Yesterday,
I outlined how the markets are likely at a very critical point regarding inflation.
By
quick way of review:
1)
Stocks initially love inflation because it boosts results
(companies don’t report inflation-adjusted returns, so any increase in product
pricing due to inflation is instead reflected as “growth”).
2)
This love relationship eventually turns to hatred as inflation leads to higher
operating costs, which squeeze profit margins.
In
yesterday’s article, I illustrated how this played out during the last major
bout of inflation in the 1970s.
At that
time, stocks initially roared higher as inflation initially boosted corporate
results. However, by the time 1974 rolled around and inflation (as measured by
the consumer price index or CPI) hit 11%, stocks began to crash, eventually
losing ~50%.
I mention all of
this because it is highly likely that something similar is about to manifest in
the markets today.
Stocks have erupted higher on the back
of inflation, courtesy of $11 trillion in Fed QE/ fiscal stimulus from the
Federal Government between March 2020 and today.
However, inflation is now taking a turn
for the worse. And, as usual, the signs are showing up in the currency markets
first.
The Fed is in the
process of ending its QE program. Fed officials have also signaled that they
intend to raise rates three or four times this year. All of this should be
highly U.S. dollar positive.
And yet… the $USD
is breaking down.
The greenback has
taken out key support (green line in the chart below). Even worse, it’s also
broken its bull market trendline (blue line in the chart below).
This is a MAJOR signal
that the Fed’s actions are not enough. Put another way, the Fed is behind
the curve on inflation! This is extremely negative for stocks as it means inflation
is getting out of control (just like in 1974).
So, what would a similar, 1970s-style crisis look like today? The market is warning us, though few have noticed.
For those looking to prepare and
profit from this mess, our Stock Market Crash Survival Guidecan show you how.
Within its 21 pages we outline which
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We’ve now reached the point at which inflation will
become a major problem.
Inflation is not inherently bad for stocks. The reason
for this is that companies report growth in nominal terms, not
in “real” or inflation-based terms.
Think of it this way: XYZ company sells widgets for
$1.00. Then inflation hits and the company raises widget prices to $1.10. Even
if the company sells the EXACT same number of widgets,
revenues “grow” by 10%. After all, they don’t have to report that the 10% in
growth was 100% due to inflation!
This is why stocks often spike higher when inflation initially hits. We saw this during the last major bout of inflation in the early 1970s. At that time, stocks roared higher, rising 50% while CPI, which measures inflation, gradually rose to 6.3%.
However, the relationship between stocks and inflation quickly goes from love to hate once costs rise fast enough that profit margins are squeezed. To return to the 1970s, this started in 1973 as CPI hit 11%. From that point onward, stocks crashed losing almost 50%.
I bring all of this up because we are likely about to witness something similar today. Stocks have erupted higher on the back of inflation, courtesy of $11 trillion in Fed QE/ fiscal stimulus from the Federal Government between March 2020 and today.
This is the good part of inflation. And by
the look of things, it’s about to go sour. Indeed, we are getting clear signs
that costs are about to explode higher for corporations.
Profit margins are at all-time highs (there’s nowhere to go but down), while real wages (incomes adjusted for inflation) are DEEPLY negative.
Workers
are now demanding higher wages. This means higher operating
costs for corporations, which in turns means lower profit margins.
In simple terms, the clock is ticking for stocks. Sure,
they might not crash this week, but another bloodbath is coming. The markets
will soon be a sea of red. And the losses will be staggering.
The markets are warning us, but few have noticed.
The coming bust is going to be
life-changing for many people. Most will lose much if not everything. But
a small number of investors will generate LITERAL FORTUNES.
For those looking to prepare and
profit from this mess, our Stock Market Crash Survival Guidecan show you how.
Within its 21 pages we outline which
investments will perform best during a market meltdown as well as how to take
out “Crash insurance” on your portfolio (these instruments returned TRIPLE
digit gains during 2008).
To pick up your copy of this report, FREE,
swing by:
One of the oldest adages in investing is that “they don’t
ring a bell at the top.”
This is quite misleading.
While it’s true it’s impossible to predict the exact day
of a market top, what is totally false is that there are not clear signals that
a top is being made.
The clearest one of all, is the Fed aggressively tightening
monetary policy. Indeed, the last two major bear markets (2000-2003 and
2007-2009) were both triggered by the Fed.
Why?
Because the markets move in similar cycles. And for over
20 years, the most important cycle has been the following:
1) The Fed ignores clear and obvious signs of a bubble
for far too long.
2) The Fed is finally forced to act to attempt to deflate
the bubble waaaaay past the point at which a soft landing is possible.
3) The bubble bursts in spectacular fashion triggering a
crisis.
This was the case in 2000, 2007, 2018, and it’s the case
today.
Yesterday Fed Chair Jerome Powell confirmed this with the
following statement made to the U.S. Senate.
“If we see inflation persisting at higher levels, longer
than expected, if we have to raise interest rates more over time, then we
will.”
This is coming from the same Fed Chair who told the
markets for the last year that inflation was “transitory” and didn’t
require the Fed to act.
So what changed?
Inflation is now a politically toxic issue for voters.
