The issue at hand
is China’s massive Evergrande property developer. The company is effectively
insolvent, with over $300 billion in bad loans. Many are calling this “China’s
Lehman Moment.”
The company’s
stock is down 80% Year to Date.
How serious is
this?
Serious.
Real estate
comprises nearly 8% of China’s economy. Construction is another ~8%. So, all in
all, you’re looking at 16% of the second largest economy in the world
experiencing the bankruptcy of one of its largest players. This has significant
implications for everything from commodities (use in construction) to finance
(the loans used to build the buildings and finance the mortgages for
consumers).
And in these types
of situations, there is never just one player at risk.
Contagion has
already begun. Hong Kong property developers and Chinese industrial producers
are getting hit. And if you think this will be confined to China you are
mistaken.
Australia supplies
much of the commodities China uses for its construction. It is not coincidence
that BHP Group (BHP) and other major Australian miners are nosediving, crashing
26% in the last few weeks.
And then there’s
European banks, which have massive exposure to China. By the look of the
bloodbath this morning, things are spreading to there as well.
This is the
problem with an Everything Bubble: you never know where the black swan is going
to come from.
With the financial
system in the single largest bubble of all time, and leveraged to the hilt by
easy debt courtesy of Central Bank policies, even a single spark can set the
whole thing to blow.
As I warned a few
weeks ago, this whole mess will come crashing down one day. In market terms,
this is going to happen, it’s just a matter of time.
The question of
course is “when”?
To
figure that out, I rely on certain key signals that flash before every market
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.
The #1 issue for the markets this week is
the $USD.
The U.S. dollar is strengthening. A
strong dollar is not necessarily a bad thing, but it runs completely
contrary to the Fed’s stated goal of creating inflation.
Following a brief spike during the
deflationary episode of March, for most of 2020, the $USD dropped like a stone
(see area highlighted by a red arrow in the chart below). However, it’s been a
completely different era for 2021 as the $USD has been rangebound thus far (see
blue rectangle in the chart below).
This is happening at a time when the Fed
has explicitly stated that it wants to create inflation. It is also happening
at a time when the U.S. is $28 trillion in debt, and the U.S. is attempting to
run a $3+ trillion deficit.
And therein lies the problem.
The U.S. finances its spending via tax
revenues. If tax revenues are not great enough to cover the costs, the U.S. issues
debt. This is deficit everyone is always talking about. In simple terms the
U.S. finances its massive spending sprees by issuing debt.
In order for the bond market to absorb
the massive debt issuance the U.S. generated in 2020 (the U.S. ran a $3 trillion
deficit that year), it required higher yields. In simple terms, this was the
bond market saying, “if you want us to buy all of this debt, you need to pay us
more.” You can see this in the chart below.
This changed in 2021, at which time bond
yields began to roll over as it appeared Congressional gridlock would limit the
Biden administration’s plans on spending some $6 trillion. Yields started to
come down as the bond market began to process this information.
But that doesn’t mean the $USD at current
levels isn’t a problem. Even if the Biden administration can’t run a $6
trillion budget, it will still run a $3+ trillion deficit. Indeed, the U.S. is
already $2 trillion in the red for 2021 as of June.
The stronger the $USD is in this
environment, the more “expensive” it is the U.S. to pay its debts. A big part
of the Fed/ Federal Government’s scheme with inflation is that it means the
U.S. can pay back its debts with dollars that are technically worth
less.
But if the $USD stays strong, this means it
becomes more expensive for the U.S. to finance its debt loads. And with total
public debt north of $28 trillion, this can be a real problem.
Indeed, it’s possible the U.S. is finally
approaching a potential debt crisis in the coming months. With that in mind,
we’ve reopened our Stock
Market Crash Survival Guide to the general public.
Within its 21 pages we
outline which investments will perform best during a market meltdown as well as
how to take out “Crash insurance” on your portfolio (these instruments returned
TRIPLE digit gains during 2008).
We are making just 100 copies
available to the general public.
To pick up your copy of this
report, FREE, swing by:
The issue is which one was the real deal. Monday could
easily have been the result of short-covering and “start of the month” buying
by financial institutions.
Similarly, Tuesday could have been the markets dropping
simply because China issued a warning that it believes U.S. stocks are “in a
bubble.”
Honestly, it’s impossible to tell. The market is a bit of a
mess. So, the best thing to do is wait and watch today as the markets will
finally provide some clarity. One of the greatest trader’s adages is “when in
doubt, stay out.” And that certainly rings true for the market this week.
For the S&P 500, the support is at 3,860, 3720, 3,640,
and 3,550. If stocks take out this first line (3,850) on a closing basis, it
opens a “trapdoor” to a nasty drop to the low 3,700s. This is a BIG reason not
to be adding to longs this week.
Similarly, if you are a stock market bear, you don’t want to
ignore the strong uptrend stocks have established over the four months. We’ve
had two “bear traps” during that time in which stocks broke down, violating the
trendlines only to reverse and rally hard. I’ve identified those occasions with
red circles in the chart below.
If you’re a bear, these are why you don’t want to bet on a
big collapse right now: stocks could breakdown only to reverse and take you to
the cleaners.
So again, the best strategy this week is to “watch and wait.” Let the market show you what is coming and then take action.
Bear in mind, we’re talking strictly about TODAY, as in right now. In the intermediate term, I remain extremely bearish.
Why?
Because inflation is blowing up the bond market. Bonds bounced a few days ago, but are once again rolling over and falling.
Put another way, the issue that blew up the stock market late last week has not been resolved. If anything, it’s about to get worse.
