One of the biggest questions we hear from clients is “why aren’t stocks breaking down?”
The answer is simple: the government.
The Fed is fighting inflation. The government is NOT. The Fed is raising interest rates and engaging in Quantitative Tightening (QT). The government is running a $1+ trillion deficit. And this is in spite of a record tax haul.
In our current socialist version of America, this money is being funneled into the economy. And as a result of this, the economy continues to plod along despite inflation hanging around 5%.
It’s likely going to get worse from here.
Estimated federal outlays for 2023 are slated to be $6.3 TRILLION. That’s 23% of GDP. and the Debt Deal only increases this as it will remove ALL SPENDING CAPS for the Federal Government through 2025.
Uncle Sam isn’t the only one spending like there’s no tomorrow.
State, county and local governments are all spending loads of money. The 50 U.S. states have budgets of $1.2 trillion for FY 2023. That’s a 6.7% increase over that of 2022 which was an 18% increase over 2021. And by the way, that 18% increase in 2021 was the largest in history.
So… if you’re looking for a reason why the economy refuses to roll over… and why stocks continue to hold up… here’s your answer: because the U.S. government from the federal down to the local level is spending trillions and trillions of dollars.
All of this is HIGHLY inflationary. And the bond market knows it.
The yield on the 6-month U.S. Treasury recently hit new highs for this cycle. The impact this is going to have on every asset class will be profound.
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.Paragraph
The report is titled Survive the Inflationary Storm. And it explains in very simply terms how to make inflation PAY YOU.
I had initially thought
that the current debt ceiling deal would feature a small amount of spending cuts
in 2024. In reality, it will feature NO
CUTS and will in fact open the door to as much spending as the Biden Whitehouse
desires.
How is this
possible?
A single line in
the fine print from Section 265: The OMB director has sole waiver authority to
spend if it’s “necessary for program delivery.” (H/T. Rep Nance
Mace for catching this).
What does this
mean?
OMB stands for
Office of Management and Budget. This is the part of the Executive Branch in charge
of “overseeing the implementation” of the President’s “vision” for the economy.
The OMB director
is appointed by the President. And according to the current version of the debt
dealing congress is voting on, this person has “sole waiver” authority on spending
caps.
Put simply, she
(the current OMB director is Shalanda Young), is permitted to spend as much
money as President Biden wants, provided the spending is deemed “necessary” to
deliver on programs that meet his vision for the economy.
So much for
spending caps! This is the equivalent of handing a credit card to your 10-year-old
child and saying, “you can only spend $100… unless it’s for something you think
you need.”
We both know how
that would turn out.
The reality is that
this debt deal opens the door to a LOT more spending by the government, a mere 17-18
months before the next Presidential election. I’m sure the government will
become fiscally conservative between now and then. After all, they’ve only grown
the debt by $8 trillion since early 2020.
More and more the U.S. is beginning to look like an emerging market economy. Rampant spending, rampant corruption, and rampant inflation. Gold’s figured out what’s coming which is why it’s hanging around $2000 per ounce despite the Fed raising rates aggressively in the last 12 months.
Some investments will make fortunes from all this government spending/ inflation, others will absolutely implode.
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.Paragraph
The report is titled Survive the Inflationary Storm. And it explains in very simply terms how to make inflation PAY YOU.
As I first noted in my best-selling book The Everything Bubble: The Endgame For Central Bank Policy, “politicians make promises, but bond markets deliver.”
What I meant by this is that our entire political system is now consists of government overspending which is ultimately financed by the bond markets. As long as the bond markets remain stable, politicians will continue to spend and spend and spend.
And that is precisely what happened with the debt ceiling “resolution.”
We now live in a “one party” system that consists of Democrats, who like to spend trillions and trillions of dollars, and Republicans who like to sign off on 98% of Democrat spending, while arguing that doing so is a “win” for conservatives because the Democrats didn’t get 100% of what they proposed.
The latest Debt Ceiling “deal” is the latest example of this dynamic.
The Debt Ceiling deal features little if any spending cuts. Total federal spending will be reduced by about 0.2% of GDP in 2024. However, total spending then jumps 1% the next year (2025). And the debt ceiling is now suspended until 2025, which means we’ll likely tack on another $4 TRILLION in debt by then.
