Investors bid the S&P to a near record high while simultaneously bidding benchmark Treasury yields to a record low.
This is not supposed to happen in functioning markets, and the fact that it transpired illustrates how central banks are destroying markets. They are actively aided and abetted in this endeavor by the financial media, which distorts the news to fit a bullish narrative that has little relationship to reality.
Take, for instance, the June jobs report…
The Jobs Picture Is an Elaborate Hoax
The headline number of 287,000 new jobs created was a total fabrication. You won't hear this on CNBC or in any of the other sycophantic media outlets because their reporters are unqualified to do their jobs.
For a reality check, we need to turn to highly skilled economists like Glusken Sheff's David Rosenberg and The Lindsey Group's Peter Boockvar.
Mr. Rosenberg's analysis of the jobs report points out that the non-farms payroll report, which produced the 287,000 figure, does not accord with data produced by the household survey that tells a far different story – that the number of jobs actually fell by 119,000.
And as Mr. Rosenberg and Mr. Boockvar both point out, the headline May and June numbers are statistical anomalies that blur declining long-term trends in job creation.
The 3-month average (even using the non-farm numbers) is only 147,000 and the 6-month average is 172,000. In a country with more than 300 million people, this is nothing less than pathetic and describes an economy closer to recession than "escape velocity."
The only place to which the economy is escaping is a debt-encumbered poorhouse of perpetually sluggish growth, rising taxes and suffocating regulation.
This Buying Spree Is Dangerous
This would be comical if it weren't so pathetic.
Two weeks after the Brexit vote that, among other things, has led to more than half a dozen United Kingdom property funds to declare that they can't repay their investors, markets in the United States are acting as though they are detached from the rest of the world.
The European banking system is falling apart in front of their very eyes, but rather than fact the facts investors are clenching their eyes shut and running straight toward the cliff.
No doubt after they jump over they will whine and moan that nobody warned them that stocks were grossly overvalued in a fragile global economy, but my readers will not need to make that excuse.
The stock market is a minefield best largely avoided until more rational heads prevail.
What Treasuries Tell Me
When will that happen? I cannot answer that question other than to suggest that readers keep a close eye on bond yields and the shape of the Treasury yield curve, which flattened further this week to its lowest level in years.
Low yields and curve flattening always denote economic weakness. Some argue that central bank distortions render these signals useless as market forecasters but I beg to differ.
Negative interest rates are destroying the fabric of the European and Japanese financial systems while near-negative interest rates in the U.S. are doing the same.
A 1.36% 10-year yield renders Treasuries certificates of confiscation. The only reason to own bonds is to try to sell them to the next fool who is willing to pay more for the privilege of lending money to a corrupt and incompetent government.
That is a dubious way to make money over the long run even if its creates short-term capital gains that are only realized by traders clever enough to get out before the entire Ponzi scheme collapses.
The "Earnings Recession" Deepens
Companies are starting to report second quarter earnings shortly and are expected to produce the fourth consecutive quarter of declining earnings.
Wall Street and the financial press tell investors that they have to invest in stocks because "there is no alternative" but that is some of the worst advice ever rendered in a long history of terrible advice.
There certainly are alternatives to over-priced stocks – cash and gold to start with. We are in the advanced stages of what I have called elsewhere "the terminal phase of central banking."
Not only are central bank policies not producing economic growth and prosperity, but they are actually destroying the economy.
The only reason we are not in the midst of another financial crisis right now is that interest rates are so low that companies and governments can still service their debts. But a closer look shows that many companies are not generating any free cash flow to reduce these debts while governments at all levels (federal, state and local) are borrowing themselves to oblivion (see Puerto Rico, Illinois, and the city of Chicago, in particular).
At some point, investors and lenders are going to demand a decent return on their capital, and when that happens the ruse will be over.
Do not believe a word that the government, Wall Street or the mainstream media tells you about anything but particularly about the economy.
Listen to people who are more interested in telling the truth than being invited onto CNBC to contribute to the dumbing down of the American investor.
We are in big trouble. Sell yours stocks, hold cash, buy gold and save yourselves.
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About the Author
Prominent money manager. Has built top-ranked credit and hedge funds, managed billions for institutional and high-net-worth clients. 29-year career.