Which means stocks could very easily be a bloodbath in the coming weeks.
On that note, if you’re worried about weathering a potential market crash, we’ve reopened our Stock Market Crash Survival Guide to the general public.
Within its 21 pages we outline which investments will perform best during a market meltdown as well as how to take out “Crash insurance” on your portfolio (these instruments returned TRIPLE digit gains during 2008).
We are making just 100 copies available to the public.
To pick up your copy of this report, FREE, swing by:
Joe Biden will be sworn in as the 46th President of the United States today.
He is inheriting a US debt mountain of over $27 trillion in debt. Indeed, the US has a Debt to GDP ratio of 130%. By way of perspective, this is where Greece was when it blew up in 2010.
Biden’s solution to this issue is to issue even MORE debt via what will be one of, if not THE largest fiscal stimulus in history. He has already proposed:
1) A new stimulus program of $2 trillion.
2) An infrastructure program of $2+ trillion.
Beyond this, Janet Yellen, his Treasury Secretary has stated that she believes Climate Change is an “existential threat” and will use policy to fight it.
This means even MORE money printing and credit issuance.
And this is at a time when the US is already running a $3 trillion deficit.
All of this is going to unleash an inflationary storm.
Gold has already figured this out. Other inflationary assets are not far behind.
At the end of the day, this isn’t an attack on Joe Biden or the Democrats. The COVID-19 pandemic has revealed that policymakers will deal with any and all issues going forward by PRINTING MONEY.
The fact the US is doing this at a time when it is perched atop the largest debt mountain in history will only accelerate things.
After all, with this much debt, there is no way on earth the US can pay it off. INFLATING it away is the only answer. Which is why I believe the Biden administration is going to make the already debt-crazed Trump administration look like amateurs when it comes to money printing.
Those investors who are well positioned to profit from it could see literal fortunes.
On that note, we just published a Special Investment Report concerning FIVE secret investments you can use to make inflation pay you as it rips through the financial system in the months ahead.
The report is titled Survive the Inflationary Storm. And it explains in very simply terms how to make inflation PAY YOU.
We are making just 100 copies available to the public.
Actually, that statement is not 100% correct. SOME stocks are in a massive bubble. Other stocks are not even close.
The bubble we are facing today is in large tech stocks.
To prove this, I’m not going to get into the technology itself, nor am I going to try to get clever with discounted cash flows or some other analysis.
Instead I’m going to use the simplest method of analysis possible: mean reversion.
Why? Because price ALWAYS reverts to the mean.
It doesn’t matter how great management is, nor how fast sales are growing, at some point a stock’s price will revert back to its mean.
For the sake of today’s argument I am using the 50-week moving average (WMA) as the “mean.” If you’re unfamiliar with this concept, the 50-week moving average comes from adding up the closing prices of the last 50 weeks and then dividing that number by 50.
Historically, this line has acted as a magnet for stock prices. In the case of large tech companies today, let’s take a look at Apple (AAPL).
As you can see in the below chart, the 50-week moving average has served as an anchor for AAPL’s stock over the last 10 years. Anytime AAPL has become too “stretched” above or below this line, it has reverted back to it… usually quite quickly.
Now, take a look at how far AAPL’s stock is stretched above the line today compared to other peaks. I’ve actually looked deeper here and AAPL is MORE stretched above its 50-WMA today than at any point in the last 10 years with only one exception.
In 2012, AAPL’s stock was 38% above its 50-WMA. That was a peak.
Later in 2012, AAPL’s stock was 21% above its 50-WMA. That was a peak.
In 2015, AAPL’s stock was 12% above its 50-WMA. That was a peak.
In 2018, AAPL’s stock was 18% above its 50-WMA. That was a peak.
In 2019, AAPL’s stock was 26% above its 50-WMA. That was a peak.
Today, AAPL’s stock is 28% above its 50-WMA.
This is a bubble, plain and simple.
Of course, AAPL stock can continue higher, becoming even more stretched above its 50-WMA but that mean reversion move is coming eventually.
Put simply, the risk to reward for large Tech Stocks is extremely high right now. Yes, you could possibly make money buying AAPL’s stock but the idea you’ll make a lot is minimal.
And at some point, this bubble will burst as all bubbles do and we will get that mean reversion move.
I believe this move may have started yesterday.
Smart investors are already taking steps to profit from the next major downturn in the markets.
In light of this, we’ve reopened our Stock Market Crash Survival Guide to the general public.
Within its 21 pages we outline which investments will perform best during a market meltdown as well as how to take out “Crash insurance” on your portfolio (these instruments returned TRIPLE digit gains during 2008).
We made 100 copies available to the public.
As I write this, there are just 9 left.
To pick up your copy of this report, FREE, swing by:
We are now entering the time in which the true structural damage caused by the COVID-19 pandemic will be revealed.
Back in April when the economy was on lockdown, it became clear that many large businesses were in serious trouble. I’m specifically talking about restaurants, commercial real estate and retail. At that time, multiple large chains informed their lenders that they would NOT be paying rent in April.
Cheesecake Factory, Subway, other major retailers tell landlords they can’t pay April rent due to coronavirus
Source: Yahoo! Finance.
To deal with this issue, the banks and large financial institutions gave their borrowers 90-day forbearances on their debt payments… meaning those groups wouldn’t be required to make debt payments for 90 days.
Put another way, the banks told these businesses “don’t worry about making any debt payments for 90 days… but come July you’ll have to start paying us again.”
That was in APRIL… exactly 90 days ago.
