The stock market has been rising relentlessly since Christmas, riding on a crest of increasingly bearish economic reports. Maybe the hedge fund algos are anticipating that the Fed will soon start cutting rates. Data indicates foreigners and retail investors are pulling cash from U.S. stocks. This for me implies that the market is being pushed higher by hedge fund computer algos reacting to any bullish words that appear in news headlines. For example, this week Trump and Kudlow have opportunistically dropped “optimistic” reports connected to trade war negotiations which trigger an instantaneous spike up in stock futures.
“U.S. economy continues to weaken more sharply and quickly than widely acknowledged” – John Williams, Shadowstats.com, Bulletin Endition #5
The real economy continues to deteriorate, both globally and in the U.S. At some point the stock market is going to “catch down” to this reality.
The graphic above shows Citigroup’s Economic Data Change index. It measures data releases relative to their 1-yr history. A positive reading means data releases have been stronger than their year average. A negative reading means data releases have been worse than their 1-yr average. The index has been negative since the spring of 2018 and is currently well south of -200, its worst level since 2009.
The Treasury yield curve inversion continued to steepen last week. It blows my mind that mainstream media and Wall Street analysts continue to advise that it’s different this time. I would advise heeding the message in this chart:
I’m not sure how any analyst who expects to be taken seriously can look at the graphic above and try to explain that an inverted yield curve this time around is irrelevant. As you can see, the last two times the Treasury curve inverted to an extreme degree, the stock bubbles began to collapse shortly thereafter.
The data in the chart above is two weeks old. The current inversion is now nearly as extreme as the previous two extreme inversions. This is not to suggest that the stock market will go off the cliff next week. There’s typically a time-lag between when the yield curve inverts and when the stock market reacts to the reality reflected in an inverted curve. Prior to the great financial crisis, the yield curve began to invert in the summer of 2006. However, before the tech bubble popped, the yield curve inversion coincided with the crash in the Nasdaq.
Another chart that I believe reflects some of the information conveyed by the inverted yield curve is this graphic from the Fed showing personal interest payments. Just like in 2000 and 2008, households once again have taken on an unmanageable level of debt service expense:
Obviously the chart above is highly correlated with stock market tops…
The Conference Board’s measure of consumer confidence dropped in March, with the Present Situation index plunging to an 11-month low. It was the biggest monthly drop in the Present Situation index since April 2008. What’s interesting about this drop in confidence is that, historically, there’s been an extraordinarily high correlation between the directional movement in the S&P 500 and consumer confidence. The move in the stock market over the last three months would have suggested that consumer confidence should be soaring.
The Cass Freight Index for February declined for the third straight month. Even the perma-bullish publishers of the Cass newsletter expressed that the index “is beginning to give us cause for concern.” The chart of the index has literally fallen off a cliff. Meanwhile, the cost of shipping continues to rise. So much for the “no inflation” narrative. The Cass Index is, in general, considered a useful economic indicator. Perhaps this is why Kudlow wants an immediate cut in the Fed Funds rate?
It’s truly remarkable to the degree the money changers have been able to cap precious metals. Even in the face of a FED capitulation & reversal of policy. Trillions in global bonds with negative yields…meh. Nothing matters anymore until it does I guess. Even Crypto currencies have seemed to have completed a full market cycle and are now moving up again. Truly maddening. Year after year we have to indure this fraud and pain. I just don’t get it anymore. If PHYSICAL silver is so scarce and vital to our modern way of life how is it still controlled by synthetic claims? IDk maybe this is a sign of the bottom when stacker like myself going on 8+ years now is starting to drown in the darkness & doubt about how long they can keep plates sponning. Sorry for the gloom Dave it just days like today when everything is in the green and the one thing with the strongest fundamentals is always getting shafted. Really takes the wind out of your sails. Maybe good guys always do finish last. I’m balls deep in physical precious metals and have youth on my side so I keep on trucking but it’s taking its toll. Just want a return to truth & sound money. Cheers
Yes it is remarkable that the manipulation has gone on for so long now. Even the biggest gold bugs have been astounded how the shell game has just kept keeping on.
When the GFC hit, I was a 40 year old man, who thought buying gold and silver was the right thing to do, I still do. Now I’m 51, yet in no way did I believe Silver would be $15 some 11 years later.
What a fraud, it makes one wonder will it be another 11 years before it breaks out above $20.
Kudlow repeatedly goes on TV and says this is the best U.S. economy in years, blah, blah, blah. Then he calls for a 50 b.p. cut in the Fed Funds rate. He says the rate cut is needed to keep this great strong U.S. economy expanding.
If the economy was so strong, it would not need a rate cut from a historically low 2.5%. Simple as that. This is the same usual hypocritical double talk that Kudlow and the rest of them always spew on TV. They never get called on these contradictory comments as it’s the same garbage talk all the time.
Hey guys feel your pain and loss. I keep stacking and now have a enough even at current prices to significantly contribute to retirement. I am not torn that the system has not yet fallen apart I prefer the perpetuation of the standard of living even as it continues to fray. When it does collapse I hope we get rid of the Federal Government as its a beast that cannot be tamed. I’m so tired of them pissing off our resources for the .5% and the War Machine.
Hey Dave with that great employment report why do we need a 50 point basis cut (sarc)? The more I watch this whole cluster. The more I have to think the Japs have been getting away with this for at least a decade longer than us and the Ponzi continues. Seriously what will be the tipping point? What will flip the switch to hyperinflation or massive deflation? Maybe it will be the Grand Solar Minimum and the collapse of food production. After watching the floods in the upper midwest and 1,000,000 head of cattle dead as well as 1/3 of our stored grain ruined. New flood warnings in Iowa again today. Global warming LMAO.
For those wanting to know more about global cooling try the Maunder Minimum or the website Adapt 2030. The sun has cycles too and we are heading towards its repeatable cooling period. The SUN or CO2 ? History says it be the SUN
The Japanese have been floating their markets for thirty
plus years. The major difference between the Japanese
model and the U.S. model is that the Japanese actually
have a manufacturing base. The U.S. not so much.
The U.S. does have the reserve currency and that is a big
card. The question is how long do we keep the reserve currency?
Not a lot longer. The rest of world increasingly avoid using the dollar in bi-lateral trade. The Achille’s Heel of the reserve status of the dollar. Russia, China, Iraq, Venezuela, India, Japan are increasingly using their own currencies or gold to settle oil trades
Dave, Directly to you point. You must be clairvoyant.