Something MAJOR happened last week for Tech Stocks.
That something?
The NASDAQ failed to reclaim its 200-week moving average (WMA).
See for yourself.
Why does this matter?
The NASDAQ has only lost its 200-WMA two other times in the last 30 years. Both of these instances (2001 and 2008) were during major bear markets that saw stocks lose an additional 44%-55% of their total value.
I’ve illustrated them in the chart below with red circles. Note that even during the 2020 crash, stocks managed to hold this line.
Not this time.
There is a small chance the bulls might be able to rally here and stop a full-scale collapse. But the clock is ticking.
If they don’t, consider that after the NASDAQ lost its 200-WMA in 2001, stocks lost another 55% in value.
In 2008, when they lost this line, stocks lost another 44%.
Suffice to say, a lot is at stake here. And as I said before… the clock is ticking.
If you’ve yet to take steps to prepare for the next leg down in the markets, 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.
The big news this week is that stocks lost their 200-Day Moving Average (DMA) again.
Historically, November and December are two of the most bullish months for stocks. Only April is better from a single month perspective. So, the fact the market was unable to reclaim its 200-DMA and remain there is EXTREMELY bearish.
The price action was feeble to say the least.
The bulls have everything going for them: the Fed has reduced the pace of its interest rate hikes, the economy is not yet in recession, and we are in one of the best months for stock market returns: the famed Santa Rally of December.
So the fact that the bulls were unable to get stocks above their 200-DMA indicates that this recent market rally was nothing more than a Bear Market Rally, NOT the start of a new Bull Market.
Below is a chart of what happened to stocks when they failed to maintain their 200-DMA during the Bear Market of 2000-2003. I’ve highlighted this in red circles. Stocks dropped another 30%.
Here’s the same item during the bear market of 2007-2009. This time around stocks lost 50%.
Unfortunately for anyone who is buying into this narrative that stocks are in a new bull market, the bear market is NOT over. With a recession just around the corner, stocks will soon collapse to new lows.
If you’ve yet to take steps to prepare for this, we just published a new exclusive special report How to Invest During This Bear Market.Paragraph
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.
The Fed will end its two-day Federal Open Market Committee (FOMC) meeting today at 2PM East Standard Time.
The known universe expects the Fed to raise rates by 0.5%. And the current consensus is that by this time next year, inflation will be down near 2%.
It’d be hilarious if it didn’t involve so much suffering.
To understand what I mean by this, let’s wind the clocks back a year to the Fed’s December 15th 2021, FOMC meeting. At that time, the Fed had only just decided that inflation was NOT “transitory.”
Bear in mind, inflation has measured by the Consumer Price Index (CPI) had cleared 5% in June of 2021. It had since increased to over 7% as of December 2021.
Despite this, the Fed had yet to raise rates or end its Quantitative Easing (QE) program: the Fed Funds Rate was at 0.25% and QE was around $105 billion per month.
Again, inflation was over 7%, the Fed Funds rate was 0.25% and QE was still over $100 billion per month. So, what did the Fed, with its army of economics PhDs and analysts predict would happen once the Fed started tightening monetary conditions in 2022?
The Fed’s official forecast for 2022 was that rates would be somewhere between 0.5% and 1%.
That is correct. With inflation over 7% and rates at 0.25% in December 2021, Fed officials predicted that one year later rates would be somewhere around 0.5%-1%. In fact, even the most HAWKISH Fed officials only saw rates around 1.25% in December 2022.
Don’t believe me? Here’s the dot plot from the December 2021 meeting.
Fast forward to today… and rates are at 4.5%. The Fed was not even in the ballpark.
But wait… it gets better.
Back in December 2021, the Fed also predicted where inflation, as measured by the Personal Consumption Expenditures (PCE) index would be a year later.
That prediction?
That PCE would be somewhere between 1.9% and 3% in 2022. In fact, the absolute worst case scenario Fed officials forecast for inflation in 2022 was 3.1%-3.2%.
See for yourself.
Fast forward to today and Personal Consumption Expenditures (PCE) inflation is 6%… or roughly DOUBLE the Fed’s WORST prediction.
I bring all of this up because the current consensus is that inflation has peaked, the Fed won’t need to be much more aggressive going forward, and that this time next year, inflation will have fallen back to the Fed’s target of 2%.
Good luck with that!
Unfortunately for anyone who is buying into this narrative today, the bear market is NOT over. With a recession just around the corner, stocks will soon collapse to new lows. And that’s even assuming that inflation DOES drop to 2% next year (it won’t).
If you’ve yet to take steps to prepare for this, we just published a new exclusive special report How to Invest During This Bear Market.Paragraph
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.
As I warned earlier this week, stocks have lost their 200-day moving average (DMA).
