Gains Pains & Capital

The Fed is NOT coming to rescue stocks this time.

For decades, investors have been conditioned to “buy the dip” because the Fed invariably steps in to prop up the stock market whenever a collapse begins in earnest.

The Fed did this throughout 2009-2017, in 2018, and again from 2020-early 2022.

For this reason, investors continue to move into stocks, despite the fact stocks are clearly in a bear market. The below chart is clear: the uptrend (blue line) from the March 2020 lows is broken. Moreover, stocks have taken out critical support (red line). 

If you’re buying stocks because you believe the Fed is going to “save the day” again, you’re in for a world of hurt. Sure, the Fed has done this in the past… but inflation wasn’t present during those times.

It is now.

Basic economics tells us:

Demand + Supply = Price.

Supply for most items is down due to supply chain issues. Meanwhile, demand is UP due to the Fed and Federal Government pumping some $11 TRILLION into the financial system over the last two years.

Higher demand + Lower Supply = RAGING Inflation. 

The Fed cannot fix the supply issues. It can’t print oil, tin, copper, or any of the other commodities the economy needs. The Fed is also powerless to address the dock worker, trucker, transportation labor shortages the country faces.

This means the only way the Fed can kill inflation is to destroy demand by triggering a recession. Put another way… the Fed DOESN’T CARE about stocks.

If you don’t believe me, maybe you’ll be Fed President Esther George.

Kansas City Federal Reserve President Esther George said Thursday that higher interest rates are needed now to bring down inflation and that policymakers are not focused on the impact that is having on the stock market.

Source: CNBC

Bear in mind… inflation is at 8+%… rates are at 1%… the Fed hasn’t even begun shrinking its balance sheet yet… and stocks are already doing this:

What happens when the Fed is forced to raise rates to FIVE percent (they’re 1% now)? What happens when it tries to shrink its nine TRILLION dollar balance sheet by $1+ trillion.

You get the idea.

The Mother of All Collapses is coming!

The time to prepare is NOW before it hits.

For those looking to prepare and profit from this mess, our Stock Market Crash Survival Guide can show you how.

We made 100 copies available to the public. As I write this, there are 7 left.

To pick up your FREE copy, swing by:

https://phoenixcapitalmarketing.com/stockmarketcrash.html

As I keep warning, the Mother of All Collapses is coming to the markets.

We’ve already detailed just how insane this Everything Bubble is.

1. Options trading volume (a sign of speculation) was exponentially higher than it was during the Tech Bubble which everyone on the planet now knows was an insane bubble.

• Crypto currencies that were invented as jokes (Dogecoin) were being valued at tens of billions of dollars.

• Tesla (TSLA), which sold ~300,000 cars in 2020, was worth more than the value of every other auto manufacturer on the planet combined.

• People were selling Non-Fungible Tokes (NFTs) of farts, toilet paper, New York Times articles and more.

All of the above items outline insane levels of speculation in individual assets, but they don’t fully illustrate just how MASSIVE this bubble is.

Check out the below chart from Jim Bianco.

Yes, the stock market is now valued at ~200% of GDP. And this level is actually down from 228% of GDP which was the peak last November.

The Tech Bubble, which everyone understands was an egregious stock market bubble, peaked at 182% of GDP in March of 2000.

Put another way, even with stocks down 20% from their all-time highs (more if you’re using the NASDAQ to calculate), today the stock market is still a larger bubble than the TECH BUBBLE AT ITS PEAK!

So again, the Mother of All Collapses is coming.

For those looking to prepare and profit from this mess, our Stock Market Crash Survival Guide can show you how.

We made 100 copies available to the public. As I write this, there are 25 left.

To pick up your FREE copy, swing by:

https://phoenixcapitalmarketing.com/stockmarketcrash.html

By Graham Summers, MBA

As I mentioned yesterday, the Mother of All Collapses is Coming

And if you think the Fed is coming to the rescue stocks this time, you’re sadly mistaken.

Historically the Fed “saves the day” by intervening in the markets whenever they come unhinged. Well, the markets are already down 20% and we haven’t heard a peep from the Fed. If anything, Fed officials are calling for the Fed to be more aggressive in tightening monetary policy.

There’s a reason for this: inflation.

The U.S. is experiencing its first inflationary storm since the 1970s. Inflation has become the #1 issue for voters. And it’s the mid-terms this year.

