Our Liquidity Specialist shows you in detail how the Fed is continuing to shrink its balance sheet and how the economy is in danger of being superficially strong.
- Proof Positive: The Fed Is Bleeding the Market Dry
- These Numbers Could Push the Fed to Do Something Stupid
- The Fed Is Still Hell-Bent on Melting the Market
- Recession Will Start by Feb. 3, 2020, Courtesy of the Fed
- Don't Look Now, but CEOs Are Getting Out of the Market
- The Fed’s Been Lying to Us About Inflation – It’s Frighteningly High
- The Fed Has Completely Lost Control of Interest Rates
- How the Fed's Dumb Mistake Will Crush Your Stocks
- Here's Exactly What You Need to Watch in Today's Fed Meeting
- That All-Important Market Narrative I Mentioned? It's Changing Right Now
- The Truth Behind Central Banks' Machinations
- Why It Doesn't Matter Who the Next Fed Chair Is
- Who Are the Fed's Primary Dealers?
- This Moneymaking Mantra Works Through Boom and Bust
- Jim Rogers: "Clueless" Fed Will Drive United States to Disaster
- How to Protect Yourself from the Fed on June 13
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.
Despite all the evidence of the damage it's doing, the Fed is still sticking to its phony numbers.
Bad news for stocks.
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.
There have been some media rumblings - trial balloons, if you will - sent up, all hinting that the Federal Reserve might stop or slow the pace of the "normalization" that's going to see $50 billion a month come out of the system before it's done.
That's going to lead to a market cataclysm - sooner, not later - because there simply won't be enough precious liquidity in the markets to sustain the kinds of stock prices we've seen in the era of quantitative easing.
Even if the Fed did slow or even halt the pace of systemic withdrawals of cash from the markets, it's just too late.
We've talked about this snowballing disaster of a monetary policy many times before; I've been screaming from the mountaintops, showing you recommendations for getting into a protective, cash-heavy stance.
And now, it seems, a certain crowd of big market players is getting wise. They've just capped a very busy quarter - a record quarter, in fact - of stock buybacks.
Even by the deeply flawed and misleading Consumer Price Index (CPI), inflation is at the U.S. Federal Reserve's target. By other measures that more accurately portray inflation, it is well above target.
The Fed will not be deterred from continuing to tighten, continuing to remove money from the system, just because of the silliness that "CPI missed expectations."
It's still at least 2%... and it's heating up.
Furthermore, we know beyond a shadow of a doubt that, as the Fed raises the federal funds rate target, it will only stimulate more inflation. The Fed will always be behind the curve, because the Fed is always back there pushing the curve ahead.
Every time it raises the federal funds target rate, the Fed signals to the decision makers in the U.S. economy that it expects more inflation, and consumers and businesses behave accordingly. I showed you the history of that a couple of weeks ago; the charts don't lie.
And the fact is that we really have more - much more - inflation than they're telling us.
This isn't a mistake, it's not a miscalculation.
What I'm going to tell you is probably going to go a fair way toward upending your sense of reality and everything you know to be true, at least as far as the markets go.
Think for a second how much mental energy, how many newspaper column inches, how many magazine articles, how many minutes of airtime are totally devoted to speculating on what the U.S. Federal Reserve's going to do to interest rates.
There are journalists and cable TV pundits who spend entire careers covering the Fed. Every time the Fed's Open Markets Committee meets, it's like time stops, and every breath hinges on, "Will they raise rates? How much? How high?"
By statute, the FOMC circus must happen eight times a year, every five to eight weeks. And it's even more frequent (and more protracted) if you count the media monkey circus surrounding it, the arcane rituals of painstakingly parsing out what the Fed is "telegraphing" or how the markets will "react."
And it's all for nothing. That's right. Nothing. It's a sham...
...because the Fed does not control interest rates. And it hasn't for years now.
The witless high priests of "Economism" and the greed-happy gurus of Wall Street preach this constantly as an article of faith: Raising interest rates suppresses inflation.
Here's the thing.
These people couldn't be any more wrong if they made the cable talking head circuit and assured us all that the sun would rise in the west tomorrow.
The truth is rising interest rates help trigger inflation. In fact, inflation and lending continue to increase through most of a rising rate cycle. Borrowers and consumers want to stay ahead of inflation by accelerating their borrowing and spending. Of course, that only promotes inflation.
I'm going to prove this - all of this - to you beyond a shadow of a doubt, because I don't want you to get sandbagged by what's coming; the U.S. Federal Reserve is wrong, and that means it will be behind the curve until the very end, just like 2008, just like always.
When it's all said and done, when it's all over but the crying, the Fed will be confronted with the obvious consequences of this faulty thinking. It'll deny it six ways from next Tuesday.
It might even get raked over the coals (or ashes) for it, but that'll be cold comfort to people who didn't listen.
But you, armed with the facts, will be safely in cash, ready to move at your leisure.
Start the conversation
Today's rate hike shouldn't be news to anyone.
But what you may have missed is a critical portion of Fed Chair Jerome Powell's press conference...
Central bankers aren't stalwart free market shepherds, although that's how they cloak themselves.
The truth is they're more like wolves... communist wolves in sheep's clothing. Today I'm going to show you what their game really is.
The financial media are trying to turn the search for a new potential Fed chair into a horse race of some kind.
We'd tell you who we think will win, but the truth is, it doesn't matter.
Start the conversation
Everyone can see the Fed has outsized influence on the stock markets, but not everyone knows why.
It has to do with a tiny group of 23 of the world's largest banks.
Editor's Note: Lee Adler has more than 44 years of experience trading and investing, as you'll see. You're going to be hearing a lot more from him in the future, because he's taking our newest free research service, Sure Money, "big time" next week. You'll have the chance to join him, but for now, he's going to show you why these four little words just might be the most profitable recommendation you've ever had. Here's Lee...
"Don't fight the Fed" was a refrain I heard often from the old men in the customers' gallery at Walston & Co.'s Philadelphia, Penn., office back in the late 1960s. I was a teenager at the time and sat with them after class.
I tried to understand what these mysterious wise men meant as I watched the ticker tape crawl along, showing a trade from New York every few seconds...
"IBM...200s... GM...1000s... PRD...100s... XRX...10,000..."
The ticker would pause for a few moments, then more trades would come.
Some of these old men were known as "tape readers" or "tape traders." They saw patterns in the movements of the ticker and bought and sold stocks based on those patterns.
They made money, too, and plenty of it.
"Don't fight the tape. Don't fight the Fed. The trend is your friend," they said. I heard it so often, I couldn't stop it from constantly playing in my head.
I still can't, to this day.
Legendary investor Jim Rogers just made a bold claim about the Federal Reserve.
"[The Fed] has no clue what they're doing," he said.