Month-to-month PCE inflation comes in below estimates … the Chinese market is surging … commodities are pushing higher … Bitcoin is above $66,000 – is it a buy? This morning, the Fed’s favorite inflation gauge came in cooler than expected. The personal consumption expenditures (PCE) price index rose just 0.1% last month, putting the 12-month rate at 2.2%. While the monthly number came in as expected, the yearly figure was just under the 2.3% climb that Dow Jones economists had expected. Core inflation, which strips out volatile food and energy prices (what the Fed focuses on the most), rose 0.1% in August and 2.7% on the year, matching expectations. Clearly, month-to-month inflation is coming in soft. But keep something in mind… The Fed’s target is 2% inflation. Federal Reserve Chairman Jerome Powell has been explicit about that, saying in press conferences that they won’t move the goalposts and accept something higher. But below, look at the year-over-year core PCE inflation readings since the start of the year, and ask yourself two questions: - How much progress are we making toward that 2% goal?
- Are Powell’s actions, not his words, suggesting he’s quietly throwing in the towel on 2%?
Here are those year-over-year numbers: - January 3.0%
- February: 2.9%
- March: 3.0%
- April: 2.9%
- May: 2.7%
- June: 2.6%
- July: 2.6%
- August: 2.7%
Yes, it’s slowing falling. And sure, 2.7%/2.8%ish inflation is not the worst thing in the world. But it’s not 2%. And with the Fed now having picked its foot up off the inflation brake pedal, I wouldn’t be looking for 2% anytime soon. The question – as Fed Governor Michelle Bowman is wondering – is are we at risk of a resurgence in inflation? ADVERTISEMENT  Backtests show it would’ve signaled every major market crash and rally of the past 20 years. It most recently signaled the Covid-19 Crash and 2020 Tech Crash. Here’s what its tools indicate is about to happen… | While we'll be tracking that, in the meantime, we're seeing solid economic data come in If you missed it, yesterday brought encouraging economic data showing that new unemployment filings dropped to a four-month low last week. On top of that, we learned that corporate profits increased at a stronger pace than initially thought in the second quarter. The Commerce Department reported that corporate profits rose at a $132.5 billion annualized rate in Q2. This was a hefty revision from the $57.6 billion pace estimated last month. Finally, gross domestic income growth was revised up to a 3.4% rate in Q2 – more than double the initial estimate of 1.3%. The combination of low inflation and stronger-than-expected economic data is a solid combination. And so, the party continues… Speaking of "party," China just spiked its punchbowl, and one famous investor says "buy everything" As we covered in Tuesday’s Digest, Beijing just unleashed a tsunami of stimulus for its beleaguered economy. From Bloomberg: China's central bank unveiled a broad package of monetary stimulus measures to revive the world's second-largest economy, underscoring mounting alarm within Xi Jinping's government over slowing growth and depressed investor confidence.
People's Bank of China governor Pan Gongsheng cut a key short-term interest rate and announced plans to reduce the amount of money banks must hold in reserve to the lowest level since at least 2018... The central bank has also pledged to provide roughly $113 billion of liquidity support for the Chinese stock market. Billionaire hedge fund founder David Tepper has one takeaway for his China action plan in response – “buy everything.” From Tepper: Everything…everything — ETFs…futures…everything. Everything. This is incredible stuff for that place, ok, so it's everything. Tepper isn’t the only investor making this move. Money is pouring into Chinese stocks. Below, we look at a handful of popular Chinese companies: Alibaba (BABA), New Oriental Education & Technology Group (EDU), Tencent (TCEHY), Pinduoduo (PDD), and Baidu (BIDU) As I write, they’ve surged between 14% and 36% over the last six days.  On one hand, this would appear to be an amazing opportunity to potentially make one- or two-years' worth of returns in just a handful of days or weeks... After all, Tepper’s “buy everything” action plan seems like a can’t-lose proposition. But if that’s the extent of your trade preparation, you’re missing the most critical part of where your profits will come from… Your exit. What if Tepper is wrong? After all, in response to Tepper’s cannonball into Chinese stocks, Ron Insana, CEO of iFi.AI, and a contributor at CNBC, wrote: I would disagree [with Tepper].
While lowering rates and injecting liquidity are potent tools, they are more powerful when a country is dealing with systemic financial crises, as opposed to systemic structural flaws...
