4) The Fed can achieve a “soft landing” (it can’t).
The Russell 2000 (IWM) which is more closely aligned with the economy and growth has figured this out. It’s only a matter of time before the S&P 500 “gets it.”
Meanwhile, regional banks are back at the lows.
Financials usually lead the broader market. Maybe this time is different?
Or maybe the next leg down is coming and coming soon.
If you’ve yet to take steps to prepare for what’s coming, we just published a new exclusive special report How to Invest During This Bear Market.
It details the #1 investment to own during the bear market as well as how to invest to potentially generate life changing wealth when it ends.
Tomorrow at 2PM EDT, the Fed will announce its policy decision for the month. And no matter what the Fed does, it’s in SERIOUS trouble.
Why?
If the Fed raises rates, this is only going to increase pressure on the banking system.
Depositors, both in the U.S. and Europe, are fleeing banks because A) the banks pay next to nothing in interest, whereas you can earn 3%-4% in a Money Market Fund or short-term T-Bills and B) depositors are now terrified that the banks at which they keep their money could go bust.
Consider that U.S. just experienced its 2nd and 3rd largest bank failures in history in the last two weeks. And over the weekend, the $1.4 trillion behemoth Credit Suisse had to be rescued by UBS and the Swiss Government.
Put simply, the issues that resulted in Silicon Valley Bank and Credit Suisse going bust / needing to be rescued will only worsen if the Fed decides to raise rates again tomorrow.
The alternative for the Fed isn’t much better.
Inflation is currently clocking in at 6%.
If the Fed doesn’t raise rates tomorrow, then inflation will rage.
I’m talking about a situation in which the U.S. becomes an emerging market, with inflation out of control, a currency collapse, and more.
Put simply, the Fed is screwed either way.
Yes, if the Fed doesn’t hike rates tomorrow there will be a relief rally in risk assets. But that relief will quickly turn to terror as U.S. Treasury yields explode higher.
Remember, the U.S. has over $31 TRILLION in debt and a Debt to GDP ratio of 120%. There are over $70 trillion debt securities in the financial system and another $500 TRILLION in derivatives that trade based on interest rates.
What’s happens to all that debt if the yield on the 10-Year U.S. Treasury spikes to 7% or even 9% if the Fed allows inflation to rage out of fear of worsening the bank crisis?
If you’ve yet to take steps to prepare for what’s coming, we just published a new exclusive special report How to Invest During This Bear Market.
It details the #1 investment to own during the bear market as well as how to invest to potentially generate life changing wealth when it ends.
The banking crisis has just claimed its first major victim.
Thus far in this banking crisis, the banks that were in trouble have been large, but not gigantic. The largest was Silicon Valley Bank which was the 15th largest bank in the U.S. at the time of its collapse with some $209 billion in assets.
Well, yesterday, UBS bought Credit Suisse for $3.3 billion. Credit Suisse is NOT a regional bank. It is a MAJOR bank with $1.4 TRILLION in assets. Indeed, the bank was literally larger than the country in which it was domiciled (Switzerland’s GDP is roughly $800 billion).
For a bank this size to fail is a MAJOR development. However, even more significant are the details of the UBS/Credit Suisse deal… namely that BOTH Credit Suisse bondholders and equity holders are getting wiped out (mostly).
Some $16 BILLION worth of Credit Suisse bonds are being written down to ZERO, while Credit Suisse shareholders will receive just one share of UBS stock for every 22.48 shares of Credit Suisse stock they owned.
Why is this a big deal?
Because no one in their right mind would want to own bonds or stock in a troubled bank after this deal.
Think of it this way… before this, banks were already facing two major problems:
1) They pay only 0.23% or so on deposits when depositors can earn 3%-4% in a Money Market Fund or Short-Term U.S. Treasuries. So money was fleeing banks for those higher yielding investments.
2) Depositors were terrified of bank failures. And so even MORE money was fleeing.
Now, banks face a new issue: trying to attract investors when there’s a very real possibility that both bondholder and stockholders would get wiped out if said bank failed.
The stock market bulls are trying to bid the markets this morning, as if this bailout/ deal is great news.
Was AIG getting bailed out great news?
What about Fannie and Freddie?
Nope.
Something VERY bad is brewing in the financial system. Indeed, my proprietary Crash Trigger is now on the first confirmed “Sell” signal since 2008.
This signal has only registered THREE times in the last 25 years: in 2000, 2008 and today.
If you’ve yet to take steps to prepare for what’s coming, we just published a new exclusive special report How to Invest During This Bear Market.
