If you’re looking for a reason why stocks erupted higher starting in early March, look no further than the below chart of the Fed’s balance sheet. As you can see, during the regional banking crisis triggered by the collapse of Silicon Valley Bank, the Fed began expanding its balance sheet rapidly.
How rapidly?
Nearly $400 BILLION in two weeks’ time. Not since the depths of the 2020 crash has the Fed printed this much money.
Stocks bottomed soon after this… exploding higher by 6+% in a single month.
I bring all of this up, because the Fed has turned off the money printer again. Over the last week, the Fed’s balance sheet has fallen by $100 billion.
What does this mean?
The clock is ticking for stocks. And with a recession just around the corner… it’s only a matter of time before the market breaks to new lows.
Indeed, our proprietary Crash signal has just triggered its 3rd confirmed signal in the last 25 years. The last two times it signaled?
2000 and 2008.
If you’ve yet to take steps to prepare for what’s coming, we just published a new exclusive special report How to Invest During This Bear Market.
It details the #1 investment to own during the bear market as well as how to invest to potentially generate life changing wealth when it ends.
Wal-Mart (WMT) is the largest private employer in the world. It’s also one of the largest retailers in the world. As such, it is a major economic bellwether.
The Waltons are the family that founded Wal-Mart (WMT). They remain the largest owners of its stock. And they have been dumping BILLIONS of dollars in WMT stock in the last few months.
What do they know that we don’t?
Apple (AAPL) is the largest company on the S&P 500. It is also the largest consumer discretionary company in the world. AAPL insiders including the CEO, COO and General Counsel have sold $41 million worth of stock recently.
The last time the CEO sold was in 2018. AAPL shares fell 41% that year. He’s selling again now.
What does he know that we don’t?
And finally… my proprietary Crash Trigger is now on the first confirmed “Sell” signal in over a decade.
The last time this signal hit?
2008.
What does it know that we don’t?
If you’ve yet to take steps to prepare for what’s coming, we just published a new exclusive special report How to Invest During This Bear Market.
It details the #1 investment to own during the bear market as well as how to invest to potentially generate life changing wealth when it ends.
The bond market is signaling some thing “BAD” is coming.
Bond yields rose throughout late 2021-early 2023 on fears of inflation. But once Silicon Valley Bank imploded, yields dropped rapidly: historically investors pile into Treasuries as a “safety trade” whenever things get hairy in the financial system. The regional banking crisis in mid-March was no exception with yields collapsing at their fastest rate since the 1987 crash.
When this happened, I began to wonder… would yields begin to rise again as things normalized following the regional banking bailouts… or would the economy roll over and yields finally start to plunge as a recession took hold?
We now have our answer…
The yield on the 2-Year U.S. Treasury is NOT rising anymore. If anything it’s rolling over and approaching the “Silicon Valley Bank” lows.
This is a signal that something “BAD” is brewing in the economy/ financial system. If everything was fine, yields would be rising again based on hopes of growth and fears of inflation.
Put simply, the fact yields are falling like this tells us that the bond market fears something far worse than inflation is coming…
Indeed, the 2s10s are now beginning to invert. Historically, this has been the signal that a recession is about to hit.
What happens to stocks when a recession hits while inflation is still at 6%?
The 70s showed us…
If you’ve yet to take steps to prepare for what’s coming, we just published a new exclusive special report How to Invest During This Bear Market.
It details the #1 investment to own during the bear market as well as how to invest to potentially generate life changing wealth when it ends.
Investors are running a repeat of the same trading pattern we saw in 2008.
That pattern?
A mini-crisis in March, followed by a summer rally, and then the real fireworks begin.
In 2008, Bear Stearns had to be absorbed in a shotgun wedding to JP Morgan on March 16th. That marked a temporary low, as investors believed the Fed easing/ backstopping the issue resolved things despite the clear evidence that the economy was rolling over.
The stock market then rallied for two months before the crisis began in earnest.
Today in 2023, the same pattern is playing out.
Once again, there was a mini-crisis in March with Silicon Valley Bank/ Signature Bank playing the part of Bear Stearns. The Fed / Treasury stepped in, backstopping the troubled banks and facilitating a deal to have them absorbed by other players.