While the Chinese market may make a great short-term trade after the stimulus, it's a horrible long-term investment. So, if you jump into China today, how will you know when a “great short-term trade” turns into a “horrible long-term investment”? The answer points us back to earlier this week when our macro expert Eric Fry sat down with the Keith Kaplan, CEO of our corporate partner, TradeSmith. The two discussed the concept behind this question – trade management. When it comes to trading and investing, buying is the easy part. What’s infinitely harder, yet ultimately is the driver of whether you make money or not, is the selling. From Keith: The most important part of a trade is never the entrance. It's the exit...
One of the first things you need to learn when either trading or investing is knowing how and when to exit a position.
The markets are littered with stories of people who didn't take profits off the table and became too psychologically invested in their losses from all-time highs.
Instead of taking gains, they found themselves stuck in a situation where a 100% gain retreated to 0% or even went into negative territory. If you want to hitch a few bucks to China today, the risk/reward tradeoff appears very attractive given the surging momentum. But having no exit plan puts whatever gains you might generate at risk. When Keith and Eric sat down, they discussed a suite of trade management tools from TradeSmith, one of which helps investors determine the right exit price for a trade or investment. It balances the tension between “stay in the trade long enough to maximize gains” with “get out of a flagging trade before it erodes all your hard-won profits.” Back to Keith: When to ride your winners higher – and when to take profits to avoid losses – is much more important than what stocks you buy... or even when you buy them. If you missed Tuesday’s event with Keith and Eric, you can catch a free replay right here. It’s well worth your time, especially if you’re considering a China trade today. ADVERTISEMENT  What could be a ‘Dead-Zone’ will send America’s most popular stocks like Nvidia, Apple, Meta, Tesla, and thousands more —plummeting back to Earth. Erasing years of investor profits… And this is why 31 billionaires, including: Warren Buffett, Elon Musk, Jeff Bezos, and more are quietly unloading shares of their OWN stocks at a record pace! Here’s the unfortunate TRUTH… The last time we saw this exact market-event happen… Stocks crashed over -50%— and it took 15 YEARS for stocks to recover back to their peak! Now, Eric Fry — who avoided the crash & showed readers how to profit — is once again going on-air, to help you prepare. Click here for the details. | Finally, keep your eyes on commodities, precious metals, and a "digital" precious metal In the wake of Chinese stimulus, solid U.S. economic data, and invigorated hopes of a soft landing, we’re seeing gains in all sorts of assets: copper, aluminum, silver, gold, and bitcoin, just to name a few. For example, from earlier this week… - Gold miner Barrick Gold (GOLD) is up nearly 2%
- Silver miner Hecla Mining Company (HL) is up 6%
- Copper miner Southern Copper (SCCO) is up 12%
- Natural resources leader Freeport-McMoRan (FCX) is up 15%
- The Dow Jones Aluminum Index is up 18%
Finally, Bitcoin has popped and retaken $66,000. As I write Friday morning, it trades at $66,310. Frankly, it feels like an “everything” rally is brewing (except oil, which we’ll tackle in an upcoming Digest). While the gains are coming fast and furious all over, let’s zero in on our digital commodity, bitcoin. You’ll recall that on Tuesday, we featured analysis from our crypto expert Luke Lango. He was waiting for one trigger to signal a green light to jump back into the crypto space: We would like to see Bitcoin make a move above $64,000 – and stay above $64,000 – to confirm that technical legitimacy of this rebound rally.
If that happens, we will view that as a "buy signal" from the market. That would likely be good time to start buying more cryptos. Well, not only is $64,000 in the books, but we’ve also retired $65,000 and now $66,000. But to Luke’s point, that’s just half of what we’re looking for… Clearly, Bitcoin is very volatile, and we haven’t yet tested $64,000. So, even though we like seeing these gains, we’d feel better if Bitcoin slipped back to $64,000 and used it as a springboard for a fresh leg higher. Doing so would mean the grandaddy crypto had turned former resistance into support.  We’ll keep a close eye on this. But so far, so good. Wrapping up, the data are coming in bullish So, let’s make money while the sun shines. But remember, getting in is the easy part. It’s getting out that can be such a challenge. Make sure you have a plan in place.
Have a good evening, Jeff Remsburg | 
