As Rod Stewart belts “Every picture tells a story, don’t it?” I en devour the following to elaborate all one needs to know when it comes to the “markets” over the past year. Although, what might be even more important of a take away is – where it may be going.
Precisely one year ago, when the MYTR Broadcast™ was in full swing, I was dissecting and discussing why the narrative being pushed across the entire mainstream business/financial media complex was not only wrong, but was downright dangerous for dispensing a more than specious narrative.
This was before the idea on any “Lock-downs” and more were even being considered, let alone, openly discussed.
As a matter of fact and record, subscribers will attest that I was one of the first to openly warn of the knock-on effects that were certain to damage the global economy when China first locked down Wuhan. I argued this alone was going to push the global economy off its axis, because so much of the world’s supply lines and production takes part there. That disruption to dependency alone was something for concern. Yet, the mainstream business/financial media could have cared less and was more concerned on covering what the buzzer-banger dispensed.
Again, as a matter of fact and record, the aforementioned “buzzer-banger” (aka Jim Cramer of CNBC™ fame) came out during this precise period to assure everyone that the sell-off that had transpired that very February into March was not only something to not fear, but rather, look at it as another god given opportunity to BTFD (buy the f’n dip).
It turned out to be anything but, as I said it would be. Here’s how I described it on March 8, 2020. To wit:
On March 4th, Wednesday of last week the markets surged with the Dow Jones Industrial Index™ over 1100 points (e.g., 1173) and it was none other than the famed “Buzzer Banger” that took to the airwaves to point out to anyone still watching, that his “most trusted market indicator says to start buying stocks.”
The entire surety of acumen he used throughout this entire argument was pure unadulterated drivel. That’s my conjecture, but now there’s proof.
He claims throughout this presentation that the last time “he” was mistaken in reading this so-called “trusted” indicator was when the entire markets collapsed, meaning, the indicator was correct and he was wrong – but not this time!
I’m pretty sure you know what I’m going to say next, don’t you?
As I am typing this the S&P 500™ futures contract are in “Limit Down” status, as in – they are frozen from going any lower until the cash market opens at 9:30am in the U.S.
The markets were open in the Sunday session for about two hours, crashed, and are now limit down – just as I have been warning on my show these past few weeks. And here we are. (i.e., Limit Down means they have reached the 5% down limit and no trades will be allowed to sell lower than ~2818. )“F.T.W.S.I.J.D.G.I.G.T.” March 8, 2020
For those that might not remember, the “markets” then continued to fall and didn’t stop falling until the Fed, once again, threw any remaining credibility not just down the drain, but into the garbage disposal to ensure it was all but destroyed, unleashing a torrent of new programs and available money-for-nothing to ensure Wall Street would not suffer any losses.
Let me make this point very clear: although it is my conjecture, the subsequent rise from those depths in March has only been for the unleashing of the Federal Reserve’s balance sheet aka QE4Eva.
Since that period the “markets” have gone straight up in spite of a closed global economy, tens of millions unemployed, and more, much more.
Below is a “picture” using the S&P 500™ to show the story. To wit:
So, for those that may just be a bit skeptical to my analysis (which I totally respect). Here’s another “picture” that I borrowed from Wolf Richter’s website where he plotted the Fed’s own data onto a chart, and I took the liberty of annotating my pertinent atop it. Again, to wit:
And for those that may still be a bit skeptical on just how and where I may have placed my notations. Here’s another via Wolfstreet from the same article showing the above only in closer detail where you can see the actual dates for “take off.” Once again, to wit:
The above is why, back during that period, I declared I would no longer waste my breath commenting on the daily machinations of the “markets,” because it no longer mattered. For, if you still believed these “markets” are something other than a Fed supported casino – good luck with that.
You can watch, read and listen (and now pay!) to all the so-called “smart crowd” paraded across the mainstream business/financial media you want – but if you think they are doing anything more than trying to front run a narrative of a Fed fueled orgy of free money as to appear as if they know what their talking about – you’re kidding yourself. And I was done turning myself blue trying to do otherwise, as I stated then, and still do.
But there is a very real possibility the Fed is now going to find itself in a quandary it never considered, and is quite possibly, a phenom that could send this entire house of cards crumbling. And it is this…
The rate for 30Year Treasury yields has risen more in percentage terms over the last few weeks than it has over the past 40 years. Repeat: Four decades. Here it is in “picture” form. To wit:
Just because you are told “Interest rates have never been lower.” means nothing if your cost of borrowing, or funding your carry trades across Wall Street, begin to not just go up a point or two, but rather, that “point or two” means a doubling, tripling, quadrupling, or more of your costs. Here’s an example…
Going from a 3% to 4% rate is an increase of 33.33%.
Going from .25% to 1.5% is an increase of 600%.
See what I mean?
Wall Street has been running on the model, implicitly guaranteed via the Fed’s jawboning, that “zero interest rates” is its policy. As a matter of fact, remember when Mr. Powell stated at a presser not that long ago that the Fed wasn’t even thinking about, thinking about, raising rates?
It’s now looking like the bond market is not only doing that “thinking” for them, rather, they’re actually raising them in earnest and in real time.
Can you say: Uh -Oh?
10Year Treasury yields broke above 1.5% and are looking like that may be only the beginning. What the Fed does in response to this is anyone’s guess, but what everyone knows with surety is whatever they do to control it – it’s going to be messy one way or the other. And, what exactly are the repercussions for the “markets” poised at these levels, with no true underlying economy to support it, is an open question.
Then again, we’ll only be going into the Ides of March time period. I mean, what can happen, right?
© 2021 Mark St.Cyr
Note: This is not trading or investing advice of any sort. This commentary is for “big picture” discussion purposes only. Please read, or re-read the “About This Site” page for any questions or clarifications.