The news headlines explained the sudden jump in the S&P futures this morning by stating that “recession fears had faded.” Just like that. Overnight. I guess the fact that the housing starts report showed a 9% sequential drop in housing starts last month and and a year-over-year 10% plunge means that the housing market is no longer considered part of the economy.
That report was followed by a highly negative March consumer confidence report which included that largest drop in the “present situation” index since 2008. What’s stunning about this report is that consumer confidence usually is highly correlated with the directional movement of the S&P 500. Obviously this would have suggested that consumer confidence should be soaring.
I explained to my Short Seller Journal subscribers that, once it became obvious the Fed would eventually have to start cutting rates and resuming QE, the stock market might sell-off. I think that’s what we saw on Friday. The “tell-tale” is the inversion in the Treasury yield curve. It’s now inverted out to 7 years when measured between the 1-yr and 7-yr rate. On Friday early the spread between the 3-month T-Bill and the 10-yr Treasury yield inverted. This has occurred on six occasions over the last 50 years. Each time an “officially declared” recession followed lasting an average of 311 days.
The yield curve inversion is a very powerful signal that economy is in far worse shape than any Fed or Government official is willing to admit. the Treasury yield curve “discounts” economic growth expectations. An upward sloping yield curve is the sign that the bond market expects healthy economic growth and potential price inflation. An inverted curve is just the opposite. If you hear or read any analysis that “it’s different this time,” please ignore it. It’s not different.
The inverted yield curve is broadcasting a recession. For many households, this country has been in a recession since 2008. That’s why debt levels have soared as easy access to credit has enabled 80% of American households to maintain their standard of living. The yield curve is telling us that credit availability will tighten considerably and the recession will hit the rest of us. This is what Friday’s stock market was about, notwithstanding the overtly obvious intervention to keep the S&P 500 above the 2800 level on Monday and today.
Without a doubt, through the “magic” of “seasonal adjustments” imposed on monthly data we might get some statistically generated economic reports which will be construed by the propagandists as showing “green shoots.” Run, run as far away as possible from this analysis. The average household has debt bulging from every orifice. In fact, the entire U.S. economic system is bursting at the seams from an 8-year debt binge. It’s not a question of “if” the economy will collapse, it’s more a matter of “when.”
Great post Dave. Do you think the IMF moving the status of gold to a Tier 1 asset from a Tier 3 asset , in a few days, will make any difference in the price?
It might but I do not a definitive view on that. It certainly could be a move toward
reintegrating gold in to the monetary system globally and facilitate an eventual “reset”
Hahahaha, Housing in the toilet, auto sales shit the bed, Bond
yield curve inverted, oil prices and stock market being manipulated
higher. This entire situation is so manipulated that Las Vegas casinos
are envious. We are living in the Twilight Zone.
https://www.bing.com/videos/search?q=twilight+zone+intro+music&view=detail&mid=8ADEF5D4897DA08A2BE28ADEF5D4897DA08A2BE2&FORM=VIRE&cc=US&setlang=en-US&cvid=56d3088f02f544b8857d7a9545469ead&qs=AS&nclid=EC651B7C918FBA3F051E76FCE7AF191D&ts=1553618109099
Dooms.Day.Esque. Stock up on Precious Metals before its too late – https://bullionexchanges.com/deals
Dave, well said. The search for remains at the bottom of the barrel lingers with almost supernatural convulsion: https://www.livemint.com/industry/banking/google-pay-starts-offering-digital-gold-mutual-funds-coming-soon-1553721132284.html
https://www.timeslive.co.za/news/south-africa/2019-03-27-major-flaws-in-mining-royalties-system-corruption-watch-report-finds/
Dave what are your thoughts on the negative divergence signal between the miners & spot price of gold? Signal suggests that we are in a 2011 type situation all over again for a sustained plunge?
https://www.youtube.com/watch?v=kdcms7xYQwI
I think both are going much higher – just a matter of time – miners are extremely undervalued vs. SPX and the price of gold