The S&P 500 has been trading in a 40-point range since mid-November. I know that sounds difficult to believe, but it’s true. For all the issues in the world (conflict in the Middle East, the ongoing war between Russia and Ukraine, economic data weakening in the U.S., political issues/ potential impeachment for the Biden administration), the stock market has gone nowhere.
See for yourself. I’ve illustrated this with a blue rectangle in the chart below.
Having said that, the market DID reveal something MAJOR in the last month… but it’s what DIDN’T happen as opposed to what happened.
What didn’t happen?
Stocks didn’t break down.
In spite of all the issues and potential risks in the world right now, the bears couldn’t generate enough selling pressure to push stocks down more than 1%. And considering the market was EXTREMELY overbought going into this period, it REALLY suggests the bears are weak right now.
Which means…
The Santa rally is about to hit. Indeed, just last week, the market managed to break out of its trading range and stay there. I’ve illustrated this development with a purple circle in the chart below.
If stocks hold this today, then the door opens to a Santa rally that sees the S&P 500 hit 4,700 before year-end. Take out 4,600 on a weekly basis and you’ve got an opening to 100 points higher relatively quickly.
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Yesterday’s market action could not have illustrated the current market rotation any better.
As I recently outlined:
1) The S&P 500 is currently consolidating after one of its best monthly performances in 30 years.
2) This consolidation has consisted of large tech correcting while laggard sectors and indices (small caps/ the Russell 2000, industrials/ the Dow Jones Industrial Average) catch a bid.
Yesterday’s price action illustrated this perfectly: microcaps (the Russell 2000) caught a major bid relative to tech (the NASDAQ) as the Russell 2000 ROSE over 1% while the NASDAQ fell nearly 0.9%.
If you heeded yesterday’s missive you did quite well! Again, you CAN outperform the overall market, but it takes a lot of work and insight!
This trend is likely to play out over the next two weeks until the Russell 2000/ NASDAQ ratio reaches its 200-day moving average (DMA) sometime around the Fed’s next FOMC (December 12th-13th).
At that point the overall market should complete its consolidation/ correction and begin its next leg up. I’ve said previously that the S&P 500 will hit 5,000 sometime in the 1Q24. The setup is clear in the longer-term Cup and Handle formation.
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The S&P 500’s performance for the month of November 2023 was one of the best single month performances for stocks in the last 30 years. Stocks finished the month up 9.5%, a truly incredible return.
The big question is “what’s next for the markets?”
The answer is “rotation.”
Tech led the rally as Big Tech blasted higher throughout November while much of the rest of the market lagged behind. We are now seeing capital flowing into some of of the laggards, specifically small caps.
The ratio between the NASDAQ and the Russell 2000 has been in a downtrend for most of 2023 as Tech stocks outperform small caps. We are now seeing a break of this downtrend to the upside as small caps finally catch a bid and Tech consolidates
This rotation is allowing overall breadth to improve as non-Tech stocks catch up to Tech leaders. You can see this clearly in the chart below in which breadth (red line) is catching up to the Tech sector (XLK).
After this rotation/ catch up is finished, stocks go to new all time highs. The Cup and Handle formation in the long-term chart for the S&P 500 is clear.
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The S&P 500 is consolidating after one of its best monthly performances in the last 30 years.
Thus far in November, the S&P 500 is up 8.5%. If the month ended today, it would be one of the top 10 monthly returns for the S&P 500 in the last 30 years. We rode this rally the entire way up, having told our clients to buy stocks aggressively when the S&P 500 was down at 4,200. Suffice to say, they’re quite happy.
And their #1 question today is: so what’s next for stocks?
The S&P 500 is quite overextended, having rallied to a level that is 4% above its 50-day moving average (DMA). Throughout the last 12 months, an extension of this magnitude above the 50-DMA has marked a temporary top for stocks.
The big question now is if stocks correct… or if they simply consolidate here, thereby allowing the 50-DMA to catch up to price, before the market make its next push higher.
Thus far the market is opting for #2: consolidating.
The S&P 500 has traded within a 20 point range since November 22nd. The key issue here as far as I’m concerned is that the bears have failed to push stocks down in any significant way, even though there was very low trading volume due to the Thanksgiving holiday.
Think of it this way… stocks are finalizing one of their most aggressive single month rallies in 30 years, and the bears can’t even generate enough selling pressure to push the S&P 500 down 1%.
This suggests that the next move for stocks will be up once this consolidation is over. And given that the market is less than 5% from its all-time highs, I believe we’ll see the S&P 500 hit NEW all-time highs some time in the first quarter of 2025, likely before February 1st, 2024.
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It is widely believed that you cannot time the market. This is a myth. You can time the market, but it takes a lot of work and knowledge.
Case in point, as I outlined in yesterday’s article, I accurately called for the S&P 500 to run to 4,600 back on November 2, 2023 when the market was still just at 4,200.
The S&P 500 hit a high an intraday high of 4,557 yesterday. Modesty aside, this was an incredible call, made within a few days of the market hitting its absolute lows before the rally.
This wasn’t luck either.
Prior to this call, I had been warning clients for weeks that stocks would break down to the 4,100s on the S&P 500 and that this would be a MAJOR buying opportunity. Heck, the literal title to a research note to private clients on October 5th was “Bonds Stabilize… But I Expect a Final Flush for Stocks.”
What happened next is illustrated in the chart chart. Again, I called for the S&P 500 to drop to the 4,100s weeks in advance, then predicted the S&P 500 would run to 4,600 weeks within days of the market bottom in late October.
So my point remains the same: you CAN time the market, but it takes a lot of work and knowledge.
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The following are excerpts from my Private Wealth Advisory market update to private clients written on 11-2-23. At that time the S&P 500 was trading in the 4,200s. It’s at 4,531 today.
The door is open to a Santa Rally to 4,600 or even higher on the S&P 500.
Why?
The Treasury just removed the single largest concern for stocks for the remainder of the year.
As I’ve noted previously, one of the most difficult aspects of stock market investing is that the market is a discounting mechanism for millions, if not billions, of pieces of information. The stock market represents the collective decisions of millions of individuals all of whom are thinking about a myriad of data points/ issues… and all of whom have literal money on the line.
However, out of all the millions or billions of pieces of information that the market is discounting at any given time, it typically only really cares about two or three issues at a time.
Sometimes it’s inflation. Other times it’s what the President is doing (or tweeting). Other times it’s China. Other times it’s what the Fed is doing or about to do. Other times it’s the economy. And so on and so forth.
What makes things even more difficult is the fact that the market changes its focus all the time. It might be really focused on inflation for a few weeks only to then ignore inflation for months on end. Similarly, the market might go weeks without acknowledging anything Fed officials say, only to then care a great deal about a single statement made by a single Fed official during an hour-long Q&A session.
I bring all of this up, because since late-July/ early-August 2023, the #1 thing the market has cared about has been the size of the Treasury’s long-duration debt issuance…
On July 31st 2023, the Treasury announced its financing needs for the third quarter (July through September). The Treasury announced it would:
1) Need to borrow $274 billion more than previously expected.
2) Increase its issuance of longer duration Treasury bonds for the first time since 2021.
Regarding #2, the actual increase in dollar terms of long duration bonds that the Treasury needed to issue was relatively small ($102 billion vs. $96 billion). However, the fact that there was increase in long duration issuance, combined with the increase in total debt issuance ($274 billion) was a surprise.
And the bond markets HATE surprises.
Since that time, bond investors have been dumping ALL long duration bonds. This has resulted in long-term Treasury yields rising (bond yields rise when bond prices fall). And because the stock market is priced based on long-duration Treasury yields, this has meant a sell-off in stocks.
The chart bel shows the yield on the 10-Year U.S. Treasury and the S&P 500 from the last QRA announcement on July 31st 2023 until last week. As you can see, the two items have been moving in lockstep.
Which brings us to this week (week of 10-30-23).
On Monday the 30th of October, the Treasury issued its QRA for the fourth quarter of 2023. It surprised the markets (in a good way) by stating that it would borrow only $776 billion (this was $76 billion less than previously expected).
Then, on Wednesday (11-1-3), the Treasury released its Report to the Secretary of the Treasury from the Treasury Borrowing Advisory Committee.
In it, the Treasury Borrowing Advisory Committee wrote the following (emphasis added)
The Committee supported meaningful deviation from the historical recommendation for 15-20% T-Bill share.While most members supported a return to within the recommended band over time, the Committee noted that the work Treasury has done to meaningfully increase WAM over the past 15 years affords them increased flexibility with T-Bill share in the medium term.
Source: Treasury.gov
As I explained to clients in the remainder of this market update, the decision of the Treasury to rely extensively on short-term T-bills to finance the deficit would ignite a “risk on” rally that will likely last into year-end.
Since that time, the S&P 500 has done this:
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Treasury Secretary Yellen wants stocks and bonds higher.
The reason is simple.
Next year 2024 is an election year. And Yellen is a playing politics for the Biden Administration. After all, it’s hard to convince voters to re-elect someone when their 401(k)s are shrinking by the week.
This is why Secretary Yellen chose to have the Treasury shift its issuance from its traditional breakdown of 15%-20% short-term debt/ 80%-85% long-term debt to favor issuing more short-term debt for the foreseeable future.
Doing this alleviates some of the pressure on long-term Treasuries as well as stocks which are priced based on the former’s yields. This is THE reason why both assets (stocks and bonds) erupted higher last week after declining for most of the last three months.
The BIG problem with this is that Secretary Yellen is choosing to rely heavily on short-term debt at a time when the Biden Administration is running its largest deficit as a percentage of GDP outside of WWII.
The U.S. has added nearly $2 TRILLION to the debt in the last 12 months alone. This is happening at a time when the Treasury is ALSO rolling over trillions of dollars worth of debt.
By relying on short-term debt (12 months of less in duration), Secretary Yellen is setting the stage for an absolute disaster in late 2024/ early 2025.
Why?
All of this short-term debt will be coming due between now and then. By late 2024, the U.S. will have nearly $35 trillion in debt. And if inflation hasn’t collapsed by then, all of the new short-term debt will need to be rolled over when rates are HIGH.