It details the #1 investment to own during the bear market as well as how to invest to potentially generate life changing wealth when it ends.
The Fed just gave out over $300 BILLION in single week.
See for yourself: the Fed’s balance sheet has erupted higher, erasing over HALF of its Quantitative Tightening (QT) efforts. Again, we are talking about $300+ BILLION in a single week.
Now, technically much of this ($164 billion to be exact) came in the form of loans to banks. The banks will have to pay this back, so it’s not quite the same as Quantitative Easing (QE). Regardless, the key point is that the Fed is NO LONGER shrinking its balance sheet… instead it is printing money. And not a little bit, but $300+ billion in a single week.
To put that into perspective, it’s the equivalent of more than TWO MONTHS’ worth the Fed’s emergency QE program that it ran in response to the pandemic. And again, the Fed did this in just FIVE DAYS.
What does this mean?
First and foremost, that something VERY BAD is going on behind the scenes in the U.S. banking system. But more importantly for us as investors, that the next round of bailouts/ easing/ reflating the financial system is here.
This won’t end well.
The Silicon Valley Bank bailout is the Bear Stearns moment for this bubble. Lehman is coming… as is AIG… and this entire mess won’t end until the stock market hits levels most cannot even imagine today… to the downside
Indeed, from a BIG PICTURE perspective my proprietary Crash Trigger is now on the first confirmed “Sell” signal since 2008.
This signal has only registered THREE times in the last 25 years: in 2000, 2008 and today.
If you’ve yet to take steps to prepare for what’s coming, we just published a new exclusive special report How to Invest During This Bear Market.
It details the #1 investment to own during the bear market as well as how to invest to potentially generate life changing wealth when it ends.
Ever since the Great Financial Crisis of 2008, the Fed has been primarily in an accommodative framework. For most of 2008-2023, interest rates were at ZERO or 0.25%. The below chart shows where rates were from 2007 until today. You’ll see that with the exception of 2017 to mid-2019, rates were effectively at ZERO for most of this time.
The Fed didn’t just keep rates at zero either. It printed money and used that money to buy assets/ debt securities to prop up the system anytime things started to break down.
We’re not talking about a little money printing either. Between 2007 and 2023, the Fed printed over $8 TRILLION.
This suppression of interest rates… combined with the money printing and easy access to credit had one primary beneficiary…
The Tech sector.
Tech, particularly high beta garbage Tech (apps, texting companies, social media, etc), NEEDs low interest rates to even exist because these companies require a TON of capital/ debt to reach profitability (assuming they even do that, which 95% DON’T).
And remember, we’re not talking about the Fed creating an artificial environment for a few months. They’ve been doing it for most of 15 years. And every time the system began to break down, the Fed would do even MORE extreme versions of these policies… which in turn made the environment even more favorable to the Tech industry.
How bad did this get?
Talk to anyone who wants to become an entrepreneur today and he or she will say they want to found a Tech company. NO ONE says they want to go into energy, or materials, or manufacturing. It’s all about apps, social media, search engines, etc.
Think of it this way, as of 2021…
The largest automaker in the stock market was a tech stock (Tesla).
The largest commerce company in the stock market was a tech stock (Amazon).
The largest consumer discretionary company in the stock market was a tech stock (Apple).
And so on…
The Tech sector was the largest sector by weighting in the S&P 500 by almost a factor of two. In fact, Tech was larger than both the 2nd and the 3rd heaviest weighted sectors COMBINED!
The below chart shows the performance of the Tech Sector relative to the broader market (S&P 500 since 1999). As you can see, Tech outperformed the broader market non-stop from 2008 onward. By the time 2022 rolled around, it was at levels that EXCEEDED those established by the Tech Bubble of 2000!
All of this is due to the Fed.
Most of the people who work in Tech are not geniuses, nor are they the best entrepreneurs on the planet. They were simply the beneficiaries of an artificial environment created by the Fed.
In the simplest of terms, Tech is to the bubble today, what Banks were to the bubble in 2007: the sector that benefited most, generated the largest profits, and consumed the largest percentage of talent/ aspirations.
That period is now OVER. And it’s not coming back.
So what does this mean for the markets?
Well, if the largest sector in the market is in a spectacular bubble the likes of which won’t return for at least another decade… what do you think?
The Silicon Valley Bank bailout is the Bear Stearns moment for this bubble. Lehman is coming… as is AIG… and this entire mess won’t end until the stock market hits levels most cannot even imagine today.
Indeed, from a BIG PICTURE perspective my proprietary Crash Trigger is now on the first confirmed “Sell” signal since 2008.
This signal has only registered THREE times in the last 25 years: in 2000, 2008 and today.
