Commodities are supposed to protect a portfolio when stocks fall. Mike McGlone, senior commodity strategist at Bloomberg Intelligence and a longtime friend of the hosts from the Chicago trading pits, argues that right now most of them won’t. In episode 167 of Traders Edge, he lays out a contrarian case: nearly every risk asset has become a “stock puppet,” and the best hedge may be the most boring asset of all. His central point is correlation. Copper’s 50-week correlation with the S&P 500 is the highest on record, Bloomberg’s all-metals index tracks the S&P almost exactly, and Bitcoin moves with stocks too. If the S&P 500 fell just 10%, he’d expect copper and Bitcoin to drop much more. He believes Bitcoin’s best days are over now that ETFs and government support are in place, that stablecoins solve the “protect your currency” problem better, and that a 20% drop in stocks could send Bitcoin back toward $10,000. Gold had its best year ever in a disinflationary environment, and he sees the peaks above $5,000 for gold and $100 for silver as tops. Instead, McGlone favours long-dated Treasuries. With 10-year yields above 5%, the highest year-end level since 1999, he describes long bonds as a put on the S&P 500 with positive carry. He points to stock market value relative to GDP at levels last seen in 1928, mortgage rates near 7.45%, and Fed funds futures pricing roughly three rate hikes over the next year. He also notes a gold-to-Treasury ratio that may be turning after four decades. On individual commodities, he sees crude as vulnerable because US and Canadian supply keeps rising (about 8 million barrels a day of surplus, heading toward 9 million), copper as distorted by tariffs that have pulled inventories into CME warehouses, and soybeans as crowded, with money managers unusually long heading into harvest while Brazil now sets global prices. The hosts add their own views. Jim, preparing a keynote on the “debasement trade” for the New Orleans Investment Conference, asks how to reconcile debasement worries with owning bonds. Bob, who still holds physical gold, says he is hedging part of it with a 2x short gold ETF and selling call spreads. They also discuss the coming Anthropic IPO, which Bob compares with SpaceX’s post-IPO slide, and housing in southwest Florida, where condo inventory is rising. Key takeaways: – Copper, metals and Bitcoin now trade like leveraged bets on the S&P 500. – McGlone sees gold, silver and Bitcoin as past their peaks. – Long-dated Treasuries may act as a stock-market hedge that pays you to hold it. – Crude, copper and soybeans look crowded on the long side. This episode is educational and not investment advice. |