This is a MAJOR development. In terms of seasonality, things are usually quite bullish this time of year (the famed “Santa rally”). The fact the bulls failed to keep the S&P 500 above its 200-DMA despite this is VERY bearish.
Remember, the 200-DMA is like a “line in the sand” for long term trends in the market. During bull markets, stocks rarely break below it. And during bear markets, stocks rarely break above it. You can see this relationship clearly in the below chart. The 200-DMA is the red line.
Put simply, the failure to maintain the 200-DMA indicates that this recent market rally was nothing more than a Bear Market Rally, NOT the start of a new Bull Market.
Below is a chart of what happened to stocks when they failed to maintain their 200-DMA during the Bear Market of 2000-2003. I’ve highlighted this in red circles. Stocks dropped another 30%.
Here’s the same development during the bear market of 2007-2009. This time around stocks lost 50%.
So again, the bear market is not over. The trend remains down. And stocks could lose another 30%-50% in the next 12 months.
If you’ve yet to take
steps to prepare for this, 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.
The following is an excerpt from my weekly investment advisory Private Wealth Advisory. To learn more about Private Wealth Advisory and how it can help you and your investments, Click Here!
This week I have
good news and bad news.
The good news is
that bonds are finally starting to stabilize.
The bad news is
that they are doing this right as the economy collapses into a severe recession.
As I’ve outlined throughout this year, the
ENTIRE stock market collapse thus far has been due to bond yields rising.
When Treasuries were yielding 0.25%-0.4%
throughout most of 2020 and 2021, investors were willing to pay 20-22 times
forward earnings for stocks. However, once Treasury yields rose over 4% stocks
were repriced down to 16-18 times forward earnings. This makes sense. When the
“risk free” rate of return is close to zero, you’ll pay a premium for growth.
But once you can earn 4+% “risk free” suddenly stocks look a lot riskier!
Indeed, stocks were priced at 20-22 times forward earnings for most of 2020 and 2021. However, once Treasury yields began to rise in late 2021, stocks peaked in terms of multiples. They were eventually repriced down to 16-18 times earnings.
As I noted since this repricing began, the ONLY thing that would stop stocks from being repriced lower would be if bond yields stabilized. With that in mind, I want to point out that the yield on the 2-Year U.S. Treasury appears to have peaked. In fact, it now looks to be forming a kind of “Head and Shoulders” topping pattern. We only need the right shoulder to complete that pattern.
Regardless of
whether that Head and Shoulders pattern is actually confirmed, the key item
here is that Treasury yields finally appear to be
stabilizing. Obviously, stocks would LOVE for Treasury yields to fall,
as that would open the door to a higher forward multiple (assuming the economy
is strong). But for now, the price action in the Treasury market suggests that
stocks will remain priced at a forward multiple of 16-18 at least for now.
That is the good
news.
The bad news is
that earnings are now collapsing, as the economy collapses into a severe
recession. This means the denominator in the P/E ratio (Price/ Earnings) is now
shrinking. Earnings for the third quarter of 2022 are DOWN 8% Year over Year.
As Charlie Bilello notes, this is the second consecutive quarter of
negative earnings growth on a Year over Year basis.
Unfortunately, earnings will be dropping even more going forward. To understand why, we need to first understand the Treasury market. The Treasury is comprised of numerous bonds with different maturation periods ranging from 4 weeks to 30 years.
When you plot the
yield on all of these bonds, you get the “yield curve.” And the
difference in yield between various bonds on this curve is one of the most
accurate predictors of recession.
Specifically, the
difference between the yield on the 10-Year U.S. Treasury and the yield on the
3-month U.S. Treasury. Anytime this difference becomes negative (meaning the
3-month yield is actually higher than the 10-year yield) this indicates a
recession is about to hit.
I’ve illustrated
this in the chart below. Anytime the
black line falls below the red line, the 10-year 3-month yield curve is
“inverted.” This was the case in 1989, 2001, 2007, and 2019: all of those
preceded recessions.
It is happening again now. And as you can see, this metric is MORE negative today than it was before the COVID-19 crash as well as the Great Financial Crisis.
Put simply, the
yield curve of the Treasury market is predicting a severe recession in
the near future, likely the start of 2023.
This is going to
force stocks to new lows.
During the typical recession, Earnings Per Share
(EPS) usually fall 25%. As I write this, Wall Street’s current consensus for
2023 EPS is $230. And Wall Street expects this to GROW by 5%!!!
This means the anticipated fair value for the S&P 500 is somewhere between 3,680 and 4,140. Incidentally, that is the EXACT trading range the S&P 500 has been moving in for the last six months.
