The stock market is about to trigger a “SELL” on its monthly MACD.
If you’re unfamiliar with the MACD is stands for moving average convergence/divergence. It’s a technical indicator that is used to monitor momentum in the stock market.
The way it works is quite technical, so to keep things simple here, you can think of the MACD as illustrating when short-term momentum shifts versus the long-term trend in the stock market. When short-term momentum breaks down against the long-term trend, it signals a “sell,” and when short-term momentum breaks out to the upside against the long-term trend, it signals “buy.”
In a nutshell, the MACD is a fantastic means of catching MAJOR market turns. You can apply it to any time frame: hourly, weekly, even monthly. But when you use it on a monthly chart, it’s one of, if not THE best means of timing bull and bear markets.
Let me show you.
The below chart shows the S&P 500 and its monthly MACD back in 2022. The short-term momentum indicator is represented by the black line in the lower box. And the longer-term trend is represented by the red line.
As you can see, the black line broke below the red line in early 2022, signaling that short-term momentum was breaking down against the longer-term trend. This was a SELL signal. And sure enough, what followed was a 12-month bear market that saw stocks lose almost 30%!
Anyone who noted the “Sell” signal in early 2022 and moved to the sidelines avoided a WORLD of pain.
So, what is the Monthly MACD saying now?
It’s right on the verge of signaling another SELL signal. This is a MAJOR warning to stock market investors that stocks are in VERY serious danger of entering another MAJOR bear market.
If you’ve yet to prepare for this, the time to act is NOW before the bear market hits.
Indeed, our proprietary Crash Trigger is now on red alert. This trigger went off before the 1987 Crash, the Tech Crash, and the 2008 Great Financial Crisis.
We detail this trigger, how it works, and what it’s saying about the market today in a Special Investment Report titled How to Predict a Crash.
Normally this report is only available to our paying clients, but in light of what’s happening in the markets today, we are making just 99 copies available to the general public.
I warned that the Fed was going to break something.
Well, things are starting to break. The latest round of economic data was disastrous.
Consumer confidence collapsed to its lowest reading since January 2021. As if that wasn’t bad enough, the Expectations Index, which is based on consumers’ views on income, business and labor market conditions, COLLAPSED to 65.2.
That is the lowest reading in 12 years. And it’s WAY below 80, which is usually the level at which predicts a recession.
Similarly, the Philadelphia Fed’s non-manufacturing index imploded to NEGATIVE 32.5. This is the lowest reading since 2020 which was during a PANDEMIC.
The writing is on the wall… unless something changes FAST, something BAD is coming in the economy. And when something BAD happens to the economy, stocks get slaughtered.
The last time President Trump and the Fed got into a pissing match, stocks took out the 200-DSMA, bounced, chopped around for a few weeks and then the REAL fireworks began.
Are stocks about to repeat this? They’ve just collapsed rapidly taking out their 200-DMA.
Pay attention here, the market might be signaling a “tell.”
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The Fed is refusing to cut interest rates because President Trump’s proposed tariffs might trigger inflation.
Yes, this is the Fed’s thinking. They’ve even admitted that Fed staff are assuming “full retaliation” for whatever tariffs the Trump administration introduces.
What are these people smoking?
What country is going to try to retaliate against the U.S., thereby losing access to the largest pool of middle-class consumers in the world? The U.S. economy is as large as the 2nd, 3rd and 4th largest economies combined… and 75 of U.S. GDP is consumer spending.
That’s $21 TRILLION in consumer spending per year.
And yet, the Fed believes that the current trade war is only going to get worse, with other nations engaging in full retaliation to whatever the Trump administration proposes. And because of this, the Fed is worried that there might be an uptick in inflation.
Never mind that the gold standard for inflation expectations shows inflation is ~2% and trending down.
Never mind that real-time inflation measures like Truflation show inflation is actually BELOW 2%.
The Fed knows better! After all, they have 400 Economics PhDs on staff. And those people are all really smart!
This is a MAJOR screwup, and it’s only a matter of time before the Fed breaks something. When this happens, the Fed will be forced to panic ease monetary conditions triggering one of the greatest wealth building opportunities in years.
To start receiving these kinds of actionable insights, join 56,000 readers in over 56 countries in receiving our daily market alert every weekday before the markets open (9:30AM EST).
Instead, the Fed stated it is on “hold” for rate cuts because the potential tariffs the Trump administration introduces might trigger inflation.
This is 100% nonsense.
Europe, Japan, China, and countless other nations have introduced tariffs, duties and other trade restrictions in the past with ZERO uptick in inflation.
Moreover, there is NO evidence that inflation expectations are on the rise. The five year forward inflation expectations is THE gold standard for measuring inflation expectations.
Do you see an uptick here? I don’t.
So what is the Fed doing?
Playing politics.
They did this during Trump’s first term in 2018 when they intentionally tightened monetary policy to the point of triggering a stock market crash (if you don’t believe me, former Vice Chair Stanley Fischer admitted this in an interview).
This is a MAJOR screwup, and it’s only a matter of time before the Fed breaks something. When this happens, the Fed will be forced to panic ease monetary conditions triggering one of the greatest wealth building opportunities in years.
The last time the Fed screwed up and was forced to change course was in 2023 when it blew up the regional banking system. What followed was an almost 1,000 point rally on the S&P 500.
To start receiving these kinds of actionable insights, join 56,000 readers in over 56 countries in receiving our daily market alert every weekday before the markets open (9:30AM EST).
The S&P 500 has now performed back to back “90% up days”.
A 90% up day is a day in which 90% or more of the stocks that comprise a stock market index rise. Historically, this is a very bullish development. And back to back 90% up days are even better! In fact, back to back 90% up days like the ones the S&P 500 staged on Friday and Monday are usually a hallmark of a market bottom!
As Ryan Detrick has noted, since 1980, two consecutive days with 90% advancing issues in the S&P 500 have resulted in positive returns 12 months out ~91% of the time. Even better, the median return over that time period is 16.5%.
See for yourself:
Put simply, a major metric is signaling to us that the odds greatly favor stocks have bottomed . The odds favor a rally, NOT a crash.
To start receiving these kinds of actionable insights, join 56,000 readers in over 56 countries in receiving our daily market alert every weekday before the markets open (9:30AM EST).
On Friday, stocks experienced their largest single day gain of 2025. Friday was also a 90% up day: a day in which 90% of stock trading volume was upwards. This, along with several other metrics, is signaling a bottom is in and a bounce has begun. The bigger question is if this is a dead cat bounce or the start of a significant rally.
The markets are a lot like a rubber band: while they can stretch one way or the other and sometimes will reach extremes… but those periods usually resolve with a “snap back” move that brings the market more in line with its normal range, just as a rubber band will snap back from an extreme stretch to its normal resting position.
For stocks, one means of reading the degree of “stretch” is to chart the percentage of the index that is trading above or below the intermediate term trend: the 50-day simple moving average (DSMA).
When a large percentage (over 85%) of stocks are trading over this line, it usually means stocks are overbought and due to correct. Conversely, when a low percentage (below 40%) of stocks are trading above this line, it usually means stocks are oversold and forming a bottom.
You can see the latter phenomenon in the chart below. Anytime less than 40% of stocks in the S&P 500 are above their 50-DSMA, the market usually bottoms soon after. Bear in mind, this is correct in every market environment whether it be during a bear market and a correction that occurs in the context of a bull market.
So what is this metric saying today?
Only 30% of stocks in the S&P 500 are currently trading above their 50-DSMA. This is a strong signal that stocks are extremely oversold and likely forming a significant bottom. Remember, the last five times this low of a percentage of stocks were above their intermediate term trend, stocks kicked off a multi-week rally.
Put simply, a major metric is signaling to us that the odds greatly favor stocks bottoming right here and now. This is the only chart to focus on this week as the media and fintwit are all extremely bearish and calling for a crash.
The odds favor a rally, NOT a crash.
To start receiving these kinds of actionable insights, join 56,000 readers in over 56 countries in receiving our daily market alert every weekday before the markets open (9:30AM EST).
This might be the most brutal 10% correction in history. But the good news is that stocks should bottom shortly.
From a purely gain/ loss perspective, the overall indices are only down 10%. However, “under the hood” the damage to the stock market has been severe. The MAG 7 stock, which account for 30% of the S&P 500’s weight, are down ~20%.
As awful as this correction feels, in many ways this was to be expected. We are in the 3rd year of this bull market begun in 2022. Historically, the 3rd year is the most challenging one for bull markets. And with the S&P 500 having recorded truly incredible gains of ~20% in both 2023 and 2024, stocks were due for some increased volatility at least in the first half of 2025.
Put simply, this current period for stocks, while painful, is to be expected. It is not unusual, nor should we panic. And by the look of things, the lows are in or about to be in.
The Tech ETF (XLK) is at MAJOR support. It would be EXTRAORDINARY for it to take out this line right here and now.
Moreover, the ratio between growth and value stocks has fallen to test its 40-Week Simple Moving Average (the same as the 200-Day Simple Moving Average). This has historically marked THE lows for market pullbacks during this bull market begun in late 2022.
In the simplest of terms, ALL of the froth has been taken out of the markets. And with the inflation data, GDP and labor market cooling, the door is open to the Fed starting to ease monetary policy again.
To start receiving these kinds of actionable insights, join 56,000 readers in over 56 countries in receiving our daily market alert every weekday before the markets open (9:30AM EST).
Yesterday, I commented that it was “bounce or big trouble” time for stocks.
The reason for this? The S&P 500 had fallen 5% to test its 200-day simple moving average (DMA): a critical trendline for the bull market.
What made this a critical situation? After all, a correction of this size (5%) is a relatively common occurrence. On average stocks drop by 5% at least once per year. So this should have been a clear “buy the dip” opportunity, right?
Not exactly.
Under the hood, the market was in a very precarious situation. Only half of its sectors remained in uptrends. Moreover, many individual companies had seen their share prices decline by 20% or more.
Put simply, while the overall indices were only down 5%, beneath the surface, stocks were trading like it was the start of a bear market. As a result of this, the test of the 200-DSMA was absolutely critical. If stocks didn’t bounce there, then we needed to prepare for a real bloodbath in the markets.
Fortunately, we got the bounce with the S&P 500 hitting its 200-DSMA briefly on an intraday basis before buyers came in.
What now?
Stocks are up this morning, but we need to see some follow through on this bounce. After all, one day of gains isn’t a big deal for stocks. So while the bounce has helped, questions remain as to whether or not it will be sufficient to stop the downward momentum.
The good news is that high yield credit, which usually leads stocks, has NOT broken down in any significant fashion. This suggests that stocks could catch a major bid if they can look past the threat of tariffs and a trade war to the fact that underlying macro conditions have not worsened much if at all.
If you’re looking for a high octane tool to determine whether or not to “buy the dips” during market correction, my proprietary Crash Trigger has got you covered. It tracks certain key developments that register before every major market meltdown.
I detail them, along with what they’re currently saying about the market today in a Special Investment Report How to Predict a Crash.
The S&P 500 is getting into some serious trouble now.
Bounces are short-lived, lasting at most a day… bulls are refusing to commit… and the breakdown is now reaching serious levels from a technical analysis perspective.
To wit, the S&P 500 is now 2% below its 10-week simple moving average (this is the same as the 50-day simple moving average). During the last four years, the only time stocks have broken down more relative to this line was during the bear market of 2022 or at THE 2023 lows.
Put another way, stocks are at a critical point in this sell-off. Either stocks hold here and begin a significant bounce or the market dynamic has changed dramatically to the point of looking more like a bear market as opposed to a garden variety correction.
See for yourself.
Indeed another way of looking at price action is to note that the S&P 500 is now on the verge of breaking below its bull run trend line from the 2023 lows. This has happened once before during the August 2024 meltdown, but stocks need to catch a bid right here and now if things aren’t going to get REALLY messy.
Seeing this, many investors are asking themselves “are stocks about to Crash?!?”
To figure that out, I rely on certain key signals that flash before every market crash.
I detail them, along with what they’re currently saying about the market today in a Special Investment Report How to Predict a Crash.
Stocks got saved over the weekend when President Trump announced that the U.S. would be moving forward with its plans for a “Crypto Reserve” that would own multiple cryptocurrencies.
The specific post from Truth Social is below:
This post served several purposes for risk assets. The most significant are:
It ignited a sharp rally in crypto currencies.
It served as a kind of “Trump Put” on risk assets.
Regarding #1, the crypto space has been in decline for the last two months largely as investors became disillusioned with the progress the Trump administration was making in introducing crypto-based government funds. Bitcoin, the largest and most liquid crypto currency, had taken out critical support and was on the verge of erasing its entire post-election gains.
President Trump’s post on Truth Social reversed all of this, sending Bitcoin back into its former range. In the simplest of terms, crypto is back on the administration’s list of priorities. The next major bull run in crypto coins is likely here.
Which brings us to #2 in our list: President Trump’s post on Truth Social served as a kind of “Trump Put” on risk assets.
One of the hallmarks of Trump’s first term was his near constant tweeting/ talking about stocks any time the markets were in danger of breaking down in a major way. Thus far in Trump’s second term, these interventions have been absent even as stocks broke below their bull market trendline last week.
President Trump’s post on Truth Social was a clear signal that the “Trump Put” is back. In the very simplest of terms, Trump is watching the markets and intervening when risk assets get into trouble.
The big question for investors is… will this work? Up until Trump intervened the markets were breaking down in a Big way, with some risk assets crashing 20%+ in a matter of days.
Put simply, are stocks about to Crash?!?
To figure that out, I rely on certain key signals that flash before every market crash.
I detail them, along with what they’re currently saying about the market today in a Special Investment Report How to Predict a Crash.
Stocks are currently taking it on the chin, having erased several months’ worth of price action in just three trading sessions. In this context, the number one question for traders is if this is just a garden variety correction or the start of something bigger.
My money is on it being a “garden variety correction.”
First and foremost, High Yield Credit is failing to confirm this down move. High yield credit (junk bonds) is typically the “canary in the coal mine” for macro changes. The reason for this is that junk bond investors are investing in an asset class that has a relatively high risk of default even under the best of circumstances.
Put simply, these individuals need to be extremely sensitive to macro downturns to insure they don’t end up losing a LOT of capital. With that in mind, I want to note that the high yield credit ETF (HYG) is failing to confirm this downturn in stocks. In fact, HYG is moving UP to retest its all-time highs!
This strongly suggests that stocks are “overdoing it” with this drop. If the economy was indeed turning downward, HYG would be dropping along with the S&P 500.
It isn’t. And this is a major signal that this correction in stocks is likely to prove short-lived. Indeed, I fully believe stocks are poised for a “rip your face off” rally in the coming weeks.
You’re probably wondering how can I act so carefree about stocks today when there are clearly so many issues in the world?
The answer is simple: I have proprietary triggers that hit before any major market break-down. Until one of them goes off, the market is telling me that stocks aren’t concerned about the issues/ risks.
To figure that out, I rely on certain key signals that flash before every market crash.
I detail them, along with what they’re currently saying about the market today in a Special Investment Report How to Predict a Crash.
For all the excitement around the election, the stock market has in fact gone nowhere for most of the last five months. Instead, stocks have been trading in a range between 5,750 and 6,100 on the S&P 500. Sure, there have been sharp daily moves lower and higher, but as a whole stocks have done NOTHING for months.
Indeed, even the fact stocks appear to be holding up this well is something of a mirage. The reality is that the S&P 500 is heavily weighted towards big tech (the largest tech companies account for 30% of the index’s weight). These are the largest, most profitable companies in the world. And they’re masking the reality that the vast majority of stocks are in fact having a terrible time.
When you remove the impact of big tech from the market with an equal weighted version of the S&P 500, the reality is that most stocks peaked in December and are down about 5% from their recent peak.
This raises the question… where is the Trump stock market miracle?
Historically, Trump has been a champion for stocks, but the reality is that they’re barely up since the election.
What is going on here?
I’ll detail what I think is happening in tomorrow’s article. But unless stocks rally hard right here and now, we’re in for a rough spring.
To start receiving these kinds of actionable insights, join 56,000 readers in over 56 countries in receiving our daily market alert every weekday before the markets open (9:30AM EST).
By now you’ve no doubt heard that the Department of Government Efficiency (DOGE) is uncovering a truly jaw-dropping amount of fraud, waste, and abuse in the U.S. Federal Government.
Some of the more egregious items:
The government effectively funds the media via backdoor grants and subscriptions. We’re not talking about small amounts either, we’re talking about $8 million for Politico, $1.6 million for the New York Times, and millions for the Associated Press.
The United States Agency for International Aid (USAID) has been spending $50 billion per year financing countless causes that are of questionable value, e.g. gender-based plays in Peru, DEI scholarships in Burma, sex changes in Guatemala, tourism in Egypt, etc.
To be clear, all of this is wasteful spending that needs to go. But the big questions are:
Will this really put a dent in the U.S. deficit?
What are the implications for investors?
Regarding #1, the fraud, waste, and abuse DOGE has uncovered thus far, while infuriating, is nowhere near the $1.8 trillion deficit run by the U.S. each year. Of course, it’s still very early in this process (the Trump administration is only in its 3rd week), but the fact remains, DOGE has a LOT of work to do to put a major dent in the U.S.’s $1.8 trillion deficit.
By way of context, USAID, which DOGE has just shut down, had an annual budget of $50 billion. That sounds like a lot of money, but it comes to just ~2% of the U.S.’s deficit. So again, DOGE needs to cut a LOT more spending to really put a dent in the U.S.’s finances.
Which brings us to #2: what are the implications for investors?
Historically, betting against Elon Musk has been a bad bet. The man has single-handedly changed auto manufacturing as well as space exploration. And he has stated that he intends to cut $1 trillion in spending before he’s done.
Now THAT would be significant. And while the media and Wall Street are in disbelief that Musk can do this, the bond market is flashing a signal that Musk could very well succeed.
To wit, bond yields peaked in early 2025 just before DOGE and Musk began their work. This is a major signal that bonds were beginning to wake up to DOGE’s potential: reducing the U.S. deficit would be VERY bullish for Treasuries.
Bonds are not the only asset class being impacted by this. Please note that stocks stopped correcting THE day that Treasury yields peaked. They then launched a “rip your face off” rally with the S&P 500 rising 300 points in a little over a week.
Bottomline: the potential impact of DOGE on the stock market is NOT being correctly discounted by the majority of investors. This kind of mispricing can open the door to incredible gains with the right investments.
To start receiving these kinds of actionable insights, join 56,000 readers in over 56 countries in receiving our daily market alert every weekday before the markets open (9:30AM EST).
One of my favorite leading indicators is high yield credit or junk bonds.
Junk bond investors are extremely sensitive to macro changes. The reason for this is that they are investing in an asset class that has a high likelihood of default. As a result of this, these investors need to be extremely attuned to any changes in the economy/ fundamentals because failing to do so can result in losing most if not all of their money.
For this reason, high yield credit tends to lead the stock market. I say “tends” because nothing in investing is flawless. But this indicator is about as good as it gets.
Case in point, during the recent tariff tantrum, stocks (black line) collapsed while high yield credit (red line) held up beautifully. This was a clear signal that a prolonged tariff war was unlikely or… that it would have minimal damage to the U.S. economy.
Sure enough… the tariff war was postponed by 30 days and stocks bounced hard. High yield credit was correct once again! And since that time, high yield credit is suggesting that new all-time highs are coming shortly. Consider that a “freebie” in terms of stocks insights.
This is just one of the signals I use to take advantage of mispricing in stocks. Feel free to add it to your arsenal!
To start receiving these kinds of actionable insights, join 56,000 readers in over 56 countries in receiving our daily market alert every weekday before the markets open (9:30AM EST).
The tariff wars have officially arrived. And the markets don’t like it.
Crypto currencies are perhaps the best liquidity/ risk on indicators in the financial system. And as I write this, they’re a sea of red.
Bitcoin is down almost 7% peak to trough from Friday afternoon. Other smaller coins are down even more.
And there is little doubt stocks will open sharply down on Monday. The S&P 5o0 fell almost 100 points Friday afternoon when the tariffs announcements hit the wires.
Trump believes the stock market is a barometer for his economic agenda. And while he’s already suggested there will be some near-term pain based on the tariffs… how long will he be willing to stomach a collapsing stock market?
The S&P 500 has a gap down around 5,860. This should prove a likely downside target for this market reaction to the tariffs. What happens then will be key.
Below that is the 200-Day Simple Moving Average (DSMA) around 5,600 on the S&P 500. It is highly unlikely Trump would stomach a break below that.
To start receiving these kinds of actionable insights, join 56,000 readers in over 56 countries in receiving our daily market alert every weekday before the markets open (9:30AM EST).
There were three primary reasons for this. By quick way of review, those reasons were:
Reason #1: There was a brief “tariff war” between the United States and Colombia. The issue was resolved rapidly, but it introduced a degree of policy uncertainty and/ or fears of tariffs being introduced in a flippant fashion. The markets don’t like uncertainty.
Reason #2 : A Chinese company Deep Seek, claimed it has created an artificial intelligence (AI) software that is as good, if not better than comparable technology in the U.S. for a fraction of the cost. However, this information has been public since November, so it’s not clear why the markets would suddenly care now as opposed to any other point in the last two months.
Reason #3: Japan’s central bank, the Bank of Japan (BoJ), raised rated for the third time since 2007, thereby blowing up its carry trade (again).
Japan’s currency, the Yen, funds a massive carry trade (a process through which investors borrow in one currency with a low interest rate to invest in higher returning assets). To “cover” a carry trade, an investor needs to sell the higher returning asset (in this case, stocks) and return the borrowed money.
Of the above issues, #3 is the most important one for risk assets. Indeed, a similar situation unfolded in August 2024 when the BoJ raised rates and stocks sold off aggressively, plunging 9% in the span of two weeks.
It’s worth noting that stocks bounced back from that situation rapidly, undoing ALL of the losses in a little over a week.
We expect a similar snapback rally this time around as well.
Remember, fundamentally nothing has changed in the macro environment. The economy is growing. The Fed is easing. And the President of the U.S., Donald Trump, is a stock market cheerleader. The big picture hasn’t changed for stocks. What has changed is a higher degree of uncertainty has appeared in the markets.
At Phoenix Capital Research, we view this correction as an opportunity, NOT the start of a market crash or bear market.
To start receiving these kinds of actionable insights, join 56,000 readers in over 56 countries in receiving our daily market alert every weekday before the markets open (9:30AM EST).
You should NOT be alarmed by this. There are three primary reasons for this sell-off is occurring. None of them are true “game changers” indicating that the bull market in stocks is over.
Those three reasons are:
Reason #1: There was a brief “tariff war” between the United States and Colombia over the latter initially refusing to accept planes returning illegal immigrants from the former.
Despite this issue being resolved rapidly (Colombia buckled), this situation introduced a degree of policy uncertainty and/ or fears of tariffs being introduced in a flippant fashion. The markets don’t like uncertainty, especially for policies that can hurt global trade or the economy.
Reason #2: Japan’s central bank, the Bank of Japan (BoJ), has raised rated for the third time since 2007.
Japan’s currency, the Yen, funds a massive carry trade (a process through which investors borrow in one currency with a low interest rate to invest in higher returning assets). The BoJ raising rates threatens this carry trade which is believed to be worth tens if not hundreds of billions of dollars in size.
To “cover” a carry trade, an investor needs to sell the higher returning asset (in this case, stocks) and return the borrowed money. A similar situation unfolded in August 2024 when the BoJ raised rates and stocks sold off aggressively.
Reason #3 : A Chinese company Deep Seek, claims it has created an artificial intelligence (AI) software that is as good, if not better than comparable technology in the U.S.. The significance of this development is that Deep Seek claims it was able to do this for a fraction of the cost.
This claim is absurd, but the markets appear to be taking it seriously with shared of the tech firms involved in the A.I. buildout in the U.S. (Nvidia, Meta, Apple, etc.) down 5% or more this morning. Here again, this issue introduces uncertainty (in this case uncertainty as to whether U.S. tech firms are overspending on their AI buildouts) and the markets don’t like uncertainty.
As a result of these issues, the markets are a sea of red today, with the S&P 500 down 2.3% and the tech-centric NASDAQ down 4%.
The reality is that none of the above issues is likely to end the bull market in stocks. However, combined, they are creating a volatile situation that appears to have “come out of nowhere.”
Do NOT panic.
Corrections of 5% or even 10% are a regular feature of bull markets. The fact that the S&P 500 managed to pass through 2024 without single 10% correction does NOT mean that we’ve entered a new period for stocks that is without downside risk
So where will this drop end?
The S&P 500 left three separate gaps during its sharp 300-point rally that occurred over the course of just five trading sessions during the week of January 13th. It would not be unusual for at least one if not two of these to be “filled” during a back-test of this recent rally.
Why are we not panicking?
The macro picture for stocks has not changed. The economy is growing. The Fed is easing. And the President of the U.S., Donald Trump, is a stock market cheerleader. The big picture hasn’t changed for stocks. What has changed is a higher degree of uncertainty has appeared in the markets.
At Phoenix Capital Research, we view this correction as an opportunity, NOT the start of a market crash or bear market.
To start receiving these kinds of actionable insights, join 56,000 readers in over 56 countries in receiving our daily market alert every weekday before the markets open (9:30AM EST).
Yesterday I shared a chart that helped us to determine that the S&P 500’s correction was a “buy the dip” opportunity, NOT the start of a serious correction/ bear market.
By quick way of review…
1) The chart showed the percentage of S&P 500 companies trading above their 50-day simple moving average (DSMA). This is a GREAT tool for tracking where the market is trading relative to its prior trend.
2) Prior to last week’s rally, the reading on this chart had fallen to ~15%.
3) A reading this low is typically associated with significant market bottoms. Indeed, the only times the reading has fallen lower during the last five years was during the pandemic crash or the major bottoms of the 2022 bear market.
You can review the chart below.
I sincerely hope all of you bought the dip. If you did, you’ve made a significant return on your trade as the S&P 500 has ripped higher by 280 points in the span of a single week.
Our research indicates this move is just getting started.
High yield credit typically leads the stock market. The reason for this is that high yield credit investors are typically more sophisticated/ sensitive to macro changes for the simple reason that they are investing in bonds that have a high probability of default. As a result of this, high yield credit can give clues as to where stocks will be heading.
The short answer today is “UP, A LOT.”
The high yield credit ETF (HYG) is back at its all-time highs. This strongly suggests stocks will be moving sharply higher from here.
Ultimately, it all comes down to this: as investors, our goal is MAKING MONEY.
To do that, you NEED to know when to “buy the dip” and when to get out of stocks to avoid bear markets. And the best way to do that is to use real quantifiable tools, not opinions, that tell you when to get out to the markets.
To start receiving these kinds of actionable insights, join 56,000 readers in over 56 countries in receiving our daily market alert every weekday before the markets open (9:30AM EST).
Yesterday, I noted that the S&P 500 has a clear Head and Shoulders pattern. As a result of this, the bears were convinced that a top was in.
Unfortunately for them, investing is rarely easy or obvious. And everyone and their mother saw that pattern forming. Thus, the odds of it actually working out in their favor were slim.
Sure enough, stocks exploded higher yesterday. And by the look of things, the S&P 500 will retest its former highs if not establish new all-time highs shortly.
High yield credit typically leads stocks. It is roaring higher after putting in a series of higher highs and higher lows. Based on this alone, the S&P 500 should be over 6,000 already.
Indeed, Senior Loans, which also lead equities are already at new all-time highs. This is NOT bearish. If anything it indicates the financial system is in an aggressive risk on framework.
Put simply, the pullback of the last two weeks was a MAJOR “buy the dip” opportunity. We had our clients ready to profit from it with specific downside targets at which to buy multiple new trades.
Come join us!
To start receiving these kinds of actionable insights, join 56,000 readers in over 56 countries in receiving our daily market alert every weekday before the markets open (9:30AM EST).
One of the key differentiators for investors is your ability to find profits in the markets. It sounds obvious, but you’d be amazed how many people keep staring at the same charts waiting for something to happen… while other investments are soaring and making investors extraordinary profits.
Consider the “Trump Trade,” for example.
The overall stock market as indicated by the S&P 500 is up only 4% since election day. And in fact, it’s down for the month of December. Seeing this, numerous analysts have claimed that the Trump Trade is fizzling out.
Meanwhile, key areas of the market that are closely aligned with the incoming administration’s policies and agendas are breaking out to new highs. Rather than fizzling out, these areas of the market are showing investors serious profits.
Consider…
Bitcoin: the incoming Trump administration is extremely pro-Bitcoin, going so far as to propose a Strategic Bitcoin Reserve designed to hold and acquire a Bitcoin stockpile for the U.S. much as the Strategic Petroleum Reserve houses our oil reserves.
Bitcoin is up 33% since the election vs ~4% for the S&P 500. And the momentum isn’t stopping either. Bitcoin has just broken out to new all-time highs, clearing $100,000 for the first time in history. This has been a place to profit even as the S&P 500 sputters out.
Tesla (TSLA) has been another area of market momentum and profits. TSLA founder Elon Musk has become one of Trump’s most trusted advisors. This cozy relationship, combined with TSLA’s development of autonomous robots, self-driving taxis, and other revolutionary technologies, has resulted in TSLA shares ERUPTING nearly 60% higher since election night.
Put simply, investors have seen EXTRAORDINARY profits here while the overall market has been going nowhere. Again, the profits are there if you know where to look!
Quantum Computing: the incoming Trump administration has made it clear it will be aggressively promoting American innovation. Quantum computing uses quantum mechanics to solve extremely complicated problems in a fraction of the time traditional computing would require. This is the next “AI” or revolutionary technology that will dramatically alter the corporate landscape. As a result of this, quantum computing stocks have been on an absolute tear with shares of IonQ (IONQ), the industry leader, more than doubling since election night.
Again, there are MAJOR profits to be found in stocks today, if you know where to look.
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You’re going to be hearing a LOT about quantum computing in 2025.
Quantum computing is a type of computing based on quantum mechanics. Experts believe it to be the next generation in computing. It is highly complicated and capable of handling problems that traditional computers cannot.
And by the look of things, it’s going to be the next “AI” theme: a technological breakthrough that produces massive gains for investors.
Quantum computing names have been EXPLODING higher in the markets.
IonQ (IONQ)
Quantum Computing Inc (QUBT)
Rigetti Computing (RGTI)
Again, the first major move has already happened in these names and the easy money has been made. But the bigger players will be moving into the space shortly. Indeed, Alphabet (GOOGL) has just announced the introduction of its own quantum computing chip Willow.
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According to the official data, the answer is “maybe” at best, but most likely “no.”
There are three official inflation measures in the U.S. They are:
The Consumer Price Index (CPI).
The Producer Price Index (PPI).
Personal Consumption Expenditures (PCE).
CPI has effectively stopped declining for six months now. A lot of commentators are pointing to the recent uptick from October’s data as indicating that inflation is coming back, but the reality is that this is a noisy data set that is subject to multiple revisions. Put simply, this data point shows CPI is close to target but refusing to decline any further.
When we remove the noisiest portions of this data set (food and energy), Core-CPI hasn’t declined since July. Again, this doesn’t necessarily mean it’s about to surge higher… but it does indicate that inflation isn’t moving towards the Fed’s target of 2% anymore.
This brings us to the Producer Price Index (PPI).
The latest round of data (October) was released mid-November. It reported an uptick in inflation with a month over month reading of 0.2% and a year over year reading of 2.4%. This chart is more worrisome for those claiming inflation is on the rise again.
As was the case with CPI, when we strip out food and energy, the chart isn’t any better.
Which brings us to the Fed’s preferred measure of inflation: Core-Personal Consumption Expenditures (PCE), or PCE excluding food and energy prices. This is arguably the single most important data point for inflation as it is the one the Fed watches closely. It has flatlined since May 2024.
Add it all up, and at best, we can argue that inflation has stopped declining for the last six months. At worst, you could make a case that any spike in energy prices would result in a major uptick in inflation. Remember, the ONLY parts of the CPI data that is down year over year are energy prices (and used cars). Every other segment of the data continues to rise in price!
Put simply, the picture for inflation is at best blurred and at worst, indicating a second wave if coming.
We fully believe inflation is going to be one of the dominant themes of 2025. Take a look at what gold or bitcoin imply is coming and you’ll see what we mean.
Our Special Investment Report on how to profit from a 2nd wave of inflation is flying off the shelves. To grab yours go to the link below.
The stock market is increasingly being driven by Trump and his agenda for his second term. If you’re looking to make money in this market, focusing on these items has been working well.
Consider what has taken place with Meta (META).
Historically, META’s CEO Mark Zuckerberg has been left leaning in his political views. He wasn’t just verbal in his politics either: he spent $400 million helping the Democrats defeat Trump in 2020.
With this in mind, one of the biggest “tells” that Trump would win the election was when Zuckerberg pivoted politically away from the left. In late August, he penned a letter to Congress claiming that he didn’t want to suppress right wing views on META but had done so due to pressure from the Biden administration. This was quite a move as polls had Harris leading at the time.
However, polls are quite inaccurate (as we’ve discovered this election cycle). But Zuckerberg had/has access to one of the greatest databases for voter behavior in the world via META. Americans might not tell pollsters who they intend to vote for, but you better believe they’re revealing that in private to their family and friends on social media. In this sense, Zuckerberg’s political pivot had less to do with true repentance for prior transgressions and more to do with pragmatism: he saw voters were going to deliver a landslide victory to Trump and was positioning himself and his company accordingly.
