00:01 Hey guys, John Polomny here. Actionable Intelligence. Today is Saturday, June 27th, and this is the weekly market update. The disclaimer: anything that you hear or see on this podcast or video is not to be taken as investment advice. I am not a registered financial advisor and I cannot give you personal financial advice.
00:26 This is for informational purposes only. Please do your own due diligence. It's your money. It's your responsibility. Okay, let's get started. So one of the things that if you've been a longtime listener or follower of this podcast, one of the things that you've heard me say many times is in the short term, what drives markets is liquidity and sentiment.
00:51 In the longer term obviously the fundamentals is what plays out, but in the short term sentiment swings and changes in liquidity actually drive markets. And one of the things that was prevalent coming out of the COVID situation was the fact that all the world central banks were flooding the world with liquidity.
01:21 This is why we had such a big response in financial markets. Then of course the inflation came. We've talked about the Cantillon effect before, how this works. I've written about it. The initial euphoria, if you're close to the money printer, you benefited as asset prices increased, but then downstream further down, prices eventually are affected by the increase in liquidity.
01:53 You never can tell when you create the liquidity where it's going to go, but inevitably asset prices rise initially and everybody's happy, and then the people that don't own assets end up with higher prices. This was an extreme example that we saw in real time that many people that are listening to this can relate to and see and understand.
02:18 Then we were in a situation where everybody was raising rates because inflation was starting to get out of control. And then later on in late 2023 we started cutting rates again. This is the Council on Foreign Relations Global Monetary Policy Tracker as of May 2026. This is the index of global easing.
02:44 You can go to their website. I'll put a link in the show notes and you can play with this and you can see it tracked 54 or 55 major country central banks. And what this thing at the top is telling you is index of easing or tightening. Zero obviously means we're at neutral.
03:11 If you're in positive numbers, that means tightening. And the closer you get towards the outliers, it's the degree of easing if you're in a negative number, or the degree of tightening. And so liquidity is tightening, central banks are starting to raise rates. And this is tightening liquidity.
03:32 And we're seeing that. We're seeing that in the markets. We're seeing that in risk assets, commodities, gold, bitcoin, we're seeing this. So these are things that normally respond to liquidity in the short term. Yes, fundamentals do matter, but these things are very volatile relative to liquidity and sentiment.
03:55 Liquidity causes initial moves one way or the other. And then the sentiment comes in, either positive or negative sentiment, which I believe exacerbates the move up or down, and that's where you get your volatility. So having moved from general easing to general tightening, we can have the expectation that liquidity is in fact tightening.
04:26 One of the main tools I use, a good tool to use, is Bitcoin because it in my view correlates very well with changes in liquidity. And here it is. Here's your 200-week moving average. This is another example. This is only going back to 2021.
04:50 I just grabbed this chart when I saw it because it reminded me. But this is what happens. You get way above a moving average and you got to pull back. And so typically what happens is you go under after a big move higher like this, you consolidate. But this coincides directly with the changes in liquidity that I was talking about.
05:08 The period when it was making new highs was a period of global easing. And now you're right around this time where it was peaking was the time where you were having a phase shift to a more lack of liquidity or less liquidity and higher rates. So this thing really does follow that.
05:37 It has been a good barometer for that. Consequently, recently we've had more, as a consequence I think, as liquidity shrinks, dollars become more valuable, the dollar index goes up. Notwithstanding the fact that because of our bull market and the fact that rates are creeping up here, it's drawing in capital from around the world into the dollar.
06:04 Obviously the dollar is inversely correlated to the gold price and commodity prices because they're priced in dollars. So we have a lot of things conspiring against gold or risk assets and commodities. These things have ran quite a bit up until recently and now they're consolidating.
06:32 These things happen. And these are intermarket relationships that we've talked about. It doesn't change my long-term view on things, but in the short term, medium-term, I don't know, 3 months, 6 months, 9 months, a year, you can have a consolidation period. And I'm going to get into why in the end all roads lead to money printing. It's inevitable.