Put simply, the market is trading based on what Wall Street
expects is coming down the pike. But as I just noted, Wall Street expects
earnings growth of 5% next year. However, the reality is that bonds are telling
us a recession is coming… and a recession would mean a DECLINE in
earnings of at least 25% (remember, the yield curve is predicting a
SEVERE recession).
This would mean the actual 2023 EPS would be closer to $172.
Assuming Treasury yields no longer rise, this means the fair
value for the S&P 500 at 16 to 18 times this much lower EPS would be
2,752-3,096. I’ve illustrated that range in the chart below. Suffice to say,
the stock market has a LONG ways to go to the downside.
“But wait a minute, Graham” some of you are probably
thinking… “the Fed is about to pivot sometime next year, and that would STOP
the bear market!”
I wish that was
the case…
Historically, anytime the Fed stops
tightening and begins easing, the markets don’t actually bottom for
another 14 months.
During the Tech Crash, the Fed started cutting rates in January of 2001. However, by that point, a recession had hit and stocks lost another 44% eventually bottoming in October 2003.
Similarly, during the Housing Crash, the
Fed started easing in August of 2007. There again, a recession hit and stocks lost
another 56% before eventually bottoming in March 2009.
Simply put, even
if the Fed were to surprise everyone and start easing as soon as next month (December) the coming recession
would STILL result in EPS collapsing and stocks cratering another 30% or so.
With stocks at
4,000 or so on the S&P 500, a 30% decline would bring them right to… 2,800,
or around the lower end of the implied fair value for the market at a 16- times
my expected EPS for 2023: $172.
Low Multiple Recessionary EPS Fair Value in 2023
16 X $172 = 2,752
or ~2.800
So again, this
week we have both good news and bad news. The good news is that bonds are
stabilizing. The bad news is that a recession is coming, and earnings are about
to crater.
That will trigger
a stock market collapse to new lows… possibly down to the mid-2000s on the
S&P 500.
If you’ve yet to take steps
to prepare for this, 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.
Over the last few days, I’ve illustrated how several major indicators are flashing “RECESSION!”
By quick way of review:
The 10y-3m yield curve has predicted every recession in the last 50 years. It’s telling us that a new severe recession is just around the corner.
Oil has collapsed from $130 per barrel to ~$75 per barrel, indicating demand destruction is underway.
All of this is BAD news for stocks.
Why?
During the typical recession Earnings Per Share (EPS) decline by 25%.
Based on what bonds are doing, stocks are priced between 16 and 18 times forward EPS. Wall Street is currently forecasting EPS growth of 5% next year to $230.
$230 X 16 (or 18)= 3,680 to 4,410.
Incidentally, that is the trading range that stocks have been in for most of the last six months.
By Graham Summers, MBA
Over the last few days, I’ve illustrated how several major indicators are flashing “RECESSION!”
By quick way of review:
The 10y-3m yield curve has predicted every recession in the last 50 years. It’s telling us that a new, severe recession is just around the corner.
Oil has collapsed from $130 per barrel to ~$75 per barrel, indicating demand destruction is underway. This only happens during a recession.
All of these data points are BAD news for stocks.
Why?
During the typical recession Earnings Per Share (EPS) decline by 25%.
Based on what bonds are doing, stocks are priced between 16 and 18 times forward EPS. And Wall Street is currently forecasting EPS growth of 5% next year to $230.
$230 X 16 (or 18)= 3,680 to 4,410.
Incidentally, that is the trading range that stocks have been in for most of the last six months.
However, a recession would mean that EPS for 2023 is closer to $172.
$172 X 16 (or 18)= 2,752 to 3,096
That’s the red box in the chart below.
Put simply, a recession will erase trillions of dollars in wealth…and Wall Street is once again asleep at the wheel, driving its clients off a cliff.
You don’t need to be one of them!
If you’ve yet to take
steps to prepare for this, 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.
Ever since the Fed began tightening monetary policy in March of 2022, numerous pundits, social media personalities, and financial media types have been pushing the notion that the Fed will “pivot” or stop tightening monetary policy soon which will ignite a new bull market in stocks.
This narrative is both ignorant and deceptive.
It is ignorant in that history has shown us that stocks usually don’t bottom for another 14 months once the Fed starts easing monetary conditions following a cycle of tightening. This was the case during the Tech Crash and the Housing Crash.
I’ve received questions from several of you as to why this was not the case during the COVID-19 crash. In that particular instance the market was imploding due to an exogenous issue (the pandemic) triggering an economic shutdown, as opposed an organic bear market triggered by Fed tightening.
Moreover, during COVID-19, the Fed effectively backstopped the entire financial system, spending over $3 trillion buying municipal bonds, corporate bonds, corporate bond ETFs, student loans, auto loans, and more in the span of three months. Were the Fed to abandon its current monetary tightening and begin easing financial conditions, it would NOT implement similar schemes; rather it would likely simply cut rates.