Inflation was already proving extremely sticky in some areas of the economy. We’re 15 months into one of the most aggressive monetary tightening cycles in history and CPI remains at 4.9% while Core PCE (the Fed’s favorite inflation measure) is at 4.7% and has been stuck there for FOUR MONTHS.
The fact the government will be permitted to continue running $1+ trillion deficits for the next 18 months will only make inflation even more embedded in the economy. The bond market knows this which is why bond yields are rising again.
The yield on the 2-Year U.S Treasury has broken out to the upside after a three-month consolidation period. As I write this, it’s rapidly approaching its former highs.
Some investments will make fortunes from this, others will absolutely implode. This is an extremely volatile market and one that could make or break your portfolio.
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.Paragraph
The report is titled Survive the Inflationary Storm. And it explains in very simply terms how to make inflation PAY YOU.
Yesterday I noted that the Artificial Intelligence (AI) bubble was still going strong, but that large players like Nvidia (NVDA) were probably “tapped out.”
At that time, I noted that the ratio between NVDA and the broader market has just hit a new all-time high. Now, regardless of how much AI really changes the world, do you think NVDA should be outperforming the S&P 500 even more than it did during the economic shutdowns when the Fed was pumping trillions of dollars into the financial system?
Seeing this I thought NVDA’s stock was probably close to a top of sorts. I mentioned that I wouldn’t be surprised for this chart to close out the month of May down from current levels, which means NVDA underperforms the broader market in the coming weeks.
NVDA reported results after the bell on Wednesday, and it completely SMASHED expectations to the upside. The stock EXPLODED higher by 27% in the after hours.
Yes, a $750+ billion company is up 27% in a single day,
This is the thing about bubbles, they can last longer and go much further than anyone believes. NVDA stock which was already up over 100% this year is now exploding even higher. How high will it go? To a market cap of $1 trillion? $2 trillion?
I have no idea.
This is why George Soros always argued you should “buy a bubble” as soon as you recognize it. Bubbles, like all manias, can exceed even your wildest expectations.
The crypto currency bubble of 2020-2022 lasted between 6 and 12 months depending on how you measure it. It saw Bitcoin (BTC) rise 600%…
… while smaller crypto currencies like Ethereum rose 3000%!
If the AI bubble began in late 2022/ early 2023, we are probably about halfway through this situation (see NVDA’s results yesterday).
Does this bubble defy reason and logic? Yes. But traders and speculators aren’t looking for reason… they are looking for profits!
And right now, AI is where the biggest profits lie.
Societe General has noted that AI-associated stocks account for ALL of the gains in the broader stock market this year. Put another way, without the influence of AI as an investment theme, the S&P 500 would be DOWN this year.
So if you feel like you’ve “missed the boat” in AI, do not be alarmed. These things take much longer and go much farther than anyone ever believes!
On that note, we are putting together an Executive Summary outlining the real impact of AI as well as which companies are best positioned to profit from this major trend when the froth is taken out of the market.
It will be available exclusively to our clients. If you’d like to have a copy delivered to your inbox when it’s completed next week, you can join the wait-list here.
The S&P 500 has managed to start turning its 200-day moving average (DMA) upwards. This is a significant development is at it indicates that the intermediate to long-term trend is on the verge of becoming “up.”
As positive as this seems, beneath the surface of the markets there are a lot of glaring divergences developing.
Divergences occur when two assets that typically trade in line with each other start to diverge. These kinds of developments tell us that something unusual is happening in the market. Sometimes it’s not a bit deal. Other times, like in late 2007 or just before the shut-downs in 2020, these divergences serve as a warning that a crash or black swan event is about to hit.
On that note, let’s consider some of the more glaring divergences taking place today.
The Retail ETF (XRT) tracks the performance of 90 retailers in the U.S. As such it serves as a decent proxy for the consumer. And XRT has NOT participated in this rally at all. In fact, it’s rapidly approaching its October 2022 lows.
There are other, similar divergences all over the markets.
Tech stocks usually trade in line with inflation-adjusted Treasuries. The reason for this is that Tech is priced based on where “real,” or inflation adjusted, Treasury yields are trading. When yields are relatively low, investors pile into tech because it is a high growth sector.
