Is The U.S. Stock Market About To “Super Nova?”

ETF flows tend to be a good contrary indicator when they become extreme, so the buying frenzy doesn’t bode well for U.S. equities.  – David Santschi, CEO of TrimTabs

If the Federal Reserve were a private corporation and did not have a money tree, it would be technically insolvent – i.e. bankrupt. As of its latest balance sheet the Fed was reporting a book value (net worth) of $40.4 billion.   But the Fed does not have to mark to market its assets.   Given the recent 100+ basis point move in the 10-yr Treasury, if the Fed were forced to mark to market its $3.8 trillion Treasuries and mortgages, it would be forced to reduce the holding value by close to $400 billion, taking the Fed’s net worth to negative $360 billion.

This is the most conservative valuation scenario.   The Fed has other holdings, on and off balance sheet, that would likely take the Fed’s book value well past negative $400 billion if mark to market accounting were applied.

Think about this for a moment:   the U.S. dollar is backed by a Government and Central Bank, both of which are technically bankrupt.   The only difference between what happened to Greece and the U.S. is the U.S.’ ability to print money unfettered.

Just like water, markets eventually find their own level of balance.  At this point the U.S. stock market, is the most unbalanced financial market in the world.  A Trim-tabs report out yesterday revealed that the public threw $98 billion into U.S. stock ETFs between November 8th and December 5th.  Compare this to the $61.5 billion that went into stock ETFs over the entire year in 2015.   Currently the rate of cash flooding into stock ETFs for December is even higher than November.

Money from the public is literally flooding into the stock market, making this the most dangerous stock market I’ve witnessed in 30+ years as a financial markets professional.  If the GAAP accounting standards enforced in 1999 and 2007 were applied now to corporate earnings, this would prove to be the most overvalued stock market in history on an “apples to apples” accounting basis.

A supernova is an astronomical event that occurs during the last stellar evolutionary stages of a massive star’s life, whose dramatic and catastrophic destruction is marked by one final titanic explosion. For a short time, this causes the sudden appearance of a ‘new’ bright star, before slowly fading from sight over several weeks or months.  – Wikipedia

The U.S. financial markets, specifically the U.S. dollar and the stock market, can be likened to fiat currency-based financial markets “Super Nova.”  The public and the momentum-chasing hedge funds are desperately chasing the “appearance” of the stock market’s “bright new star.”   Unfortunately, it’s an illusion.  The stock market is headed for catastrophic destruction.

I don’t know if this final explosion will occur early in 2017 or if there will be on last “Weimar-like” push fueled by a round of money printing substantially larger than “QE 1 thru 4.”   Either way, the U.S. financial system is heading toward a period of unprecedented wealth destruction.

I’m not going to sit here and urge anyone who will listen to move their money into the safety of physical gold and silver because I have no idea how diabolically aggressive the Fed and the banks will be in exerting downward pressure on the price of gold and silver using fiat paper gold.  No one knows and anyone who proclaims to know is full of horse hooey.   I’m moving any money not needed for expenses into physical silver.  I know a sale when I see one and sovereign-minted silver bullion coins are on “fire sale” right now.

Unfortunately, the only chance you have to financially survive what is coming at us is to get your money out of all financial “assets.”  These are not “assets.” They are fiat paper liabilities issued by a Federal Reserve that is technically insolvent by at least $360 billion and likely multiples of that when off-balance-sheet considerations are factored in to the equation.  If you don’t want to buy precious metals, at least get your money out of the stock market.

While Wall Street shills and the financial media are busy seducing the public with their incessant “Dow 20,000” rally cry, corporate insiders are busy unloading their shares hand-over-fist.  Every company (other than mining stocks) I’ve analyzed over the last month has been characterized by extremely heavy insider selling.  The parabolic rise in the dollar is annihilating corporate revenues and profitability.   Follow the money here because insiders are broadcasting this fact loudly.

China is dumping Treasuries and corporate executives are dumping stocks.  Total U.S. debt outstanding hits new highs daily.   Once again “smart money” is unloading its paper “assets” on an unsuspecting public.  The delinquency and default rates in mortgage, auto and credit card debt are beginning to spike up, according to the latest reports made available and not disseminated through the mainstream media.

The U.S. markets are going Super Nova – don’t be left holding bag…

16 thoughts on “Is The U.S. Stock Market About To “Super Nova?”

  1. Dave, Appreciate your candid lucidity regarding the timing of these
    potential financial events. I have been diversified between hard assets
    and index funds since 2009. I realized then that as long as $dollars$ would
    continue to be accepted world wide that the possibility of a total melt down
    was not in the cards. As long as the Fed controlled the Treasury the ones and
    zeros would continue to flood. Jim Willy got my attention with the same super
    nova scenario and elaborated that first, the Euro and other currencies would
    melt down as the $dollar$ soared. You article today reminded me of his forecast
    three years ago. I think with everything we are seeing at this point, the dIe maybe
    cast and a surprise explosion may occur in 2017.

  2. “….because I have no idea how diabolically aggressive the Fed and the banks will be in exerting downward pressure on the price of gold and silver….”

    Apparently there is also no way of knowing what tools/leverage they have left to continue the drubbing. It isn’t just open interest/COT apparently…but the price has to be managed on the CRIMEX.