06:55 So you can either understand that or not understand that. And I'll make my argument of why that is. I'm not a doom and gloomer, but these things, you are going to constantly — we're in a scenario now I believe where you're just going to constantly run higher inflation rate. And the central bankers, specifically in the US, I don't care who you put in there, if you resurrect Volcker and put him in there, when there's a crisis, when there's a need, they will print money. They are not there for the mandate.
07:31 The mandate being 2% inflation and employment is a secondary mandate. Then why are you — the Taylor rule, which is something I'm not going to get into all these things, says that you should have a 6% fed funds rate. Well, if you had a 6% fed funds rate the economy would be in a deflationary depression because of all the debt. And so you see that this central bank and this whole thing is an engine of inflation, which is always and everywhere a monetary phenomenon.
08:09 So we'll get more into that. Now here's the gold chart. We showed you the Bitcoin chart. Gold performed well. It's interesting that this kind of popped out or coincided with the beginning of the conflict with Iran. It's interesting to note also. But this thing went on a good run from 3,300 up to 5,600 and now you have to consolidate.
08:38 We've seen this chart over and over. Gold, copper, uranium. We've seen this chart over and over. You get a run. Everybody gets pulled into it because of all the rah-rah, the FOMO going higher, and then the inevitable pullback and consolidation happens. This is what happens in the rotation out of this into something else.
09:04 And this is coinciding with a liquidity that is contracting, and then you throw on the negative sentiment because going down, people get negative. I don't want to own it. Get me out. And this is what you have, declining prices until you find a bottom. I don't try to pick bottoms. This is what you see on FinTwit among the gold guys and all this, well, this is the bottom.
09:32 They're calling bottoms. I don't try to do that. What I look for is — you can see a definite bottom. This is not a chart that I would want to buy. Let's put it that way. You have the moving averages. The 50-day is getting ready to cross over the 200-day. That's negative.
09:53 You're trading below the 200-day. You're making new lows. You don't have to be a technical analyst to realize this is not a chart that's positive. You need to bottom. You need to test that bottom and you need to look for a turn. And that should coincide. Gold will sniff out the next passive money printing.
10:14 Now remember, they still have the 40 billion a month. I'm talking about a big print. You need a crisis. What's that crisis? Because you already have 40 billion a month being bought so that they can issue T-bills, buy those and then buy back the long bond, because they're trying to slowly suppress rates because rates are moving higher because the deficits are moving higher and the debt's moving higher.
10:45 And inflation is there. Now oil prices are way down. But that will take time to feed into this and feed into lower inflation. But yeah, right now the sentiment is negative and you don't want to stand in front of these things. Here's the CRB. You see how far ahead it just launched, basically when the war started, launched, made a new high, got way above the moving average.
11:25 Now we're pulling back. A lot of that is because of energy. But where is it going to bottom? We don't know. Is it going to round trip all the way? We don't know. We'll have to wait and see. Everything's going to be based on what's the ultimate situation with the oil price relative to this index.
11:48 And so here's the oil chart. Let me speak a little to this. It's interesting because on the way up, a lot of people will accuse me of forecasting 200. I said it was a possibility. No one can predict the future. Let me be insistent upon this. It's not possible.
12:09 What you can do is look at probabilities. Was there a certain percentage probability that oil could have went 200? Yes, depending on the circumstances in the war. If Iran would have continued attacking facilities, then that would have been priced in. They didn't do that. It's deescalated.
12:32 Now, a lot of people go out there and make these predictions. I don't make predictions about commodities. I learned my lesson a long time ago. You don't do that. You look at the probabilities based on the information. Right now the sentiment in the market, the view in the market being expressed in futures market is everybody's short now. Everything is solved. Everything's open and ships are pouring out and that's true. We had a big slug of mostly Iranian tankers leave the Gulf and oil prices reacting to that. So things react on the upside and things react on the downside. You have record amount of short position.