Investors are taking this to signal the “all clear” and are piling back into stocks, kicking off a rally… once again despite the clear evidence the economy is rolling over.
As if this wasn’t spooky enough, consider that in the BIG PICTURE my proprietary Crash Trigger is now on the first confirmed “Sell” signal in over a decade.
The last time this signal hit?
2008.
See for yourself…
If you’ve yet to take steps to prepare for what’s coming, we just published a new exclusive special report How to Invest During This Bear Market.
It details the #1 investment to own during the bear market as well as how to invest to potentially generate life changing wealth when it ends.
OPEC shocked the world by announcing oil production cuts of 1.6 million barrels per day starting in May.
This is a big deal for inflation.
Why?
Because as I have noted previously, the ONLY inflation data that had come down in the last 12 months was in energy prices. And that was due to the Biden administration dumping 250 million barrels of oil in the open market while OPEC was maintaining its regular production rates.
See the data for yourself… literally everything but energy prices and used car prices continues to rise…
But now OPEC is cutting production at the same time that the Biden administration is set to STOP dumping oil on the market.
What does this mean?
Energy prices are about to erupt higher, pushing inflation to new highs.
Oil is already back at $80 a barrel, up from $66 per barrel a few weeks ago.
Gold has figured out what’s coming already. It’s rocketed from $1,600 an ounce to $2,000 an ounce and is about to break out to new all-time highs.
On that note, we published a Special Investment Report concerning FIVE secret investments you can use to make inflation pay you as it rips through the financial system in the months ahead.
The
report is titled Survive the Inflationary Storm. And it
explains in very simply terms how to make inflation PAY YOU.
We are making just 100 copies available to the public.
Bitcoin… the ultimate liquidity play, has a rounded top. It is just clinging to support. Below that is nothing but air pockets down to 24,000 it not 19,000.
Short term Treasury bonds and high beta growth company Nvidia (NVDA). This entire move higher in high growth tech has been driven by rates. That is now ending…
Historically a recession hits when a yield curve inversion goes back to positive. We’re well on our way to that as I write this.
Seeing multiple set ups suggesting the same thing (a risk off move is coming) adds to the probability. And from a BIG PICTURE perspective my proprietary Crash Trigger is now on the first confirmed “Sell” signal since 2008.
This signal has only registered THREE times in the last 25 years: in 2000, 2008 and today.
If you’ve yet to take steps to prepare for what’s coming, we just published a new exclusive special report How to Invest During This Bear Market.
It details the #1 investment to own during the bear market as well as how to invest to potentially generate life changing wealth when it ends.
I have a question… and it’s one we need to consider as investors.
What happens to inflation if oil begins to rally aggressively?
Black gold has been in a downtrend for the last 12 months. This, combined with the Biden administration dumping 250 million barrels of oil, has resulted in energy inflation dropping considerably.
Indeed, according to the Consumer Price Index (CPI), which is the official inflation measure in the U.S., energy inflation is the ONLY form of inflation that has come down in any meaningful way in the last year (aside from car prices).
See for yourself in the table below.
I bring all of this up because oil is once again showing signs of life. Despite the threat of recession, the commodity has refused to drop below $65 be barrel. And after yesterday’s 5% rally, it’s within spitting distance of an upside breakout from its year long downtrend.
This could very well be the next MAJOR money maker for investors who take heed.
On that note, we published a Special Investment Report concerning FIVE secret investments you can use to make inflation pay you as it rips through the financial system in the months ahead.
The
report is titled Survive the Inflationary Storm. And it
explains in very simply terms how to make inflation PAY YOU.
We are making just 100 copies available to the public.
The Fed and Treasury keep telling us everything is fine… but the Fed has just expanded its balance sheet by $400+ billion in the span of two weeks.
We haven’t seen money printing like this since the depth of the 2020 meltdown. The Fed has erased 2/3rds of its 9 month long Quantitative Tightening in 14 days!
Despite these emergency loans/ access to credit, the regional banking ETF is right back near its panic lows.
Even stranger, several of the big banks are collapsing in share price as well. Wells Fargo, Bank of America, and Citigroup are all back at their October lows.
