U.S. market futures are trading in green territory as traders and investors return from the Presidents Day break which included lots of (continuing) cold weather across the country, as well as Trump's acquittal in his second impeachment trial.  Market sentiment seems to remain positive based on continuing progress with both COVID-19 vaccinations and Biden's stimulus package. The energy sector is strengthening thanks to the cold front while gold bulls take stock.

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Writing in Should Gold Bulls Worry About A Market Crash?, TalkMarkets contributor Jordan Roy-Byrne says he's been in the precious metals sector long enough to know that fear of a near term crash in the market is nothing new. Here are some of his thoughts and how such fears could play out for gold investors.

"This view is that the stock market will crash, which will cause a crash in Gold and gold stocks, and only after that happens can Gold and gold stocks go to the moon...With the Fed remaining accommodative, more free money coming from Uncle Sam, and the business cycle turning up, the probability of a crash this year is low. However, a sharp correction and a partial unwinding of some of this newbie speculation are quite possible...Over the past six months, precious metals have corrected as they should have. They had an amazing, record-breaking run last spring and summer and a sustained correction was to be expected. During that period, investment capital and hot money have flowed into just about everything else. The S&P 500 is up nearly 20%. The CRB index is up 25%. Bitcoin has gone parabolic. Gold and Bonds have performed the worst, and that is during a slight decline in the dollar."

Below is the chart followed by a few of Roy-Byrne's assumption and his conclusion:

"Let’s assume there is a 20% decline in the stock market, and capital flows back into Bonds and the US Dollar. How is that going to be a negative for Gold and gold stocks when they have declined during a period of hot money inflows into everything else? Instead, it is more likely to be a major catalyst for Gold and gold stocks...A sharp correction in stocks and other risk assets may be needed to put precious metals in position for the next breakout and impulsive advance. Gold and gold stocks could sell off a bit but would reverse well before the end of the correction."

Roy-Byrne ends with this tip: "If you remain worried about a crash driving down precious metals, but you want to stay invested, here is what I would do...(This year’s goal is to) accumulate high-quality juniors to put yourself in a position to capitalize on the next big breakout, which would take Gold from nearly $2,100 towards $3,000."

Gold (GLD) is currently trading at around $1,825. Read the article for more charts and historical analysis.

TalkMarkets contributor Brian Romanchuk philosophizes about bitcoin, but also does not dismiss it as a good speculative vehicle in his article, The New Gold. 

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"My view is that BTC is a speculative trading vehicle without any economic significance, and I prefer to look at markets from a value perspective. As such, I see little value in discussing it. However, in addition to wishful thinking from BTC backers, critics of BTC are also falling prey to the assumption that what ought to happen will happen. Although things could go south for the crypto-currency, it is not that deep an insight to argue that BTC has carved out a niche as the new gold -- with certain advantages for speculators."

Romanchuk goes on to outlining possible outcomes and cases for investing in bitcoin (BITCOMP) and compares bitcoin enthusiasts to gold fanciers and seemingly gives the edge to bitcoin. It is a fascinating article that should get you thinking. He concludes with these thoughts: "Given that the only use cases for BTC that make economic sense involve evading laws and regulations, it is not too hard to imagine a scenario where money flows are cut off by regulators. On the other hand, there are many in the financial sector who see a profitable new trading platform. On both sides of the debate, there seems to be a general hope that something interesting will happen with Bitcoin. Although prices are likely to remain volatile, it can easily remain a niche collectible."

Adam Sharp in a TM Editor's Choice piece entitled, Most-Shorted Stocks Are Excelling Beyond Reason takes a look at the performance of Most Shorted Stocks (MSS) in the current bull market and finds some unexpected surprises.

"The MSS in the U.S. have increased 245% since their March 2020 lows, according to research by Deutsche Bank. And they’ve outperformed the Russell 3000 by a whopping 147% in that same time period. Typically the MSS underperform the market significantly. Here’s a chart from Deutsche Bank showing the trend since 1985."

Here's the chart:

What's causing this a historical turn of events?  Sharp explains it in this way.

"You can’t earn 5% a year risk-free from government bonds anymore. To make any money these days, you have to take risks. And most people do that by buying stocks...Investors are piling into call options...When a lot of people buy call options on the same company, the dealers who sold those options are forced to buy shares to hedge their position. It’s called a gamma squeeze, and it can really juice a stock higher in the short-term. This is a piece of what’s driving the overall market and MSS higher."

But don't get Sharp wrong, he does not seem to be advocating MSS as an investment strategy. His (risk-on make no doubt about it) plan is different.

"I’m investing in emerging markets, precious metals, startups, bitcoin, and cannabis for the most part. I think these bull markets are a lot more sustainable than others. And they have more upside over the long-term. And that’s ultimately what it comes down to for me in this unprecedentedly crazy environment." 

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Herbert Blank in an exclusive for TalkMarkets, Why Investors Should Avoid Buying SPY And GLD has some straightforward advice for Jane and Joe investor.

"If you are an investor, do not buy SPY to access exposure to the S&P 500 and most definitely do not buy GLD to access gold."

1) "Two better alternatives for wealth accumulation to access S&P 500 are IVV offered by Blackrock iShares and Vanguard's VOO."

2) For Gold: "...IAU - iShares Gold Trust, BAR - Granite Shares Gold Trust, and GLDM - SPDR Mini Gold Trust."

Read Blank's article for more details and analysis. As always caveat emptor.

Circling back to the bigger picture How Effective Are Government Stimulus Programs? is the question economist Norman Mogil asks in this exclusive article for TalkMarkets. 

"As Congress considers Biden’s stimulus package, economists are debating the merits of a $1.9 trillion relief package. The debate centers on whether the government response is appropriate or goes well-beyond what is needed to promote recovery. "

As Mogil delves into the question he seems to weigh-in with the "too much of a good thing can be negative" crowd. Though he falls short of saying that $1.9 trillion is too, much he does offer this quote worth pondering from Lacy Hunt of Hoisington Investment Management:

To paraphrase Tevye the Milkman of "Fiddler on the Roof" fame:

Tevye: "Rabbi what can we hope for from the Treasury?"

Rabbi: "From the Treasury? We hope that Janet Yellen will bless and keep Inflation far away from us!"

Wikimedia Commons, Mileta Leskovac, scenographer

Have a good week.