2022 is an election year. And a CNN poll from December shows
that the the #1 issue for voters is higher prices.
In this context, the Fed is receiving tremendous pressure
from the Biden administration to stop inflation NOW. We know this because Fed
Chair Jerome Powell only changed his tune on inflation AFTER he
was nominated for a second term by President Biden.
That’s the bell.
Both the White House and the Fed want inflation killed.
This means the Fed must now act aggressively to try to stop it by hiking rates
faster and more frequently than most investors believe.
Given the Fed’s success with deflating the last two
bubbles (both instances lead to crises), what are the odds it is able to
succeed this time without a crash?
Put another way… what are the odds this time it’s any
different?
For those looking to prepare and
profit from this mess, our Stock Market Crash Survival Guidecan show you how.
Within its 21 pages we outline which
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The
markets are about to lose their “training wheels.”
And
by the look of things, it won’t be pretty.
On
March 23, 2020, during the depths of the market crash triggered by the economic
shutdowns, the Fed moved to backstop everything.
And I
do mean EVERYTHING.
The
Fed On Monday March 23nd, 2020, the Fed staged an Emergency Meeting during
which it announced that it would be expanding its $700 billion QE program to
“unlimited”… meaning it would print as much money as was needed.
It
also announced that it would be using this unlimited QE to fund various credit
facilities that would buy:
·
Mortgage-Backed Securities (MBS)
·
U.S. Treasuries
·
Corporate debt or debt issued by corporations.
·
Corporate debt-related ETFs (stock funds linked to corporate debt).
·
Municipal debt (debt issued by states, counties, and cities).
·
Certificates of Deposit (CDs)
·
Student Loans
·
Auto Loans
Since
that time, stocks have ripped higher in a near straight line…
The Fed, nearly
two years later, finally decided to its time to end the interventions. Within
eight weeks its current QE program will be over. And the Fed intends to start
raising rates soon after.
So, what will the
market look like once the Fed stops its nearly weekly interventions?
High yield credit
is already offering a preview. The Fed stopped intervening in this market weeks
ago.
The signs are
clear… another bloodbath is just around the corner.
For those looking to prepare and profit from this mess, our Stock Market
Crash Survival Guidecan show you how.
Within
its 21 pages we outline which investments will perform best during a market meltdown
as well as how to take out “Crash insurance” on your portfolio (these
instruments returned TRIPLE digit gains during 2008).
To
pick up your copy of this report, FREE, swing by:
The technical damage
of the last week has been severe.
The S&P 500
broke below critical support at 4,705 with heavy selling this week. That’s bad
news. Even worse, the market has failed to
reclaim that level during yesterday’s bounce.
This means that
what used to be support is now resistance. The fact the bulls couldn’t reclaim
this level means we are going lower.
How much lower?
Breadth is telling
us to expect 4,600.
High yield credit says
it will be even lower at 4,500.
The signs are
clear… another bloodbath is just around the corner.
For those looking to prepare and profit from this mess, our Stock Market
Crash Survival Guidecan show you how.
Within
its 21 pages we outline which investments will perform best during a market
meltdown as well as how to take out “Crash insurance” on your portfolio (these
instruments returned TRIPLE digit gains during 2008).
To
pick up your copy of this report, FREE, swing by:
Ignore the goldilocks crowd, the inflationary tidal wave is only
just getting started.
Everyone likes to talk about inflation, but very few people
actually understand it. This goes for central bankers as well as the talking
heads in the financial media.
Wait a minute… aren’t central bankers supposed to be EXPERTS on
inflation?
Nope. And they’ve admitted as much publicly.
Janet Yellen, the former Fed Chair who now serves as Treasury
Secretary to the Biden Administration admitted back in September 2017 that the
Fed really has no idea how inflation works.
Speaking to the National Association for Business Economics in
Cleveland on Setpmerb 26th 2017, then Fed Chair Yellen stated the
following whopper:
My colleagues and I may have misjudged the strength of the labor
market, the degree to which longer-run inflation expectations are consistent
with our inflation objective, or even the fundamental forces driving
inflation.
This is central banker speak for “we really don’t
know what we’re talking about when it comes to inflation and what causes
it.”
Bear in mind… this was YEARS before the real inflationary tidal
wave hit in 2021. Unfortunately, it appears the Fed hasn’t figured much out
concerning inflation during that time.
To wit, in October of this year, after claiming that inflation
was “transitory” for months and months, current Fed Chair Jerome Powell finally
admitted that inflation is “well above target” and that “This
is a different situation from what the new Fed framework is designed to
address.”
At the end of the day, the current inflationary tidal wave is
quite simple.
Regular Demand + Fewer Goods and Services =HOT
INFLATION
Americans are returning to normal life as the economy reopens.
And in some areas of the economy, demand is exploding higher as people have
decided to stop putting off their dream purchases due to the “You Only Live
Once (YOLO)” mentality the shutdowns helped foster.
This demand is not being met by supply.
Why?
Because shutting down the economy disrupted the supply chain and
caused a major labor shortage. Having been paid to not work
for the better part of 18 months, many Americans have decided not to go back to
work… or to change careers from their previous work entirely.
This is happening in numerous sectors of the economy.