So again, history is very clear here: barring an exogenous issue (another pandemic, nuclear war, etc.) if the Fed were to abandon its tightening and begin easing conditions, stocks would continue to fall and likely not bottom for another year.
However, the “Fed is about to pivot” narrative is not only ignorant… it is also deceptive in that there is practically ZERO evidence that the Fed has even begun considering it.
Looking over the statements made by Fed officials since March 2022, I’m struck by the fact that even the most formerly dovish Fed officials have become inflationary hawks.
Neel Kashkari is the President of the Federal Reserve Bank of Minneapolis. Prior to the Fed’s current monetary tightening it is quite difficult to find any instances in which he wasn’t a fan of money printing/ QE/ maintaining easy monetary conditions.
However, since the Fed embarked on its crusade to end inflation, Mr. Kashkari has been extremely hawkish. Some notable headlines from the last six months…
Fed’s Kashkari: We may have to push long-term real rates into restrictive territory.
~May 2022
Fed’s Kashkari says officials are ‘a long way’ from backing off inflation fight.
~July 2022
Kashkari stakes out the most aggressive stance on lifting interest rates
~August 2022.
Kashkari Says Bar for Fed Policy Pivot on Rates Is ‘Very High’
~October 2022.
Again, this is Neel Kashkari, the man who was arguing that the Fed shouldn’t “overreact” to “temporary inflation” throughout 2021. And now he is adamant that the Fed needs to be aggressive in raising rates to end inflation. Nowhere do you see him even hinting at the Fed pausing rate hikes let alone easing.
Another example of a formerly dovish Fed official turning inflation hawk is John Williams.
Mr. Williams is the current President of the Federal Reserve Bank of New York: the branch of the Fed responsible for market operations. In September of 2021, when inflation cleared 5% for the first time in 13 years, Mr. Williams commented that it might be “appropriate” for the Fed to ends its emergency level Quantitative Easing Program sometime in “mid-2022.”
Yes, he wanted the Fed to run QE for another eight months despite inflation clearing 5%. This was insanely dovish and negligent.
Fast forward to the middle 0f 2022, and Mr. Williams is making the following statements:
NY Fed president urges big interest-rate hike but believes ‘economy is strong’
~June 2022.
Fed’s Williams pushes back on market expectations of a rate cut next year.
~August 2022.
Fed’s Williams says more rate hikes needed to bring down inflation
~ September 2022.
My point with the above examples is anyone who pushes the narrative that the Fed will soon pivot isn’t actually paying attention to what the Fed (and Fed officials) are saying. In this sense, the people who keep finding excuses to push this narrative are being highly deceptive.
But that hasn’t stopped them from trying…leading investors to the slaughter time and again!
I’ll detail what’s really driving stocks higher in tomorrow’s article.
A crash is coming. And it’s going to make 2008 look like a joke. I coined the term the “Everything Bubble” in 2014. I warned about it for the better part of 10 years.
And it has officially burst.
On that note, we are putting together an Executive Summary outlining how to invest now that the Everything Bubble has burst.
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.
Once again, the bean counters at the Bureau of Labor Statistics (BLS) made the economy look better than reality.
According to the BLS, the economy added 261,000 jobs in October. This was significantly higher than the 200,000 that was expected. The investing world was ecstatic to see this and bought stocks hand over fist on Friday.
The only problem with this is that none of those “jobs” were real.
As Bill King notes in the King Report, the BLS tweaked its seasonal adjustments in 2022 to boost the NFP numbers.
In 2021, for the month of October, the BLS reduced the total number of jobs in America from 149.31 million jobs down to 148.005 million jobs, an adjustment of -1.305 million.
For some reason, this year (2022) the BLS only adjusted the total number of jobs by -1.061 million.
That’s a difference of +244,000 from the 2021 adjustment.
So, right off the bat, 244,000 of the 261,000 jobs the economy “created” in October of 2022 were imaginary, created via a seasonal adjustment in a spreadsheet by the BLS.
For those of you keeping track this means that over 93% of the jobs created in October 2022 were fake or made up.
Actually, in reality, things were even worse than this.
Another gimmick the BLS used was to create “jobs” was its Birth-Death Model.
You see, in the real world, jobs are not created consistently throughout the year. Some months see a lot of jobs created and others don’t, depending on how many businesses are created or go bust in a given month.
The BLS tries to “smooth” over this by using a Birth-Death Model. It too, is a gimmick, nothing more. And for some reason, this gimmick boosted the number of jobs crated in October 2022.
In 2021, the Birth-Death model added 363,000 jobs in October. In 2022, this same model added 455,000 jobs. That’s a difference of 92,000 jobs.