And the Fed is feeling the heat from the political classes.

President Biden, who appointed Jerome Powell to a second term as Fed Chair EXPLICITLY called out the Fed earlier this week.

As I said yesterday, inflation is a challenge for families across the country and bringing it down is my top economic priority. This starts with the Federal Reserve, which plays a primary role in fighting inflation in our country…[emphasis added]           

            ~President Biden speaking on inflation 5/10/22.

Yes, the White House is laying the blame for inflation SQUARELY on the Fed’s shoulders. The rest of the Beltway crowd as well as the media will soon be joining in.

Which means… the Fed is being forced to ignore stocks in order to end inflation. And it has a LOOONG ways to go.

Inflation is over 8%. The Fed has rates at 1%. And it has yet to even begin draining liquidity from the system with Quantitative Tightening.

And stocks have already done this:

What happens when the Fed is forced to raise rates to FIVE percent? What happens when it tries to shrink its nine TRILLION dollar balance sheet.

You get the idea.

The Mother of All Collapses is coming!

The time to prepare is NOW before it hits.

For those looking to prepare and profit from this mess, our Stock Market Crash Survival Guide can show you how.

We made 100 copies available to the public. As I write this, there are 37 left.

To pick up your FREE copy, swing by:

https://phoenixcapitalmarketing.com/stockmarketcrash.html

The mother of all collapses is coming.

The Fed claims it can tackle inflation without triggering a crisis.

Good luck with that!

The Fed triggered a crisis with the Tech Bubble (a bubble in a single stock market sector) and the Housing Bubble (a bubble in a single asset class). And neither of those are remotely comparable to this last bubble.

This is the Everything Bubble: the bubble in every major asset class (stocks, housing, corporate debt, municipal debt, etc.)

Some of the most egregious signs of froth/ financial excess.

1. Options trading volume (a sign of speculation) was exponentially higher than it was during the Tech Bubble which everyone on the planet now knows was an insane bubble.

• Crypto currencies that were invented as jokes (Dogecoin) were being valued at tens of billions of dollars.

• Tesla (TSLA), which sold ~300,000 cars in 2020, was worth more than the value of every other auto manufacturer on the planet combined.

• People were selling Non-Fungible Tokes (NFTs) of farts, toilet paper, New York Times articles and more.

• “Meme stocks” or stocks that were traded for ironic/ humorous purposes were doing this:

• Former President Trump’s Special Purpose Acquisition Company (SPAC) rose to a value of $5 billion despite having no business or operations.

And the Fed believes it can somehow tackle inflation… AND dissipate this bubble without blowing things up?

Ok, I’ll bite.

Inflation is at 8+%. The Fed has raised rates to 1%. It has yet to even begin shrinking its balance sheet. And stocks have done this:

What happens when the Fed is forced to raise rates to 5%? What happens when it tries to shrink its balance sheet buy $1 trillion+?

You get the idea.

The Mother of All Collapses is coming.

For those looking to prepare and profit from this mess, our Stock Market Crash Survival Guide can show you how.

We made 100 copies available to the public. As I write this, there are 49 left.

To pick up your FREE copy, swing by:

https://phoenixcapitalmarketing.com/stockmarketcrash.html

The market is now in very serious trouble.

The bond market is NOT calming down. Last week the yield on the all-important 10-Year U.S. Treasury (the most important bond in the world) spiked to new highs for this bull run.

Why does this matter?

Because the yield on this bond represents the “risk free” rate of return against which all risk assets are priced. Every move higher in this yields means risk assets (including stocks) will be priced lower.

Put another way, until the bond market calms down ALL BETS ARE OFF for stocks. This is why the S&P 500 took out critical support last week.

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:

https://phoenixcapitalmarketing.com/stockmarketcrash.html

By Graham Summers, MBA

All eyes are on the Fed today.

Thus far the bond market doesn’t believe the Fed is serious about tackling inflation. Why would it? The Fed printed another $55 billion after its QE program supposedly ended… and has only raised rates by 0.25%.

Meanwhile inflation is clocking in at 8.5%.

This is why the yield on the 2-year Treasury continues to move higher… the bond market is telling the Fed that it (the Fed) hasn’t done enough. Put another way, the bond market doesn’t think the Fed’s current plan to tackle inflation is credible.

