Dear Reader,
Happy Friday! TGIF.
What a week – I realized the other day that the stock market had gone down 10 days in a row, which is the longest losing streak since 1974.
Here’s what’s happening:
And then of course Wednesday, after the Fed lowered rates a quarter point (a mistake in my view), the market dropped a thousand points.
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Rare signal predicts 50% market drop
The first time it flashed red was in 1929 - right before the market crashed 80%.
This second time it flashed red was in 1999 - right before the dot com crash sent the market down 50%.
And now it’s flashing red again – for the third time in history.
Take these 4 steps to protect your retirement here.
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So, what’s happening to the stock market?
It looks to me like the stock market is actually catching up to what the bond market’s been saying…
The Fed started lowering rates in September, and lowered rates 100 basis points, a full percentage point.
And the 10-year Treasury yield which is the yield to which most people compare their stock investments, is up 80 basis points.
So the treasury yield is ignoring the stock market.
The bond market is basically ignoring the Fed and the stock market. This is a weird, unique situation in American history.
What you have happening here is bond investors saying, “It doesn’t matter what the Fed does. Forget the Fed.”
The Fed is out of control of the longer-term bond market.
Beyond a couple, maybe five years, bond investors are not listening to the Fed.
It used to be the Fed would lower rates and then all types of long rates would go down…
Mortgage rates…
30-year bond rates…
(Remember, mortgage rates are based on 30-year bond rates).
So the Fed would lower rates and then all of a sudden these 30-year, 20-year and 10-year rates would go down.
But the opposite is happening now because professional investors are now saying what we’ve been talking about here for a long time…
No way am I going to accept 4.5% interest for 30 years. No way.
Bond investors, who are frankly the most sophisticated investors because the bond market literally dwarfs the size of the stock market…
Are saying, look – too much inflation…
Too many deficits...
The tariffs are crazy.
And now you’re going to do more tax cuts?
You are going to run so much red ink through this country that for us to lend you money for 30 years, you have to pay us a heck of a lot more…
You are going to debase the currency.
The value of bonds is going to go down.
Every year… the more red ink, the more deficits, the more fiscal irresponsibility there is.
So the 10-day market drop didn’t surprise me.
I can’t even believe the Fed lowered rates here. That’s surprising.
But remember – there’s an inverse relationship – a seesaw relationship between interest rates and the stock market.
Rates go up, the stock market goes down.
Rates go down, the stock market goes up.
Now, of course, this time rates went down and the stock market also went down – that’s because of future expectations.
The Fed said “whoa” – they got more hawkish.
They said, we’re not going to cut four times next year – not another full percentage point…
We might cut two times – maybe.
So investors said, gosh – this kind of looks like maybe the end of the loosening cycle.
So again, we saw the longest losing streak for the Dow since 1974.
And this is a very different Dow.
This is a Dow that’s being manipulated greatly…
Any company with any stock that’s not doing well – they get rid of it and just replace it with stocks that are doing well.
It’s a rigged Dow Industrial Average.
It’s crazy because it’s only 30 stocks.
So you could rig that really easily.
The S&P 500’s harder to manipulate because it’s 500 stocks. You could do it, to a degree.
But what they do, the wise people who run the Dow is they’ve just put well-performing stocks in there.
Now, in 1974 it was really a better representation of all sectors of the economy – good or bad.
So this longest losing streak in 50 years is telling us this stock market has become unhinged – disconnected from reality.
We started talking about this in the middle of the year – July, August – and it’s been even crazier since then.
And it looks like what professional investors, bond investors, where the BIG money is – the people who determine the stock market – have been warning us about may be finally starting to show up in the stock market. The stock market may be finally catching up to reality.
Now again, a flock of birds can fly any direction it wants for as long as it wants. We can’t predict that.
All we can say is, the market’s overvalued by any stretch of the imagination and by any indicator anyone wants to use.
So we can’t be certain what happens when, but seeing this stock market’s historic down week we haven’t seen the likes of in 50 years…
Makes it look like people are finally listening to the bond market, which is where we spend a lot of our time and attention.
Remember, my #1 priority for my money and yours is, don’t lose it!
So, yes, we’ve made phenomenal gains this year…
Yes, we are finding some incredible stocks at incredible prices even still and we’ll be telling you about them.
But if you haven’t taken these 4 steps to prepare for what’s coming, there is no time to waste.
This is the playbook – I’ve used it to make most of my personal fortune from market crashes.
If you’re not selling certain stocks at an all-time high market, you’re not going to have the capital you need when it’s time to take advantage of low prices.
Don’t wait on this. Now is the time. Go here now to see what’s coming and how to prepare.
Have a great weekend.
See you Monday.
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