Having said that, once Trump won on November 5th, META shares lagged as investors were uncertain whether Trump would seek vengeance for Zuckerberg’s prior political actions. While the overall market exploded higher on election night (red line in the chart below), META shares (black line in the chart below) failed to participate.
Then Zuckerberg had dinner with Trump on November 27th, and META shares EXPLODED higher. They’re now up 6% since that date, having broken through critical overhead resistance (red line in the chart below) and soaring to new all-time highs.
Bear in mind, literally NOTHING changed about META’s business during this time other than Zuckerberg cozying up to Trump and publicly stating that he’d love to have a role in Trump’s new administration. But as you can see for yourself, those developments had a MAJOR impact on META’s share price action.
So again, as I stated at the beginning of this article, The stock market is increasingly being driven by Trump and his agenda for his second term. If you’re looking to make money in this market, focusing on these items has been working well.
If you’re looking for guidance on this, we just published a Special Investment Report detailing that, as well as the #1 investment to own during Trump’s 2nd Term.
We are selling this report as a standalone item for $499… but you can pick up a copy FREE simply by joining our daily market commentary, Gains Pains & Capital.
We are making only 99 copies available to the public.
More Department Of Government Efficiency (DOGE) news.
As the Trump administration prepares to take office on January 20, 2025, more and more data points detailing the egregious fraud, waste, and abuse in government spending are being made public.
Consider…
The Federal Government spends $15 billion per year on office buildings/ energy costs, not to mention hundreds of millions if not billions of dollars on office furnishings. Despite this massive overhead, the government is current sitting on over 7,000 vacant office buildings as most Federal government employees are still allowed to work from home.
Bear in mind, the pandemic ended over 18 months ago.
Having said that, the primary issue as far as government waste is concerned isn’t the number of Federal employees which hasn’t grown by much over the last 20 years… rather it’s the government spending, particularly on ludicrous projects/ programs that offer little if any real benefit to society.
Some of the more disturbing items DOGE has noted…
Congress dispensed $516 billion to programs whose authorizations previously expired under federal law. Over half of that ($320 billion) pertained to programs whose authorizations expired over a decade ago.
The Pentagon has failed its 7th STRAIGHT AUDIT and is unable to account for where $824 BILLION in spending went. That’s roughly the same size as Poland’s GDP.
In 2023, federal programs made $236 billion in improper payments. That’s billion with a “b.”
Some $200 billion in pandemic spending/ stimulus went to fraud/ abuse whether it be companies that didn’t qualify for PPP loans, fake companies that didn’t even exist, etc.
These are just the LARGE line items of note. Once you start delving into the smaller, individual programs the government funds, things go from disturbing to ludicrous.
Some of the worst of the worst that DOGE has highlighted on X (formerly Twitter).
$45 million for a diversity and inclusion scholarship in Burma
$3 million for “girl-centered climate action” in Brazil
$288,563 for diverse bird watcher groups
$100,000 to study if tequila or gin makes sunfish more aggressive
Almost $1 million to study if cocaine makes Japanese quail more sexually promiscuous
$750,000 to study if Neil Armstrong said “One small step for Man” or “One small step for ‘a’ man” during the moon landing.
$28 million in licensing fees for a green camouflage pattern for Afghan National Army uniforms. Bear in mind, the “camouflage” didn’t work as Afghanistan is mostly desert.
$2.5 million on a Super Bowl Ad for the Census
$1.7 million for holograms of dead comedians
$500,000 to build an IHOP in Washington, DC
And on and on.
The mere fact DOGE is bringing these items to the public’s consciousness is a worthy endeavor. Hopefully, DOGE can get rid of this stuff and get government spending under control. As we write this, the Federal debt has cleared $35 TRILLION and is adding $1 trillion in new debt every 100 days.
This spending isn’t free. Interest payments on the federal debt have cleared $1 trillion per year and are now the largest line item in our annual federal budget. If DOGE doesn’t get government spending under control, a debt crisis is coming sooner rather than later.
The one thing that IS clear is that DOGE would improve the U.S. fiscal situation. This would remove one of the biggest concerns for the stock market (the U.S. debt mountain/ massive deficits) and open the door to new highs.
On that note, we just published a Special Investment Report detailing that, as well as the #1 investment to own during Trump’s 2nd Term.
We are selling this report as a standalone item for $499… but you can pick up a copy FREE simply by joining our daily market commentary, Gains Pains & Capital.
We are making only 99 copies available to the public.
The Trump administration intends to treat the government like a business, removing waste and increasing productivity. Can it be done? It’s difficult to say. Firing government employees is notoriously difficult (hence the “fail up” theme that is common in the public sector).
Having said that, there’s clearly room for improvement/ cost cutting. The bigger issues pertain to how the Elon Musk and Vivek Ramaswamy’s Department of Government Efficiency (DOGE) would affect the overall economy.
Let’s dive in.
All told, over 23 MILLION people are employed by the government in the U.S. That’s not a typo. You can see this for yourself. The chart has gone straight up with few drops in the last 80 years.
Of this, the Federal Government is currently responsible for ~3 million workers. To put that into context, Wal-Mart employs roughly 1.6 million people in the U.S. So, Uncle Sam employs a little under two times as many people as the country’s largest private sector employer.
Does the government need all these employees? It’s difficult to say. There are plenty of stories of wasteful spending in government, but is the wasteful spending pertaining to programs, employees, or both? Put another way, is DOGE’s mission to improve the U.S.’s fiscal situation… or is it meant to primarily reduce the size of the government?
This remains to be seen.
Moreover, is DOGE meant to apply to just Federal Employees, of is it mean to also streamline state and local government operations? The U.S. has 167 million people in its labor force. With three million of these people employed by Uncle Sam, this means that less than 2% of labor force would be in DOGE’s targets. If DOGE is meant to also apply to state and local government, then the percentage of people who could be affected jumps to 13% of the labor force.
These issues need to be clarified for us to get a better sense of the impact of DOGE on U.S. employment.
Finally, and perhaps most pressing for investors, will DOGE trigger a recession? Elon Musk famously laid off 80% of Twitter (now X’s) employees without too much difficulty. If he and Vivek Ramaswamy manage to accomplish even half of that (meaning laying off 40% of Federal Government employees), if would mean 1.2 million Federal Employees losing their jobs.
There are currently 6.9 million people unemployed out of a labor force of 168.4 million. This comes to a U-3 unemployment rate of 4.1%. Adding 1.2 million unemployed people to this ratio would increase the U-3 unemployment rate to 4.8%. And bear in mind that this analysis assumes that the overall labor force dynamics do NOT change at all in the private, state or local government sectors (unlikely if DOGE is also cutting spending).
The lowest U-3 unemployment rate during this current cycle was 3.4%. So, a spike to 4.8% in unemployment would mean a total increase of 1.4% to the unemployment rate trough to peak. That is roughly equal to the unemployment rate spikes that occurred during the recessions of the early ‘90s and the early ‘00s (1.6% and 1.4%, respectively) so this is recessionary territory.
Would President Trump be willing to stomach a technical recession if it was triggered by delivering a campaign promise to shrink the government? I have no idea. President Trump was extremely proud of the economy’s strength during the first three years of his first term. Would the pride of shrinking government for the first time in decades eclipse the perceived economic “failure” of a technical recession occurring during the first two years of his term?
This remains to be seen.
The one thing that IS clear is that DOGE would improve the U.S. fiscal situation. This would remove one of the biggest concerns for the stock market (the U.S. debt mountain/ massive deficits) and open the door to new highs.
We just published a Special Investment Report detailing that, as well as the #1 investment to own during Trump’s 2nd Term.
We are selling this report as a standalone item for $499… but you can pick up a copy FREE simply by joining our daily market commentary, Gains Pains & Capital.
We are making only 99 copies available to the public.
As I write this, there are only 59 left…
To pick up yours…
We just published a Special Investment Report detailing that, as well as the #1 investment to own during Trump’s 2nd Term.
We are selling this report as a standalone item for $499… but you can pick up a copy FREE simply by joining our daily market commentary, Gains Pains & Capital.
We are making only 99 copies available to the public.
As I write this, there are only 67 left…
To pick up yours…
Best Reghttps://phoenixcapitalresearch.com/trump2ndterm-leadgen/
It’s easy to do… every day we are inundated with thousands of pieces of information. And if you’re an active investor, there is no shortage of opinions from the mainstream media, social media, and even financial advisors as to what you should own.
However, sometimes it’s best to simply block out all that stuff and let the market show you where to invest.
With that in mind, below is a chart illustrating the performance of three assets since election night.
Which one would prefer to own?
It’s a no brainer: one is up 75% while the others are up just 4% and down 5% respectively. So obviously you want to buy the top performer right?
Here’s the chart with the assets labeled. The top performer is crypto market maker Coinbase Global (COIN) .
The message is clear here: the Trump administration is going to be EXTREMELY bullish for all things crypto.
Don’t overthink this. The markets are literally telling you where you need to invest.
For those investors looking fror specific investment strategies to profit from Trump’s 2nd term, we just released a Special Investment Report detailing what we consider to be the #1 investment to own during Trump’s 2nd Term. It rose 2,000% during his first term… and it’s already up 32% since election night!
We are selling this report as a standalone item for $499… but you can pick up a copy FREE simply by joining our daily market commentary, Gains Pains & Capital.
We are making only 99 copies available to the public.
Let’s dive into the latest development that has the financial community buzzing – Donald Trump’s proposal for a Strategic Bitcoin Stockpile. This proposition is stirring quite a bit of excitement and curiosity, so let’s unpack what it could mean for you and your investment strategy.
Trump’s Bold Move: A Strategic Bitcoin StockpileIn a recent announcement, Trump unveiled his plans to establish a Strategic Bitcoin Stockpile, a move that underscores his shifting view on the cryptocurrency market. This Stockpile is designed to hold the U.S.’s bitcoin, leveraging its potential as a digital asset class and a hedge against traditional market fluctuations.Trump put it simply at a conference in Nashville in July of this year, “NEVER sell your bitcoin… If elected, it will be the policy of my administration to keep 100% of all the bitcoin the U.S. government currently holds or acquires into the future.”Now that Trump is President, this proposal can become a reality.Why It Matters: Potential Impact on the MarketThis isn’t just another fund – it’s a statement. By proposing a Strategic Bitcoin Reserve, Trump is signaling a significant shift in how influential figures understand and utilize digital currencies.Here are a few key takeaways on why this proposition matters:
Legitimacy Boost: Trump’s endorsement provides a significant vote of confidence for Bitcoin and could help cement its place as a mainstream investment vehicle. This might encourage other prominent investors and institutions to follow suit, driving further adoption and integration into traditional finance.Investor Confidence: For savvy investors like yourself, greater institutional involvement can translate to more confidence in the market. With influential figures backing Bitcoin, the perceived risk may diminish, making it a more attractive option for a diversified portfolio.
So, what can we expect if Trump’s Strategic Bitcoin Stockpile gets off the ground? Here are a few predictions based on current trends and insights:
Increased Institutional Interest: Following Trump’s lead, we might see more institutional investors entering the Bitcoin market. This could drive significant growth and potentially more stable price movements.Regulatory Advances: With more high-profile figures betting on Bitcoin, there may be a push toward clearer and more supportive regulatory frameworks. This can provide a more secure environment for all investors.Mainstream Adoption: As Bitcoin becomes more integrated into traditional finance through such strategic Stockpiles, we could see broader adoption and everyday use cases emerging, further solidifying its role in the financial landscape.
Final ThoughtsTrump’s proposed Strategic Bitcoin Reserve is more than just a bold move; it’s a pivotal moment for the cryptocurrency market. For investors, it presents new opportunities to consider Bitcoin within a diversified, forward-looking investment strategy.Smart investors are already positioning themselves to profit from this.We just published a Special Investment Report, The Bitcoin ETF You NEED To Know About that details a unique investment through which you can buy bitcoin via the stock market, like a regular stock (instead of with a crypto-based brokerage account).We are selling this report as a standalone item for $499… but you can pick up a copy FREE simply by joining our daily market commentary, Gains Pains & Capital.We are making only 99 copies available to the public.To pick up yours…CLICK HERE NOW!Best RegardsGraham Summers, MBAChief Market StrategistPhoenix Capital Research
Let’s grab a cup of coffee and talk about something that’s intrigued many of us over the past few years – Donald Trump’s impact on the stock market.
Whether you loved him, hated him, or found yourself somewhere in between, it’s undeniable that Trump’s presidency had a significant impact on the markets. And as investors, our goal is on making money, NOT choosing political sides. So, let’s break down how and why this happened, without getting caught in the political weeds.
Let’s start with Trump’s 2016 policies, and what they meant for stocks…
Key Policies and Their Impacts
Corporate Tax Cuts:
One of the cornerstone policies of Trump’s administration was the Tax Cuts and Jobs Act of 2017. This piece of legislation slashed the corporate tax rate from 35% to 21%. Lower taxes meant higher net profits for companies, and subsequently, higher dividends for shareholders. This injection of optimism contributed to a bullish market.
Deregulation:
Trump’s administration took significant steps to roll back regulations, particularly in the financial and energy sectors. By reducing regulatory burdens, companies found it easier to do business and increase profitability. As a result, the market reacted positively, favoring sectors directly impacted by deregulation.
Trade Policies and Tariffs:
Perhaps the most contentious aspect of Trump’s economic policy was his approach to trade, particularly with China. The imposition of tariffs led to increased costs for businesses reliant on global supply chains and created uncertainty in the markets. However, many investors saw these moves as part of a broader strategy to level the playing field for American businesses.
Add it all up, and this mix of lower taxes, lower regulatory burden, and America-first dynamics were a boon for corporate profits, which drive stocks. The market roared higher during Trump’s 1st term. Even when the pandemic hit, Trump’s combination of aggressive stimulus along with the Fed’s extraordinary actions resulted in a rapid recovery.
Stocks finished Trump’s term up over 85% for average annual gains of over 20%. This was an EXTRAORDINARY period to be a stock investor.
Now Donald Trump is President once again. And by the look of things, he’s going to be even more stock market obsessed with a specific focus on controlling the Fed top insure stocks go higher.
This is going to have a profound impact on the economy and stock markets. Our Chief Market Strategist, Graham Summers, MBA will be hosting a webinar addressing this situation next Friday, November 22nd at 1PM.
During this webinar, Graham will detail Trump’s proposals for reorganizing the Fed, who are the likely candidates for the next Fed chair, and what this will mean for the financial system and stock markets including specific investment strategies to profit from these developments.
This webinar will available to the general public for $49.99…
However, as a Gains Pains & Capital subscriber, you can reserve a place for just $9.99.
For those investors looking fror specific investment strategies to profit from Trump’s 2nd term, we just released a Special Investment Report detailing what we consider to be the #1 investment to own during Trump’s 2nd Term. It rose 2,000% during his first term… and it’s already up 32% since election night!
We are selling this report as a standalone item for $499… but you can pick up a copy FREE simply by joining our daily market commentary, Gains Pains & Capital.
We are making only 99 copies available to the public.
The Fed claims to be politically independent, but that’s largely a myth. And no one is more aware of that than the new President of the United States, Donald Tump.
This week our host, Graham Summers, MBA, delves into the history of the Fed’s political interference, outlining clear examples in which the Fed has “tipped the scales” in favor of the establishment.
Graham also outlines some of the proposals the Trump administration has floated to address this situation, including handicapping the Fed’s autonomy with interest rate policy and more.
Put simply, a Trump 2nd Term could very well revolutionize the financial system. And this week, Graham breaks it all down into easy to understand terms as only he can.
To access this week’s episode of Bulls Bears and BS…
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The Federal Reserve (or “the Fed” for short) is supposed to be a politically independent entity.
Political commentators are outraged that Federal Reserve employees donated $10 to Democrats for every $1 to Republicans during this latest election cycle. As you can imagine, this has resulted in numerous accusations of the Fed being a left-leaning or Democrat controlled entity.
Those accusations are true.
However, the reality is that the Fed’s political actions are far greater than the mere $552,000 Fed employees donated to the left in the last four years. Indeed, in the last 15 years alone, there have been at least FOUR occasions during which the Fed engaged in monetary policies that were questionable at best, given the political context.
For those of us who track these things, the Fed:
Influenced the 2012 Presidential race to aid the Obama Administration’s re-election bid.
Damaged the economy/ financial system on purpose in 2017-2018 as an act of defiance against President Trump
Claimed inflation was “transitory” despite mountains of evidence to the contrary, only to then abandon this claim as soon as Fed Chair Jerome Powell was reappointed by President Biden.
Announced a new focus on climate change/ DEI/ leftist political interests despite those issues being outside the scope of the Fed’s mandates.
Let’s dive in.
First and foremost, consider that in 2012, the Bernanke-led Fed announced QE 3, its largest QE program in history at the time (an $80 billion per month, open-ended program), a mere THREE MONTHS before the U.S. Presidential election.
Bear in mind that the U.S. economy was growing, and the U.S. financial system wasn’t under significant duress at the time. Also bear in mind that the Fed did this within 90 days of a Presidential election.
In this context the decision to launch the largest QE program to date was blatant political interference to aid the Obama Administration’s re-election bid by boosting the stock market and economy. Even if you’re inclined to give the Fed a pass for this, you can’t argue that given the data and the timing, the move was suspect.
A second example of Fed political bias concerns its major shift in monetary policy once Donald Trump became President in 2017. To fully grasp this, we need to provide a little historical context.
Between 2008 and 2016, the Fed engaged in eight years of extraordinary monetary easing, maintaining interest rates of 0.25% (zero), and engaging in over $3 trillion worth of QE. Bear in mind that throughout this time, the U.S. economy was technically NOT in recession. Economic growth was steady:
And the unemployment rate was in a clear downtrend:
Once the Fed actually ended easing, it embarked on one of the feeblest campaigns of tightening monetary policy in history, raising rates only one time in 2015 and 2016 each. To put this into context, during a normal cycle, the Fed raises rates by three or four times per year.
Then Donald Trump won the 2016 Presidential election, and suddenly the Fed “got religion” about normalizing monetary policy. It raised rates three times in 2017 and another four times in 2018. In 2018, it also began shrinking its balance sheet via a process called Quantitative Tightening or QT. It would ultimately drain $500 billion in liquidity from the financial system via QT in 12 months.
All the above represent quite a shift considering the Fed had maintained rates at or close to ZERO for eight years prior to this. And this shift ended up damaging the economy and stock market.
Throughout 2016-2018, the Fed ignored numerous signals that this pace of tightening was placing the financial system under duress, right up until the junk bond market froze and the U.S. stock market crashed 20% during the holidays in December 2018.
For those who would argue that the Fed’s sudden shift from maintaining easy monetary policy for the better part of a decade to aggressively normalizing policy in the span of 20 months had nothing to do with Donald Trump being President, consider that former Fed Vice Chair Stanley Fisher admitted in an interview that the Fed’s raising rates in December 2018 was done specifically to hurt the economy because the Fed was annoyed with President Trump’s constant tweeting about them.
We’ll detail the final two politically egregious Fed actions in tomorrow’s article. But for now, the above examples alone are enough to definitively show the Fed IS a political entity and it DOES lean to the left.
Now Donald Trump is President once again. And he is going to exact vengeance on the Fed.
This is going to have a profound impact on the economy and stock markets. Our Chief Market Strategist, Graham Summers, MBA will be hosting a webinar addressing this situation next Friday, November 22nd at 1PM.
During this webinar, Graham will detail Trump’s proposals for reorganizing the Fed, who are the likely candidates for the next Fed chair, and what this will mean for the financial system and stock markets including specific investment strategies to profit from these developments.
This webinar will available to the general public for $49.99…
However, as a Gains Pains & Capital subscriber, you can reserve a place for just $9.99.
The initial breakthrough phase, which occurs before social/legal frameworks are in place.
The “normalization” phase during which social/legal frameworks are implemented giving the technology a societal and financial legitimacy.
If you need a real-world example of this, think of the electronic music file or MP3 revolution.
The first phase was Napster in 1999, which featured the sharing of music in what was later deemed as illegal activity (the legal framework was not yet ready for the technology). During this initial phase Napster exploded in popularity particularly among young people. At its peak Napster had tens of millions of users.
Then came the lawsuits, Napster went bankrupt, and social/ legal frameworks were introduced for this new technology. During this time Apple introduced iTunes: a version of MP3 technology in which MP3s could be bought and sold in a legally acceptable form.
Napster is still around. Its marketing promotes the fact it is “100% legal.” And it has about five million users. At its peak, iTunes hit 500+ million users and accounted for 63% of all digital music sales. It is now in the process of being converted over to Apple Music, a new service that also offers music streaming and other services in order to compete with Spotify which is the new market leader. So once again, the technology has changed and requires adaption. And streaming music is now $46 billion market.
So, what does this all have to do with crypto currencies? Under the new Trump administration, bitcoin and crypto currencies will shift from their Napster phase to their iTunes phase.
Bitcoin was invented in 2009. Since that time, the crypto currency market has grown to over 5,000 coins with a total market cap of $3 trillion. It’s unregulated, messy, and highly volatile. Put simply, since 2009, the crypto market has been in its Napster phase,
All of that is about to change. The Trump administration is going to oversee a massive widespread adoption of crypto currencies, particularly Bitcoin.
For starters, Trump himself is a huge proponent of crypto currencies.
How do we know this?
For one thing, Trump spoke at a Bitcoin Conference in Nashville on July 27th. Bear in mind, he was shot a mere two weeks prior. The fact he did NOT cancel his appearance despite being shot tells us this conference and its subject matter were of personal significance to Trump.
Indeed, Trump sees crypto currencies, particularly Bitcoin as a part of his agenda. He has stated he wants to make the U.S. the “crypto capital of the world” and that crypto mining of strategic importance to the U.S..
Trump is not the only one in his administration to favor Bitcoin.
Trump isn’t the only member of his administration who is pro-Bitcoin. His Vice President is J.D. Vance, who personally owns between $100,000 and $250,000 worth of Bitcoin as detailed by financial filings.
And finally, Elon Musk, who has established himself as one of Trump’s most trust advisors, is a big proponent of crypto currencies, including Bitcoin. Indeed, Tesla (TSLA) itself owns nearly $1 billion in Bitcoin.
Put simply, the President, the Vice President, and one of their biggest economic advisors are all involved in Bitcoin in some fashion. And during Trump’s 2nd term, crypto currencies will enter their “iTunes phase”: the phase during which the legal/ social framework is implemented amidst widespread adoption.
This is when the largest gains/ profits will be made from the crypto markets. Indeed, I fully believe the greatest crypto bull market has just begun.
Smart investors are already positioning themselves to profit from this.
We just published a Special Investment Report, The Bitcoin ETF You NEED To Know About that details a unique investment through which you can buy bitcoin via the stock market, like a regular stock (instead of with a crypto-based brokerage account).
We are selling this report as a standalone item for $499… but you can pick up a copy FREE simply by joining our daily market commentary, Gains Pains & Capital.
We are making only 99 copies available to the public.
As I keep stating, Donald Trump will win the 2024 U.S. Presidential election.
The first major signal (aside from the betting markets) was Meta (formerly Facebook) founder and CEO Mark Zuckerberg pivoting politically in August 2024.
Zuckerberg has been left-leaning for most of his career. But he is also a pragmatist. And with Meta, he has access to what is perhaps the largest dataset of voter sentiment in the world. We’re talking about what voters really think as opposed to what they tell a pollster.
Zuckerberg pivoted politically in August 2024, writing a letter to Congress in which he stated that the Biden administration had pressured him and Meta to limit free speech.
That is one heck of a statement by one of the most powerful, connected elites in the world. Do you think Zuckerberg would do this if he didn’t see the writing on the wall via Meta’s massive collection of voter sentiment?
Zuckerberg isn’t the only one who’s figured out that Trump will win either.
Yesterday, Ukrainian President Volodymyr Zelenskyy outlined the steps he would take to make sign a peace treaty with Russia. This comes after 2+ years of armed conflict between the two countries… conflict that was financed by the Biden administration/ congress to the tune of $175+ BILLION.
Zelenskyy has had countless opportunities to end this conflict since it began in early 2022. Indeed, there was a full peace deal prepared as early as April 2022 that the U.S. and U.K. rejected. The only reason Zelenskyy is looking to make a deal now is because he knows Trump will soon be the next President and the U.S. will no longer be funding this conflict.
Again, Donald Trump will win the 2024 U.S. Presidential election. The most connected tech and political elites are already preparing for it.
You should too…
We just published a Special Investment Report detailing that, as well as the #1 investment to own during Trump’s 2nd Term.
We are selling this report as a standalone item for $499… but you can pick up a copy FREE simply by joining our daily market commentary, Gains Pains & Capital.
We are making only 99 copies available to the public.
Politics are a full contact sport that brings out the ugliest aspects of human nature. And the political environment today is more toxic than at any other time in my lifetime.
Unfortunately for investors, the President and his/her agenda for the economy has a MAJOR impact on the markets. For those of us who want to make money from our investments, we have to address recent political events.
With that in mind, it is clear that Donald Trump will be the next U.S. President. That is not an opinion, it’s a fact: the betting markets give Trump a ~60% chance of winning.
This will have clear implications for risk assets, specifically stocks.
Why?
Trump is the Ultimate Stock Market Cheerleader
First and foremost, former President Trump LOVES the stock market.
During President Trump’s first term, then-Treasury Secretary Mnuchin stated that the Trump administration viewed the stock market as a “barometer” for the economy. Put another way, with stocks, President Trump had a real-time measure he could point to when claiming that his agenda was benefiting Americans’ net worth.
Indeed, between 2016 and 2020, President Trump posted 256 tweets mentioning the term “market”, 162 tweets mentioning the terms “stock market” another 26 tweets mentioning “stocks,” 23 tweets mentioning “highs” in relation to stocks, and finally 15 tweets mentioning the “S&P 500” all on X (formerly Twitter).
All told, we’re talking about ~500 tweets touting the stock market in a four-year span. That comes to at least TWO tweets per week during Trump’s first term!
I do not anticipate this focus on stocks to change during Trump’s 2nd Term. Say what you will about Donald Trump, but he loves wealth. And the stock market is the 2nd most-owned asset class in America behind housing: 56% of American households have exposure to stocks vs. 65% who own real estate.
Moreover, President Trump has already figured out that the stock market is a segment of the economy that he can rapidly and dramatically influence via social media. To wit, dozens of times during the trade war with China during Trump’s 1st Term he tweeted positive news about negotiations (oftentimes extremely vague) and stocks would rip higher.
The only thing Trump might love more than wealth is power. And the power to push stocks higher is one that I doubt he’ll forgo during his 2nd term.
With that in mind, it is very likely the stock market will push after Trump’s November win in 2024. This is particularly true when you consider the macro environment President Trump will inherit and create.
The Fed has already started cutting interest rates. So, Trump will inherit a stock market driven by Fed initiating a new easing cycle, at a time when the economy is still growing.
This is as close to a “goldilocks” environment for stocks you can get. And Trump will inherit this without lifting a finger.
Moreover, Team Trump has already leaked that they intend to pressure and potentially even assume partial control of the Fed via the Treasury.
This is what’s known as a “trial” balloon through which politicians gauge the public’s response to a potential policy.
I’ve posted a blurb from CNBC on the policy below…
This proposal is not surprising. From 2018-2019 Trump routinely harassed the Fed on social media, emphasizing that the Fed’s decision to raise rates and drain liquidity via Quantitative Tightening (QT) were harming his beloved stock market.
The below tweets are two such examples.
To recap…
1) The Fed was already talking about cutting rates before Trump took the lead in the polls. There is no way the Fed can reverse this intended policy path without drawing President Trump’s ire.
2) During his first term, Trump was extremely combative with the Fed, particularly any attempt by the latter to tighten monetary policy.
3) Team Trump has already leaked a document proposing several policies including
A) allowing the President to fire the Fed Chair prior to the end of the latter’s term,
B) giving the White House greater control over the Fed’s interest rate decisions, and C) using the Treasury to influence the Fed’s bond buying activities.
Considering the above items, it is clear that President Trump will have an even greater influence over the stock market during his second term.
Put simply, you could almost argue that “stocks going up” will be a Presidential Mandate!
How high could stocks go on a Trump win?
We just published a Special Investment Report detailing that, as well as the #1 investment to own during Trump’s 2nd Term.
We are selling this report as a standalone item for $499… but you can pick up a copy FREE simply by joining our daily market commentary, Gains Pains & Capital.
We are making only 99 copies available to the public.
Upon observing the current movement in the stock market, it’s evident that stocks have recently crossed a critical resistance point on a weekly timeline. The market is now backtesting this breakout, which is to be expected. The key issue is whether or not this breakout holds. The line to watch is 5,675 on a weekly chart.
High yield credit often guides stock movements. Currently, high yield credit is strong, signaling continued momentum and a potential S&P 500 hit 5,750 soon.
Pay attention to high yield credit’s strength – it could lead to a significant S&P 500 breakthrough to 5,750 in the near term.
The market breadth is on the rise, signaling a strengthening bull market rally that is expanding, not constricting. Once again, we see no indications of an imminent collapse. In fact, the current scenario presents a prime opportunity to ‘buy the dip’ in stocks.”
I bring all of this up because a LOT of analysts have gotten bearish. Their clients have MISSED out on these gains! Don’t be one of them!
To avoid making the mistake of panicking during a garden variety pullback, I’d refer you to our special investment report, How to Predict a Crash which details a quantifiable tool that has accurately predicted Black Swan market crashes. It caught the 1987 Crash, the Tech Crash, and the Great Financial Crisis, to name a few.
With just one look at this tool, you can tell whether it’s a good time to buy stocks or not. I detail it, along with what it’s currently saying about the market today in How to Predict a Crash.
Normally, I’d charge $499 for this report as a standalone item. But I’m giving it away FREE to anyone who joins our daily market commentary Gains Pains & Capital.
To pick up your copy now (it doesn’t cost a dime)…
Stocks have broken above critical resistance on a weekly basis. Historically, this has lead to several months’ worth of gains. As I write this, the S&P 500 is backtesting the breakout.
High yield credit, which typically leads stocks is showing no signs of slowing down. It has turned up again and anticipates the S&P 500 breaking above 5,750 in the near future.
Breadth is also strengthening. This bull market rally is getting broader, NOT narrower. And here again, there are no signs of a collapse about to begin. This is a “buy the dip” moment for stocks.
I bring all of this up because a LOT of analysts have gotten bearish. Their clients have MISSED out on these gains! Don’t be one of them!
To avoid making the mistake of panicking during a garden variety pullback, I’d refer you to our special investment report, How to Predict a Crash which details a quantifiable tool that has accurately predicted Black Swan market crashes. It caught the 1987 Crash, the Tech Crash, and the Great Financial Crisis, to name a few.
With just one look at this tool, you can tell whether it’s a good time to buy stocks or not. I detail it, along with what it’s currently saying about the market today in How to Predict a Crash.
Normally, I’d charge $499 for this report as a standalone item. But I’m giving it away FREE to anyone who joins our daily market commentary Gains Pains & Capital.
To pick up your copy now (it doesn’t cost a dime)…
This week’s episode of Bulls Bears and BS is available now.
The Fed cut rates by 0.5% last week. Many commentators are seeing this as a signal that the economy is in recession. We completely disagree. In this week’s episode, Chief Market Strategist Graham Summers, MBA outlines why this time “is different” and what it means for risk assets, particularly stocks. Graham also provides a macro framework for the next 18 months, as well as where he sees stocks going before this bull market ends.
Finally, Graham dives into gold’s recent price spike, placing it in the context of two potential outcomes for what is happening in the financial system today. If you’re concerned that inflation might be returning, and want to learn about some of the potential warning signs Graham sees that this might be the case, you won’t want to miss this week’s episode!
To access this week’s episode of Bulls Bears and BS…
Outside of the U.S., the world economy is in serious trouble. Europe is teetering on the verge of recession with its collective economy barely growing for three quarters in a row.
Germany, the largest most dynamic economy in the EU has only just established a new high in its stock market. This is shocking when you consider the European Central Bank (ECB) has already cut interest rates by nearly 1%! Put another way, European stocks are struggling despite that region’s central bank already aggressively easing monetary policy!
Elsewhere in the world, China just “blinked” by cutting rates on reverse repos and injecting liquidity into its financial system. The problem here is similar to in Europe: economic weakness.
Chinese equities have gone nowhere since late 2022. In a financial system that relies heavily on asset prices for political stability, this has been a disaster. Chinese policymakers are finally acting in the hopes of breaking the downtrend.
Japan has a strong stock market… at the expense of a collapsing currency. The Yen is trading at levels not seen since the early ’90s. The global financial system experienced its first “ripple” from this situation in early August when stocks nose-dived as the Yen erupted higher on an intervention.
This leaves the the U.S. as the sole major economy chugging along with GDP growth of ~3% and a stock market that hit new all-time highs on a regular basis for six months.
A lot is riding on Uncle Sam’s shoulders. Does he have what it takes to keep the world from rolling over into recession?
To answer that question, I’d refer you to our special investment report, How to Predict a Crash which details a quantifiable tool that has accurately predicted Black Swan market crashes. It caught the 1987 Crash, the Tech Crash, and the Great Financial Crisis, to name a few.
