Debt Bomb

By Graham Summers, MBA

The U.S. passed a debt ceiling resolution in May of 2023. Both the GOP and the Democrats claimed victory for the deal, but the reality is the government won and Americans were screwed.

How do I know this?

It took the U.S. 232 years to generate its first $10 trillion in debt. It added another $10 trillion in debt in just nine years once the Fed pinned interest rates at zero and cornered the bond market with Quantitative Easing (QE) from 2008 to 2017. 

The U.S. then added another $10 Trillion in debt in just five years when the Fed reintroduced ZIRP and QE in NUCLEAR fashion in response to the pandemic. Obviously, you’re beginning to see the trend here: the U.S. added $10 trillion in debt in 232 years, nine years, and five years. 

But the “debt deal” has really added fuel to the fire.

The U.S. has added another $4 trillion in debt since 2022. But~ $2 trillion of this was added in the seven months since the debt deal was passed! And thanks to the debt deal removing the debt ceiling until 2025, there is little chance that the pace of debt issuance will slow anytime this year.

How will this end? With a debt crisis of some sort. The details, for now, are unclear.

What isn’t unclear is that investors can potentially make a LOT of money from this situation. Those who invested in the right assets at the right times during the last 20 years while the U.S. has engaged in a debt bonanza have seen some truly OBSCENE returns.

And no, I’m not talking about gold. The precious metal has traded sideways for four years, while the U.S. has tacked on another $10 trillion in debt.

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By Graham Summers, MBA

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.

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By Graham Summers, MBA

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: 

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By Graham Summers, MBA

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: 

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By Graham Summers, MBA

“Someone” saved stocks yesterday.

The day started with the S&P 500 breaking below:

1) The 200-DMA (red line in the chart below).

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.

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By Graham Summers, MBA

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: 

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By Graham Summers, MBA

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: 

https://phoenixcapitalmarketing.com/BM.html

By Graham Summers, MBA

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.

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Best Regards

By Graham Summers, MBA

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.

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:

https://phoenixcapitalmarketing.com/BM.html

By Graham Summers, MBA

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.

To pick up your copy, swing by:

https://phoenixcapitalmarketing.com/BM.html

By Graham Summers, MBA

Trouble is brewing in the U.K. again.

Back in September 2022, which now seems so long ago, the global financial system nearly entered a debt crisis. 

The first country to “get to the brink” was the United Kingdom or U.K. At that time, the U.K.’s new government, led by Prime Minster Liz Truss, introduced a tax cutting program that neither the bond nor the currency markets could stomach. 

The yield on the 10-Year U.K. Government bond went vertical signaling default risk.

While the British Pound imploded, collapsing to a 30+ year low.

In the simplest of terms, the U.K. appeared to be the first country to enter a sovereign debt crisis. Then, suddenly, in the span of a few weeks, this ENTIRE PROBLEM went away.

The official narrative sold to the public concerning the “solution” to this issue was that Prime Minster Truss resigned and a new government was formed. 

However, it’s rather odd that TWO WEEKS before Ms. Truss resigned, the $USD suddenly rolled over and started to collapse while risk assets like stocks caught a bid. Indeed, the entire global financial system entered one of its most aggressive “risk on” chapters in recent history. And it did this on a dime in mid-October 2022.

Perhaps something or someone else was responsible for this incredible turn of events. Perhaps global central banks coordinated a “behind the scenes” intervention that forced bond yields lower so stocks could catch a bid. We’ll never know the true story, but the global financial system sure as heck wasn’t “saved” by Prime Minister Truss resigning.

I mention all of this because once again the U.K.’s debt markets are blowing up with yields on the 10-Year U.K. Government bond getting dangerously close to the levels at which things started to break in 2022.

There are many different ways to profit from this situation. We recently outlined one method that smart investors have used to create life changing wealth during a bear market.

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.

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By Graham Summers, MBA

Is this the next black swan?

The commercial real estate market in the U.S. is about $20 trillion in size. This is not a small asset class. And thanks to the pandemic changing work habits, the Fed creating a massive credit bubble, and many cities going soft on crime, the collapse of commercial real estate may very well be the next black swan event.

In its simplest rendering, the problems facing commercial real estate are as follows:

1) People do NOT want to return to the office, even if the pandemic is over. 

2) Valuations/ prices in the market have been badly distorted by the Fed, both indirectly via the massive credit bubble the Fed created in 2020-2022, and directly by the Fed offering to buy commercial mortgage backed securities (the last point put a floor beneath this market).

3) Many large cities have decided to go soft on crime, resulting in criminal activity skyrocketing. As a result of this and heavy tax burdens, large businesses are moving out of places like Chicago, New York and the like.

It’s literally a perfect storm for the commercial real estate sector.

Oh… and lest we forget, much of this asset class is financed by trillions of dollars worth of debt. And that debt is now coming due.

The New York Post notes that $1.5 trillion worth of commercial real estate debt comes due by the end of 2025. Bear in mind, rates have done this since much of this debt was issued:

So commercial real estate firms will either need to pay this back (hard to imagine given office vacancies) or roll the debt over at much higher interest rates.

And last but not least… guess who loaned out all this debt to commercial real estate developers and landlords?

REGIONAL BANKS.

Perhaps this is why the regional banking sector can’t rally despite the Fed gifting them hundreds of billions of dollars worth of cheap credit over the last month.

What does this mean?

A $20 trillion asset class is fast approaching its “2008” moment. 

Indeed, our proprietary Crash signal has just triggered its 3rd confirmed signal in the last 25 years. The last two times it signalled?

2000 and 2008.

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

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

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