So, there’s another 92,000 FAKE jobs created in a spreadsheet instead of in the economy.
And people were BUYING stocks based on this?!?!
The reality is that stripped of gimmicks, the economy LOST more jobs than it created in October. This only adds to the evidence that the U.S. economy is in fact in recession.
And what happens to stocks during recessions?
A crash is coming. And it’s going to make 2008 look like a joke. I coined the term the “Everything Bubble” in 2014. I warned about it for the better part of 10 years.
And it has officially burst.
On that note, we are putting together an Executive Summary outlining how to invest now that the Everything Bubble has burst.
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.
The financial system is currently experiencing a “relief rally.”
For the eight weeks ending October 28th, the primary problems facing the financial system were:
1) The collapse of the British Pound/ UK Government Bonds
2) The collapse of the Japanese Yen.
3) The collapse of U.S. Treasuries.
All of those have been resolved temporarily, courtesy of the Truss Government resigning in the U.K., the Bank of Japan making its largest intervention ever in the currency markets, and U.S. Treasuries catching a bid, courtesy of Treasury Secretary Janet Yellen verbally intervening to help the Biden Administration with the mid-term elections.
All of these solutions are temporary however.
The fact is that the U.S. is in an inflationary recession. I know it. You know it. Policymakers know it, though they have to lie to prop up the bogus narrative that everything is under control.
It’s not.
The financial system has already erased more wealth in 2022, than it did in 2020 or 2008. During those prior crises, bonds rallied providing a hedge against the collapse in stocks.
Not this time.
Bonds AND stocks are both collapsing, erasing over $18 trillion in wealth. And bear in mind, that’s NOT counting the loss of capital in housing or other asset classes.
And unfortunately for the bulls, we are nowhere near the bottom for either stocks or bonds.
Stanley Druckenmiller is arguably the greatest investor alive today. He averaged 30% a year for 30 years straight. And he notes that historically, whenever inflation gets over 5%, inflation never comes down until the Fed raises rates ABOVE CPI.
Currently, rates are 3.0-3.25%.
CPI is over 8%.
We have a looooong ways to go here. And there is plenty of historical data to back that up.
During the last stagflationary crisis in the 1970s, stocks lost 50% of their value before bottoming.
Thus far, in 2022, stocks have only lost 22%. If we are LUCKY, we are half way through this bear market.
Who would you rather bet on being correct… an investment legend like Druckenmiller, who has one of the greatest track records in history… or the Fed or some other establishment shill whose job it is to claim everything is great?
A crash is coming. And it’s going to make 2008 look like a joke. I coined the term the “Everything Bubble” in 2014. I warned about it for the better part of 10 years.
And it has officially burst.
On that note, we are putting together an Executive Summary outlining how to invest now that the Everything Bubble has burst.
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.
According to the Bureau of Economic Analysis (BEA), the U.S. economy grew at an annual rate of 2.6% in 3Q22. So all of our concerns about a recession were misguided! The economy is back on track!
There’s only one problem with this narrative: the BEA “massaged” the data to make things look better than reality.
As Bill King notes in the King Report, the BEA used an inflation rate of 4.1% to manufacture the GDP growth of 2.6%.
Yes, you read that correctly. The BEA claims inflation was 4.1% in 3Q22.
It’s an odd claim, given that the BEA used an inflation rate of over 9% during 2Q22. So the BEA is claiming that inflation was cut in half between June and October?
Good luck with that!
It’s not like we don’t have other data to compare to. Heck, even the Consumer Price Index (CPI), which most people know understates inflation, had inflation around 8% for most of 3Q22.
Why would the BEA claim inflation was so much lower than reality?
Because UNDER-stating inflation allowed them to OVER-state growth.
Let’s say that GDP grows by 10% in a given quarter. On the surface that sounds pretty fantastic. But what if inflation was at 10% during that same quarter? Well then in real terms, there was ZERO growth: all of the “growth” was in fact the product of prices rising courtesy of inflation.
Put another way, by using the ridiculously low inflation rate of 4.1%, the BEA was able to manufacture GDP growth 2.6% for 3Q22. Had the BEA used a more realistic measure of inflation, GDP growth would have been ZERO if not negative.
And we can’t have that a mere two weeks before the mid-terms can we?
The reality is that the economy is already in recession. I know it. You know it. Heck, the bond market just told all of us when the yield curve inverted… just as it did in 2007, late 2019 and today.
By the time the official numbers admit this, stocks will have already collapsed to new lows. In the meantime, those investors who are buying into the BEA’s ridiculous growth claims are being lead like sheep to the slaughter.
Meanwhile, smart investors are taking advantage of this to prepare for the coming crash.
For those looking to prepare and profit from this mess, our Stock Market Crash Survival Guide can show you how.
