Consider Bill Hwang’s firm, Archegos, $20 billion dollar margin call a wake-up call.
- We still do not know all the repercussions of these events as it is still unfolding. Be careful. Reduce margin debt if you are able.
- News flow on this current event is still unfolding but hopefully getting resolved.
What are likely reactions in the market that we can look for both safety and opportunity?
Here are three areas for safety and hopefully profit:
- Physical Gold was down Monday, but a number of gold Miners were up. AngloGold Ashanti (AU)* often mentioned in these writings and held in LOTM related accounts was up $1.26 to $22.29 (5.99%) on Monday. The rise in AU, is in direct reaction to the liquidity events happening at Brokers and Banks over the past three trading days. These actions could be the catalyst to bring gold back into favor. We have said a number of times, Gold Miners are the best value in the market and now there is a reason for others to own them. Big gold miners will move first, but the smaller ones will move, more. We have mentioned a number of times we favor Karora Resources (KRRGF)* $2.67 as our biggest gold miner position. We added to the position Monday.
- Bitcoin is flirting with $60,000 again. Same as gold – it is a new safe haven asset. We own some Bitcoin through Grayscale Bitcoin Trust (GBTC) $49.45 up $3.02 (6.5%); we have been focused on Galaxy Digital (BRPHF)* as the best company for supporting infrastructure to Blockchain/ Crypto currencies. Galaxy was up $2.50 (15.35%) on Monday to $18.75. We did buy more shares near the market close. Earnings are out Tuesday morning. We are going to initiate the accumulation of shares in Argo Blockchain $3.38 (up 9%). Argo is a British miner of Crypto currencies (in Canada for Hydro power source) and is expanding into additional Blockchain activities. (website) The last I read; they will continue owning the crypto they mine. MKTY* (Mechanical Tech) $13.00, (a new crypto/blockchain venture but an old company) can be price volatile, but as a company, they are small but solid and can ride though whatever the market throws at them. Same with Argo and Galaxy in my opinion. We suggest buying into weakness, should it happen.
- Interest Rates. In times of liquidity crisis, the Fed and other Central banks will do what they can to prevent a collapse of the financial system. That is their Job! Never mind they often help create the problems they have to solve. The point being, expect no more rising interest rates for the time being! This should help gold (all commodities), stocks and bonds. The financial system is under stress – the final outcome is not yet determined so the Central Banks will keep liquidity high and easy! My God, have we heard this enough yet! More financial bubble if the system doesn’t break. You might consider the long US Treasury 20–30-year ETF, TLT $135.50. This ETF has been under pressure with rising rates since August, but that might be reversed with the current problems.
It is entirely possible a liquidity issue could arise if more major financial institutions have issues or go away. This could cause selling in the above areas as well. The areas above would be the first to snap back in price. Hence our opening comment of lower debt if you can be able to ride through all situations that might unfold.
Hopefully, this passes in the night, but one never knows. Be careful. It can be dangerous out there.
If you are reading my stuff – I care about you! T.
LOTM Research & Consulting Service
Where Value meets Buy Signals!
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* An account related to LOTM holds a position in this security.
Neither LOTM nor Tom Linzmeier is a Registered Investment Advisor.
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