There are 8.6% fewer coal miners working today than there were
BEFORE the pandemic. The oil industry is experiencing an even worse situation:
only 1/3rd of the 100,000 employees let got by the industry in 2020 have
returned to work.
Oil is a SYSTEMIC item for the economy. Oil or oil
derivatives are present in lipstick, Vaseline, solar panels, polyester (stain
resistant clothes), chewing gum, crayons, Aspirin, pantyhose, sneakers,
detergent, CDs, concrete/cement, plastics of any kind, food additives,
fertilizers, pesticides, candles, milk cartons, pen ink, and more.
So you can imagine the impact that fewer oil employees will have
on things.
Dock workers aren’t returning to the workforce either. As I
write this there are dozens of cargo ships sitting off the coast of the U.S.
waiting to be unloaded. And many of those containers that are unloaded
don’t go anywhere because the trucking industry is also experiencing a labor
shortage.
Again, Regular Demand + Fewer Goods and Services =HOT
INFLATION
And the craziest thing about this whole mess is that the same
policymakers who created it, can’t do a thing to fix it.
The Fed, which has printed over $4 TRILLION to prop up the
financial system can’t print new workers keen to return to work, keeping
interest rates at zero doesn’t make oil prices come down, and spending hundreds
of billions of dollars on QE per month doesn’t result in cargo ships being
unloaded and life returning to normal.
Similarly, the DC crowd has no idea how to fix the mess they
made.
The Department of Energy Secretary, the highest official for the
energy industry in the U.S. doesn’t even know how many barrels of
oil the U.S. consumes per day. The Secretary of Transportation is
on paternity leave during the single greatest supply chain
crisis in decades. The President thinks releasing 50 million barrels of oil
from the Strategic Petroleum Reserve (SPR) over several months will lower gas
prices… when the U.S. consumes 22 million barrels of oil per day.
It would be hilarious if it wasn’t so tragic. And the reality is
that it has unleashed an inflationary storm that is giving investors a ONCE IN
A LIFETIME opportunity to get filthy rich from government incompetence.
During the last major bout of inflation in the 1970s, smart
investors locked in gains in the QUADRUPLE digits (1,000% or higher). And THAT
version of inflation was the kind the Fed could stop!
So you can imagine the profit
potential of this crisis today.
I outline five investments that could explode higher as
inflation rips through the financial system in a Special Investment Report titled Survive the
Inflationary Storm.
Yesterday, I outlined the dark truth about the economic shutdowns of 2020.
That truth?
That the shutdowns have unleashed an inflationary tidal wave.
Central bankers have been trying to create inflation for years. They’ve printed over $20 trillion in new money. And they’ve cut interest rates over 800 times. But inflation never fully showed up.
Then we shut down the economy and BOOM! inflation appeared.
Why?
Because shutting down the economy damaged/broke supply chains. And forcing people to stay home while scaring the heck out of them with a virus made them decide to not go back work even when the “all clear” was signaled. In any parts of the economy (coal mining, oil and gas, shipping/ trucking, etc.) people have decided to change career paths entirely.
As a result of this, today we are facing both a supply chain crisis and a labor shortage.
BOTH are inflationary.
Why?
Because both mean fewer goods and services are available.
Meanwhile, demand is returning to normal as the economy reopens. In some areas, demand is exploding higher as people have decided to stop putting off their dream purchases due to the “You Only Live Once (YOLO)” mentality the shutdowns helped foster.
Regular Demand + Fewer Goods and Services =HOT INFLATION
The craziest thing about this whole mess is that the same policymakers who created it, can’t do a thing to fix it.
The Fed, which has printed over $4 TRILLION to prop up the financial system can’t print new workers keen to return to work, keeping interest rates at zero doesn’t make oil prices come down, and spending hundreds of billions of dollars on QE per month doesn’t result in cargo ships being unloaded and life returning to normal.
Similarly, the DC crowd has no idea how to fix the mess they made.
The Department of Energy Secretary, the highest official for the energy industry in the U.S. doesn’t even know how many barrels of oil the U.S. consumes per day. The Secretary of Transportation is on paternity leave during the single greatest supply chain crisis in decades. The President thinks releasing 50 million barrels of oil from the Strategic Petroleum Reserve (SPR) over several months will lower gas prices… when the U.S. consumes 22 million barrels of oil per day.
It would be hilarious if it wasn’t so tragic. And the reality is that it has unleashed an inflationary storm that is giving investors a ONCE IN A LIFETIME opportunity to get filthy rich from government incompetence.
During the last major bout of inflation in the 1970s, smart investors locked in gains in the QUADRUPLE digits (1,000% or higher). And THAT version of inflation was the kind the Fed could stop!
So you can imagine the profit potential of this crisis today.
I outline five investments that could explode higher as
inflation rips through the financial system in a Special Investment Report titled Survive the
Inflationary Storm.
It is highly likely
fund managers/ the few remaining traders on Wall Street will gun the markets
higher to end 2021 on the highest possible note.
But by all looks,
2022 will be the year of the next major crisis.
The Fed is beginning
to tighten monetary policy. Sure, it’s highly unlikely the Fed will even be
able to normalize monetary conditions completely, but the markets will no
longer be receiving $1.4 TRILLION in liquidity from the Fed in 2022.