13:05 Everybody's short. Oil's going back to 50. Well, maybe it will. Who knows? My view is that we're never going back to the way things were. I believe that this was a strategic defeat for the United States.
13:27 We've went over the 14-point plan. You see the negotiations that are going on. I don't see the big progress being made. The Iranians are going to come out of this better probably than they started. And you just saw there was attacks yesterday. United States attacked Iran, so the ceasefire is already — there was some ship from Singapore that was going through on the Omani side.
13:53 Whatever reason, the Iranians hit the bridge of the ship with a drone. The United States responded with attacks on drone and missile positions on the coast of Iran. There's your ceasefire. And so how do you go back to normal? That's what I keep saying. Is the market pricing in — the question you have to ask is, is the market pricing in everything back to normal?
14:26 And yes, Iran and the others are incentivized because they need the money. This is what they do. But I don't foresee a situation where — who has the upper hand here? Who has the best hand in the poker game? Iran's getting funds. We're going to be releasing funds to them. They're exporting oil now again.
14:55 This toll arrangement hasn't been figured out yet and Iranians are insistent that that's going to happen, that they issued a joint communique that said they and the Omanis would control access to the Strait of Hormuz. Now I haven't heard that much from the Omanis about this but the Iranians say that they're going to control this.
15:19 And so the bottom line is, I think a lot of assumptions are being made here. My base case, which doesn't include a price, is we don't go back to the way it was on February 28th. Those days are over with. The United States could not open militarily the Strait of Hormuz.
15:42 They could not force Iran into a situation or agreement that they wanted. Iran's not going to agree to weapons inspectors because they consider everybody in the IAEA as MI6 or CIA or Mossad operatives. So that's not going to happen. And so what's the United States gain out of this? Well, the United States needed the spice to flow, i.e. oil, because the midterms are coming up.
16:06 And somebody finally sat the president down and explained to him that the Republicans are going to get wiped out if we don't have lower oil prices and get these prices down. That's what people care about. They have internal polling. That's what people care about. Haven't you been watching the last few elections or what happened in New York? We have Democratic socialists.
16:32 Everybody is running not to the left, not to be a socialist. They want the prices under control. Now I don't believe that government is going to solve that. That's another discussion. This is what people want, the big man to do something. Somebody come down and fix my life and make it better.
17:12 He's not focusing on Israel and Iran anymore. He's focusing on Ukraine. Remember they were going to solve the Ukrainian Russian war in one day. In the meantime, everybody's enriching themselves and strip mining the average person. But I'm not going to go on that soapbox. Oil is round-tripping. Does it go back to 50? It's not a 0% chance. Question again is what's the probable outcome?
17:58 And so my base case is that we don't go back to normal, or if we do it's many many years. So what does that mean for trade? Realignment of trade. It means that we're going to see the Gulf producers build pipelines to bypass the Strait of Hormuz. All of these things we've talked about. And so that will eventually all get priced into the oil price.
18:26 So we'll have to wait and see. But again, I'm still bullish on oil field services. This is going to be bullish for them because people are going to be looking to increase oil reserves and oil production or looking for things outside of the Middle East because it's demonstrating to be unreliable.
18:51 And the United States has demonstrated, at least on this round of this conflict, that its US Navy cannot open, keep and maintain a sea lane. And why is that? It's because of drone and missile technology. It's asymmetric warfare. We've talked about this over and over.
19:33 It's asymmetric warfare. This is part of the reason why the Ukrainians have been able to bog down the Russians even though the Russians are superior in every military facet. It's because of the overwhelming drone technology.
20:19 One of the main priorities of the US Navy is to keep the sea lanes open for commerce. It's been demonstrated that it wasn't able to be done in this case. Now, there'll be many that will argue we didn't do enough. Well, what else were you going to do? When I was in the Navy during the first Gulf War, we were in the Gulf with the destroyers escorting Kuwaiti tankers.