If you’ve yet to take steps to prepare for what’s coming, we just published a new exclusive special report How to Invest During This Bear Market.
It details the #1 investment to own during the bear market as well as how to invest to potentially generate life changing wealth when it ends.
A major bank just went under… contagion is dragging down other similar firms… the Fed is introducing emergency measures to bailout the system.
Is it 2008 all over again?
Yes and no.
“Yes” in the sense that the Fed created a massive bubble in risk assets. Also “yes” in the sense that banks made stupid decisions, violating central tenets of risk management by lending money to clients that could never pay it back (this time tech startups instead of high risk mortgage borrowers). And finally “yes” in the sense that the guilty players get bailed out by the tax-payer and the wealthy are made “whole” with preferential treatment due to their connections to DC.
However, that’s where the similarities end… because the issues the financial system faces today are far greater and systemic that the ones it faced in 2008.
The 2008 crisis was triggered by a crisis in housing… which became a banking crisis courtesy of Wall Street’s toxic derivatives trades,
This crisis (2023) is a crisis in Treasuries… which are the bedrock of our current financial system, the senior-most asset class in existences. And once again Wall Street has gone bananas with derivatives based on an asset class.
In 2008, the derivatives were “credit default swaps” and the market for them was roughly $50-$60 trillion in size.
Today, the derivatives are based on “interest rates/ bond yields” and the market for them is $500+ trillion. And as we just discovered with Silicon Valley Bank and Signature Bank… the banks weren’t particularly clever in how they managed their risks this time either.
Over the last year as the Fed raised interest rates from 0.25% to 4.75%, the Treasury market has collapsed. Remember, when bond yields RISE, bond prices FALL.
Other debt securities followed suit including mortgage-backed securities, corporate bonds and the like. Because remember, the yield on Treasuries represents the “risk free” rate of return against which all risk assets are priced. So when Treasuries fell, ALL other debt instruments had to be repriced accordingly.
As a result of this, U.S. banks are currently sitting on $640 BILLION in unrealized losses on their longer duration bond/debt portfolios. This is what precipitated the collapse of Silicon Valley Bank… and if you think that’s the last shoe to fall in this mess, I’ve got a bridge to sell you in Brooklyn.
So enjoy the bounce we are seeing in risk assets now. It won’t last… just as the market rally triggered by Bear Stearns’ shotgun wedding to JP Morgan in March 2008 didn’t last either.
Indeed, from a BIG PICTURE perspective my proprietary Crash Trigger is now on the first confirmed “Sell” signal since 2008.
This signal has only registered THREE times in the last 25 years: in 2000, 2008 and today.
If you’ve yet to take steps to prepare for what’s coming, we just published a new exclusive special report How to Invest During This Bear Market.
It details the #1 investment to own during the bear market as well as how to invest to potentially generate life changing wealth when it ends.
Stocks are bouncing this morning on announcements that the Feds will backstop ALL of the deposits at the now bankrupt Silicon Valley Financial Group (SIVB) AKA Silicon Valley bank.
This is a massive mistake. The banking system is in serious trouble and it is not clear that the $25 billion bailout the Feds crafted will be enough to deal with fallout.
One other bank (Signature) has already been closed, while most of the regional banks in California have seen their stocks halted.
What’s causing all of this?
Two things:
1) For the first time in 15 years, depositors can earn 4% or 5% in yield.
2) Banks are up to the eyeballs in garbage loans made during the pandemic.
Regarding #1, most banks are now paying out something like 0.05% or lower on deposits. Meanwhile, money market accounts and short-term T-bills are paying 4% of 5%.
As a result of this depositors are pulling money out of banks. And because the banks have to maintain leverage ratios based on capital requirements, the banks are being forced to sell assets (deleverage).
We are not talking about a small amount of money either. There is $5.5 trillion in deposits in small/ regional banks in the U.S.
This brings us to #2.
SIVB went bananas with its lending following the pandemic courtesy of all the bail-out/ stimulus money. SIVB was the bank for (h/t DiscloseTV):
1) Some 1,500 climate and energy-tech companies.
2) More than 60% of all community-based solar financing.
3) Countless “woke” programs that financed politically-tied entities/ startups.
Look, a bank can lend money to whoever it likes… but when you throw lending standards out the window and start loaning money based solely on political ideology (as opposed to whether or not the person/ business could ever pay you back) it’s a recipe for disaster.
By doing this, SIVB went from the 42nd largest bank to the 15th largest bank in the U.S. in the span of THREE YEARS. The chart below is not of a tech start-up or micro-cap… it’s that of a BANK. Yes, it went from $150 per share to $750 per share in less than two years.
