A lower-than-expected Consumer Price Index release on Sept. 12 sent the stock market rocketing higher.
But has anything really changed?
And does it mean anything for our bearish stock market outlook and strategy?
After a quick glimpse at how the media handled it, we'll take a deeper dive into the numbers to see what's really going on, versus the Wall Street media narrative.
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With gold prices still trading tightly in the $1,200 price range, the yellow metal can't seem to gather any momentum.
But that's about to change.
The Daily Treasury Statement data for the end of August showed some improvement in total tax collections, including a slight uptick in withholding taxes and an even bigger increase in excise taxes.
The numbers suggest that an early summer slowdown has ended. After the expected downward revisions in June and July jobs data, the August uptick in jobs was not a fluke. And the excise tax data suggests strong retail sales.
So, not an altogether bad summer – if you happen to be a politician or government taxman. But what about for investors?
Well surprise, surprise, surprise! Good news is bad news, which is what we've been talking about here all along.
Good economic news, as presaged by the uptick in tax receipts, will encourage the Fed to keep tightening.
And tighten it shall, in two ways: Most importantly (and most destructively), it will drain more money from the banking system. Secondarily, it will continue to rubber-stamp tightening money markets by raising the federal-funds rate.
And that, as I have been shaking my fist at the sky about for months, is really bearish.
The stuff has not hit the fan yet, but it is coming...
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Wall Street traders await the first Friday of every month with bated breath.
Why? Because it's Nonfarm Payrolls Day!
When the news is posted at 8:30 a.m. ET, the market often gyrates wildly in response. And today was no exception!
So let's walk through exactly what happened in the markets the morning of Sept. 7, and look at what impact we can expect this to have moving forward.
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Europe has always played a huge role in the U.S. markets. The U.S. Treasury reported that European investors and central banks held $1.6 trillion of U.S. Treasury securities in June. More importantly, they had purchased $114 billion of that over the past year, including $32 billion from April to June.
And although there's no breakdown of U.S. stock and corporate bond holdings by country, Treasury holdings are about one third of total foreign securities holdings. Assuming that ratio applies to European holders, then they hold a total of roughly $4.8 trillion in U.S. assets, and added nearly $100 billion of that over the April-June period.
There's little doubt that this has helped drive the stock market blowoff.
That cash flows into the U.S. markets. When European investors buy Treasuries, most of those purchases are from U.S. Primary Dealers, even if they are not direct purchases of US stocks. The dealers use some of the cash they get in those sales to Europeans to buy stocks. When European investors, or U.S. corporations in Europe, buy U.S. assets, that adds liquidity to the U.S. system and fuel for the inflation of the U.S. stock market bubble.
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Despite all the evidence of the damage it's doing, the Fed is still sticking to its phony numbers.
Bad news for stocks.
But our Lee Adler won't let you be fooled, and he's got all the actual facts and numbers...
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Many of you remember the old Warner Bros. cartoon series, Looney Tunes – specifically the slapstick episodes involving the hilarious duo, Wile E. Coyote and the Road Runner.
Somehow, in every episode, the fast-running ground bird manages to outwit the coyote, despite repeated attempts by the coyote to catch and eat it.
No matter how ingenious and complex the contraptions the coyote devises, they always manage to backfire – often with the coyote running off the cliff, falling deep into the canyon, as seen from a bird's-eye view.
And this is exactly what we are seeing right now with the Federal Reserve.
The market is overinflated, and the Fed has concocted an elaborate plan to engineer a soft landing.
But it won't be a soft landing. It will be a hard landing, just like the coyote running off the cliff and falling deep into the canyon.
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Stocks fell sharply on Wednesday – then they gained it all back, and even rose a little further, on Thursday.
Ostensibly, that was because the Turkey crisis deepened on Wednesday and was resolved on Thursday.
The market's gyrations are enough to make your head spin.
And so are the changing stories.
But I don't buy them.
Jerome Powell and the central bank will send the U.S. economy hurtling into contraction mode no later than the winter after next.
How can I be so sure of my claim? Well, one very reliable indicator is flashing red.
In fact, it's so dependable that since 1980, it has predicted the advent of every recession, right around a year to 18 months ahead of time.
And right now, it's approaching the critical level.
See, the Fed's raising of short-term rates is causing the yield curve to flatten. From there, it's a short trip to outright inversion. Once it inverts, two-year Treasuries will yield more than 10-year Treasuries.
Once that happens, a major peak in stocks – then a recession – is all but totally certain within the next year and a half.
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One of our most reliable predictors of recessions is trending in a dangerous direction.
It's happening right now, even as you read this.
This indicator has signaled before each of the last seven recessions, going all the way back to 1969.
But you don't have to be blindsided by what's about to happen.
We know what this signal means, and we know how to prepare for it...
Fed Watch
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