    It seems the more I strive to understand, the less I know.

  3. the stock market is like the battle of ‘Mobile Bay’……”Dam the torpedoes, full speed ahead”..a cry once heard in this battle ,before the ‘ship of state, ie the Southern Confederacy’ was sunk….Dave gives sound advice….as the ‘South and North’ again are joined in battle,this time on the same side, to try and save the Union from a mortal enemy…THE FED and the Banksters…….as their ‘tool of war’…is the stock market and YOUR investing in it…….BEWARE…..imho

  4. The irony is that silver is a metal which is ACTUALLY generated in the universe with exploding supernovas.

    On one hand, you have paper Fake Money US Dollar based metaphorical supernova. On the other hand, you have Real Money based on real PHYSICAL supernova.

  5. STOP THE PRESSES, STOP THE PRESSES!!!

    Something far crazier is transpiring out of the left field. Since last night Rudy Giuliani has gone NUCLEAR!

    Is Rudy Giuliani a neo-con? Had he ever been a neo-con?

    All I remember about this is his argument with Ron Paul in 2007, during the 2008 Republican Primary debate. Ron Paul put him in his spot about crimes of the Military Industrial Complex. Giuliani acted like a dyed in the wool neo-con & Ron Paul lectured him about CIA, Pentagon, blowback etc. I also held a deep grudge against Giuliani about his orders to knowingly send New York city firefighters into harm’s way of World Trade Center smoldering hell on 9/11.

    Out of nowhere, Giuliani went on a NUCLEAR twitter rant since last night, spilling what he knows about 9/11 & PizzaGate & the whole nine yards. Twitter deleted his account short while ago. But it’s all archived in full glory for all to see over here, and it’s quite a sight to see:

    http://archive.is/IDBh5

      1. There is a different twitter acct @ link below, which also claims to be his. But it says “Joined August 2016” & has only 46 tweets, also no “Verified Account” blue check next to the name. This seems highly suspicious.

        https://twitter.com/RudyGiuliani

        Suspended twitter account from archive.as says “Joined April 2016” with only 83 tweets. It doesn’t have any “Verified Account” blue check-mark either. But I’m not sure if in the act of archiving tidbits like that get lost. OR in the process of an account getting suspended, twitter may automatically revoke “Verified Account” privilege making the blue check disappear.

        ?!?

        The entire thing is full of suspense & needs more research.

  6. OK, never mind. Rudy Giuliani has NEVER had a single twitter account. EVER. He’s probably among an extreme minority of politicians in this regard. Incorrect assumption about this has caused a lot of confusion to lot of people today. In fact, even among the Fake News media like NBC News, incorrect assumption about him having a twitter account had caused some PRESSTITUTES to make mistakes in the past.

    I noticed Eric Dubin got drawn into this distraction today as well, w/ a retraction later on.

    Back to regular programming….

    P.S. Rudy Giuliani is still a neo-con. Until he atones for the sins he committed on Sept. 11, 2001, he will remain in the bad books.

  7. Good article. Thanks for sharing. I’ve been warning people about this sort of thing for several years. I show the guys at work articles, facts, figures and the like. I try to explain economics to them but I am afraid my limited understanding of the topic isn’t getting through to them. They don’t understand ( best case scenario) but most times they just think I am crazy. These are hard working middle class manufacturing guys. I try to tell them that economics, like phyics, is a constant no matter what country you live in. If you throw a ball in the air in Cantprintistan the ball will come down just like in The United States. Same thing with economics; if you debase the currency by printing in Cantprintistan it will have the same devestating effect as in the United States, except it will take longer here because of the dollars reserve currency status. I have told them about Cyprus, fractional reserve banking, bank bail-ins and pension confiscation. They would rather talk about football or Movies. It certainly wouldn’t do any good to preach or be too forceful, so I watch that those things don’t happen. It’s frustrating though because things appear to be fine. Hard to be a downer when the stock market is flirting with 20,000 and my shop is working 60 hours a week.

    I will continue sharing articles about this topic and continue urging people to read up on it. I wish they would use the internet to read, learn and prepare for what is certainly going to be an economic disaster.

  8. Despite being a pig with lipstick, the US Stock market still has strong tail winds
    1. All other mkts are fucked up, so money is flowing in to the US
    2. The lemmings are piling in, with record inflow of funds into the markets
    3. Trumpgasm working like a self fulfiling prophecy, with rips higher being chased further higher and trading bots kicking in with buy programs
    4. Related to 3 – shortcovering and resultant short squeeze taking the market even higher
    5. Any dip causing stampede level panic buying
    6. Of course, support and blessings of the FED, PPT et al

    Gold OTOH has severe headwinds:
    1. Strengthening dollar
    2. Record outflows out of gold as MSM has successfully reinforced the “gold is a gloom and doom trade” concept and people no longer see a gloomy scenario unfolding anytime soon.
    3. Of course, the well documented smack downs of PMS that have been publicly revealed but no one cares about

    What will change the current scenario?

    1. Physics.

      Basic laws of physics are what will change the current scenario.

      (Or violence of an unimaginable magnitude.)

      Unless you’re an alchemist or invent a perpetual machine (and conclusively prove that you’ve figured out how to generate free energy out of nothing), in the absence of a (World) War, I can’t compute a scenario in which this status quo can be sustained.

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