Which means… these same businesses will now have to start making debt payments again. And if they have not TRULY recovered from the economic shutdown… we’re about to see a TSUNAMI of defaults and bankruptcies, as well as layoffs and shutdowns.
This process has already begun as the below headlines reveal:
Wells Fargo reportedly preparing to cut thousands of jobs
United Airlines warns it could furlough 36,000 employees by Oct. 1 as demand remains low
Storied apparel brand Brooks Brothers files for bankruptcy as it seeks a buyer and closes dozens of stores
Muji files for bankruptcy
GNC files for bankruptcy and will close up to 1,200 stores
24 Hour Fitness files for bankruptcy, closes more than 100 gyms
It’s only going to get worse from here on out.
Smart investors are already taking steps to profit from the next major downturn in the markets.
In light of this, we’ve reopened our Stock Market Crash Survival Guide to the general public.
Within its 21 pages we outline which investments will perform best during a market meltdown as well as how to take out “Crash insurance” on your portfolio (these instruments returned TRIPLE digit gains during 2008).
We made 100 copies available to the public.
As I write this, there are just 9 left.
To pick up your copy of this report, FREE, swing by:
We are now entering the time in which the true structural damage caused by the COVID-19 pandemic will be revealed.
Back in April when the economy was on lockdown, it became clear that many large businesses were in serious trouble. I’m specifically talking about restaurants, commercial real estate and retail. At that time, multiple large chains informed their lenders that they would NOT be paying rent in April.
Cheesecake Factory, Subway, other major retailers tell landlords they can’t pay April rent due to coronavirus
Source: Yahoo! Finance.
To deal with this issue, the banks and large financial institutions gave their borrowers 90-day forbearances on their debt payments… meaning those groups wouldn’t be required to make debt payments for 90 days.
Put another way, the banks told these businesses “don’t worry about making any debt payments for 90 days… but come July you’ll have to start paying us again.”
That was in APRIL… exactly 90 days ago.
Which means… these same businesses will now have to start making debt payments again. And if they have not TRULY recovered from the economic shutdown… we’re about to see a TSUNAMI of defaults and bankruptcies, as well as layoffs and shutdowns.
This process has already begun as the below headlines reveal:
Wells Fargo reportedly preparing to cut thousands of jobs
United Airlines warns it could furlough 36,000 employees by Oct. 1 as demand remains low
Storied apparel brand Brooks Brothers files for bankruptcy as it seeks a buyer and closes dozens of stores
Muji files for bankruptcy
GNC files for bankruptcy and will close up to 1,200 stores
24 Hour Fitness files for bankruptcy, closes more than 100 gyms
It’s only going to get worse from here on out.
Smart investors are already taking steps to profit from the next major downturn in the markets.
In light of this, we’ve reopened our Stock Market Crash Survival Guide to the general public.
Within its 21 pages we outline which investments will perform best during a market meltdown as well as how to take out “Crash insurance” on your portfolio (these instruments returned TRIPLE digit gains during 2008).
We made 100 copies available to the public.
As I write this, there are just 9 left.
To pick up your copy of this report, FREE, swing by:
The #1 thing investors need to be thinking about today are “unintended consequences.”
Everyone knows that the Fed has flooded the financial system with liquidity. This liquidity, combines with what appears to be a “V” shaped recovery in the economy, is what propelled stocks to go straight up from the March lows.
As I write this Tuesday morning, the S&P 500 has broken out of a rising wedge formation (blue lines in the chart below) to the upside. It is now slamming into overhead resistance (red line in the chart below).
It is unlikely we break this on the first try. And a drop to retest the breakout would be perfectly normal. I’ve drawn what this would look like with a red arrow in the chart above.
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So… stocks rally on liquidity as the Fed reflates the system. That’s the obvious consequence of the Fed printed $1 trillion a month. But what is the unintended consequence of this money printing?
The market is suggesting it could be a crash in bonds.
The US was already on schedule to run a $3-$4 trillion deficit this year based on the March-May economic shutdown. However, it is growing clearer that the real number is going to be even higher than that.
Multiple states (NY, CA, IL) are on the brink of insolvency and will need bailouts soon. And the President has suggested he’d like a massive infrastructure bill ($1+ trillion) passed this year as well.
Either of those could mean the US needing to issue $5-$6 trillion in NEW debt this year on top of rolling over old debts. The bond market is signaling this might be too much for it to absorb at current levels.
The long-term Treasury has rolled over badly. We are now at support (green line in the chart below) and STILL a long ways from a mean-reversion drop to test the bull market trendline (blue line in the chart below).
A bond crash would mean the bond market revolting against the US’s fiscal stimulus. And it would have a profound impact on ALL risk assets, including stocks.
So while it’s nice to see stocks rallying so much, we need to consider what might be coming down the pike in the near-future. Bonds suggest it’s nothing pretty.
If you’re sick of narratives and want to focus on how to actually make money from the markets, join our FREE e-letter Gains Pains & Capital.
Let’s talk about what just happened with Oil prices.
Yesterday, Oil dropped to -$40 per barrel. That is not a typo. Oil was priced at NEGATIVE $40.
On Friday, it was priced at $27 per barrel.
How is this possible?
This is possible because of derivatives: financial instruments that trade in opaque markets, with little oversight, and which regulators, including Congress, have permitted to become a systemic problem.
In its simplest rendering, yesterday oil traders who owned oil derivatives realized that if they continued to hold these derivatives, they (the traders) would have to actually take delivery on the physical oil they owned. We’re talking thousands and thousands of oil barrels being delivered.