With that in mind, there is a large divergence between tech stocks and inflation-adjusted Treasuries today. Someone is “wrong” here.
These are just two examples of major divergences, but there are literally over a dozen happening in the stock market right now. Something is very, very “off” about this market rally in stocks.
And I think I know what it is.
What’s happening is that the overall market is being pushed higher by a handful of large tech companies. Because these companies account for nearly 25% of the S&P 500’s overall weight, their outperformance is forcing the overall market to move higher despite all these divergences.
Indeed, when we strip out the effect of these companies with an “equal weight” stock market index, this dynamic becomes clear. MOST of the companies in the S&P 500 are down. Only a small handful are up. They just happen to be the largest companies both in terms of size and in terms of index weighting.
How will this play out?
Sometimes divergences resolve with the trailing assets playing “catch up.” However, when there are so many divergences occurring across so many different areas of the market, this is unlikely.
What’s far more likely is that the markets nose-dive in the near future. Many analysts will tell you “ no one saw this coming!” but now you know better.
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Artificial Intelligence (A)I is the current major them for the markets. With economically related companies (TGT, X, etc) showing lower returns, investors are piling into AI as the next major source of growth for corporate top lines (revenues) and profit margins (presumably AI will replace many employees which will lower operating costs).
As far as market price action is concerned, anything associated with AI is in a strong uptrend. The most notable example is Nvidia (NVDA) which has more than doubled year to date. Even the multi-trillion dollar market cap giant Microsoft (MSFT) has caught a bid due to its exposure to AI. MSFT is up 30% year to date.
AI is THE market mover for 2023. Societe General has noted that AI-associated stocks account for ALL of the gains in the broader stock market this year. Put another way, without the influence of AI as an investment theme, the S&P 500 would be DOWN this year.
Indeed, things are becoming so frothy as far as AI is concerned that executives are mentioning AI as frequently as possible during earnings calls… even if their company has little if any exposure to the new technology!
What does this all mean?
AI is yet another “game changer” technology being touted by Wall Street. It, like the internet in the ‘90s, the “cloud” in the mid 2010s, and even crypto in the last five years is a novel item, the impact of which is difficult to quantify. We are currently in the “froth” stage in which everyone is manic about this idea. The REAL money will appear when the key players who will go on to dominate this trend emerge.
Consider what happened with the internet bubble in the 1990s.
At that time, anything associated with e-commerce or internet exposure exploded higher. However, the REAL money came in the years AFTER the bubble burst as Amazon (AMZN), and other internet market leaders emerged.
See for yourself.
So if you feel like you’ve “missed the boat” in AI, do not be alarmed. This is the mania phase: the phase in which everyone is trying to align themselves with a trend in order to score some easy price appreciation.
The REAL money will appear when this passes and the true market leaders in AI emerge. And we are currently positioning our clients to profit from it.
On that note, we are putting together an Executive Summary outlining the real impact of AI as well as which companies are best positioned to profit from this major trend when the froth is taken out of the market.
It will be
available exclusively
to our clients. If you’d like to have a copy delivered to your inbox when it’s
completed, you can join the wait-list here.
Copper, the commodity
with a PhD in economics, has erased all of its year to date gains. It’s
currently about 10% off its 2022 lows which marked the low for risk assets
before this current bear market rally began.
It’s a similar story
for oil, which is just slightly off its 2023 lows and down 46% from its 2022
highs.
Steel doesn’t look good trading at new lows for 2023.
Ditto for aluminum.
As well as lumber.
Is this demand
destruction? Or is it the result of the Fed tightening monetary policy and
taking out some of the froth from the financial system?
The bond market
suggests its demand destruction. The 2s10s, which has predicted every recession
since 1955 is suggesting a severe recession is coming.
What do you think this
will do to stocks?
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You no doubt have some concerns about the bank at which you keep your deposits.
I mean, why wouldn’t you? Three of the largest bank failures in U.S. history have already taken place this year. And by the look of things, there are even more to come.
So today we’re going to do a quick break down of how to analyze a bank to see if it’s in trouble. This is NOT meant to be an exhaustive lesson on accounting, but simply a decent rule of thumb to help you figure out if a bank is in serious trouble as far as its bond portfolio is concerned.
