James Dines: Suspense is to Adrenaline What Certainty is to Boredom

Written by James Dines
Posted September 21, 2019

Publisher's Note: To say the market is all over the place would be an understatement. Mr. James Dines gave his take on it to his readers in The Dines Letter recently. Today we share it with you as well.

To Your Wealth,

Nick Hodge Signature

Nick Hodge
Outsider Club Founder and President

“When I use a word,” Humpty Dumpty said in a rather scornful tone,
“it means just what I choose it to mean –neither more nor less.”
“The question is,” said Alice, “whether you can make
words mean different things.”
“The question is,” said Humpty Dumpty, “which is to be master – that’s all.” 
— Lewis Carroll, Through the Looking Glass

When we flashed a very important “Sell” on February 2, 2018, we were highly confident it had detected the beginning of a serious shift out of the doomed FAANG stocks. However, we were not confident into which area the proceeds would flow: would the capital flight result in a general bear market, or merely a switch to “group rotation?”

We were highly confident some of that money would rotate into the admittedly-unlikely areas of cryptocurrencies, gold, silver, and cannabis. However, all our predictions came true. There was the opportunity for serious money to have been made by our TDLers in those four areas. Personally, we believe there’s plenty more profit remaining.

The big and unanswered question remains: is this to be a top leading to a bear market, or merely a shift of leadership? The very flatness of the S&P since 2018 has reflected that uncertainty. Unsurprisingly, the majority of our technical indicators are likewise suggesting caution. The bigger question about the economy’s direction also persists just ahead.

The market has been informing TDL for the last two years that there is an increasing risk of recession ahead, but such a consideration only just this month suddenly burst into the world’s mass media. So far the consensus has evolved from complacency to concern about a “possible” recession, which was a decisive change in mass psychology.

We are against politicizing predicting a recession. Instead, our choices are the result of our listening to the market itself as it tells us where it is headed, and nothing in TDL should suggest otherwise. Personally, we actually believe a longer-term recessionary process began in 2008, which was its initial tremor, as explicitly predicted in our book The Invisible Crash.

Subtracting all the money printed since then would lay bare the truth of a general underground economic malaise. All will be revealed in the fullness of time. Timing is highly important in our work, hoping our predictions are right at least 70% — or hopefully even 80% — of the time. TDLers have in the last few years seen us lead the world in calling new bull markets. We await the next wave, especially alert to the next bull market; there has always been another one.

A bear market is not a bad thing per se in that declines provide buying opportunities to those who might have missed the previous rises; cycles and corrections are normal in any trend. We must remain attentive to markets rather than being judgmental, reporting wisdom as it is revealed to us, obedient only to the market itself.

For example, the Dow-Jones Transport average, a key indicator as to the volume of commercial goods being moved or not, has been in a downtrend since its all-time high back on September 14, 2018, indicating fewer goods are being carried, so we pay particular attention to its possible upside reversal. Of the three leading averages, only the staid Dow-Jones Utility Average is in a confirmed uptrend, which should end in an upcoming finale of glory.

The single most baffling thing about the world’s economy has been the crash in commodity prices. We have repeatedly wondered how there could be such a boom without using the materials to build things. Copper, a basic industrial commodity, still is in a vicious bear market, and we’re waiting for the next juicy “Buy” signal on it. Are commodities foreshadowing a deep recession?

The biggest crash of all we identified so far has been in batteries, especially our mystifying “Sell” on cobalt. Everybody was optimistic on batteries, what with, for example China (with brands such as Volvo) converting its entire automotive market to electric! To be perfectly honest, we ourselves had trouble believing our own pessimism toward battery stocks, but we had to obey what the market was telling us. Looking back, our “Sell” on battery stocks is emerging as one of our best calls ever.

Many investors are puzzled by the disconnect between flat leading market averages and mixed individual stocks, but that merely reflects the expected group rotation within the overall flat market. The next stage will be a “unification” between averages and individual stocks, leading a unified market, either up or down. Personally, while we continually hunt for it, we don’t think the market itself has yet made that decision.

James Dines is legendary for having made correct forecasts that were in complete contradiction to the rest of the financial community. He is the author of five highly regarded books, including "Goldbug!," in addition to his popular newsletter, The Dines Letter, and videotaped educational series. Dines' highly successful investment strategies have been praised by Barron's, Financial Times, Forbes, Moneyline, and The New York Times, among others.

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