysfunction in the market. Yeah, there’s some good news. But what’s GameStop done in 3 months that makes a stock go from 10. Maybe, it’s a $20 stock. Maybe it’s a $40 stock.

[00:03:59]
It’s not a $300 stock, makes no sense. People are buying it. They don’t have a position in online gaming, those major consoles, how are they going to get established against the major consoles PlayStation and Microsoft Xbox, how are they going to get against and compete against Sony and Microsoft, what are they going to do with the mall stores? 5000+ mall stores that they’re going to have to get rid of. We’re going to have the Stock Smart contest coming next few weeks will have more information. Very first stock picking contest, going to have to decide, we’re slightly positive on the S&P 500 oscillator yesterday had a big move, changed it.

We might be negative today or neutral, nothing really to be concerned about at this point. When we get overbought conditions will let you know, the VIX is down today getting near safer levels, VIX is down about 4% right around 22, a safe zone for the VIX is about 20.

[00:04:53]
So we’re getting to more palatable or tolerable levels in the VIX, and the VIX sits at 20. Seems to be the new resting place, it used to be around 10, but now with the increased option activity we’re getting it to a resting place of about 20. So at 22, there’s not a lot of fear in the market and it is trending downward. The most recent trends are down. So VIX is looking strong right now.

STOCK WATCH

Let’s talk about a stock. We’ll do the marketing language game here. We provide heavy performance computing solutions to efficiently solve complex problems, currently the company is focused on the research and development of advanced technology including such areas as AI chips, AI algorithms, AI architectures, system and chip integration. Okay, who are we? The company is called Canaan, it is bought by an ADR. It is a Chinese company. They are delving heavily into the bitcoin marketplace.

[00:05:45]
It is a Beijing-based company founded in 2013 and it manufactures super computers for use in bitcoin mining. So if you’re a believer in bitcoin you don’t just have to buy bitcoin, but you should also get involved like in their supply chain, 3 years back when Nvidia went just ballistic, doubled in price it was because people were buying their processors to farm bitcoin, or to mine bitcoin I should say, so Canaan again taking that advantage right here, up about a thousand percent. Now it had a massive movie yesterday. And again, I think this is a stock that moved so far to the upside. It has moved a thousand percent in 6 months. So that’s going to be a short target, when you see a chart that’s like a hockey stick, that’s a company that’s going to get shorted because it’s got no support and it could fall a great deal.

[00:06:35]
So yesterday’s move probably was a short in the company and it got played out big market day, big move and it went up a lot. This is a stock we like, we think you should add a little bit to it and see how it does over the next week or two because it’s going to be maybe a little bit tumultuous as it had such a big rise in one day. They kind of changed what they were doing. They just announced that they recently had over a thousand units of bitcoin mining machines, sold to customers just in North America. And the company changed what they were doing

[00:07:06]
They had a different operations model where they were selling to consumer, but now they’ve made their machine just to publicly-available just to publicly-traded companies and bitcoin focused investment funds and it’s led to bigger orders for them, so Canaan is in play and if you want to be part of kind of on the periphery, maybe not investing in bitcoin because again, there aren’t that many ways you can invest in the stock market directly in bitcoin. There are a couple ETFs that are coming on board but they’re very hard to get approved. And so there have been very few that have been allowed but there are a couple that you can get and dip a toe in but this is a way where you can kind of get involved, Canaan, CAN stock ticker symbol.

THE AVERAGE INVESTOR

So I got a question from Ted, and Ted wants to know, when do we see inflation picking up? And again, thanks for the questions, you can send them to Jeffrey@JeffreyKamys.com

[00:07:55]
I would say keep watching the CPI numbers if you see inflation picking up, so again here’s what’s happening, right? So when inflation goes up we see this creep in inflation. It scares the bond market because what happens is we get a lot of Sellers and when we get more sellers than buyers the bond-price or the bond interest rate has to go up the bond price goes down. So that’s what’s pushing the bond-price up. So we’re getting a lot of sellers, people inflation bonds with low interest rates are not a protection against inflation, and so you get a lot of selling, now when you get an interest rate like Japan having a 0 interest rate on their bond you get you know, you’re going to get buying from Japan.

[00:08:35]
However our inflation will continue to push the bond interest rates up, bond prices down as we continue to see a creep up in inflation which we are seeing and as what we think and if you look at the CPI, and we looked at the whole thing this morning. We’re going to see and continue gradual price increase, so all index items in the CPI rose about 1% for the previous 12 months because they do it in a rolling 12-month period. But when the numbers from March, April and May are escaped and those are negative numbers of about 1.2%, when those are escaped, you’re going to see a bigger bump in these inflationary numbers and one thing that caught my eye when I was reading this inflation document, the CPI that’s perused by the government at the Bureau of Labor Statistics.

[00:09:18]
They have a disclaimer in here and this is kind of interesting to me and I think that their numbers could be a little bit flawed. You’re not going to hear this from anybody you really have to actually go and read the document, you’re not going to see this on CNBC, but there is a disclaimer in the CPI and it says data collected by personal visit for Consumer Price Index program has been suspended so it means that generally they would go out in the field and get this data in person. So the date is going to be better. So now they get it over the phone and online. And they’re actually getting less data, that kind of scared me when I read that because that made me think, uh oh,  we hit June, July, they start getting real data really in front of people.

[00:10:00]
We’re going to get a number that just skyrockets in one month. So here’s my point, watch these numbers. There’s another report coming out April 13th. I would be a big watcher in inflation as we continue to get inflation, bond prices go down, interest rates go up, as interest rates go up when we get to two and a half, which we could, probably not by the end of this year, but we could that’s when it’s going to start getting scarier for growth stocks and all stocks in general because people will move into those higher interest rate bonds. So hey, another great show. Appreciate all you listeners all the feedback and all the comments on all the questions we get. Have a great day and we’ll see you again next time on Stock Smart.

More from this show

Episode 31