By Graham Summers, MBA

The banking crisis has just claimed its first major victim.

Thus far in this banking crisis, the banks that were in trouble have been large, but not gigantic. The largest was Silicon Valley Bank which was the 15th largest bank in the U.S. at the time of its collapse with some $209 billion in assets.

Well, yesterday, UBS bought Credit Suisse for $3.3 billion. Credit Suisse is NOT a regional bank. It is a MAJOR bank with $1.4 TRILLION in assets. Indeed, the bank was literally larger than the country in which it was domiciled (Switzerland’s GDP is roughly $800 billion).

For a bank this size to fail is a MAJOR development. However, even more significant are the details of the UBS/Credit Suisse deal… namely that BOTH Credit Suisse bondholders and equity holders are getting wiped out (mostly).

Some $16 BILLION worth of Credit Suisse bonds are being written down to ZERO, while Credit Suisse shareholders will receive just one share of UBS stock for every 22.48 shares of Credit Suisse stock they owned. 

Why is this a big deal?

Because no one in their right mind would want to own bonds or stock in a troubled bank after this deal. 

Think of it this way… before this, banks were already facing two major problems:

1) They pay only 0.23% or so on deposits when depositors can earn 3%-4% in a Money Market Fund or Short-Term U.S. Treasuries. So money was fleeing banks for those higher yielding investments.

2) Depositors were terrified of bank failures. And so even MORE money was fleeing.

Now, banks face a new issue: trying to attract investors when there’s a very real possibility that both bondholder and stockholders would get wiped out if said bank failed.

The stock market bulls are trying to bid the markets this morning, as if this bailout/ deal is great news. 

Was AIG getting bailed out great news? 

What about Fannie and Freddie?

Nope.

Something VERY bad is brewing in the financial system. Indeed, my proprietary Crash Trigger is now on the first confirmed “Sell” signal since 2008.

This signal has only registered THREE times in the last 25 years: in 2000, 2008 and today.

If you’ve yet to take steps to prepare for what’s coming, we 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.

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By Graham Summers, MBA

High yield credit is turning back down again.

This is a big deal as historically high yield credit leads stocks.

Indeed, high yield credit bottomed in October 2022 (purple circle in the chart below) a full two weeks before stocks did (blue circle in the chart below).

Now high yield credit is telling us stocks are set to drop. According to high yield credit, the S&P 500 should already be at 3,900 a full 100 points lower.

Oh… and by the way… our proprietary Bear Market Trigger… the one that predicted the Tech Crash as well as the Great Financial Crisis… is on a confirmed SELL signal for the first time since 2008.

If you’ve yet to take steps to prepare for what’s coming, we just published a new exclusive special report How to Invest During This Bear Market.

It details the #1 investment to own during the bear market as well as how to invest to potentially generate life changing wealth when it ends.

To pick up your FREE copy, swing by:

https://phoenixcapitalmarketing.com/BM.html

PS. Our new investing podcast Bulls, Bears & BS is officially live and available on every major podcast application (Apple, Spotify, etc.)

To download or listen, swing by:

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By Graham Summers, MBA

The stock market is primed for another major leg down.

Why?

Treasury yields are spiking again.

The yield on the 2-Year U.S. Treasury has exploded higher… blasting through its previous high of 4.72%. It is now closing in on 5%.

Bear in mind, it was just 1.25% this time last year.

Why does this matter?

The ENTIRE collapse in stocks thus far in this bear market has been due to Treasury yields spiking. Investors used to collect 0.25% “risk free” from these bonds. They can now get almost 5%.

As a result of this, no one is willing to pay 20-22 times forward earnings for growth from stocks. Instead they’re paying just 16-18 times forward earnings. And by the look of things it will soon be lower than that. Treasury yields keep rising… so stocks will keep falling.

This is the kind of environment in which crashes can happen. The Fed is rapidly losing credibility. And investors have been suckered into believing the “worst” is behind them: they poured $1.5 billion into stocks every day in January. And they did this at a time when my proprietary Crash Trigger is now on the first confirmed “Sell” signal since 2008.

This signal has only registered THREE times in the last 25 years: in 2000, 2008 and today.

If you’ve yet to take steps to prepare for what’s coming, we have published an exclusive special report How to Invest During This Bear Market.

It details the #1 investment to own during the bear market as well as how to invest to potentially generate life changing wealth.

This report is usually $250, but we’re giving away 100 copies for FREE to those who sign up for our free daily market commentary.

To pick up one of the remaining copies, use the link below…

https://phoenixcapitalmarketing.com/BM2.html

By Graham Summers, MBA

The Fed has now made what would be its second “career ending” mistake if it operated in the real world.