Looking at this, it appears something MAJOR is brewing behind the scenes. Banks might less than 14% of the S&P 500 weighting, but they account for something like 70% of all mortgages and 60% of all consumer loans.
Put simply, if this sector is in major trouble, it’s going to have a MAJOR effect on the economy.
Indeed, from a BIG PICTURE perspective my proprietary Crash Trigger is now on the first confirmed “Sell” signal since 2008.
This signal has only registered THREE times in the last 25 years: in 2000, 2008 and today.
If you’ve yet to take steps to prepare for what’s coming, we just published a new exclusive special report How to Invest During This Bear Market.
It details the #1 investment to own during the bear market as well as how to invest to potentially generate life changing wealth when it ends.
Now is the time to be particularly careful in the markets.
First and foremost, the banking crisis is not over. This is quite concerning, because the Fed has pumped nearly $400 BILLION into the financial system in the last two weeks.
Despite these emergency loans/ access to credit, the regional banking ETF is right back near its panic lows. What does it say about the issues in the financial system that $400 billion in additional liquidity combined with verbal backstops by the Fed/ Treasury isn’t enough to reverse the decline?
The next leg down is coming and coming soon.
Indeed, from a BIG PICTURE perspective my proprietary Crash Trigger is now on the first confirmed “Sell” signal since 2008.
This signal has only registered THREE times in the last 25 years: in 2000, 2008 and today.
If you’ve yet to take steps to prepare for what’s coming, we just published a new exclusive special report How to Invest During This Bear Market.
It details the #1 investment to own during the bear market as well as how to invest to potentially generate life changing wealth when it ends.
4) The Fed can achieve a “soft landing” (it can’t).
The Russell 2000 (IWM) which is more closely aligned with the economy and growth has figured this out. It’s only a matter of time before the S&P 500 “gets it.”
Meanwhile, regional banks are back at the lows.
Financials usually lead the broader market. Maybe this time is different?
Or maybe the next leg down is coming and coming soon.
If you’ve yet to take steps to prepare for what’s coming, we just published a new exclusive special report How to Invest During This Bear Market.
It details the #1 investment to own during the bear market as well as how to invest to potentially generate life changing wealth when it ends.
Tomorrow at 2PM EDT, the Fed will announce its policy decision for the month. And no matter what the Fed does, it’s in SERIOUS trouble.
Why?
If the Fed raises rates, this is only going to increase pressure on the banking system.
Depositors, both in the U.S. and Europe, are fleeing banks because A) the banks pay next to nothing in interest, whereas you can earn 3%-4% in a Money Market Fund or short-term T-Bills and B) depositors are now terrified that the banks at which they keep their money could go bust.
Consider that U.S. just experienced its 2nd and 3rd largest bank failures in history in the last two weeks. And over the weekend, the $1.4 trillion behemoth Credit Suisse had to be rescued by UBS and the Swiss Government.
Put simply, the issues that resulted in Silicon Valley Bank and Credit Suisse going bust / needing to be rescued will only worsen if the Fed decides to raise rates again tomorrow.
The alternative for the Fed isn’t much better.
Inflation is currently clocking in at 6%.
If the Fed doesn’t raise rates tomorrow, then inflation will rage.
I’m talking about a situation in which the U.S. becomes an emerging market, with inflation out of control, a currency collapse, and more.
Put simply, the Fed is screwed either way.
Yes, if the Fed doesn’t hike rates tomorrow there will be a relief rally in risk assets. But that relief will quickly turn to terror as U.S. Treasury yields explode higher.
Remember, the U.S. has over $31 TRILLION in debt and a Debt to GDP ratio of 120%. There are over $70 trillion debt securities in the financial system and another $500 TRILLION in derivatives that trade based on interest rates.
What’s happens to all that debt if the yield on the 10-Year U.S. Treasury spikes to 7% or even 9% if the Fed allows inflation to rage out of fear of worsening the bank crisis?
If you’ve yet to take steps to prepare for what’s coming, we just published a new exclusive special report How to Invest During This Bear Market.
It details the #1 investment to own during the bear market as well as how to invest to potentially generate life changing wealth when it ends.
The banking crisis has just claimed its first major victim.
Thus far in this banking crisis, the banks that were in trouble have been large, but not gigantic. The largest was Silicon Valley Bank which was the 15th largest bank in the U.S. at the time of its collapse with some $209 billion in assets.
Well, yesterday, UBS bought Credit Suisse for $3.3 billion. Credit Suisse is NOT a regional bank. It is a MAJOR bank with $1.4 TRILLION in assets. Indeed, the bank was literally larger than the country in which it was domiciled (Switzerland’s GDP is roughly $800 billion).
For a bank this size to fail is a MAJOR development. However, even more significant are the details of the UBS/Credit Suisse deal… namely that BOTH Credit Suisse bondholders and equity holders are getting wiped out (mostly).
Some $16 BILLION worth of Credit Suisse bonds are being written down to ZERO, while Credit Suisse shareholders will receive just one share of UBS stock for every 22.48 shares of Credit Suisse stock they owned.
Why is this a big deal?
Because no one in their right mind would want to own bonds or stock in a troubled bank after this deal.
Think of it this way… before this, banks were already facing two major problems:
1) They pay only 0.23% or so on deposits when depositors can earn 3%-4% in a Money Market Fund or Short-Term U.S. Treasuries. So money was fleeing banks for those higher yielding investments.
2) Depositors were terrified of bank failures. And so even MORE money was fleeing.
Now, banks face a new issue: trying to attract investors when there’s a very real possibility that both bondholder and stockholders would get wiped out if said bank failed.
The stock market bulls are trying to bid the markets this morning, as if this bailout/ deal is great news.
Was AIG getting bailed out great news?
What about Fannie and Freddie?
Nope.
Something VERY bad is brewing in the financial system. Indeed, my proprietary Crash Trigger is now on the first confirmed “Sell” signal since 2008.
This signal has only registered THREE times in the last 25 years: in 2000, 2008 and today.
If you’ve yet to take steps to prepare for what’s coming, we just published a new exclusive special report How to Invest During This Bear Market.
It details the #1 investment to own during the bear market as well as how to invest to potentially generate life changing wealth when it ends.
The Fed just gave out over $300 BILLION in single week.
See for yourself: the Fed’s balance sheet has erupted higher, erasing over HALF of its Quantitative Tightening (QT) efforts. Again, we are talking about $300+ BILLION in a single week.
Now, technically much of this ($164 billion to be exact) came in the form of loans to banks. The banks will have to pay this back, so it’s not quite the same as Quantitative Easing (QE). Regardless, the key point is that the Fed is NO LONGER shrinking its balance sheet… instead it is printing money. And not a little bit, but $300+ billion in a single week.
To put that into perspective, it’s the equivalent of more than TWO MONTHS’ worth the Fed’s emergency QE program that it ran in response to the pandemic. And again, the Fed did this in just FIVE DAYS.
What does this mean?
First and foremost, that something VERY BAD is going on behind the scenes in the U.S. banking system. But more importantly for us as investors, that the next round of bailouts/ easing/ reflating the financial system is here.
This won’t end well.
The Silicon Valley Bank bailout is the Bear Stearns moment for this bubble. Lehman is coming… as is AIG… and this entire mess won’t end until the stock market hits levels most cannot even imagine today… to the downside
Indeed, from a BIG PICTURE perspective my proprietary Crash Trigger is now on the first confirmed “Sell” signal since 2008.
This signal has only registered THREE times in the last 25 years: in 2000, 2008 and today.
If you’ve yet to take steps to prepare for what’s coming, we just published a new exclusive special report How to Invest During This Bear Market.
It details the #1 investment to own during the bear market as well as how to invest to potentially generate life changing wealth when it ends.
Ever since the Great Financial Crisis of 2008, the Fed has been primarily in an accommodative framework. For most of 2008-2023, interest rates were at ZERO or 0.25%. The below chart shows where rates were from 2007 until today. You’ll see that with the exception of 2017 to mid-2019, rates were effectively at ZERO for most of this time.
The Fed didn’t just keep rates at zero either. It printed money and used that money to buy assets/ debt securities to prop up the system anytime things started to break down.
We’re not talking about a little money printing either. Between 2007 and 2023, the Fed printed over $8 TRILLION.
This suppression of interest rates… combined with the money printing and easy access to credit had one primary beneficiary…
The Tech sector.
Tech, particularly high beta garbage Tech (apps, texting companies, social media, etc), NEEDs low interest rates to even exist because these companies require a TON of capital/ debt to reach profitability (assuming they even do that, which 95% DON’T).
And remember, we’re not talking about the Fed creating an artificial environment for a few months. They’ve been doing it for most of 15 years. And every time the system began to break down, the Fed would do even MORE extreme versions of these policies… which in turn made the environment even more favorable to the Tech industry.
How bad did this get?
Talk to anyone who wants to become an entrepreneur today and he or she will say they want to found a Tech company. NO ONE says they want to go into energy, or materials, or manufacturing. It’s all about apps, social media, search engines, etc.
Think of it this way, as of 2021…
The largest automaker in the stock market was a tech stock (Tesla).
The largest commerce company in the stock market was a tech stock (Amazon).
The largest consumer discretionary company in the stock market was a tech stock (Apple).
And so on…
The Tech sector was the largest sector by weighting in the S&P 500 by almost a factor of two. In fact, Tech was larger than both the 2nd and the 3rd heaviest weighted sectors COMBINED!
The below chart shows the performance of the Tech Sector relative to the broader market (S&P 500 since 1999). As you can see, Tech outperformed the broader market non-stop from 2008 onward. By the time 2022 rolled around, it was at levels that EXCEEDED those established by the Tech Bubble of 2000!
All of this is due to the Fed.
Most of the people who work in Tech are not geniuses, nor are they the best entrepreneurs on the planet. They were simply the beneficiaries of an artificial environment created by the Fed.
In the simplest of terms, Tech is to the bubble today, what Banks were to the bubble in 2007: the sector that benefited most, generated the largest profits, and consumed the largest percentage of talent/ aspirations.
That period is now OVER. And it’s not coming back.
So what does this mean for the markets?
Well, if the largest sector in the market is in a spectacular bubble the likes of which won’t return for at least another decade… what do you think?
The Silicon Valley Bank bailout is the Bear Stearns moment for this bubble. Lehman is coming… as is AIG… and this entire mess won’t end until the stock market hits levels most cannot even imagine today.
Indeed, from a BIG PICTURE perspective my proprietary Crash Trigger is now on the first confirmed “Sell” signal since 2008.
This signal has only registered THREE times in the last 25 years: in 2000, 2008 and today.
If you’ve yet to take steps to prepare for what’s coming, we just published a new exclusive special report How to Invest During This Bear Market.
It details the #1 investment to own during the bear market as well as how to invest to potentially generate life changing wealth when it ends.
A major bank just went under… contagion is dragging down other similar firms… the Fed is introducing emergency measures to bailout the system.
Is it 2008 all over again?
Yes and no.
“Yes” in the sense that the Fed created a massive bubble in risk assets. Also “yes” in the sense that banks made stupid decisions, violating central tenets of risk management by lending money to clients that could never pay it back (this time tech startups instead of high risk mortgage borrowers). And finally “yes” in the sense that the guilty players get bailed out by the tax-payer and the wealthy are made “whole” with preferential treatment due to their connections to DC.
However, that’s where the similarities end… because the issues the financial system faces today are far greater and systemic that the ones it faced in 2008.
The 2008 crisis was triggered by a crisis in housing… which became a banking crisis courtesy of Wall Street’s toxic derivatives trades,
This crisis (2023) is a crisis in Treasuries… which are the bedrock of our current financial system, the senior-most asset class in existences. And once again Wall Street has gone bananas with derivatives based on an asset class.
In 2008, the derivatives were “credit default swaps” and the market for them was roughly $50-$60 trillion in size.
Today, the derivatives are based on “interest rates/ bond yields” and the market for them is $500+ trillion. And as we just discovered with Silicon Valley Bank and Signature Bank… the banks weren’t particularly clever in how they managed their risks this time either.
Over the last year as the Fed raised interest rates from 0.25% to 4.75%, the Treasury market has collapsed. Remember, when bond yields RISE, bond prices FALL.
Other debt securities followed suit including mortgage-backed securities, corporate bonds and the like. Because remember, the yield on Treasuries represents the “risk free” rate of return against which all risk assets are priced. So when Treasuries fell, ALL other debt instruments had to be repriced accordingly.
As a result of this, U.S. banks are currently sitting on $640 BILLION in unrealized losses on their longer duration bond/debt portfolios. This is what precipitated the collapse of Silicon Valley Bank… and if you think that’s the last shoe to fall in this mess, I’ve got a bridge to sell you in Brooklyn.
So enjoy the bounce we are seeing in risk assets now. It won’t last… just as the market rally triggered by Bear Stearns’ shotgun wedding to JP Morgan in March 2008 didn’t last either.
Indeed, from a BIG PICTURE perspective my proprietary Crash Trigger is now on the first confirmed “Sell” signal since 2008.
This signal has only registered THREE times in the last 25 years: in 2000, 2008 and today.
If you’ve yet to take steps to prepare for what’s coming, we just published a new exclusive special report How to Invest During This Bear Market.
It details the #1 investment to own during the bear market as well as how to invest to potentially generate life changing wealth when it ends.
Stocks are bouncing this morning on announcements that the Feds will backstop ALL of the deposits at the now bankrupt Silicon Valley Financial Group (SIVB) AKA Silicon Valley bank.
This is a massive mistake. The banking system is in serious trouble and it is not clear that the $25 billion bailout the Feds crafted will be enough to deal with fallout.
One other bank (Signature) has already been closed, while most of the regional banks in California have seen their stocks halted.
What’s causing all of this?
Two things:
1) For the first time in 15 years, depositors can earn 4% or 5% in yield.
2) Banks are up to the eyeballs in garbage loans made during the pandemic.
Regarding #1, most banks are now paying out something like 0.05% or lower on deposits. Meanwhile, money market accounts and short-term T-bills are paying 4% of 5%.
As a result of this depositors are pulling money out of banks. And because the banks have to maintain leverage ratios based on capital requirements, the banks are being forced to sell assets (deleverage).
We are not talking about a small amount of money either. There is $5.5 trillion in deposits in small/ regional banks in the U.S.
This brings us to #2.
SIVB went bananas with its lending following the pandemic courtesy of all the bail-out/ stimulus money. SIVB was the bank for (h/t DiscloseTV):
1) Some 1,500 climate and energy-tech companies.
2) More than 60% of all community-based solar financing.
3) Countless “woke” programs that financed politically-tied entities/ startups.
Look, a bank can lend money to whoever it likes… but when you throw lending standards out the window and start loaning money based solely on political ideology (as opposed to whether or not the person/ business could ever pay you back) it’s a recipe for disaster.
By doing this, SIVB went from the 42nd largest bank to the 15th largest bank in the U.S. in the span of THREE YEARS. The chart below is not of a tech start-up or micro-cap… it’s that of a BANK. Yes, it went from $150 per share to $750 per share in less than two years.
Which brings us to today.
SIVB is NOT the only bank with these problems, just as Bear Stearns wasn’t the only bank with exposure to subprime mortgage loans in 2008. There is no easy way out of this mess.
Remember, there are over $5.5 TRILLION in deposits sitting in regional banks in the U.S. The Fed thinks that a $25 billion bailout fund will be enough to prop up the banks as a major percentage of this leaves to seek higher yields.
Good luck with that!
Oh… and by the way… our proprietary Bear Market Trigger… the one that predicted the Tech Crash as well as the Great Financial Crisis… is on a confirmed SELL signal for the first time since 2008.
If you’ve yet to take steps to prepare for what’s coming, we just published a new exclusive special report How to Invest During This Bear Market.
It details the #1 investment to own during the bear market as well as how to invest to potentially generate life changing wealth when it ends.
I warned and warned and then warned some more… that the market rally was NOT to be trusted.
The next leg down in this bear market has just begun. And Private Wealth Advisorysubscribers couldn’t be happier.
As I write this, our three CRASH trades designed to profit from a market meltdown are all EXPLODING HIGHER!
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Don’t miss out on this opportunity. Because it won’t be around much longer. And you’ll regret not taking advantage of it… especially as the market breaks down to new lows.
This is a big deal as historically high yield credit leads stocks.
Indeed, high yield credit bottomed in October 2022 (purple circle in the chart below) a full two weeks before stocks did (blue circle in the chart below).
Now high yield credit is telling us stocks are set to drop. According to high yield credit, the S&P 500 should already be at 3,900 a full 100 points lower.
Oh… and by the way… our proprietary Bear Market Trigger… the one that predicted the Tech Crash as well as the Great Financial Crisis… is on a confirmed SELL signal for the first time since 2008.
If you’ve yet to take steps to prepare for what’s coming, we just published a new exclusive special report How to Invest During This Bear Market.
It details the #1 investment to own during the bear market as well as how to invest to potentially generate life changing wealth when it ends.
It’s been heading towards one for years… but the massive rise in Treasury yields may finally be the match that lights the fuse.
I’ve written extensively about the rise in Treasury yields over the last few weeks. I’ve primarily done this from the perspective of yields rising due to inflation… which triggered the bear market in stocks.
However, it’s worth noting that this rise in yields has another far more systemic consequence. That is: the U.S. is now paying a WHOLE LOT more on its debt.
Consider the following…
On Monday, the U.S. issued $48 billion worth of six months T-Bills.
This time last year, based on where yields were, the U.S. would pay just ~$180 million in interest on these bonds.
Today, it’s going to end up paying ~$1.3 BILLION.
This is just one example. But this issue will apply to ALL new debts the U.S. issues going forward: higher rates will mean greater debt payments.
And bear in mind, the U.S. has over $31 trillion in debt outstanding… and is adding to this mountain via its $1+ TRILLION deficit this year.
So we’re talking about greater debt payments on a mountain of debt that will need to be rolled over or paid back sometime in the near future.
Meanwhile, investors are piling into stocks as if a new bull market has just begun. Despite the 20% drop last year, stocks continue to trade at a market cap to GDP of 150%+. To put this into perspective, it is roughly the same level that the markets hit relative to GDP at the PEAK OF THE TECH BUBBLE!
Oh… and by the way… our proprietary Bear Market Trigger… the one that predicted the Tech Crash as well as the Great Financial Crisis… is on a confirmed SELL signal for the first time since 2008.
If you’ve yet to take steps to prepare for what’s coming, we just published a new exclusive special report How to Invest During This Bear Market.
It details the #1 investment to own during the bear market as well as how to invest to potentially generate life changing wealth when it ends.
The Fed is trying to fight inflation by raising rates… but low rates were NOT what triggered inflation: rampant money printing and supply chain issues were the reason inflation ignited.
Some historical perspective…
Between 2008 and 2014, the Fed printed roughly $3 trillion to combat the Great Financial Crisis and its aftermath. The Fed printed that same amount in six months in 2020. And it would ultimately print a total of ~$5 trillion in just 24 months.
That’s correct, during the pandemic, the Fed printed nearly DOUBLE the amount of money that it printed in response to the Great Financial Crisis. And the Fed did this in 1/3 of the time (two years vs. six years).
The Fed was not the only one.
In fact, compared to what the Federal Government did, the Fed looked like a bunch of money printing/ spending amateurs. The Federal Government spent ~$6 in 2020 ALONE. It then spent another $1.9 trillion in 2021, for a total of roughly $8 TRILLION in two years.
Who would have thought that printed/ spending $13 TRILLION (61% of U.S. GDP) in 24 months would ignite inflation!?!
So what is the Fed’s response to all of this?
Raise rates from 0.25% to 4.75% while draining a measly $500 billion in liquidity from the system.
That’s right, the Fed believes it can rein in the inflation that was created by printing/spending $13 TRILLION by raising rates a little over 4%… and shrinking its balance sheet by 6%.
Give me a break.
So again, the Fed is playing a dangerous game today. Every month that it continues messing around inflation becomes more embedded in the financial system.
On that note, we published a Special Investment Report concerning FIVE secret investments you can use to make inflation pay you as it rips through the financial system in the months ahead.
The
report is titled Survive the Inflationary Storm. And it
explains in very simply terms how to make inflation PAY YOU.
We are making just 100 copies available to the public.