The 30-year Treasury is even more important than the 2-year. This is because bonds of longer duration do a better job of indicating what long-term implications of Fed incompetence.

Put simply, this yield NEEDS to stabilize, otherwise the Fed risks losing control and we enter a bond crisis shortly.

Again, all eyes are on the Fed today. Either the Fed’s strategy is credible and things stabilize… or it’s crisis time. And if it’s crisis time… buckle up, because this current bubble is even larger than the Housing Bubble.

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:

https://phoenixcapitalmarketing.com/stockmarketcrash.html

By Graham Summers, MBA

Yesterday I noted that the bond market is crashing. 

By quick way of review:

1)    The Fed is horribly behind the curve on inflation. This has resulted in Treasury yields spiking as Treasury bonds collapse.

2)    The pace of the spike in yields is truly historic: in six months, they’ve moved the same amount as they did in three years from 2003 to 2006 and in six years from 2012-2018. 

3)    The last time bond yields spiked like this was in 2018. At that time the corporate debt markets froze and stocks crashed 20% in a matter of weeks.

Unfortunately, this isn’t the end of the bad news either!

The 10-year U.S. Treasury is the single most important bond in the world. The reason for this is that A) it is issued by the U.S., which is the largest, most dynamic, economy in the world and B) 10 years represents a full economic cycle.

The yield on this bond has just broken out of its 35+ year downtrend for the second time in decades.

As the above chart shows, the first break took place in 2018.

As I mentioned yesterday, at that time the Fed was raising rates four times a year while also shrinking its balance sheet by $500 billion. The end result was the junk bond market froze and stocks crashed (see blue rectangle in the chart below). This forced the Fed to abandon tightening monetary policy.

By way of contrast, during this latest breakout of the yield on the 10-Year U.S. Treasury, the Fed has only just ended QE, has yet to shrink its balance sheet at all, and has only raised rates ONCE.

Again, this is a HUGE freaking deal. Last time this happened the Fed could start easing monetary conditions to stop the carnage. This time around, the Fed CANNOT. It has to continue tightening monetary policy or risk inflation destroying the economy.

Put simply, the Fed needs to decide… does it save stocks or bonds.

Saving stocks means risking a debt crisis that would make 2008 look like a picnic.

Savings bonds means stocks collapsing… but the system remains intact.

Which do you think the Fed will choose?

The stage is set for a historic collapse. It might not be today or tomorrow… but it’s coming.

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:

https://phoenixcapitalmarketing.com/stockmarketcrash.html

The bond market is blowing up.

As I outlined several weeks agothe financial system is now experiencing its first coordinated central bank tightening in over a decade.

The reason for this tightening is inflation. Inflation is a global phenomenon. Once it appears, it is everywhere. That is the case today.

Our current financial system is based on debt. Sovereign bonds, particularly U.S. Treasuries, are the bedrock of the financial system. These are the senior-most assets owned by large financial institutions. And the yields on these bonds represent the “risk free” rate of return against which all assets (stocks, commodities, real estate, etc.) are valued.

The yields on bonds have been spiking due to inflation. This is what forced central banks to begin tightening monetary policy. But thus far, they are failing to slow, let alone kill inflation.

The U.S. central bank, the Federal Reserve (or Fed) raised rates by 0.25% in March. It was supposed to have ended its Quantitative Easing (QE) program that same month, but for whatever reason, chose to print another $55 billion during that time.

The yield on the 2-Year U.S. Treasury, has since spiked from 2.0% to 2.6%. That is a MASSIVE move for one of the most important bonds in the world (chart on the next page).

A similar move has taken place with the 10-Year U.S. Treasury, which is the single most important bond in the world. The yield on this bond has spiked from 2.1% to 2.9%.

To put these moves into context, bonds, particularly, sovereign bonds, are NOT like stocks. A 2% move is a BIG move for bonds. And we are talking about a 5% move in the most important bonds in the world over the span of four weeks… when the Fed is tightening.

This means that the Fed is now MORE behind the curve on inflation than it was four weeks ago. That is a huge freaking deal. It means the bond market doesn’t believe the Fed is going to kill inflation yet. The Fed will need to be MUCH more aggressive to do so.

It is difficult to express the severity of what is happening right now in bonds. So let me provide some longer-term charts to help you visualize this.