Which brings us to today.
SIVB is NOT the only bank with these problems, just as Bear Stearns wasn’t the only bank with exposure to subprime mortgage loans in 2008. There is no easy way out of this mess.
Remember, there are over $5.5 TRILLION in deposits sitting in regional banks in the U.S. The Fed thinks that a $25 billion bailout fund will be enough to prop up the banks as a major percentage of this leaves to seek higher yields.
Good luck with that!
Oh… and by the way… our proprietary Bear Market Trigger… the one that predicted the Tech Crash as well as the Great Financial Crisis… is on a confirmed SELL signal for the first time since 2008.
If you’ve yet to take steps to prepare for what’s coming, we just published a new exclusive special report How to Invest During This Bear Market.
It details the #1 investment to own during the bear market as well as how to invest to potentially generate life changing wealth when it ends.
I warned and warned and then warned some more… that the market rally was NOT to be trusted.
The next leg down in this bear market has just begun. And Private Wealth Advisorysubscribers couldn’t be happier.
As I write this, our three CRASH trades designed to profit from a market meltdown are all EXPLODING HIGHER!
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Frankly, this is a ridiculous amount of material to offer for just $4.99…
Heck, the book alone is worth $9.99, and you’re getting FREE shipping on it!
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Don’t miss out on this opportunity. Because it won’t be around much longer. And you’ll regret not taking advantage of it… especially as the market breaks down to new lows.
This is a big deal as historically high yield credit leads stocks.
Indeed, high yield credit bottomed in October 2022 (purple circle in the chart below) a full two weeks before stocks did (blue circle in the chart below).
Now high yield credit is telling us stocks are set to drop. According to high yield credit, the S&P 500 should already be at 3,900 a full 100 points lower.
Oh… and by the way… our proprietary Bear Market Trigger… the one that predicted the Tech Crash as well as the Great Financial Crisis… is on a confirmed SELL signal for the first time since 2008.
If you’ve yet to take steps to prepare for what’s coming, we just published a new exclusive special report How to Invest During This Bear Market.
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It’s been heading towards one for years… but the massive rise in Treasury yields may finally be the match that lights the fuse.
I’ve written extensively about the rise in Treasury yields over the last few weeks. I’ve primarily done this from the perspective of yields rising due to inflation… which triggered the bear market in stocks.
However, it’s worth noting that this rise in yields has another far more systemic consequence. That is: the U.S. is now paying a WHOLE LOT more on its debt.
Consider the following…
On Monday, the U.S. issued $48 billion worth of six months T-Bills.
This time last year, based on where yields were, the U.S. would pay just ~$180 million in interest on these bonds.
Today, it’s going to end up paying ~$1.3 BILLION.
This is just one example. But this issue will apply to ALL new debts the U.S. issues going forward: higher rates will mean greater debt payments.
And bear in mind, the U.S. has over $31 trillion in debt outstanding… and is adding to this mountain via its $1+ TRILLION deficit this year.
So we’re talking about greater debt payments on a mountain of debt that will need to be rolled over or paid back sometime in the near future.
Meanwhile, investors are piling into stocks as if a new bull market has just begun. Despite the 20% drop last year, stocks continue to trade at a market cap to GDP of 150%+. To put this into perspective, it is roughly the same level that the markets hit relative to GDP at the PEAK OF THE TECH BUBBLE!
Oh… and by the way… our proprietary Bear Market Trigger… the one that predicted the Tech Crash as well as the Great Financial Crisis… is on a confirmed SELL signal for the first time since 2008.
If you’ve yet to take steps to prepare for what’s coming, we just published a new exclusive special report How to Invest During This Bear Market.
It details the #1 investment to own during the bear market as well as how to invest to potentially generate life changing wealth when it ends.
The Fed is trying to fight inflation by raising rates… but low rates were NOT what triggered inflation: rampant money printing and supply chain issues were the reason inflation ignited.
Some historical perspective…
Between 2008 and 2014, the Fed printed roughly $3 trillion to combat the Great Financial Crisis and its aftermath. The Fed printed that same amount in six months in 2020. And it would ultimately print a total of ~$5 trillion in just 24 months.
That’s correct, during the pandemic, the Fed printed nearly DOUBLE the amount of money that it printed in response to the Great Financial Crisis. And the Fed did this in 1/3 of the time (two years vs. six years).
The Fed was not the only one.
In fact, compared to what the Federal Government did, the Fed looked like a bunch of money printing/ spending amateurs. The Federal Government spent ~$6 in 2020 ALONE. It then spent another $1.9 trillion in 2021, for a total of roughly $8 TRILLION in two years.