The traders don’t want the actual physical oil. They simply want to be able to trade oil prices. So, they dumped their derivatives at any price… including PAYING someone to take the derivatives off of their hands.
This is how you get NEGATIVE oil prices. And it reveals the degree to which the financial system has become totally overrun with derivatives, leverage, and financial trickery.
Even worse, Oil is not the only asset class that has been overrun with derivatives. The bulk of trading in every commodity, including gold, involves derivatives. The same is true of BONDS.
Derivatives are used to hide losses, manipulate prices, and even fake profits. They are a massive problem that nearly blew up the financial system in 2008… and as oil’s implosion yesterday revealed, remain a major problem today as well.
How big a problem are we talking?
The last official data on the global derivatives market puts it at $640 TRILLION, or over SEVEN TIMES GLOBAL GDP.
What happened in oil is a signal that this financial monstrosity is once again rearing its head. The question now is just how horrific the carnage will be.
On that note, if you’re worried about weathering a potential market crash, we’ve reopened our Stock Market Crash Survival Guide to the general public.
Within its 21 pages we outline which investments will perform best during a market meltdown as well as how to take out “Crash insurance” on your portfolio (these instruments returned TRIPLE digit gains during 2008).
Today is the last day this report will be available to the public.
To pick up your copy of this report, FREE, swing by:
Let’s talk about what just happened with Oil prices.
Yesterday, Oil dropped to -$40 per barrel. That is not a typo. Oil was priced at NEGATIVE $40.
On Friday, it was priced at $27 per barrel.
How is this possible?
This is possible because of derivatives: financial instruments that trade in opaque markets, with little oversight, and which regulators, including Congress, have permitted to become a systemic problem.
In its simplest rendering, yesterday oil traders who owned oil derivatives realized that if they continued to hold these derivatives, they (the traders) would have to actually take delivery on the physical oil they owned. We’re talking thousands and thousands of oil barrels being delivered.
The traders don’t want the actual physical oil. They simply want to be able to trade oil prices. So, they dumped their derivatives at any price… including PAYING someone to take the derivatives off of their hands.
This is how you get NEGATIVE oil prices. And it reveals the degree to which the financial system has become totally overrun with derivatives, leverage, and financial trickery.
Even worse, Oil is not the only asset class that has been overrun with derivatives. The bulk of trading in every commodity, including gold, involves derivatives. The same is true of BONDS.
Derivatives are used to hide losses, manipulate prices, and even fake profits. They are a massive problem that nearly blew up the financial system in 2008… and as oil’s implosion yesterday revealed, remain a major problem today as well.
How big a problem are we talking?
The last official data on the global derivatives market puts it at $640 TRILLION, or over SEVEN TIMES GLOBAL GDP.
What happened in oil is a signal that this financial monstrosity is once again rearing its head. The question now is just how horrific the carnage will be.
On that note, if you’re worried about weathering a potential market crash, we’ve reopened our Stock Market Crash Survival Guide to the general public.
Within its 21 pages we outline which investments will perform best during a market meltdown as well as how to take out “Crash insurance” on your portfolio (these instruments returned TRIPLE digit gains during 2008).
Today is the last day this report will be available to the public.
To pick up your copy of this report, FREE, swing by:
The Everything Bubble has burst. The next crisis, the BIG one to which 2008 was the warmup, is fast approaching.
During the 2008 crisis,
the Fed did three things:
Cut
interest rates to zero making credit all but free for banks.
Implemented
large Quantitative Easing (QE) programs through which it printed $3.5+ trillion
in new money to buy assets from large financial institutions, primarily
mortgage backed securities and US government debt, also called Treasuries.
Urged
the Financial Accounting Standards Board (FASB) to abandon “market to market”
valuations for the banks, thereby allowing the banks to value the debts on
their balance sheet at “make believe” prices.
Combined, these
three policies, particularly #s 1 and 2, create a bubble in US Treasuries,
forcing yields to extraordinary lows.
Treasuries are the
bedrock of the global financial system. Their yields represent the “risk free”
rate of return: the rate against which all risk assets (stocks, commodities,
real estate, etc.) are priced.
So, when the Fed
created a bubble in Treasuries, it created a bubble in EVERYTHING:
the entire financial system became mispriced based on a false risk profile.
Every
asset class in the world trades based on the pricing of bonds. So the
fact that bonds are in a bubble (arguably the biggest bubble in financial
history), means that EVERY asset class is
in a bubble.
I am focusing on
the Fed here, but the same policies played out in every major financial system.
The European
Central Bank (ECB) employed the same policies in Europe, the Bank of England
(BoE) employed the same policies in the UK, and the Bank of Japan, (BoJ) which
had already been doing both ZIRP and QE since 2000, took these polices to even
greater extremes.
The end result is
central bankers created the BIGGEST, most egregious bubble in financial
history. A $250 TRILLION debt bomb… with another $500+ trillion in derivatives
trading based on its yields.
To put this into
perspective, the Tech Bubble was about $15 trillion in size. The
Housing Bubble, which triggered the 2008 Crisis, was about $30 trillion in
size.
The bond
bubble is over $250 TRILLION in size. Some $50 trillion of this is in sovereign debt, with the rest
coming from corporate debt, mortgages, auto loans, credit cards and the like.
This mountain of
debt is categorized based its riskiness. Not all debt is equal because of the
fact that different borrowers have different levels of risk of default. For
instance, an oil shale company that needs oil to trade at $60 per barrel is at
much greater risk of default than a sovereign nation like the U.S..
For simplicities
sake we’re going to ignore auto-loans, student debt, and credit card debt to
focus on the truly systemically important debt.