As I’ve already outlined earlier this week, 2022 was the worst year on record for long-term Treasury bonds. This has been a huge problem for banks which own hundreds of billions, if not trillions of dollars’ worth of long-duration bonds and loans that move based on what happened with Treasuries. Unless the banks hedged this risk, they are likely sitting on substantial losses in their long-duration portfolios.
Now, by law, every bank has to report the losses or gains on many of the assets it owns. These are recorded as “unrealized” gains or losses in the case of the assets that the bank still owns/ has yet to sell.
See for yourself.
Below is a screenshot from the income statement of a bank. As you can see, the total amount of unrealized losses ballooned in 2022, likely as a result of these assets dropping in value when the bond market collapsed. As of year-end 2022, this bank is sitting on $952 million worth of unrealized losses.
Now, that sounds like a lot of money in “unrealized losses,” but everything is relative. So to see if this is a major issue we need to assess that number against the bank’s shareholder equity (the stock owners).
In this particular instance, the bank in question has shareholder equity of $3.9 billion. So put another way, this bank is sitting on unrealized losses equal to 25% of shareholder equity. That’s a pretty big deal, which would suggest this bank could find itself in trouble.
All of this information can be found on the SEC’s website. Simply go there, type in the symbol for your bank, then go to its annual or quarterly financial statements (the 10-K or 10-Q). You can even do a “search” function in those files for the terms “unrealized losses” or “shareholder equity” to find the specific parts you need to see.
I hope this helps!
If you’ve yet to take steps to prepare for what’s coming courtesy of the banking crisis, 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.
Today is the last day this report is available to the general public.
To pick up one of the remaining copies, use the link below…
Thus far in 2023, there have been three major bank failures. And I do mean MAJOR: all told the three banks had $532 billion in assets. That amount is actually greater in size that the combined assets of the 25 banks that failed in 2008.
What is going on here?
What is going on is that the Fed created this mess… and bad risk management at the banks has exacerbated it.
Let me explain.
Traditionally, banks make money as follows:
1) You deposit your money at the bank.
2) The bank pays you a low interest rate on this deposit.
3) The bank turns around and loans out $5, $7, even $10 in loans for every $1 you deposited. The bank charges a much higher rate of interest on these loans than the interest rate it pays you on your deposit.
4) Alternatively, the bank buys $5, $7, or even $10 in long-duration assets (Treasuries, or other long-term bonds) for every $1 you deposited.
5) The bank pockets the spread between the interest it earns on its loans/ bonds and the interest rate is pays you on your deposits.
This situation works well provided the Fed keeps interest rates low. Unfortunately for the banks, the Fed unleashed inflation by printing ~$5 TRILLION between 2020 and 2022.
Bond yields trade based on many things… including inflation. And once inflation entered the financial system, Treasury yields ripped higher.
When Treasury yields rise, bond prices FALL. And who was sitting on trillions of dollars’ worth of long-term Treasuries and loans that traded based on long-term Treasuries?
You guessed it… the regional banks.
Courtesy of the Fed’s idiocy, the banks were destined to be sitting on hundreds of billions of dollars worth of losses on these assets.
But it gets worse.
Once the Fed finally decided to get off its rear and do something about inflation, it embarked on its most aggressive rate hike cycle in history, raising rates from 0.25% to 5% in the span of a single year.
Why does this matter?
Remember how banks pay you a low interest rate on your deposit? Well who is going to want to keep his or her money in a bank that pays 0.3% at best… when he or she can earn 4% or even 5% in a money market fund or short-term Treasury bond, courtesy of the Fed raising rates so high so fast ?
And so, depositors began pulling their money from banks… and not by a little: 2022 was the first year since 1945 in which money on a NET BASIS left the banking system in the U.S.
But hang on… remember how the bank loaned out or bought $5, $7, or even $10 worth of loans or long-term assets based on every $1 you deposited in the bank? Well when you pull your money out of the bank, the bank has to unload all that stuff to maintain its capital requirements.
And so, the Fed delivered the ultimate 1-2 punch to the U.S. regional banking system.
The first punch was it ignored inflation to the point that the banks were sitting on hundreds of billions of dollars’ worth of losses.
However, the KO punch was the Fed raised rates aggressively, which resulted in depositors pulling money out of the banks in search of higher returns on their cash.