Who would have thought that printed/ spending $13 TRILLION (61% of U.S. GDP) in 24 months would ignite inflation!?!
So what is the Fed’s response to all of this?
Raise rates from 0.25% to 4.75% while draining a measly $500 billion in liquidity from the system.
That’s right, the Fed believes it can rein in the inflation that was created by printing/spending $13 TRILLION by raising rates a little over 4%… and shrinking its balance sheet by 6%.
Give me a break.
So again, the Fed is playing a dangerous game today. Every month that it continues messing around inflation becomes more embedded in the financial system.
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The stock market is primed for another major leg down.
Why?
Treasury yields are spiking again.
The yield on the 2-Year U.S. Treasury has exploded higher… blasting through its previous high of 4.72%. It is now closing in on 5%.
Bear in mind, it was just 1.25% this time last year.
Why does this matter?
The ENTIRE collapse in stocks thus far in this bear market has been due to Treasury yields spiking. Investors used to collect 0.25% “risk free” from these bonds. They can now get almost 5%.
As a result of this, no one is willing to pay 20-22 times forward earnings for growth from stocks. Instead they’re paying just 16-18 times forward earnings. And by the look of things it will soon be lower than that. Treasury yields keep rising… so stocks will keep falling.
This is the kind of environment in which crashes can happen. The Fed is rapidly losing credibility. And investors have been suckered into believing the “worst” is behind them: they poured $1.5 billion into stocks every day in January. And they did this at a time when my proprietary Crash Trigger is now on the first confirmed “Sell” signal since 2008.
This signal has only registered THREE times in the last 25 years: in 2000, 2008 and today.
If you’ve yet to take steps to prepare for what’s coming, we have published an 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.
This report is usually $250, but we’re giving away 100 copies for FREE to those who sign up for our free daily market commentary.
To pick up one of the remaining copies, use the link below…
The Fed has now made what would be its second “career ending” mistake if it operated in the real world.
The first such mistake concerned its ludicrous claim that inflation was “transitory” throughout 2021- 2022. Anyone who bothered doing any real research knew that argument was total nonsense… yet somehow the Fed with its 400 researchers and analysts failed to get it right.
In the real world, someone in a major position (Fed Chair or multiple Fed Presidents) would have been fired for this degree of incompetence. But we’re talking about the Fed here… which exists in some fantasy land in which you can blow up the financial system/ economy and still keep your job.
Which brings us to the Fed’s second “career ending” level mistake… believing that inflation was under control because some highly manipulated data suggested it was.
In December, the official inflation measure, the Consumer Price Index (CPI) recorded a month over month pace of -0.1%. Since October had been 04% and November had been 0.2%, the Fed took this to mean that “disinflation” had arrived. Fed Chair Powell used that word close to a dozen times during the Fed’s February press conference.
The only problem with this was that the CPI is a notoriously AWFUL measure of inflation… and is prone to multiple revisions. I knew that. Most analysts knew it. It is truly staggering that the Fed would NOT know it. And yet, that seems to be the case as the Fed fell for this nonsense and began slowing the speed of its rate hikes down to 0.25% in early 2023.
December’s CPI has since been revised to 0.1%. November and October’s were also revised higher. And January’s clocked in at 0.5% month over month. That’s inflation of 6% on an annualized basis.
Bonds have woken up to the fact the Fed has lost the plot. The yield on the 2-Year U.S. Treasury has erupted higher taking out its former highs with ease. The Fed will very likely be forced to INCREASE the pace of its rate hikes to 0.5% or even higher in the coming months.
This is the kind of environment in which crashes can happen. The Fed is rapidly losing credibility. And investors have been suckered into believing the “worst” is behind them: they poured $1.5 billion into stocks every day in January. And they did this at a time when my proprietary Crash Trigger is now on the first confirmed “Sell” signal since 2008.
This signal has only registered THREE times in the last 25 years: in 2000, 2008 and today.
If you’ve yet to take steps to prepare for what’s coming, we have published an 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.
This report is usually $250, but we’re giving away 100 copies for FREE to those who sign up for our free daily market commentary.
To pick up one of the remaining copies, use the link below…
I keep hearing from supposed gurus and commentators (not to mention the White House) that inflation is on the decline… but whenever I go to the grocery store or try to hire someone to fix something at my house or do just about anything other than pay for gas… the price is UP.
Who am I to believe? The establishment or my own eyes and wallet?