With just one look at this tool, you can tell whether it’s a good time to buy stocks or not. I detail it, along with what it’s currently saying about the market today in How to Predict a Crash.
Normally, I’d charge $499 for this report as a standalone item. But I’m giving it away FREE to anyone who joins our daily market commentary Gains Pains & Capital.
To pick up your copy now (it doesn’t cost a dime)…
You are going to hear a LOT of people talking about this, saying it’s a sign that the economy is in recession.
It’s not.
This business cycle, is unlike any other. If you’re comparing what’s happening now to what happened in 2000 or 2007, then you’re comparing apples to oranges.
Was the economy shut down prior to the Fed cutting rates by 0.5% in 2000 or 2007?
No.
Did the Fed and Federal Government pump $11 trillion into the financial system in the years preceding the Fed’s decision to cut rates by 0.5% in 2000 or 2007?
No.
Did the U.S. experience an inflationary storm prior to the Fed cutting rates by 0.5% in 2000 or 2007?
No.
Comparing the Fed rate cuts and their implications today to the last two times the Fed cut rates by 0.5% without accounting for these differences is not just bad thinking… it’s actually BAD for your portfolio.
Why?
Because in 2024, the economy is NOT rolling over into recession, nor is the financial system showing any signs of duress. GDP growth is clocking in at 2%+.
As far as the financial system is concerned, stocks are outperforming junk bonds in dramatic fashion. Every time the financial system has been under duress during the last 17 years, this ratio has gone UP, breaking above its 10 month moving average (blue line in the chart below). Today there are ZERO signs of duress in this ratio.
As far as the financial system is concerned, stocks are outperforming junk bonds in dramatic fashion. Every time the financial system has been under duress during the last 17 years, this ratio has gone UP, breaking above its 10 month moving average (blue line in the chart below). Today there are ZERO signs of duress in this ratio.
Again, what’s happening today is NOTHING like what happened in 2000 or 2007. If your guru or strategist is telling you to sell the farm and prepare for a crisis, you need to FIRE THEM and get a copy of my How to Predict a Crash investment report, instead.
How to Predict a Crash uses a quantifiable tool that has accurately predicted Black Swan market crashes. It caught the 1987 Crash, the Tech Crash, and the Great Financial Crisis, to name a few.
With just one look at this tool, you can tell whether it’s a good time to buy stocks or not. I detail it, along with what it’s currently saying about the market today in How to Predict a Crash.
Normally, I’d charge $499 for this report as a standalone item. But I’m giving it away FREE to anyone who joins our daily market commentary Gains Pains & Capital.
To pick up your copy now (it doesn’t cost a dime)…
Why isn’t the economy rolling over into recession?
Every other week, an economic metric that has historically predicted multiple recessions goes off. Between this and the stock market’s volatility, stock market bears have plenty of ammunition for arguments that a crash or bear market is about to hit.
On the flip-side of this, stocks simply refuse to break down. Every time the market appears to be on the verge of a significant collapse, stocks erupt higher. And other economic data appears to be quite strong.
As a result of this, analysts trying to make sense of this situation end up either flip flopping on their forecasts… or appearing to be perma-bears or perma-bulls: investors who simply maintain the same perspective no matter what is happening.
What’s the deal here?
The deal is that this economic cycle is unlike any other in history. In the last five years the U.S. has experienced…
1) A voluntary economic shut down (2020-2021).
2) The Federal Reserve printing and funneling $5 trillion into the financial system in the span of 20 months (2020-2022).
3) The Federal Government spending $6 trillion in stimulus/ interventions in the span of two years (2020-2022).
4) The Federal Government running the largest deficit as a percentage of GDP outside of World War II (2020-today).
This is why everything feels so messy: investors are trying to navigate not just one Black Swan (a previously never seen before phenomenon), but FOUR Black Swans. The end result is a business cycle that is truly unlike any other.
So what are investors to do?
The answer is actually simple: invest in those stocks that will benefit from this unique environment, until a quantitative market trigger signals that a bear market is about to begin.
I’m not talking about a trigger that ONLY works during normal business cycles. I’m talking about a trigger that can in fact predict Black Swan events.
And I’ve developed PRECISELY such a tool.
It signaled before legitimate Black Swans: it fired before the 1987 Crash, the Tech Crash, and the Great Financial Crisis.
I detail this investing tool, how it works, and what it’s saying about the markets today in a special investment report How to Predict a Crash.
Normally, I’d sell this report as a standalone item for $499. But I’m giving it away for FREE for the next 30 days, to anyone who joins our daily investment commentary Gains Pains & Capital.
Again, this report will ONLY be available to the general public for the next 30 days.
Stocks suffered a mini crash in early August when the Bank of Japan blew up the carry trade. Peak to trough, the S&P 500 lost 10% in a matter of three days.
Then “someone” stepped in, buying stocks hand over fist, and the market erupted higher, erasing all of those losses in less than two weeks.
This was blatant manipulation. No REAL buyer panic buys stocks. In fact, the traders running books for large financial institutions are graded based on their ability to acquire shares without moving the market.
Again, this was clear manipulation. Someone was trying to force stocks higher no matter what.
Fast forward to last week, and the same mystery buyer was at it again.
The S&P 500 was rejected by critical resistance at 5,650 (red line in the chart below). Stocks began to roll over, taking out the all-important 50-day moving average (the blue line in the chart below). Note that breaking below the 50-DMA was what precipitated the minicrash in early August.
Then the mystery buyer showed up again, PANIC BUYING stocks. Sending them straight up with every single dip being bought aggressively. Once again, the entire decline was erased in a matter of days.
Again, this is blatant manipulation. No REAL buyer with deep pockets does this stuff. This was someone who was CLEARLY intent on propping up the stock market at all costs.
Who is doing this?
It has to be the Fed… or the Fed courtesy of a proxy.
No other investor has bottomless pockets and PANIC BUYS stocks like this. Again, this is not some investor who’s trying to make money… this is someone who wants stocks higher no matter what.
Again, this has to be the Fed. In fact, I believe that at some point in the next few months, the Fed will openly admit to buying stocks with a new QE program.
I’m putting together a special report detailing precisely why this is… and which stocks I believe the Fed is buying.
This report, titled Chapter X will be sold as a standalone item for $499.
But readers of our free daily market commentary Gains Pains & Capital will have a copy delivered to their inboxes FREE of charge.
To join Gains Pains & Capital and have your copy of Chapter X delivered to your inbox later this week…
One of our proprietary measures for the economy is signaling a recession is at hand.
That measure is the Target (TGT): Walmart (WMT) ratio.
Target and Walmart are big box retailers with distinctively different brands/ price points. Target tends to be more consumer discretionary-oriented while Walmart tends to be more consumer staple-centric.
As a result of this, comparing the performance of the two companies’ stocks is a handy way of seeing if consumers are spending more money on discretionary items or if they are cutting back and focusing on lower price goods/ staples.
Put simply, when the TGT:WMT ratio rises, the consumer is strong. And when it collapses, it usually signals that an economic contraction is underway.
See for yourself. This ratio collapsed during the recession of 1990-1992, the Tech Crash/ recession, the Great Financial Crisis and the “close-call” of 2016-2017.
So what is this metric showing us today?
Hint: it’s UGLY.
Sure, this might be a fluke… but given the accuracy of this measure over the last 40 years, I wouldn’t bet on it. Indeed, my proprietary Crash trigger is on the verge of registering a “SELL” for the first time in four years.
This signal went off before the 1987 Crash, the Tech Crash, and even the Great Financial Crisis. And right now, it’s flashing its first MAJOR warning sign in years.
To find out about this trigger, and what it’s saying about stocks today…
Economically sensitive commodities like copper and oil have erased all of their 2024 gains and are now declining rapidly.
Defensive sectors like utilities are soaring… while growth-oriented sectors like Tech are struggling to move higher.
And worst of all, the ratio between stocks and long-term Treasuries has broken its 40-week moving average (the same as the 200-day moving average) for the first time since the pandemic crash!
All of this is EXTREMELY bearish and poses a major warning sign that additional downside could be here soon. Indeed, my proprietary Crash trigger is on the verge of registering a “SELL” for the first time in four years.
This signal went off before the 1987 Crash, the Tech Crash, and even the Great Financial Crisis. And right now, it’s flashing its first MAJOR warning sign in years.
To find out about this trigger, and what it’s saying about stocks today…
Stocks have experienced a great deal of volatility in the last week.
However, when you take a step back and look at the big picture for the equity markets, it’s clear that stocks have been in a consolidation phase since mid-May. That consolidation has been between 5,200 and 5,600 on the S&P 500.
Why is this happening?
There are two critical issues the market is trying to determine:
When and how aggressively the Fed will start cutting rates.
Who will win the Presidential election in November.
Regarding #1, three factors have “muddied the waters” in terms of figuring out when and how aggressively the Fed will cut rates this year.
Those three factors are the inflation data, unemployment data, and GDP data.
With the economy not yet contracting, unemployment spiking due to immigration NOT job losses, and inflation trending down, albeit in a noisy fashion, the Fed has suffered from institutional inertia as it opts to focus on the data as opposed to cutting rates.
However, at the end of the day, the Fed tends to take its cues from the yield on the 2-Year U.S. Treasury. And the yield on the 2-Year U.S. Treasury is telling us the Fed is WAAAAAY behind the curve. The Fed needs to take action and soon or it risks a recession.
Regarding #2, the Presidential election has also provided a great deal of confusion for stocks. Some of the more critical items of note include A) the Democrat candidate was replaced in July when President Biden opted to not continue with his campaign, B) Kamala Harris has yet to debate Donald Trump, and C) the economic agenda of the two current candidates couldn’t be more different when it comes to specific policies.
However, at the end of the day, both candidates have proven to be big on social spending. In this sense, whoever wins the election, we can assume the government will continue to run significant deficits. And this will provide stimulus to the economy, which will benefit stocks.
You can see this in the monthly chart of the S&P 500. Sure, it’s experiencing a down month thus far in September, but the uptrend is clearly intact. For this reason, we view the current pullback as an opportunity to “buy the dip” not “sell the farm.”
As investors, our job is to make money, not look for any excuse to dump stocks and panic about something bad happening. And as I’ve outlined in recent articles, this means riding bull markets for as long as possible, and then side-stepping bear markets when they eventually hit.
In the very simplest of terms, you need to be invested in stocks, until an objective, verifiable tool (not your feelings or limiting beliefs) tells you it’s time to “get out.”
I’ve developed a tool that takes ALL of the guessing work out of this problem. With just one look at this tool, you can tell whether it’s a good time to buy stocks or not. I detail it, along with what it’s currently saying about the market today in a Special Investment Report How to Predict a Crash.
The crash callers and bears just got a major lesson.
It’s a lesson that all investors have to learn at some point. Indeed, the only investors who actually make money from the markets are those who have learned that lesson and integrated its outcomes to their investing strategies.
The lesson?
Bears don’t make money.
The reality is that being a bear provides you with endless material to write or complain about. After all, at any point in time there are a million things that can go wrong in the markets. But most of the time, as in over 95% of the time, those terrible things don’t actually play out.
Even when bad things do play out, few if any investors actually make money from them.
Consider the Great Financial Crisis of 2008: arguably the greatest bear market/ crisis of our lifetimes.
In 2008, there were roughly 216 million American adults over the age of 18. Roughly 60% of them had exposure to the stock market via brokerage accounts or retirements accounts (401Ks, IRAs, etc.) So, we’re talking about roughly 130 MILLION people who were involved in the stock market in one way or another.
The number of investors who got rich betting on a crash at that time is under 30. So, we’re talking about 30 people out of 130 MILLION succeeding. That’s roughly one ten millionth of one percent (0.00001%).
To put that into perspective, you are TEN TIMES more likely to be struck by lightning (the odds of that happening are one in one million).
Moreover, those few investors who DID get rich from the Great Financial Crises were all in highly unusual circumstances, none of which apply to the typical trader/ individual investor.
John Paulson is a famous hedge fund manager who became a billionaire betting on the housing crash. What you might not know is that the only reason this happened was because he personally had Goldman Sachs build securities that were chock full of garbage mortgages, which Goldman Sachs then sold to other clients… so Paulson could bet against them.
This was unethical and borderline illegal. And individual investors like you or I would NEVER have this opportunity (when was the last time you told Goldman Sachs to create something for you to bet against?)
Michael Burry is another hedge fund manager who got rich from betting on the housing crash. He had to LOSE money for two years before his bets worked out. And even once things went in his favor, the investment banks who sold him the securities he used to bet against the housing market refused to value his trades as profitable. Then his investors tried to withdraw their funds. When Burry refused to give the money back, they sued him. What followed was years of legal hell as well as an investigation by the FBI.
So let us consider this…
The odds of making a fortune betting on a crisis or some other Black Swan even are less than those of being struck by lightning.
The small handful of people who DO get rich from these situations do so either because they have A) a ridiculously unethical set up like John Paulson B) are willing to experience a nightmarish scenario for months, or even years like Michael Burry.
Again, being a bear is great if you want something to complain about… but it’s terrible if you want to make money from the markets.
If you’re tired of listening to bears who do nothing but lose you money, come join our daily market commentary Gains Pains & Capital. It focuses on proven investment strategies that can boost you portfolio returns.
Indeed, we just published a special investment report that details proprietary triggers that register before every bear market or crash. Unless these triggers go off, we’re putting our money to work, profiting from the markets.
I detail them, along with what they’re currently saying about the market today in our Special Investment Report How to Predict a Crash.
The Crash Callers are out in full force once again.
The problem with calling for a Crash is that you’re wrong 99% of the time. Then, once every few years, you’re correct. The whole process reminds me of a broken clock which is “correct” two times a day… but wrong the other 23 hours 58 minutes.
Remember, the purpose of investing is to make money. The easiest way to do that is to ride bull markets for as long as possible… and then get out before a bear market/ crash hits.
But what about the investors who make huge fortunes during Crashes like the Great Financial Crisis of 2008?
Let me bring you in on a dirty little secret…
Almost NO ONE made money during the market crashing in 2008. And the people who did were in situations that you or I will NEVER be in.
In 2008, there were roughly 216 million American adults over the age of 18. Roughly 60% of them had exposure to the stock market via brokerage accounts or retirements accounts (401Ks, IRAs, etc.) So, we’re talking about roughly 130 MILLION people who were involved in the stock market in one way or another.
The number of investors who got rich betting on a crash at that time is under 30. So, we’re talking about 30 people out of 130 MILLION succeeding. That’s roughly one ten millionth of one percent (0.00001%).
To put that into perspective, you are TEN TIMES more likely to be struck by lightning (the odds of that happening are one in one million).
Moreover, those few investors who DID get rich from the Great Financial Crises were all in highly unusual circumstances, none of which apply to the typical trader/ individual investor.
John Paulson is a famous hedge fund manager who became a billionaire betting on the housing crash. What you might not know is that the only reason he succeeded was because he personally had Goldman Sachs build securities that were chock full of garbage mortgages, which Goldman Sachs then sold to other clients… so Paulson could bet against them.
This was unethical and borderline illegal. And individual investors like you or I would NEVER have this opportunity (when was the last time you told Goldman Sachs to create something for you to bet against?)
Michael Burry is another hedge fund manager who got rich from betting on the housing crash. He had to LOSE money for two years before his bets worked out. And even once things went in his favor, the investment banks who sold him the securities he used to bet against the housing market refused to value his trades as profitable.
To top it off, his investors tried to withdraw their funds. When Burry refused to give the money back, they sued him. What followed was years of legal hell as well as an investigation by the FBI.
So, let us consider this…
The odds of making a fortune betting on a crisis or some other Black Swan are less than those of being struck by lightning.
The small handful of people who DO get rich from these situations do so either because they have A) a ridiculously unethical set up like John Paulson B) are willing to experience a nightmarish scenario for months, or even years like Michael Burry.
Which brings me back to my original point: the purpose of investing is to make money. The easiest way to do that is to ride bull markets for as long as possible… and then get out before a bear market/ crash hits.
Put another way, the Crash Callers have investing totally backwards: you need to focus on the 99% of times stocks don’t Crash, NOT the 1% of the time they do.
So obviously, investors need a tool for determining whether stocks are simply correcting in the context of a bull market… or if a legitimate crash/ bear market is about to unfold.
I’ve developed a tool that takes ALL of the guessing work out of this problem. With just one look at this tool, you can tell whether it’s a good time to buy stocks or not. I detail it, along with what it’s currently saying about the market today in a Special Investment Report How to Predict a Crash.
This mini-crisis was triggered by the BoJ raising rates for the first time since 2007, which in turn, blew up the Yen carry trade.
I realize that sounds as if I’m speaking in code, so let me break this down.
As I outlined in my most recent bestseller, Into The Abyss, Japan is the grandfather of monetary insanity. The Fed first introduced Zero Interest Rate Policy (ZIRP) and Quantitative Easing (QE) in 2008. Japan’s central bank, the Bank of Japan, or BoJ for short, introduced ZIRP in 1999 and QE in 2001, respectively.
Over the course of the last 20+ years, the BoJ has engaged in a slow-motion nationalization of Japan’s financial system. Today it owns over 50% of all Japanese Government bonds and is the single largest shareholder of Japanese stocks in the world.
All of this worked relatively well until inflation entered the financial system in 2020-2021 and the BoJ refused to address the situation.
The Fed and the European Central Bank (ECB) started raising rates and shrinking their balance sheets in early/ mid-2022. The BoJ only started tightening monetary policy in 2023. And it finally started raising rates at the end of July (as in a week ago).
That’s when all hell broke loose.
The Japanese Yen has been in a free-fall for the last four years as the BoJ refused to tighten monetary policy while every other major central bank was raising rates and draining liquidity. Indeed, going into the BoJ’s rate hike decision a week ago, the Yen was trading at levels not seen since the late 1980s.
Once the BoJ started talking about raising rates, the Yen started moving higher. And last week, when the BoJ actually raised rates, the Yen EXPLODED higher.
This is a globally systemic issue because the Yen is one of the largest carry trades in the world. If you’re unfamiliar with a carry trade, it consists of borrowing money in one currency (at a low interest rate) to invest in other assets.
Since the Yen has been yielding more or less ZERO for the last 20+ years, hedge funds and other institutional investors have been borrowing hundreds of billions of dollars’ worth of Yen to invest in other assets with EXTREME leverage.
The problem with this is that leverage works both positively and negatively.
Imagine you have $1 million to invest and you borrow $10 million in Yen at 0.1%. Your annual interest payments on the Yen are ~$10,000. Meanwhile, you invest that $10 million in stocks, which then rally 10%.
You’ve just made $1.1 million in profits (10% of your $11 million). And since your actual capital is just $1 million, you’ve more than doubled your money with this trade courtesy of leverage.
However, this process ALSO works to the downside when things go wrong. If the currency you are borrowing in (the Yen) skyrockets relative to the currency in which the assets you are buying are denominated (the $USD), your trade will BLOW up quite badly.
In the last month, the Yen/ $USD pair has ripped 12% higher. This, combined with the higher interest rate on the Yen (the BoJ raised rates from 0.1% to 2.5% last week) is BLOWING UP hundreds of billions of dollars’ worth of the Yen carry trade.
When a carry trade blows up, investors are forced to panic liquidate their holdings. That is why the market melted down over the last few weeks with companies like Apple and Nvidia collapsing in share price despite being OBSCENELY profitable.
Which brings us to today.
The BoJ announced a previously unscheduled meeting with Japan’s Ministry of Finance and its Financial Services Agency on Tuesday. This was a signal to the markets that an intervention of sorts was coming.
Soon after that, the deputy head of the BoJ, Shinichi Uchida announced that the BoJ won’t “raise rates if the markets are unstable.” This is akin to the BoJ telling the markets, “we got the message and are standing down.”
The big question now is if the lows are in… or is another round of selling coming? Put another way, was this simply a correction in the context of a bull market… or is a legitimate crash/ bear market is about to unfold.
One the one hand, corrections are common events in which you should “buy the dip.” But on the other hand, once every 10 years or so, a REAL crash/ bear market will hit that will wipe out years’ worth of gains!
So obviously, investors need a tool for determining whether stocks are simply correcting in the context of a bull market… or if a legitimate crash/ bear market is about to unfold.
I’ve developed a tool that takes ALL of the guessing work out of this problem. With just one look at this tool, you can tell whether it’s a good time to buy stocks or not. I detail it, along with what it’s currently saying about the market today in a Special Investment Report How to Predict a Crash.
Stocks have broken down in a big way, leading investors to ask…
Is this a garden variety correction… or the start of a REAL crash?
The S&P 500 sliced through its 50-SMA and plunged down to its 200-SMA in a matter of days. We haven’t seen a collapse like this since the regional bank crisis of March 2023.
First and foremost, you should know that market dips/ pullbacks are quite common.
Consider that stocks will typically pull back 5%+ three or four times every year. Larger drops aren’t that uncommon either: the market corrected 10% or more in HALF of the 20 years from 2002-2021.
Anyone who panicked and sold the farm when that happened ended up missing out in a big way!
Having said that, this correction has been quite violent. Many of the market’s leaders are down 20%+ which technically would be considered “bear market” territory.
Moreover, the Volatility Index (VIX) has spiked to levels that are typically associated with crises. See for yourself in the chart below.
Thus, investors are in a quandary.
One the one hand, corrections are common events in which you should “buy the dip.” But on the other hand, once every 10 years or so, a REAL crash/ bear market will hit that will wipe out years’ worth of gains!
So obviously, investors need a tool for determining whether stocks are simply correcting in the context of a bull market… or if a legitimate crash/ bear market is about to unfold.
I’ve developed a tool that takes ALL of the guessing work out of this problem. With just one look at this tool, you can tell whether it’s a good time to buy stocks or not. I detail it, along with what it’s currently saying about the market today in a Special Investment Report How to Predict a Crash.
A month ago, everyone on the planet was talking about new all-time highs for the stock market and big tech was the only game in town.
Fast forward to today, and Nvidia (NVDA) is down 20%, and I see gurus calling for a new bear market in stocks. And bear in mind… the S&P 500 is down just ~5%… after rallying 40% in just eight months!
This is the problem with being bearish. Sure, you will be right once a decade or so… but, 99% of the time, panicking is a colossal mistake.
Why?
Because over the long-term, stocks go up and go up a LOT. As in 1,000s of percentage points.
Moreover, market dips/ pullbacks are quite common.
Consider that stocks will typically pull back 5%+ three or four times every year. Larger drops aren’t that uncommon either: the market corrected 10% or more in HALF of the 20 years from 2002-2021.
Anyone who panicked and sold the farm when that happened ended up missing out in a big way!
As Charles Schwab notes, since 1974, the S&P 500 has risen an average of more than 8% one month after a market correction bottom and more than 24% one year later.
Put simply, panicking or getting overly bearish simply because stocks are correcting is a MASSIVE mistake for the simple reason that pullbacks/ dips are quite common even during raging bull markets!
Thus, investors are in a quandary.
One the one hand, corrections are common events in which you should “buy the dip.” But on the other hand, once every 10 years or so, a REAL crash/ bear market will hit that will wipe out years’ worth of gains!
So obviously, investors need a tool for determining whether stocks are simply correcting in the context of a bull market… or if a legitimate crash/ bear market is about to unfold.
I’ve developed a tool that takes ALL of the guessing work out of this problem. With just one look at this tool, you can tell whether it’s a good time to buy stocks or not. I detail it, along with what it’s currently saying about the market today in a Special Investment Report How to Predict a Crash.
Editors note: Chief Market Strategist Graham Summers, MBA will be on the Schilling Show radio program today at 1:30 EST. You can listen in here.
Everywhere I look, I see investors proclaiming that “THE” top is in and a bear market is about to unfold.
First and foremost, there is NO reason to ever try to call a top.
Why?
Because doing so doesn’t make you any money. In fact, top callers usually miss out on major market gains by selling way too early.
Consider what happened during the last market correction in April 2024. Then, just as now, the top callers came out of the woodwork. The market corrected for two weeks before rallying another 15%. Anyone who sold, missed out on these gains.
Moreover, there are nearly ZERO signs from real market indicators that THE top is in right now.
Consider the last major bear market that unfolded from early 2022 until October 2023. At that time, high yield credit broke down along with stocks, signaling that a major shift had taken place in the financial system.
Today, high yield credit is near all-time highs. If anything, it is signaling that stocks have sold off TOO MUCH!
The same is true for market breadth. Going into the bear market of 2022, breadth peaked before stocks.
Today, breadth is near all-time highs. It too is signaling that the selling is overdone for stocks.
Finally, and likely most importantly, the U.S. is four months away from the next Presidential election. And the next President of the United States, Donald Trump, is obsessed with the stock market.
Do you REALLY want to be shorting stocks when the single biggest cheerleader in the history of the stock market is going to take office?
With that in mind, we are about to publish a Special Investment Report detailing the #1 investment to own when during a Trump 2nd Term.
Normally, this report would sell as a stand-alone item for $499, but we are giving away a limited number of copies for free to investors who join our daily e-letter: Gains Pains & Capital.
To join today… and reserve your copy of The #1 Investment to Own During Trump’s 2nd Term…
This correction is close to over. And when it ends, stocks will rally hard to new all-time highs.
How do I know this?
Because the market internals are telling me.
Historically, high yield credit leads the stock market. The reason for this is because high yield credit (read: junk bonds) is MUCH more sensitive to macro changes due to the fact that when the economy rolls over, junk bond investors typically lose a LOT of money very quickly.
Because of this, high yield credit acts as a kind of “canary in the coal mine” for the financial system. If something BAD is coming, this is the first area to react.
High yield credit (red line in the chart below) just hit new all-time highs. Indeed, based on high yield credit, the S&P 500 should be north of 5,600 right now. This is NOT bearish for risk assets including stocks.
High yield credit isn’t the only market internal that suggests stocks are ready to rip higher.
Overall breadth has bounced hard after hitting new all-time highs. The below chart is telling us that the S&P 500 is being dragged down by big tech, but overall market breadth is getting STRONGER not weaker.
Again, this is NOT bearish. Indeed, if we go by breadth (red line in the chart below), the S&P 500 should be 100 points higher right now.
I suspect part of the reason why market internals are acting so strongly is because the market is discounting that the next President of the United States will be Donald Trump, who is obsessed with the stock market.
If you’ll recall, the former President promoted the stock market almost non-stop during his first term. Indeed, he tweeted about it an average of two times per week, mentioned it in the media dozens of times, and even pumped it higher by leaking economic developments any time it looked as if the markets would break down.
Put simply, Trump is a stock market cheerleader, and I believe the stock market is discounting a second Trump term. This will benefit certain sectors and stocks more than others. And those investors who are properly positioned stand to make potential fortunes.
With that in mind, we are about to publish a Special Investment Report detailing the #1 investment to own when during a Trump 2nd Term.
Normally, this report would sell as a stand-alone item for $499, but we are giving away a limited number of copies for free to investors who join our daily e-letter: Gains Pains & Capital.
To join today… and reserve your copy of The #1 Investment to Own During Trump’s 2nd Term…
Get ready for a “Rip Your Face Off” rally in the stock market.
Why?
Three reasons…
1) The bull market is getting stronger, not weaker.
Regarding #3, for most of the last three months, the overall market’s gains have been driven by a handful of Big Tech plays.
No longer…
Overall market breadth has surged in the last two weeks, hitting new all-time highs before this recent pullback. This bull market is getting stronger, not weaker.
Reason #2 why stocks are about to explode higher.
The Fed is about to start cutting rates… at a time when the economy is still growing. The futures market is predicting between 1.75% and 2% in rate cuts by September of next year. That means seven or even EIGHT rate cuts in a 13 month period!
That is NOT bearish.
And finally, and likely most importantly, reason #3 why stocks are about to rally hard.
The next President of the United States, Donald Trump, is obsessed with the stock market. He tweeted about it an average of two times per week during his first term. And Team Trump has already leaked proposals to take over the Fed if the Fed doesn’t play ball.
Remember, the stock market is forward looking, which means that starting today, the market is going to begin discounting a Trump win.
This will benefit certain sectors and stocks more than others. And those investors who are properly positioned stand to make potential fortunes.
With that in mind, we are about to publish a Special Investment Report detailing the #1 investment to own when during a Trump 2nd Term.
Normally, this report would sell as a stand-alone item for $499, but we are giving away a limited number of copies for free to investors who join our daily e-letter: Gains Pains & Capital.
To join today… and reserve your copy of The #1 Investment to Own During Trump’s 2nd Term…
I ask because everywhere I look, I see analysts and gurus proclaiming that yesterday’s “bearish” action was the start of a major collapse.
There’s just one problem with this… MOST of the market rallied yesterday.
I’m not making this up… over 400 of the 500 companies in the S&P 500 finished the day UP yesterday. The reason the market fell at all is because big tech, which comprises 30% of the market’s weight, dropped hard.
In fact, the overall market breadth (a measure of internal market strength) actually erupted to new all time highs yesterday.
Does this look like the start of a major collapse to you?
This is why you have to be so careful when someone starts spouting off bearish arguments based on stocks dropping. It’s so easy to panic and sell… when the dip might in fact be a MAJOR buying opportunity.
Case in point, a LOT of people sold in April when the market corrected just ~5% (a totally healthy correction in the context of a bull market). The S&P 500 has since rallied over 600 points. Anyone who sold in April MISSED OUT on making some serious money!
Remember, as investors, our job is to make money, not look for any excuse to dump stocks and panic about something bad happening. And as I’ve outlined in recent articles, this means riding bull markets for as long as possible, and then side-stepping bear markets when they eventually hit.
In the very simplest of terms, you need to be invested in stocks, until an objective, verifiable tool (not your feelings or limiting beliefs) tells you it’s time to “get out.”
I’ve developed a tool that takes ALL of the guessing work out of this problem. With just one look at this tool, you can tell whether it’s a good time to buy stocks or not. I detail it, along with what it’s currently saying about the market today in a Special Investment Report How to Predict a Crash.
As I outlined yesterday, as an individual investor, there are two things you NEED to focus on:
1) Ride bull markets for as long as possible.
2) Get out of stocks once a bear market hits.
If you do this, you WILL get wealthy from investing over time.
I bring this up, because I’m seeing more and more analysts arguing that the bull market is about to end and that a raging recession will crater stocks.
I don’t see what they are seeing. If anything, stocks look ready to go to new highs of 5,800 or even higher by year end. Please note, I’m not saying there won’t be dips and corrections along the way… I mean that this is a bull market, and if anything it’s getting stronger.
One of the primary criticisms of this bull market is that it’s being driven by just a handful of stocks: the big tech plays like Amazon, Alphabet, Nvidia, etc. Meanwhile, the other 495 stocks that comprise the S&P 500 are trailing behind.
This actually makes perfect sense. The big tech companies are the most profitable companies in history. Collectively, Amazon, Nvidia, Microsoft, Meta, and Alphabet generated $116 BILLION in cash flow in 1Q24.
That’s roughly $1.28 BILLION in cash flow… per day.
Again, there’s a reason by the big tech companies lead the market: they’re the largest, most profitable companies in history. They should lead the market!
The key item is whether the rest of the market plays “catch up” or if big tech rolls over. And throughout this bull market begun in October 2022, the rest of the market has played “catch up.”
Take a look at the first leg higher from October 2022 to June 2023. At that time, the regular S&P 500 which is heavily weighted towards tech and is represented by the black line in the chart below dramatically outperformed the equal weighted S&P 500: a version of the S&P 500 in which each company receives 1/500th weighting as represented by the blue line in the chart below.
Then, just like now, stock market bears and misguided gurus were out proclaiming that the stock market was about to collapse because it was “held up by only a handful of stocks.”
Then the rest of the market played “catch up” and the market roared to over 5,000 within eight months.
So again, the fact that big tech is leading the market… and makes up the bulk of its gains isn’t necessarily a BAD thing. If the rest of the market plays catch up… as it tends to do… the bull market will continue MUCH LONGER than most analysts expect.
Remember, as investors, our job is to make money, not look for any excuse to dump stocks and panic about something bad happening. And as I’ve outlined in recent articles, this means riding bull markets for as long as possible, and then side-stepping bear markets when they eventually hit.
In the very simplest of terms, you need to be invested in stocks, until an objective, verifiable tool (not your feelings or limiting beliefs) tells you it’s time to “get out.”
I’ve developed a tool that takes ALL of the guessing work out of this problem. With just one look at this tool, you can tell whether it’s a good time to buy stocks or not. I detail it, along with what it’s currently saying about the market today in a Special Investment Report How to Predict a Crash.
As an individual investor, there are two things you NEED to focus on:
1) Ride bull markets for as long as possible.
2) Get out of stocks once a bear market hits.
If you do this, you WILL get wealthy from investing over time.
Consider the last 35 years. The investor who simply bought stocks regardless of whether they were in a bull or bear market experienced a 17 year period in which he or she made NO money from their investments.
The reason?
The bear markets from 2000-2003 and 2007-2009. The losses generated by those five years’ worth of bear markets resulted in 17 years of ZERO gains from the markets.
See for yourself… from 1996 through 2013/2014, stocks went nowhere. Anyone who invested during this time grew his or her portfolio via contributions NOT market gains.
Again, as an individual investor you can’t just ride bull markets. You also need to avoid bear markets.
If you did that over the last 35 years, you achieved the gains from the green rectangles, and didn’t give back those gains during the bear markets in between. And you got rich in the process.
