By Graham Summers, MBA

So much for the Fed pivot!

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.

https://phoenixcapitalmarketing.com/TEB.html

By Graham Summers, MBA

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.

https://phoenixcapitalmarketing.com/TEB.html

By Graham Summers, MBA

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.

https://phoenixcapitalmarketing.com/TEB.html

By Graham Summers, MBA

Great news… the economy recovered in Q3!

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!

To pick up your FREE copy, swing by:

https://phoenixcapitalmarketing.com/stockmarketcrash.html

By Graham Summers, MBA

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.

To pick up your FREE copy, swing by:

https://phoenixcapitalmarketing.com/stockmarketcrash.html

By Graham Summers, MBA

Bad news for anyone who’s bullish.

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.

To pick up your FREE copy, swing by:

https://phoenixcapitalmarketing.com/stockmarketcrash.html

By Graham Summers, MBA

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.

As I write this there are 27 left.

To pick up your FREE copy, swing by:

https://phoenixcapitalmarketing.com/stockmarketcrash.html

By Graham Summers, MBA

Stocks are now in very serious trouble.

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.

As I write this there are 39 left.

To pick up your FREE copy, swing by:

https://phoenixcapitalmarketing.com/stockmarketcrash.html

By Graham Summers, MBA

Let’s talk about market structure.

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.

To pick up your FREE copy, swing by:

https://phoenixcapitalmarketing.com/stockmarketcrash.html