Today is the last day this report will be available to the public. We extended this deadline based on the dead cat bounce in stocks the last week. But this is it! No more extensions!
The financial markets are now experiencing their 3rd “the Fed is about to pivot” delusion.
Ever since the Fed started tightening monetary policy in March 2022, the financial media and social media have been abuzz with claims that the Fed will eventually “pivot,” meaning that the Fed will abandon its tightening and start easing by cutting rates or introducing Quantitative Easing (QE).
The argument here is that you should BUY STOCKS because once the Fed eases, stocks will erupt higher in a new bull market.
It’s complete and utter BS… and anyone who believes it will lose their shirts.
Why?
Because historically anytime the Fed stops tightening and begins easing, the markets don’t actually bottom for another 14 months.
During the Tech Crash, the Fed started cutting rates in January of 2001. Stocks lost another 44% and didn’t bottom until October 2003.
Similarly, during the Housing Crash, the Fed started easing in August of 2007. Stocks would go on to lose another 56% and wouldn’t bottom until March 2009.
So again, even if the Fed were to surprise the markets and CUT RATES in November, stocks will likely lose another 30% and not bottom for at least another year.
And bear in mind… the Fed HAS NOT said it will ease anytime soon… not even in 2023! So we are NOWHERE near a bottom in stocks.
As I keep stating, the Great Crisis… the one to which 2008 was a warm-up, has finally arrived. In 2008 entire banks went bust. In 2022, entire countries will do so.
For those looking to prepare and profit from this mess, our Stock Market Crash Survival Guide can show you how.
Today is the last day this report will be available to the public.
The yield on the 2-year U.S. Treasury just hit a new high.
This entire collapse in stocks thus far in 2022 has been due to Treasury yields rising. Put another way, until Treasury yields STOP rising, stocks will continue to drop.
With that in mind, the long-term chart for the yield on the 2-year U.S. Treasury is a disaster. Every line of resistance is being taken out. As I write this Friday, the yield is well on its way to 5%.
The implication for stocks is terrible.
If you can make 5% risk free from Treasuries… stocks lose much of their attractiveness. What becomes the fair value for the S&P 500?
14 times forward earnings or 3,300?
12 times forward earnings at 2,760?
Somewhere lower?
During the last major inflation-induced bear market in the 1970s, stocks traded at a single digit P/E. Even if it’s 9 times forward earnings, you’re talking about 2,070 on the S&P 500 today.
That’s the red line below.
As I keep stating, the Great Crisis… the one to which 2008 was a warm-up, has finally arrived. In 2008 entire banks went bust. In 2022, entire countries will do so.
For those looking to prepare and profit from this
mess, our Stock Market Crash Survival Guide can
show you how.
Today is the last day this report will be available to the public.
The situation in the United Kingdom (U.K) is accelerating now.
Several weeks ago, the new government in the UK introduced a tax cut. The financial system revolted, with the British pound collapsing…
And British government bond yields spiking…
The central bank, the Bank of England, or BoE, intervened to stabilize things by re-introducing an emergency, “unlimited” Quantitative Easing (QE) program.
Bear in mind, the BoE had yet to even being introducing Quantitative Tightening (QT) or the process of shrinking its balance sheet, when this emergency hit, and it was forced to start easing again. This only confirms the central thesis of bestselling book The Everything Bubble, that once a central bank launches extraordinary monetary policy, it can never normalize.
Well, fast forward to yesterday, when the BoE announced that its emergency interventions would end this Friday. What do you think happened?
The British Pound rolled over again…
And British government bond yields starting spiking.
Simply put, the BoE is trapped. If it attempts to stop its interventions, it risks blowing up the U.K.’s financial system.
Bear in mind, we’re not talking about an emerging market here… this is the FIFTH LARGEST ECONOMY IN THE WORLD. And its currency and bond markets are imploding!
As I keep stating, the Great Crisis… the one to which 2008 was a warm-up, has finally arrived. In 2008 entire banks went bust. In 2022, entire countries will do so.
And smart investors are already preparing for what’s coming…
For those looking to prepare and profit from this
mess, our Stock Market Crash Survival Guide can
show you how.
We made an additional 100 copies available to the public based on what is happening in the markets.
The ENTIRE collapse thus far in this bear market for stocks has been due to bond yields rising. When Treasuries were yielding 0.25%, investors were willing to pay 20-22 times forward earnings for stocks. However, once Treasury yields rose to 3%+, stocks were repriced down to 16-18 times forward earnings.
The below chart from Ed Yardeni does a great job of illustrating this.
I bring this up because Treasury yields are showing NO SIGNS of stopping.
The yield on the 30-Year Treasury erupted higher last week, breaking above critical resistance at 3.75%. The door is now open to 4% if not 4.25%.