Remember, as investors, our job is to make money, not look for any excuse to dump stocks and panic about something bad happening. And as I’ve outlined in recent articles, this means riding bull markets for as long as possible, and then side-stepping bear markets when they eventually hit.
In the very simplest of terms, you need to be invested in stocks, until an objective, verifiable tool (not your feelings or limiting beliefs) tells you it’s time to “get out.”
I’ve developed a tool that takes ALL of the guessing work out of this problem. With just one look at this tool, you can tell whether it’s a good time to buy stocks or not. I detail it, along with what it’s currently saying about the market today in a Special Investment Report How to Predict a Crash.
If you’re looking for a reason why the U.S. hasn’t slipped into recession yet, the answer is simple…
Uncle Sam is propping up the economy. And it’s working… for now
Some items of note:
Since, mid-2021, public sector job growth has outpaced private sector job growth.
Government transfers (social spending) accounted for 40% of the growth in income in 1Q24 and was the single largest contributor to personal income growth in 20 states.
In June, the government accounted for 1/3rd of all job gains.
When you add private sector jobs that are funded indirectly by the government, (healthcare, education) Uncle Sam accounted for 74% of ALL jobs created in June!
As I mentioned earlier, the government is propping up the economy via hiring and social spending. This is why the U.S. economy refuses to break down into a recession despite weakness in the private sector.
Small wonder then that stocks keep ripping higher. The S&P 500 has hit new all-time highs in each of the last five weeks!
Put simply, this is a raging bull market courtesy of an economy that is being propped up abject government spending that is funded by the largest deficit as a percentage of GDP in the history of the U.S. (outside of WWII).
At some point this situation will end… BADLY. But in the meantime, we need to ignore all the doom and gloom and ride this bull market for as long as possible.
Think about the raging bull market that occurred in the early ’00s. The first signs of the Great Financial Crisis appeared in mid-2006. Those who panicked based on this, had to wait another 20 months as the market rose another ~30% before stocks finally began to break down.
Remember, as investors, our job is to make money, not look for any excuse to dump stocks and panic about something bad happening. And as I’ve outlined in recent articles, this means riding bull markets for as long as possible, and then side-stepping bear markets when they eventually hit.
In the very simplest of terms, you need to be invested in stocks, until an objective, verifiable tool (not your feelings or limiting beliefs) tells you it’s time to “get out.”
I’ve developed a tool that takes ALL of the guessing work out of this problem. With just one look at this tool, you can tell whether it’s a good time to buy stocks or not. I detail it, along with what it’s currently saying about the market today in a Special Investment Report How to Predict a Crash.
Over the last week, I’ve noted that Uncle Sam is the economy now.
What I mean by this, is that the U.S. government is spending so much money, and hiring so many people, that the economy is refusing to fall into recession despite weakness in the private sector.
By quick way of review…
Since, mid-2021, public sector job growth has outpaced private sector job growth.
Government transfers (social spending) accounted for 40% of the growth in income in 1Q24 and was the single largest contributor to personal income growth in 20 states.
Put simply, the “fix” is in as far as the economy is concerned. And it’s Uncle Sam, NOT the Fed, sitting in the economic driver’s seat.
The most powerful financial insider in the world, Fed Chair Jerome Powell, confirmed this in a speech at the ECB Forum on Central Banking yesterday.
Some highlights from Fed Chair Powell’s comments.
The budget deficit is very large, and the deficit path is unsustainable.
Debt sustainability should be a real focus going forward, should be tackled sooner or later.
Fiscal policy is a job for elected officials.
The Fed has been told to stay out of politics and they do.
(h/t Bill King)
This is a MAJOR tell from the most powerful financial insider in the world: the Federal Government is the one running the “economic” show right now. And it is issuing a truly jaw dropping amount of debt to accomplish this: the Biden administration is on pace to add $9 trillion in debt in just four years.
See for yourself… the U.S.’s debt load is going parabolic.
At some point, this is going to be a REAL problem. But for those of us focusing on making money from the markets, the important thing to note right now is that the economic “fix” is in. And the Fed’s not going to get in the way.
Small wonder then that stocks keep ripping higher. By the look of things, the S&P 500 will hit a new all-time highs later today.
After all, as investors, our job is to make money, not look for any excuse to dump stocks and panic about something bad happening. And as I’ve outlined in recent articles, this means riding bull markets for as long as possible, and then side-stepping bear markets when they eventually hit.
In the very simplest of terms, you need to be invested in stocks, until an objective, verifiable tool (not your feelings or limiting beliefs) tells you it’s time to “get out.”
I’ve developed a tool that takes ALL of the guessing work out of this problem. With just one look at this tool, you can tell whether it’s a good time to buy stocks or not. I detail it, along with what it’s currently saying about the market today in a Special Investment Report How to Predict a Crash.
Yesterday, I noted that Uncle Sam effectively is the economy… for now.
What I meant by this is that the government is hiring so many people and spending so much money, that it is stopping the economy from rolling over into a recession.
By quick way of review…
Since, mid-2021, public sector job growth has outpaced private sector job growth.
Government transfers (social spending) accounted for 40% of the growth in income in 1Q24 and was the single largest contributor to personal income growth in 20 states.
It is VERY difficult for the U.S. economy to roll over into a recession with this going on. But this economic “prop” is coming at a cost.
The U.S. is issuing a staggering amount of debt to hire all these people and pay out all this money. The Biden administration has already added $7 trillion in new debt and is adding a new $1 trillion in debt every 100 days.
Put simply, assuming President Biden completes his first term, he will have presided over the largest debt expansion in U.S. history: a jaw dropping $9 trillion.
At some point, this is going to be a REAL problem, particularly when you consider that a massive amount of debt that was issued when rates were around zero will come due in the next 24 months.
With rates now over 5%, the U.S. will be forced to pay a lot more money in interest payments when it goes to roll over this old debt.
How much more money?
Interest payments on the national debt are expected to clear $870 billion this year and $1 trillion in 2025. That would make interest payments the single largest government outlay.
In very simple terms, starting next year, Uncle Sam’s will be paying his debtors MORE than he pays Americans via social security.
How will this play out? That remains to be seen. But one thing is clear: all this money printing is stopping the U.S. from rolling over into recession. And this is boosting stocks.
To whit, the stock market has hit a new all-time highs in four of the last five weeks. This is a RAGING BULL of a market, and investors NEED to ride it for as long as possible until the music stops.
Why?
Because when the next recession hits, the market will lose 20%-30% and be DEAD money for at least nine months.
After all, as investors, our job is to make money, not look for any excuse to dump stocks and panic about something bad happening. And as I’ve outlined in recent articles, this means riding bull markets for as long as possible, and then side-stepping bear markets when they eventually hit.
In the very simplest of terms, you need to be invested in stocks, until an objective, verifiable tool (not your feelings or limiting beliefs) tells you it’s time to “get out.”
I’ve developed a tool that takes ALL of the guessing work out of this problem. With just one look at this tool, you can tell whether it’s a good time to buy stocks or not. I detail it, along with what it’s currently saying about the market today in a Special Investment Report How to Predict a Crash.
The most important thing for investors to understand about the economy is that “it is different this time.”
We’ve already assessed how multiple previously accurate recession indicators (yield curve inversion, Sahm Rule trigger, etc.) have registered false positives in this cycle.
Why is this happening?
For one thing, the U.S. has never voluntarily shut down its economy. It’s also never pumped $11 TRILLION (an amount equal to over 50% of GDP at the time) into its financial system in the span of 20 months.
But surely both of those items have been factored into the data by now, right?
Sure, but you also have to consider that the money printing/ spending, hasn’t stopped! The U.S. is currently running the largest deficit as a percentage of GDP outside of WWII.
It is VERY difficult for the economy to roll over into recession with this going on. Indeed, in many ways, the government IS the economy right now.
Since mid-2021, job growth in the public sector/ government (red line in the chart below) has outpaced that in the private sector (blue line in the chart below).
The government isn’t just hiring, either. It’s also putting out gargantuan amounts of money via social spending. As E.J. Antoni notes, 40% of the growth in income in 1Q24 was from government transfers (read: spending). Indeed, government transfers were the SINGLE largest contributor to personal income growth in 20 states!
So Uncle Sam isn’t just hiring… he’s also handing out money by the tens of billions of dollars!
Again, it’s VERY difficult for the economy to roll over into recession with this going on. I’m not saying this will work forever. But we need to see the private sector absolutely collapse to overcome all these government interventions in order for the economy to roll over into a REAL recession.
After all, as investors, our job is to make money, not look for any excuse to dump stocks and panic about something bad happening. And as I’ve outlined in recent articles, this means riding bull markets for as long as possible, and then side-stepping bear markets when they eventually hit.
In the very simplest of terms, you need to be invested in stocks, until an objective, verifiable tool (not your feelings or limiting beliefs) tells you it’s time to “get out.”
I’ve developed a tool that takes ALL of the guessing work out of this problem. With just one look at this tool, you can tell whether it’s a good time to buy stocks or not. I detail it, along with what it’s currently saying about the market today in a Special Investment Report How to Predict a Crash.
I keep warning that “this time really is different” when it comes to the economy.
Everyone knows this on some level… but most analysts are refusing to acknowledge it.
Remember, never before has the U.S. shut down its economy voluntarily. Not during WWII, not during the Spanish flu, NEVER. So that alone was a game-changer as far as how our economy functions (and is measured).
Moreover, never before has the Fed and the Federal Government pumped $11 TRILLION into the financial system in the span of 20 months. Consider that the U.S. economy was ~$20 trillion at the time… so we’re talking about policymakers putting an amount greater that 50% of GDP into the financial system.
Again, this has never happened before. In fact, if you add up all the money ever printed in the history of the U.S., over 40% of it was printed in 2020 alone.
So again, it is “different” this time. Both the downturn, and the policy response were unprecedented. And that has rendered many traditional economic metrics useless at predicting the next move in the cycle.
We’ve already assessed the yield curve inversion, as well as the coming Sahm Rule trigger which we expect later this summer. Today’s lets assess the Money Supply or M2.
In its simplest rendering, M2 measures the amount of money in the financial system (savings accounts, money market funds, etc.) Historically, analysts have looked at M2 to assess whether a recession was coming or not. If M2 goes negative, it usually precedes a recession.
I bring all of this up because in 2023, M2 went negative, resulting in countless analysts and commentators shouting that a recession was about to hit.
The big problem with this is that they forgot to note that M2 had GROWN by 40% during the pandemic… so of course it’s going to decline a bit! Heck even a significant decline is likely to occur after a 40% jump!
Today, M2 is turning back up again. And all the folks who were screaming about its decline indicating a recession was about to hit are silent. And all the investors who sold the farm based on the gurus/ analysts screaming about M2 have missed out on one of the greatest bull runs in stock market history.
Again… it really is different this time. Most historical economic measures are so warped by the pandemic and subsequent policy-response that obsessing over them is only going to lead to missing out on market gains.
After all, as investors, our job is to make money, not look for any excuse to dump stocks and panic about something bad happening. And as I’ve outlined in recent articles, this means riding bull markets for as long as possible, and then side-stepping bear markets when they eventually hit.
In the very simplest of terms, you need to be invested in stocks, until an objective, verifiable tool (not your feelings or limiting beliefs) tells you it’s time to “get out.”
I’ve developed a tool that takes ALL of the guessing work out of this problem. With just one look at this tool, you can tell whether it’s a good time to buy stocks or not. I detail it, along with what it’s currently saying about the market today in a Special Investment Report How to Predict a Crash.
Stocks hit new all-time highs last week… but you wouldn’t know it from the mood on social media and financial TV!
It’s truly incredible to watch… the markets have been on a historic run, with the S&P 500 rallying 1,400 points since the November 2023 lows. And yet, throughout this period, the overall mood amongst market participants seems anxious if not outright worried.
Everywhere you look, there’s talk of a potential recession… or concerns about geopolitics… or claims that Artificial Intelligence (AI) stocks are in a massive bubble that is about to burst.
And yet, the markets keeps charging higher, with every dip being bought. Those who fretted about the countless number of things that could go wrong have made nothing. Those who focused on making money and stayed invested in stocks have seen their entire portfolios increase by over 33%!
Which brings us to #2: trying to calling a top.
Please understand, I’m not trying to make fun of people who are cautious or conservative with their investments. But at some point, if you’re looking to make real money with your investing, you need to focus on what works and ignore feelings/ worries that don’t contribute anything to your net worth.
I’m talking about thoughts like…
1) This stock has gone up a lot, so it must be in a bubble.
2) This is the top!
3) The market is rigged!
NO ONE got rich from any of those three concepts. If your goal is to make money from your investments, you should remove all three of them from your investing vocabulary.
Let’s break down all three.
Regarding #1, since going public Apple (AAPL) has looked “bubbly” countless times. Heck, it was up 20,000% in 2018. And yet, if you focused on the fact AAPL had gone up so much, you missed out on the run to 200,000% gains!
Which brings us to #2: trying to calling a top.
No one… I repeat, NO ONE has ever gotten rich from calling a top. A small handful of people have gotten rich from crashes or bear markets… but most if not ALL of investors (including the legends) got rich from riding bull markets or bull moves in individual stocks.
Indeed, every bull market is nothing more than a series of “tops” which are then taken out by new highs. If you’re obsessed with calling a top and getting out of stocks, you’re guaranteeingyou won’t see future gains. Put another way, your obsession is limiting your profits.
Which brings us to #3 in our list: claiming that the market is rigged.
The reason people claim this is because time and again it looks as if stocks are going to break down only to reverse and ramp higher. But if you dig a little deeper into this way of thinking, you quickly realize that it means the person who is angry that the markets refuse to collapse secretly wants something bad to happen to the markets.
Understand, I’m not saying that the markets aren’t manipulated. Anything that involves a lot of money or power breeds corruption and manipulation. But getting angry because stocks refuse to break down badly is bad for your physical health, your mental health, and your portfolio.
As investors, our job is to make money, not look for any excuse to dump stocks and panic about something bad happening. And as I’ve outlined in recent articles, this means riding bull markets for as long as possible, and then side-stepping bear markets when they eventually hit.
In the very simplest of terms, you need to be invested in stocks, until an objective, verifiable tool (not your feelings or limiting beliefs) tells you it’s time to “get out.”
I’ve developed a tool that takes ALL of the guessing work out of this problem. With just one look at this tool, you can tell whether it’s a good time to buy stocks or not. I detail it, along with what it’s currently saying about the market today in a Special Investment Report How to Predict a Crash.
Everywhere you look, people are calling for a recession to hit. In fact, many big name investors and gurus have been calling for a recession for most of the last two years.
During that time, stocks have gone up 50%.
The primary reason people are calling for a recession is that a number of signals that have previously predicted recessions are once again flashing “danger.”
For instance, the yield curve has been inverted for nearly two years. Historically a yield curve inversion followed by a subsequent dis-inversion has predicted every recession since 1980.
You can see this clearly in the chart below. Anytime the blue line broke below 0, the yield curve was inverted. You’ll note that recessions (grey bars) hit soon after the yield curve became dis-inverted (the blue line broke back above 0).
Looking at that chart, many investors believe it’s time to dump their stocks and prepare for a recession and market crash. However, there are two problems with using this metric to invest in stocks today.
1) The pandemic and its economic impact messed up the usefulness of many metrics including the yield curve.
2) Stock returns vary dramatically during yield curve inversions.
Regarding #1, the pandemic/ economic shutdowns and subsequent Fed/ Federal Government interventions have never happened before. Never before in history has the economy been shut down. And never before has the Fed/ Federal Government pumped $11 TRILLION into the financial system in the span of 20 months.
Put simply, our current economic environment is completely different from every other environment in which the yield curve inverted. Case in point, today the Fed is talking about cutting rates while the economy is growing and inflation is falling.
That was not the case when the yield curve inverted in 1980, 1988, 2001, 2007, or 2019. So again, the pandemic messed up a lot of economic metrics that have been accurate in the past.
Which brings us to #2 in our list above: stock returns vary dramatically during yield curve inversions.
Stocks returned anywhere from -38% to +16% during the last five yield curve inversions. That is QUITE a range of returns. And it negates the usefulness of investing based on what the yield curve is doing.
Think of it this way… if someone approached you and said, “if you use this investing trick, you either lose 38% or make 16%,” you’d tell them to take a hike.
Well, that’s what stocks have returned during yield curve inversions.
As investors, our job is to make money, not look for any excuse to dump stocks and panic about something bad happening. And as I’ve outlined in recent articles, this means riding bull markets for as long as possible, and then side-stepping bear markets when they eventually hit.
In the very simplest of terms, you need to be invested in stocks, until an objective, verifiable tool (not your feelings or an inaccurate economic metric) tells you it’s time to “get out.”
I’ve developed a tool that takes ALL of the guessing work out of this problem. With just one look at this tool, you can tell whether it’s a good time to buy stocks or not. I detail it, along with what it’s currently saying about the market today in a Special Investment Report How to Predict a Crash.
As an investment strategist, I get asked this question all the time. On the surface, it sounds as if the person is interested in making money from the stock market.
Having worked in finance for over 20 years, I’ve come to realize that when someone asks me this, what he or she is really saying is that they believe stocks are too risky for investing. After all, during the course of my career the markets have experienced three MAJOR crises. And who wants to put his or her money into an asset class that can lose 30% in a matter of weeks?
Let’s start with the basics of stock market investing.
Stocks are essentially a means of investing in human innovation. Nearly every stock trading on the stock market represents someone’s life work to build a better product/service. Sure, there is the occasional fraud or company that manages to go public without actually producing anything of value, but for the most part, the stock market is the closest thing to betting on human ingenuity/ innovation.
Now, humanity gets a lot of things wrong. But when it comes to inventing/ creating/ developing things, it’s RARELY a good idea to bet against us. For this reason, over the long-term, stocks tend to go up a LOT.
See for yourself.
So why not simply buy stocks ALL THE TIME?!?
Because, during the occasional periods in which stocks DON’T go up… they either A) lose a LOT of money or B) go nowhere for ~20 years.
See for yourself. I’ve illustrated those periods in which stocks didn’t do well with red rectangles in the chart below.
Thus, investors are in a quandary.
One the one hand, stocks tend to go up a LOT over the long-term. But on the other hand, there are periods in which stocks do NOTHING for ~20 years.
Thus, the focus for ANYONE looking to invest in stocks is to determine whether stocks are in a strong bull market… or if they are about to enter a prolonged period of ZERO returns.
I’ve developed a tool that takes ALL of the guessing work out of this problem. With just one look at this tool, you can tell whether it’s a good time to buy stocks or not. I detail it, along with what it’s currently saying about the market today in a Special Investment Report How to Predict a Crash.
Everywhere I look on social media, the defining narrative is that the stock market is in a massive bubble that is about to burst, triggering a devastating crash.
The dirty little secret about the people pushing these narratives is that they have never actually called a crash. Instead, they’ve been bearish for years and years, and like a broken clock, they’ve been right once or twice. And I can guarantee you they didn’t make ANY MONEY from a market crash when it DID happen.
Let’s start with the basics here.
Crashes, DO happen, but they are RARE. There have been THREE in the last 35 years:
1) 2000-2003
2) 2007-2009
3) February-April 2020
Bear in mind, I’m talking about REAL crashes here or full-scale crises, not garden variety corrections of 10%. I’ve illustrated the crashes of note in the chart below.
Again, there were just THREE major financial catastrophes in a 35 year period, or roughly one every 10 years or so. That’s quite rare. Name another “1 in 10 years” event that people obsess about to this degree. I can’t. People get worked up about buying new homes or changing careers, both of which are “1 in 10 years”-type events… but I don’t see entire Youtube Channels and social media accounts that talk non-stop about those events the same way I see people obsessing about market crashes.
Again, when we talk about crashes, we’re talking about “1 in 10 years” events!
Even if we were to include EVERY time the market dropped more than 10% in rapid fashion, the number of “events” in the stock market is less than 10. Even if I missed a few here, you’re still talking about a “1 in 3 years” event.
Meanwhile, throughout this 35 year period, in spite of these crashes/ events, stocks rose nearly 2,000%. Anyone who obsessed about crashes to the point of avoiding stocks completely, or even worse, betting on a collapse non-stop, missed one of the greatest periods of wealth generation in human history.
So why not simply buy stocks non-stop and hold for the long-term?
Because when crashes DO happen, stocks can take YEARS before they hit new highs.
Consider the period from 1996-2013. There were several MAJOR bull markets that saw stocks generate huge returns. Unfortunately, the subsequent bear markets/ crashes ERASED most if not all of those gains. As a result of this, stocks didn’t make a cent for 17 years!
Thus, investors are in a quandary.
One the one hand, crashes are rare events. And obsessing over them can lead to missing out on creating generational wealth from your investments.
However, on the other hand, when crashes DO happen, they can lead to 10+ years of ZERO returns for long-term, buy and hold investors. What are the odds that a REAL person would be willing to sit through a period like that and not despair?
Likely ZERO.
So obviously, investors need a tool of avoiding crashes, while riding bull markets for as long as possible.
I’ve developed PRECISELY such a tool. I detail it, along with what it’s currently saying about the market today in a Special Investment Report How to Predict a Crash.
The stock market is setting up to offer a buying opportunity in the next week or two.
The S&P 500 hit a new all-time high last week. Every dip was bought as the markets finished the week in a solid “risk on” framework.
However, beneath the surface, several market leading indicators show a dip is coming…
High yield credit, which has led every turn for stocks in the last four months, has rolled over. As I write this Monday morning, it suggests the S&P 500 will fall to 5,300 in the near future. This is just a “dip” and we see it as a buying opportunity.
Breadth, another market leading indicator, is saying the same thing direction-wise. But it suggests the dip will be slightly deeper with the S&P 500 dropped to the 5,200s . The fact both breadth and high yield credit are saying the same thing, adds weight to the forecast for a risk off move.
Will this risk off move open the door to something worse? Could stocks crash some time in the near future?
To answer those questions, I rely on certain key signals that flash before every market crash.
I detail them, along with what they’re currently saying about the market today in a Special Investment Report How to Predict a Crash.
Being bearish is inherently problematic because historically stocks tend to go up… and quite a lot. Over the last 100 years, the Dow Jones Industrial Average has finished the year up 68% of the time. And as you can see in the chart below… they’ve gone up a LOT.
Investing is all about probabilities, and if there is a greater than two thirds odds that stocks will go up in any given year, betting on a collapse is generally going to be a losing bet.
Understand, I’m not suggesting you should be mindlessly optimistic about the markets. There are always risks. But from a big picture perspective, stocks tend to go up, and go up quite a lot.
This should be the foundation for your view of the markets.
So why not simply buy stocks any time you have any additional capital?
Because when stocks DON’T go up, they either:
1) Go nowhere for years, if not decades.
2) Can lose a LOT of money VERY quickly.
Regarding #1, take a look at the below chart of the Dow Jones Industrial Average since 1919. You’ll note that there were three periods in which stocks went nowhere for a considerable length of time.
They were:
1) 1923-1953 (30 years)
2) 1963-1982 (19 years)
3) 1993-2015 (22 years)
Anyone who loaded up on stocks automatically throughout these time periods didn’t make a cent for decades.
There are a lot of analysts who ignore these facts and tell their clients to simply buy stocks for the long-term at any time, but what are the odds that a real person, putting real money to work in the markets could sit through ~20 years of NO gains and not despair?
ZERO.
Put simply, if you’re looking to make REAL wealth from the markets, you need to focus on WHEN to buy stocks and when to avoid them.
You’re probably wondering how can I act so carefree about stocks today when there are clearly so many issues in the world?
The answer is simple: I have proprietary triggers that hit before any major market break-down. Until one of them goes off, the market is telling me that stocks aren’t concerned about the issues/ risks.
To figure that out, I rely on certain key signals that flash before every market crash.
I detail them, along with what they’re currently saying about the market today in a Special Investment Report How to Predict a Crash.
After all, there’s the prospect of a recession, the massive deficit ($1.6 trillion), conflict in the Middle East, the so-called AI bubble waiting to burst, and more.
However, despite all of these problems, stocks keep rising. In fact, they closed at new all-time highs just last week. Anyone who sold their holdings based on any of the above risks missed out on growing their portfolio. Anyone who panicked in April and sold their positions… or even worse DIDN’T take advantage of the drop to go long, has missed out on a LOT of money.
It’d be bad enough to do this once… but unfortunately many investors do this time and time again to the point of missing out on MILLIONS’ of dollars worth of gains.
It all stems from a lack of understanding about the stock market.
At any given time, the market’s action is determined by the decisions of millions of individuals, all of whom have “skin in the game” in the form of money. So, the market is processing literally billions, if not trillions, of pieces of information every day.
However, out of all these pieces of information, stocks usually only “care about” or focus on two or three items at any particular time. Sometimes it might be the economy. Other times it might be the Fed. Other times it might be a war, or a President’s actions (or tweets), or a hedge fund blowing up, or inflation, etc.
And until stocks start caring about a specific issue to the point of breaking down… all the hypothetical risks or issues that investors care about individually are unimportant (as far as stocks are concerned).
This is the single biggest mistake most investors make: worrying or panicking about risks to the point of missing out on bull markets. It’d be one thing if this was just a mistake… but it’s a costly mistake. As I mentioned earlier, investors miss out on MILLIONS of dollars’ worth of market gains when they don’t catch the big market rallies.
I realize the above words sound crazy coming from me. After all, two of the biggest calls of my career involved betting on bad things happening: the Great Financial Crisis of 2008 and the EU Debt Crisis of 2011-2012.
So how can I act so carefree about stocks today when there are clearly so many issues in the world?
The answer is simple: I have proprietary triggers that hit before any major market break-down. Until one of them goes off, the market is telling me that stocks aren’t concerned about the issues/ risks.
I’ll detail one of the them in tomorrow’s article… but in the meantime, if you’re looking for someone to guide your investing to make sure you’re NOT missing out on the biggest market gains, I can help.
Some quick facts about my track record.
I first recommended shares of Nvidia (NVDA) to clients in 2007 when it was trading at a split-adjusted price of $1 per share (it’s over $900 today).
I moved clients into Microsoft (MSFT) in 2014 when it was below $50 a share (it’s over $400 today).
We also bought AutoZone in 2012 when it was $422 a share (it’s over $2,700 today).
Simply put, when it comes to making BIG money from investing, I’ve done it time and again. Indeed, since 2015, subscribers of my Private Wealth Advisory have maintained a win rate of 74%.
Yes, we made money on three out of every four trades we closed… for EIGHT YEARS STRAIGHT!
And I believe 2024 is going to be our best year yet! We’ve already locked in gains of 10%, 15%, 27%, 30% and 67%… and the year isn’t even half over!
I’d love to have you join us. And you can do this today, for just $3.99 with a 30-day trial to Private Wealth Advisory!
Before proceeding I must warn you that this offer will expire this coming Friday at midnight!
A six month subscription comes with:
Again, the doors close on this offer this Friday at midnight.
Japan is showing us the endgame for central bank insanity.
Ever since the Great Financial Crisis, the Fed has been following Japan’s playbook for propping up a financial system. Indeed, everything the Fed has done, Japan originally nearly a decade earlier.
The Fed first cut interest rates to zero in 2008. Japan did that in 1999.
Similarly, the Fed first introduced large-scale Quantitative Easing (QE) programs in 2008. Japan first did that in 2001.
My point is that Japan is the grandfather for central bank insanity. Because of this, the current situation in that country bears watching as it shows us the endgame for what will eventually unfold in the US.
I’m talking about the collapse of a currency.
Japan’s currency, the Yen, started collapsed in 2002. Since that time, Japan’s central bank, the Bank of Japan or BoJ for short, has begun intervening to prop up the currency.
As you can see in the below chart, every single one of these interventions has failed. The Yen is now hanging on to the edge of a cliff by its fingernails. If this last line of support gives way, it could enter a free-fall.
Put simply, the third largest economy in the world is on the verge of an outright currency collapse. And if you think this couldn’t happen in the U.S., you are mistaken. The Fed has already signaled that it will be inflating away the U.S. debt in the coming years.
This means the $USD slowly entering a death spiral… and inflation trades making fortunes.
There is a LOT of money to be made here… and if you’re looking for a means to to insure you profit from it, we recently published a Special Investment Report detailing three investments that will profit from the Fed’s inflationary mistakes. As I write this, all three of them are exploding higher.
Normally this report would cost $499, but we are giving copies FREE to anyone who joins our daily market commentary.
Since that time, the Fed has shifted to talking about easing monetary conditions.
This has ignited a second wave of inflation.
On an annualized basis, the 1-month change in inflation is 3.9%
On an annualized basis, the 3-month change in inflation is 4.4%
This resurgence in inflation has benefited former President Trump’s campaign as Americans by and large vote with their wallets.
Former President Trump has set his sights on the Fed.
Regarding #5, Trump is convinced the Fed plays politics to benefit the establishment/ leftists. He believes the Fed intentionally sabotaged the economy during his first term by raising rates aggressively from 2017-2019. He also believes the Fed is actively juicing the markets to help the Biden administration today (he’s not wrong there).
And unlike his prior attacks on the Fed, which largely consisted of tweets and interviews in which he mocked Fed officials, this time around, Trump is planning to take action if elected.
Trump’s advisors recently leaked a proposal to overhaul the Fed completely should Trump win in 2024. Among the various proposals:
Allowing Trump to fire Fed Chair Jerome Powell before the latter’s term is up.
Revising the Fed’s leadership structure to include the White House in decisions concerning monetary policy (including cutting or raising interest rates).
Using the Treasury to keep Fed policy “in check”
Let me be clear here: I’m not saying that I agree with Trump’s proposals or that a Trump win in 2024 would be a good thing. I’m simply pointing out, as a statement of fact, what Trump plans to do if he wins.
This terrifies the Fed. If there’s one thing policymakers DON’T like, it’s being told what to do, or worse still, being fired.
And thus the Fed is in a pickle. On the one hand, it wants to do everything it can to juice the economy/ stock market to insure Trump doesn’t win.
But on the other hand… juicing the financial system is highly inflationary, which makes it more likely that Trump will win!
So what does this mean for stocks?
Increased volatility.
Stocks are being pulled in two directions shifting from focusing on potential Fed easing, to worrying about higher inflation resulting in the Fed having to tighten again.
We’ve already gotten a taste of this in 2024.
Stocks came into the year roaring higher on hopes of the Fed cutting rates. Then inflation began to tick upwards, resulting in stocks falling on fears that the Fed wouldn’t be able to cut rates any time soon.
We’re not talking about small price swings either as the below chart illustrates.
What does this mean for investors?
Your best bet is to ride the inflationary impulse into the election. After that, everything hinges on who wins.
What investments will profit the most from this situation?
To answer that, we recently published a Special Investment Report detailing three investments that will profit from the Fed’s inflationary mistakes. As I write this, all three of them are exploding higher.
Normally this report would cost $499, but we are giving copies FREE to anyone who joins our daily market commentary.
Because, its efforts to loosen monetary policy to juice stocks and real estate higher to aid the Biden administration with its re-election campaign have unleashed another round of inflation.
Don’t believe me? See for yourself.
The Consumer Price Index (CPI) bottomed right around the time the Fed stopped raising rates. It has since flat-lined and is now turning back up.
The same is true for the Fed’s preferred inflation measure, core-Personal Consumption Expenditures or core-PCE.
That little uptick doesn’t look like much, but as economist Jason Furman notes, if you annualize the 1-month and 3-month changes in core-PCE, the situation the second wave of inflation becomes clear.
Annualizing the 1-month MoM rate of change in Core-PCE gives you inflation of 3.9%.
Annualizing the 3-month MoM rate of change in Core-PCE gives you inflation of 4.4%.
Still not convinced? Take a look at what gold is doing.
As a general rule, Americans vote with their pocketbooks. And this spike in inflation is TOXIC for the Biden administration.
Former President Trump is one of the most unlikeable candidates in history… and yet, he’s been gaining on President Biden in the polls ever since inflation started ticking back up again in September 2023 (see for yourself)
So what will the Fed do? Its monetary easing boost stocks and real estate, but it also worsens inflation, which increases the odds of former-President Trump taking the White House. And what investments will profit the most from this situation?
To answer that, we recently published a Special Investment Report detailing three investments that will profit from the Fed’s inflationary mistakes. As I write this, all three of them are exploding higher.
Normally this report would cost $499, but we are giving copies FREE to anyone who joins our daily market commentary.
On the one hand, the economic data ranges from good to great, with GDP growth clocking in at an annualized rate of 3.9%, and the economy adding ~300,000 jobs per month.
On the other hand, President Biden has the worst job approval rating in 70 years with just 38.7% of Americans approving of his efforts. And always remember, Americans vote with their wallets.
How are these two items possible? How can the economy be doing so well and President Biden be so unpopular?
The answer is quite simple: Bidenomics is actually Bubble-nomics through which the Federal Reserve juices the stock and real estate markets to levels that have no real connection to reality.
Those Americans who make up the top 20%, and especially the top 1% of the economy (the ones who own a lot of stocks and real estate) are doing GREAT. Everyone else? Not so much.
It all started in November of last year. At that time, the Fed announced that it was getting ready to start cutting interest rates despite the fact that inflation was still well above 3% and financial conditions were actually looser than they were before the Fed started tightening monetary policy to end inflation!
Stocks literally EXPLODED higher on the announcement and haven’t looked back.
As for real estate, the Fed effectively cornered the Mortgage-Backed Securities (MBS) market during the pandemic, sending home prices through the roof. Even with this market cooling in the last year or so, prices are WAY higher than they were before the Fed intervened.
By the way, once the Fed starts cutting rates, this market will also explode higher as two-years of pent up demand (mortgage rates were prohibitively high for most of the last two years) comes to market.
The top 20% of the country, particularly the top 1%, who own more assets that the entire Middle Class (the mid-60% in income brackets) have seen their net worth EXPLODE higher during President Biden’s first term.
These individuals comprise an extreme amount of the consumer spending/ economic drivers that are masking how the other 99% of the country are doing.
What does this mean for the markets?
I’ll detail that in tomorrow’s article.
On that note, we recently published a Special Investment Report detailing three investments that will profit from the inflationary effects of Bidenomics. Normally this report would cost $499, but we are giving copies FREE to anyone who joins our daily market commentary.
The stock market has finally woken up to what I’ve been warning about for weeks… namely that inflation is rebounding.
By quick way of review, the Fed stopped raising interest rates in July 2023. It then started talking about cutting interest rates in November. And it did this despite the clear evidence that Energy prices were the only part of the inflation data that had turned negative. Put another way, every other segment of the inflation data was still rising… albeit at a slower pace.
Fast forward to today, and the official inflation measure, the Consumer Price Index or CPI for short has bottomed and is beginning to rebound.
With inflation doing this, there is NO WAY the Fed can cut rates three times this year. The bond market has realized this and is now discounting maybe one rate cut of 0.25% this year.
Stocks didn’t like that. The S&P 500 has now dropped 4% and is below its 50-day moving average (DMA) for the first time since November 2023.
Bottomline: this move was entirely predictable, and those investors who were prepared for it are seeing EXTRAORDINARY returns in their portfolios.
On that note, we recently published a Special Investment Report detailing three investments that will profit from this rampant government spending. Normally this report would cost $499, but we are giving copies FREE to anyone who joins our daily market commentary.
I warned time and again that the Fed was making a massive policy mistake that would unleash another round of inflation.
By quick way of review, the Fed stopped raising interest rates in July 2023. It then started talking about cutting interest rates in November. This was a MASSIVE mistake as inflation has NOT been defeated.
Indeed, ever since the Fed started talking about cutting rates, the official inflation measure, the Consumer Price Index (CPI) has bottomed and is now turning back up.
This trend continues. Yesterday, the Bureau of Labor Statistics (BLS) revealed that CPI rose 0.4% Month-over-Month (MoM) and 3.5% Year-over-Year (YoY) in March 2024.
This represents the FOURTH straight month of CPI coming in hotter than expected. The fact it surprised Wall Street and most investment strategists confirms that NONE of these people are paying attention to the data.
The only part of the inflation data that is down is energy prices (and used cars which receives almost no weight). Every other segment of the CPI continues to rise.
See for yourself:
However, even Energy prices will begin turning up again… as are commodities in general. Both gasoline prices and copper prices are on the rise and about to break out of multi-year consolidation periods.
This is going to catch most investors offsides… but the good news is that with the right investments, you could see EXTRAORDINARY returns from what’s coming.
On that note, we recently published a Special Investment Report detailing three investments that will profit from this rampant government spending. Normally this report would cost $499, but we are giving copies FREE to anyone who joins our daily market commentary.
Over the last week, we’ve warned investors that the Fed’s actions are unleashing another round of inflation in the U.S. financial system.
By quick way of review.
The only part of the inflation data that is declining year over year is Energy prices. Every other segment of the Consumer Price Index (CPI) continues to rise.
Financial conditions are as loose today as they were when the Fed first started raising interest rates in March 2022. And yet, the Fed is preparing to cut rates instead of raising them.
The Fed is still providing hundreds of billions of dollars in liquidity to the financial system via credit facilities.
The Fed’s own research indicates that food inflation is the best predictor of future inflation. And agricultural commodities are skyrocketing to new highs.
Unfortunately for Americans, the Fed isn’t the only entity that is engaged in inflationary policies. The Biden administration is currently engaged in truly extraordinary levels of money printing.
The Biden administration has added $6 trillion to the national debt since taking office. Bear in mind, this is happening at a time when the U.S. is collecting a record amount in taxes. So, the Biden administration is not only spending all of the tax dollars collected, it’s spending so much money that the U.S. is having to issue record amounts of debt!
The below chart needs no explanation. This is simply not sustainable.
Indeed, the pace of debt issuance is speeding up not slowing. The Biden admin issued $3 trillion in new debt in between 2021 and 2023. It added another $4 trillion in new debt in 2023 alone. At this pace. the U.S. will hit $40 trillion in debt some time in mid-2025.
Indeed, the pace of debt issuance is speeding up not slowing. The Biden admin issued $3 trillion in new debt in between 2021 and 2023. It added another $4 trillion in new debt in 2023 alone. At this pace. the U.S. will hit $40 trillion in debt some time in mid-2025.
The good news is that those investors who are properly positioned for this stand to generate truly EXTRAORDINARY returns in the coming months.
On that note, we recently published a Special Investment Report detailing three investments that will profit from this rampant government spending. Normally this report would cost $499, but we are giving copies FREE to anyone who joins our daily market commentary.
As I keep emphasizing, another round of inflation is coming.
And the worst part?
The Fed knows it, but is playing political games to boost the economy/ stock market for the Biden Administration.
“But wait a minute, Graham,” you’re no doubt thinking, “the Fed’s preferred inflation measure is core-Personal Consumption Expenditures and that is trending down to the Fed’s 2% target.”
Let me let you in on a little secret… PCE is a terrible predictor of future inflation… and the Fed knows it.
The Fed is the largest employer of economics PhDs in the world. All told, the Fed has over 400 economics PhDs and 150 research assistants on payroll. As a result of this, the Fed is constantly doing research on various issues.
Back in 2001, the Fed had several researchers dive into the subject of inflation. Their goal was the analyze whether the Fed’s preferred measures of inflation (the CPI and the Personal Consumption Expenditures or PCE) are decent predictors of future inflation. The Fed also investigated a whole slew of other inflation measures for comparison purposes.
The results?
The Fed found that food inflation, NOT CPI or PCE, is the best predictor of future inflation. Fed researchers wrote the following:
We see that past inflation in food prices has been a better forecaster of future inflation than has the popular core measure [CPI and PCE]…Comparing the past year’s inflation in food prices to the prices of other components that comprise the PCEPI (as in Table 1), we find that the food component still ranks the best among them all…
Source: St Louis Fed (emphasis added).
Now, food is derived from agricultural commodities. And what have agricultural commodities been doing in the last few months?
The first round of inflation is highlighted with a pink oval. The current price move is significantly larger. According to the Fed’s own research, this indicates a second wave of inflation is about to hit the US.
The good news is that those investors who are properly positioned for this stand to generate truly EXTRAORDINARY returns in the coming months.
On that note, the FREE copies of our Special Investment Report detailing three investments that will profit from the next round of inflation are rapidly being reserved. So if you want reserve one, you better move fast!
Ever since the S&P 500 bottomed in late October/ early November 2023, the 21-day exponential moving average (EMA) has served a major “trend line.” Put simply, whenever stocks fell to test this line, they “bounced” soon after and the rally continued.
Last week’s price action featured a different dynamic. Stocks fell to test the 21-EMA and struggled to reclaim it for two sessions (blue oval in the chart below). The only other time this happened was during the brief market pullback in early January 2024. At that time, the market rebounded sharply on the third trading session (purple oval in the chart below).
In this context, today’s price action is key. If the S&P 500 rallies hard and reclaims the 21-EMA, then it’s likely stocks will rally to new highs. However, if stocks cannot reclaim the 21-EMA with conviction today, then we’re likely to see more downside for stocks.
I’ve illustrated the S&P 500’s support lines in the chart below.
If you’re interested in taking advantage of a unique situation in the stock market today, the FREE copies of our Special Investment Report detailing three investments that can profit from inflation are rapidly being reserved. So if you want reserve one, you better move fast!
Our latest theme is that the U.S. Central Bank, called the Federal Reserve, or the Fed for short, is NOT politically independent, but is in fact a highly partisan organization that leans left.
The above items are not some conspiracy theory. The Fed’s own actions support this view.
By quick way of review…
1) The Bernanke-led Fed launched QE 3 just three months before the 2012 Presidential election. At the time, the economy was growing, unemployment was falling, and there were no signs of systemic duress in the financial system. So this was a clear intervention to aid the Obama Administration’s 2012 re-election bid.
2) The Fed kept rates at zero for seven of the eight years President Obama was in office. Once it finally got around to raising rates, it engaged in one of the feeblest hiking schedules in history, raising them only once in 2015
and once in 2016.
3) Donald Trump won the 2016 Presidential election in a major upset to the political establishment. At that point the Fed suddenly began raising rates three to four times per year while simultaneously draining $500 billion in liquidity from the financial system.
4) Today, the Fed is actively juicing the stock market via multiple credit facilities designed to provide liquidity to help the Biden administration with its re-election bid. The Fed is also promising to cut rates despite the fact it’s an election year and inflation has not fallen to its 2% target.
I wish this was the end of this disturbing exercise, but it’s not: the Fed is also letting housing bubble up again. The reason? You guessed it, real estate is the single most owned asset class in the U.S. And boosting home prices during an election year is likely to sway voters.
TheS&P CoreLogic Case-Shiller U.S. National Home Price Index rose 6% in January. This is up from 5.6% in December 2023. As HousingWire notes, this represents the seventh consecutive month of annual price growth. It’s also the biggest increase since November 2022.
By the way, inflation was around 6% at that time!
So we’ve got both real estate and stocks bubbling up again, courtesy of the Fed playing political games. In the near-term this is fantastic for Americans, who will see their net worth rise as a result of this.
The bad news is that there’s no such thing as a free lunch. And the Fed’s political shenanigans are unleashing a second wave of inflation.
Gold has figured it out. It recently exploded to new all-time highs.
The good news is that those investors who are properly positioned for this stand to generate truly EXTRAORDINARY returns in the coming months.
On that note, the FREE copies of our Special Investment Report detailing three investments that will profit from the next round of inflation are rapidly being reserved. So if you want reserve one, you better move fast!
Yesterday, I detailed how the Fed is a political entity… and it leans left.
By quick way of review…
1) The Bernanke-led Fed launched QE 3 just three months before the 2012 Presidential election. At the time, the economy was growing, unemployment was falling, and there were no signs of systemic duress in the financial system. So this was a clear intervention to aid the Obama Administration’s 2012 re-election bid.
2) The Fed kept rates at zero for seven of the eight years President Obama was in office. Once it finally got around to raising rates, it engaged in one of the feeblest hiking schedules in history, raising them only once in 2015
and once in 2016.
3) Donald Trump won the 2016 Presidential election in a major upset to the political establishment. At that point the Fed suddenly began raising rates three to four times per year while simultaneously draining $500 billion in liquidity from the financial system.
It is possible that the above items are all coincidence. It’s also possible that Bigfoot could actually be Elvis living in disguise in the woods.
So what is the Fed up to now?
It’s trying to help President Biden win the 2024 Presidential election by juicing the two asset classes that have the largest impact on Americans’ net worth (stocks and housing ).
Today we’ll be assessing the stock market.
The Fed is supposed to be draining liquidity from the financial system via its Quantitive Tightening (QT) program. However, the Fed is ALSO providing $155 BILLION in liquidity via its overnight credit facilities. To put that into perspective, it’s more liquidity than the Fed was providing via this facility in MARCH 2009 right after the worst financial crisis in 80 years!
As if that’s not egregious enough, the Fed is ALSO providing nearly $500 billion in liquidity via a process called Reverse Repurchase Agreements.
Small wonder then that the stock market has been roaring higher. The Fed is providing EMERGENCY levels of liquidity to the financial system at a time when the economy is growing! So much for QT!
In the very simplest of terms, the Fed is juicing stocks higher to boost the Biden Administration’s 2024 re-election bid. And rest assured, I’ll detail how the Fed is doing the same thing with housing in tomorrow’s article.
The good news is that those investors who are properly positioned for this stand to see extraordinary gains.
On that note, the FREE copies of our Special Investment Report detailing three investments that will profit from the next round of inflation are rapidly being reserved. So if you want reserve one, you better move fast!
It’s time to tell the truth when it comes to Fed political interventions.
One of the biggest myths concerning the Fed is that it is politically independent. This is laughably false to anyone who has paid attention during the last 25 years.
Consider that in 2012, the Bernanke-led Fed announced QE 3, its largest QE program in history at the time (an $80 billion per month, open-ended program), a mere THREE MONTHS before the U.S. Presidential election.
Bear in mind, the U.S. economy was growing and the U.S. financial system wasn’t under significant duress at the time. So this was blatant political interference to aid the Obama Administration’s re-election bid by boosting the stock market and economy.
A second major example of Fed political bias concerns its major shift in monetary policy once Donald Trump became President. To fully grasp this, we need to provide a little historical context.
Between 2008 and 2016, the Fed engaged in eight years of extraordinary monetary easing, maintaining interest rates of 0.25% (zero), and engaging in over $3 trillion worth of QE from 2008 to 2015. Bear in mind that throughout this time, the U.S. economy was technically NOT in recession. Economic growth was steady:
And the unemployment rate was in a clear downtrend:
Once the Fed actually ended easing, it embarked on one of the feeblest campaigns of tightening monetary policy in history, raising rates only one time in 2015 and 2016. I would note that all of this took place under the Obama administration.
Then Donald Trump won the 2016 Presidential election, and suddenly the Fed “got religion” about normalizing monetary policy. It raised rates three times in 2017 and another four times in 2018. In 2018 it also began shrinking its balance sheet via a process called Quantitative Tightening or QT. It would ultimately drain $500 billion in liquidity from the financial system via QT in 12 months. That is quite a shift considering the Fed had maintained rates at or close to ZERO for eight years prior to this.
Throughout 2016-2018, the Fed ignored numerous signals that this pace of tightening was placing the financial system under duress, right up until the junk bond market froze and the U.S. stock market crashed 20% during the holidays in December 2018.
For those who would argue that the Fed’s sudden shift from maintaining easy monetary policy for the better part of a decade to aggressively normalizing policy in the span of 20 months had nothing to do with Donald Trump being President, consider that former Fed Vice Chair Stanley Fisher admitted in an interview that the Fed’s raising rates in December 2018 was done specifically to hurt the economy because the Fed was annoyed with President Trump’s constant tweeting about them.
So again… the Fed IS a political entity… and it leans LEFT.
I’ll detail what this means investors as we head into the 2024 President election in tomorrow’s article. But for now, gold is giving us a clue.
The good news is that those investors who are properly positioned for this stand to see extraordinary gains.
On that note, the FREE copies of our Special Investment Report detailing three investments that will profit from the next round of inflation are rapidly being reserved. So if you want reserve one, you better move fast!
Last week, the Fed confirmed that it intends to cut rates three times this year, despite the fact inflation is NOT near its target of 2% and is in fact turning back up.
If you’re scratching your head on this, there’s a very simple answer:
It’s an election year. And the Powell Fed is stacked with political hacks.
It is clear that the Powell Fed is full committed to aiding the Biden administration in its re-election bid. After all, why else would the Fed talk about triggering an easing cycle when:
1) The stock market is at all-time highs.
2) Financial conditions are looser now than they were BEFORE the Fed starting raising rates in 2022.
3) The economy is growing, NOT slowing down.
4) Inflation is turning back up.
These are the sorts of conditions in which the Fed usually RAISES rates. Instead, the Fed is going to start cutting rates AND reducing the pace of its Quantitative Tightening (QT) program.
Both of those are HIGHLY inflationary.
In this context, it is clear the Fed has become a political entity. There is no credible economic/ financial reason for the Fed to commit to these policies. At the very least, the Fed should remove one rate cut from its forecast for 2024.
Instead, it is clear that the Fed is committed to pushing stocks and housing as high as possible going into the 2024 Presidential election. This will be a boon for Americans in the short-term, but the consequences will be devastating in the coming months as inflation eviscerates incomes and investment portfolios.
The good news is that those investors who are properly positioned for this stand to see extraordinary gains.
On that note, the FREE copies of our Special Investment Report detailing three investments that will profit from the next round of inflation are rapidly being reserved. So if you want reserve one, you better move fast!
I’ve previously explained in great detail that the official inflation measure, the Consumer Price Index or CPI, is massaged to the point of being a work of fiction.
Among the more egregious gimmicks employed by the BLS:
Data collection consists of surveys with low response rates.
Those being surveyed are asked to remember what they paid for goods and services (as if anyone keeps an excel spreadsheet of that stuff).
The CPI doesn’t consider food or energy prices.
The CPI doesn’t use real world measures for shelter, instead relying on carefully crafted artificial metrics that have no connection to reality.
And so on.
However, if you’re looking for one simple explanation that the CPI is fiction, you need look no further than the Biden administration’s poll numbers.
President Biden is an historically unpopular President. This is truly astonishing when you consider that his opponent for the 2024 election (former President Trump) is one of the most polarizing and unappealing candidates in history.
Why are Biden’s polls so bad?
Inflation.
Americans vote based on many factors, but ultimately, they tend to vote with their pocket books. And inflation is a MAJOR problem for the bottom four quintiles (lower 80%) of Americans based on net worth/ income.
The media shills and hacks like to argue that Biden is unpopular because Americans are “wrong” or “misguided” due to “disinformation.” But we have to remember that these are the same people who told us inflation was “transitory” for most of 2021 and 2022. Their track record is truly abysmal when it comes to accurately assessing reality.
Bottomline: inflation has NOT come down, no matter what the BLS and media tell you. And those investors who don’t prepare for what’s coming are in for a world of hurt.
I’ll detail what this means for the markets in tomorrow’s article.
If you’ve yet to position your portfolio to profit a resurgence in inflation, we just published a Special Investment Report outlining the clear signals that inflation is back as well as THREE unique investments that could EXPLODE higher as inflation takes hold of the financial system later in 2024.
This report went live just four days ago. And already two of these investments are up.
The Fed is screwing up… again. And investors who don’t prepare for what’s coming are in for a NASTY surprise in the coming months.
To understand what I mean by this, let me provide some context.
Starting in November of 2023, Fed officials began proclaiming that inflation had been tamed. The argument, at the time, was that inflation data was clearly trending down, while rates were much higher, so the Fed would need to start cutting rates soon to avoid crushing the economy.
I realize this is difficult to picture, so I’ve included the below image for you. The Fed Funds Rate is the red line. The official inflation measure, the Consumer Price Index, or CPI for short, is the blue line. As you can see, starting in mid-2023, the red line was much higher than the blue line.
During the last 25 years, any time the Fed Funds Rate has been much higher than inflation for long, something BAD has happened (a recession or crisis). I’ve illustrated this on the below chart with red rectangles.
This is why the Fed started talking about cutting interest rates in November 2023, despite the fact inflation was still well above 3%, while the Fed’s target for inflation was 2%. In the very simplest of terms, the Fed was “betting” that inflation would continue to trend down, therefore giving the Fed the excuse to cut rates.
However, since that time, the CPI has stopped declining as rapidly. The trend, while still down, isn’t nearly as strong.
Indeed, the situation looks much uglier when we include food and energy prices to inflation. As I noted in yesterday’s article, the ONLY reason inflation appears to have declined as much as it has is because energy prices have collapsed year over year. Once you include energy data in the inflation measure, things look like this:
Put simply, the Fed has screwed up… again. The Fed promised it would cut rates base on an assumption that has proven false. This opens the door to a serious upset for the markets in the coming weeks.
If you’ve yet to take action to profit a resurgence in inflation, we just published a Special Investment Report outlining the clear signals that inflation is back as well as THREE unique investments that could EXPLODE higher as inflation takes hold of the financial system later in 2024.
Throughout 2023, I warned that inflation was not really disappearing from the financial system. Time and again I noted that the ONLY data in the inflation measure that had declined was energy prices.
This trend continues to this day, by the way. See for yourself.
Take out energy prices (and used cars) and the inflationary data is still RISING in every category.
And things are going to get worse soon.
Why?
Energy prices will soon no longer be DOWN year over year. For 12 months, the CPI has been calculated by comparing the prices in the blue rectangle to prices in the purple rectangle. However, in 2024, prices will be compared to the blue rectangle for inflation calculations.
We’ve now had two months of the CPI surprising to the upside. And this is while Energy prices are HELPING the inflation data. What happens when Energy is no longer down on a year over year basis?
Hint: gold has already figured it out. Other asset classes will soon.
If you’ve yet to take action to profit a resurgence in inflation, we just published a Special Investment Report concerning THREE investments you can use to make inflation pay you as it rips through the financial system in the months ahead.
The report is titled How to Profit from Inflation: Three Investments to Make Money”. And it explains in very simply terms how to make inflation PAY YOU.
We’re picking up where we left off our A Deep Dive Into What AI Means For Corporate America investment series. If you missed the first two parts from this series, you can access them hereandhere.
By brief way of review:
Artificial Intelligence (AI) is the dominant theme in the investing world today.
Currently AI is capable of accessing vast swathes of available information and integrating it in such a way that AI appears to be creating something from scratch.
Current AI models are being deployed in practically every sector of the economy from entertainment to marketing, operations and more.
While the areas of the economy that AI is impacting are different, the implications are all the same:
Improving productivity (getting more results for less effort).
This is why AI is so exciting for the economy and investors. In a best-case scenario, AI will lead to a massive increase in profitability as revenues grow and costs decrease. And that is what has triggered a kind of mania for AI-related stocks.
The flipside of this is that AI is currently a kind of Wild West in which “anything goes.” There are no legal, legislative, or societal frameworks for this technology. As a result, advances are being made with few if any ethical considerations.
In this sense, AI is following a pattern we’ve seen with other technological revolutions in the past. That pattern consists of two phases is:
The initial breakthrough phase, which occurs before social/legal frameworks are in place.
The “normalization” phase during which social/legal frameworks are implemented, giving the technology a societal and financial legitimacy.
If you need a real-world example of this, think of the electronic music file or MP3 revolution.
The first phase was Napster in 1999, which featured the sharing of music in what was later deemed as illegal activity (the legal framework was not yet ready for the technology). During this initial phase Napster exploded in popularity particularly among young people. At its peak Napster had tens of millions of users. Then came the lawsuits, Napster went bankrupt, and social/ legal frameworks were introduced for this new technology. During this time Apple introduced iTunes: a version of MP3 technology in which MP3s could be bought and sold in a legally acceptable form.
Napster is still around. Its marketing promotes the fact it is “100% legal.” And it has about five million users. By way of contrast, at its peak, iTunes had 500+ million users and accounted for 63% of all digital music sales. It is now in the process of being converted over to Apple Music, a new service that also offers music streaming and other services in order to compete with Spotify which is the new market leader. So once again, the technology has changed and requires adaption.
AI as it stands today, is in its “Napster” phase. As investors we can profit from this by riding key players in the space, but we need to do so with our eyes open to risks, in particular the risk that at some point, the threat of a regulatory framework for AI will appear. And when it does, much of the “froth” in AI stocks will disappear as hot money/ momentum investors leave the space out of fear.
This doesn’t mean that AI will be “dead” at that time. Indeed, the BIG money will be made as market leaders emerge from the ashes of that collapse.
We’ll delve deeper into this in tomorrow’s article…
In the meantime, if you’re interested in profiting from this technological revolution, we are currently putting the finishing touches on a special investment reporting that outlines some of the larger implications for AI as well as several of the most likely market leaders.
To receive this special report when it’s published later this week, all you need to do is sign up for our FREE daily investment commentary Gains Pains & Capital.
We’re picking up where we left off our A Deep Dive Into What AI Means For Corporate America investment series. If you missed the first part from this series last week, you can access it here.
By brief way of review:
Artificial Intelligence (AI) is the dominant theme in the investing world today.
Currently AI is capable of accessing vast swathes of available information and integrating it in such a way that AI appears to be creating something from scratch.
We’ve already detailed the impact this technology will have on the entertainment industry: creating videos/ movies/ commercials used to require dozens of people (directors, actors, lighting technicians, sound technicians, editors, etc.) Courtesy of AI, ONE person can serve all of those functions.
Today, we’re going to assess the impact AI can have on other industries.
In the corporate world, AI can perform many tasks that previously required several people if not entire departments. AI can write an entire marketing piece and even create a visual advertisement for a product using a few words/ phrases entered by one user.
Interactive Investor recently used to AI to develop an entire online marketing campaign including thousands of ads and keywords. The results saw an increase in account creation and decrease in acquisition costs.
AI can do legal work as well, performing document review, analyzing contracts, and even preparing a deposition. There are now several examples of AI “legal assistants” located online.
AI can even alter business operations. Whole Foods has begun introducing “Just Walk Out” stores in which you simply walk in, take whatever you want from the shelves, and walk out. Sensors and cameras take care of the payment side of things.
The above examples of AI technology pertain to very different areas of the economy: making movies, performing legal diligence, shopping for groceries, etc. However, for investors, the implications of AI all boil down to just two items:
Improving productivity (getting more results for less effort).
This is why AI is so exciting for the economy and investors. In a best-case scenario, AI will lead to a massive increase in profitability as revenues grow and costs decrease. And that is what has triggered a kind of mania for AI-related stocks: Nvidia, Super Micro Computers, etc.
The flipside of this is that AI is currently a kind of Wild West in which “anything goes.” There are no legal, legislative, or societal frameworks for this technology. As a result, advances are being made with few if any ethical considerations.
We’ll be assessing those in tomorrow’s article.
In the meantime, if you’re interested in profiting from this technological revolution, we are currently putting the finishing touches on a special investment reporting that outlines some of the larger implications for AI as well as several of the most likely market leaders.
To receive this special report when it’s published later this week, all you need to do is sign up for our FREE daily investment commentary Gains Pains & Capital.
Artificial Intelligence (AI) is the dominant theme in the investing world today.
If you’re unfamiliar with AI, the concept is as follows: AI represents technology that can “think for itself.”
That sounds pretty advanced, but the reality is that AI in its current form is something of a misnomer. What I mean by this is that the technology doesn’t actually “think,” rather it accesses vast swathes of available information and integrates it in such a way that AI appears to be creating something from scratch.
The results can be incredible or ridiculous, depending on your perception.
For example, below is a screenshot from a video that was generated by an AI technology called “Sora.” The image on the left is a photo of a real person. The image on the right is a still shot from a video that was generated by AI to show the woman singing the lyrics to a pop song. AI took the fixed image from the left and generated a full 90 seconds of facial movements to make it appear as if the woman was singing a song. It’s astonishing.
H/T Min Choi
The obvious implication here is that AI will be highly disruptive for the entertainment industry. Previously, creating movies required dozens of people (directors, actors, lighting technicians, sound technicians, editors, etc.) Courtesy of AI, ONE person can serve all of those functions. This is why the Writers Guild of America (screenwriters) writers went on strike last year: many if not ALL of these people are in danger of losing their jobs as AI progresses.
The entertainment industry isn’t the only part of the economy at risk of disruption by AI.
I’ll detail what AI means for other industries tomorrow. But in the meantime, if you’re interested in profiting from this technological revolution, we are currently putting the finishing touches on a special investment reporting that outlines some of the larger implications for AI as well as several of the most likely market leaders.
To receive this special report when it’s published, all you need to do is sign up for our FREE daily investment commentary Gains Pains & Capital.
I’m about to share the single most important thing about investing in Artificial Intelligence (AI) today…
If you keep this in mind, you’ll avoid the basic mistake that 99% of investors are making when they put capital to work in AI.
Are you ready? Here it comes…
Over 99% of commentators have no idea what they’re talking about.
I’m not trying to be rude, nor facetious. There are plenty of brilliant, insightful people commenting about AI today. But investors often act as if strategists and analysts are psychic.
They’re not.
Human innovation is too messy, chaotic, and ever-changing for lots of people to accurately predict. This is especially true when it comes to technological revolutions with far-reaching implications.
If you don’t believe me, let’s consider what happened with search engines, one of the recent technological revolutions that produced incredible profits for investors who played it correctly.
Today, Alphabet (GOOGL) is THE search engine of the world, accounting for over 90% of global searches. At a market cap of $1.7 TRILLION company, it is one of the 10 largest companies in the world. It routinely produces tens of billions of dollars in profits. In fact, its 2023 profits were greater than the market capitalizations of Ford (F) and U.S. Steel (X) combined.
However, back in the 1990s when search engine technology first came to market, Alphabet (then Google) wasn’t a market leader. Rather, the company was competing for market share with numerous other firms including Yahoo!, Hot Bot, Excite, Ask Jeeves, AltaVista, AOL Search, MSN Search and others.
Indeed, at that time, Yahoo! was the largest search engine company with a market capitalization of $125 billion. In fact, Yahoo! had a chance to buy the Alphabet for just $1 billion in 2002! Fast forward to 2017, and Yahoo! was sold to Verizon for less than $5 billion… by which point Alphabet was a $730 billion company.
Who saw that coming?
My point here is that, the internet, specifically search engines, represented an incredible revolution that changed the world. However, few if any people were able to accurately predict how it would play out.
And this didn’t just concern picking winners vs. losers… it also concerned the technology as a whole: many investors thought that the Tech Crash of the early ’00s meant that the opportunity for profiting from search engines was over. They couldn’t have been more wrong as the below chart illustrates.
The great news is that those who were able to navigate the markets to profit from search engines made truly STAGGERING amounts of money. And if you could pick the future market leaders in advance… while riding the booms and busts with proper risk management… well, the above chart of Alphabet shows you the kind of returns you could generate.
Thus, the key for investing in AI today is determining who the future leaders will be. That’s where the REAL money will be made.
We are currently putting the finishing touches on a special investment reporting that outlines some of the larger implications for AI as well as several of the most likely market leaders.
To receive this special report when it’s published, all you need to do is sign up for our FREE daily investment commentary Gains Pains & Capital.
Inflation is going in the wrong direction again… and that is BAD news for stocks.
If you’ll recall, the primary driver of the recent rally in stocks was the Fed suggesting that it would soon begin cutting rates. Indeed, it was a speech by Fed Governor Waller concerning that exact topic in late November 2023 that ignited the move from 4,550 to new all time highs for the S&P 500.
However, with the economy still growing at an annualized rate of 3%, stocks at new all-time highs, and financial conditions looser today than they were before the Fed starting raising rates in March 2022, the ONLY way the Fed could cut rates without looking like a group of political activists is if inflation is at or close to target.
It’s not. In fact, the latest inflation data is going the WRONG way for the Fed.
The Consumer Price Index (CPI) for January was supposed to show a month over month (MoM) increase of just 0.2% and a year over year (YoY) increase of 2.9%. Instead it showed a MoM of 0.3% and a YoY of 2.9%).
That 0.1% difference in MoM and 0.2% difference in YoY don’t sound like a big deal, but this was the reason the market dropped like a brick last week on Tuesday.
Then, on Friday, January’s Core Producer Price Index (PPI) came in at 0.5% MoM vs. expectations of 0.1%. Now that is a legitimately big deal as Core PPI is the Fed’s PREFERRED inflation measure.
This means there will be NO rate cuts in March. And investors will be lucky if they get a rate cut in April/ May.
This sets the stage for a significant stock market correction. I’ve warned repeatedly that stocks are quite stretched above their primary trend. I believe the S&P 500 will be working its way down to 4,800 and then eventually 4,600 in the coming weeks. I’ve illustrated those levels on the chart below.
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The S&P 500 looks primed for a correction of sorts.
As I’ve noted previously, the S&P 500 is quite extended above both its 10-week moving average (same as the 50-DMA) as well as the 40-week moving average (same as the 200-DMA). Historically, this degree of extension above both trendlines has marked a temporary top as the below chart illustrates.
Beyond this, NO sector is outperforming the S&P 500 at this time (maybe with the exception of Communication Services).
Below are three charts showing the ratio performance between each sector in the S&P 500 and the broader index. When the individual sector outperforms, the line rises. When the individual sector underperforms, the line falls. As you’ll note, NO SECTOR is leading the market higher right now.
Tech, Healthcare, Consumer Discretionary and Financials:
Communication Services, Industrials, Consumer Staples, and Energy.
Utilities, Real Estate and Materials:
Looking at the above ratios, we note that Tech, Consumer Discretionary, Financials and Real Estate lead the market higher during the rally from early November until the end of 2023. However, today, not one single sector is leading the overall market higher (maybe with the exception of Communication Services). Even the Tech sector, which usually is a market leader has been underperforming the broader index since January.
So how has the market held up despite every sector underperforming?
A handful of stocks have pulled the overall market higher. Specifically, Nvidia (NVDA), Amazon (AMZN), Meta (META), and Eli Lilly & CO (LLY). Remove those companies from the S&P 500 and stocks are effectively flat.
Add it all up, and the above analysis suggests that “under the surface” the S&P 500 could see a decent correction of 5% or more in the coming weeks. Only a small handful of stocks are holding everything up. This combined with our overbought and overextended the market is suggests the momentum for the next market move will be DOWN.
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Yesterday, I outlined how the Fed and the Treasury are actively working to juice the financial system to aid the Biden administration’s re-election bid.
By quick way of review:
1) The Fed will soon begin cutting interest rates while stocks are at all time highs, the economy is still growing, and financial conditions are in fact looser than they were before the Fed raised rates for the first time in March 2022.
2) The U.S. is running emergency levels of social spending at a time when the economy is still growing. It’s added $5 trillion in debt since President Biden took office. And the pace of debt issuance is speeding up, not slowing down: the U.S. has added $2 trillion in debt in the last 12 months alone. You can thank Treasury Secretary Janet Yellen for signing off on this insanity.
Today, I’d like to delve a bit more into one of the more nefarious schemes the Fed is using to juice stocks higher. To fully grasp this, we need to wind the clock back to March 2023, when the U.S. regional banking system was on the verge of collapse.
At that time, a number of large regional banks collapsed due to:
1) Bad risk management: their leadership teams failed to appropriately hedge their interest rate risk while the Fed was raising rates.
2) Banks were only paying 0.1% on deposits, while money market funds and short-term Treasuries were yielding 4% or more. As a result of this, depositors were pulling funds out of the banks, resulting in the banks having to sell large portions of their loan portfolios at a loss (banks must maintain certain capital requirements based on deposits).
The Fed took action to stop a crisis from unfolding, pumping $400 billion in liquidity into the financial system in just three weeks. Prior to that, the Fed’s balance sheet was falling due to its Quantitative Tightening (QT) program. The Fed reversed NINE months worth of that program in just three weeks!
That staved off a crisis from hitting. But the Fed then began a back-door bailout of the banks through which it gave them additional access to credit and liquidity. And not just a little… but a LOT.
The below chart shows this facility’s use running back to 2005. And no, you’re not imagining things: the Fed’s use of this facility to juice the financial system in 2023 was greater than what it did during the pandemic, and almost as great as that used during the Great Financial Crisis of 2008! In fact, today it’s higher than it was during the absolute depth of the pandemic in March 2020!
We’re now almost a year out from the regional banking issues and the Fed continues using this facility to the tune of over $200 BILLION. So again, the Fed is juicing the financial system for political purposes. It’s abhorrent and corrupt, but it’s reality. And well prepared investors can take steps to insure they profit from what’s happening with the right investments.
I’ll address how to profit from this in tomorrow’s article. If you’d like it delivered to your inbox, all you have to do is join our FREE daily investment commentary GAINS PAINS & CAPITAL.
The Fed and the Treasury are juicing the markets to help the Biden administration with its 2024 re-election bid. And their actions are going to result in a massive crisis hitting some time in 2025.
The Fed is supposed to be politically independent, but everyone knows that is a fairytale. The Bernanke-led Fed introduced QE 3 a mere two months before the 2012 election to help the Obama administration. Moreover, former Fed Vice-Chair Stanley Fisher admitted that the Powell-led Fed intentionally raised rates in December 2018 (triggering a stock market crash) to hurt the economy under former President Trump.
Put simply, anyone who tells you that the Fed doesn’t play politics hasn’t been paying attention. And it is clear that today’s Fed led by Jerome Powell and today’s Treasury led by Janet Yellen are actively juicing the markets and economy to help the Biden administration with its claims that the economy is booming and everything is great.
Case in point, the Fed is talking about easing monetary conditions at a time when the stock market is at all-time highs and financial conditions are LOOSER than they were when the Fed first started raising rates! Why do this? To keep stocks higher for the election.
The Fed is not the only one in on this scheme.
The Treasury is pulling out all the stops to help the Biden administration. Typically, the U.S. runs a massive deficit during recessions in order to cushion the economic contraction. Today the U.S. economy is technically still growing… and the Biden administration is running the U.S.’s largest deficit as as percentage of GDP in history (outside of World War II).
Put another way, the U.S. is running emergency levels of social spending at a time when the economy is still growing. And this is adding trillions of dollars in new debt to the U.S.’s liabilities every year.
The U.S. owed $28 trillion in debt when Joe Biden was sworn into office in 2021. It owes $33 trillion today. And the pace of debt issuance is speeding up, not slowing down: the U.S. has added $2 trillion in debt in the last 12 months alone. You can thank Treasury Secretary Janet Yellen for signing off on this insanity.
Worst of all, the above items are happening for political purposes. There are ZERO fundamental reasons for the Fed and the Treasury to be implementing the above policies. But in today’s world of political corruption and systemic abuse of power, it’s simply how things are.
I’ll address how to profit from this in tomorrow’s article. If you’d like it delivered to your inbox, all you have to do is join our FREE daily investment commentary GAINS PAINS & CAPITAL.
Who are you going to believe… the mainstream shills, or your own eyes and wallets?
The economic data in the US is telling us that the economy is booming. GDP growth is roaring at annualized rate of over 4%. Unemployment is collapsing, with over 300,000 new jobs being created last month. And inflation has been tackled, falling from a peak of nearly 9% to 3% where is sits today.
The mainstream media parrots these data points as if they were facts. There’s only one problem… if any of this were true, the Biden administration’s approval rating would not have just hit a new low of 37%. You can’t argue that the economy is doing great, but the President is doing an awful job at the same time. So one of these items (the economic data or the President’s approval ratings) is false.
It’s not the approval ratings.
The economic data in the U.S., particularly any economic data that is politically important (GDP growth, inflation, employment) is now largely fiction. And I don’t mean “fiction” as in there are honest mistakes being made because things are complicated; I mean fiction as in the bulk of the data is invented in a spreadsheet by a government beancounter.
Case in point, we are told that in January the economy added 353,000 jobs. As ZeroHedge notes this happened in a month in which the economy actually LOST 63,000 full time jobs and gained 96,000 part-time jobs. Yes, somehow the economy “created” 353,000 jobs while losing 96,000 full time jobs.
Some added food for thought about the true state of the economy. As I write this, the U.S. is adding over $2 trillion in debt every year. The below chart needs no explanation. This is obviously NOT going to end well.
Why is the U.S. adding so much debt?
Because the Biden administration is running the largest deficit as a percentage of GDP outside of WWII. Yes, the deficit is larger today than it’s been during any recession in the last 100 years. Surely this must be because the economy is roaring!
If all of the above items make your head hurt, consider the added insanity that financial institutions and fund managers actually invest trillions of dollars based on this stuff. And people wonder why no one ever sees a crisis coming in advance!?!?
Don’t fall for this stuff. There’s a lot of money to be made in the markets based on these lies, but it takes a lot of work and insight!
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Having juiced the markets higher with the promises of rates cuts, the Fed now finds itself in the absurd position of walking back these promises as A) stocks are at all time highs, B) the BLS continues to release manipulated jobs data to aid the Biden administration and C) the economy is allegedly growing at annualized rate of 4%+.
Regarding the jobs data…
It has become a running joke that the beancounters in Washington DC release absurdly positive economic data to aid the Biden administration, only to revise the data downward multiple times after the fact. Perhaps the single most ridiculous example of this occurred in 2022 when the Philadelphia Fed revealed that the BLS had overstated job growth in first half of the year by one million jobs.
I bring this up because the BLS was up to its usual shenanigans with the January jobs report released on Friday. In it the BLS claimed that the economy added 353,000 jobs in January 2024 instead of the expected 185,000. Let’s be blunt here, if the economy was even close to as strong as the gimmicked data the BLS issues, the Biden administration’s approval ratings wouldn’t be in the toilet.
Politics aside, the issue with this jobs report is that it makes it impossible for the Fed to cut rates any time soon. After all, how can the Fed start easing monetary conditions when the economy is supposedly adding over 300,000 jobs per month and GDP is supposedly growing at 4.2%?!
And so the markets are in a kind of limbo. Everyone is bullish based on hopes of Fed rate cuts… but the Fed can’t cut rates with the data this strong. This opens the door to a market correction to take some of the “froth” out of stocks.
The S&P 500 hasn’t touched its 50-day moving average (DMA) in three months. The 50-DMA is represented by the blue line in the chart below. As you can see, it’s unusual for the S&P 500 NOT to touch this line for such a long period of time.
I would also add that the S&P 500 is ~5% above the 50-DMA. Historically, this degree of extension has market a top of sorts.
With all of this in mind, the odds favor a correction to the 50-DMA (upper 4700s) some time in the next few weeks. After that, we’ll revisit our market forecast to see what’s next.
As I keep stating, you CAN outperform the overall market, but it takes a lot of work and insight!
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The most critical companies to monitor are the MAG 7/ big tech plays. These are the largest companies in the S&P 500. Because of their size, they account for ~30% of the index’s weight.
Thus far, Tesla (TSLA), Microsoft (MSFT), and Alphabet (GOOGL) have reported. The results have been interesting.
TSLA reported on 1/24/24. The stock was down 10% on its results.
Last night, MSFT and GOOGL reported. MSFT is down about 0.5% while GOOGL is down over 5%.
So, thus far two of the three MAG 7 have seen their stocks collapse a LOT on earnings results while one of is effectively flat.
This doesn’t bode well for the broader market. It is VERY difficult for the S&P 500 to rally much at all if the MAG 7 plays are weak. Remember, these companies account for 30% of the market’s weight.
Apple (AAPL), Amazon (AMZN) and Meta (META) report on Thursday. Nvidia (NVDA) reports on 2/21/24. If AAPL and META also sell-off on their results, it’s safe to assume the market will experience a decent correction.
From a technical analysis perspective, the S&P 500 has support just below 4,800. After that is CRITICAL support at 4,595. Given how the MAG 7 plays are responding to earnings, I wouldn’t be surprised to see a correction to 4,595 in the next two months.
This would represent a back-test of the Cup and Handle formation I showed yesterday. Bear in mind, a correction like this would NOT negate our longer term forecast for the S&P 500 to go to 6,000 before 2025. Rather, this correction is a short-term development and would present a fantastic buying opportunity.
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The S&P 500 is up nearly 150 points in just five sessions. This has been quite a move. And what’s truly extraordinary is that every intraday dip is being bought aggressively.
However, a word of caution here.
The S&P 500 is now 4% above its 50-Day Moving Average (DMA) and 9.8% above its 200-DMA. Over these last 18 months, any time the index has become this extended above its trend has resulted in a short term peak. So, it wouldn’t be surprising to see the S&P 500 correct down to back-test the recent breakout at 4,790.
After that, the door is open to 5,000 on the S&P 500. The Cup and Handle formation I outlined a few weeks ago has broken to the upside. Long-term (later in 2024) we are likely going MUCH higher.
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On November 28th, 2023, I predicted that stocks would hit new all-time highs before February 1, 2024.
Bear in mind, the S&P 500 was at 4,550 when I wrote this. So my prediction meant that the index would have to rally to over 4,818 (the former all-time high established January 3, 2022) in eight weeks’ time.
On Friday this happened, a full two weeks ahead of schedule. Anyone who followed our prediction made a killing!
So what happens now?
Stocks are now quite stretched to the upside. I anticipate we’ll see a drop to backtest this recent breakout at 4,800 sometime in the next 10 days. But after that, the door is open to a run to 4,920 by the end of 1Q24. That’s the upside target for the inverse Head and Shoulders pattern the S&P 500 has established in the last four weeks.
So, in the last seven months, we’ve predicted:
1) The S&P 500 to decline to 4,100s (when it was at 4,500).
2) The S&P 500 to rally from the 4,100s to 4,600 (when it was at 4,200).
3) The S&P 500 to hit new all-time highs before February 1st 2024(when it was at 4,550).
As I keep stating, you CAN outperform the overall market, but it takes a lot of work and insight!
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On December 20th 2023, I predicted that stocks would hit new all-time highs before February 2024. Despite all the drama in Washington as well as the geopolitical risk in the world, stocks are within spitting distance of doing this… and we’re only halfway through January.
The S&P 500 bounced hard off of support at 4,700. If the index closes this week even marginally higher, it will be at new all-time highs.
This is not our first accurate prediction for stocks.
Throughout September and October of 2023, we warned clients that the S&P 500 was due for a pull back down to the 4,100s. Time and again, we warned our readers not to buy into the rally and to preserve their capital for an incredible buying opportunity that would soon hit.
And hit it did! And our readers “backed up the truck.”
Then, on November 2, when the S&P 500 was still at 4,200, we told clients to buy aggressively because the S&P 500 was going to 4,600 before year end. Remember, the S&P 500 had only just bottomed at 4,100 and we were predicting a 400 point move to hit in the span of eight weeks. So this was an EXTREMELY aggressive forecast. But our research backed it up and we trust our work!
The market then rallied to 4,600 in just four weeks! Those clients who followed our recommendation and loaded up on stocks at 4,100 made an absolute killing!
So, in the last seven months, we’ve predicted:
1) The S&P 500 to decline to 4,100s (when it was at 4,500).
2) The S&P 500 to rally from the 4,100s to 4,600 (when it was at 4,200).
3) The S&P 500 to hit new all-time highs before February (when it was at 4,600).
As I keep stating, you CAN outperform the overall market, but it takes a lot of work and insight!
If you’re looking for someone to guide your investing to insure you crush the market, you can sign up for our FREE daily market commentary, GAINS PAINS & CAPITAL.
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Governments around the world are issuing staggering amounts of debt to “paper over” any weakness in the private sector with public spending. As Bloomberg notes, collectively, the U.S., U.K., E.U., and Japan will issue $2 trillion in new debt this year.
This is keeping the world from entering a recession, while simultaneously setting the stage for the next round of inflation. Remember that the first wave of inflation (2021-2023) was triggering by egregious levels of public spending/ stimulus during a time of private sector weakness.
In the U.S., it is clear the Biden administration is implementing policies to prop up the economy and financial markets for the 2024 election regardless of the consequences the policies will bring down the road.
Case in point, the U.S. is running the levels of deficit you usually see during a recession, at a time when the economy is technically still growing. Indeed, the only periods in which the U.S. was running a larger deficit as a percentage of GDP in the last 100 years during World War II, and the Great Financial Crisis.
As you likely know, deficits are financed via the issuance of debt. And because the U.S. is constantly having to roll over old debt into new debt while also issuing new debt to finance its deficit, the country has added some $2 TRILLION in debt in the last seven months alone!
My question to policymakers: what if all this spending brings back higher inflation when the U.S. finally rolls over into recession? What’s the plan, then?
Gold has figured it out already. Other asset classes will soon, too.
If you’re looking for someone to guide your investing to insure you crush the market, you can sign up for our FREE daily market commentary, GAINS PAINS & CAPITAL.
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The U.S. passed a debt ceiling resolution in May of 2023. Both the GOP and the Democrats claimed victory for the deal, but the reality is the government won and Americans were screwed.
How do I know this?
It took the U.S. 232 years to generate its first $10 trillion in debt. It added another $10 trillion in debt in just nine years once the Fed pinned interest rates at zero and cornered the bond market with Quantitative Easing (QE) from 2008 to 2017.
The U.S. then added another $10 Trillion in debt in just five years when the Fed reintroduced ZIRP and QE in NUCLEAR fashion in response to the pandemic. Obviously, you’re beginning to see the trend here: the U.S. added $10 trillion in debt in 232 years, nine years, and five years.
But the “debt deal” has really added fuel to the fire.
The U.S. has added another $4 trillion in debt since 2022. But~ $2 trillion of this was added in the seven months since the debt deal was passed! And thanks to the debt deal removing the debt ceiling until 2025, there is little chance that the pace of debt issuance will slow anytime this year.
How will this end? With a debt crisis of some sort. The details, for now, are unclear.
What isn’t unclear is that investors can potentially make a LOT of money from this situation. Those who invested in the right assets at the right times during the last 20 years while the U.S. has engaged in a debt bonanza have seen some truly OBSCENE returns.
And no, I’m not talking about gold. The precious metal has traded sideways for four years, while the U.S. has tacked on another $10 trillion in debt.
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Since early 2023, numerous pundits and gurus have been calling for a recession. And despite numerous indicators flashing that one is coming… the recession has yet to arrive.
Why?
This:
The U.S. is running a GARGANTUAN deficit equal to 5.5% of GDP.
To put this into perspective, it’s larger than the deficit the U.S. ran during EVERY recession in the last 100 years except for the Great Financial Crisis and when the economy was shutdown in 2020.
Put simply, the U.S. is running the kind of spending that we usually see during periods in which the private sector is in a total free-fall… at a time when the private sector is weak, but not yet collapsing.
This has managed to keep the economy positive. But it’s a short-term fix.
Ultimately, the U.S. cannot stay out of recession forever as no amount of government spending can replace the economic impact of the private sector (we learned this during the shutdowns when the Fed and Uncle Sam spent $8 trillion in 12 months but the economy still collapsed).
Moreover… this situation presents us with a MAJOR problem down the road: if the U.S. is already spending at a pace usually associated with recessions while the economy is still growing, what is going to happen when the economy finally does roll over into recession? How much spending will it be doing then? 8% of GDOP? 10% of GDP? More?
And bear in mind, this spending is being funded by debt (it is a deficit after all). What happens to the bond market if the U.S. cranks up its spending to 8% or more of GDP when the actual recession hits?
Gold has started to figure it out. Other assets will figure it out soon.
As I keep stating, you CAN outperform the overall market, but it takes a lot of work and insight!
If you’re looking for someone to guide your investing to insure you crush the market, you can sign up for our FREE daily market commentary, GAINS PAINS & CAPITAL.
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As I keep telling you, it IS possible to time the market. The key is to put in the work to do so.
For me, one of the best means of predicting stock market moves is to focus on “market leading” indicators, or assets that typically lead stocks to the upside and the downside during market turns.
One of my favorite such indicators is high yield credit, or junk bonds.
Bonds/ credit are senior to stockholders. If a company goes bust and needs to liquidate its assets, bond/ credit holders will be paid out long before stockholders see a dime. And generally speaking, bond investing is more sophisticated than stock investing largely due to bonds’ greater sensitivity to Fed policy, the economy, and more.
As a result of this, credit, particularly high yield credit, or credit for companies that are at a greater risk of going bust, typically leads stocks when it comes to pricing future risk on or risk off moves.
You can see this clearly in the following charts which depict the High Yield Corporate Bond ETF (red line) and the S&P 500 (black line). Sometimes the two assets move in tandem, but other times, credit leads stocks clearly to the point that you can accurately predict the next market move for stocks.
The first chart concerns the risk on move in assets that occurred from late 2022/ early 2023. At that time, HYG lead the market to the upside, rallying aggressively even when stocks would dip for a day or two. I’ve illustrated this with a purple rectangle below. Throughout that time period, the ongoing strength in HYG was a reliable indicator that the stock market would continue to rally.
Another example concerns the risk off move in assets that occurred from July 2023 through November 2023. During that period, high yield credit failed to confirm any rally in stocks, with the red line (credit) rolling over quickly even when the black line (stocks) bounced aggressively. I’ve illustrated this with a blue rectangle in the chart below.
So, what is high yield credit telling us about the future of the stock market today?
HYG is leading stocks to the downside, though it is doing so in a very controlled manner. Right now, HYG is suggesting that the S&P 500 will drop to 4,700 or so. Obviously this can change as things develop, but for now, HYG is telling us that any stock pullback should be relatively shallow.
As I keep stating, you CAN outperform the overall market, but it takes a lot of work and insight!
If you’re looking for someone to guide your investing to insure you crush the market, you can sign up for our FREE daily market commentary, GAINS PAINS & CAPITAL.
As an added bonus, I’ll throw in a special report Billionaire’s “Green Gold” concerning a unique “off the radar” investment that could EXPLODE higher in the coming months. It details the actions of a family of billionaires who literally made their fortunes investing in inflationary assets. And they just became involved in a mid-cap company that has the potential to TRIPLE in value in the coming months.
The S&P 500 is ~5% above its 50-Day Moving Average. Historically, this degree of extension above the primary trend has marked a temporary top. It doesn’t mean that stocks will collapse, rather is suggests the upside is limited and consolidation/ correction is the high probability scenario.
The question now is how deep the correction will be…
For that analysis we turn to bonds and the Fed.
The yield on the 2-Year U.S. Treasury has declined from 5.25% to 4.2% where it is now. This decline has been driven by the Fed pivot, in that the Fed will no longer be raising rates, but instead will begin cutting them in the near future.
This will be a boon for stocks as this declining yield means:
1) Stocks will be priced at a higher future Earnings Per Share (EPS) multiple.
2) Money will begin to flow out of bonds and money market accounts into stocks as yields have peaked.
All of the above suggests that any and all dips in stocks will be relatively shallow. Put simply the coming decline is an opportunity to “buy the dip” in a new bull market.
In terms of specific price points, the S&P 500 has major support at 4,700. I would be very surprised to see the market drop much below that level. The S&P 500 might decline into the upper 4,600s to “run the stops” for stock bulls, but a drop below 4,680 is unlikely.
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On Monday I told you that the S&P 500 was headed for 4,700. At that time, the market was hovering around 4,600. And given all the risks in the world (turmoil in the Middle East, slowing economic data in the U.S.), I’m sure many people thought I was bonkers to predict that stocks would continue higher.
Fast forward 48 hours and it looks as if the S&P 500 will hit my target before the week ends. As I write this, the S&P 500 futures are at 4,656.
The gains won’t stop there either. I believe the market will reach new all-time highs before February 1 2024. The former high was 4,818 set in October of 2022. I believe we’ll break that within six weeks’ time.
The long-term chart is clear… I’ll tell you what it portends tomorrow. But for now, here’s a hint.
As I keep stating, you CAN outperform the overall market, but it takes a lot of work and insight!
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The S&P 500 has been trading in a 40-point range since mid-November. I know that sounds difficult to believe, but it’s true. For all the issues in the world (conflict in the Middle East, the ongoing war between Russia and Ukraine, economic data weakening in the U.S., political issues/ potential impeachment for the Biden administration), the stock market has gone nowhere.
See for yourself. I’ve illustrated this with a blue rectangle in the chart below.
Having said that, the market DID reveal something MAJOR in the last month… but it’s what DIDN’T happen as opposed to what happened.
What didn’t happen?
Stocks didn’t break down.
In spite of all the issues and potential risks in the world right now, the bears couldn’t generate enough selling pressure to push stocks down more than 1%. And considering the market was EXTREMELY overbought going into this period, it REALLY suggests the bears are weak right now.
Which means…
The Santa rally is about to hit. Indeed, just last week, the market managed to break out of its trading range and stay there. I’ve illustrated this development with a purple circle in the chart below.
If stocks hold this today, then the door opens to a Santa rally that sees the S&P 500 hit 4,700 before year-end. Take out 4,600 on a weekly basis and you’ve got an opening to 100 points higher relatively quickly.
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Yesterday’s market action could not have illustrated the current market rotation any better.
As I recently outlined:
1) The S&P 500 is currently consolidating after one of its best monthly performances in 30 years.
2) This consolidation has consisted of large tech correcting while laggard sectors and indices (small caps/ the Russell 2000, industrials/ the Dow Jones Industrial Average) catch a bid.
Yesterday’s price action illustrated this perfectly: microcaps (the Russell 2000) caught a major bid relative to tech (the NASDAQ) as the Russell 2000 ROSE over 1% while the NASDAQ fell nearly 0.9%.
If you heeded yesterday’s missive you did quite well! Again, you CAN outperform the overall market, but it takes a lot of work and insight!
This trend is likely to play out over the next two weeks until the Russell 2000/ NASDAQ ratio reaches its 200-day moving average (DMA) sometime around the Fed’s next FOMC (December 12th-13th).
At that point the overall market should complete its consolidation/ correction and begin its next leg up. I’ve said previously that the S&P 500 will hit 5,000 sometime in the 1Q24. The setup is clear in the longer-term Cup and Handle formation.
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The S&P 500’s performance for the month of November 2023 was one of the best single month performances for stocks in the last 30 years. Stocks finished the month up 9.5%, a truly incredible return.
The big question is “what’s next for the markets?”
The answer is “rotation.”
Tech led the rally as Big Tech blasted higher throughout November while much of the rest of the market lagged behind. We are now seeing capital flowing into some of of the laggards, specifically small caps.
The ratio between the NASDAQ and the Russell 2000 has been in a downtrend for most of 2023 as Tech stocks outperform small caps. We are now seeing a break of this downtrend to the upside as small caps finally catch a bid and Tech consolidates
This rotation is allowing overall breadth to improve as non-Tech stocks catch up to Tech leaders. You can see this clearly in the chart below in which breadth (red line) is catching up to the Tech sector (XLK).
After this rotation/ catch up is finished, stocks go to new all time highs. The Cup and Handle formation in the long-term chart for the S&P 500 is clear.
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The S&P 500 is consolidating after one of its best monthly performances in the last 30 years.
Thus far in November, the S&P 500 is up 8.5%. If the month ended today, it would be one of the top 10 monthly returns for the S&P 500 in the last 30 years. We rode this rally the entire way up, having told our clients to buy stocks aggressively when the S&P 500 was down at 4,200. Suffice to say, they’re quite happy.
And their #1 question today is: so what’s next for stocks?
The S&P 500 is quite overextended, having rallied to a level that is 4% above its 50-day moving average (DMA). Throughout the last 12 months, an extension of this magnitude above the 50-DMA has marked a temporary top for stocks.
The big question now is if stocks correct… or if they simply consolidate here, thereby allowing the 50-DMA to catch up to price, before the market make its next push higher.
Thus far the market is opting for #2: consolidating.
The S&P 500 has traded within a 20 point range since November 22nd. The key issue here as far as I’m concerned is that the bears have failed to push stocks down in any significant way, even though there was very low trading volume due to the Thanksgiving holiday.
Think of it this way… stocks are finalizing one of their most aggressive single month rallies in 30 years, and the bears can’t even generate enough selling pressure to push the S&P 500 down 1%.
This suggests that the next move for stocks will be up once this consolidation is over. And given that the market is less than 5% from its all-time highs, I believe we’ll see the S&P 500 hit NEW all-time highs some time in the first quarter of 2025, likely before February 1st, 2024.
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It is widely believed that you cannot time the market. This is a myth. You can time the market, but it takes a lot of work and knowledge.
Case in point, as I outlined in yesterday’s article, I accurately called for the S&P 500 to run to 4,600 back on November 2, 2023 when the market was still just at 4,200.
The S&P 500 hit a high an intraday high of 4,557 yesterday. Modesty aside, this was an incredible call, made within a few days of the market hitting its absolute lows before the rally.
This wasn’t luck either.
Prior to this call, I had been warning clients for weeks that stocks would break down to the 4,100s on the S&P 500 and that this would be a MAJOR buying opportunity. Heck, the literal title to a research note to private clients on October 5th was “Bonds Stabilize… But I Expect a Final Flush for Stocks.”
What happened next is illustrated in the chart chart. Again, I called for the S&P 500 to drop to the 4,100s weeks in advance, then predicted the S&P 500 would run to 4,600 weeks within days of the market bottom in late October.
So my point remains the same: you CAN time the market, but it takes a lot of work and knowledge.
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The following are excerpts from my Private Wealth Advisory market update to private clients written on 11-2-23. At that time the S&P 500 was trading in the 4,200s. It’s at 4,531 today.
The door is open to a Santa Rally to 4,600 or even higher on the S&P 500.
Why?
The Treasury just removed the single largest concern for stocks for the remainder of the year.
As I’ve noted previously, one of the most difficult aspects of stock market investing is that the market is a discounting mechanism for millions, if not billions, of pieces of information. The stock market represents the collective decisions of millions of individuals all of whom are thinking about a myriad of data points/ issues… and all of whom have literal money on the line.
However, out of all the millions or billions of pieces of information that the market is discounting at any given time, it typically only really cares about two or three issues at a time.
Sometimes it’s inflation. Other times it’s what the President is doing (or tweeting). Other times it’s China. Other times it’s what the Fed is doing or about to do. Other times it’s the economy. And so on and so forth.
What makes things even more difficult is the fact that the market changes its focus all the time. It might be really focused on inflation for a few weeks only to then ignore inflation for months on end. Similarly, the market might go weeks without acknowledging anything Fed officials say, only to then care a great deal about a single statement made by a single Fed official during an hour-long Q&A session.
I bring all of this up, because since late-July/ early-August 2023, the #1 thing the market has cared about has been the size of the Treasury’s long-duration debt issuance…
On July 31st 2023, the Treasury announced its financing needs for the third quarter (July through September). The Treasury announced it would:
1) Need to borrow $274 billion more than previously expected.
2) Increase its issuance of longer duration Treasury bonds for the first time since 2021.
Regarding #2, the actual increase in dollar terms of long duration bonds that the Treasury needed to issue was relatively small ($102 billion vs. $96 billion). However, the fact that there was increase in long duration issuance, combined with the increase in total debt issuance ($274 billion) was a surprise.
And the bond markets HATE surprises.
Since that time, bond investors have been dumping ALL long duration bonds. This has resulted in long-term Treasury yields rising (bond yields rise when bond prices fall). And because the stock market is priced based on long-duration Treasury yields, this has meant a sell-off in stocks.
The chart bel shows the yield on the 10-Year U.S. Treasury and the S&P 500 from the last QRA announcement on July 31st 2023 until last week. As you can see, the two items have been moving in lockstep.
Which brings us to this week (week of 10-30-23).
On Monday the 30th of October, the Treasury issued its QRA for the fourth quarter of 2023. It surprised the markets (in a good way) by stating that it would borrow only $776 billion (this was $76 billion less than previously expected).
Then, on Wednesday (11-1-3), the Treasury released its Report to the Secretary of the Treasury from the Treasury Borrowing Advisory Committee.
In it, the Treasury Borrowing Advisory Committee wrote the following (emphasis added)
The Committee supported meaningful deviation from the historical recommendation for 15-20% T-Bill share.While most members supported a return to within the recommended band over time, the Committee noted that the work Treasury has done to meaningfully increase WAM over the past 15 years affords them increased flexibility with T-Bill share in the medium term.
Source: Treasury.gov
As I explained to clients in the remainder of this market update, the decision of the Treasury to rely extensively on short-term T-bills to finance the deficit would ignite a “risk on” rally that will likely last into year-end.
Since that time, the S&P 500 has done this:
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Treasury Secretary Yellen wants stocks and bonds higher.
The reason is simple.
Next year 2024 is an election year. And Yellen is a playing politics for the Biden Administration. After all, it’s hard to convince voters to re-elect someone when their 401(k)s are shrinking by the week.
This is why Secretary Yellen chose to have the Treasury shift its issuance from its traditional breakdown of 15%-20% short-term debt/ 80%-85% long-term debt to favor issuing more short-term debt for the foreseeable future.
Doing this alleviates some of the pressure on long-term Treasuries as well as stocks which are priced based on the former’s yields. This is THE reason why both assets (stocks and bonds) erupted higher last week after declining for most of the last three months.
The BIG problem with this is that Secretary Yellen is choosing to rely heavily on short-term debt at a time when the Biden Administration is running its largest deficit as a percentage of GDP outside of WWII.
The U.S. has added nearly $2 TRILLION to the debt in the last 12 months alone. This is happening at a time when the Treasury is ALSO rolling over trillions of dollars worth of debt.
By relying on short-term debt (12 months of less in duration), Secretary Yellen is setting the stage for an absolute disaster in late 2024/ early 2025.
Why?
All of this short-term debt will be coming due between now and then. By late 2024, the U.S. will have nearly $35 trillion in debt. And if inflation hasn’t collapsed by then, all of the new short-term debt will need to be rolled over when rates are HIGH.
Interest payments on the debt are already at $800 billion. What do you think will happen to them when the U.S. has $35 trillion in debt and needs to roll over a large amount of this while rates are still in the 4% range or higher?
The long-term end of the bond market has figured it out. Stocks will too eventually.
As I keep warning, the Great Debt Crisis of our lifetimes is fast approaching.
In 2000, the Tech Bubble burst.
In 2007, the Housing Bubble burst.
The Great Debt Bubble burst in 2022. And the crisis is now approaching.
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.
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Both stocks and bonds caught a bid mid-week on announcements that the Treasury has decided to issue less long duration bonds that previously expected.
This is GREAT news for risk assets in the short-term. It’s EXTRAORDINARILY BAD NEWS for EVERYTHING in the long-term.
Let’s me explain.
The recent sell-off in both bonds and stocks was driven by one primary concern: that the Treasury would need to issue a gargantuan amount of long-term debt to fund the Biden administration’s profligate spending.
In its simplest rendering:
1) The Biden administration is running the largest fiscal deficit as a percentage of GDP outside of WWII.
2) All of this spending requires the Treasury to issue massive amounts of debt.
Historically, the Treasury’s debt issuance consisted of 15%-20% short-term debt, and 80%-85% long-term debt. The reason for this was to avoid a rate shock should rates change dramatically in a 12-month period (all the short-term debt would come due at a time when rates were much higher).
It was this heavy reliance on long-term debt issuance that resulted in the 10-Year U.S. Treasury collapsing from late July through late October. And since stocks are generally a long-duration asset class, this pulled stocks down as well.
The below chart shows the 10-Year U.S. Treasury (red line) plotted against the S&P 500 (black line). As you can see, the two were trading in lock-step as soon as the Treasury announced its long duration debt issuance needs for the third quarter of 2023 on July 31st.
The Treasury took note of this collapse, which is why it announced a shift in focus for its 4Q23 debt issuance from long-term debt to short-term debt.
In its very simplest rendering, the Treasury intentionally removed the #1 concern for the stock market… thereby opening the door to a Santa Rally into year-end. Unfortunately, the cost of this is that the U.S. debt markets will be in VERY serious trouble a year from now.
Why?
Because this is a “one time” trick that cannot be repeated. Sure, it puts a floor under bonds for the time being, but unless the government cuts spending in a BIG WAY, sometime in the next 6-12 months all of this short-term debt will come due and the Treasury will once again need to issue long-term debt.
Mind you, the U.S. is currently adding debt at a pace of nearly $2 TRILLION per year. So you can only imagine the yield investors will require to lend money to Uncle Sam for any time period a year from now when our debt is over $35 trillion and we’re still running a ~$1 TRILLION deficit.
The below chart needs no explanation. Long-term Treasuries have broken their multi-decade trendline. They are now sitting on CRITICAL support. Once that green line goes, the debt crisis begins.
As I keep warning, the Great Debt Crisis of our lifetimes is fast approaching.
In 2000, the Tech Bubble burst.
In 2007, the Housing Bubble burst.
The Great Debt Bubble burst in 2022. And the crisis is now approaching.
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.
Normally this report would be sold for $249. But we are making it FREE to anyone who joins our Daily Market Commentary Gains Pains & Capital.To pick up your copy, swing by:
Japan’s central bank, the Bank of Japan (or BoJ for short) is currently engaged in an open-ended Quantitative Easing (QE) program. In its simplest rendering, the BoJ starts buying the 10-Year Japanese Government Bond any time that bond’s yield rises to 1% or higher.
It’s possibly the boldest QE program in history: a definitive “line in the sand” drawn by a major central bank as far as bonds are concerned. Again, this is an open-ended, unlimited QE program through which a MAJOR central bank does whatever it takes to keep is country’s bond yields from rising.
However, even this program is proving inadequate.
The BoJ has had to engage in previously unscheduled bond market interventions SIX TIMES in the last four weeks. And yesterday, it finally gave in and announced that its “line in the sand” of 1% for the yield on the 10-Year Japanese Government bond is now a “loose upper bound” instead of a definitive cap.
The below chart needs little explanation.
In response to this announcement, Japan’s currency, the Yen, broke to new lows. The Yen hasn’t traded at this level since the late 1980s!
This is the end game for every major central bank: the gradual losing control of the bond market… and having to sacrifice your currency in order to stave off a debt crisis. But even that won’t work eventually as the weaker the currency, the less value bonds will have.
As I keep warning, the Great Debt Crisis of our lifetimes is fast approaching.
In 2000, the Tech Bubble burst.
In 2007, the Housing Bubble burst.
The Great Debt Bubble burst in 2022. And the crisis is now approaching.
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.
Normally this report would be sold for $249. But we are making it FREE to anyone who joins our Daily Market Commentary Gains Pains & Capital.To pick up your copy, swing by:
Yesterday, the Treasury announced that it would “only” need $775 billion to fund the budget for the fourth quarter of 2023.
This was considered to be good news.
Back in July, the Treasury had announced it would need $852 billion for the fourth quarter. So the fact the Treasury surprised the markets by needing less was used as an excuse for traders to gun the markets higher.
There’s just one small problem with this…
The Treasury QRA was an obvious lie. There is no way on earth the Treasury only needs $775 billion in refunding for 4Q23. Heck, it needed $500 billion in the last month alone!
Moreover, it’s not as if the government is suddenly becoming careful about spending. The Biden Administration has added $4.6 trillion in debt since taking office. And the pace is actually INCREASING, not decreasing: they added almost $1 TRILLION in new debt between 1Q23 and 2Q23.
So again, the idea that the Treasury can somehow fund everything with just $775 billion in refunding needs in the 4Q23 is a joke. The real amount will be MUCH larger than that.
As I keep warning, the Great Debt Crisis of our lifetimes is fast approaching.
In 2000, the Tech Bubble burst.
In 2007, the Housing Bubble burst.
The Great Debt Bubble burst in 2022. And the crisis is now approaching.
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.
Normally this report would be sold for $249. But we are making it FREE to anyone who joins our Daily Market Commentary Gains Pains & Capital.To pick up your copy, swing by:
Japan is slowing losing control of its bond market.
The Bank of Japan (BoJ) is currently engaged in an open-ended Quantitative Easing (QE) program. In its simplest rendering, the BoJ starts buying the 10-Year Japanese Government Bond any time that bond’s yield rises to 1% or higher.
It’s possibly the boldest QE program in history: a definitive “line in the sand” drawn by a major central bank as far as bonds are concerned. Again, this is an open-ended, unlimited QE program through which a MAJOR central bank does whatever it takes to keep is country’s bond yields from rising.
However, even this program is proving inadequate.
The BoJ has had to engage in previously unscheduled bond market interventions SIX TIMES in the last month. The below chart needs little explanation. You can see that yields broke above critical resistance in mid-2023 and have gone vertical ever since.
At this point, the BoJ is now having to engage in direct interventions in its bond market more than once a week. And this is happening at a time when the Japanese currency (the Yen) is about to break to new lows.
As I keep warning, the Great Debt Crisis of our lifetimes is fast approaching.
In 2000, the Tech Bubble burst.
In 2007, the Housing Bubble burst.
The Great Debt Bubble burst in 2022. And the crisis is now approaching.
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.
Normally this report would be sold for $249. But we are making it FREE to anyone who joins our Daily Market Commentary Gains Pains & Capital.To pick up your copy, swing by:
2) The October lows at 4,223 (purple line in the chart below).
3) CRITICAL support at 4,200 (blue line in the chart below).
This happened as the yield on the 10-Year U.S. Treasury breached 5% for the first time since 2007. As I’ve noted before, a close above this level would induce a collapse in risk assets, including stocks.
That’s when “someone” or “someones” MANIPULATED the stock market, by PANIC buying stocks, forcing the ENTIRE MARKET up by 35 pts in the span of 40 minutes. From that point until 1PM, every single dip was bought with PANIC buying.
How do we know this was manipulation or an intervention?
NO ONE panic buys stocks the moment they break below critical thresholds. There isn’t a single trading shop or trading team in the world in which the head screams “GO ALL IN ON STOCKS” as soon as the market violates a critical level of support.
In the simplest of terms, the manipulators staved off a crisis… for now. But the fact remains that the U.S. Treasury bubble burst in 2022. And the crisis is now approaching.
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.
Normally this report would be sold for $249. But we are making it FREE to anyone who joins our Daily Market Commentary Gains Pains & Capital.To pick up your copy, swing by:
The yield on the 10-Year U.S. Treasury is about to break 5%.
As the below chart illustrates, this is a major level. Once we take it out, there’s little if any overhead resistance until 5.25% and then 6%.
The 10-Year U.S Treasury is the single most important bond in the world. It is the bond against which all long duration risk assets (real estate, tech stocks, etc) are priced. So if it collapses in a panic (meaning its yields skyrocket) then the ENTIRE financial system will panic.
Stocks are already completely disconnected from the realities of the bond market. They won’t be for much longer if bonds continue breaking down.
Is the Great U.S. Debt Crisis about to begin?
In 2000, the Tech Bubble burst.
In 2007, the Housing Bubble burst.
The U.S. Treasury bubble burst in 2022. And the crisis is now approaching.
Smart investors are already taking steps to prepare for this.
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.
Normally this report would be sold for $249. But we are making it FREE to anyone who joins our Daily Market Commentary Gains Pains & Capital.To pick up your copy, swing by:
The yield on the 2-Year U.S. Treasury hit a new high yesterday.
Why does this matter?
Because…
1) It indicates the Fed’s fight to tame inflation is NOT done.
2) Stocks are in for a world of hurt in the coming months.
Regarding #1, back in May 2023, the 2-Year U.S. Treasury was anticipating that the Fed would have rates at 3.75% in May of 2025. At the time, this meant the Fed would cut rates at least two times before May of 2025 (rates were at 5.25% in May 2023).
Fast forward to today, and the 2-Year U.S. Treasury has just broken out to new highs of 5.20%. This means the market is now anticipating that the Fed will have cut rates possibly ONCE by October of 2025. Moreover, the idea that rates will be ABOVE 5% instead of BELOW 4% in late 2025 is a HECK of a shift.
Put simply, the bond market is figuring out that the Fed will need to keep rates MUCH higher for MUCH longer. And this brings us to #2 in our list above.
Stocks are in for a world of hurt.
Stocks are priced based on Treasury yields. This is one of the primary reasons why stocks remain down almost 10% from their all-time highs despite the fact the economy is growing. After all, if you can earn 5.25% risk free in bonds for two years, why risk putting your money into much riskier stocks where both the earnings yield AND the dividend yield are lower (4.07% and 1.62%, respectively).
The great crisis of our lifetimes is fast approaching.
In 2000, the Tech Bubble burst.
In 2007, the Housing Bubble burst.
The long term U.S. Treasury bubble burst in 2022. And the crisis is now approaching.
Smart investors are already taking steps to prepare for this.
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.
Normally this report would be sold for $249. But we are making it FREE to anyone who joins our Daily Market Commentary Gains Pains & Capital.To pick up your copy, swing by:
The yield on the all-important 10-Year U.S. Treasury is spiking again. As I write this, it’s about to take out its former highs.
There are no shortage of reasons.
First and foremost, Inflation remains HOT.
Mainstream economists have been high-fiving one another because CPI is now 3.7%. Apparently the fact prices are still rising but at a slower pace is some kind of BIG WIN for the Fed. For those of us who live in the real world, the fact that prices are still rising by this much despite the Fed embarking on its most aggressive monetary tightening in decades is not a good thing.
And bond yields know it.
Bond trade based on many things including inflation expectations. In this light, the fact inflation is proving this difficult to slay is yet another reason bond yields are spiking higher: they know the Fed will have to do more.
The second reason why yields are spiking is that there is still too much excess liquidity in the financial system. Banks are still parking over $1.2 TRILLION at the Fed every night. This is a clear signal banks have too much extra capital/ liquidity lying around.
And finally, there’s the the ENORMOUS deficit that the Biden administration has been running since President Biden took office. Indeed, Bidenomics should be renamed SPEND-onomics as the federal government is running its largest deficit as a percentage of GDP outside of WWII.
All this spending requires the Treasury to issue massive amounts of debt. Basic economics tells us that the more of something there is, the less it’s worth. This is why U.S. Treasuries are worth less and hopefully won’t become worthless.
The below chart is truly horrifying. It tells us that the fuse is lit on a $33 trillion debt bomb.
The great debt crisis of our lifetimes is fast approaching.
In 2000, the Tech Bubble burst.
In 2007, the Housing Bubble burst.
The U.S. Treasury bubble burst in 2022. And the crisis is now approaching.
Smart investors are already taking steps to prepare for this.
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.
Normally this report would be sold for $249. But we are making it FREE to anyone who joins our Daily Market Commentary Gains Pains & Capital.To pick up your copy, swing by:
As I noted yesterday, the great debt crisis of out lifetimes is approaching.
The U.S. is now adding debt at an exponential rate. The U.S. racked up its first $10 trillion in debt over the course of 232 years. Following the Great Financial Crisis, it added another $10 trillion in just nine years. The next $10 trillion took only four years.
And by the look of things, the next $10 trillion will take even less than that. The U.S. has added $2 trillion in debt in the last four months. We’re now adding $1.2 billion in debt per hour.
How will this play out?
Well there are three ways to deal with a major debt problem.
1) Pay it back.
2) Inflate it away.
Guess which one policymakers have opted for?
Why did they spend $8 TRILLION in the span of just 24 months from 2020
Why else is the U.S. running its largest fiscal deficit as a percentage of GDP outside of WWII… despite the fact the economy is still growing!?!
Why else is the Fed providing over $1 TRILLION in reverse repo liquidity schemes to the financial system every single night… despite the fact the financial system isn’t in a crisis?!?
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The great debt crisis of out lifetimes is approaching.
The U.S. has now reached the point at which it is adding debt at an exponential rate.
It took the U.S. 232 years to rack up its first $10 trillion in debt. Thanks to the Fed’s egregious monetary policies following the Great Financial Crisis, the U.S. added another $10 trillion in debt in just nine years as the government went on a spending spree.
It’s added another $10 trillion in a little over FOUR years, thanks to the insane spending the U.S. implemented following the pandemic.
And the pace is only accelerating.
In June of this year, the U.S. had $31 trillion in debt. Today, it’s over $33 trillion. So we’ve just added another $2 trillion in a little over FOUR MONTHS.
And the Fed is confused as to why U.S. Treasuries are collapsing!?!
Basic economics tells us that the more of something there is… the less value it holds. Small wonder then that as the U.S. issues more and more debt, the debt is collapsing in value.
Below is a chart of the long-term U.S. Treasury ETF (TLT). It needs no explanation.
Again, the great debt crisis of our lifetimes is fast approaching.
In 2000, the Tech Bubble burst.
In 2007, the Housing Bubble burst.
The U.S. Treasury bubble burst in 2022. And the crisis is now approaching.
Smart investors are already taking steps to prepare for this.
I’ve identified a series of market events that unfold before every crash.
I detail them, along with what they’re currently saying about the market today in a Special Investment Report How to Predict a Crash.
Normally this report would be sold for $249. But we are making it FREE to anyone who joins our Daily Market Commentary Gains Pains & Capital.
As usual, everyone is attempting to have an “expert” take on this situation. The reality is that less than one in 10,000 of the people speaking on this stuff have any idea what they are talking about. And unfortunately this goes for the actual experts with degrees and pedigree.
Before listening to anyone opining on this conflict, ask yourself the following three questions:
1) Does this person know what kind of government the country or countries involved has? (parliament, congress, neither, theocracy, etc).
2) Could this person find the countries in question on a map?
3) Can this person name the leaders of the countries in question?
If the answer to all three of these isn’t YES, then ignore anything else this person has to say. If they’re too lazy to even spend five minutes learning the basics, then they’re just another fake guru trying to act like they’re omniscient.
With that in mind, I’m staying in my lane and focusing on the markets today. I’m doing this not because I don’t care about the people under attack, nor is it because I’m insensitive to the situation… I’m doing this because I’m not an expert on the middle east and have nothing to add in the way of quality insights.
What I did note however was the stock market bounced hard from the initial sell-off yesterday and closed out the day at the highs. This is quite bullish given that the geopolitical situation.
From a purely technical analysis situation, stocks bounced HARD off the 200-day moving average, or DMA, as represented by the green line in the chart below. The door is now open to a run to the 50-DMA as represented by the red line in the chart below.
The key however is what happens to bonds.
The bond market was closed yesterday. So we need to assess how bonds act today now that they’re trading again. If yields break to new highs, then something BAD is coming for the stock market in the next few weeks.
Again, everything hinges on what bonds do. Bonds are the reason stocks rallied from 2020 to 2022. They’re the reason stocks crumbled from March 2022 to October 2022. So whatever happens in bonds will dictate what’s coming for stocks.
The key however is what happens to bonds.
The bond market was closed yesterday. So we need to assess how bonds act today now that they’re trading again. If yields break to new highs, then something BAD is coming for the stock market in the next few weeks.
Again, everything hinges on what bonds do. Bonds are the reason stocks rallied from 2020 to 2022. They’re the reason stocks crumbled from March 2022 to October 2022. So whatever happens in bonds will dictate what’s coming for stocks.
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Try as they might, the bears simply couldn’t get it done last week.
The S&P 500 spent a few days chopping around its 200-day moving average (DMA) before spiking higher on Friday. Much of this late week rally was short covering, but the fact remains that sellers simply didn’t have what it took to push stocks any lower.
Indeed, the biggest news as far as stocks were concerned was the fact that the tech-heavy NASDAQ simply refused to take out support at 13,000.
Tech is a long-duration sector of the market… meaning it is heavily influenced by long duration bonds. The reason for this is that your typical tech start-up will take years before it brings a product or service to market and starts generating cash flow. So when you’re modeling a tech company’s future cash flows, you need to be thinking five years out or more. This means comparing a tech company’s future earnings against what you’d earn from owning a risk-free U.S. Treasury over the same time period.
Simply put, the tech sector is heavily influenced by what long-duration bonds do… which is why it’s truly astonishing that the NASDAQ has refused to break down despite the fact the yield on the 10-year U.S. Treasury spiked to new highs. The fact that stock market bears failed to crush tech is really quite bullish and a significant “tell” for the markets.
With all of this in mind, it’s quite possible stocks bottomed last week or will bottom this one. I remain concerned about a number of risks to the markets, but we have to respect price action. And price action tells us that stocks are strong in spite of many issues.
For more market insights and analysis, join our free daily market commentary Gains Pains & Capital. You’ll immediately start receiving our Chief Market Strategist Graham Summers, MBA’s briefings to your inbox every morning before the market’s open. Since 2015, Graham has shown investors a win rate of 75% meaning they made money on three out of every four positions closed.
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Bonds finally bounced yesterday. However, the bounce was relatively weak and didn’t signal the “all clear.”
Simply put, things stabilized. But they didn’t actually improve much. And market leading indicators suggest this correction isn’t over yet.
High yield credit typically leads stocks both the upside and the downside. It bottomed weeks before stocks did in October 2022. And right now, it’s telling us the S&P 500 could easily go to 4,100.
Breadth is another market leading indicator I watch. And it is also telling us stocks are not finished falling just yet. Again, I don’t trust this bounce in stocks at all.
Again, the long-end of the Treasury market has completely collapsed. Banks and financial entities are sitting on hundreds of billions of dollars worth of losses. As I keep warning, the Great Debt Crisis of our lifetimes is fast approaching. The time to prepare is NOW, before it hits.
As I keep warning, the Great Debt Crisis of our lifetimes is fast approaching. The time to prepare is NOW, before it hits.
I’ve identified a series of market events that unfold before every crash.
I detail them, along with what they’re currently saying about the market today in a Special Investment Report How to Predict a Crash.
Normally this report would be sold for $249. But we are making it FREE to anyone who joins our Daily Market Commentary Gains Pains & Capital.
Everyone is applauding the short-term deal to keep the government open for another 45 days.
Well, everyone except the bond market, that is.
The bond market, specifically, the market in U.S. sovereign bonds or Treasuries is the single most important market in the world. Everyone focuses on stocks, because stocks are “exciting” and the best investment for obtaining wealth.
However, the dirty little secret of the investing world is that MOST if not all of the gains from stocks are the result of the bond market. Remember, Treasuries are the bedrock of our current financial system; the yields they pay are the risk free rate of return against which all risk assets (stocks) are priced.
So if bonds blow up, you can kiss the stock market goodbye.
And thanks the the insane amount of spending the Biden administration is engaged in, bonds are about to blow up. Indeed, Bidenomics should really be retitled “debt-o-nomics” because it’s debt, not any kind of economic know-how from the Biden White House that is driving all of this stuff.
Case in point, the U.S. is currently running its largest deficit as a percentage of GDP in history outside of WWII. Bear in mind, this isn’t during a recession. The Biden White House is spending like this while the economy is technically still growing!
Basic economics tells us that the more of something there is, the less value it has. And thanks to the Biden Administration’s spending insanity, the U.S. is issuing a LOT more Treasuries. And that means… you guessed it… Treasuries are being valued as worth less.
Below is a chart you won’t see on CNN or the Mainstream Media. This is a 40+ year chart of the 30-Year U.S. Treasury. If this were a stock, you’d look at this chart and think “GAME OVER.”
As I keep warning, the Great Debt Crisis of our lifetimes is fast approaching. The time to prepare is NOW, before it hits.
I’ve identified a series of market events that unfold before every crash.
I detail them, along with what they’re currently saying about the market today in a Special Investment Report How to Predict a Crash.
Normally this report would be sold for $249. But we are making it FREE to anyone who joins our Daily Market Commentary Gains Pains & Capital.
The Fed didn’t raise rates yesterday. What it did do was update its projected dot plot for where Fed officials expect rates to be in 2024 and 2025.
The Fed now only expects to cut rates twice in 2024, as opposed to four times. In very simple terms, the Fed sent a message that rates will need to be higher for longer to end inflation.
The markets took the news hard with bonds, stocks, and even oil all selling off simultaneously. The yield on the all-important 10-Year U.S. Treasury spiked to new highs.
This is a HUGE deal. As I mentioned in yesterday’s article, this is the bond yield against which all risk assets, especially Tech stocks, are priced. If this yield keeps rising, it means stocks will need to be repriced lower.
High yield credit has already figured this out. Stocks are next.
And God help us if the S&P 500 FINALLY realizes what the long end of the treasury market has been saying for the last few months.
As I keep warning. The Great Debt Crisis of our lifetimes is fast approaching.
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The most important bond in the world has just broken to a new low.
Our financial system is backed by debt, specifically, U.S. Government debt or Treasuries. These bonds are the senior-most assets in the world, representing the bedrock of our banking system and financial markets. The yield on these bonds represents the risk-free rate of return against which all risk assets (stocks, real estate, oil, etc.).
Now, when we talk about Treasuries, we are actually talking about a series of bonds of different duration ranging from 4-weeks to 30 years. The total list is below.
Treasury Bill Maturation Periods:
4 Weeks
13 Weeks
26 Weeks
52 Weeks
Treasury Note Maturation Periods
2 Years
3 Years
5 Years
7 Years
10 Years
Treasury Bond Maturation Periods
20 Years
30 Years
Of these bonds, the 10-Year U.S. Treasury is the single most important one. The reason for this is that 10 years usually encompasses an entire economic cycle. This is the bond used to determine mortgage rates as well as pricing all longer duration assets (tech stocks).
I mention all of this because the yield on the 10-Year U.S. Treasury has just broken to new highs.
This is a HUGE deal. The risk free rate of return is rising… which means ALL risk assets will be repriced to lower levels in the near future. Small cap stocks, which are closely aligned with the real economy have already figured this out. The S&P 500 will soon follow.
That’s not the worst of it either. As I wrote in yesterday’s article, the Great Debt Crisis of our Lifetimes is fast approaching. I’ll explain precisely how the 10-Year U.S. Treasury fits into that in tomorrow’s article. In the meantime, if you’re looking to prepare yourself and your family for what’s coming, the time to take action is NOW before it hits.
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.
Normally this report would be sold for $249. But we are making it FREE to anyone who joins our Daily Market Commentary Gains Pains & Capital.
The Great Debt Crisis of our lifetimes is approaching.
As S&P Global recently noted, global debt has just hit $300 TRILLION for the first time in history. As if that wasn’t jaw dropping enough, this amount of debt represents 349% of global GDP. If you were to spread out this debt across the world population each man woman and child would owe over $36,000.
Put simply, this is an incomprehensibly massive debt bomb. And inflation has lit the fuse.
You see, bond yields trade based on inflation among other things. So once inflation entered the financial system in 2021, it was only a matter of time before bonds yields began to rise.
Higher bond yields mean greater debt payments. And greater debt payments mean that it the debt becomes more difficult to service. At a yield of 0.25%, you can service $1,000,000 worth of debt for just $2,500. But at a yield of 5%, that same $1,000,000 in debt now costs $50,000 to service.
Again, inflation lit the fuse of our global debt bomb in 2021. And by the look of things, the fuse has almost burned completely away!
Take a look at the below chart and you’ll see what I mean. This is the Invesco 1-30 Laddered Treasury ETF (GOVI). It’s effectively a proxy for the entirety of the U.S. Treasury market. And as you can see, it is now trading at the same level it first hit in 2015, and just barely clinging to critical support.
Once that line gives way, the great debt crisis of our lifetimes will likely begin.
Smart investors are already taking steps to profit from this.
On that note, we are putting together an Executive Summary outlining how to invest when this Everything Bubble bursts.
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While mainstream economists prance around on television claiming that inflation has been defeated, the real data suggests otherwise.
It’s a well known “secret” on Wall Street that the official inflation measure, the Consumer Price Index, or CPI, is heavily massaged to UNDER-state inflation. However, even the CPI, with all of its gimmicks is showing inflation bottomed in June.
In June of 2023, the CPI was 3.0%. It’s now 3.7%. And with oil now above $90 a barrel again, it’s likely going much higher in the coming months. Again, this chart is going in the WRONG way.
The CPI is not the only inflation metric that has rebounded. The Atlanta Fed’s “sticky inflation” metric tracks parts of inflation that are deeply embedded in the financial system. These items are “sticky” meaning that it’s much more difficult for the Fed to get rid of them. And it’s clocking in at 4.7% after dropping below 3% just a few months ago.
That’s quite a rebound.
Indeed, CPI for August clocked in at 3.7% year over year. That sounds decent until you realize that CPI was 3.0% in June. That’s quite a rebound in just two months. And bear in mind, core inflation is still well over 4%!
Take a look at what oil is doing. Does this look like inflation is under control to you?
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As I noted a few weeks ago, inflation likely bottomed in July.
By quick way of review, the official inflation metric, the Consumer Price Index or CPI, is measured on a year over year basis. So, when the CPI is 5.5%, for instance, what it’s saying is that prices are 5.5% higher than they were during the same month the year before.
As many pundits have noted, CPI has been declining. What they are failing to recognize however is that the only part of the CPI data that has been declining in 2023 is energy prices. And the reasons for this are:
1) Oil prices collapsed for most of the last 12 months after spiking higher during Russia’s invasion of Ukraine in 1Q22.
2) The Biden administration has dumped ~292 million barrels of oil from the Strategic Petroleum Reserve (SPR) forcing oil prices lower.
You can see this for yourself in the table below. Again, the ONLY parts of the CPI that has dropped significantly are energy prices (well that and used cars and medical devices).
However, this period is now ending. On a year over year basis, energy prices will no longer be down much if at all because we are comparing prices in the purple rectangle to prices in the blue rectangle on a year over year basis. This should result in CPI moving higher.
Indeed, CPI for August clocked in at 3.7% year over year. That sounds decent until you realize that CPI was 3.0% in June. That’s quite a rebound in just two months. And bear in mind, core inflation is still well over 4%!
So again, inflation has bottomed. Some investors will profit beautifully from this. Others will get taken to the cleaners.
On that note, we recently outlined a unique “off the radar” investment that could EXPLODE higher as inflation rebounds. We detail this opportunity in a special report called Billionaire’s “Green Gold.”
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Nearly every market collapse follows a particular pattern.
That pattern?
1) Stocks break down below a critical level of support.
2) Stocks rally to “kiss” this former support, failing to reclaim it.
3) Stocks roll over and the real collapse begins.
This pattern is now playing out with the S&P 500.
The S&P 500 first broke below its 50-day moving average (DMA) in August of 2023. This was a significant development as it was the first time the S&P 500 had lost this support since the March 2023 lows. I’ve illustrated this with a blue rectangle in the chart below.
The market then rallied to retest the 50-DMA from below. It briefly broke above this line in early September, but has failed to hold it.This represents the “kiss” as I mentioned earlier: when stocks try to reclaim critical support but fail to do so. I’ve illustrated this with a purple square in the chart below.
What comes next?
Bonds have been telling us for weeks. It’s just a matter of time before stocks “get it.”
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Last week, I noted that the Bureau of Labor Statistics (BLS) and other government agencies have been engaging in a strange scheme.
That scheme?
Releasing economic data that initially suggests the economy is booming, only for that same data to be revised downward multiple times in subsequent months.
Some people think the BLS is massaging the data the make Bidenomics look more successful that it really is. Others simply believe that the BLS is using faulty economic models (after all, how accurate is your model if it needs two or three revisions to be correct?).
Regardless of the reason, this issue continues to happen. And investors keep falling for it!
Case in point, last Friday, the BLS released the non farms payroll numbers for August 2023. And once again, you guessed it, the prior months (June and July) were revised lower. And not by a little: June’s NFP number was revised down by 80,000 jobs, while July’s was revised downward by 30,000 jobs.
Bear in mind, June’s initial NFP number of 209,000 had already been revised downward by 24,000 jobs in July. So with this second downward revision of 80,000 jobs, we now know that HALF of the jobs in the June NFP report were FAKE.
104,000 Fake Jobs / 209,000 Jobs Claimed = 49.7% of the jobs were fake.
As I mentioned a moment ago, the August NFP report also revised July’s job numbers down by 30,000. So when we add this to the 104,000 fake jobs “created” in June, we’re now up to 134,000 FAKE jobs being created in the last two months.
As if that wasn’t bad enough, as Bill King noted in his King Report, seasonal adjustments were boosted to make August’s NFP numbers look better. In 2022, the BLS adjusted August’s NFP numbers upward by 47,000. But for some reason, this very same seasonal adjustment accounted for 117,000 jobs.
Put another way, we already know that 70,000 of the 187,000 jobs the BLS claims the economy generated in August were due to a seasonal adjustment, as opposed to being real jobs created in the economy.
Oh, and bear in mind, July’s numbers have only been revised down once thus far. They will likely be revised down again next month. And we can expect a similar thing to happen for August’s NFP numbers as well.
Indeed, as ZeroHedge recently pointed out, these downward revisions have occurred for every single month in 2023 thus far.
Why does all of this matter?
Because investors are pouring billions of dollars of capital into stocks based on those initial jobs numbers. Check out the below chart and you’ll see what I mean.
These folks are in for a RUDE awakening in the coming weeks. The signs are now clear that the economy is slowing. And this is happening at a time when investors are paying 19 times forward earnings for stocks!
The only time stocks were previously this richly valued was when A) the economy was expanding rapidly and B) the Fed was printing trillions of dollars in new month.
Today the economy is rolling over… and the Fed is DRAINING liquidity from the financial system. So again, investors are buying stocks based on a fantasy.
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One of the hallmarks of the Biden Presidency is that economic data is released that looks fantastic at first glance… only to then be revised much lower in subsequent months.
Conspiracy theorists believe this indicates that the Bureau of Labor Statistics (BLS) and other bean-counter agencies are massaging the data to make the economy look better than it is in order to push a narrative that Bidenomics works. Other people simply believe that the reason data is continually being revised lower is because the economic models the BLS and other agencies use are garbage with little value (after all, how great can the model be if it needs to be revised two or three times to get an accurate number).
Regardless of the reason this is happening, the impact is the same: investors are buying stocks based on a fantasy that the economy is booming.
The formula is as follows:
1) The initial data released about jobs or GDP or some other metric looks quite strong.
2) Investors pile into stocks based on the notion that the economy is booming.
3) The data is revised lower, usually more than once.
The key item here is that investors DON’T sell stocks at a later date based on the downward revisions… in fact, few if any investors even bother keeping track of this stuff. And that’s the problem: people are buying based on the illusion of strong economic growth when in reality the growth is much weaker if not indicative of contraction!
As Zerohedge noted a few days ago, the monthly payrolls report has been revised lower every single month in 2023. Again, this is not just one or two months with downward revisions… it’s every. single. month.
Now, you could easily argue that these downward revisions are simply because the BLS’s models are useless, but that’s missing the point: the headline data, or the data that investors use to justify buying stocks at 19 times forward earnings, is WRONG.
In fact, if we dig into less popular data that isn’t broadcast by the financial media, we get a VERY DIFFERENT picture of the U.S. economy.
Take a look at the official job openings data taken from the Federal Reserve. Again, this is official data showing how many jobs are currently available in the U.S. economy. If the economy is booming and businesses are hiring people to expand their operations, why is this number cratering in ways usually associated with a recession.
Meanwhile, investors are bidding stocks higher and higher. As I write this, the stock market is priced at 19 times forward earnings. The only time stocks are this richly valued is when A) the economy is expanding rapidly and B) the Fed is printing trillions of dollars in new month.
Today the economy is rolling over… and the Fed is DRAINING liquidity from the financial system. So again, investors are buying stocks based on a fantasy.
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If longer duration Treasury yields continue to drop, then stocks will find a bottom of sorts. But if Treasury yields continue to rise, particularly on the all-important 10-Year U.S. Treasury, then stocks will be repriced to much lower levels.
As the below chart from Dr Ed Yardeni illustrates, the S&P 500 is currently trading at around 19 times forward earnings. This is an extremely RICH valuation given that the yield on the 10-Year U.S. Treasury is around 4.25%.
Consider that the last time stocks were this richly valued was early 2022 BEFORE the Fed started tightening monetary policy. At that time, the yield on the 10-Year U.S. Treasury was around ~2%. Obviously corporate earnings are now much higher, but the point is that the stock market is priced at a VERY high multiple given where the risk-free rate of return is trading right now.
Something has to give. Either Treasury yields are about to drop hard… or stocks will collapse. And smart investors who are properly positioned for this will see extraordinary returns.
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.
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Ever since the U.S. abandoned the Gold Standard in 1971, U.S. debt, also called Treasuries have become the bedrock of our financial system.
Put in the very simplest of terms, Treasuries are the senior most asset class, with their yields representing the “risk free” rate of return against which all risk assets (stocks, real estate, commodities, etc.) are priced.
Treasury yields are the reason stocks exploded higher from the April 2020 lows. They are also the reason stocks peaked and began a bear market in March 2022. And they are the reason stocks bottomed in October 2022, igniting one of the best bull runs in recent history.
I mention all of this because the yield on the 10-Year U.S. Treasury, which is the single most important bond in the world, has recently hit new highs. And if it doesn’t stop right here and now, stocks are primed for a major collapse.
How major?
The last time the yield on the 10-Year U.S. Treasury was at its current level, the S&P 500 was trading at 3,600. Today it’s at 4,400.
See for yourself.
Sure, stocks might hold up with Treasury yields at these levels for a time. But the clock is ticking. And it’s only a matter of time before we get a NASTY risk off move.
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.
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The Tech ETF (XLK) is at major support at $166. Even if this is not THE low, it’s a decent spot for a bounce as XLK rallies to $175 or so as it carves out a potential right shoulder in a Head and Shoulders pattern.
Moreover, the yield on the 10-Year U.S. Treasury is at major resistance.