Look at the speed of this rise in yields relative to what bonds have done over the last 20 years. From 2003 to 2006 the yield on the 2-Year U.S. Treasury rose from 1.00% to 5.00%. This represents a quintupling in yield. And it occurred when the Fed was raising rates continuously for three years straight during a major economic expansion.

By way of contrast, the yield on the 2-Year U.S. Treasury has just gone from 0.25% to 2.6% in the span of six months.

That too is a quintupling in yield. And it took place at a time when the economy is faltering, and the Fed has barely begun tightening policy.

You can now see why this is a HUGE deal. The entire financial system will now need to reprice based on this different rate of return. The last time we saw this occur was in 2018. That’s when stocks did this:

Put simply, another collapse is coming. It might not be today or Monday… but it’s coming.

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:

https://phoenixcapitalmarketing.com/stockmarketcrash.html

By Graham Summers, MBA

The market is once again on thin ice.

The S&P 500 cannot even maintain its 50-day moving average (DMA). And this is despite the Fed pumping $55 billion into the financial system in the last month. Moreover, the 50-DMA is rolling over again. All of this is quite bearish.

The picture is even uglier for the NASDAQ. Tech stocks broke back below their 50-DMA last week. They have since failed to reclaim it. Again, this is quite bearish.

At the end of the day, the only thing holding up stocks is the fact retail investors keep “buying the dip.” Having been conditioned to believe stocks never go down courtesy of two years of Fed interventions, this crowd continues to buy at every opportunity. They’ve collectively poured $40 billion into U.S.-based stock funds in the last six weeks.

I’m guessing no one showed them this chart:

The market is on thin ice. The next bloodbath is just around the corner.

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:

https://phoenixcapitalmarketing.com/stockmarketcrash.html

By Graham Summers, MBA

The Fed released its meeting minutes from March yesterday.

The highlights are:

1)    The Fed will likely begin raising rates by 0.5%, instead of 0.25% sometime this year.

2)   The Fed will begin shrinking its balance sheet by $95 billion per month, sometime in the next three months.

Anyone who tells you this is NOT bearish is out of their mind. The Fed is announcing publicly that it needs to tighten financial conditions as rapidly as possible. This is akin to the Fed screaming, “we want stocks lower and soon.”

If you don’t believe me, perhaps you’ll listen to Bill Dudley.

Bill Dudley is the ex-President of the New York Fed: the branch of the Fed in charge of financial markets. He is also the ex-chief economist for Goldman Sachs. He is the ultimate insider’s insider, a man who not only knows how the Fed controls things, but who actually ran the programs through which the Fed did it.

Mr. Dudley published an article in Bloomberg earlier this week that was truly jaw-dropping. The title? 

If Stocks Don’t Fall, the Fed Needs to Force Them

In his piece, Mr. Dudley makes it clear that the Fed believes it can control the economy via the stock market, not the other way around. In his own words, he writes, “

“Equity prices [stocks] influence how wealthy [Americans] feel, and how willing they are to spend rather than save…”

In simple terms, the American consumer is 75% of GDP. When the stock market is up a lot, Americans feel wealthier and spend more. When the stock market collapses, they feel poorer and spend less.

Mr. Dudley then states that the Fed needs to COLLAPSE the markets to force Americans to spend less… which will end inflation. He writes…

“The Fed will have to shock markets to achieve the desired response.”

This is not the ramblings of some doom and gloom blogger… this is THE man who ran the Fed’s QE programs during from 2009-2018, when the Fed was literally attempting to save the financial system from the Great Financial Crisis.

And he is calling on the Fed to crash the markets. And don’t forget where stock prices are right now relative to the last two crashes.

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:

https://phoenixcapitalmarketing.com/stockmarketcrash.html

By Graham Summers, MBA

The single most important rule in investing is “don’t fight the Fed.”

The Fed is the single most powerful entity in the financial system. And as we discovered in 2020, there is almost no limit to its power: the Fed was able to stop the most aggressive market crash in history… and push stocks to new all-time highs, at a time when the real economy was shut-down.

Again, the Fed managed to force stocks to new all-time highs during an economic shut-down. You can focus on value investing, momentum investing, day-trading… but whatever you do, DO NOT fight the Fed.

And right now the Fed is SCREAMING that it is going to aggressively tighten monetary policy.