20:51 Now you can overwhelm those systems with drones, with a drone swarm. And so that's why you didn't see ships in the Gulf because they would get sunk. That should tell you something. So this is your 10-year Treasury going back to basically 1956 or 1960.
21:31 This is the big increase in rates during the late 70s up until 1980. This is when rates were raised by Volcker to crush inflation and then you had this long basically 40-year period of disinflation and equities boomed during this period and now you have a phase change. We said this before, this is really good because we've been talking about this for a while, but it's hard to see in the day-to-day movements of the markets, but when you look at a very long chart like this, you see that the new era of inflation has begun. Started with COVID, it will continue now because of the fiscal deterioration of the federal government, of the governments in the west.
22:05 They're now to the point, not necessarily at the tipping point of no return, but getting close. And so the debts are going to start overwhelming them. And as we have said before, in the end, all roads lead to money printing. It's just inevitable.
22:32 This is what history has shown us. You cannot demonstrate to me any movement, any coalition, any section of any western government where there's a constituency who cut spending. It's not going to happen.
23:23 So when you look at the long-term, this is when you can see it. Does this mean you can trade it on Monday? No. But this should be in the back of your mind that we're in a longer-term inflationary cycle. Now that will be punctuated with periods of deflation. Nothing goes straight up, nothing goes straight down.
23:46 But would you buy a 30-year bond from the US government and hold it for 30 years? What will it be worth when they give you your principal back in 30 years? Not much. Here's the 30-year Treasury, 5%. It's been moving higher over time. And with a government that's running anywhere from 1.5 to $2 trillion a year in deficits, 6 to 7% deficits in supposedly a time when the economy is doing well, this is going to put upward pressure on rates.
24:37 The purchasing power of the US dollar for the average person from December 1995 to 2025, this is 30 years, is down 53%. That's going to continue. So regardless, talking at the start of this that gold is in a short or medium-term intermediate-term down cycle, ultimately it's going to move higher.
27:18 So this will continue because there's no constituency to stop it. This is the inevitability of democracy. This is human nature. This is not new. This has happened before many times throughout history. So I'm a big fan of Kopernik Global Investors, Dave Iben. They came out with these charts. This chart and this chart were from their recent Dave Iben's insights. It comes out every few months. And reflecting this trend here, the collapse in purchasing power of the dollar because of the printing of money to cover the deficit spending.
28:01 This is what he says and I agree with this. This is why even though gold's down in the short term you have to look at these things longer term because it's inevitable. So what's he say? Quote, "Certainly the next 30 years will be much worse given the comfort level the government has with perpetual $2 trillion deficits. Over the past century, the dollar has lost over 99.5% of its value relative to gold. It would be shocking if the next century isn't much worse, if such a thing is possible."
28:54 Devaluation is said to be endemic to all systems, especially democracies. Scottish historian Alexander Fraser Tytler was correct. Quote, "Democracies can only last until the voters discover that they can vote themselves largesse from the public treasury." Unquote.
30:23 We have crossed the Rubicon decades ago of where we can take the pain and deal with this. And I'm going to get into when I think that was, which is 1987, because it kind of ties into another news event this week. But I'll put a link to the Kopernik Global Investors letter, Dave Iben. One of the things he says is just because this is happening, and the stock market's overvalued and chips and all this other thing, there's still value.
30:56 This is what I maintain in the Actionable Intelligence Alert newsletter. You have the ability now because trading has opened up all over the world. You can trade many many markets around the world and you can find value. You don't have to be wedded to one country. Now here in the US, you still have the ability. You can open brokerage accounts up that will allow you to trade virtually over the entire world.
31:46 And so that's what I'm taking advantage of and seeking out value wherever I can find it, or in different industries that, looking for what's bombed out or what may be turning around and have upside. That's what you have to be on the hunt for. It's not hard to just go buy Micron because it's going up. Are you going to be successful chasing shiny objects for a while? You might be, but you're not going to be able to make a successful investing career out of that.