This means that stocks are about to be repriced even lower, possibly to 14 times forward earnings, or ~3,400 on the S&P 500. And if Treasury yields don’t stop soon, we might even go to 12 times forward earnings which is sub-3000 on the S&P 500.
This all ties in with what I’ve been saying for months…
Inflation blew up the Everything Bubble. And smart investors are using this to see incredible returns!
For those looking to prepare and profit from this
mess, our Stock Market Crash Survival Guide can
show you how.
We made an additional 100 copies available to the public based on what is happening in the markets.
The S&P 500 is extremely weighted towards Tech stocks. Tech is the largest sector by weighting. It is in fact larger than the weighting of the 2nd and 3rd largest sectors combined.
Put another way, the S&P 500 is in fact largely a proxy for the Tech sector.
Now, Tech stocks are highly sensitive to long-term rates. You can see this clearly in the below chart in which the Tech Sector ETF (XLK) closely follows the price movements of the Long-Treasury ETF (TLT) albeit with greater volatility.
I mention all of this because the Long-Treasury ETF (TLT) is rolling over again.
This suggests the current rally in stocks is on borrowed time. Enjoy it while it lasts.
At the end of the day, the stock market can rally all it wants, but it will all be in vain.
Why?
Because the Great Crisis… the one to which 2008 was a warm-up, has finally arrived.
I’m talking about the crisis in which entire countries go bust.
Take a look at what is happening with the British Pound. THIRTY YEAR LOWS and dropping like a stone.
How about the Japanese Yen…25 year lows and no end in sight!
Stocks are in la la land… just like they were before the Tech Crash, the Housing Crash… and now the Everything Bubble Crash.
Meanwhile, smart investors are preparing for what is coming…
For those looking to prepare and profit from this
mess, our Stock Market Crash Survival Guide can
show you how.
Today is the last day this report is available to the public.
I’ve received a number of emails asking me why stocks rallied from mid-March until this week despite the clear and obvious warning signals I’ve flagged: the economy rolling over, supply chain disruptions, inflation, and a hawkish Fed.
A significant part of this rally has been fueled by investors moving money out of bonds and into stocks. The reason for this is that bond prices fall/ bond yields rise during periods of higher inflation. This means bonds are less attractive as an asset class… which, according to modern portfolio theory, means it’s time to move capital into stocks. And not just a little.
Throughout March, investors have pulled $40 BILLION from bond funds while putting $45 billion into stocks. Because the U.S. is the “cleanest dirty shirt” as far as developed markets go, some $41 billion of the $45 billion in stock fund inflows has gone to U.S.-based funds
This is why stocks rallied in March, despite the OBVIOUS red flags. It’s not that stocks are a great investment at current prices… it’s that bonds are so much worse.
However, this looks ready to change.
The technical damage of the last few weeks has been severe. As I write this, the S&P 500 is hovering around its 50-week/ 10 month moving average. If it breaks lower here… it’s going to at least 4,200 if not 3,600.
I would also point out that the Monthly MACD (a momentum gauge) is now on a “sell signal.” This has preceded declines of 20+% every time it registered in the last four years.
Put simply, another bloodbath is coming… and smart investors are already taking steps to profit from it.
For those looking to prepare
and profit from this mess, our Stock Market Crash Survival
Guide can show you how.
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:
“Someone”
is manipulating stocks higher. And the manipulations are getting even more
desperate.
Over
the last two weeks, there has been a determined effort to manipulate the stock
market higher. Time and again, stocks have gone vertical on new news or no
major developments.
Financial
institutions do NOT attempt to move markets. In fact, the traders charged with
executing these institutions’ trades are graded based
on their ability to buy and sell large chunks of stocks without
moving the tape.
Which is why we knew that no real investor was responsible for the moves that occurred yesterday from 9:35AM to 11:00AM, again at 3PM and finally at 3:40PM. All three of those moves saw the S&P 500 move 20-50 points on no news or developments.
No real investor does this. This is egregious
manipulation. And it shows us that the manipulators are becoming increasingly
desperate.
Why?
High yield credit, which typically leads the stock market, is telling us the S&P 500 should be down at 3,900 (stocks are at 4,400 right now). You can see it lead stocks higher throughout 2021. And now it’s leading them lower. Without manipulation, the S&P 500 would easily be sub-4000.
In simple terms, the signs are clear: another bloodbath is coming.
The markets will soon be a sea of red again. And the losses will be staggering.
And
it’s just the beginning. It’s quite possible the markets are entering a
prolonged BEAR MARKET… a time in which stocks lose 50% or more over the
course of months.
For those
looking to prepare and profit from this mess, our Stock Market Crash Survival Guide can show you how.