Interest payments on the debt are already at $800 billion. What do you think will happen to them when the U.S. has $35 trillion in debt and needs to roll over a large amount of this while rates are still in the 4% range or higher?
The long-term end of the bond market has figured it out. Stocks will too eventually.
As I keep warning, the Great Debt Crisis of our lifetimes is fast approaching.
In 2000, the Tech Bubble burst.
In 2007, the Housing Bubble burst.
The Great Debt Bubble burst in 2022. And the crisis is now approaching.
If you’ve yet to take steps to prepare for what’s coming, we just published a new exclusive special report How to Invest During This Bear Market.
It details the #1 investment to own during the bear market as well as how to invest to potentially generate life changing wealth when it ends.
Normally this report would be sold for $249. But we are making it FREE to anyone who joins our Daily Market Commentary Gains Pains & Capital.To pick up your copy, swing by:
Both stocks and bonds caught a bid mid-week on announcements that the Treasury has decided to issue less long duration bonds that previously expected.
This is GREAT news for risk assets in the short-term. It’s EXTRAORDINARILY BAD NEWS for EVERYTHING in the long-term.
Let’s me explain.
The recent sell-off in both bonds and stocks was driven by one primary concern: that the Treasury would need to issue a gargantuan amount of long-term debt to fund the Biden administration’s profligate spending.
In its simplest rendering:
1) The Biden administration is running the largest fiscal deficit as a percentage of GDP outside of WWII.
2) All of this spending requires the Treasury to issue massive amounts of debt.
Historically, the Treasury’s debt issuance consisted of 15%-20% short-term debt, and 80%-85% long-term debt. The reason for this was to avoid a rate shock should rates change dramatically in a 12-month period (all the short-term debt would come due at a time when rates were much higher).
It was this heavy reliance on long-term debt issuance that resulted in the 10-Year U.S. Treasury collapsing from late July through late October. And since stocks are generally a long-duration asset class, this pulled stocks down as well.
The below chart shows the 10-Year U.S. Treasury (red line) plotted against the S&P 500 (black line). As you can see, the two were trading in lock-step as soon as the Treasury announced its long duration debt issuance needs for the third quarter of 2023 on July 31st.
The Treasury took note of this collapse, which is why it announced a shift in focus for its 4Q23 debt issuance from long-term debt to short-term debt.
In its very simplest rendering, the Treasury intentionally removed the #1 concern for the stock market… thereby opening the door to a Santa Rally into year-end. Unfortunately, the cost of this is that the U.S. debt markets will be in VERY serious trouble a year from now.
Why?
Because this is a “one time” trick that cannot be repeated. Sure, it puts a floor under bonds for the time being, but unless the government cuts spending in a BIG WAY, sometime in the next 6-12 months all of this short-term debt will come due and the Treasury will once again need to issue long-term debt.
Mind you, the U.S. is currently adding debt at a pace of nearly $2 TRILLION per year. So you can only imagine the yield investors will require to lend money to Uncle Sam for any time period a year from now when our debt is over $35 trillion and we’re still running a ~$1 TRILLION deficit.
The below chart needs no explanation. Long-term Treasuries have broken their multi-decade trendline. They are now sitting on CRITICAL support. Once that green line goes, the debt crisis begins.
As I keep warning, the Great Debt Crisis of our lifetimes is fast approaching.
In 2000, the Tech Bubble burst.
In 2007, the Housing Bubble burst.
The Great Debt Bubble burst in 2022. And the crisis is now approaching.
If you’ve yet to take steps to prepare for what’s coming, we just published a new exclusive special report How to Invest During This Bear Market.
It details the #1 investment to own during the bear market as well as how to invest to potentially generate life changing wealth when it ends.
Normally this report would be sold for $249. But we are making it FREE to anyone who joins our Daily Market Commentary Gains Pains & Capital.To pick up your copy, swing by:
Japan’s central bank, the Bank of Japan (or BoJ for short) is currently engaged in an open-ended Quantitative Easing (QE) program. In its simplest rendering, the BoJ starts buying the 10-Year Japanese Government Bond any time that bond’s yield rises to 1% or higher.
It’s possibly the boldest QE program in history: a definitive “line in the sand” drawn by a major central bank as far as bonds are concerned. Again, this is an open-ended, unlimited QE program through which a MAJOR central bank does whatever it takes to keep is country’s bond yields from rising.
However, even this program is proving inadequate.
The BoJ has had to engage in previously unscheduled bond market interventions SIX TIMES in the last four weeks. And yesterday, it finally gave in and announced that its “line in the sand” of 1% for the yield on the 10-Year Japanese Government bond is now a “loose upper bound” instead of a definitive cap.
The below chart needs little explanation.
In response to this announcement, Japan’s currency, the Yen, broke to new lows. The Yen hasn’t traded at this level since the late 1980s!
This is the end game for every major central bank: the gradual losing control of the bond market… and having to sacrifice your currency in order to stave off a debt crisis. But even that won’t work eventually as the weaker the currency, the less value bonds will have.
As I keep warning, the Great Debt Crisis of our lifetimes is fast approaching.
In 2000, the Tech Bubble burst.
In 2007, the Housing Bubble burst.
The Great Debt Bubble burst in 2022. And the crisis is now approaching.
If you’ve yet to take steps to prepare for what’s coming, we just published a new exclusive special report How to Invest During This Bear Market.
It details the #1 investment to own during the bear market as well as how to invest to potentially generate life changing wealth when it ends.
Normally this report would be sold for $249. But we are making it FREE to anyone who joins our Daily Market Commentary Gains Pains & Capital.To pick up your copy, swing by:
Yesterday, the Treasury announced that it would “only” need $775 billion to fund the budget for the fourth quarter of 2023.
This was considered to be good news.
Back in July, the Treasury had announced it would need $852 billion for the fourth quarter. So the fact the Treasury surprised the markets by needing less was used as an excuse for traders to gun the markets higher.
There’s just one small problem with this…
The Treasury QRA was an obvious lie. There is no way on earth the Treasury only needs $775 billion in refunding for 4Q23. Heck, it needed $500 billion in the last month alone!
Moreover, it’s not as if the government is suddenly becoming careful about spending. The Biden Administration has added $4.6 trillion in debt since taking office. And the pace is actually INCREASING, not decreasing: they added almost $1 TRILLION in new debt between 1Q23 and 2Q23.
So again, the idea that the Treasury can somehow fund everything with just $775 billion in refunding needs in the 4Q23 is a joke. The real amount will be MUCH larger than that.
As I keep warning, the Great Debt Crisis of our lifetimes is fast approaching.
In 2000, the Tech Bubble burst.
In 2007, the Housing Bubble burst.
The Great Debt Bubble burst in 2022. And the crisis is now approaching.
If you’ve yet to take steps to prepare for what’s coming, we just published a new exclusive special report How to Invest During This Bear Market.
It details the #1 investment to own during the bear market as well as how to invest to potentially generate life changing wealth when it ends.
Normally this report would be sold for $249. But we are making it FREE to anyone who joins our Daily Market Commentary Gains Pains & Capital.To pick up your copy, swing by:
Japan is slowing losing control of its bond market.
The Bank of Japan (BoJ) is currently engaged in an open-ended Quantitative Easing (QE) program. In its simplest rendering, the BoJ starts buying the 10-Year Japanese Government Bond any time that bond’s yield rises to 1% or higher.
It’s possibly the boldest QE program in history: a definitive “line in the sand” drawn by a major central bank as far as bonds are concerned. Again, this is an open-ended, unlimited QE program through which a MAJOR central bank does whatever it takes to keep is country’s bond yields from rising.
However, even this program is proving inadequate.
The BoJ has had to engage in previously unscheduled bond market interventions SIX TIMES in the last month. The below chart needs little explanation. You can see that yields broke above critical resistance in mid-2023 and have gone vertical ever since.
At this point, the BoJ is now having to engage in direct interventions in its bond market more than once a week. And this is happening at a time when the Japanese currency (the Yen) is about to break to new lows.
As I keep warning, the Great Debt Crisis of our lifetimes is fast approaching.
In 2000, the Tech Bubble burst.
In 2007, the Housing Bubble burst.
The Great Debt Bubble burst in 2022. And the crisis is now approaching.
If you’ve yet to take steps to prepare for what’s coming, we just published a new exclusive special report How to Invest During This Bear Market.
It details the #1 investment to own during the bear market as well as how to invest to potentially generate life changing wealth when it ends.
Normally this report would be sold for $249. But we are making it FREE to anyone who joins our Daily Market Commentary Gains Pains & Capital.To pick up your copy, swing by:
2) The October lows at 4,223 (purple line in the chart below).
3) CRITICAL support at 4,200 (blue line in the chart below).
This happened as the yield on the 10-Year U.S. Treasury breached 5% for the first time since 2007. As I’ve noted before, a close above this level would induce a collapse in risk assets, including stocks.
That’s when “someone” or “someones” MANIPULATED the stock market, by PANIC buying stocks, forcing the ENTIRE MARKET up by 35 pts in the span of 40 minutes. From that point until 1PM, every single dip was bought with PANIC buying.
How do we know this was manipulation or an intervention?
NO ONE panic buys stocks the moment they break below critical thresholds. There isn’t a single trading shop or trading team in the world in which the head screams “GO ALL IN ON STOCKS” as soon as the market violates a critical level of support.
In the simplest of terms, the manipulators staved off a crisis… for now. But the fact remains that the U.S. Treasury bubble burst in 2022. And the crisis is now approaching.
If you’ve yet to take steps to prepare for what’s coming, we just published a new exclusive special report How to Invest During This Bear Market.
It details the #1 investment to own during the bear market as well as how to invest to potentially generate life changing wealth when it ends.
Normally this report would be sold for $249. But we are making it FREE to anyone who joins our Daily Market Commentary Gains Pains & Capital.To pick up your copy, swing by:
The yield on the 10-Year U.S. Treasury is about to break 5%.
As the below chart illustrates, this is a major level. Once we take it out, there’s little if any overhead resistance until 5.25% and then 6%.