Corporate,
Municipal, and Sovereign/ National.
In the U.S.,
things rapidly moving up the bond food chain.
The Junk Bond
corporate bond market bubble has burst.
The bubble in less
risky corporate debt, called investment grade is about to do the same.
Further up the
food chain, the bubble in high yield municipal bonds (bonds issued by cities,
states and the like) has also burst.
The BAD news is
that the bubble in investment grade municipal bonds has ALSO burst.
This leaves
sovereign bonds, or Treasuries. Right now, the bubble in U.S. treasuries
remains intact with bond yields within a clearly defined bear market (bond
yields fall when bond prices rise, so the bubble is stable).
This is NOT the
case in Europe.
Germany is the
largest most dynamic economy in Europe. As such Germany is the ultimate
backstop for the EU. And German sovereign bonds are beginning to breakdown.
Despite a
deflationary collapsing, bond yields on the 10-Year German Government bonds is
RISING, meaning those bonds are falling in value.
This SHOULD not be
happening. German bond yields should be falling based on the deflation in the
system right now.
Indeed, just this
week Germany experienced a failed bond auction… meaning not enough buyers
showed up to buy its bonds.
That kind of thing
can happen from time to time… but for it to happen during a flight to safety
like the one happening right now is a REAL signal that the EU’s bond market is
in serious trouble.
In light of this,
we’ve reopened our Stock Market Crash Survival
Guide to the general public.
Within its 21 pages we outline
which investments will perform best during a market meltdown as well as how to
take out “Crash insurance” on your portfolio (these instruments returned TRIPLE
digit gains during 2008).
To pick up your copy of this
report, FREE, swing by:
The Everything Bubble has burst. The next crisis, the BIG one to which 2008 was the warmup, is fast approaching.
During the 2008 crisis,
the Fed did three things:
Cut
interest rates to zero making credit all but free for banks.
Implemented
large Quantitative Easing (QE) programs through which it printed $3.5+ trillion
in new money to buy assets from large financial institutions, primarily
mortgage backed securities and US government debt, also called Treasuries.
Urged
the Financial Accounting Standards Board (FASB) to abandon “market to market”
valuations for the banks, thereby allowing the banks to value the debts on
their balance sheet at “make believe” prices.
Combined, these
three policies, particularly #s 1 and 2, create a bubble in US Treasuries,
forcing yields to extraordinary lows.
Treasuries are the
bedrock of the global financial system. Their yields represent the “risk free”
rate of return: the rate against which all risk assets (stocks, commodities,
real estate, etc.) are priced.
So, when the Fed
created a bubble in Treasuries, it created a bubble in EVERYTHING:
the entire financial system became mispriced based on a false risk profile.
Every
asset class in the world trades based on the pricing of bonds. So the
fact that bonds are in a bubble (arguably the biggest bubble in financial
history), means that EVERY asset class is
in a bubble.
I am focusing on
the Fed here, but the same policies played out in every major financial system.
The European
Central Bank (ECB) employed the same policies in Europe, the Bank of England
(BoE) employed the same policies in the UK, and the Bank of Japan, (BoJ) which
had already been doing both ZIRP and QE since 2000, took these polices to even
greater extremes.
The end result is
central bankers created the BIGGEST, most egregious bubble in financial
history. A $250 TRILLION debt bomb… with another $500+ trillion in derivatives
trading based on its yields.
To put this into
perspective, the Tech Bubble was about $15 trillion in size. The
Housing Bubble, which triggered the 2008 Crisis, was about $30 trillion in
size.
The bond
bubble is over $250 TRILLION in size. Some $50 trillion of this is in sovereign debt, with the rest
coming from corporate debt, mortgages, auto loans, credit cards and the like.
This mountain of
debt is categorized based its riskiness. Not all debt is equal because of the
fact that different borrowers have different levels of risk of default. For
instance, an oil shale company that needs oil to trade at $60 per barrel is at
much greater risk of default than a sovereign nation like the U.S..
For simplicities
sake we’re going to ignore auto-loans, student debt, and credit card debt to
focus on the truly systemically important debt.
Corporate,
Municipal, and Sovereign/ National.
In the U.S.,
things rapidly moving up the bond food chain.
The Junk Bond
corporate bond market bubble has burst.
The bubble in less
risky corporate debt, called investment grade is about to do the same.
Further up the
food chain, the bubble in high yield municipal bonds (bonds issued by cities,
states and the like) has also burst.
The BAD news is
that the bubble in investment grade municipal bonds has ALSO burst.
This leaves
sovereign bonds, or Treasuries. Right now, the bubble in U.S. treasuries
remains intact with bond yields within a clearly defined bear market (bond
yields fall when bond prices rise, so the bubble is stable).
This is NOT the
case in Europe.
Germany is the
largest most dynamic economy in Europe. As such Germany is the ultimate
backstop for the EU. And German sovereign bonds are beginning to breakdown.
Despite a
deflationary collapsing, bond yields on the 10-Year German Government bonds is
RISING, meaning those bonds are falling in value.
This SHOULD not be
happening. German bond yields should be falling based on the deflation in the
system right now.
Indeed, just this
week Germany experienced a failed bond auction… meaning not enough buyers
showed up to buy its bonds.
That kind of thing
can happen from time to time… but for it to happen during a flight to safety
like the one happening right now is a REAL signal that the EU’s bond market is
in serious trouble.
In light of this,
we’ve reopened our Stock Market Crash Survival
Guide to the general public.
Within its 21 pages we outline
which investments will perform best during a market meltdown as well as how to
take out “Crash insurance” on your portfolio (these instruments returned TRIPLE
digit gains during 2008).