The first such mistake concerned its ludicrous claim that inflation was “transitory” throughout 2021- 2022. Anyone who bothered doing any real research knew that argument was total nonsense… yet somehow the Fed with its 400 researchers and analysts failed to get it right. 

In the real world, someone in a major position (Fed Chair or multiple Fed Presidents) would have been fired for this degree of incompetence. But we’re talking about the Fed here… which exists in some fantasy land in which you can blow up the financial system/ economy and still keep your job.

Which brings us to the Fed’s second “career ending” level mistake… believing that inflation was under control because some highly manipulated data suggested it was.

In December, the official inflation measure, the Consumer Price Index (CPI) recorded a month over month pace of -0.1%. Since October had been 04% and November had been 0.2%, the Fed took this to mean that “disinflation” had arrived. Fed Chair Powell used that word close to a dozen times during the Fed’s February press conference.

The only problem with this was that the CPI is a notoriously AWFUL measure of inflation… and is prone to multiple revisions. I knew that. Most analysts knew it. It is truly staggering that the Fed would NOT know it. And yet, that seems to be the case as the Fed fell for this nonsense and began slowing the speed of its rate hikes down to 0.25% in early 2023.

December’s CPI has since been revised to 0.1%. November and October’s were also revised higher. And January’s clocked in at 0.5% month over month. That’s inflation of 6% on an annualized basis.

Bonds have woken up to the fact the Fed has lost the plot. The yield on the 2-Year U.S. Treasury has erupted higher taking out its former highs with ease. The Fed will very likely be forced to INCREASE the pace of its rate hikes to 0.5% or even higher in the coming months.

This is the kind of environment in which crashes can happen. The Fed is rapidly losing credibility. And investors have been suckered into believing the “worst” is behind them: they poured $1.5 billion into stocks every day in January. And they did this at a time when my proprietary Crash Trigger is now on the first confirmed “Sell” signal since 2008.

This signal has only registered THREE times in the last 25 years: in 2000, 2008 and today.

If you’ve yet to take steps to prepare for what’s coming, we have published an exclusive special report How to Invest During This Bear Market.

It details the #1 investment to own during the bear market as well as how to invest to potentially generate life changing wealth.

This report is usually $250, but we’re giving away 100 copies for FREE to those who sign up for our free daily market commentary.

To pick up one of the remaining copies, use the link below…

https://phoenixcapitalmarketing.com/BM2.html

By Graham Summers, MBA

I’m getting sick of the lies.

I keep hearing from supposed gurus and commentators (not to mention the White House) that inflation is on the decline… but whenever I go to the grocery store or try to hire someone to fix something at my house or do just about anything other than pay for gas… the price is UP.

Who am I to believe? The establishment or my own eyes and wallet?

This is a MAJOR issue today in America… we are told all the time that something is a certain way… only to find out that it’s not like that at all. And the idea that inflation is going away is one MAJOR lie that hits close to home since it affects our incomes and our lives on a daily basis.

I’ve been one of the few people stating that inflation is not declining for months now. In fact, the only reason the data even rolled over at all was because energy prices fell because the Biden administration dumped 250 MILLION barrels of oil on the markets.

All that accomplished was about three months of declining energy prices. Because the bond market just called “BS” on the idea that inflation is under control.

To whit… the yield on the 2-Year U.S. Treasury… which the Fed tracks to determine where rates need to go… is SPIKING again and about to take out its former highs! This tells us pint blank that inflation is back and if anything the Fed will need to be MUCH MORE aggressive to stop it.

And despite this… and the economy rolling over… and inflation NOT being on the decline… investors poured $1.5 BILLION per day into stocks last month. In fact, from what I can tell, investors are MORE bullish today than they were a year ago! These folks BELIEVE the lies they are being told!

This is the kind of environment in which crashes can happen.

Indeed, my proprietary Crash Trigger is now on the first confirmed “Sell” signal since 2008.

This signal has only registered THREE times in the last 25 years: in 2000, 2008 and today. I’ve illustrated them in the chart below.

The clock is ticking on the markets today… just like it was in 2000 and 2008. Many investors will lose everything… but you don’t have to be one of them.

If you’ve yet to take steps to prepare for what’s coming, we have published an exclusive special report How to Invest During This Bear Market.

It details the #1 investment to own during the bear market as well as how to invest to potentially generate life changing wealth.

This report is usually $250, but we’re giving away 100 copies for FREE to those who sign up for our free daily market commentary.

To pick up one of the remaining copies, use the link below…

https://phoenixcapitalmarketing.com/BM2.html