The 10-Year U.S Treasury is the single most important bond in the world. It is the bond against which all long duration risk assets (real estate, tech stocks, etc) are priced. So if it collapses in a panic (meaning its yields skyrocket) then the ENTIRE financial system will panic.
Stocks are already completely disconnected from the realities of the bond market. They won’t be for much longer if bonds continue breaking down.
Is the Great U.S. Debt Crisis about to begin?
In 2000, the Tech Bubble burst.
In 2007, the Housing Bubble burst.
The U.S. Treasury bubble burst in 2022. And the crisis is now approaching.
Smart investors are already taking steps to prepare for this.
If you’ve yet to take steps to prepare for what’s coming, we just published a new exclusive special report How to Invest During This Bear Market.
It details the #1 investment to own during the bear market as well as how to invest to potentially generate life changing wealth when it ends.
Normally this report would be sold for $249. But we are making it FREE to anyone who joins our Daily Market Commentary Gains Pains & Capital.To pick up your copy, swing by:
The yield on the 2-Year U.S. Treasury hit a new high yesterday.
Why does this matter?
Because…
1) It indicates the Fed’s fight to tame inflation is NOT done.
2) Stocks are in for a world of hurt in the coming months.
Regarding #1, back in May 2023, the 2-Year U.S. Treasury was anticipating that the Fed would have rates at 3.75% in May of 2025. At the time, this meant the Fed would cut rates at least two times before May of 2025 (rates were at 5.25% in May 2023).
Fast forward to today, and the 2-Year U.S. Treasury has just broken out to new highs of 5.20%. This means the market is now anticipating that the Fed will have cut rates possibly ONCE by October of 2025. Moreover, the idea that rates will be ABOVE 5% instead of BELOW 4% in late 2025 is a HECK of a shift.
Put simply, the bond market is figuring out that the Fed will need to keep rates MUCH higher for MUCH longer. And this brings us to #2 in our list above.
Stocks are in for a world of hurt.
Stocks are priced based on Treasury yields. This is one of the primary reasons why stocks remain down almost 10% from their all-time highs despite the fact the economy is growing. After all, if you can earn 5.25% risk free in bonds for two years, why risk putting your money into much riskier stocks where both the earnings yield AND the dividend yield are lower (4.07% and 1.62%, respectively).
The great crisis of our lifetimes is fast approaching.
In 2000, the Tech Bubble burst.
In 2007, the Housing Bubble burst.
The long term U.S. Treasury bubble burst in 2022. And the crisis is now approaching.
Smart investors are already taking steps to prepare for this.
If you’ve yet to take steps to prepare for what’s coming, we just published a new exclusive special report How to Invest During This Bear Market.
It details the #1 investment to own during the bear market as well as how to invest to potentially generate life changing wealth when it ends.
Normally this report would be sold for $249. But we are making it FREE to anyone who joins our Daily Market Commentary Gains Pains & Capital.To pick up your copy, swing by:
The yield on the all-important 10-Year U.S. Treasury is spiking again. As I write this, it’s about to take out its former highs.
There are no shortage of reasons.
First and foremost, Inflation remains HOT.
Mainstream economists have been high-fiving one another because CPI is now 3.7%. Apparently the fact prices are still rising but at a slower pace is some kind of BIG WIN for the Fed. For those of us who live in the real world, the fact that prices are still rising by this much despite the Fed embarking on its most aggressive monetary tightening in decades is not a good thing.
And bond yields know it.
Bond trade based on many things including inflation expectations. In this light, the fact inflation is proving this difficult to slay is yet another reason bond yields are spiking higher: they know the Fed will have to do more.
The second reason why yields are spiking is that there is still too much excess liquidity in the financial system. Banks are still parking over $1.2 TRILLION at the Fed every night. This is a clear signal banks have too much extra capital/ liquidity lying around.
And finally, there’s the the ENORMOUS deficit that the Biden administration has been running since President Biden took office. Indeed, Bidenomics should be renamed SPEND-onomics as the federal government is running its largest deficit as a percentage of GDP outside of WWII.
All this spending requires the Treasury to issue massive amounts of debt. Basic economics tells us that the more of something there is, the less it’s worth. This is why U.S. Treasuries are worth less and hopefully won’t become worthless.
The below chart is truly horrifying. It tells us that the fuse is lit on a $33 trillion debt bomb.
The great debt crisis of our lifetimes is fast approaching.
In 2000, the Tech Bubble burst.
In 2007, the Housing Bubble burst.
The U.S. Treasury bubble burst in 2022. And the crisis is now approaching.
Smart investors are already taking steps to prepare for this.
If you’ve yet to take steps to prepare for what’s coming, we just published a new exclusive special report How to Invest During This Bear Market.
It details the #1 investment to own during the bear market as well as how to invest to potentially generate life changing wealth when it ends.
Normally this report would be sold for $249. But we are making it FREE to anyone who joins our Daily Market Commentary Gains Pains & Capital.To pick up your copy, swing by:
As I noted yesterday, the great debt crisis of out lifetimes is approaching.
The U.S. is now adding debt at an exponential rate. The U.S. racked up its first $10 trillion in debt over the course of 232 years. Following the Great Financial Crisis, it added another $10 trillion in just nine years. The next $10 trillion took only four years.
And by the look of things, the next $10 trillion will take even less than that. The U.S. has added $2 trillion in debt in the last four months. We’re now adding $1.2 billion in debt per hour.
How will this play out?
Well there are three ways to deal with a major debt problem.
1) Pay it back.
2) Inflate it away.
Guess which one policymakers have opted for?
Why did they spend $8 TRILLION in the span of just 24 months from 2020
Why else is the U.S. running its largest fiscal deficit as a percentage of GDP outside of WWII… despite the fact the economy is still growing!?!
Why else is the Fed providing over $1 TRILLION in reverse repo liquidity schemes to the financial system every single night… despite the fact the financial system isn’t in a crisis?!?
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The great debt crisis of out lifetimes is approaching.
The U.S. has now reached the point at which it is adding debt at an exponential rate.
It took the U.S. 232 years to rack up its first $10 trillion in debt. Thanks to the Fed’s egregious monetary policies following the Great Financial Crisis, the U.S. added another $10 trillion in debt in just nine years as the government went on a spending spree.
It’s added another $10 trillion in a little over FOUR years, thanks to the insane spending the U.S. implemented following the pandemic.
And the pace is only accelerating.
In June of this year, the U.S. had $31 trillion in debt. Today, it’s over $33 trillion. So we’ve just added another $2 trillion in a little over FOUR MONTHS.
And the Fed is confused as to why U.S. Treasuries are collapsing!?!
Basic economics tells us that the more of something there is… the less value it holds. Small wonder then that as the U.S. issues more and more debt, the debt is collapsing in value.
Below is a chart of the long-term U.S. Treasury ETF (TLT). It needs no explanation.
Again, the great debt crisis of our lifetimes is fast approaching.
In 2000, the Tech Bubble burst.
In 2007, the Housing Bubble burst.
The U.S. Treasury bubble burst in 2022. And the crisis is now approaching.
Smart investors are already taking steps to prepare for this.
I’ve identified a series of market events that unfold before every crash.
I detail them, along with what they’re currently saying about the market today in a Special Investment Report How to Predict a Crash.
Normally this report would be sold for $249. But we are making it FREE to anyone who joins our Daily Market Commentary Gains Pains & Capital.
As usual, everyone is attempting to have an “expert” take on this situation. The reality is that less than one in 10,000 of the people speaking on this stuff have any idea what they are talking about. And unfortunately this goes for the actual experts with degrees and pedigree.
Before listening to anyone opining on this conflict, ask yourself the following three questions:
1) Does this person know what kind of government the country or countries involved has? (parliament, congress, neither, theocracy, etc).
2) Could this person find the countries in question on a map?
3) Can this person name the leaders of the countries in question?
If the answer to all three of these isn’t YES, then ignore anything else this person has to say. If they’re too lazy to even spend five minutes learning the basics, then they’re just another fake guru trying to act like they’re omniscient.
With that in mind, I’m staying in my lane and focusing on the markets today. I’m doing this not because I don’t care about the people under attack, nor is it because I’m insensitive to the situation… I’m doing this because I’m not an expert on the middle east and have nothing to add in the way of quality insights.
What I did note however was the stock market bounced hard from the initial sell-off yesterday and closed out the day at the highs. This is quite bullish given that the geopolitical situation.
From a purely technical analysis situation, stocks bounced HARD off the 200-day moving average, or DMA, as represented by the green line in the chart below. The door is now open to a run to the 50-DMA as represented by the red line in the chart below.
The key however is what happens to bonds.
The bond market was closed yesterday. So we need to assess how bonds act today now that they’re trading again. If yields break to new highs, then something BAD is coming for the stock market in the next few weeks.
Again, everything hinges on what bonds do. Bonds are the reason stocks rallied from 2020 to 2022. They’re the reason stocks crumbled from March 2022 to October 2022. So whatever happens in bonds will dictate what’s coming for stocks.
The key however is what happens to bonds.
The bond market was closed yesterday. So we need to assess how bonds act today now that they’re trading again. If yields break to new highs, then something BAD is coming for the stock market in the next few weeks.
Again, everything hinges on what bonds do. Bonds are the reason stocks rallied from 2020 to 2022. They’re the reason stocks crumbled from March 2022 to October 2022. So whatever happens in bonds will dictate what’s coming for stocks.
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Try as they might, the bears simply couldn’t get it done last week.
The S&P 500 spent a few days chopping around its 200-day moving average (DMA) before spiking higher on Friday. Much of this late week rally was short covering, but the fact remains that sellers simply didn’t have what it took to push stocks any lower.
Indeed, the biggest news as far as stocks were concerned was the fact that the tech-heavy NASDAQ simply refused to take out support at 13,000.
Tech is a long-duration sector of the market… meaning it is heavily influenced by long duration bonds. The reason for this is that your typical tech start-up will take years before it brings a product or service to market and starts generating cash flow. So when you’re modeling a tech company’s future cash flows, you need to be thinking five years out or more. This means comparing a tech company’s future earnings against what you’d earn from owning a risk-free U.S. Treasury over the same time period.