This is a MAJOR issue today in America… we are told all the time that something is a certain way… only to find out that it’s not like that at all. And the idea that inflation is going away is one MAJOR lie that hits close to home since it affects our incomes and our lives on a daily basis.
I’ve been one of the few people stating that inflation is not declining for months now. In fact, the only reason the data even rolled over at all was because energy prices fell because the Biden administration dumped 250 MILLION barrels of oil on the markets.
All that accomplished was about three months of declining energy prices. Because the bond market just called “BS” on the idea that inflation is under control.
To whit… the yield on the 2-Year U.S. Treasury… which the Fed tracks to determine where rates need to go… is SPIKING again and about to take out its former highs! This tells us pint blank that inflation is back and if anything the Fed will need to be MUCH MORE aggressive to stop it.
And despite this… and the economy rolling over… and inflation NOT being on the decline… investors poured $1.5 BILLION per day into stocks last month. In fact, from what I can tell, investors are MORE bullish today than they were a year ago! These folks BELIEVE the lies they are being told!
This is the kind of environment in which crashes can happen.
Indeed, my proprietary Crash Trigger is now on the first confirmed “Sell” signal since 2008.
This signal has only registered THREE times in the last 25 years: in 2000, 2008 and today. I’ve illustrated them in the chart below.
The clock is ticking on the markets today… just like it was in 2000 and 2008. Many investors will lose everything… but you don’t have to be one of them.
If you’ve yet to take steps to prepare for what’s coming, we have published an 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.
This report is usually $250, but we’re giving away 100 copies for FREE to those who sign up for our free daily market commentary.
To pick up one of the remaining copies, use the link below…
Yesterday I wrote about the egregious levels of froth that have returned to the financial system.
By quick way of review:
1) Investors poured $1.5 billion into stocks per day in January.
2) Meme stocks and insolvent garbage tech plays are exploding higher by 20%, 30% even 100%+ in days.
3) Financial conditions are now LOOSER than they were before the Fed started raising rates in March of 2022.
Today, I’d like to share a chart that illustrates this situation to perfection. It’s alleged to be Warren Buffett’s favorite means of valuing the stock market. In fact, Buffett used this indicator to avoid going anywhere near stocks during the Tech Bubble in the late 1990s.
I’m talking about the total stock market’s capitalization as a percentage of the U.S.’s Gross Domestic Product.
The single most important aspect of this chart is the fact that in spite of stocks collapsing 20% last year… this indicator is STILL HIGHER than it was at the PEAK of the Tech Bubble.
Anyone who claims this bear market is over and that the Fed’s work is done is out of their minds. The stock market is now MORE overvalued relative to the economy than it was at the absolute peak of the Tech Bubble.
I fully believe the stock market is going to crash. My proprietary Crash Trigger is on a confirmed “SELL” for the first time since 2007. The only other time it has signaled in the last 25 years was in 2000, right before the Tech Crash.
If you’ve yet to take steps to prepare for what’s coming, we have published an 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.
This report is usually $250, but we’re giving away 100 copies for FREE to those who sign up for our free daily market commentary.
To pick up one of the remaining copies, use the link below…
Everywhere you look, there are major signs of froth.
1) Investors poured $1.5 billion into stocks per day in January.
2) Meme stocks and insolvent garbage tech plays are exploding higher by 20%, 30% even 100%+ in days.
3) Financial conditions are now LOOSER than they were before the Fed started raising rates in March of 2022.
4) The c-r-y-p-t-o pumpers are back… promoting their scams as the “answers” to everyone’s problems.
Put simply, it’s as if the Fed never even attempted to deflate the bubble of 2021-2022. If it weren’t for the fact Treasuries now yield 5%, you’d be hard pressed to find any signs that the Fed has accomplished anything of note.
Speaking of Treasury yields, the yield on the 2-Year U.S. Treasury has broken out of its downtrend. It is now probing its former highs. If it breaks here… GOOD NIGHT.
The Fed is going to have to get a LOT more aggressive to reduce this level of froth and asset price inflation from the financial system. Put simply, the Fed will need to tighten things until something MAJOR breaks.
This opens the door to a SEVERE recession later this year. And that will mean stocks crashing to lows that no one anticipates.
If you’ve yet to take steps to prepare for what’s coming, we have published an 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.
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Throughout this week, I’ve pounded the table on the fact that the economic data the U.S. government has put out recently is a huge pile of BS.
We’ve covered everything from the jobs data, to inflation, and the recent retail sales results. By quick way of review, the highlights from my research are:
1) The reason the U.S. economy supposedly “added” 500,000+ jobs in January was due to an accounting gimmick, NOT because those jobs were actually created.