To pick up your copy of this
report, FREE, swing by:
Back in September 2019, the Fed announced it would begin implementing a number of repurchase “repo” programs.
If you’re unfamiliar with repo programs, these are programs through which the Fed allows financial banks/ institutions to park assets at the Fed, in exchange for cash.
At the time the Fed announced this, it claimed that it was performing these programs to help with a capital crunch due to tax season. However, that excuse was soon proven to be total bunk as the repo programs were extended from September through October and finally through January.
At the same time, the repo programs grew in size from $75 billion for overnight repos and $30 billion for term repos, to $120 billion in overnight repos and $45 billion in term repos.
Why would the Fed be doing this? After all, the economy was growing at the time, and there were no indications or systemic risk in the U.S. financial system.
The Fed was doing this because a financial institution or institutions were in BAD SHAPE and desperate for capital. By bad shape I mean “Lehman Brothers” type failure.
We do not know who it is but considering the fact that the Fed announced an emergency round of $1.5 TRILLION in repos last week… and even that stopped the market from collapsing, suggest it’s a very LARGE institutions (think the size of Deutsche Bank or UBS).
With this in mind, it doesn’t matter what happens with coronavirus or with the economy. If a large systemically important financial institution or bank fails, we could get a Lehman-like liquidation in the markets.
If you think I’m being dramatic here, consider that the EIGHT largest U.S. banks just announced they are going to start accessing the Fed’s Discount Window: a means through which the Fed gives banks access to capital overnight.
The banks haven’t done this since 2008.
Again, a large financial institution or institutions are in MAJOR trouble here. The fact that even $1.5 TRILLION in repos didn’t fix this issue means it’s truly a systemic problem.
In light of this, we’ve reopened our Stock Market Crash Survival Guide to the general public.
Within its 21 pages we outline which investments will perform best during a market meltdown as well as how to take out “Crash insurance” on your portfolio (these instruments returned TRIPLE digit gains during 2008).
To pick up your copy of this report, FREE, swing by:
Back in September 2019, the Fed announced it would begin implementing a number of repurchase “repo” programs.
If you’re unfamiliar with repo programs, these are programs through which the Fed allows financial banks/ institutions to park assets at the Fed, in exchange for cash.
At the time the Fed announced this, it claimed that it was performing these programs to help with a capital crunch due to tax season. However, that excuse was soon proven to be total bunk as the repo programs were extended from September through October and finally through January.
At the same time, the repo programs grew in size from $75 billion for overnight repos and $30 billion for term repos, to $120 billion in overnight repos and $45 billion in term repos.
Why would the Fed be doing this? After all, the economy was growing at the time, and there were no indications or systemic risk in the U.S. financial system.
The Fed was doing this because a financial institution or institutions were in BAD SHAPE and desperate for capital. By bad shape I mean “Lehman Brothers” type failure.
We do not know who it is but considering the fact that the Fed announced an emergency round of $1.5 TRILLION in repos last week… and even that stopped the market from collapsing, suggest it’s a very LARGE institutions (think the size of Deutsche Bank or UBS).
With this in mind, it doesn’t matter what happens with coronavirus or with the economy. If a large systemically important financial institution or bank fails, we could get a Lehman-like liquidation in the markets.
If you think I’m being dramatic here, consider that the EIGHT largest U.S. banks just announced they are going to start accessing the Fed’s Discount Window: a means through which the Fed gives banks access to capital overnight.
The banks haven’t done this since 2008.
Again, a large financial institution or institutions are in MAJOR trouble here. The fact that even $1.5 TRILLION in repos didn’t fix this issue means it’s truly a systemic problem.
In light of this, we’ve reopened our Stock Market Crash Survival Guide to the general public.
Within its 21 pages we outline which investments will perform best during a market meltdown as well as how to take out “Crash insurance” on your portfolio (these instruments returned TRIPLE digit gains during 2008).
To pick up your copy of this report, FREE, swing by:
The first, coronavirus, is manufactured, the second, a credit implosion, is very real.
The coronavirus panic was 100% made up and manufactured by the media. Globally 100,000 people have been infected and a little over 3,000 have died. Swine Flu infected 60 MILLION and KILLED 60,000 people, in the U.S. alone.
No one shut down their economy over swine flu. No one stock piled toilet paper. No one talked about the end times. Those are facts.
However, now that the elites are shutting down things, the economy will take a real hit. If large group meetings are considered a danger, then factories, companies, schools, conferences and the like will be canceled. And that will hit the economy HARD.
Now let’s talk about the REAL crisis that is hitting the financial system.
As you are no doubt aware, there is too much debt in the financial system. Globally Debt to GDP is north of 200%. Leverage is higher today than it was in 2007. And the world is absolutely saturated in debt on a sovereign, state, municipal, corporate and personal level.
However, everything continued to run smoothly as long as nothing began to blow up in the debt markets/ credit markets. And despite a few hiccups here and there, the debt markets have been relatively quiet for the last few years.
Not anymore.
Someone or something is blowing up in a horrific way “behind the scenes.”
The Fed was FORCED to start providing over $100 BILLION in free money overnight back in September 2019. And even that massive amount is proving inadequate (last night the Fed was forced to pump $216 BILLION into the system).
You don’t get those kinds of demands for liquidity unless something is truly horrifically wrong. Think LEHMAN BROTHERS.
This is why the markets are failing to rally. It is why every major central bank is out talking about launching new aggressive monetary policies. And it is why the Fed is privately freaking out.