Simply put, the tech sector is heavily influenced by what long-duration bonds do… which is why it’s truly astonishing that the NASDAQ has refused to break down despite the fact the yield on the 10-year U.S. Treasury spiked to new highs. The fact that stock market bears failed to crush tech is really quite bullish and a significant “tell” for the markets.
With all of this in mind, it’s quite possible stocks bottomed last week or will bottom this one. I remain concerned about a number of risks to the markets, but we have to respect price action. And price action tells us that stocks are strong in spite of many issues.
For more market insights and analysis, join our free daily market commentary Gains Pains & Capital. You’ll immediately start receiving our Chief Market Strategist Graham Summers, MBA’s briefings to your inbox every morning before the market’s open. Since 2015, Graham has shown investors a win rate of 75% meaning they made money on three out of every four positions closed.
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Bonds finally bounced yesterday. However, the bounce was relatively weak and didn’t signal the “all clear.”
Simply put, things stabilized. But they didn’t actually improve much. And market leading indicators suggest this correction isn’t over yet.
High yield credit typically leads stocks both the upside and the downside. It bottomed weeks before stocks did in October 2022. And right now, it’s telling us the S&P 500 could easily go to 4,100.
Breadth is another market leading indicator I watch. And it is also telling us stocks are not finished falling just yet. Again, I don’t trust this bounce in stocks at all.
Again, the long-end of the Treasury market has completely collapsed. Banks and financial entities are sitting on hundreds of billions of dollars worth of losses. As I keep warning, the Great Debt Crisis of our lifetimes is fast approaching. The time to prepare is NOW, before it hits.
As I keep warning, the Great Debt Crisis of our lifetimes is fast approaching. The time to prepare is NOW, before it hits.
I’ve identified a series of market events that unfold before every crash.
I detail them, along with what they’re currently saying about the market today in a Special Investment Report How to Predict a Crash.
Normally this report would be sold for $249. But we are making it FREE to anyone who joins our Daily Market Commentary Gains Pains & Capital.
Everyone is applauding the short-term deal to keep the government open for another 45 days.
Well, everyone except the bond market, that is.
The bond market, specifically, the market in U.S. sovereign bonds or Treasuries is the single most important market in the world. Everyone focuses on stocks, because stocks are “exciting” and the best investment for obtaining wealth.
However, the dirty little secret of the investing world is that MOST if not all of the gains from stocks are the result of the bond market. Remember, Treasuries are the bedrock of our current financial system; the yields they pay are the risk free rate of return against which all risk assets (stocks) are priced.
So if bonds blow up, you can kiss the stock market goodbye.
And thanks the the insane amount of spending the Biden administration is engaged in, bonds are about to blow up. Indeed, Bidenomics should really be retitled “debt-o-nomics” because it’s debt, not any kind of economic know-how from the Biden White House that is driving all of this stuff.
Case in point, the U.S. is currently running its largest deficit as a percentage of GDP in history outside of WWII. Bear in mind, this isn’t during a recession. The Biden White House is spending like this while the economy is technically still growing!
Basic economics tells us that the more of something there is, the less value it has. And thanks to the Biden Administration’s spending insanity, the U.S. is issuing a LOT more Treasuries. And that means… you guessed it… Treasuries are being valued as worth less.
Below is a chart you won’t see on CNN or the Mainstream Media. This is a 40+ year chart of the 30-Year U.S. Treasury. If this were a stock, you’d look at this chart and think “GAME OVER.”
As I keep warning, the Great Debt Crisis of our lifetimes is fast approaching. The time to prepare is NOW, before it hits.
I’ve identified a series of market events that unfold before every crash.
I detail them, along with what they’re currently saying about the market today in a Special Investment Report How to Predict a Crash.
Normally this report would be sold for $249. But we are making it FREE to anyone who joins our Daily Market Commentary Gains Pains & Capital.
The Fed didn’t raise rates yesterday. What it did do was update its projected dot plot for where Fed officials expect rates to be in 2024 and 2025.
The Fed now only expects to cut rates twice in 2024, as opposed to four times. In very simple terms, the Fed sent a message that rates will need to be higher for longer to end inflation.
The markets took the news hard with bonds, stocks, and even oil all selling off simultaneously. The yield on the all-important 10-Year U.S. Treasury spiked to new highs.
This is a HUGE deal. As I mentioned in yesterday’s article, this is the bond yield against which all risk assets, especially Tech stocks, are priced. If this yield keeps rising, it means stocks will need to be repriced lower.
High yield credit has already figured this out. Stocks are next.
And God help us if the S&P 500 FINALLY realizes what the long end of the treasury market has been saying for the last few months.
As I keep warning. The Great Debt Crisis of our lifetimes is fast approaching.
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 most important bond in the world has just broken to a new low.
Our financial system is backed by debt, specifically, U.S. Government debt or Treasuries. These bonds are the senior-most assets in the world, representing the bedrock of our banking system and financial markets. The yield on these bonds represents the risk-free rate of return against which all risk assets (stocks, real estate, oil, etc.).
Now, when we talk about Treasuries, we are actually talking about a series of bonds of different duration ranging from 4-weeks to 30 years. The total list is below.
Treasury Bill Maturation Periods:
4 Weeks
13 Weeks
26 Weeks
52 Weeks
Treasury Note Maturation Periods
2 Years
3 Years
5 Years
7 Years
10 Years
Treasury Bond Maturation Periods
20 Years
30 Years
Of these bonds, the 10-Year U.S. Treasury is the single most important one. The reason for this is that 10 years usually encompasses an entire economic cycle. This is the bond used to determine mortgage rates as well as pricing all longer duration assets (tech stocks).
I mention all of this because the yield on the 10-Year U.S. Treasury has just broken to new highs.
This is a HUGE deal. The risk free rate of return is rising… which means ALL risk assets will be repriced to lower levels in the near future. Small cap stocks, which are closely aligned with the real economy have already figured this out. The S&P 500 will soon follow.
That’s not the worst of it either. As I wrote in yesterday’s article, the Great Debt Crisis of our Lifetimes is fast approaching. I’ll explain precisely how the 10-Year U.S. Treasury fits into that in tomorrow’s article. In the meantime, if you’re looking to prepare yourself and your family for what’s coming, the time to take action is NOW before it hits.
If you’ve yet to take steps to prepare for what’s coming, we just published a new exclusive special report How to Invest During This Bear Market.
It details the #1 investment to own during the bear market as well as how to invest to potentially generate life changing wealth when it ends.
Normally this report would be sold for $249. But we are making it FREE to anyone who joins our Daily Market Commentary Gains Pains & Capital.
The Great Debt Crisis of our lifetimes is approaching.
As S&P Global recently noted, global debt has just hit $300 TRILLION for the first time in history. As if that wasn’t jaw dropping enough, this amount of debt represents 349% of global GDP. If you were to spread out this debt across the world population each man woman and child would owe over $36,000.
Put simply, this is an incomprehensibly massive debt bomb. And inflation has lit the fuse.
You see, bond yields trade based on inflation among other things. So once inflation entered the financial system in 2021, it was only a matter of time before bonds yields began to rise.
Higher bond yields mean greater debt payments. And greater debt payments mean that it the debt becomes more difficult to service. At a yield of 0.25%, you can service $1,000,000 worth of debt for just $2,500. But at a yield of 5%, that same $1,000,000 in debt now costs $50,000 to service.
Again, inflation lit the fuse of our global debt bomb in 2021. And by the look of things, the fuse has almost burned completely away!
Take a look at the below chart and you’ll see what I mean. This is the Invesco 1-30 Laddered Treasury ETF (GOVI). It’s effectively a proxy for the entirety of the U.S. Treasury market. And as you can see, it is now trading at the same level it first hit in 2015, and just barely clinging to critical support.
Once that line gives way, the great debt crisis of our lifetimes will likely begin.
Smart investors are already taking steps to profit from this.
On that note, we are putting together an Executive Summary outlining how to invest when this Everything Bubble bursts.
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.
While mainstream economists prance around on television claiming that inflation has been defeated, the real data suggests otherwise.
It’s a well known “secret” on Wall Street that the official inflation measure, the Consumer Price Index, or CPI, is heavily massaged to UNDER-state inflation. However, even the CPI, with all of its gimmicks is showing inflation bottomed in June.
In June of 2023, the CPI was 3.0%. It’s now 3.7%. And with oil now above $90 a barrel again, it’s likely going much higher in the coming months. Again, this chart is going in the WRONG way.
The CPI is not the only inflation metric that has rebounded. The Atlanta Fed’s “sticky inflation” metric tracks parts of inflation that are deeply embedded in the financial system. These items are “sticky” meaning that it’s much more difficult for the Fed to get rid of them. And it’s clocking in at 4.7% after dropping below 3% just a few months ago.
That’s quite a rebound.
Indeed, CPI for August clocked in at 3.7% year over year. That sounds decent until you realize that CPI was 3.0% in June. That’s quite a rebound in just two months. And bear in mind, core inflation is still well over 4%!
Take a look at what oil is doing. Does this look like inflation is under control to you?
On that note, we recently outlined a unique “off the radar” investment that could EXPLODE higher as inflation rebounds. We detail this opportunity in a special report called Billionaire’s “Green Gold.”
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As I noted a few weeks ago, inflation likely bottomed in July.
By quick way of review, the official inflation metric, the Consumer Price Index or CPI, is measured on a year over year basis. So, when the CPI is 5.5%, for instance, what it’s saying is that prices are 5.5% higher than they were during the same month the year before.
As many pundits have noted, CPI has been declining. What they are failing to recognize however is that the only part of the CPI data that has been declining in 2023 is energy prices. And the reasons for this are:
1) Oil prices collapsed for most of the last 12 months after spiking higher during Russia’s invasion of Ukraine in 1Q22.
2) The Biden administration has dumped ~292 million barrels of oil from the Strategic Petroleum Reserve (SPR) forcing oil prices lower.
You can see this for yourself in the table below. Again, the ONLY parts of the CPI that has dropped significantly are energy prices (well that and used cars and medical devices).