2) The Bureau of Labor Statistics (BLS) openly admits this, citing that without its “population control effect” the economy added… 84,000 jobs.
3) The only part of the inflation data that has dropped has been in Energy prices.
4) The reason Energy prices dropped was because the Biden administration dumped over 250 MILLION barrels of oil in the last two years.
5) Retail sales are booming because of INFLATION (things cost more), not because of consumer spending. The jump on credit card debt and massive decline in consumer savings confirms that Americans are maxing out their credit just to get by.
Perhaps the single most disturbing element of the above items is that they reveal the complete failure of the Federal Reserve to tame inflation. Indeed, according to the Taylor Rule which is widely considered one of the best indicators of where rates should be the Fed should have ALREADY raised rates to over 9% to stop inflation.
Instead the Fed has raised rates to 4.75% and is now talking about possibly one or two more rate hikes of just 0.25%.
Everywhere you look, the Fed is failing miserably at curtailing inflation.
1) Financial conditions are now as loose it not looser then they were before the Fed began tightening monetary policy.
2) Meme stock mania is back with garbage companies rallying 30%, 50% even 100% or more in the last few weeks… again just like before the Fed began tightening monetary policy.
3) The inflationary data is being revised upwards: December’s -0.1% CPI report has been revised upwards to 0.1%, November and October’s CPI numbers were also revised higher.
4) The Producer Price Index results for January 2023 were reported yesterday. They showed inflation rising 0.7% month over month. On an annualized basis this puts inflation over 9%.
And all of this is AFTER the Fed raises rates 4.5% and drains over $500 billion in liquidity from the system!
The Fed now has a choice: get serious about ending inflation and trigger a market meltdown… or face a debt crisis in the near future as bond yields roar to new highs, forcing the government to spend more and more money on debt payments.
Either way, the U.S. is heading for a crisis in the near future. And most investors are being lead like sheep to the slaughter!
On that note, we published a Special Investment Report concerning FIVE secret investments you can use to make inflation pay you as it rips through the financial system in the months ahead.
The
report is titled Survive the Inflationary Storm. And it
explains in very simply terms how to make inflation PAY YOU.
We are making just 100 copies available to the public.
In the last two days, I’ve addressed two major piles of economic BS… the jobs data from January… and the inflation data.
By quick way of review…
1) The reason the U.S. economy supposedly “added” 500,000+ jobs in January was due to an accounting gimmick, NOT because those jobs were actually created.
2) The Bureau of Labor Statistics (BLS) openly admits this, citing that without its “population control effect” the economy added… 84,000 jobs.
3) The only part of the inflation data that has dropped has been in Energy prices.
4) The reason Energy prices dropped was because the Biden administration dumped over 250 MILLION barrels of oil in the last two years.
Today we’re addressing a new pile of BS… the January retail sales.
In case you missed it, January’s retail sales were fantastic, up 3% month over month.
Even more incredibly all 13 retail categories rose month over month. This is the first time this happened since the economy emerged from the depths of the pandemic shutdowns.
The economy must be roaring right!
WRONG.
The retail sales were NOT adjusted for inflation.
Inflation is somewhere between 6.4% and 9% depending on the data you track.
So the retail sales were actually NEGATIVE when you account for inflation. Or put simply, this supposed retail “growth” was all due to the prices of things rising.
Think of it this way.
Let’s say your boss gives you a 10% raise. Now let’s say that inflation is also 10%.
Did you really get a raise?
No… your income is precisely where it was before relative to your cost of living.
THAT’s what is happening in retail. Everythings costs more… so the sales look stronger.
If you don’t believe me, consider the below chart of credit card debt. Americans are maxing out their credit cards…
While eating into their savings…
Put simply, the retail numbers were total BS. Americans are spending more just to get by because of inflation… not because the economy is booming.
And yet… investors are buying stocks based on this BS!
Oh… and by the way… our proprietary Bear Market Trigger… the one that predicted the Tech Crash as well as the Great Financial Crisis… is on a confirmed SELL signal for the first time since 2008.
If you’ve yet to take steps to prepare for what’s coming, we just published a new exclusive special report How to Invest During This Bear Market.
It details the #1 investment to own during the bear market as well as how to invest to potentially generate life changing wealth when it ends.
Yesterday I wrote to you about the complete and utter BS that was the January jobs report.
By quick way of review…
1) The reason the U.S. economy supposedly “added” 500,000+ jobs in January was due to an accounting gimmick, NOT because those jobs were actually created.
2) The Bureau of Labor Statistics (BLS) openly admits this, citing that without its “population control effect” the economy added… 84,000 jobs.