Additionally, the
days of massive fiscal spending are over. It’s possible the Biden administration
will be able to pass a watered-down Build Back Better bill of $1.8 trillion in
2022… but the days of $3-$5+ trillion in stimulus spending we experienced in
2020 and 2021 are over.
So that’s another
$3+ trillion in free money the system won’t be receiving.
Add it all up, and
you’re talking about the market no longer receiving $5 trillion or so in free
money/ liquidity in 2022.
If you think this
won’t have an impact, you’re mistaken. It is not coincidence that stocks went
into BUBBLE MODE when the Fed and Uncle Sam started throwing around trillions
of dollars in response to the C-O-V-I-D 19 pandemic.
Every time the Fed
or Uncle Sam have withdrawn easy money conditions, stocks have visited their
50-month moving average. Every. Single. Time.
As I write this, the 50-MMA is at 3,200. That’s a full 30% lower than where stocks are trading today.
Moreover, it’s quite possible the markets will be entering a prolonged
BEAR MARKET in 2022… a time in which stocks lose 50% or more over the course
of months.
The coming bust is going to be life-changing for many people. Most
will lose much if not everything. But a small number of investors will generate
LITERAL FORTUNES.
For those looking to prepare and profit from this mess, our Stock Market
Crash Survival Guidecan show you how.
Within
its 21 pages we outline which investments will perform best during a market
meltdown as well as how to take out “Crash insurance” on your portfolio (these
instruments returned TRIPLE digit gains during 2008).
To
pick up your copy of this report, FREE, swing by:
Stocks
are bouncing from yesterday’s lows, but the technical damage from yesterday’s
bloodbath is severe.
The
S&P 500 was stopped by its 50-day moving average (DMA) at 4,607 (see red
line in the chart below). Unless the S&P 500 can break above this line,
we’re in for MORE downside.
What’s REALLY concerning is the fact that unlike stocks, high
yield credit (red line in the chart below) NEVER even revisited its former
highs. Instead it’s already turning back down.
Remember,
this is THE market leader that signaled the first leg down on this plunge.
This strongly suggests stocks will be revisiting the lows. And
unfortunately, that’s the BEST outcome based on what I’m seeing.
Consider
that breadth, which typically leads the broader market, barely bounced at all!
And it’s already at NEW lows. Based on this alone, we should see the S&P
500 down in the 4,300s in the near future.
Put another way, another bloodbath is coming. And
when it hits, smart investors will cash in while everyone else gets taken to
the cleaners.
For those looking to prepare and profit from this mess, our Stock Market
Crash Survival Guidecan show you how.
Within
its 21 pages we outline which investments will perform best during a market
meltdown as well as how to take out “Crash insurance” on your portfolio (these
instruments returned TRIPLE digit gains during 2008).
To pick
up your copy of this report, FREE, swing by:
It might not be tomorrow, next week or even next month, but it will be truly life changing for most investors.
How do we know this?
Because the current bubble is so insane, so out of control, that when it bursts it will make 2008 look like a picnic.
Consider that:
Options trading volume (a sign of speculation) is exponentially higher than it was during the Tech Bubble.
Crypto currencies that were invented as jokes trade at tens of billions of dollars.
Tesla (TSLA) a $1 trillion company, trades like a penny stock rising or falling 10+% in a single day.
People are selling Non-Fungible Tokes (NFTs) of farts, and other garbage… and making significant money.
“Meme stocks” or stocks that are traded for ironic/ humorous purposes rise triple digits in a single day.
Former President Trump’s Special Purpose Acquisition Company (SPAC) rose to a value of $5 billion despite having no business or operations.
And what is the Fed’s answer to all of this?
The Fed is going to keep rates at ZERO until at least the middle of 2022. And between now and then, it’s going to print another $90 billion in QE ($60 billion in QE in January, then another $30 billion in February and finally no QE in March).
Put another way the Fed believes that because it is printing less money, somehow this is going to make investors become rational/ deflate the bubble without inducing a crash. There was a time, before 2008, in which the Fed didn’t do ANY QE at all, but those days are long gone.
So where does this us?
Official inflation metrics show it clocking it at 6.8%, while REAL inflation is somewhere in the ballpark of 9%. The Fed has rates at zero and won’t raise them until the middle of 2022.
And this is happening:
Again, a crisis is
coming. And it’s going to make 2008 look like a picnic.
For those looking to prepare and profit from this mess, our Stock Market Crash Survival Guide can show you how.
Within
its 21 pages we outline which investments will perform best during a market meltdown
as well as how to take out “Crash insurance” on your portfolio (these
instruments returned TRIPLE digit gains during 2008).
To
pick up your copy of this report, FREE, swing by:
I’ve noted many times in the past that the official inflation
measure, the Consumer Price Index, or CPI, is gimmicked to the point
of fiction.
The reason for this is simple: this is the number everyone looks
at. And if it reflected reality, Americans would realize that “quality of
life” in this country has been in decline for the last 40 years as real
costs of living have dramatically outpaced the rise in incomes.