However, this period is now ending. On a year over year basis, energy prices will no longer be down much if at all because we are comparing prices in the purple rectangle to prices in the blue rectangle on a year over year basis. This should result in CPI moving higher.
Indeed, CPI for August clocked in at 3.7% year over year. That sounds decent until you realize that CPI was 3.0% in June. That’s quite a rebound in just two months. And bear in mind, core inflation is still well over 4%!
So again, inflation has bottomed. Some investors will profit beautifully from this. Others will get taken to the cleaners.
On that note, we recently outlined a unique “off the radar” investment that could EXPLODE higher as inflation rebounds. We detail this opportunity in a special report called Billionaire’s “Green Gold.”
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Nearly every market collapse follows a particular pattern.
That pattern?
1) Stocks break down below a critical level of support.
2) Stocks rally to “kiss” this former support, failing to reclaim it.
3) Stocks roll over and the real collapse begins.
This pattern is now playing out with the S&P 500.
The S&P 500 first broke below its 50-day moving average (DMA) in August of 2023. This was a significant development as it was the first time the S&P 500 had lost this support since the March 2023 lows. I’ve illustrated this with a blue rectangle in the chart below.
The market then rallied to retest the 50-DMA from below. It briefly broke above this line in early September, but has failed to hold it.This represents the “kiss” as I mentioned earlier: when stocks try to reclaim critical support but fail to do so. I’ve illustrated this with a purple square in the chart below.
What comes next?
Bonds have been telling us for weeks. It’s just a matter of time before stocks “get it.”
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Last week, I noted that the Bureau of Labor Statistics (BLS) and other government agencies have been engaging in a strange scheme.
That scheme?
Releasing economic data that initially suggests the economy is booming, only for that same data to be revised downward multiple times in subsequent months.
Some people think the BLS is massaging the data the make Bidenomics look more successful that it really is. Others simply believe that the BLS is using faulty economic models (after all, how accurate is your model if it needs two or three revisions to be correct?).
Regardless of the reason, this issue continues to happen. And investors keep falling for it!
Case in point, last Friday, the BLS released the non farms payroll numbers for August 2023. And once again, you guessed it, the prior months (June and July) were revised lower. And not by a little: June’s NFP number was revised down by 80,000 jobs, while July’s was revised downward by 30,000 jobs.
Bear in mind, June’s initial NFP number of 209,000 had already been revised downward by 24,000 jobs in July. So with this second downward revision of 80,000 jobs, we now know that HALF of the jobs in the June NFP report were FAKE.
104,000 Fake Jobs / 209,000 Jobs Claimed = 49.7% of the jobs were fake.
As I mentioned a moment ago, the August NFP report also revised July’s job numbers down by 30,000. So when we add this to the 104,000 fake jobs “created” in June, we’re now up to 134,000 FAKE jobs being created in the last two months.
As if that wasn’t bad enough, as Bill King noted in his King Report, seasonal adjustments were boosted to make August’s NFP numbers look better. In 2022, the BLS adjusted August’s NFP numbers upward by 47,000. But for some reason, this very same seasonal adjustment accounted for 117,000 jobs.
Put another way, we already know that 70,000 of the 187,000 jobs the BLS claims the economy generated in August were due to a seasonal adjustment, as opposed to being real jobs created in the economy.
Oh, and bear in mind, July’s numbers have only been revised down once thus far. They will likely be revised down again next month. And we can expect a similar thing to happen for August’s NFP numbers as well.
Indeed, as ZeroHedge recently pointed out, these downward revisions have occurred for every single month in 2023 thus far.
Why does all of this matter?
Because investors are pouring billions of dollars of capital into stocks based on those initial jobs numbers. Check out the below chart and you’ll see what I mean.
These folks are in for a RUDE awakening in the coming weeks. The signs are now clear that the economy is slowing. And this is happening at a time when investors are paying 19 times forward earnings for stocks!
The only time stocks were previously this richly valued was when A) the economy was expanding rapidly and B) the Fed was printing trillions of dollars in new month.
Today the economy is rolling over… and the Fed is DRAINING liquidity from the financial system. So again, investors are buying stocks based on a fantasy.
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One of the hallmarks of the Biden Presidency is that economic data is released that looks fantastic at first glance… only to then be revised much lower in subsequent months.
Conspiracy theorists believe this indicates that the Bureau of Labor Statistics (BLS) and other bean-counter agencies are massaging the data to make the economy look better than it is in order to push a narrative that Bidenomics works. Other people simply believe that the reason data is continually being revised lower is because the economic models the BLS and other agencies use are garbage with little value (after all, how great can the model be if it needs to be revised two or three times to get an accurate number).
Regardless of the reason this is happening, the impact is the same: investors are buying stocks based on a fantasy that the economy is booming.
The formula is as follows:
1) The initial data released about jobs or GDP or some other metric looks quite strong.
2) Investors pile into stocks based on the notion that the economy is booming.
3) The data is revised lower, usually more than once.
The key item here is that investors DON’T sell stocks at a later date based on the downward revisions… in fact, few if any investors even bother keeping track of this stuff. And that’s the problem: people are buying based on the illusion of strong economic growth when in reality the growth is much weaker if not indicative of contraction!
As Zerohedge noted a few days ago, the monthly payrolls report has been revised lower every single month in 2023. Again, this is not just one or two months with downward revisions… it’s every. single. month.
Now, you could easily argue that these downward revisions are simply because the BLS’s models are useless, but that’s missing the point: the headline data, or the data that investors use to justify buying stocks at 19 times forward earnings, is WRONG.
In fact, if we dig into less popular data that isn’t broadcast by the financial media, we get a VERY DIFFERENT picture of the U.S. economy.
Take a look at the official job openings data taken from the Federal Reserve. Again, this is official data showing how many jobs are currently available in the U.S. economy. If the economy is booming and businesses are hiring people to expand their operations, why is this number cratering in ways usually associated with a recession.
Meanwhile, investors are bidding stocks higher and higher. As I write this, the stock market is priced at 19 times forward earnings. The only time stocks are this richly valued is when A) the economy is expanding rapidly and B) the Fed is printing trillions of dollars in new month.
Today the economy is rolling over… and the Fed is DRAINING liquidity from the financial system. So again, investors are buying stocks based on a fantasy.
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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If longer duration Treasury yields continue to drop, then stocks will find a bottom of sorts. But if Treasury yields continue to rise, particularly on the all-important 10-Year U.S. Treasury, then stocks will be repriced to much lower levels.
As the below chart from Dr Ed Yardeni illustrates, the S&P 500 is currently trading at around 19 times forward earnings. This is an extremely RICH valuation given that the yield on the 10-Year U.S. Treasury is around 4.25%.
Consider that the last time stocks were this richly valued was early 2022 BEFORE the Fed started tightening monetary policy. At that time, the yield on the 10-Year U.S. Treasury was around ~2%. Obviously corporate earnings are now much higher, but the point is that the stock market is priced at a VERY high multiple given where the risk-free rate of return is trading right now.
Something has to give. Either Treasury yields are about to drop hard… or stocks will collapse. And smart investors who are properly positioned for this will see extraordinary returns.
If you’ve yet to take steps to prepare for what’s coming, we just published a new exclusive special report How to Invest During This Bear Market.
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Ever since the U.S. abandoned the Gold Standard in 1971, U.S. debt, also called Treasuries have become the bedrock of our financial system.
Put in the very simplest of terms, Treasuries are the senior most asset class, with their yields representing the “risk free” rate of return against which all risk assets (stocks, real estate, commodities, etc.) are priced.
Treasury yields are the reason stocks exploded higher from the April 2020 lows. They are also the reason stocks peaked and began a bear market in March 2022. And they are the reason stocks bottomed in October 2022, igniting one of the best bull runs in recent history.
I mention all of this because the yield on the 10-Year U.S. Treasury, which is the single most important bond in the world, has recently hit new highs. And if it doesn’t stop right here and now, stocks are primed for a major collapse.
How major?
The last time the yield on the 10-Year U.S. Treasury was at its current level, the S&P 500 was trading at 3,600. Today it’s at 4,400.
See for yourself.
Sure, stocks might hold up with Treasury yields at these levels for a time. But the clock is ticking. And it’s only a matter of time before we get a NASTY risk off move.
If you’ve yet to take steps to prepare for what’s coming, we just published a new exclusive special report How to Invest During This Bear Market.
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The Tech ETF (XLK) is at major support at $166. Even if this is not THE low, it’s a decent spot for a bounce as XLK rallies to $175 or so as it carves out a potential right shoulder in a Head and Shoulders pattern.
Moreover, the yield on the 10-Year U.S. Treasury is at major resistance.
Tech is a long-duration play, meaning it is heavily affected by the yield on longer-term Treasuries. The odds of the yield on the 10-Year U.S. Treasury breaking above its current levels right here and now are not high. This suggests the next move for this yield would be down, which would alleviate some of the pressure on tech stocks.
Given that the S&P 500 is heavily weighted towards tech (the sector accounts for 28% of the index’s weight) all of the above items suggest a bounce in tech and the broader market here. Again, this is just a short-term idea.
In the big picture however, my proprietary Bull Market Trigger is about to register its first “buy” in over a decade.
This signal has only registered TWO times in the last 25 years: in 2003 and 2010. And it’s close to registering a new signal today,
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Nothing has changed in the U.S. in the last month.
The primary framework for investing in the U.S. is as follows:
1) The stock market is bubbling up due to:
a. There being too much liquidity in the financial system.
b. Inflation, particularly core inflation remains elevated (4.8%).
c. Stocks are a better inflation hedge that bonds or cash.
2) The U.S. economy isn’t growing rapidly, but it’s not contracting either.
a. The Atlanta Fed’s GDP Now metric shows economic growth of 2.4%.
b. The Federal government is running its largest deficit as a percentage of GDP in history outside of wartime/ a recession. Much of this deficit is going towards social programs and stimulus measures.
c. Social spending and economic stimulus measures will continue if not increase as we head into the 2024 Presidential election.
d. The recent debt ceiling deal removes all spending caps through the 2024 election.
Put simply we are in a situation in which nothing is going great, but pretty much everything is going OK. Inflation remains high, but it has come down from its peak. The economy is still growing, albeit at a sub-3% pace. And there is ample liquidity in the financial system.
All of this is generally “risk on” for the markets… which means this situation will continue until something significant breaks. This doesn’t mean that stocks won’t correct or ever fall in price again. But it does mean that we are likely in a new bull market and that things will continue to be in “risk on” mode until something major breaks.
Regarding the potential for a recession, the yield curve, particularly the all-important 2s10s (what you get when you subtract the yield of the 2-Year U.S. Treasury from the yield of the 10-Year U.S. Treasury) remains extremely inverted.
This has predicted every recession since 1955. However, the actual recession doesn’t hit until this dis-inverts, meaning it moves back into positive territory. And as the below chart shows, it can take months if not years for the yield curve to dis-invert once it becomes inverted.
Put simply, until this chart moves back into positive territory, this is just a warning that a recession is coming eventually. Nothing more.
So again, there are red flags in the financial system today, but these are warnings not signals that it’s time to get REALLY bearish. The purpose of investing is to make money, not miss out on gains because of a warning. So we ride this bull run for as long as we can until it ends.
Indeed, my proprietary Bull Market Trigger is about to register its first “buy” in over a decade.
This signal has only registered TWO times in the last 25 years: in 2003 and 2010. And it’s close to registering a new signal today,
If you’ve yet to take steps to prepare for invest accordingly, we have published an exclusive special report How to Time a Market Bottom.
It details the my proprietary bull market trigger, how stocks have performed following prior signals, and what it is stating right now.
Normally this report would be sold for $249. But we are making it FREE to anyone who joins our Daily Market Commentary Gains Pains & Capital.
Everything changed for the financial system in March 2023.
What happened then?
The Fed and the Treasury implemented a backdoor bailout of the banking system.
If you’ll recall, in late February/ early March 2023, a number of smaller/ regional banks failed in the U.S. While we say these banks were “small” in comparison to the mega banks like JP Morgan or Wells Fargo, the reality is that when Silicon Valley bank, Signature Bank, and First Republic bank failed, they represented three of the largest bank failures in U.S. history.
Why were these banks failing?
Two reasons:
1) The banks were only paying 0.3% on deposits at a time when depositors could earn 4% or even 5% in a money market fund or short-term Treasuries. So people were pulling their money out of the banks in droves.
2) The banks were sitting on hundreds of billions of dollars’ worth of unrealized losses on their longer-duration assets (mid to long-term treasuries and loans) courtesy of inflation forcing these bonds to collapse.
Now, investor confidence is a strange thing. Both of the above issues were common knowledge as early as November 2022, but for whatever reason, investors chose to ignore them and give regional banks the benefit of the doubt until late February 2023,
Then Silicon Valley bank, Signature Bank, and First Republic failed, and investors began to panic, dumping regional bank shares. Banks’ share prices were falling 10%, 20% even 50% in a single day. And in early March 2023, it appeared as if the U.S. was mere days away from a full-scale banking crisis.
That’s when the Fed and the Treasury jumped in…
The Treasury, acting with the Federal Deposit Insurance Corporation (FDIC) moved to assure depositors that their money was safe, offering to backstop ALL deposits above the usual $250,000 that is insured by the FDIC.
Simultaneously, the Fed pumped nearly $400 billion into the financial system in the span of three weeks.
The Fed also opened a backdoor bailout scheme to funnel nearly $100 billion to the banks.
And that’s when everything changed for the stock market. Stocks bottomed and haven’t looked back.
Below is a weekly chart for the S&P 500 year to date. Each of those candles represent the price action of a given week. White candles represent up weeks and black candles represent down weeks.
As you can see, the last major black candle occurred in late February/ early March 2023 during the regional banks’ issues. Since that time, the market has closed UP for 13 of the last 19 weeks. And of the six down weeks, only two were significant; the other four we all bought aggressively, with stocks reclaiming most of the initial losses by the time the week ended.
I’ve illustrated the two significant down weeks with blue circles in the chart below. Note that the other four down weeks were either down only slightly (purple circles) or saw the market ramp hard off the lows (red circles).
In the simplest of terms, everything changed for stocks in early March 2023. Since that time, the markets are back into “bubble mode” with everything soaring. Companies like Sirius XM Holdings have saw their share price DOUBLE in the span of a week. Meanwhile Carvana is up 700%!
Bearing all of this in mind, smart investors are asking, “what’s next? Will the Fed continue to pump the markets into an even larger bubble, or is this whole mess going to come crashing down?”
I’ll detail my thoughts on this in tomorrow’s article. In the meantime, we recently outlined a unique “of the radar” investment that will could EXPLODE higher as due to the Fed’s money printing. We detail this investment in an investment report called Billionaire’s “Green Gold.”
It details the actions of a family of billionaires who literally made their fortunes investing in inflationary assets. And they just became involved in a mid-cap company that has the potential to TRIPLE in value in the coming months.
Normally this report would be sold for $249. But we are making it FREE to anyone who joins our Daily Market Commentary Gains Pains & Capital.
The Fed has raised interest rates from 0.25% to 5.25% in the span of 16 months.
And yet…inflation has yet to disappear in any significant fashion.
As I noted earlier this week, the ONLY data points in the CPI that are DOWN year over year are energy prices. When you strip out energy and food prices you find that core CPI is only slightly down. As I write this, it’s still clocking in at 4.8%… after fluctuating around 5% for most of 2023.
Moreover, asset inflation is out of control.
Stocks are less than 5% off their all time highs, despite one of the most aggressive rate hike cycles in history!
While financial conditions are roughly as loose as they were BEFORE the Fed started raising rates!
What’s going on here?
What’s going on is that the Fed is repeating the same mistake it initially made during the last major inflationary bout in the U.S. in the 1970s: focusing on rate hikes as opposed to draining excess reserves/ liquidity from the financial system.
During the first round of inflation from 1972-1975, the official inflation measure, the Consumer Price Index or CPI, rose from 3.3% to 11.1%. During this period, the Fed, chaired by Arthur Burns, attempted to rein in inflation using rate hikes. This succeeded in triggering a recession, but failed to end inflation: CPI only fell to 5.7% in 1976 before rebounding and eventually peaking at 13% in 1980.
Burns was replaced William Miller as Fed Chair in 1978, but Miller only lasted a year, as his efforts to end inflation proved similarly futile: the Fed raised rates from 6.75% to 10.5% during Miller’s tenure, but inflation continued to rise from 7.6% to 11.3%
It was only when Paul Volcker took the reins as Fed Chair in August 1979 that things changed. Volcker shifted the Fed’s focus from rate hikes to draining excess reserves/ liquidity from the financial system. The goal was to remove the froth from the financial system, while letting rates move in a wider range in order to tighten policy to the point that inflation finally disappeared.
The effect was a severe recession (July 1981-November 1982), but CPI also came down, eventually falling to ~3% in 1983.
The below chart of CPI in the 1970s is clear: rate hikes didn’t end inflation… but draining excess reserves did.
Unfortunately for us today, the Fed is repeating the EXACT same mistake it made from 1972-1979. And those investors who are properly positioned to profit from this mistake will do extremely well as I’ll outline in tomorrow’s article.
In the meantime, if you’re in the market for someone who can help you profit from the Fed’s blunders, I can help you not only thrive but achieve tremendous financial success.
This opens the door to some VERY inflationary surprises in the near future. And those who are positioned to profit from this could see some absolutely stunning returns.
We recently outlined a unique “of the radar” investment that will could EXPLODE higher as inflation turns back up. We detail this investment in an investment report called Billionaire’s “Green Gold.”
It details the actions of a family of billionaires who literally made their fortunes investing in inflationary assets. And they just became involved in a mid-cap company that has the potential to TRIPLE in value in the coming months.
Normally this report would be sold for $249. But we are making it FREE to anyone who joins our Daily Market Commentary Gains Pains & Capital.
Yesterday, I noted that inflation has very likely bottomed for 2023.
No one in the media is discussing this, but the only parts of the inflation data that is actually falling are energy prices.
See for yourself.
Everything else is still going UP in price, though the pace is slower (this doesn’t stop the media from claiming inflation is falling though).
However, by the look of things, energy prices are bottoming here, particularly in Year over Year comparables.
You see, the inflation data published in the U.S. is based on year over year comparisons. When the Consumer Price Index (CPI) comes out at 5%, what it’s really stating is that a basket of goods and services costs ~5% more currently than it did a year ago.
This is called the base effect: a comparison between two data points in which the current one is expressed as a ratio of the older one. And it can result in some pretty strange circumstances if you’re not careful.
Situations like the one we’re in today.
Let’s wind the clocks back to the first quarter of 2022. Oil prices were rising rapidly due to inflation as the Fed had yet to end its Quantitative Easing (QE) program, let alone raise interest rates. Then Russia invaded Ukraine, and oil spiked even higher to $130 a barrel as the financial world grew terrified of large-scale oil production disruptions.
I’ve illustrated this time period on the below chart of oil prices with a red rectangle.
The rise in oil prices then halted as it became clear that Russia’s war with Ukraine wouldn’t disrupt global oil production by much if at all (Russia would continue selling oil via back-channels to India and other countries). Another factor that stopped oil prices from rising was the fact the Biden administration dumped 292 million barrels of oil on the market by draining the Strategic Petroleum Reserve (SPR).
I’ve been accused of playing politics with this data point, but the chart is clear. President Biden took office in January 2021. At that time the SPR had 638 million barrels of oil. What followed was the largest drop in the SPR’s history, with the SPR declining to 346 million barrels of oil where it sits today. That is a decline of 292 MILLION barrels of oil.
Add it all up, and the end result is that since June 2022, oil prices have declined from $130 a barrel down to the upper $60s/ lower $70s per barrel. The result of this, as far as the CPI is concerned, is that on a year over year basis, for the entirety of 1H23, we have been comparing oil prices in the blue rectangle to oil prices in the red rectangle. As a result of this, energy inflation is down sharply.
This trend is now ending as we work our way into the second half of 2023. Going forward, oil prices on a year over year basis will be compared to the prices in the red rectangle in the chart below.
Put simply, on a year over year basis, the massive drop in energy prices that has lowered overall CPI considerably will be ending. And since energy prices are the ONLY part of the CPI data that has been declining… it is highly likely that the inflation data is bottoming here… or at the very least, won’t be declining much more.
This opens the door to some VERY inflationary surprises in the near future. And those who are positioned to profit from this could see some absolutely stunning returns.
We recently outlined a unique “of the radar” investment that will could EXPLODE higher as inflation turns back up. We detail this investment in an investment report called Billionaire’s “Green Gold.”
It details the actions of a family of billionaires who literally made their fortunes investing in inflationary assets. And they just became involved in a mid-cap company that has the potential to TRIPLE in value in the coming months.
Normally this report would be sold for $249. But we are making it FREE to anyone who joins our Daily Market Commentary Gains Pains & Capital.
The inflation data published in the U.S. is based on year over year comparisons. When the Consumer Price Index (CPI) comes out at 5%, what it’s really stating is that a basket of goods and services costs ~5% more currently than it did a year ago.
This is called the base effect: a comparison between two data points in which the current one is expressed as a ratio of the older one. And it can result in some pretty strange circumstances if you’re not careful.
Situations like the one we’re in today.
For most of the first half of 2023, inflation, as measured by the year over year comparison for the CPI has been trending down. However, as I’ve noted repeatedly, the only part of the inflationary data that is declining is energy prices (well that and used car prices).
See for yourself.
I mention this, because it is increasingly looking as though oil prices have bottomed.
Oil has spent much of the last 18 months in a downtrend. But that downtrend is about to be broke.
If oil prices rip higher from here, then the inflationary data will begin to turn back upwards. Remember, energy prices are the ONLY part of the CPI that are DOWN. The price of everything else continues to RISE, albeit a slower rate.
Many investors will be caught offsides here. Don’t be one of them!
We recently outlined a unique “of the radar” investment that will could EXPLODE higher as inflation turns back up. We detail this investment in an investment report called Billionaire’s “Green Gold.”
It details the actions of a family of billionaires who literally made their fortunes investing in inflationary assets. And they just became involved in a mid-cap company that has the potential to TRIPLE in value in the coming months.
Normally this report would be sold for $249. But we are making it FREE to anyone who joins our Daily Market Commentary Gains Pains & Capital.
The greenback peaked in October 2022. After plunging some 11% from October 2022 to January 2023, the $USD has since been moving in a range or what trader’s would call a “consolidation phase.”
There are a couple key issues to consider when you look at a consolidation phase. They are:
1) How long it lasts.
2) Whether the eventual breakout is a continuation or a reversal of the prior trend.
Regarding #1, the length of a consolidation phase is closely correlated with the significance of the eventual breakout: the longer the consolidation phase, the more significant the breakout.
In the case of the $USD, it’s been in a consolidation phase for SIX MONTHS. That is a significant length of time. And it tells us that the eventual breakout is of major importance.
Regarding #2, it’s critical to note whether an eventual breakout continues the trend the asset was in prior to consolidating or whether it reverses said trend. If the breakout is a continuation, then the asset is in a MAJOR trend, and the consolidation was simply a kind of “breather” between major moves.
That appears to be the case with the $USD today. The trend was down before it began consolidating. And now it is breaking down in a big way. This suggests that the $USD is in a MAJOR downtrend that will last for some time.
Finally, remember we are talking about the $USD here… arguably the most important asset in the world. This breakdown will have a MAJOR impact on the markets, particularly those that benefit from higher inflation/ a weaker $USD.
We recently outlined one such investment that should benefit GREATLY from a weaker $USD in an investment report called Billionaire’s “Green Gold.”
It details the actions of a family of billionaires who literally made their fortunes investing in assets that outperform during this kind of environment. And they just became involved in a mid-cap company that has the potential to TRIPLE in value in the coming months.
Normally this report would be sold for $249. But we are making it FREE to anyone who joins our Daily Market Commentary Gains Pains & Capital.
We continue to receive signals that the U.S. is an emerging market.
One of the hallmarks of emerging markets, particularly banana republics, is that politically connected businesses are treated like royalty while everyone else gets screwed over.
This theme was on full display last week when JP Morgan reported its “outstanding” results. JPM reported record Net Interest Income that was boosted by the fact that the bank was given First Republic’s profitable assets for pennies on the dollar.
But who picked up the losses? After all, First Republic failed!
You did. So did I and the rest of the public.
The Federal Deposit Insurance Corporation (FDIC), which is part of the government that taxpayers fund, absorbed most of First Republic’s losses. Oh, and the FDIC also gave JP Morgan a $50 BILLION line of credit as part of the deal.
How sweet was this deal?
JP Morgan immediately reported a one time gain of $2.6 billion as soon as the deal closed. And it is expected to make $500 million per year from the assets it bought for pennies on the dollar.
These kinds of sweetheart deals that benefit the connected while burdening everyone else are common in emerging markets. To be clear, the U.S. has had them for a long time as well. But they only reached “3rd world banana republic” levels after 2008 once the Wall Street bailouts went from being the exception to the rule.
Indeed, things have become so egregious as far as fraud, waste, and abuse are concerned that the head of the Small Business Administration (SBA) didn’t even bother showing up to a hearing on fraud related to COVID-19 loans.
By the way, the fraud in question is $200 BILLION.
Sweetheart deals that favor the connected and screw everyone else? Administration officials who don’t even bother showing up for meetings concerning hundreds of billions of dollars in government funded fraud?
These are 3rd world, banana republic type issues. The fact that the U.S. can’t go a week without some new example of this stuff tells us just how far down the toilet the system has gotten.
aving said that, this kind of tectonic shift represents a “once in a lifetime” opportunity. Some investments are going to produce fortunes. Others will lose money for years… if not decades. And those investors who are positioned correctly for this will thrive while others struggle.
We recently outlined a unique “of the radar” investment that will outperform in this new economic landscape in an investment report called Billionaire’s “Green Gold.”
It details the actions of a family of billionaires who literally made their fortunes investing in emerging markets. And they just became involved in a mid-cap company that has the potential to TRIPLE in value in the coming months.
Normally this report would be sold for $249. But we are making it FREE to anyone who joins our Daily Market Commentary Gains Pains & Capital.
As I keep emphasizing, the U.S. is becoming an emerging market.
Two of the hallmarks of emerging markets are a weak domestic currency and higher inflation. While neither of these are good for those living in the nation, they do make the performance in the domestic stock market look fantastic.
Case in point, take a look at the South Africa stock market’s performance over the last 20 years.
Nothing special, right? It’s effectively been moving sideways since 2010.
Well, a big reason for that is that the above chart is priced in $USD. Watch what happens when we price South Africa’s stock market in its domestic currency, the Rand.
A similar dynamic is playing out today in the U.S.
The S&P 500 look wonderfully bullish. After all, it bottomed in October 2022 and since been roaring higher ever since.
However, much of this performance stems from the fact that the S&P 500 is priced in our domestic currency, the $USD, which has been extremely weak.
Watch what happens when we price the S&P 500 is another, stronger currency like the Euro.
Not quite some fantastic anymore is it? In fact, the S&P 500 priced in Euros has effectively been trading sideways for most of 2023.
Put simply, a major reason why the S&P 500 has done so well since October 2022 is because it’s priced in $USD. And the $USD has been dropping like a stone.
Again, this is the hallmark of an emerging market.
If you’re an individual investor trying to navigate this market, the framework that worked for investing in the U.S. from 1940 until today is over. You’re no longer investing in a developed nation… you’re investing in an emerging market.
Having said that, this kind of tectonic shift represents a “once in a lifetime” opportunity. Some investments are going to produce fortunes. Others will lose money for years… if not decades. And those investors who are positioned correctly for this will thrive while others struggle.
We recently outlined a unique “of the radar” investment that will outperform in this new economic landscape in an investment report called Billionaire’s “Green Gold.”
It details the actions of a family of billionaires who literally made their fortunes investing in emerging markets. And they just became involved in a mid-cap company that has the potential to TRIPLE in value in the coming months.
Normally this report would be sold for $249. But we are making it FREE to anyone who joins our Daily Market Commentary Gains Pains & Capital.
If you missed it, my main point was this: the U.S. is now an emerging market. And it’s getting downright embarrassing.
Last week our Secretary of the Treasury, Janet Yellen, arguably the most important financial figure in our country, and the person in charge of managing the U.S. dollar/ financial system, groveled in front of China’s Vice Premiere He Lifeng during her visit to China
Ms. Yellen bowed repeatedly to the Vice Premiere, groveling much as an emerging market financial official would kowtow to his or her counterpart from a more developed, superior nation upon which the former’s nation relied for aid/ support/ assistance.
See for yourself. And mind you, this is one of NUMEROUS bows.
I wish this was the worst thing about the current state of incompetence for financial/ economic leaders in the U.S., but unfortunately, it’s not.
No, far worse is the fact that our central bank, the Federal Reserve, or the Fed for short, has become a political entity, as is often the case in emerging markets/ banana republics.
Let me explain.
The Fed, as per its Dual Mandate, is meant to focus on just two things: inflation and employment.
That’s the law. And for most of the last 100+ years, the Fed did focus on these issues above anything else.
No longer.
The Powell Fed is a den of corruption, incompetence, and political activism. In the last few years we’ve witnessed:
1) Scandals in which senior Fed officials were caught trading around Fed announcements. This is insider trading on a banana republic level!
2) The Fed ignoring literally HUNDREDS of signals that inflation was out of control… while still printing over $1 trillion per year and paying billions of dollars to banks.
3) The creation of the worst inflationary storm in 40+ years, all due to Fed incompetence (how did the Fed’s 400+ Economics PhDs and 150 research associates miss that inflation had arrived in 2020-2022!?!)
4) Fed Presidents pushing social justice issues openly in speeches. It’s one thing for them to discuss these things in private. It’s something else entirely for them to push for policies to address climate change, social justice, and other item as FED OFFICIALS.
5) The Fed testing the banking system for “Climate Change Risks.” Mind you, this is the same Fed that didn’t see the regional banking crisis coming, resulting in several of the largest bank failures in history.
All of the above would be downright hilarious, if the damage they inflicted on ordinary Americans wasn’t so devastating.
Let me be blunt here…
Few if any of us got rich during the pandemic. Multiple Fed officials did by trading on insider information. By the way, this continues today, with at least one Fed President caught actively trading during Fed “black out” periods when it’s illegal to do so. He wasn’t fired or forced to resign either.
Similarly, inflation has taken a heavy toll on Americans. And yet, NONE of the Fed officials who ignored the countless signals that inflation was appearing in 2020-2022 have been fired. And why would they? These are politically connected academics who haven’t worked in the private sector in years, if ever!
Again, the U.S. is an emerging market. All the signs are there: abject corruption, incompetence, politicizing everything, etc. The U.S. that existed from the 1940s until the mid-’00s is gone forever. And most of us are now on our own to navigate this new environment.
The only good thing that will come from this is that if you know how to invest in emerging market regimes, you can stand to make a fortune in the coming years.
Indeed, this kind of tectonic shift represents a “once in a lifetime” opportunity. Some investments are going to produce fortunes. Others will lose money for years… if not decades. And those investors who are positioned correctly for this will thrive while others struggle.
We recently outlined a unique “of the radar” investment that will outperform in this new economic landscape in an investment report called Billionaire’s “Green Gold.”
It details the actions of a family of billionaires who literally made their fortunes investing in emerging markets. And they just became involved in a mid-cap company that has the potential to TRIPLE in value in the coming months.
Normally this report would be sold for $249. But we are making it FREE to anyone who joins our Daily Market Commentary Gains Pains & Capital.
Last week I noted that the U.S. is becoming an emerging market.
By quick way of review:
1) Many of the most important institutions in the U.S. now exhibit a level of corruption that is normal for banana republics. We now see these institutions doing everything from interfering in elections to arresting political opponents and more. The individuals who do this are not punished, if anything they given book deals and TV slots.
2) The U.S. no longer has a clear rule of law. Those with the correct political leanings and connections can avoid jail time for serious crimes, even treason. Meanwhile, those on the other side of the political spectrum are given lengthy sentences for minor transgressions.
3) The U.S. economy is no longer a manufacturing/ industrial leader. Decades of outsourcing have gutted the middle class resulting in the kind of wealth disparities you usually see in emerging markets. American children dream of becoming influencers or social media personalities instead of business owners or innovators.
It’s enough to make you sick.
Indeed, the “U.S. is an emerging market” theme was on full display last week when our Secretary of the Treasury, Janet Yellen, arguably the most important financial figure in our country, and the person in charge of managing the U.S. dollar/ financial system, groveled in front of China’s Vice Premiere He Lifeng during her visit to China
Ms. Yellen bowed repeatedly to the Vice Premiere, groveling much as an emerging market financial official would kowtow to his or her counterpart from a more developed, superior nation upon which the former’s nation relied for aid/ support/ assistance.
See for yourself. And mind you, this is one of NUMEROUS bows.
Again, this is the thing of emerging markets. And the fact that the person who manages our finances and currency is this incompetent/ embarrassing illustrates clearly just how far the U.S. has sunk.
The only good thing that will come from this is that if you know how to invest in emerging market regimes, you can stand to make a fortune in the coming years.
Indeed, this kind of tectonic shift represents a “once in a lifetime” opportunity. Some investments are going to produce fortunes. Others will lose money for years… if not decades. And those investors who are positioned correctly for this will thrive while others struggle.
We recently outlined a unique “of the radar” investment that will outperform in this new economic landscape in an investment report called Billionaire’s “Green Gold.”
It details the actions of a family of billionaires who literally made their fortunes investing in emerging markets. And they just became involved in a mid-cap company that has the potential to TRIPLE in value in the coming months.
Normally this report would be sold for $249. But we are making it FREE to anyone who joins our Daily Market Commentary Gains Pains & Capital.
As I’ve noted in our last two articles, the $USD has begun a significant decline against most major currencies (the Euro, the Pound and the Franc). And the only reason it is showing relative strength against the Yen is because Japan’s central bank continues to ease monetary conditions.
What’s happening here? The $USD should be performing well based on interest rates as well as how far along the U.S.’s central bank is in its fight against inflation.
I believe what is happening is that the world is increasingly aware that the U.S. has become an emerging market.
Historically, the U.S. was held up as the eminent developed nation with strong and stable institutions, the Rule of Law, and a dynamic economy.
No longer.
It is now clear that many of our most significant institutions in the U.S. are corrupt. And I’m not talking about the typical corruption one can assume from any organization involving people and power. I’m talking about 3rd world, banana republic levels of corruption, e.g. interfering with elections, jailing political adversaries, censoring free speech, etc.
Similarly, the Rule of Law in the U.S. is now more of a catch phrase than a reality. There are clear double standards applied on a local, state and federal level when it comes to the law. The politically connected/ chosen can commit everything from felonies to outright treason with little if any jail time. And in many cases, those involved in undermining their political adversaries even when it was illegal/ treasonous received book deals and prime time TV slots as opposed to going to prison.
Again, this the domain of 3rd world banana republics.
The U.S. economy has similarly entered a state of secular decline. The U.S. once was the manufacturing/ industrial capital of the world. It’s now a hollowed out, socialist economy that relies on other regimes (many of them hostile to the U.S.) for its resources and economic needs.
More and more Americans are paid simply to not work. Of those that do work, many take no pride in their efforts. It has become a running joke to post videos of goofing off at the office/ pretending to work/ faking productivity. Anyone who runs a business knows how hard it is to find committed, hard working people.
Perhaps nowhere are the above issues as obvious as in the U.S.’s financial status.
The U.S. now has a Debt to GDP ratio of over 120%. The government is running the largest peacetime deficit relative to GDP in history. Is the government trying to rein this in? Not in the slightest. The new Debt Deal removes all spending cuts through 2024.
Meanwhile, basic services (roads, bridges, etc) are crumbling. Go to any major U.S. airport or drive down any major U.S. highway and you’re looking at something that was a high quality/ top of the line project back in the 1950s.
Abject corruption, a lack of the Rule of Law, massive debt, massive deficits, crumbling infrastructure. These are the hallmarks of an emerging market. So is it any surprise that the U.S. dollar is behaving like an emerging market currency?
I’m not saying that other currencies/ economies are much better (if better at all)… I’m simply noting that the U.S. is far worse than ever before. On a relative basis, all of the things that made the U.S. an exceptional place are now of questionable quality/ credibility.
So why wouldn’t the U.S. currency be the same? Why wouldn’t the $USD become weaker, lose more and more purchasing power, and ultimately no longer serve as a storehouse of value?
For those of you who are upset by all of this, it’s time to take your financial future into your own hands
Indeed, this kind of tectonic shift represents a “once in a lifetime” opportunity. Some investments are going to produce fortunes. Others will lose money for years… if not decades. And those investors who are positioned correctly for this will thrive while others struggle.
We recently outlined a unique “of the radar” investment that will outperform in this new economic landscape in an investment report called Billionaire’s “Green Gold.”
It details the actions of a family of billionaires who literally made their fortunes investing in emerging markets. And they just became involved in a mid-cap company that has the potential to TRIPLE in value in the coming months.
Normally this report would be sold for $249. But we are making it FREE to anyone who joins our Daily Market Commentary Gains Pains & Capital.
The fate of the stock market is in the hands of Treasury Secretary Janet Yellen this week.
Every quarter the Treasury announces its financing needs via its Quarterly Refunding Announcement (QRA). In the QRA, the Treasury announces:
1) How much debt it will need to issue total to fund the government for the coming quarter.
2) The amount of new debt the Treasury will need to issue as opposed to simply rolling over old debt.
3) The breakdown of the debt issuance: short-term T-bills versus longer-term Treasury Bonds.
These three items are the MOST IMPORTANT issues for the markets today.
If you think I’m exaggerating this, consider that the last time the Treasury made its QRA was July 31st 2023. That was THE day that stocks topped and bond yields began to skyrocket.
The Treasury will announce the basics of the #1 and #2 in the list above today. But we won’t get the full breakdown of debt (#3) until Wednesday.
Historically, the Treasury tries to keep the amount of short-term debt issuance to just 20% of total issuance. The reason for this is that if the Treasury relies too heavily on short-term debt to fund spending, it opens the door to a rate shock.
Consider what would have happened if the Treasury had issued 80% of total debt in short-term T-bills in 2021 when rates were at 0.25%. At the time, the move would have looked quite clever as the Treasury would be taking advantage of the fact that rates were so low. However, fast forward a year to 2022, and the Treasury would need to roll over that same debt at a time when rates were now ABOVE 4%! Interest payments would have been EXPONENTIALLY higher and a debt crisis would arrive.
So again, the Treasury usually keeps T-bill issuance to just 20% of total issuance… unless it’s intentionally trying to calm the markets and juice stocks higher for political purposes.
Which brings us to today.
Janet Yellen is ACUTELY aware of the impact that her decisions will have on the stock market. Indeed, the hallmark of her tenure as Fed Chair from 2014-2018 was to implement monetary policy that benefitted stocks, even if the economic data didn’t warrant it.
So the odds favor her doing something to prop the markets up… especially as we enter an election year in 2024.
However, doing this only sets the stage for a debt crisis down the road. If the Treasury relies extensively on T-bills to finance the budget now, that same debt will come due in a year… which opens the door to a MAJOR rate shock at that time, especially if inflation rebounds.
Again, the fate of the stock market is in Treasury Secretary Janet Yellen’s hands today. If she chooses to game the debt markets for political purposes it only delays the inevitable debt crisis… and not by much.
As I keep warning, the Great Debt Crisis of our lifetimes is fast approaching.
In 2000, the Tech Bubble burst.
In 2007, the Housing Bubble burst.
The Great Debt Bubble burst in 2022. And the crisis is now approaching.
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