Below is a chart showing the credit market (black line) relative to the stock market (red line). As you can see, the credit market is already telling us that stocks should be trading at 2,600 or even lower.
This is a real crisis. And from what I can see, the Fed can’t stop it.
What stopped the last crisis?
The Fed fought back by launching rate cuts and QE.
This crisis started when the Fed was already doing rate cuts and QE.
And those policies aren’t doing anything to stop the bloodbath.
In light of this, we’ve reopened our Stock Market Crash Survival Guide to the general public.
Within its 21 pages we outline which investments willperform best during a market meltdown as well as how to take out “Crash insurance” on your portfolio (these instruments returned TRIPLE digit gains during 2008).
To pick up your copy of this report, FREE, swing by:
The first, coronavirus, is manufactured, the second, a credit implosion, is very real.
The coronavirus panic was 100% made up and manufactured by the media. Globally 100,000 people have been infected and a little over 3,000 have died. Swine Flu infected 60 MILLION and KILLED 60,000 people, in the U.S. alone.
No one shut down their economy over swine flu. No one stock piled toilet paper. No one talked about the end times. Those are facts.
However, now that the elites are shutting down things, the economy will take a real hit. If large group meetings are considered a danger, then factories, companies, schools, conferences and the like will be canceled. And that will hit the economy HARD.
Now let’s talk about the REAL crisis that is hitting the financial system.
As you are no doubt aware, there is too much debt in the financial system. Globally Debt to GDP is north of 200%. Leverage is higher today than it was in 2007. And the world is absolutely saturated in debt on a sovereign, state, municipal, corporate and personal level.
However, everything continued to run smoothly as long as nothing began to blow up in the debt markets/ credit markets. And despite a few hiccups here and there, the debt markets have been relatively quiet for the last few years.
Not anymore.
Someone or something is blowing up in a horrific way “behind the scenes.”
The Fed was FORCED to start providing over $100 BILLION in free money overnight back in September 2019. And even that massive amount is proving inadequate (last night the Fed was forced to pump $216 BILLION into the system).
You don’t get those kinds of demands for liquidity unless something is truly horrifically wrong. Think LEHMAN BROTHERS.
This is why the markets are failing to rally. It is why every major central bank is out talking about launching new aggressive monetary policies. And it is why the Fed is privately freaking out.
Below is a chart showing the credit market (black line) relative to the stock market (red line). As you can see, the credit market is already telling us that stocks should be trading at 2,600 or even lower.
This is a real crisis. And from what I can see, the Fed can’t stop it.
What stopped the last crisis?
The Fed fought back by launching rate cuts and QE.
This crisis started when the Fed was already doing rate cuts and QE.
And those policies aren’t doing anything to stop the bloodbath.
In light of this, we’ve reopened our Stock Market Crash Survival Guide to the general public.
Within its 21 pages we outline which investments willperform best during a market meltdown as well as how to take out “Crash insurance” on your portfolio (these instruments returned TRIPLE digit gains during 2008).
To pick up your copy of this report, FREE, swing by:
As I warned yesterday, the Fed has discovered that:
1) It is impossible to normalize monetary policy in an Everything Bubble.
And…
2) The Everything Bubble is now bursting.
The Fed now has a choice: implement monetary policies even more extreme than the ones it used in 2008-2012 or… let the Everything Bubble burst and the whole system come crashing down.
The Fed has obviously chosen option #1.
If you think I’m being overly dramatic about what’s happening here, consider that the President of the NY Fed (the branch of the Fed in charge of financial markets) announced yesterday that the Fed is consider NEGATIVE Interest Rate Policy (NIRP).
If everything is fine… if the financial system is stable… and we are nowhere near a crisis… why would the head of the NY Fed be suggesting the Fed consider cutting rates to NEGATIVE during the next downturn?
—————————–——————–
Who said getting rich from trading was hard?
Since inception in 2015, this trading system has produced average annual gains of 41%.
And it’s doing this with just one trade once per week. In fact we just closed a 12% gain last week.
We are closing the doors on this system to new clients on Friday this week.
This is the yield on the 10-Year Treasury, the single most important bond in the financial system. As you can see, it’s broken a multi-decade downtrend to the upside.
When bond yields rise, bond prices fall.
When bond prices fall, debt deflation hits the financial system.
When debt deflation hits the financial system, the financial system BLOWS UP.
THIS is why the Fed is in a panic. It’s why the Fed has stopped hiking rates. And it’s why the Fed is desperate to launch even MORE extreme monetary policy as soon as possible.
If you aren’t actively taking steps to prepare for this, you need to start NOW.
On that note, we are putting together an Executive Summary outlining all of these issues as well as what’s coming down the pike when the 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.
Yesterday, Fed Chair Jerome Powell made a starling admission,
“The U.S. federal government is on an unsustainable fiscal path,” Powell told the Senate Banking Committee, noting that “debt as a percentage of GDP is growing, and now growing sharply… And that is unsustainable by definition.”
Source: Yahoo! Finance
What Powell said has been obvious to anyone with a functioning brain for years. However, we have to remember one key item…
This is the FED CHAIR talking… the person in charge of maintaining STABILITY for the financial system and who controls the printing the of the US currency… not just some talking head on TV.
So just how bad are the US’s finances that the Fed Chair would be willing to admit this PUBLICLY?
Total US debt has just hit $22 trillion. The US now has a Debt to GDP ratio of 105%. This is roghly where Greece was when it entered a debt crisis in 2010 (though there are certain key differences between the US’s and Greece’s abilities to deal with their debt issues).
