By Graham Summers, MBA

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

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

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

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

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

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

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

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

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

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

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By Graham Summers, MBA

I’m getting sick of the lies.

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

https://phoenixcapitalmarketing.com/BM2.html

By Graham Summers, MBA

A truly incredible bull market is underway.

It’s catching everyone by surprise. And smart investors should read this article carefully to make sure they don’t miss out…

It’s a bull market in economic BS.

Before proceeding I want to stress that this is not a left vs right issue, nor is it Democrat vs Republican.

It’s reality vs. total fantasy.

The total fantasy is the notion that the economy is doing well right now. And one of the prime examples is the latest jobs numbers which claim the U.S. economy added 500,000+ jobs last month (January 2023).

The jobs report argues that the U.S. economy added 517,000 jobs in January. It arrived at this number courtesy of the household survey which argued that 894,000 jobs were added last month.

The Bureau of Labor Statistics (BLS) then admits in the very next column that 810,000 of these jobs were added via its “Population Control Effect” AKA an accounting gimmick, NOT reality.

Remove that gimmick and the U.S. added 84,000 jobs last month.

If you don’t believe me, here’s the table from the BLS stating this reality.

How is this possible? How can the BLS add so many fake jobs to its official numbers? Simple:

1) Only 44% of those given surveys actually answer them.

2) The Bureau of Labor Statistics applies numerous gimmicks to the data in an attempt to normalize things. Perhaps this is due to political pressure, or perhaps they are incompetent. Whatever the reason, the data is a work of fiction and has a tenuous connection to reality at best.

Some of the gimmicks the BLS applied to the January jobs data.

Its seasonal adjustments added over two million people to the non-farm payrolls number for the economy in both January 2022 and January 2023. Without these adjustments, only 152 million are working, as opposed to the 155 million the official number claimed.

Similarly, the household survey was adjusted to add over 1 million people to the “employed” category. So, in December of 2022, these one million people were NOT counted as employed. In January 2023 they were, NOT because they obtained jobs, but because the BLS’ model tweaked the number higher.

Things get even wackier from there.

Part-time employment supposedly jumped by 627,000 in January 2023… despite the clear historical trend that part employment should DROP after the holidays.

The BLS also claims that only 5,000 tech workers lost their jobs in January. The real number of tech workers who lost jobs is 85,000.

Bottomline: remove all of the gimmicks and tricks, and the real economy only added 84,000 jobs last month, which is the weakest job growth in TWO YEARS.

So how was the “official” number presented to the public so positive?

The BLS updated its methodology based on new estimates from the census. Doing this meant applying its model to a MUCH LARGER number, which generated MUCH LARGER job creation.

Don’t believe me? The BLS lays it all out in clear language here. Note the words “updated, estimates, and assumption” are featured heavily here.

So again, the economy is NOT booming. What’s booming is the amount of BS the government bean-counters apply to the economic data. I fully expect much of this to be revised down in the coming months.

But what’s truly frightening?

Investors are actually BUYING STOCKS based on this stuff!

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By Graham Summers, MBA

Stocks look to have formed a short-term peak last week. 

Ever since this bear market began, the S&P 500 has followed certain dynamics. One of them is that it usually peaks around the same levels above its 50- and 200-day moving averages (DMAs).

Specifically, anytime the S&P 500 gets 5% above its 50-DMA and 3% above its 200-DMA, it usually tops out and rolls over. I’ve illustrated this dynamic with red horizontal lines in the chart below. And as you can see, this dynamic was at work during the recent stock market action as well: the S&P 500 rallied right to those levels and then rolled over.

So where do stocks go from here?

Well, the chart suggests they won’t stop the coming leg down until they are 8% below their 50-DMA and 10%-12% below their 200-DMA. That is where stocks have “bottomed” during the down legs of this bear market thus far.

I’ve illustrated those levels with red horizontal lines in the chart below. 

Bear in mind, these kinds of moves can take weeks if not months to play out, so don’t expect a crash here and now. I’m simply sharing these charts with you to give you some idea of the underlying dynamics of this bear market, and where things are likely headed in the weeks to come.

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

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By Graham Summers, MBA

Friday’s data just obliterated any hope of the Fed stopping its rate hikes.

In case you missed it, on Friday the Institute for Supply Management (ISM) reported that its non-manufacturing PMI hit 55 in January 2023. This is a HUGE deal as the same data point was 49 in December 2022.

Anything below 50 is considered to indicate an economic contraction. So the fact we saw this sharp rebound indicates the economy is still going strong. And this, combined with the fact that the economy added over 500,000 jobs last month, tells us that the Fed has a LOT more room to raise rates going forward.

So if you were betting on a soft landing… or the Fed stopping its rate hikes and cutting rates later this year, you’re in for a rude surprise. 

The $USD figured out what’s coming last week. But as usual, stocks are last to “get it.”

In simple terms, the markets are setting up to deal out a load of pain to stock market bulls in the coming weeks.

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

To pick up your FREE copy, swing by:

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By Graham Summers, MBA

Stocks are now in a strange time in which they do not perceive any major threats.

As a result of this, the bulls are buying stocks based on the usual “the Fed is about to pivot” nonsense. And they’re in for a world of pain.

Last year (2022) the big threat was inflation. Inflation, combined with the Fed tightening monetary policy, forced Treasury yields higher. With yields hitting 4% or higher in some cases, stocks were no longer as attractive as an investment class. So the stock market was repriced downwards from 20-22 times forward earnings to 16-18 times forward earnings.

However, as the above chart shows, since October 2022, Treasury yields have stabilized. With yields no longer rising, the threat of inflation has “disappeared” as far as stocks are concerned. And so investors have begun pouring back into the stock market based on the hope that the Fed will soon end its monetary tightening.

This is horribly misguided. Few things destroy an investor’s portfolio like buying stocks during a recession based on hope that the Fed will start easing monetary policy. And rest assured, the same bond market that told us inflation was out of control, is now telling us that a recession has arrived.

So what happens to stock bulls who buy stocks going into a recession? Well, the last two times, stocks did this:

In simple terms, the markets are setting up to deal out a load of pain to stock market bulls in the coming weeks. 

But you don’t need to be one of them!

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

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

To pick up your FREE copy, swing by:

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By Graham Summers, MBA

The data is finally beginning to register that a recession is at hand.

I’ve been forecasting that the U.S. economy was in recession back in November. Leading indicators and the bond market made this clear. 

The yield curve has accurately predicted every recession since 1982. And it was SCREAMING that a recession was about to hit in the U.S. since mid-2022. As you can see in the chart below, the yield curve was more inverted than at any point in the last 40 years.

However, a big problem with economic forecasting is that most data sets are backwards looking. So often times you don’t get actual data telling you that a recession has arrived until the economy is already several months into the recession.

And the stock market pays attention to economic data, NOT leading indicators.

I mention all of this because the recession that I’ve seen unfolding since November is finally showing up in the economic data. Yesterday, the Commerce Department released a number of data series that were HIGHLY recessionary. 

Retail Sales clocked in at -1.1% Month over Month. Similarly, Industrial Production came in at -0.7% Month Over Month while Manufacturing Production registered -1.3% Month Over Month. 

Bear in mind, these are the data points for December. So, this is what was happening in the economy a month ago. And bear in mind, the Month Over Month numbers are a comparison between December and November. So, the downturn actually started more than seven weeks ago. 

This is why stocks took it on the chin and bonds caught a bid yesterday. And judging by yesterday’s data, this process is just getting started.

And remember what happened to stocks during the last two major recessions in 2000 and 2007.

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

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

To pick up your FREE copy, swing by:

https://phoenixcapitalmarketing.com/BM.html