Today I’d like to talk to you about a different type of economic BS… this time concerning inflation.
The prevailing myth in the media is that inflation is coming down.
This is complete and utter BS. The only data that has fallen has been in energy prices (well, that and used cars). And the reason energy has fallen is because the Biden administration dumped over 250 MILLION barrels of oil in the last two years.
If you don’t believe me, here’s the data straight from the inflation report announced yesterday. Where in this table are there any negative numbers (meaning inflation is turning down) for the months of November and December outside of energy (and used cars)?
“Yeah Graham, but the pace of inflation is slowing, this is a big win!” some media stooges might be saying.
Let me be blunt here…
The Fed raised rates from 0.25% to 4.75% in less than a year… while also draining $500 BILLION in liquidity from the system… and all it did was SLOW the pace at which prices are still RISING?
And that is a big win?
Oh and by the way, the BLS just changed its methodology for how it calculates inflation this year for some odd reason (hint: political pressure from the White House). If we calculated January’s inflation numbers using the methodology that was applied in December (a mere 30 days before) inflation would be rising at an annualized rated of…
9.6%.
WHOOPS!
Again, the inflation problem is NOT going away. What’s happening is that the government is spewing out complete and utter BS and pretending that the BS is reality.
It’s not. It’s BS. I know it. You know it. And yes, they know it… but it doesn’t look good if you keep spending trillions of dollars while inflation remains at a 40 year high, does it?
And once again, the most disturbing aspect of all of this is that Americans are investing their hard earned dollars based on this BS.
On that note, we published a Special Investment Report concerning FIVE secret investments you can use to make inflation pay you as it rips through the financial system in the months ahead.
The
report is titled Survive the Inflationary Storm. And it
explains in very simply terms how to make inflation PAY YOU.
We are making just 100 copies available to the public.
It’s catching everyone by surprise. And smart investors should read this article carefully to make sure they don’t miss out…
It’s a bull market in economic BS.
Before proceeding I want to stress that this is not a left vs right issue, nor is it Democrat vs Republican.
It’s reality vs. total fantasy.
The total fantasy is the notion that the economy is doing well right now. And one of the prime examples is the latest jobs numbers which claim the U.S. economy added 500,000+ jobs last month (January 2023).
The jobs report argues that the U.S. economy added 517,000 jobs in January. It arrived at this number courtesy of the household survey which argued that 894,000 jobs were added last month.
The Bureau of Labor Statistics (BLS) then admits in the very next column that 810,000 of these jobs were added via its “Population Control Effect” AKA an accounting gimmick, NOT reality.
Remove that gimmick and the U.S. added 84,000 jobs last month.
If you don’t believe me, here’s the table from the BLS stating this reality.
How is this possible? How can the BLS add so many fake jobs to its official numbers? Simple:
1) Only 44% of those given surveys actually answer them.
2) The Bureau of Labor Statistics applies numerous gimmicks to the data in an attempt to normalize things. Perhaps this is due to political pressure, or perhaps they are incompetent. Whatever the reason, the data is a work of fiction and has a tenuous connection to reality at best.
Some of the gimmicks the BLS applied to the January jobs data.
Its seasonal adjustments added over two million people to the non-farm payrolls number for the economy in both January 2022 and January 2023. Without these adjustments, only 152 million are working, as opposed to the 155 million the official number claimed.
Similarly, the household survey was adjusted to add over 1 million people to the “employed” category. So, in December of 2022, these one million people were NOT counted as employed. In January 2023 they were, NOT because they obtained jobs, but because the BLS’ model tweaked the number higher.
Things get even wackier from there.
Part-time employment supposedly jumped by 627,000 in January 2023… despite the clear historical trend that part employment should DROP after the holidays.
The BLS also claims that only 5,000 tech workers lost their jobs in January. The real number of tech workers who lost jobs is 85,000.
Bottomline: remove all of the gimmicks and tricks, and the real economy only added 84,000 jobs last month, which is the weakest job growth in TWO YEARS.
So how was the “official” number presented to the public so positive?
The BLS updated its methodology based on new estimates from the census. Doing this meant applying its model to a MUCH LARGER number, which generated MUCH LARGER job creation.
Don’t believe me? The BLS lays it all out in clear language here. Note the words “updated, estimates, and assumption” are featured heavily here.
So again, the economy is NOT booming. What’s booming is the amount of BS the government bean-counters apply to the economic data. I fully expect much of this to be revised down in the coming months.
But what’s truly frightening?
Investors are actually BUYING STOCKS based on this stuff!
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.