Over the last six weeks, multiple Fed officials, including Fed Chair Jerome Powell (the most powerful Fed insider in the world) have stated that the Fed is WAY behind the curve on inflation and needs to start raising rates by 0.5% multiple times this year.

If you don’t believe me, perhaps you’ll believe Lael Brainard.

Ms. Brainard is the Fed Vice-Chair, the Fed’s second in command. She is arguably the most liberal, pro-money printing Fed official currently in office. Rarely, if ever, has she publicly stated anything that is not in favor Fed monetary easing.

Yesterday Ms. Brainard gave a speech in which she stated the following:

·      High inflation places a “burden on working families.”

·      It is of “paramount importance” that the Fed stop inflation.

·      The Fed will start reducing its “balance sheet at a rapid pace” as early as May.

·      The Fed is prepared to take even “stronger action” if needed.

Again, this is the most pro-money printing Fed official currently in office stating publicly that the single most important focus for the Fed today is ending inflation.

This means aggressive rate hikes and shrinking the Fed’s balance sheet as quickly as possible.

So while foolish investors continue to buy every dip in the stock market… and are willing to gamble on companies that couldn’t make money even when the Fed was easing… smart investors are preparing for what’s coming.

Don’t fight the Fed. Especially when it wants to stop inflation by popping a bubble.

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:

https://phoenixcapitalmarketing.com/stockmarketcrash.html

By Graham Summers, MBA

The bond market is telling us that the Fed is in very serious trouble.

Bonds are quite complicated, so I’m going to do my best to keep things very simple here.

The Fed ended its Quantitative Easing (QE) program through which it prints new money and used it to buy assets from Wall Street in early March. Since that time, the Fed has also begun raising interest rates, implementing its first rate hike of 0.25% on March 17th.

Historically, when the Fed begins raising interest rates, it looks to the 2-Year U.S. Treasury for guidance: the Fed tracks the yield on this bond as a proxy for where rates need to go.

With that in mind, the yield on the 2-year Treasury, is exploding higher. In six months, it has moved approximately the same amount that it did from 2012-2018!!! This is a truly incredible move, and it tells us the Fed is WAYYYY behind the curve in terms of where interest rates need to go.

If you think that’s disturbing, consider the following…

This yield on the 2-year U.S. Treasury is HIGHER now than it was before the Fed raised rates a few weeks ago. This means the Fed is MORE behind the curve now than it was before it actually raised rates!

We know from the inflationary storm of the late 1970s/ early 1980s that once the Fed gets really behind the curve on inflation, small moves no longer work. The Fed will NEED to be EXTREMELY aggressive going forward to stop inflation.

How aggressive?

Bill King notes that the Taylor Rule suggests rates need to be over 9.5% to stop inflation. Yes, 9.5%. Rates are at currently at 0.5%!

If you think the Fed is going to back off on its monetary tightening, you’re mistaken. The Fed HAS to move and move aggressively if it wants to stop inflation from completely destroying the economy.

This will mean the Fed intentionally triggering a recession within six months. It has no other choice. It has to end inflation and the only way to do so is to crush demand via a recession.

The time to prepare for what’s coming is NOW, before it hits.

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:

https://phoenixcapitalmarketing.com/stockmarketcrash.html

All last week, I warned that the markets are setting up for a spectacular collapse.

I noted that inflation is at levels that have preceded recessions throughout the last 50 years.

I also noted that the yield curve had inverted. This might be the single most accurate predictor of recession. It has accurately predicted every recession since the early ‘70s, including the 2020 recession (something fewer than 1% of professional investors got right). And it’s now forecasting a recession in the near future.

Today, we are adding the economically sensitive Dow Transports index to the list of recession warnings. On Friday, this stock index collapsed almost 5%. The damage was led by highly economically sensitive trucking and rail companies: companies that usually signal a recession months before the rest of the market “catches on.” 

JB Hunt is one of the largest trucking companies in the nation. Trucking might be THE most economically sensitive industry in the market. What does this chart tell you is coming?

Put simply, multiple signals with extremely accurate historical track records are screaming “RECESSION!”

What are the odds they are ALL wrong this time?

The time to prepare for what’s coming is NOW, before it hits.

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:

https://phoenixcapitalmarketing.com/stockmarketcrash.html