Yields To Surge As Biden-Yellen Create Record Deficits

Well, right on cue, it looks like the endless creation of fake money by the Fed has now poisoned both the stock market and the bond market. The Dow was down 1,000 (3%) points in two days and the Nasdaq down 7% in two weeks.

Gold and silver are also falling in sympathy. This was expected short-term, but the outlook for the precious metals look excellent as I will discuss later.

Is this what the 16th-century Swiss doctor Paracelsus ordered? It certainly looks like it. He told us that too high a dosage of anything is toxic. And with a world flooded with toxic money with little value, the levels of poison have reached extremes.

The toxic financial system needs to be cleansed but as we have warned many times, this will have dire consequences for the world.

FRANTIC STOCK BUYING BEFORE THE MUSIC STOPS

Buy high and sell low is the mantra of many investors. And as the stock market surges – buy more! And when it falls, buy still more.

But this time, the method of always being long, which has been foolproof for decades and underwritten by the Fed, will fail hopelessly. Whether investors buy on strength or buy the dips, they will get slaughtered.

As often the case at the end of a cycle, we have in recent weeks seen frantic buying of anything that moves just like with tech stocks in 1999-2000.

Just look at the incredible 16-week inflow to stocks of $414 billion. This is 2X the 2018 peak of $200b and an all-time record.

Investors are clearly jumping on the bandwagon just before the music stops.

There are many indicators that point to a market top currently and a secular bear market for many year as I have pointed out in recent newsletters.

The graph below is a clear red flag for stocks. It shows that all the higher highs since October 2017 have not been confirmed by momentum indicators (bearish divergence). So in spite of the Dow having gone up almost 6,000 points since Oct 2017, the RSI (Relative Strength Index) has shown lower tops for each new high in the Dow. That is very bearish.

There are a number of other technical indicators pointing to a top at this time.

TOXIC SPECULATION AND HELICOPTER MONEY 

Coming back to toxic speculation, this caused the crash of the sub-prime market in 2006-9 when the global financial system was minutes from implosion. This led to the Great Financial Crisis. But an economics professor from Princeton University, who was chairman of the Fed at the time, “saved the world.” It was Helicopter Ben of course.

But Bernanke didn’t save the world. All he did was to take the orders of his masters, the heads of the major investment banks like JP Morgan, Goldman Sachs, and Morgan Stanley. These banks had everything at stake. They were on the verge of bankruptcy and only a massive rescue mission by the Fed and other central banks could save them.

1 2 3 4
View single page >> |
How did you like this article? Let us know so we can better customize your reading experience.

Comments

Leave a comment to automatically be entered into our contest to win a free Echo Show.