Trading Trend

The trend is your friend. At least until it is not. To me, that means that I have to remain, or get long gold, the traditional hedge against inflation, physical gold or the SPDR Gold Shares ETF (GLD). If Bitcoin is your thing, that may be generational. There is good reason for that, beyond just being old fashioned. While Bitcoin probably has the potential to "out-return" gold in US dollar terms, it also has the potential for far greater volatility than does gold. A younger person might find that trade-off acceptable whereas someone my age who would like to eventually retire, might prefer the more risk averse alternative investment as an inflation hedge. There's a lot more to this than merely "Gold versus Bitcoin." Physical silver and the iShares Silver Trust (SLV) play a roll as well. I know... there's no scarcity of silver, but the "sort of" precious metal also provides for abundant industrial use. That's why I also need to think about the United States Copper Fund (CPER) and / or Freeport-McMoRan (FCX) at these times. How are your utility rates? Electricity is getting expensiv. Electricity prices at the consumer level were down 0.1% in April, but were up 0.9% in March, and stand up 5.1% year over year. Think it gets worse? Me too. Bitcoin miners use as much power as some decent-sized European countries. What about electric vehicles? Maybe that revolution has paused. How about artificial intelligence, large language modeling and the evolution of the data center? Think this won't permanently change the demand / supply dynamic going forward for power? For electricity? How much is the Utilities sector SPDR ETF (XLU) up over the past month? Like 12.9%. How about year to date? 15.2%. The S&P 500 is up 11.2%. The Nasdaq Composite is up 11.16%. What else is beating the broader market this year? The Philadelphia Semiconductor Index is up 19.34%. What commonality do the two share? Certain semiconductors are the brains of the developing generative artificial intelligence craze. Psst... it's not a craze, it's your future. It's everyone's future. None of it happens without the utilities. None of it. All this said, if you're surfing the inflation trade with me, because you and I both know that US inflation is not only not defeated, but it probably is also not going to slow as smoothly as predicted. If it does slow, the road to disinflation (because deflation would be way too much to hope for) won't be paved. It will be built with cobblestone, and cobblestone makes for a tough ride. There will be inelastic demand for only a few things as the economy enters a less healthy period. I don't think it should take a genius to adapt. Food for thought.