32:06 So I wanted to talk about this. Alan Greenspan died this week. He was a hundred years old. This is a picture of him. I think this was when he became the head of the Federal Reserve. I think it was like a couple months before the 87 crash. This is one of his good friends, Ayn Rand.
32:32 I put this up here because this is what I'm talking about. It doesn't matter if it's Kevin Warsh or whoever you put in there, Mickey Mouse, Bugs Bunny. These people are put in there for one reason and one reason only. That they're going to toe the line. That they're going to be the steward of making sure the banks remain solvent. Talking about the Federal Reserve, and that the government is funded and that the central bank is maintained for what it is, an engine of inflation to the benefit of the oligarchy and the government.
33:29 We're not going to have a deflationary depression. It's not going to happen. You will have periods of disinflation, which we are probably entering now, but you're not going to have a 1929 deflation because they can print money.
35:39 So this is an article kind of like an obituary talking about Greenspan who died last weekend, 100 years old. Alan Greenspan had been running the Federal Reserve for barely two months when the floor gave out. On October 19th, 1987, the day that became known as Black Monday, the Dow Jones Industrial Average plunged nearly 23% in a single session. Still the worst 1-day percentage drop in its history.
36:13 Panic rippled across global markets, but the new Fed chair's response would define the next two decades and beyond. This is exactly right. This is the first time when I think that, hey, let it rip. Money printing bailed out the market and it worked, but no one considered the long-term repercussions of this.
38:46 So this is the playbook. Dislocation in the market, panic, print money. This is not hard to understand. In the meantime, obfuscate, smoke screen, talk a good game in front of Congress, to the press, press conferences. I'm going to do this. We're going to have the dot plot. All this nonsense. In the end, all roads lead to money printing.
39:43 So before he became the maestro, what did Greenspan think? Here's a quote from an article, Gold and Economic Freedom, that he wrote in 1966. I found it on Barry Ritholtz's site. Quote, "Deficit spending is simply a scheme for the hidden confiscation of wealth. Gold stands in the way of this insidious process."
41:13 Quote, "This is the shabby secret of the welfare statists' tirades against gold. Deficit spending is simply a scheme for the confiscation of wealth. Gold stands in the way of this insidious process. It stands as a protector of property rights."
44:46 And so it's obvious to me that the core values that Alan Greenspan had before he became chairman were totally changed once he got that position. This is why I don't believe in the long term — I don't worry about these short-term or medium-term declines in precious metals. You should look for a bottom at some point. It'll come eventually. I don't know when. And then we're eventually going to have another crisis. And then what's Warsh — I don't care if it's Warsh or Bugs Bunny. They're going to print money.
45:24 So I wanted to point this out. Retail always is on the wrong side of things. Here's from Bloomberg. Retail piling into semiconductor stocks. Of course they are because they only go up. Semi stocks always go up. Flows for all US semis ETFs listed on Bloomberg. Monthly inflows reached a new high last week. Of course they did because they only go up. Until they don't. The shoe clerks and bleacher bums are always the bag holders.
46:17 I was looking at the lockup schedule for the SpaceX stock. I live down here in South Texas, fairly close to Boca Chica where the SpaceX facility is. And they had in the papers here how many millionaires were made. Yes, on paper. They had an article about janitors and this welder that's been working out there since there was just a construction tent. He said, "I didn't even know what they did out here, but they got stock and now I'm worth $800,000." Yeah, on paper. Wait till the lockups come.
46:54 Every one of these — what people don't seem to understand is the people that put the money into these things, venture capitalists and these speed rounds, these are the people that really make the money because they buy in at valuations that are really low.
47:12 And so when this thing's brought public, that's exit liquidity, the bag holder, the retail. And then look how they're trying to skew things to get these things into the indexes, forced buying of SpaceX stock. And read the S1. It's just stupid talking about going to Mars. This is dumb. You have basically, many people — it has a business. The satellites work, but it's not like going to replace cell towers. It's a step behind 5G on Earth.