Remember, if incomes do not rise at the same pace as inflation,
your real cost of living is rising. Ever wonder why back in the 1950s most
families got by on one income, while today both parents work and most families
have massive mortgages, over $10K in credit card debt, and $50K in student
loans?
Wonder no more!
What does this have to do with today?
Well, the official inflation data point, the CPI, claims
inflation is at 6.8%. This is a 40 year high. But because CPI is
gimmicked to UNDER-state inflation, the REAL rate of inflation is much, much
worse.
If you don’t believe me, take a look at the Producer Prices
Index (PPI), the CPI’s less known, less watched, but more accurate
cousin.
Unlike CPI, which is crafted by bean counters at the government,
PPI is based on actual information from actual producers of goods and services
who must adjust their costs based on inflation or lose profits in the real
economy…
Which is why the latest PPI data point is catastrophically
bad, clocking in at 9.6% year over year (YoY) for the month of
November.
Yes, 9.6% as in almost double digits.
Suffice to say, the Fed is WAAAAAAAAAYYYY behind the curve on
inflation.
How high will the Fed need to raise rates to stop this? 2%? 4%?
More?
More importantly for the financial system, how will the mountain
of debt that was issued based on interest rates of ZERO, going to react to the
Fed tightening monetary conditions.
Some $2 trillion in corporate debt was issued in the U.S. last
year alone. The U.S. Government issued another $5+ trillion. So
right off the bat, you’ve got $7+ trillion in debt that was issued while rates
were effectively at zero.
How is this going to adjust to rates at 1%? 2%? Higher?
For bonds with yields this low, every time the Fed raises rates,
there is a dramatic impact. Remember, the yield on U.S. Treasuries represent
the “risk free” rate of return against which the entire financial system is
valued.
So, when the Fed raises rates, that $7+ trillion must adjust
accordingly. This means those bond prices FALL and their yields RISE. And if
they rise enough, the investors begin to default.
And we’re just getting started here.
As Lawrence McDonald recently noted, globally there is
$30+ TRILLION MORE debt with sub-2% yields than there was the last time the Fed
attempted to raise rates.
How is all that debt going to handle higher rates? What if the
Fed has to raise rates way over 2% to stop inflation? What happens to the
mountain of debt that was created BASED on yields being at 0%?
If you think the Fed can navigate this successfully, I would
like to point out that the Fed wasn’t able to deflate the Tech Bubble nor the
Housing Bubble without creating full-scale crises.
What are the odds the Fed can successfully deflate this current
Everything Bubble… which is exponentially larger than the first two?
Look at the below chart and you tell me.
For those looking to prepare and profit from this mess, our Stock Market Crash Survival Guide can show you how.
Within
its 21 pages we outline which investments will perform best during a market meltdown
as well as how to take out “Crash insurance” on your portfolio (these
instruments returned TRIPLE digit gains during 2008).
To
pick up your copy of this report, FREE, swing by:
The
Fed Finally Created Inflation… And Now It’s Going To Blow Up the Financial
System
By Graham Summers, MBA
The
Fed finally succeeded in creating its much-desired inflation… and the great
irony is that it will likely blow up the financial system.
For
decades now the Fed argued that it should keep interest rates at zero… and
continue printing hundreds of billions of dollars, because it wanted inflation
to hit “2%.”
This
is why the Fed did what it did after the Tech Crash, the Housing Crash, and
the C-O-V-I-D-19 Crash. Anytime someone
pointed out that the Fed’s monetary policies were creating another, even larger
bubble, the Fed told us, “We need to keep doing what we’re doing until
inflation hits 2%!”
The
whole thing was a joke. After all, how can you create inflation of 2%, and make
sure it stays at 2%? Inflation isn’t like a car where you can
hit the desired speed and then press “cruise control.”
Regardless,
the Fed has spent well over $7 trillion pursuing this
goal. And now that inflation has arrived, it’s clear the Fed has no idea what
it’s doing.
The
official inflation numbers claim inflation is at 6.8%. However, everyone,
including the Fed, knows this is fiction.
The
real inflation number is well over 9%. The Bureau of Labor Statistics get away
with stating that inflation is just 6% by claiming housing/ shelter prices are
only up a mere 3% over the last 12 months. The reality, using actual
data shows housing prices are up 19% and apartment rents are up over 8%.
Put
simply, real inflation is much higher than 6%. But even the 6% inflation number
is systemically problematic.
The
Fed now claims it needs to tighten monetary conditions to stop the very
inflation it has been trying to create. Stopping inflation means the Fed needs
to raise rates. But the world is awash in debt and quite a bit of it
was issued based on rates being at EXTRAORDINARY lows.
Some
$2 trillion in corporate debt was issued in the U.S. last year alone. The U.S.
Government issued another $5+ trillion. So right off the bat, you’ve
got $7+ trillion in debt that was issued while rates were effectively at zero.
How
is this going to adjust to rates at 1%? 2%? Higher?
For
bonds with yields this low, every time the Fed raises rates, there is a
dramatic impact. Remember, the yield on U.S. Treasuries represent the “risk
free” rate of return against which the entire financial system is valued.
