Why Todd Horwitz is short gold as markets tumble
Markets are continuing their downward spiral on Thursday as both the equities and gold, gold and precious metals markets are seeing tremendous pressure. The SOP is down 1.3% and gold has broken it's critical port level of $1,700. Todd Bubba, Horwitz of bubble trading.com back with us to dissect market volatility.
Baba, welcome. Welcome back on this very tumultuous. Good afternoon, David. It's great to be back with you. And it's great that you bank at this time. Cause I think there's a lot of stuff we can talk about. Absolutely. We'll start with Jerome Powell, his comments, the markets seem to be taken back by surprise, but this is, this is what he say.
He said that the, if the inflation should pick up once the economy opens up, but. Look, we, we spoke about this last time and he made similar comments in his testimony with Congress last, last week or two weeks ago. And this is not really a surprise, right? He said pretty much the exact same thing. Inflation will pick up and it's not going to be persistent yet.
Bond yields are rising markets. Aren't taking this message. Well, why? Well, David, look at, first of all, you look at the bond market and they're telling you, they're telling you there's big problems. Okay. And you know, the bond market is the biggest market in the world by 10 times. So they can compete and push the fed, you know, fixed income is very big, but what the real problem is.
Is that what their old antiquated models in which they do business, they don't measure inflation properly. I mean, if we take a look at just a couple of things that are going on, take a look at the price of oil since the election, it has double take a look at cotton, even though it's down this week. Look at the grains.
Look at all the other commodities with the exception of gold and silver, they're all soaring. And you're telling me that there's no inflation ask any farmer who produces if there's inflation or not. They're getting whacked on both sides of the equation. And it's ridiculous. It's about time. That they recognize that we're making less money and paying more for goods and services.
It just doesn't matter. You cannot just count refrigerators that you buy every 10 years. Is that right? Well, we've seen how the markets are reacting to inflationary pressures today, actually just on comments of inflation of your pressure. So you're right. They should admit it, but the central bank really cannot because if they go out and just outright say we're going to get a lot of inflation.
Everything's just going to implode. Well, listen, what they're were they're really, he had her to David as are heading to stagflation with inflation because we're not creating jobs. We're not growing. They've already, you know, the new administration has already given away the keys to everything by letting OPEC back in and taking out our shell producers.
By going back in with China, everything he has done is detrimental to what we do. And you throw in the Federalists reserve or central bank around the world. They continue to print dollars, hoping that they can print them out of debt, but that does not create growth. It does not create jobs. It creates lazy peoples that no matter couch getting paid to do nothing.
Okay. Let's tie this back to the markets. Now, Bubba, we, you, you set that the, uh, bond market has signaled major problems. What are these major problems you're talking about? Well, first one is inflation. They're telling you that th th the markets cannot stand. This was rates at zero. Okay. If fed funds rate at zero.
And now, well, now the thing is one and a half, right? And it should be higher. The overall demand for money as much greater as you can see by the housing. So they've got to slow things down and until they do so that it's going to be worse of a problem, because all you're doing is you're allowing the banks to get in major trouble.
Once again. When they lifted the restrictions on fractional banking, you've taken away. Your, these guys are, the banks are making money, hand over fist. That's why the bank stocks have been flying because they're making so much money. You have to let the free markets work. And that is one of the problems with the federal reserve and central banking is they don't want to let the free markets work.
They want to determine what's next, which is totally the wrong way to go about attacking an Academy. Okay. Let's talk about inflation now and why that's actually a problem for the markets. Why doesn't the market, the stock market in particular like inflation, is it just because bond yields are taking up, which brings down valuations or are there other reasons as well, Bubba?
Well, I think when you look forward, okay, we're, we're heading for a real disaster, David. I mean, Look, we know we're in a bubble type of territory in the markets to begin with. You know, these markets have gone straight up for, you know, 10 years. And I, I think when you look at the situation, evaluations are ridiculous and all of a sudden.
You know, we're going get a little bit of inflation and the, the, the, the, the, the debt is growing. There's so many other issues that nobody ever accounts for, because what they've done is they've lacked up every person in the world who wants to put money somewhere. You can't put in the bank because there no return.
So it has to go into the stock market, which when it does decide that the rally's over and maybe it's over now, maybe this is just a pause. We don't know when this bubble is going to pop. It is going to pop. We don't never know for sure when. But you're seeing so many warning signs with the lack of growth, the lack of jobs and all these other things.
And the markets are now starting to sense that. And because they've made so much money, they're starting to take some off the table while selling will be, get more selling. And you look at the NASDAQ, which has gotten crushed the last few days. It is the NASDAQ has broken down. That is for sure for now.
Now the rest are still have a little room, but they're all getting there. Uh, you know, you and I have spoken several times over the last year. This is the first time I've seen you this negative in the markets, even during last year at the height of the pandemic, you still had some, some glimmer of hope for humanity.
Now. I don't know. I sense it's all gone. What happened? Well, I, I, well, I, I mean, I, you know, I look at the admin, the new administration. I look at what I look at OPEX. You've taken, you get on me, exp big jobs you get rid of by going back to OPEC. Not to mention that we're paying double the cost. So that's that, to me, that's a big problem.
You took out guys who are making a hundred thousand dollars a year or more, and they're now not working anymore and they've shut down those companies. So they're turning us back into a total service economy instead of our production. So our costs are going higher. Okay. They keep offering these stimulus packages, which is a total waste, because again, stimi, this does not create anything.
Yeah, but free, but free money. The money is not free. It's not a government bail out. This is a taxpayer bailout. The government doesn't pay for it. The government facilitates, you know, printing the money and then billing it back to the taxpayers. So there's so many issues that are growing here. And instead of allowing the country to open and let Americans make a choice, you, if you don't want to go out because you're afraid of the pandemic, okay.
Then don't go out, but don't shut down all small business. Do you realize that we've probably going to lose before this has done 85 to 90% of small business will be out of business. Because no restaurant or retailer small can, can, can survive because they allowed only the big chains to stay open through this.
Okay. So these are the problems of the market is now that is, that is a, that is a key point you brought up. So you said you're, you're saying that most of the small businesses. That were shut down, are not going to go back into business. Well, hold on, let me, let me just try to understand this, because I think the whole reason we're having inflation expectations is that as Powell said, the economy is due to open up and when it opens up, we're going to get inflation.
That's what spooking the markets, right? So, you know, you're not positive on the, on the economy reopening, uh, well, I'm, I'm positive on the recap of your opening, but again, I'm positive that Walmart and Amazon and stores like that will continue to thrive. But again, the local pharmacist that people would prefer to go to the local restaurant, that's owned by an individual that people would like to go to.
They're never going to be back. They're already out of business and will never be able to come back. So this is, you know, the, the, the, the party of the small that's supposed to take care of the little guy buried the little guy. Throughout this whole situation. And you're, you're, you've, you've ruined a generation of children by keeping them out of school.
So you've done so much damage to human beings and business. I mean, it's got to bring some negative sentiment coming down, and it's very frustrating because you know, you look at Texas, you look, excuse me, you look at Florida, they're thriving and they're open and they're open for business. Okay. I mean, even here in Nevada, they're open.
So you usually, you gotta have things going on and you have nothing in so many places because they want the, they want to bail out the, the busted States like New York, Illinois, and California. And this is what this is bailouts about. Not about the individuals and that's what they're doing. So they've really destroyed an Academy.
Um, by their, by the very actions of what they'd done. And by adding all this stimulus and allowing the, the super conglomerates to thrive and everybody else too bad. So you're currently in Nevada, Las Vegas. How are things there are things back to normal? Not yet. Well, they're not a hundred percent back to normal, but they're open.
They're crowded. Okay. Everywhere you go. Is that there's a relative good crowd. I mean, when I flew in. Uh, on Sunday as Chicago was packed at the airport. And so it was Nevada's in the Las Vegas airport was packed. So they're back to business and allowing the small guys, the independence to operate, which his whole country was built on small business growing and capitalism.
And they, they they've single handedly, bad policies. And with the new administration destroyed. The, the, the ability to want to be a capitalist or to be able to get the money to do so and exist in an environment like we have created. No. Okay. I w what does a new administration have to do with this policy?
I'm just curious, because the lockdowns happened way before the elections, right? Well, yeah, of course, but it sounds like the lockdowns. What about the paying? $60, $65 a barrel for oil instead of 32. Okay. What about the jobs that were lost? Okay. And not created because we got out of the, the shale industry, you know, there's so many jobs that come from that.
And so many companies. Okay. And the bottom line is, is that for months and months, the Republican States have been open and I'm not listening. I'm not preaching to either side or I'm thinking about this particular right now that the policies are in place because I don't have a site. But what I can see is that when he was going through the right States were open, the left, safe for closed.
The right States are flourishing and the left States are looking for money. So to me, that creates a bigger problem. Yeah. All right. Uh, gold in particular, I have a few questions about that. Critical support level of $1,700 was broken today. How do you feel as a trader? Well, listen, we're short, so I'm, I'm very happy as a trader.
I mean, I had been, as you know, I've written for GetGo for about, since I think, I don't know, two or three months now we've been sellers of gold. Now look, I want to re I want to be very clear to everybody. You know, this is as a trader. Okay. I am not afraid to buy gold and store it. Okay. But when I'm trading, I'm not concerned about six months from now, I'm concerned about today and tomorrow.
And so we're trading we're on the short side. And I said this morning that if we break 1,716, 50 is in play. And I think you're going to see 16, 50, and possibly lower. I mean, gold is really weak. And these levels, and it will be strong again at some point, but right now, because of everything else going on, it is just weak and it's, you've got people wanting to sell, having to raise capital for whatever reasons.
Yeah. So going back to this negative sentiment that you were talking about, it seems to me that. Uh, this, this negative sentiment is creeping in just now. If I'm not mistaken, just now we're seeing a top in the NASDAQ, the S and P Dow Jones gold has been trending down for quite a few months already, but just, just now we're starting to see the, the equities markets, uh, seeing a bit of a reversal.
Why now? Here's my question. Why haven't they felt? Yeah, I hope the hope that we had. Okay. The hope that you had when, when president Trump was in charge of net administration gave you reason to believe that we were going to get it done. And now you've gone, you've made, you know, a, a one 80. And now it doesn't appear.
I mean, if you look what's going on in California, but the teachers, the teachers unions, they won't go back to work. Okay. They want to get paid. They want to stay home. And I want to go back to work where many States are back in school and the, again, every single one of these States that is closed is, is looking for reasons to stay closed.
And of course, you've got a lot of unhappiness. Because we go again to the lack of creation of jobs, and I'm talking about real jobs. And now they're talking about the minimum wage. If they raise. Minimum wage, you know, what's really going to happen. Don't you, you're not going to have employees written period.
There's going to be every McDonald's. Every Domino's pizza will be fully automated with only one employee or two employees versus the 15 to 20 that they employ now. Okay. So if you take the S and P 500, just take a chart and zoom it out over the last year. Yeah. We're seeing a bit of a blip and it's just a blip.
It's still up a lot on the year, right? Do you see us heading back towards 4,000 points, Bubba? Cause right now we're at what? 36, 3,730. You know what, David, I cannot predict where we're going to go from here. Okay. I can disclose to you what my exact position is right today, as it stands at the close of business today.
Okay. I am short the NASDAQ. I am still lawn the S and P however, you know, I run my stuff off of a proprietary algorithm and I don't run it until after everything is closed. And I'm going to, it's going to be very close to whether or not we'll be short across the board, starting tomorrow. Now the lawn we've been long, basically since.
Uh, since the end of March, believe it or not. And of course we've obviously benefited greatly from this rally and of course we're we're trend playing. So right now the trend is up and everything, but the NASDAQ and gold, you know, of the Duke magazine we talked about for now, and that may change. Like I said, I would suspect.
That there'll be some changes overnight, but you know, it wouldn't surprise me. I mean, you know, look at, um, I don't know when the ultimate sell-offs in a com there's going to be another meltdown as we've seen, you know, every, you know, 10, 15, 20 years, you get a real crack and you know, is this the start of it?
I don't, I don't know. We will definitely have rallies regardless because markets don't go straight up. They don't go straight down, but we have gone up substantially since. The pandemic, you know, the startup, it we've, we've actually, I think it rustles up at some point 125% since March. So bit quick to be moving.
So a pullback would be natural. The real question will be is those the pullback? Create enough fear to create a panic and create some massive selling. And that's what we're going to find out. We'll see it it'll show up in the tape and the price section as soon as it starts to happen. Well, usually, uh, Todd, usually when the equities market sees the, uh, season's panic that you're talking about, the metals markets get brought down with it.
And so with gold at 1696, right now, I'm looking at my screen. How do you feel? Are you still short? Oh, yeah, no, I'll be sure we'll be short gold for quite a while. I mean, right now, if I were to guess gold would have to go back to about 1740 before I would even think of reversing. And again, I don't, you know, I don't make the decision at the end.
The decision gets made with no emotion and no thought through the algorithm. But based on what I can see in a church, I can't see any reason to turn and I can also see a silver getting weighed down quite a bit. It's amazing how strong or how well platinum has held up through all this? Well, we'll see how the metals play out.
Bubba. Thank you very much for your update today. Thank you for coming on the show today, David. Thanks for having me back and thank you for watching Kitco news. I'm David Lynn, stay tuned for more coverage and don't forget to subscribe.