48:27 But the idea that everybody's just going to shift to their technology is not going to happen. And there's a limit on the rockets. What's the total addressable market for launches? Well, you don't understand, John. They're going to have data centers in space. Yeah. I'm still waiting for the full self-driving for the Teslas. The guy's a tremendous marketer. But he overpromises and underdelivers.
50:23 So there's forced buying because of passive flows. This isn't the first time and it won't be the last time. So I get questions a lot like where's this bull market in uranium? I just give you the long-term chart, long-term price chart for uranium. Contrary to those other charts of commodities, those charts you would not want to buy because they're going down now. This is a chart you would want to buy. This is a long-term uptrend. It will continue.
51:15 A lot of people were saying, well, demand destruction is what caused the oil price to go down. What's causing the oil price to go down is the reaction to the high oil prices. It's very volatile, but demand is still there. US gasoline demand for 2026, you're above last year's and you're in between 2024. So there's no big demand destruction going on in gasoline markets, at least in the US.
51:41 I know there's been speculation that things have changed in China and electric cars and coal liquids and all these things, that their demand's going to go down millions of barrels. Again, transportation fuel is one small part of a barrel that's used. Petrochemicals, all these other things are the majority of what a crude oil barrel is used for, not necessarily just gasoline for cars.
52:07 So my view on oil is that it's going to swing between very volatile extremes until it finds whatever that balance is. My view would be anywhere between 70 and $90 a barrel at some point. And as I've said from the start of this thing, that's a sweet spot for the things that I'm interested in, which is offshore services and things of that nature.
52:57 I'll be writing about this in the Actionable Intelligence Alert newsletter, the July issue. Biotech has been in a decline for 10 years or so, 11 years. Looks like it's bottoming. Has it broken higher? It's looking to try to break higher. I was listening to one analyst that talks about this. He's into biotech, has a pretty decent Substack. One thing I thought interesting was, you don't have a blowoff top in stock markets usually unless you need to see a biotech rally too.
53:55 Has biotech bottomed? Has healthcare bottomed? These are things that are ignored and are out of favor right now. And there's a lot of exciting things happening. One of the best performing companies in the Actionable Intelligence Alert newsletter is a drug company that has probably one of the best product launches in the last several years and that thing is up tremendously.
54:12 Again, as a generalist investor, I'll be honest. I just took a position already in the ARKG, the ARK Invest genomic ETF, just to get a position because that was breaking out to the upside. That's more of a momentum trade. I just want to get a leg into it. And I'm going to be doing more investigation.
54:56 This is the biotech index as compared to the QQQ and it's been in a downtrend for 11 years and it's looking to turn upwards. So I'm becoming interested in this sector. Maybe I just play it via ETFs or something like that and just try to capture some of the move.
55:49 People ask me, what's my process? This is what I see. I start listening to a few podcasts. I start to become interested. I take a small position somewhere just to get my beak wet. And then I start doing more and more investigation. This sector's been out of favor relative to the market for over a decade. Things are changing.
56:09 It ties into the whole silver tsunami situation where we have this population that's getting older and older, and we also have a position in the portfolio that's taking advantage of that. So just getting this on everybody's radar screen. I look at that ARKG — I'm not a big Cathie Wood fan, but I took a look at the ETF. It's breaking out. I'm just going to take a small position, a taste.
57:21 I don't anticipate becoming a biotech analyst. I don't have the knowledge base for that, but I do think there's opportunity here. Okay, guys, that's it for this week. Thank you for tuning in. I guess it was more of an educational situation and making my case for the fact that yes, in this short term we're experiencing some pain in some of the resource sector.
57:43 I think a lot of it is just because we were overbought and the sentiment around higher rates and things like that, but I think patience should be rewarded, will be rewarded. We've been through this before and at some point we'll touch a bottom because all roads lead to inflation.
58:04 So that's it for this week. We'll talk to you next week. Thank you.