Fed Chair Jerome Powell has also made it clear that it is NOT the Fed’s job to fix this.
“We need to stabilize debt to GDP. The timing the doing that, the ways of doing it —through revenue, through spending — all of those things are not for the Fed to decide.”
Source: Yahoo! Finance
So… either the US Political Elite needs to spend less (not going to happen) or it needs to find access to new sources of capital… ours.
With that in mind, the current political agenda to push for Wealth Taxes, cash grabs and other means of raising capital all makes sense.
Consider the following:
The IMF has already called for a wealth tax of 10% on NET WEALTH.
More than one Presidential candidate for the 2020 US Presidential Race has already openly called for a wealth tax in the US.
Polls suggest that the majority of Americans support a wealth tax.
And if you think this will stop with the super wealthy, you’re mistaken. You could tax 100% of the wealth of the top 1% and it would finance the US deficit for less than six months.
Which means…
Cash grabs, wealth taxes, and more will soon be coming to Main Street America.
Indeed, we’ve uncovered a secret document outlining how the Fed plans to both seize and STEAL savings during the next crisis/ recession.
We detail this paper and outline three investment strategies you can implement right now to protect your capital from the Fed’s sinister plan in our Special Report The Great Global Wealth Grab.
We are making just 100 copies available for FREE the general public.
Yesterday, Fed Chair Jerome Powell made a starling admission,
“The U.S. federal government is on an unsustainable fiscal path,” Powell told the Senate Banking Committee, noting that “debt as a percentage of GDP is growing, and now growing sharply… And that is unsustainable by definition.”
Source: Yahoo! Finance
What Powell said has been obvious to anyone with a functioning brain for years. However, we have to remember one key item…
This is the FED CHAIR talking… the person in charge of maintaining STABILITY for the financial system and who controls the printing the of the US currency… not just some talking head on TV.
So just how bad are the US’s finances that the Fed Chair would be willing to admit this PUBLICLY?
Total US debt has just hit $22 trillion. The US now has a Debt to GDP ratio of 105%. This is roghly where Greece was when it entered a debt crisis in 2010 (though there are certain key differences between the US’s and Greece’s abilities to deal with their debt issues).
Fed Chair Jerome Powell has also made it clear that it is NOT the Fed’s job to fix this.
“We need to stabilize debt to GDP. The timing the doing that, the ways of doing it —through revenue, through spending — all of those things are not for the Fed to decide.”
Source: Yahoo! Finance
So… either the US Political Elite needs to spend less (not going to happen) or it needs to find access to new sources of capital… ours.
With that in mind, the current political agenda to push for Wealth Taxes, cash grabs and other means of raising capital all makes sense.
Consider the following:
The IMF has already called for a wealth tax of 10% on NET WEALTH.
More than one Presidential candidate for the 2020 US Presidential Race has already openly called for a wealth tax in the US.
Polls suggest that the majority of Americans support a wealth tax.
And if you think this will stop with the super wealthy, you’re mistaken. You could tax 100% of the wealth of the top 1% and it would finance the US deficit for less than six months.
Which means…
Cash grabs, wealth taxes, and more will soon be coming to Main Street America.
Indeed, we’ve uncovered a secret document outlining how the Fed plans to both seize and STEAL savings during the next crisis/ recession.
We detail this paper and outline three investment strategies you can implement right now to protect your capital from the Fed’s sinister plan in our Special Report The Great Global Wealth Grab.
We are making just 100 copies available for FREE the general public.
Yesterday, Fed Chair Jerome Powell made a starling admission,
“The U.S. federal government is on an unsustainable fiscal path,” Powell told the Senate Banking Committee, noting that “debt as a percentage of GDP is growing, and now growing sharply… And that is unsustainable by definition.”
Source: Yahoo! Finance
What Powell said has been obvious to anyone with a functioning brain for years. However, we have to remember one key item…
This is the FED CHAIR talking… the person in charge of maintaining STABILITY for the financial system and who controls the printing the of the US currency… not just some talking head on TV.
So just how bad are the US’s finances that the Fed Chair would be willing to admit this PUBLICLY?
Total US debt has just hit $22 trillion. The US now has a Debt to GDP ratio of 105%. This is roghly where Greece was when it entered a debt crisis in 2010 (though there are certain key differences between the US’s and Greece’s abilities to deal with their debt issues).
Fed Chair Jerome Powell has also made it clear that it is NOT the Fed’s job to fix this.
“We need to stabilize debt to GDP. The timing the doing that, the ways of doing it —through revenue, through spending — all of those things are not for the Fed to decide.”
Source: Yahoo! Finance
So… either the US Political Elite needs to spend less (not going to happen) or it needs to find access to new sources of capital… ours.
With that in mind, the current political agenda to push for Wealth Taxes, cash grabs and other means of raising capital all makes sense.
Consider the following:
The IMF has already called for a wealth tax of 10% on NET WEALTH.
More than one Presidential candidate for the 2020 US Presidential Race has already openly called for a wealth tax in the US.
Polls suggest that the majority of Americans support a wealth tax.
And if you think this will stop with the super wealthy, you’re mistaken. You could tax 100% of the wealth of the top 1% and it would finance the US deficit for less than six months.
Which means…
Cash grabs, wealth taxes, and more will soon be coming to Main Street America.
Indeed, we’ve uncovered a secret document outlining how the Fed plans to both seize and STEAL savings during the next crisis/ recession.
We detail this paper and outline three investment strategies you can implement right now to protect your capital from the Fed’s sinister plan in our Special Report The Great Global Wealth Grab.
We are making just 100 copies available for FREE the general public.