Now, don’t get me wrong. The banks are partially to blame for the fact that didn’t act once the Fed announced it would be raising rates to end inflation. With proper risk management (bond hedges for instance) these banks would have been better prepared for the bond market massacre of 2022.
However, even careful risk management would have done nothing to help these banks once depositors started pulling their money out. And no bank could raise its deposit rates to 4% or 5% to compete with money market funds or short-term Treasuries while staying in business.
And so we get this: a situation in which MAJOR regional banks are going bust and the regional bank ETF has lost a third of its value in the span of six weeks.
This situation is nowhere near over. According to some analysis, HALF of the U.S.’s banks are currently insolvent.
The clock is ticking here. Ignore trader games, something BAD is coming to the markets.
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First and foremost, it’s significantly higher than expectations: 3.5% vs 3.2%.
Secondly, it shows that inflation is turning back upwards in Japan. Last month’s inflation data was 3.2% which was down from the prior month’s 3.3% which was down from the prior month’s 4.3%.
Put simply, after trending down for three months, inflation is turning back upwards in Japan.
And finally… Japan remains the last central bank that is still easing monetary conditions.
The Fed is aggressively tightening monetary conditions. So is the European Central Bank as well as the Bank of England. Only the Bank of Japan remains engaged in Quantitative Easing.
With inflation coming in hot in Japan, the Bank of Japan will soon be forced to end its money printing. Which means the financial system would lose its last and final source of excess liquidity.
Put another way, the great monetary easing from 2020-2023 would completely over. Every major central bank would be tightening. Liquidity would be exiting the system at an even more rapid clip.
What do you think this would do to stocks?
My proprietary crash trigger knows. It just triggered its 3rd confirmed “SELL” signal in 25 years.
The last two time sit signaled?
2000 and 2008.
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.
As I write this, there are less than 30 left.
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Warren Buffett is arguably the greatest investor of all time.
Unlike many of the super wealthy that existed before him (Rockefeller, Morgan, Vanderbilt, Dupont) Buffett wasn’t an entrepreneur who built an oil, steel, banking, or railroad empire. Instead, Buffett was an investor, who allocated capital in such a way that his holding company Berkshire Hathaway, grew to be one of the 10 largest companies on the S&P 500.
Buffett himself grew to be worth over $100 billion in the process.
Put simply, this is a man who got unbelievably rich from the markets. So when Warren Buffet speaks on the subject of stocks, it’s a good idea to listen.
One of Buffett’s best known quotes concerning the markets is that “trannies don’t lie,” meaning that the Dow Jones Transportation Index, which is comprised of companies associated with transportation in the real economy is one of the most accurate economic bellwethers out there.
Put simply, whatever the Dow Jones Transportation Index does, is a solid indicator of what’s happening in the economy.
I mention this because the Transportation index has just broken down from a clear Head and Shoulders topping pattern. This suggests the economy is rolling over in a significant manner.
Now take a look at the Transportation index (red line) overlaid with the broader market as represented by the S&P 500 (black line) in the chart below. The implication concerning the economy is clear. But the S&P 500 has yet to “get it.”
Indeed, in the Big Picture, 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.
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As I write this, there are less than 40 left.
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You can forget about what the media is telling you…because REAL inflation has come down much at all.
The media likes to trumpet that headline inflation has dropped in the U.S. from a peak of ~9% down to ~6%. However, as I’ve noted time and again, the ONLY reason headline inflation has dropped this much is due to energy prices falling. And the primary reason energy prices have fallen is because the Biden Administration has dumped over 150 MILLION barrels of oil in the last 12 months pushing oil down from $130 a barrel to $70 a barrel.
Core inflation, which removes the effect of energy and food, presents a much clearer picture of underlying inflation without the impact of these political shenanigans. And the situation for core inflation (blue line) doesn’t look NEARLY as promising as headline inflation (red line) as the below chart illustrates.
As you can see, core inflation has barely dropped much if at all. And it’s now in the process of turning back up!
And bear in mind, this is after the Fed performed its most aggressive 12 month monetary tightening in history, raising rates from 0.25% to 5%!
So what do you think will happen to inflation now that the Fed is beginning to talk about pausing its rate hikes?
Gold has figured it out. The rest of the market will soon as well!
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 earnings season and options expiration week for the month of April.
Both of those items have historically been extremely bullish: stocks almost always rally into earnings and options expiration week is the week of for Wall Street to gun the markets higher.
And yet… the stock market is doing this.
When a pattern that has a lot of historical precedent stops working… it can indicate a serious shift is taking place under the surface of the markets.
I would also note that the Fed’s balance sheet has rolled over, indicating that the Fed is withdrawing liquidity from the system again.
While Bitcoin and other liquidity plays are beginning to roll over as well.
All of this suggests the next leg down for the markets is just around the corner.
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 first round focused on energy prices. Oil rose from $10 a barrel at the 2020 lows to $130 per barrel at the 2022 highs. You may find this hard to believe, but oil (black line) actually outperformed tech stocks by such a wide margin that the NASDAQ ‘s (blue line) performance looks pathetic in comparison!
During major bull markets in commodities, the sector that leads during the first leg up rarely leads during subsequent moves higher. Which is why this leg up for the inflation trade looks to be lead by precious metals.
As I write this, gold is closing in on its ALL TIME highs. Yes, ALL TIME highs. And practically no one has noticed or cares.
In the simplest of terms, we are getting multiple signals that the inflation trade is about to hit again. Smart investors are already taking steps to profit from it.
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
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explains in very simply terms how to make inflation PAY YOU.
We are making just 100 copies available to the public.
The commercial real estate market in the U.S. is about $20 trillion in size. This is not a small asset class. And thanks to the pandemic changing work habits, the Fed creating a massive credit bubble, and many cities going soft on crime, the collapse of commercial real estate may very well be the next black swan event.
In its simplest rendering, the problems facing commercial real estate are as follows:
1) People do NOT want to return to the office, even if the pandemic is over.
2) Valuations/ prices in the market have been badly distorted by the Fed, both indirectly via the massive credit bubble the Fed created in 2020-2022, and directly by the Fed offering to buy commercial mortgage backed securities (the last point put a floor beneath this market).
3) Many large cities have decided to go soft on crime, resulting in criminal activity skyrocketing. As a result of this and heavy tax burdens, large businesses are moving out of places like Chicago, New York and the like.
It’s literally a perfect storm for the commercial real estate sector.
Oh… and lest we forget, much of this asset class is financed by trillions of dollars worth of debt. And that debt is now coming due.
The New York Post notes that $1.5 trillion worth of commercial real estate debt comes due by the end of 2025. Bear in mind, rates have done this since much of this debt was issued:
So commercial real estate firms will either need to pay this back (hard to imagine given office vacancies) or roll the debt over at much higher interest rates.
And last but not least… guess who loaned out all this debt to commercial real estate developers and landlords?
REGIONAL BANKS.
Perhaps this is why the regional banking sector can’t rally despite the Fed gifting them hundreds of billions of dollars worth of cheap credit over the last month.
What does this mean?
A $20 trillion asset class is fast approaching its “2008” moment.
Indeed, our proprietary Crash signal has just triggered its 3rd confirmed signal in the last 25 years. The last two times it signalled?
2000 and 2008.
If you’ve yet to take steps to prepare for what’s coming, we just published a new exclusive special report How to Invest During This Bear Market.
It details the #1 investment to own during the bear market as well as how to invest to potentially generate life changing wealth when it ends.
If you’re looking for a reason why stocks erupted higher starting in early March, look no further than the below chart of the Fed’s balance sheet. As you can see, during the regional banking crisis triggered by the collapse of Silicon Valley Bank, the Fed began expanding its balance sheet rapidly.
How rapidly?
Nearly $400 BILLION in two weeks’ time. Not since the depths of the 2020 crash has the Fed printed this much money.
Stocks bottomed soon after this… exploding higher by 6+% in a single month.
I bring all of this up, because the Fed has turned off the money printer again. Over the last week, the Fed’s balance sheet has fallen by $100 billion.
What does this mean?
The clock is ticking for stocks. And with a recession just around the corner… it’s only a matter of time before the market breaks to new lows.
Indeed, our proprietary Crash signal has just triggered its 3rd confirmed signal in the last 25 years. The last two times it signaled?
2000 and 2008.
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Wal-Mart (WMT) is the largest private employer in the world. It’s also one of the largest retailers in the world. As such, it is a major economic bellwether.
The Waltons are the family that founded Wal-Mart (WMT). They remain the largest owners of its stock. And they have been dumping BILLIONS of dollars in WMT stock in the last few months.
What do they know that we don’t?
Apple (AAPL) is the largest company on the S&P 500. It is also the largest consumer discretionary company in the world. AAPL insiders including the CEO, COO and General Counsel have sold $41 million worth of stock recently.
The last time the CEO sold was in 2018. AAPL shares fell 41% that year. He’s selling again now.
What does he know that we don’t?
And finally… my proprietary Crash Trigger is now on the first confirmed “Sell” signal in over a decade.
The last time this signal hit?
2008.
What does it know that we don’t?
If you’ve yet to take steps to prepare for what’s coming, we just published a new exclusive special report How to Invest During This Bear Market.
It details the #1 investment to own during the bear market as well as how to invest to potentially generate life changing wealth when it ends.
The bond market is signaling some thing “BAD” is coming.
Bond yields rose throughout late 2021-early 2023 on fears of inflation. But once Silicon Valley Bank imploded, yields dropped rapidly: historically investors pile into Treasuries as a “safety trade” whenever things get hairy in the financial system. The regional banking crisis in mid-March was no exception with yields collapsing at their fastest rate since the 1987 crash.
When this happened, I began to wonder… would yields begin to rise again as things normalized following the regional banking bailouts… or would the economy roll over and yields finally start to plunge as a recession took hold?
We now have our answer…
The yield on the 2-Year U.S. Treasury is NOT rising anymore. If anything it’s rolling over and approaching the “Silicon Valley Bank” lows.
This is a signal that something “BAD” is brewing in the economy/ financial system. If everything was fine, yields would be rising again based on hopes of growth and fears of inflation.
Put simply, the fact yields are falling like this tells us that the bond market fears something far worse than inflation is coming…
Indeed, the 2s10s are now beginning to invert. Historically, this has been the signal that a recession is about to hit.
What happens to stocks when a recession hits while inflation is still at 6%?
The 70s showed us…
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Investors are running a repeat of the same trading pattern we saw in 2008.
That pattern?
A mini-crisis in March, followed by a summer rally, and then the real fireworks begin.
In 2008, Bear Stearns had to be absorbed in a shotgun wedding to JP Morgan on March 16th. That marked a temporary low, as investors believed the Fed easing/ backstopping the issue resolved things despite the clear evidence that the economy was rolling over.
The stock market then rallied for two months before the crisis began in earnest.
Today in 2023, the same pattern is playing out.
Once again, there was a mini-crisis in March with Silicon Valley Bank/ Signature Bank playing the part of Bear Stearns. The Fed / Treasury stepped in, backstopping the troubled banks and facilitating a deal to have them absorbed by other players.
Investors are taking this to signal the “all clear” and are piling back into stocks, kicking off a rally… once again despite the clear evidence the economy is rolling over.
As if this wasn’t spooky enough, consider that in the BIG PICTURE my proprietary Crash Trigger is now on the first confirmed “Sell” signal in over a decade.
The last time this signal hit?
2008.
See for yourself…
If you’ve yet to take steps to prepare for what’s coming, we just published a new exclusive special report How to Invest During This Bear Market.
It details the #1 investment to own during the bear market as well as how to invest to potentially generate life changing wealth when it ends.
OPEC shocked the world by announcing oil production cuts of 1.6 million barrels per day starting in May.
This is a big deal for inflation.
Why?
Because as I have noted previously, the ONLY inflation data that had come down in the last 12 months was in energy prices. And that was due to the Biden administration dumping 250 million barrels of oil in the open market while OPEC was maintaining its regular production rates.
See the data for yourself… literally everything but energy prices and used car prices continues to rise…
But now OPEC is cutting production at the same time that the Biden administration is set to STOP dumping oil on the market.
What does this mean?
Energy prices are about to erupt higher, pushing inflation to new highs.
Oil is already back at $80 a barrel, up from $66 per barrel a few weeks ago.
Gold has figured out what’s coming already. It’s rocketed from $1,600 an ounce to $2,000 an ounce and is about to break out to new all-time highs.
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The
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