Tech is a long-duration play, meaning it is heavily affected by the yield on longer-term Treasuries. The odds of the yield on the 10-Year U.S. Treasury breaking above its current levels right here and now are not high. This suggests the next move for this yield would be down, which would alleviate some of the pressure on tech stocks.
Given that the S&P 500 is heavily weighted towards tech (the sector accounts for 28% of the index’s weight) all of the above items suggest a bounce in tech and the broader market here. Again, this is just a short-term idea.
In the big picture however, my proprietary Bull Market Trigger is about to register its first “buy” in over a decade.
This signal has only registered TWO times in the last 25 years: in 2003 and 2010. And it’s close to registering a new signal today,
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Nothing has changed in the U.S. in the last month.
The primary framework for investing in the U.S. is as follows:
1) The stock market is bubbling up due to:
a. There being too much liquidity in the financial system.
b. Inflation, particularly core inflation remains elevated (4.8%).
c. Stocks are a better inflation hedge that bonds or cash.
2) The U.S. economy isn’t growing rapidly, but it’s not contracting either.
a. The Atlanta Fed’s GDP Now metric shows economic growth of 2.4%.
b. The Federal government is running its largest deficit as a percentage of GDP in history outside of wartime/ a recession. Much of this deficit is going towards social programs and stimulus measures.
c. Social spending and economic stimulus measures will continue if not increase as we head into the 2024 Presidential election.
d. The recent debt ceiling deal removes all spending caps through the 2024 election.
Put simply we are in a situation in which nothing is going great, but pretty much everything is going OK. Inflation remains high, but it has come down from its peak. The economy is still growing, albeit at a sub-3% pace. And there is ample liquidity in the financial system.
All of this is generally “risk on” for the markets… which means this situation will continue until something significant breaks. This doesn’t mean that stocks won’t correct or ever fall in price again. But it does mean that we are likely in a new bull market and that things will continue to be in “risk on” mode until something major breaks.
Regarding the potential for a recession, the yield curve, particularly the all-important 2s10s (what you get when you subtract the yield of the 2-Year U.S. Treasury from the yield of the 10-Year U.S. Treasury) remains extremely inverted.
This has predicted every recession since 1955. However, the actual recession doesn’t hit until this dis-inverts, meaning it moves back into positive territory. And as the below chart shows, it can take months if not years for the yield curve to dis-invert once it becomes inverted.
Put simply, until this chart moves back into positive territory, this is just a warning that a recession is coming eventually. Nothing more.
So again, there are red flags in the financial system today, but these are warnings not signals that it’s time to get REALLY bearish. The purpose of investing is to make money, not miss out on gains because of a warning. So we ride this bull run for as long as we can until it ends.
Indeed, my proprietary Bull Market Trigger is about to register its first “buy” in over a decade.
This signal has only registered TWO times in the last 25 years: in 2003 and 2010. And it’s close to registering a new signal today,
If you’ve yet to take steps to prepare for invest accordingly, we have published an exclusive special report How to Time a Market Bottom.
It details the my proprietary bull market trigger, how stocks have performed following prior signals, and what it is stating right now.
Normally this report would be sold for $249. But we are making it FREE to anyone who joins our Daily Market Commentary Gains Pains & Capital.
Everything changed for the financial system in March 2023.
What happened then?
The Fed and the Treasury implemented a backdoor bailout of the banking system.
If you’ll recall, in late February/ early March 2023, a number of smaller/ regional banks failed in the U.S. While we say these banks were “small” in comparison to the mega banks like JP Morgan or Wells Fargo, the reality is that when Silicon Valley bank, Signature Bank, and First Republic bank failed, they represented three of the largest bank failures in U.S. history.
Why were these banks failing?
Two reasons:
1) The banks were only paying 0.3% on deposits at a time when depositors could earn 4% or even 5% in a money market fund or short-term Treasuries. So people were pulling their money out of the banks in droves.
2) The banks were sitting on hundreds of billions of dollars’ worth of unrealized losses on their longer-duration assets (mid to long-term treasuries and loans) courtesy of inflation forcing these bonds to collapse.
Now, investor confidence is a strange thing. Both of the above issues were common knowledge as early as November 2022, but for whatever reason, investors chose to ignore them and give regional banks the benefit of the doubt until late February 2023,
Then Silicon Valley bank, Signature Bank, and First Republic failed, and investors began to panic, dumping regional bank shares. Banks’ share prices were falling 10%, 20% even 50% in a single day. And in early March 2023, it appeared as if the U.S. was mere days away from a full-scale banking crisis.
That’s when the Fed and the Treasury jumped in…
The Treasury, acting with the Federal Deposit Insurance Corporation (FDIC) moved to assure depositors that their money was safe, offering to backstop ALL deposits above the usual $250,000 that is insured by the FDIC.
Simultaneously, the Fed pumped nearly $400 billion into the financial system in the span of three weeks.
The Fed also opened a backdoor bailout scheme to funnel nearly $100 billion to the banks.
And that’s when everything changed for the stock market. Stocks bottomed and haven’t looked back.
Below is a weekly chart for the S&P 500 year to date. Each of those candles represent the price action of a given week. White candles represent up weeks and black candles represent down weeks.
As you can see, the last major black candle occurred in late February/ early March 2023 during the regional banks’ issues. Since that time, the market has closed UP for 13 of the last 19 weeks. And of the six down weeks, only two were significant; the other four we all bought aggressively, with stocks reclaiming most of the initial losses by the time the week ended.
I’ve illustrated the two significant down weeks with blue circles in the chart below. Note that the other four down weeks were either down only slightly (purple circles) or saw the market ramp hard off the lows (red circles).
In the simplest of terms, everything changed for stocks in early March 2023. Since that time, the markets are back into “bubble mode” with everything soaring. Companies like Sirius XM Holdings have saw their share price DOUBLE in the span of a week. Meanwhile Carvana is up 700%!
Bearing all of this in mind, smart investors are asking, “what’s next? Will the Fed continue to pump the markets into an even larger bubble, or is this whole mess going to come crashing down?”
I’ll detail my thoughts on this in tomorrow’s article. In the meantime, we recently outlined a unique “of the radar” investment that will could EXPLODE higher as due to the Fed’s money printing. We detail this investment in an investment report called Billionaire’s “Green Gold.”
It details the actions of a family of billionaires who literally made their fortunes investing in inflationary assets. And they just became involved in a mid-cap company that has the potential to TRIPLE in value in the coming months.
Normally this report would be sold for $249. But we are making it FREE to anyone who joins our Daily Market Commentary Gains Pains & Capital.
The Fed has raised interest rates from 0.25% to 5.25% in the span of 16 months.
And yet…inflation has yet to disappear in any significant fashion.
As I noted earlier this week, the ONLY data points in the CPI that are DOWN year over year are energy prices. When you strip out energy and food prices you find that core CPI is only slightly down. As I write this, it’s still clocking in at 4.8%… after fluctuating around 5% for most of 2023.
Moreover, asset inflation is out of control.
Stocks are less than 5% off their all time highs, despite one of the most aggressive rate hike cycles in history!
While financial conditions are roughly as loose as they were BEFORE the Fed started raising rates!
What’s going on here?
What’s going on is that the Fed is repeating the same mistake it initially made during the last major inflationary bout in the U.S. in the 1970s: focusing on rate hikes as opposed to draining excess reserves/ liquidity from the financial system.
During the first round of inflation from 1972-1975, the official inflation measure, the Consumer Price Index or CPI, rose from 3.3% to 11.1%. During this period, the Fed, chaired by Arthur Burns, attempted to rein in inflation using rate hikes. This succeeded in triggering a recession, but failed to end inflation: CPI only fell to 5.7% in 1976 before rebounding and eventually peaking at 13% in 1980.
Burns was replaced William Miller as Fed Chair in 1978, but Miller only lasted a year, as his efforts to end inflation proved similarly futile: the Fed raised rates from 6.75% to 10.5% during Miller’s tenure, but inflation continued to rise from 7.6% to 11.3%
It was only when Paul Volcker took the reins as Fed Chair in August 1979 that things changed. Volcker shifted the Fed’s focus from rate hikes to draining excess reserves/ liquidity from the financial system. The goal was to remove the froth from the financial system, while letting rates move in a wider range in order to tighten policy to the point that inflation finally disappeared.
The effect was a severe recession (July 1981-November 1982), but CPI also came down, eventually falling to ~3% in 1983.
The below chart of CPI in the 1970s is clear: rate hikes didn’t end inflation… but draining excess reserves did.
Unfortunately for us today, the Fed is repeating the EXACT same mistake it made from 1972-1979. And those investors who are properly positioned to profit from this mistake will do extremely well as I’ll outline in tomorrow’s article.
In the meantime, if you’re in the market for someone who can help you profit from the Fed’s blunders, I can help you not only thrive but achieve tremendous financial success.
This opens the door to some VERY inflationary surprises in the near future. And those who are positioned to profit from this could see some absolutely stunning returns.
We recently outlined a unique “of the radar” investment that will could EXPLODE higher as inflation turns back up. We detail this investment in an investment report called Billionaire’s “Green Gold.”
It details the actions of a family of billionaires who literally made their fortunes investing in inflationary assets. And they just became involved in a mid-cap company that has the potential to TRIPLE in value in the coming months.
Normally this report would be sold for $249. But we are making it FREE to anyone who joins our Daily Market Commentary Gains Pains & Capital.
Yesterday, I noted that inflation has very likely bottomed for 2023.
No one in the media is discussing this, but the only parts of the inflation data that is actually falling are energy prices.
See for yourself.
Everything else is still going UP in price, though the pace is slower (this doesn’t stop the media from claiming inflation is falling though).
However, by the look of things, energy prices are bottoming here, particularly in Year over Year comparables.
You see, the inflation data published in the U.S. is based on year over year comparisons. When the Consumer Price Index (CPI) comes out at 5%, what it’s really stating is that a basket of goods and services costs ~5% more currently than it did a year ago.
This is called the base effect: a comparison between two data points in which the current one is expressed as a ratio of the older one. And it can result in some pretty strange circumstances if you’re not careful.
Situations like the one we’re in today.
Let’s wind the clocks back to the first quarter of 2022. Oil prices were rising rapidly due to inflation as the Fed had yet to end its Quantitative Easing (QE) program, let alone raise interest rates. Then Russia invaded Ukraine, and oil spiked even higher to $130 a barrel as the financial world grew terrified of large-scale oil production disruptions.
I’ve illustrated this time period on the below chart of oil prices with a red rectangle.
The rise in oil prices then halted as it became clear that Russia’s war with Ukraine wouldn’t disrupt global oil production by much if at all (Russia would continue selling oil via back-channels to India and other countries). Another factor that stopped oil prices from rising was the fact the Biden administration dumped 292 million barrels of oil on the market by draining the Strategic Petroleum Reserve (SPR).
I’ve been accused of playing politics with this data point, but the chart is clear. President Biden took office in January 2021. At that time the SPR had 638 million barrels of oil. What followed was the largest drop in the SPR’s history, with the SPR declining to 346 million barrels of oil where it sits today. That is a decline of 292 MILLION barrels of oil.
Add it all up, and the end result is that since June 2022, oil prices have declined from $130 a barrel down to the upper $60s/ lower $70s per barrel. The result of this, as far as the CPI is concerned, is that on a year over year basis, for the entirety of 1H23, we have been comparing oil prices in the blue rectangle to oil prices in the red rectangle. As a result of this, energy inflation is down sharply.
This trend is now ending as we work our way into the second half of 2023. Going forward, oil prices on a year over year basis will be compared to the prices in the red rectangle in the chart below.
Put simply, on a year over year basis, the massive drop in energy prices that has lowered overall CPI considerably will be ending. And since energy prices are the ONLY part of the CPI data that has been declining… it is highly likely that the inflation data is bottoming here… or at the very least, won’t be declining much more.
This opens the door to some VERY inflationary surprises in the near future. And those who are positioned to profit from this could see some absolutely stunning returns.
We recently outlined a unique “of the radar” investment that will could EXPLODE higher as inflation turns back up. We detail this investment in an investment report called Billionaire’s “Green Gold.”
It details the actions of a family of billionaires who literally made their fortunes investing in inflationary assets. And they just became involved in a mid-cap company that has the potential to TRIPLE in value in the coming months.
Normally this report would be sold for $249. But we are making it FREE to anyone who joins our Daily Market Commentary Gains Pains & Capital.
The inflation data published in the U.S. is based on year over year comparisons. When the Consumer Price Index (CPI) comes out at 5%, what it’s really stating is that a basket of goods and services costs ~5% more currently than it did a year ago.
This is called the base effect: a comparison between two data points in which the current one is expressed as a ratio of the older one. And it can result in some pretty strange circumstances if you’re not careful.
Situations like the one we’re in today.
For most of the first half of 2023, inflation, as measured by the year over year comparison for the CPI has been trending down. However, as I’ve noted repeatedly, the only part of the inflationary data that is declining is energy prices (well that and used car prices).
See for yourself.
I mention this, because it is increasingly looking as though oil prices have bottomed.
Oil has spent much of the last 18 months in a downtrend. But that downtrend is about to be broke.
If oil prices rip higher from here, then the inflationary data will begin to turn back upwards. Remember, energy prices are the ONLY part of the CPI that are DOWN. The price of everything else continues to RISE, albeit a slower rate.
Many investors will be caught offsides here. Don’t be one of them!
We recently outlined a unique “of the radar” investment that will could EXPLODE higher as inflation turns back up. We detail this investment in an investment report called Billionaire’s “Green Gold.”
It details the actions of a family of billionaires who literally made their fortunes investing in inflationary assets. And they just became involved in a mid-cap company that has the potential to TRIPLE in value in the coming months.
Normally this report would be sold for $249. But we are making it FREE to anyone who joins our Daily Market Commentary Gains Pains & Capital.
The greenback peaked in October 2022. After plunging some 11% from October 2022 to January 2023, the $USD has since been moving in a range or what trader’s would call a “consolidation phase.”
There are a couple key issues to consider when you look at a consolidation phase. They are:
1) How long it lasts.
2) Whether the eventual breakout is a continuation or a reversal of the prior trend.
Regarding #1, the length of a consolidation phase is closely correlated with the significance of the eventual breakout: the longer the consolidation phase, the more significant the breakout.
In the case of the $USD, it’s been in a consolidation phase for SIX MONTHS. That is a significant length of time. And it tells us that the eventual breakout is of major importance.
Regarding #2, it’s critical to note whether an eventual breakout continues the trend the asset was in prior to consolidating or whether it reverses said trend. If the breakout is a continuation, then the asset is in a MAJOR trend, and the consolidation was simply a kind of “breather” between major moves.
That appears to be the case with the $USD today. The trend was down before it began consolidating. And now it is breaking down in a big way. This suggests that the $USD is in a MAJOR downtrend that will last for some time.
Finally, remember we are talking about the $USD here… arguably the most important asset in the world. This breakdown will have a MAJOR impact on the markets, particularly those that benefit from higher inflation/ a weaker $USD.
We recently outlined one such investment that should benefit GREATLY from a weaker $USD in an investment report called Billionaire’s “Green Gold.”
It details the actions of a family of billionaires who literally made their fortunes investing in assets that outperform during this kind of environment. And they just became involved in a mid-cap company that has the potential to TRIPLE in value in the coming months.
Normally this report would be sold for $249. But we are making it FREE to anyone who joins our Daily Market Commentary Gains Pains & Capital.
We continue to receive signals that the U.S. is an emerging market.
One of the hallmarks of emerging markets, particularly banana republics, is that politically connected businesses are treated like royalty while everyone else gets screwed over.
This theme was on full display last week when JP Morgan reported its “outstanding” results. JPM reported record Net Interest Income that was boosted by the fact that the bank was given First Republic’s profitable assets for pennies on the dollar.
But who picked up the losses? After all, First Republic failed!
You did. So did I and the rest of the public.
The Federal Deposit Insurance Corporation (FDIC), which is part of the government that taxpayers fund, absorbed most of First Republic’s losses. Oh, and the FDIC also gave JP Morgan a $50 BILLION line of credit as part of the deal.
How sweet was this deal?
JP Morgan immediately reported a one time gain of $2.6 billion as soon as the deal closed. And it is expected to make $500 million per year from the assets it bought for pennies on the dollar.
These kinds of sweetheart deals that benefit the connected while burdening everyone else are common in emerging markets. To be clear, the U.S. has had them for a long time as well. But they only reached “3rd world banana republic” levels after 2008 once the Wall Street bailouts went from being the exception to the rule.
Indeed, things have become so egregious as far as fraud, waste, and abuse are concerned that the head of the Small Business Administration (SBA) didn’t even bother showing up to a hearing on fraud related to COVID-19 loans.
By the way, the fraud in question is $200 BILLION.
Sweetheart deals that favor the connected and screw everyone else? Administration officials who don’t even bother showing up for meetings concerning hundreds of billions of dollars in government funded fraud?
These are 3rd world, banana republic type issues. The fact that the U.S. can’t go a week without some new example of this stuff tells us just how far down the toilet the system has gotten.
aving said that, this kind of tectonic shift represents a “once in a lifetime” opportunity. Some investments are going to produce fortunes. Others will lose money for years… if not decades. And those investors who are positioned correctly for this will thrive while others struggle.
We recently outlined a unique “of the radar” investment that will outperform in this new economic landscape in an investment report called Billionaire’s “Green Gold.”
It details the actions of a family of billionaires who literally made their fortunes investing in emerging markets. And they just became involved in a mid-cap company that has the potential to TRIPLE in value in the coming months.
Normally this report would be sold for $249. But we are making it FREE to anyone who joins our Daily Market Commentary Gains Pains & Capital.
As I keep emphasizing, the U.S. is becoming an emerging market.
Two of the hallmarks of emerging markets are a weak domestic currency and higher inflation. While neither of these are good for those living in the nation, they do make the performance in the domestic stock market look fantastic.
Case in point, take a look at the South Africa stock market’s performance over the last 20 years.
Nothing special, right? It’s effectively been moving sideways since 2010.
Well, a big reason for that is that the above chart is priced in $USD. Watch what happens when we price South Africa’s stock market in its domestic currency, the Rand.
A similar dynamic is playing out today in the U.S.
The S&P 500 look wonderfully bullish. After all, it bottomed in October 2022 and since been roaring higher ever since.
However, much of this performance stems from the fact that the S&P 500 is priced in our domestic currency, the $USD, which has been extremely weak.
Watch what happens when we price the S&P 500 is another, stronger currency like the Euro.
Not quite some fantastic anymore is it? In fact, the S&P 500 priced in Euros has effectively been trading sideways for most of 2023.
Put simply, a major reason why the S&P 500 has done so well since October 2022 is because it’s priced in $USD. And the $USD has been dropping like a stone.
Again, this is the hallmark of an emerging market.
If you’re an individual investor trying to navigate this market, the framework that worked for investing in the U.S. from 1940 until today is over. You’re no longer investing in a developed nation… you’re investing in an emerging market.
Having said that, this kind of tectonic shift represents a “once in a lifetime” opportunity. Some investments are going to produce fortunes. Others will lose money for years… if not decades. And those investors who are positioned correctly for this will thrive while others struggle.
We recently outlined a unique “of the radar” investment that will outperform in this new economic landscape in an investment report called Billionaire’s “Green Gold.”
It details the actions of a family of billionaires who literally made their fortunes investing in emerging markets. And they just became involved in a mid-cap company that has the potential to TRIPLE in value in the coming months.
Normally this report would be sold for $249. But we are making it FREE to anyone who joins our Daily Market Commentary Gains Pains & Capital.
If you missed it, my main point was this: the U.S. is now an emerging market. And it’s getting downright embarrassing.
Last week our Secretary of the Treasury, Janet Yellen, arguably the most important financial figure in our country, and the person in charge of managing the U.S. dollar/ financial system, groveled in front of China’s Vice Premiere He Lifeng during her visit to China
Ms. Yellen bowed repeatedly to the Vice Premiere, groveling much as an emerging market financial official would kowtow to his or her counterpart from a more developed, superior nation upon which the former’s nation relied for aid/ support/ assistance.
See for yourself. And mind you, this is one of NUMEROUS bows.
I wish this was the worst thing about the current state of incompetence for financial/ economic leaders in the U.S., but unfortunately, it’s not.
No, far worse is the fact that our central bank, the Federal Reserve, or the Fed for short, has become a political entity, as is often the case in emerging markets/ banana republics.
Let me explain.
The Fed, as per its Dual Mandate, is meant to focus on just two things: inflation and employment.
That’s the law. And for most of the last 100+ years, the Fed did focus on these issues above anything else.
No longer.
The Powell Fed is a den of corruption, incompetence, and political activism. In the last few years we’ve witnessed:
1) Scandals in which senior Fed officials were caught trading around Fed announcements. This is insider trading on a banana republic level!
2) The Fed ignoring literally HUNDREDS of signals that inflation was out of control… while still printing over $1 trillion per year and paying billions of dollars to banks.
3) The creation of the worst inflationary storm in 40+ years, all due to Fed incompetence (how did the Fed’s 400+ Economics PhDs and 150 research associates miss that inflation had arrived in 2020-2022!?!)
4) Fed Presidents pushing social justice issues openly in speeches. It’s one thing for them to discuss these things in private. It’s something else entirely for them to push for policies to address climate change, social justice, and other item as FED OFFICIALS.
5) The Fed testing the banking system for “Climate Change Risks.” Mind you, this is the same Fed that didn’t see the regional banking crisis coming, resulting in several of the largest bank failures in history.
All of the above would be downright hilarious, if the damage they inflicted on ordinary Americans wasn’t so devastating.
Let me be blunt here…
Few if any of us got rich during the pandemic. Multiple Fed officials did by trading on insider information. By the way, this continues today, with at least one Fed President caught actively trading during Fed “black out” periods when it’s illegal to do so. He wasn’t fired or forced to resign either.
Similarly, inflation has taken a heavy toll on Americans. And yet, NONE of the Fed officials who ignored the countless signals that inflation was appearing in 2020-2022 have been fired. And why would they? These are politically connected academics who haven’t worked in the private sector in years, if ever!
Again, the U.S. is an emerging market. All the signs are there: abject corruption, incompetence, politicizing everything, etc. The U.S. that existed from the 1940s until the mid-’00s is gone forever. And most of us are now on our own to navigate this new environment.
The only good thing that will come from this is that if you know how to invest in emerging market regimes, you can stand to make a fortune in the coming years.
Indeed, this kind of tectonic shift represents a “once in a lifetime” opportunity. Some investments are going to produce fortunes. Others will lose money for years… if not decades. And those investors who are positioned correctly for this will thrive while others struggle.
We recently outlined a unique “of the radar” investment that will outperform in this new economic landscape in an investment report called Billionaire’s “Green Gold.”
It details the actions of a family of billionaires who literally made their fortunes investing in emerging markets. And they just became involved in a mid-cap company that has the potential to TRIPLE in value in the coming months.
Normally this report would be sold for $249. But we are making it FREE to anyone who joins our Daily Market Commentary Gains Pains & Capital.
Last week I noted that the U.S. is becoming an emerging market.
By quick way of review:
1) Many of the most important institutions in the U.S. now exhibit a level of corruption that is normal for banana republics. We now see these institutions doing everything from interfering in elections to arresting political opponents and more. The individuals who do this are not punished, if anything they given book deals and TV slots.
2) The U.S. no longer has a clear rule of law. Those with the correct political leanings and connections can avoid jail time for serious crimes, even treason. Meanwhile, those on the other side of the political spectrum are given lengthy sentences for minor transgressions.
3) The U.S. economy is no longer a manufacturing/ industrial leader. Decades of outsourcing have gutted the middle class resulting in the kind of wealth disparities you usually see in emerging markets. American children dream of becoming influencers or social media personalities instead of business owners or innovators.
It’s enough to make you sick.
Indeed, the “U.S. is an emerging market” theme was on full display last week when our Secretary of the Treasury, Janet Yellen, arguably the most important financial figure in our country, and the person in charge of managing the U.S. dollar/ financial system, groveled in front of China’s Vice Premiere He Lifeng during her visit to China
Ms. Yellen bowed repeatedly to the Vice Premiere, groveling much as an emerging market financial official would kowtow to his or her counterpart from a more developed, superior nation upon which the former’s nation relied for aid/ support/ assistance.
See for yourself. And mind you, this is one of NUMEROUS bows.
Again, this is the thing of emerging markets. And the fact that the person who manages our finances and currency is this incompetent/ embarrassing illustrates clearly just how far the U.S. has sunk.
The only good thing that will come from this is that if you know how to invest in emerging market regimes, you can stand to make a fortune in the coming years.
Indeed, this kind of tectonic shift represents a “once in a lifetime” opportunity. Some investments are going to produce fortunes. Others will lose money for years… if not decades. And those investors who are positioned correctly for this will thrive while others struggle.
We recently outlined a unique “of the radar” investment that will outperform in this new economic landscape in an investment report called Billionaire’s “Green Gold.”
It details the actions of a family of billionaires who literally made their fortunes investing in emerging markets. And they just became involved in a mid-cap company that has the potential to TRIPLE in value in the coming months.
Normally this report would be sold for $249. But we are making it FREE to anyone who joins our Daily Market Commentary Gains Pains & Capital.
As I’ve noted in our last two articles, the $USD has begun a significant decline against most major currencies (the Euro, the Pound and the Franc). And the only reason it is showing relative strength against the Yen is because Japan’s central bank continues to ease monetary conditions.
What’s happening here? The $USD should be performing well based on interest rates as well as how far along the U.S.’s central bank is in its fight against inflation.
I believe what is happening is that the world is increasingly aware that the U.S. has become an emerging market.
Historically, the U.S. was held up as the eminent developed nation with strong and stable institutions, the Rule of Law, and a dynamic economy.
No longer.
It is now clear that many of our most significant institutions in the U.S. are corrupt. And I’m not talking about the typical corruption one can assume from any organization involving people and power. I’m talking about 3rd world, banana republic levels of corruption, e.g. interfering with elections, jailing political adversaries, censoring free speech, etc.
Similarly, the Rule of Law in the U.S. is now more of a catch phrase than a reality. There are clear double standards applied on a local, state and federal level when it comes to the law. The politically connected/ chosen can commit everything from felonies to outright treason with little if any jail time. And in many cases, those involved in undermining their political adversaries even when it was illegal/ treasonous received book deals and prime time TV slots as opposed to going to prison.
Again, this the domain of 3rd world banana republics.
The U.S. economy has similarly entered a state of secular decline. The U.S. once was the manufacturing/ industrial capital of the world. It’s now a hollowed out, socialist economy that relies on other regimes (many of them hostile to the U.S.) for its resources and economic needs.
More and more Americans are paid simply to not work. Of those that do work, many take no pride in their efforts. It has become a running joke to post videos of goofing off at the office/ pretending to work/ faking productivity. Anyone who runs a business knows how hard it is to find committed, hard working people.
Perhaps nowhere are the above issues as obvious as in the U.S.’s financial status.
The U.S. now has a Debt to GDP ratio of over 120%. The government is running the largest peacetime deficit relative to GDP in history. Is the government trying to rein this in? Not in the slightest. The new Debt Deal removes all spending cuts through 2024.
Meanwhile, basic services (roads, bridges, etc) are crumbling. Go to any major U.S. airport or drive down any major U.S. highway and you’re looking at something that was a high quality/ top of the line project back in the 1950s.
Abject corruption, a lack of the Rule of Law, massive debt, massive deficits, crumbling infrastructure. These are the hallmarks of an emerging market. So is it any surprise that the U.S. dollar is behaving like an emerging market currency?
I’m not saying that other currencies/ economies are much better (if better at all)… I’m simply noting that the U.S. is far worse than ever before. On a relative basis, all of the things that made the U.S. an exceptional place are now of questionable quality/ credibility.
So why wouldn’t the U.S. currency be the same? Why wouldn’t the $USD become weaker, lose more and more purchasing power, and ultimately no longer serve as a storehouse of value?
For those of you who are upset by all of this, it’s time to take your financial future into your own hands
Indeed, this kind of tectonic shift represents a “once in a lifetime” opportunity. Some investments are going to produce fortunes. Others will lose money for years… if not decades. And those investors who are positioned correctly for this will thrive while others struggle.
We recently outlined a unique “of the radar” investment that will outperform in this new economic landscape in an investment report called Billionaire’s “Green Gold.”
It details the actions of a family of billionaires who literally made their fortunes investing in emerging markets. And they just became involved in a mid-cap company that has the potential to TRIPLE in value in the coming months.
Normally this report would be sold for $249. But we are making it FREE to anyone who joins our Daily Market Commentary Gains Pains & Capital.
You know your economic model is doing a terrible job when you watch it blow up in a matter of days. Recently, investors got a taste of that with the Atlanta Fed’s GDPNow measure.
GDPNow is meant to be a real-time (rather than backwards looking) measure of economic activity. It’s a major “go to” tool for investors looking to monitor if the economy is expanding or starting to collapse.
I bring all of this up, because the GDPNow measure entered a free-fall in late February, with its growth rate plunging from 2.9% to NEGATIVE 2.8% in the span of just one month.
Seeing this, investors panicked, believing the economy was entering a recession at a rapid clip. I have little doubt that this contributed to the aggressive sell-off we’ve been seeing in stocks since late February.
There’s just one issue with GDPNow’s collapse: it’s 100% bogus.
It turns out that gold imports to the U.S. rose rapidly during this time from $13 billion to $36 billion, and the GDPNow model inaccurately took this to mean that the trade deficit was exploding which it interpreted as bad news for the economy.
Don’t believe me?
The Atlanta Fed issued a series of statements on X last Friday, in which it admitted that without this screw up, the model would show the economy was still growing by 0.4%, NOT collapsing by 2.4%!
See for yourself.
Talk about a screwup! The economic model that you tout as being one of if not THE best real-time measures of GDP proved to be practically worthless. Sorry to all the investors who saw this and panicked, thinking the U.S. was in recession!
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The markets are setting up for a big test. If they fail, we’re in for some REAL fireworks in stocks. I’ve been bullish on stocks for most of the last few weeks, but yesterday’s price action, combined with how the weekly candles are setting up, is changing everything.
The MAG-7 stocks have declined to test their 40-week (same as the 200-day) simple moving average. This has held during every pullback in the last two years. If it doesn’t hold here, then we’re in for a rough patch that will last several weeks and possibly months.
The S&P 500 is now in the process of erasing ALL of its post-election gains. The “Trump bump” is gone, and stocks have failed to make any money for four months.
The economically sensitive Russell 2000 has already taken out its 40-WSMA. This might be the UGLIEST chart for the stock market bulls. Unless this reverses right here and now, this chart is suggesting that the bull run begun in late 2023 is OVER.
Finally, the totality of stocks over the totality of bonds ratio (ITOT:IGOV) has broken below its 50-DSMA and is heading towards its 200-DSMA. This tells us it’s time to shift capital to income plays/ bonds and out of stocks as we’re entering a significant “risk off” period.
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Thus far, the Trump tariff wars are following a negotiation framework that Trump has used throughout his career in commercial real estate.
That pattern:
Open with an outrageous demand, thereby anchoring negotiations to a number that is highly in your favor.
Ask for something in return for whenever you walk back from your original ask.
Present your opponent with a long-term opportunity in exchange for deal that isn’t what they want right now.
Regarding #1, anchoring is a psychological phenomenon through which the negotiating parties become psychologically “anchored” to the first number or “ask” introduced in the negotiation regardless of how outrageous it is.
Consider the recent tariff war with Mexico.
President Trump introduced the negotiation with tariffs of 25% on all exports from Mexico to the United States. This was a huge and outrageous move to make (he could have opened with tariffs of just 5%), and it served the purpose of anchoring the negotiation on a number that is highly in his favor. This sets the #2 in our list: asking for something in return whenever you walk back from your original ask.
Now that negotiations are underway between President Trump and Mexico’s President Claudia Sheinbaum, Trump can walk back from the threat of 25% tariffs (say to tariffs of 20%, 15%, etc.) while simultaneously asking for something in return. In this manner, it appears as if he’s “giving ground” and should get something in return for doing so (the rule of reciprocity).
It’s working.
Mexico has already agreed to put 10,000 troops at the border in exchange for the 25% tariffs not being introduced for a month. This is extraordinary. On Thursday, there were NO tariffs between the two nations. Four days later, by anchoring the negotiation on an extreme outcome (25% tariffs) Trump has already gotten Mexico to “buy into” the need for better border security between the two nations without giving up anything (all he’s done is postponed his intended tariffs by a month).
Which brings us to #3 in the above negotiations.
Trump is famous for suggesting a long-term relationship that is mutually beneficial in exchange for an immediate deal that is highly in his favor. In commercial real estate, this might consist of asking a contractor to perform a job for less money in exchange for the promise of a long-term relationship through which Trump would give the contractor lot more business in the future.
In terms of the current trade war between the U.S. and Mexico, President Trump could very well end up finalizing negotiations with tariffs of 10% on imports from Mexico, while offering any number of benefits to the country as part of a long-term trade agreement. In this fashion he scores a huge win politically, while introducing a new more balanced trade deal between the two nations.
For investors we are in a new environment in which those who have studied Trump and his strategies have a definite edge. Because of our understanding of what Trump was doing over the weekend, we viewed the recent correction as an opportunity, NOT the start of a market crash or bear market.
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