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:
Thus far this week, we’ve been noting an extremely odd development. And it’s left strategic investors feeling uneasy to say the least.
Stocks, the asset class most investors pay attention to, have erupted higher. Indeed, if you only look at stocks by themselves… everything looks great right now.
The S&P 500 has gone straight up, rising well above both its 50-day moving average (DMA) and its 200-DMA. And who would have thought we’ve be within 4% of new all time highs!
Meanwhile, beneath the surface, the bond market is flashing major warning signs.
“So what?” thinks the stock investor, “bonds are boring. They only rally 2% on a big day. Stocks are up 10% and some stocks as much as 50% in a week!”
Bonds are the bedrock of our current financial system. Their yields represent the “risk free rate” of return against which every asset class, including stocks, are valued. So if bonds are signaling trouble, the entire financial system is in trouble.
The yield curve, which is a means of measuring risk in the bond market, is now inverted. This is a MAJOR recession signal that has predicted every recession since the mid-1970s. This includes the brief, but horrific C.O.V.I.D.-19 recession of 2020. And yes, bonds somehow “knew” about that in advance.
Again, this trigger has hit before every recession going back 50 years. And it just hit again.
What are the odds it’s different this time?
Look, I get it, stocks are up… a lot. Some stocks like Tesla (TSLA) or AMC Entertainment Holdings (AMC) are up 50% or more in just a week! So who cares about boring old bonds?
Everyone should… especially after bonds predicted the 2020 recession and crash… something fewer than 1% of investors got right. And the fact so few investors are payng attention to bonds today is enough to make you wonder if another, equally ugly situation is about to unfold.
Bonds terrified, but stocks in la la land? This is the kind of environment in which crashes happen.
For those looking to prepare
and profit from this mess, our Stock Market Crash Survival
Guide can show you how.
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:
Something isn’t right about this rally in stocks. Something doesn’t add up. In fact, something very bad is brewing in the financial system.
Stocks have erupted higher over the last week, rising 9%.
However, beneath the surface, something truly incredible is happening. In fact, it’s horrifying.
I’m talking about the bond market.
The media likes to focus on the stock market because stocks are “sexy” and grab the public’s attention. However, the reality is that the stock market is one of the smallest asset classes out there. Globally the stock market is about $89 trillion.
By way of comparison, globally the debt markets are over $281 trillion. When you include derivatives that trade based on bond yields (debt interest payments) the amount balloons up over $750 trillion.
Which is why, the complete carnage occurring in bonds should terrify everyone. Across the board, bond prices are collapsing while bond yields skyrocket.
The yield on the 5- Year U.S., Treasury is up 100 basis points this month. 100 basis points. It rose over 20 basis points last week alone.
The yield on the all-important 10-Year U.S. Treasury (the most important bond in the world) is also exploding higher. It’s up almost 75 basis points this month, roaring higher by 13 basis points last week alone.
I realize most of you likely don’t follow the bond market… but you have to remember that our current financial system is debt-based.
The $USD is not backed by anything finite, and U.S. Treasuries are the senior most asset class owned by the large financial institutions. They are literally the bedrock of our current financial system.
And the bedrock is cracking in a big way.
Imagine the impact it would have on a skyscraper if the bedrock, which supports its foundation began to crack… that’s where we are with the financial system today.
For those looking to prepare
and profit from this mess, our Stock Market Crash Survival
Guide can show you how.
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:
As everyone knows… the Fed has saved the day again!
On Tuesday, Fed Chair Jerome Powell announced that the Fed is NOT going to raise rates anymore. It’s not going to shrink their balance sheet either. And best of all… inflation which entered the financial system for the first time in 40 years… is actually disappearing and will soon be gone!
That’s what stocks think, isn’t it? After all, they’ve rallied over 8% in a single week.
Heck, Tesla (TSLA) is up over 35% in one week’s time!
Oh wait… the Fed didn’t say any of that.
In fact, Jerome Powell said the following on Tuesday:
1) Inflation is MUCH too high.
2) If the Fed finds that raising rates by 0.25% is not enough, it will begin raising by 0.5% at every Fed meeting.
3) If the Fed finds that it is not curbing inflation adequately, it is willing to overshoot to the upside with rate hikes.
So, the Fed is going to be a LOT MORE aggressive than people think. If anything, it’s warning the markets that it’s going to have to raise rates a LOT and quite QUICKLY.
Here’s what happened the last two times the Fed did this. I’m sure the third time’s the charm!
If you believe the Fed will somehow be able to stop inflation without blowing up the markets, please stop reading now.
However, if you’re a clear-thinking investor, someone who doesn’t fall for hype and nonsense… someone who is serious about using the markets to produce extraordinary gains… you should download our Stock Market Crash Survival Guide now.
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:
