Month: September 2019

That’s THREE strikes against the Fed.

The Fed cut rates again in September.

At this point, trying to keep track of the Fed’s reasoning for monetary policy is all but impossible. There is no logic or reason behind anything they do.

A year ago, the Fed told us that hiking rates four times a year while running $50 billion in Quantitative Tightening (QT) per month would have no effect on the economy or financial system.

At that time, the Fed told us that even if the financial markets did drop because of Fed policy, the Fed would not change course.

Then, in the span of six weeks, from late November to early January the corporate bond market imploded, and the Fed abandoned its entire strategy for normalization.  Stocks suffered a crash and the Treasury had to step in to prop the system up.

That’s Strike #1: the Fed proved its models for projecting the impact of monetary policy on the financial system had no connection to actual reality.

Moreover, anyone who was monitoring the financial system would have seen as early as last July that the Fed’s policy was destroying global growth and would result in a crash (I certainly did).

Strike #2 came later after the Fed spent six months (January to July of this year) pushing for extreme monetary policy including:

1)   Introducing Negative Interest Rates

2)   Making Quantitative Easing (QE) a permanent, normal policy instead of one used during crises.

3)   Targeting bond yields to corner the bond market even more.

4)   Using QE to buy assets other than Treasuries (corporate debt, stocks, etc.).

It’s odd because throughout this time period, the U.S. economy was growing and unemployment was falling. And yet, for six months the Fed claimed it was data dependent, while suggesting it should start using these various monetary tools.

Strike #2 hit when the Fed then cut rates in July despite unemployment being below 4%, the economy growing by at least 2% and stocks being within spitting distance of all time highs.

If you’re going to claim you’re data dependent and can’t be influenced politically, why would you then cut rates when ALL of the data is ranging from strong to very strong? The only reason the Fed is that the Fed buckled to political pressure from the Trump administration. So there goes its claim that it is politically independent as well as its claim it focuses on the data.

That’s Strike #2 for the Fed.

Which brings us to late September, in which the Fed cut rates again despite both economic data and the financial markets strengthening since July, while also ignoring the worst liquidity crisis since 2007.

You’ve probably heard about the “repo crunch” or “liquidity crisis” occurring at the Fed over the last few weeks. A detailed explanation of these issues would require an entire book, so for simplicity’s sake, the best explanation is as follows:

1)   Banks park money with the Fed on a daily basis.

2)   If banks have extra capital, they lend it to other banks that need it at a particular interest rate.

3)   This interest rate is THE interest rate the Fed targets with its rate cuts/rate increases.

4)   Banks have suddenly started charging one another a rate of interest that is HIGHER than the Fed’s desired rate. This means capital is in high demand “behind the scenes” which suggests banks are in trouble.

How bad was it?

Overnight lending facilities hit rates as high as 5%+ (remember the Fed’s current desired rate is 2.25%) for capital.

All of this indicates that “someone” or “someones” are in SERIOUS need of money. To address this situation, the Fed has had to stage its first liquidity injections since the 2008 crisis. All told, the Fed will put $275 BILLION into the financial system at the end of September.

So when I saw “someone “ or “someones” are in trouble, I’m not talking about a small hedge fund, I’m talking about large financial institutions that need nearly a over quarter of a trillion dollars in funding over a four day period.

If this sounds a little familiar it is exactly what happened in 2007 during the first phase of the credit crisis.

From August 2007:

The Fed garnered attention last week by adding billions of dollars to the money market to relieve upward pressure on interest rates. How do these operations work? Here’s a primer.

The Fed influences growth and inflation by controlling short-term interest rates. It controls those rates in turn via its monopoly over the supply of reserves to the banking system.

Source: Wall Street Journal

Put simply, the Fed is currently facing the worst funding issue in over a decade. Again, we’re talking $275 billion in liquidity injections occurring.

How did the Fed address this in its FOMC meeting and Powell’s Q&A session?

It didn’t.

There was little if any mention of any of the above issues by the Fed. Fed Chair Jerome Powell completely avoided the topic during his prepared remarks. And during the Q&A portion of his appearance he ducked every question concerning it, instead suggesting that this issue was related to the U.S.’s fiscal condition, which are the “Treasury’s job and Congress’s job.”

Strike 3.

At this point it is clear the Fed no clue what it’s doing. Between this and the desperate efforts to pump money into the system I’d say we’re in “late 2007” when it comes to the next crisis.

A Crash is coming… and smart investors are preparing NOW before it hits.

On that note, we are already preparing our clients for this with a 21-page investment report titled the Stock Market Crash Survival Guide.

In it, we outline the coming collapse will unfold…which investments will perform best… and how to take out “crash” insurance trades that will pay out huge returns during a market collapse.

Today is the last day this report will be available to the general public.

To pick up one of the last remaining copies…

https://www.phoenixcapitalmarketing.com/stockmarketcrash.html

Best Regards

Graham Summers

Chief Market Strategist

Phoenix Capital Research

 

 

 

That’s THREE strikes against the Fed.

The Fed cut rates again in September.

At this point, trying to keep track of the Fed’s reasoning for monetary policy is all but impossible. There is no logic or reason behind anything they do.

A year ago, the Fed told us that hiking rates four times a year while running $50 billion in Quantitative Tightening (QT) per month would have no effect on the economy or financial system.

At that time, the Fed told us that even if the financial markets did drop because of Fed policy, the Fed would not change course.

Then, in the span of six weeks, from late November to early January the corporate bond market imploded, and the Fed abandoned its entire strategy for normalization.  Stocks suffered a crash and the Treasury had to step in to prop the system up.

That’s Strike #1: the Fed proved its models for projecting the impact of monetary policy on the financial system had no connection to actual reality.

Moreover, anyone who was monitoring the financial system would have seen as early as last July that the Fed’s policy was destroying global growth and would result in a crash (I certainly did).

Strike #2 came later after the Fed spent six months (January to July of this year) pushing for extreme monetary policy including:

1)   Introducing Negative Interest Rates

2)   Making Quantitative Easing (QE) a permanent, normal policy instead of one used during crises.

3)   Targeting bond yields to corner the bond market even more.

4)   Using QE to buy assets other than Treasuries (corporate debt, stocks, etc.).

It’s odd because throughout this time period, the U.S. economy was growing and unemployment was falling. And yet, for six months the Fed claimed it was data dependent, while suggesting it should start using these various monetary tools.

Strike #2 hit when the Fed then cut rates in July despite unemployment being below 4%, the economy growing by at least 2% and stocks being within spitting distance of all time highs.

If you’re going to claim you’re data dependent and can’t be influenced politically, why would you then cut rates when ALL of the data is ranging from strong to very strong? The only reason the Fed is that the Fed buckled to political pressure from the Trump administration. So there goes its claim that it is politically independent as well as its claim it focuses on the data.

That’s Strike #2 for the Fed.

Which brings us to late September, in which the Fed cut rates again despite both economic data and the financial markets strengthening since July, while also ignoring the worst liquidity crisis since 2007.

You’ve probably heard about the “repo crunch” or “liquidity crisis” occurring at the Fed over the last few weeks. A detailed explanation of these issues would require an entire book, so for simplicity’s sake, the best explanation is as follows:

1)   Banks park money with the Fed on a daily basis.

2)   If banks have extra capital, they lend it to other banks that need it at a particular interest rate.

3)   This interest rate is THE interest rate the Fed targets with its rate cuts/rate increases.

4)   Banks have suddenly started charging one another a rate of interest that is HIGHER than the Fed’s desired rate. This means capital is in high demand “behind the scenes” which suggests banks are in trouble.

How bad was it?

Overnight lending facilities hit rates as high as 5%+ (remember the Fed’s current desired rate is 2.25%) for capital.

All of this indicates that “someone” or “someones” are in SERIOUS need of money. To address this situation, the Fed has had to stage its first liquidity injections since the 2008 crisis. All told, the Fed will put $275 BILLION into the financial system at the end of September.

So when I saw “someone “ or “someones” are in trouble, I’m not talking about a small hedge fund, I’m talking about large financial institutions that need nearly a over quarter of a trillion dollars in funding over a four day period.

If this sounds a little familiar it is exactly what happened in 2007 during the first phase of the credit crisis.

From August 2007:

The Fed garnered attention last week by adding billions of dollars to the money market to relieve upward pressure on interest rates. How do these operations work? Here’s a primer.

The Fed influences growth and inflation by controlling short-term interest rates. It controls those rates in turn via its monopoly over the supply of reserves to the banking system.

Source: Wall Street Journal

Put simply, the Fed is currently facing the worst funding issue in over a decade. Again, we’re talking $275 billion in liquidity injections occurring.

How did the Fed address this in its FOMC meeting and Powell’s Q&A session?

It didn’t.

There was little if any mention of any of the above issues by the Fed. Fed Chair Jerome Powell completely avoided the topic during his prepared remarks. And during the Q&A portion of his appearance he ducked every question concerning it, instead suggesting that this issue was related to the U.S.’s fiscal condition, which are the “Treasury’s job and Congress’s job.”

Strike 3.

At this point it is clear the Fed no clue what it’s doing. Between this and the desperate efforts to pump money into the system I’d say we’re in “late 2007” when it comes to the next crisis.

A Crash is coming… and smart investors are preparing NOW before it hits.

On that note, we are already preparing our clients for this with a 21-page investment report titled the Stock Market Crash Survival Guide.

In it, we outline the coming collapse will unfold…which investments will perform best… and how to take out “crash” insurance trades that will pay out huge returns during a market collapse.

Today is the last day this report will be available to the general public.

To pick up one of the last remaining copies…

https://www.phoenixcapitalmarketing.com/stockmarketcrash.html

Best Regards

Graham Summers

Chief Market Strategist

Phoenix Capital Research

 

 

 

That’s THREE strikes against the Fed.

The Fed cut rates again in September.

At this point, trying to keep track of the Fed’s reasoning for monetary policy is all but impossible. There is no logic or reason behind anything they do.

A year ago, the Fed told us that hiking rates four times a year while running $50 billion in Quantitative Tightening (QT) per month would have no effect on the economy or financial system.

At that time, the Fed told us that even if the financial markets did drop because of Fed policy, the Fed would not change course.

Then, in the span of six weeks, from late November to early January the corporate bond market imploded, and the Fed abandoned its entire strategy for normalization.  Stocks suffered a crash and the Treasury had to step in to prop the system up.

That’s Strike #1: the Fed proved its models for projecting the impact of monetary policy on the financial system had no connection to actual reality.

Moreover, anyone who was monitoring the financial system would have seen as early as last July that the Fed’s policy was destroying global growth and would result in a crash (I certainly did).

Strike #2 came later after the Fed spent six months (January to July of this year) pushing for extreme monetary policy including:

1)   Introducing Negative Interest Rates

2)   Making Quantitative Easing (QE) a permanent, normal policy instead of one used during crises.

3)   Targeting bond yields to corner the bond market even more.

4)   Using QE to buy assets other than Treasuries (corporate debt, stocks, etc.).

It’s odd because throughout this time period, the U.S. economy was growing and unemployment was falling. And yet, for six months the Fed claimed it was data dependent, while suggesting it should start using these various monetary tools.

Strike #2 hit when the Fed then cut rates in July despite unemployment being below 4%, the economy growing by at least 2% and stocks being within spitting distance of all time highs.

If you’re going to claim you’re data dependent and can’t be influenced politically, why would you then cut rates when ALL of the data is ranging from strong to very strong? The only reason the Fed is that the Fed buckled to political pressure from the Trump administration. So there goes its claim that it is politically independent as well as its claim it focuses on the data.

That’s Strike #2 for the Fed.

Which brings us to late September, in which the Fed cut rates again despite both economic data and the financial markets strengthening since July, while also ignoring the worst liquidity crisis since 2007.

You’ve probably heard about the “repo crunch” or “liquidity crisis” occurring at the Fed over the last few weeks. A detailed explanation of these issues would require an entire book, so for simplicity’s sake, the best explanation is as follows:

1)   Banks park money with the Fed on a daily basis.

2)   If banks have extra capital, they lend it to other banks that need it at a particular interest rate.

3)   This interest rate is THE interest rate the Fed targets with its rate cuts/rate increases.

4)   Banks have suddenly started charging one another a rate of interest that is HIGHER than the Fed’s desired rate. This means capital is in high demand “behind the scenes” which suggests banks are in trouble.

How bad was it?

Overnight lending facilities hit rates as high as 5%+ (remember the Fed’s current desired rate is 2.25%) for capital.

All of this indicates that “someone” or “someones” are in SERIOUS need of money. To address this situation, the Fed has had to stage its first liquidity injections since the 2008 crisis. All told, the Fed will put $275 BILLION into the financial system at the end of September.

So when I saw “someone “ or “someones” are in trouble, I’m not talking about a small hedge fund, I’m talking about large financial institutions that need nearly a over quarter of a trillion dollars in funding over a four day period.

If this sounds a little familiar it is exactly what happened in 2007 during the first phase of the credit crisis.

From August 2007:

The Fed garnered attention last week by adding billions of dollars to the money market to relieve upward pressure on interest rates. How do these operations work? Here’s a primer.

The Fed influences growth and inflation by controlling short-term interest rates. It controls those rates in turn via its monopoly over the supply of reserves to the banking system.

Source: Wall Street Journal

Put simply, the Fed is currently facing the worst funding issue in over a decade. Again, we’re talking $275 billion in liquidity injections occurring.

How did the Fed address this in its FOMC meeting and Powell’s Q&A session?

It didn’t.

There was little if any mention of any of the above issues by the Fed. Fed Chair Jerome Powell completely avoided the topic during his prepared remarks. And during the Q&A portion of his appearance he ducked every question concerning it, instead suggesting that this issue was related to the U.S.’s fiscal condition, which are the “Treasury’s job and Congress’s job.”

Strike 3.

At this point it is clear the Fed no clue what it’s doing. Between this and the desperate efforts to pump money into the system I’d say we’re in “late 2007” when it comes to the next crisis.

A Crash is coming… and smart investors are preparing NOW before it hits.

On that note, we are already preparing our clients for this with a 21-page investment report titled the Stock Market Crash Survival Guide.

In it, we outline the coming collapse will unfold…which investments will perform best… and how to take out “crash” insurance trades that will pay out huge returns during a market collapse.

Today is the last day this report will be available to the general public.

To pick up one of the last remaining copies…

https://www.phoenixcapitalmarketing.com/stockmarketcrash.html

Best Regards

Graham Summers

Chief Market Strategist

Phoenix Capital Research

 

 

 

Yesterday’s drop did a lot of damage to the rally.

Stocks rolled over after hitting resistance (red line). They also broke the bearish rising wedge formation they’ve been forming over the last month (blue lines).

This is very bad news. Stocks had every reason to break to new highs between the Fed pumping billions of dollars in liquidity into the system and the trade deal progressing (China will be visiting the U.S. in October).

And yet, stocks couldn’t get it done. Instead they rolled over.

When everything points towards a bullish outcome and things get bearish, it’s extremely BAD for the markets.

So what comes next?

Momentum stocks are all suggesting a major breakdown is coming. Netflix, Wayfair and Tesla, all of them Wall Street darlings suggest the market could collapse 2,500 or lower.

Unfortunately that’s not the worst of it either.

Real world economic indicators say the market could go even lower.

Fed Ex, a major global bell-weather says the market could drop 2,400. And copper and Treasuries suggest the markets could crash to 2,000 or lower.

A Crash is coming… and smart investors are preparing NOW before it hits.

On that note, we are already preparing our clients for this with a 21-page investment report titled the Stock Market Crash Survival Guide.

In it, we outline the coming collapse will unfold…which investments will perform best… and how to take out “crash” insurance trades that will pay out huge returns during a market collapse.

Today is the last day this report will be available to the general public.

To pick up one of the last remaining copies…

https://www.phoenixcapitalmarketing.com/stockmarketcrash.html

Best Regards

Graham Summers

Chief Market Strategist

Phoenix Capital Research

 

Gold has been on a tear lately. This has lead to many of you asking me why the precious metal is breaking out and if this is the start of the next bull market.

Gold is rallying primarily due to central bank issuing forward guidance. What I mean by this is that globally central banks have made it clear that they are going to be cutting rates and launching new QE programs going forward.

This is resulting in bonds around the world rallying to the point of having NEGATIVE yields. What this means is that the person lending the money is PAYING the person borrowing the money for the right to lend!

It’s insanity, but because bonds move based on interest rate policy, if central banks cut rates to negative, many bonds are going to have negative yields.

How many?

Currently there are over $15 trillion in bonds with negative interest rates. Gold yields nothing. But if bonds are CHARGING you money, a yield of zero is actually quite attractive.

This is why gold is rallying alongside the long-term Treasury ETF.

Of course nothing goes straight up or straight down, and it would be quite normal for gold to correct back to test former resistance (red line) after its recent breakout.

However, the long-term implication of that chart is that gold is going north of $3,000 per ounce.

This is going to lead to literal fortunes for those who invest properly with targeted picks.

On that note, we just published a Special Investment Report concerning a secret back-door play on Gold that gives you access to 25 million ounces of Gold that the market is currently valuing at just $273 per ounce.

The report is titled The Gold Mountain: How to Buy Gold at $273 Per Ounce

We are giving away just 100 copies for FREE to the public.

To pick up yours, swing by:
https://www.phoenixcapitalmarketing.com/goldmountain.html
Best Regards

Graham Summers
Chief Market Strategist
Phoenix Capital Research