So,
when the Fed raises rates, that $7+ trillion must adjust accordingly. This
means those bond prices FALL and their yields RISE. And if they rise
enough, the investors begin to default.
And
we’re just getting started here.
As
Lawrence McDonald recently noted, globally there is $30+ TRILLION MORE debt with
sub-2% yields than there was the last time the Fed attempted to raise rates.
How
is all that debt going to handle higher rates? What if the Fed has to raise
rates way over 2% to stop inflation? What happens to the mountain of debt that
was created BASED on yields being at 0%?
If
you think the Fed can navigate this successfully, I would like to point out
that the Fed wasn’t able to deflate the Tech Bubble nor the Housing Bubble
without creating full-scale crises.
What
are the odds the Fed can successfully deflate this current Everything
Bubble… which is exponentially larger than the first two?
Look at the below chart and you tell me.
For those looking to prepare and profit from this mess, our Stock Market
Crash Survival Guidecan show you how.
Within
its 21 pages we outline which investments will perform best during a market
meltdown as well as how to take out “Crash insurance” on your portfolio (these
instruments returned TRIPLE digit gains during 2008).
To
pick up your copy of this report, FREE, swing by:
Inflation is soaring. And the Fed has signaled that it is
shifting its focus from growth (employment) to inflation. Specifically, after
20 months of claiming inflation is “transitory” and not a problem, Fed Chair
Jerome Powell has publicly stated that he no longer believes inflation is
“transitory” and that the Fed can consider wrapping up its taper “a few months
sooner.”
This means the Fed will be tapering QE and hiking interest rates
sooner than expected.
There’s just one small problem.
As Lawrence McDonald recently noted, there is over $30 TRILLION
more in debt trading at yields lower than 2% than there was the last time the
Fed attempted to raise rates.
For bonds with yields this low, every time the Fed raises rates,
there is a dramatic impact. Remember, the yield on U.S. Treasuries are the
“risk free” rate of return against which the entire financial system is valued.
So, when the Fed raises rates, all debt, including that $30+
trillion must adjust accordingly. This means those bond prices FALL and
their yields RISE. And if they rise
enough, the investors begin to default.
Put another way, this time around, there is a $30 TRILLION+
ticking bomb sitting there. And the Fed is going to start playing with matches
right next to it… hoping the fuse doesn’t light by mistake.
Given that Fed’s attempt in dealing with the Tech Bubble and the
Housing Bubble resulted in full-scale crises…what are the odds the Fed can
successfully deflate this current Everything Bubble… which is
exponentially larger than the first two?
Look at the below chart and you tell me.
It is HIGHLY likely another bloodbath is
coming to the markets.
It’s quite possible the markets will be entering a prolonged BEAR
MARKET… a time in which stocks lose 50% or more over the course of months.
The coming bust is going to be life-changing for many people. Most
will lose much if not everything. But a small number of investors will generate
LITERAL FORTUNES.
Let me be blunt here, if
you’re not taking steps to prepare for what’s coming, NOW is the time to do so.
For those looking to prepare and profit from this mess, our Stock Market
Crash Survival Guidecan show you how.
Within
its 21 pages we outline which investments will perform best during a market
meltdown as well as how to take out “Crash insurance” on your portfolio (these
instruments returned TRIPLE digit gains during 2008).
To
pick up your copy of this report, FREE, swing by:
You’ve got to hand
it to the manipulators, they managed to get stocks almost to their former highs
in a matter of days.
However, underneath
the surface, internals are calling, “BS.”
High yield credit,
which bottomed first and lead stocks higher has actually peaked and begun rolling
over two days ago.
Breadth is also no
supporting this move at all. If we were going by that metric, stocks would be still
be down near the 4,400 on the S&P 500.
So, what happened
here?
What happened is “someone”
manipulated the markets higher, and this forced hedge funds to panic and cover
their shorts. When you short a stock, you must buy it back at some point. And hedge
funds have been doing this by the truck load over the last 48 hours
Did it work?
The markets are
red again this morning. This is always the problem with manipulations… they
only work for a time.
It is HIGHLY likely another bloodbath is coming to the markets.
The
losses will be staggering.
And
it’s just the beginning. It’s quite possible the markets are entering a
prolonged BEAR MARKET… a time in which stocks lose 50% or more over the course
of months.
The
coming bust is going to be life-changing for many people. Most will lose much
if not everything. But a small number of investors will generate LITERAL
FORTUNES.
For those looking to prepare and profit from this mess, our Stock Market
Crash Survival Guidecan show you how.
Within
its 21 pages we outline which investments will perform best during a market
meltdown as well as how to take out “Crash insurance” on your portfolio (these
instruments returned TRIPLE digit gains during 2008).
To
pick up your copy of this report, FREE, swing by:
As I’ve been outlining over the last few days, “someone” is aggressively manipulating stocks higher.
Large financial institutions do NOT attempt to move markets. In fact, the traders charged with executing these institutions’ trades are graded based on their ability to buy and sell large chunks of stocks without moving the tape.
So, we can be certain that the “investor” who is doing this…
…isn’t a large financial institution looking to open a legitimate position. No, the kind of ramp in a matter of minutes on no news is the work of “someone” looking to manipulate the markets higher.
Why are they doing this?
Because the market is forward-looking… and next year, the Fed will be ending its $120 billion QE program, and the U.S. government will be ending its stimulus programs.
This means a total of $4-$5 TRILLION in free money/ liquidity will no longer be funneled into the financial system.
Why do you think copper, the commodity with so many industrial uses, it’s called “Dr. Copper, the commodity with a PhD in economics,” has broken down?
Or how about stocks that are closely tied to the REAL ECONOMY like 3M?
Or how about FedEx (FDX), which is even MORE sensitive to economic developments?
In simple terms, the signs are clear: the economy will be collapsing in 2022. And a bloodbath is coming to the markets.
The losses will be staggering.
And it’s just the beginning. It’s quite possible the markets are entering a prolonged BEAR MARKET… a time in which stocks lose 50% or more over the course of months.
The coming bust is going to be life-changing for many people. Most will lose much if not everything. But a small number of investors will generate LITERAL FORTUNES.
Let me be blunt here, if you’re not taking steps to prepare for what’s coming, NOW is the time to do so.
For those looking to prepare and profit from this mess, our Stock Market
Crash Survival Guidecan show you how.
Within
its 21 pages we outline which investments will perform best during a market
meltdown as well as how to take out “Crash insurance” on your portfolio (these
instruments returned TRIPLE digit gains during 2008).
To
pick up your copy of this report, FREE, swing by:
The stock market manipulations
are getting even more desperate.
On Friday I noted
that the only thing holding up the stock market was abject manipulation. As I
noted then, financial institutions do NOT attempt to move markets. In fact, the
traders charged with executing these institutions’ trades are graded
based on their ability to buy and sell large chunks of stocks without
moving the tape.
Which is why we knew
that no real investor was responsible for the move that occurred
Thursday morning. I’m talking about the move that pushed stocks up from 4,506
to 4,566 Thursday morning in the span of a few minutes on no news.
That was Thursday. But on Friday, the manipulation became
even more extreme. This time around, the manipulators desperately forced stocks
higher during the final 15 minutes of trading to end the week at a better
level. You can see it here:
No real
investor waits until 3:45PM to suddenly panic buy stocks. This is egregious manipulation. And it
shows us that the manipulators are becoming increasingly desperate.
Why?
Breadth, which
leads the broader market, is telling us the S&P 500 should be down at 4,300
(stocks are at 4,500 right now). Also note that whereas stocks bounced nicely
last week, breadth was already revisiting the lows.
In simple terms, the signs are clear: another bloodbath is
coming. The markets will soon be a sea of red again. And the losses will be
staggering.
And
it’s just the beginning. It’s quite possible the markets are entering a
prolonged BEAR MARKET… a time in which stocks lose 50% or more over the
course of months.
The
coming bust is going to be life-changing for many people. Most will lose much
if not everything. But a small number of investors will generate LITERAL
FORTUNES.
For those looking to prepare and profit from this mess, our Stock Market
Crash Survival Guidecan show you how.
Within
its 21 pages we outline which investments will perform best during a market
meltdown as well as how to take out “Crash insurance” on your portfolio (these
instruments returned TRIPLE digit gains during 2008).
To
pick up your copy of this report, FREE, swing by:
The only thing holding the stock market up is blatant manipulation.
Financial institutions do NOT attempt to move markets. In fact, the traders charged with executing these institutions’ trades are graded based on their ability to buy and sell large chunks of stocks without moving the tape.
Which is why we know that no real investor is responsible for a move like this:
“Someone” or “someones” pushed stocks up from 4,506 to 4,566 yesterday morning in the span of a few minutes. No major news item or development hit the tape during this time. This was abject manipulation by someone trying to force stocks higher.
It makes you wonder what they’re afraid of…
Perhaps they’re afraid of the fact that stocks are in the single largest bubble in history… a bubble so frenzied with insane speculation that it makes the Tech Bubble look tame by comparison?
Perhaps this “someone” is concerned that the Fed is ending its monetary easing… the same monetary easing that has provided over $4 trillion in liquidity to the system since March 2020?
Perhaps this “someone” is also worried that the federal government is no longer able to provide $5 trillion in fiscal stimulus to prop up the system.
Or perhaps the “someone” is worried that a stock market crash would make the Biden administration look even worse when its polling is already in the toilet.
Whatever the reason, “someone” is intent on stopping the markets from imploding. Meanwhile, hedge funds, corporate insiders, and smart money are all selling the farm.
And they’re selling the farm to individual investors… who have borrowed more money to buy stocks than at any point in history.
So let’s review.
1) The Fed is ending its liquidity schemes.
2) Uncle Sam is ending his fiscal stimulus schemes.
3) Hedge Funds and corporate insiders are selling the farm.
4) Individual investors have borrowed a RECORD amount of money to buy stocks.
Guess who’s going to get taken to the cleaners on this?
Let me be blunt here, if you’re not taking steps to prepare for what’s coming, NOW is the time to do so.
For those looking to prepare and profit from this mess, our Stock Market Crash Survival Guidecan show you how.
Within its 21 pages we outline which investments will perform best during a market meltdown as well as how to take out “Crash insurance” on your portfolio (these instruments returned TRIPLE digit gains during 2008).
To pick up your copy of this report, FREE, swing by:
The only thing holding the stock market up is blatant manipulation.
Financial institutions do NOT attempt to move markets. In fact, the traders charged with executing these institutions’ trades are graded based on their ability to buy and sell large chunks of stocks without moving the tape.
Which is why we know that no real investor is responsible for a move like this:
“Someone” or “someones” pushed stocks up from 4,506 to 4,566 yesterday morning in the span of a few minutes. No major news item or development hit the tape during this time. This was abject manipulation by someone trying to force stocks higher.
It makes you wonder what they’re afraid of…
Perhaps they’re afraid of the fact that stocks are in the single largest bubble in history… a bubble so frenzied with insane speculation that it makes the Tech Bubble look tame by comparison?
Perhaps this “someone” is concerned that the Fed is ending its monetary easing… the same monetary easing that has provided over $4 trillion in liquidity to the system since March 2020?
Perhaps this “someone” is also worried that the federal government is no longer able to provide $5 trillion in fiscal stimulus to prop up the system.
Or perhaps the “someone” is worried that a stock market crash would make the Biden administration look even worse when its polling is already in the toilet.
Whatever the reason, “someone” is intent on stopping the markets from imploding. Meanwhile, hedge funds, corporate insiders, and smart money are all selling the farm.
And they’re selling the farm to individual investors… who have borrowed more money to buy stocks than at any point in history.
So let’s review.
1) The Fed is ending its liquidity schemes.
2) Uncle Sam is ending his fiscal stimulus schemes.
3) Hedge Funds and corporate insiders are selling the farm.
4) Individual investors have borrowed a RECORD amount of money to buy stocks.
Guess who’s going to get taken to the cleaners on this?
Let me be blunt here, if you’re not taking steps to prepare for what’s coming, NOW is the time to do so.
For those looking to prepare and profit from this mess, our Stock Market
Crash Survival Guidecan show you how.
Within
its 21 pages we outline which investments will perform best during a market
meltdown as well as how to take out “Crash insurance” on your portfolio (these
instruments returned TRIPLE digit gains during 2008).
To
pick up your copy of this report, FREE, swing by:
Stocks started the
day up as traders “bought the dip” expecting that once again the Fed would intervene
to prop the markets up.
They were wrong,
and stocks rolled over a dropped hard into the close.
What is going on here?
What is going on
is that the Fed is no longer in the business of propping the markets up with
more easing. As I noted yesterday, the Fed has completely shifted its focus
from growth to inflation.
This means the Fed
will be TIGHTENING, not easing going forward.
If you don’t
believe me, maybe you’ll believe Fed Chair Powell who told a Senate panel yesterday:
“The risk of
persistently higher inflation has clearly risen, and I think our policy has
adapted.”
“Policy has adapted”
= we are tightening to crush inflation.
So, if you think
the Fed is coming to the rescue anytime soon, you are mistaken. Stocks have NOT
bottomed. If anything, this mess has just gotten started.
High yield credit
(red line) has already figured this out. Stocks are only just starting
to “get it.”
For those looking to prepare and profit from this mess, our Stock Market
Crash Survival Guidecan show you how.
Within
its 21 pages we outline which investments will perform best during a market
meltdown as well as how to take out “Crash insurance” on your portfolio (these
instruments returned TRIPLE digit gains during 2008).
To
pick up your copy of this report, FREE, swing by:
Stocks are bouncing again because investors have been trained by the Fed to “buy the dip” since the March 2020 lows.
So, traders are buying this one.
However, there is a big difference between this recent drop in stocks and the others.
This time around, the Fed has indicated it is NOT going to start easing again. In fact, Fed Chair Jerome Powell made it clear the Fed might very well accelerate its monetary tightening.
Yesterday Fed Chair Jerome Powell told a Senate panel that he no longer believes inflation is “transitory” and that the Fed can consider wrapping up its taper “a few months sooner.”
This means the Fed has shifted gears.
For the last 20 months, the Fed has told the world that its focus was on growth in terms of jobs and employment. Throughout this period, Fed Chair Powell and his Fed colleagues stated that inflation was “transitory’ and didn’t warrant action.
This meant the Fed was willing to risk inflation while trying to create growth.
Not anymore.
The Fed is now focused on inflation, not growth. Which means it will be tightening not easing monetary conditions, most likely faster than most expect.
The credit markets have figured this out… take note where high yield credit (red line) is relative to stocks (black line) in the chart below. High yield credit leads stocks. It did so from the March lows. And now it’s doing the same to the downside.
Look, the message here is simple: the correction in stocks is NOT over. It’s NOT time to buy yet. If anything, we can expect stocks to drop to the red box sometime in the coming days.
Put another way, another bloodbath is coming. And when it hits, smart investors will cash in while everyone else gets taken to the cleaners.
For those looking to prepare and profit from this mess, our Stock Market Crash Survival Guide can show you how.
Within
its 21 pages we outline which investments will perform best during a market
meltdown as well as how to take out “Crash insurance” on your portfolio (these
instruments returned TRIPLE digit gains during 2008).
To
pick up your copy of this report, FREE, swing by:
