Latest / Financial Survival Network / Fed Has Nowhere to Run to, Nowhere to Hide -- Gordon T. Long #6023

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Fed Has Nowhere to Run to, Nowhere to Hide -- Gordon T. Long #6023 · Financial Survival Network

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People's belief in something as suddenly as questioned, it's a false belief they have.
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And it's my opinion this is I'm guessing it'll be inflation. We do
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not believe in any stretch of MEAs inflation has been beaten, and specifically in
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services inflation. And if that's the case, then when the FED says higher
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for longer, it could be much longer, or it could be have to
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take rates up again a little higher, not dramatically, but a little higher.
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Just anything in that could really be a trigger. You are listening to
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Carrie. Let'sa's Financial Survival Network where you get valuable information you just can't find
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anywhere else to thrive in today's trying times. You need the Financial Survival Network
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now more than ever. Go to Financial Survivalnetwork dot com and get your free
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newsletter and gift. Financial Survival Network now more than ever, And welcome.
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You are listening to and watching the Financial Survival Network. I'm your host,
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Carrie Lutz. Hey, if you're on the podcast, we're attempting to add
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a PDF file. If you're watching, we'll show you the PDF file.
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I'm still getting over this. I lid to phenomena in medical terms. It's
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called a Schalasian and it's where you have a clogged land and the oil builds
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up. And no, I didn't get into a fight. In case that's
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what you're thinking. I've tried to. I almost got into a fight a
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couple of weeks ago, physical at publics, but luckily didn't come down to
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that. I don't know how I would have handled it. But we're in
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a fight here, all of us, an economic fight, whether you realize
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it or not. It's what you call Gordon the trifecta. Gordon too long
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and it's great to have you back. So the trifecta. What is the
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trifecta? I got absolutely Carrie. By the way, you remind me of
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high school. When I look at you, I think I had a BA
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come home few times looking like that myself. Anyway, we digress. Yeah.
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Here I set these couple of charts to you because I thought it was
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a good place for us to start the trifecta. This first chart up here
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is is a log chart and going you know, a long ways back,
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and you see any time is in should share this. I'm going to share
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this on my screen right now. Give me one moment, I can find
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it all right, So Gordon, we've got the trifecta here. I've got
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your your uh slides up on the screen. Can you see them there?
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I can. That's uh, the next the next one, the next one.
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Yeah, that's the that's the trifecta that I'm referring to. Okay,
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Well, a trifecta when you're at the track for those of you not in
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the new that is when you pick the first, second, and third orsus
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in a race, and it usually has large payoffs. But here this trifecta,
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I think maybe not such a good payoff. No, it's going to
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be a which side of the table you're on on on this way. But
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the trifect here what this a long term chat going back to the nineteen fifties,
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you know of the S and P. And you'll see it forty two
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percent of the time it actually traded with since ninety eight forty eight within five
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percent of all time highs. And then you can see these little coloring lines
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along is sort of in orange, and then you see three boxes. And
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so what I did, what I distilled from from our research is is ours
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three times where we've actually had ourselves within five percent of all time, historical
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points in time, and that's that's an interesting point. But what's important is
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once you once you get that, you get into what the trifect is,
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and that is in all three of these, and the three being when we
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you know, back in the seventies, same inflationary kinds of issues. You
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see a double top there in the first box, and the lower the next
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week we had the same thing. You see a double top. That was
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where we had the dot com bubble leading to the financial crisis, the second
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hump in there, and then today where we're at where we're putting in a
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second top. But what's common in this and then it's what's behind this.
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It's important is that you get any every one of those. You had extreme
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narrowing of the market. So what happens is the market went up rapidly based
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on fewer and fewer stocks. So back in the first box there in the
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seventies, and you carry you probably remember this, I do. We created
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the nifty to fifty and it was fifty big comps. We were going global.
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It was just that was where it was, and you had to be
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in those fifty stocks. As you remember, during the dot com bubble,
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we had the same that wasn't bet narrower depth, but still narrowed down,
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and we were into the key Internet box like Cisco and World common these kinds
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of corporations. Today the breath is as narrow as we've ever had it.
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We have the Magnificent seven, and frankly since in the last sixty days it's
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been simply in non ideot in it. But that this massive narrowing of breath
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is the first thing that's common only to these three of boxes. And it's
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not just the narrowing that's himself is important, but it's that they go parabolic
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and so as it takes a while for them to build up, but it's
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when they go parabolic that you you really start to see where this prefectus starts
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to bring itself in. That's the first one of the three. The second
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and I alluded to earlier they all have double tops, and that is you
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get into this fomo and fear, the fear of missing out and buying the
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dips and the excitement, and everybody gets into the market, sells off.
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But it takes a second big push up to to really start to take that
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out of the market. And then so it can actually start to even potentially
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capitulate. Still takes a bit of time. And and the third one is
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in every case at least the second hump was a big recession, a hard
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recession. And so if we get a hard recession or just a recession period,
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I know what the market thinks now. But if we get our it,
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we've all dropped down to that black line historically, and et cetera.
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We go to the next chart, it really kind of brings it a little
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further Herey, it won't rob me any at any point here as we're talking.
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This is this this of the bottom fifty of the S and P five
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and you can see where it gets narrow and narrower all the way down.
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But what's interesting on the bottom, even though it's is now that the narrowness
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is so so tight, as I said the Magnificent seven, that that we
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went completely parabolic in that in that point alone, and you can see from
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that line it's I thought there was something interesting that they would all connect like
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that, and it's I don't know what the computers are reading into it,
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but it's an amazing that it is working out like that. It's a little
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scary going to the next chart if we could this is this is this is
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something we've it's an interesting chart and that we've been using this chart for I
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guess for five five years now before COVID, and you can see where we're
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going parabolic at this point in time. But we drew we drew this chart
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where there's a dotted red line that's going parabolic and you can see inside the
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bottom red one. We drew that, which was really and you can see
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it touching the loaves and we it was allowing us to see that we when
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we came out of COVID, where we thought we were going, and so
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it really was beautiful for hi, I'm just talking about the dot line,
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dot line, and we thought we'd reaching the point. It hadn't quite went
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parablem Then it dropped and we fell down. And so what we were forced
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to do we said, well, I guess that was the end of that.
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We don't playing loud is. We had to redraw it hang around with
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the COVID. You see it's redrawn with touching COVID, and it started to
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tell us that at the end of the next cycle, and you can see
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cycles along the bottom of the chart, a little rounded humps the next time
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we're in a cycle top, this thing would be on the vertical red line.
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We could go parabolic again. And we drew these dotted black lines and
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we came to fifty one eighty six and we said, this is absurd.
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We didn't believe it, we really didn't, but we we had it there.
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We put it aside at fifty one eighty six. Well, last week,
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Carrie, it hit fifty one eighty six eighty seven and immediately pulled back.
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I don't know that tells us anything, but it does tell us that
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we're at a very major junction in the world right now in terms of the
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terms of markets. And I cautioned people right now to really be careful if
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this is the time to take risk off the table, because that last five
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percent can be an absolute, absolute killer. You go to the next chart.
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Hey, let's not forget what gold is doing now in bitcoin, and
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it's doing it because of this bitcoin and gold they're doing it because of this
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while a number of reasons that they're doing it and big time, and we
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may have got some time we'll love to talk about gold specifically, but this
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is another chart that this big dome top, which was a third box,
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and you can see the We didn't draw the dome on the down here a
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little lower at the dot com further to the left, but we've drawn this
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don't cop and we felt that we would come up and touch that. Because
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tops are a process, they take time, and this is a generational top,
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we believe, and therefore it would expect it to be two or three
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years in the making, which is what we're going through. We think we're
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very close to it and we will probably if thing's unfold and there's a big
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caveat I'll get to in a second. We should rock it on to the
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bottom of that black line and that channel going all the way back to the
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financial crisis, and we're not going to correct that, but we're going to
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correct a big part, probably back to the pre COVID high before we went
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into COVID. We think we'll be corrected, and then from there we will
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see what happens. But even with some moving around, it shopped down.
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You can drop and you see the divergence here at the bottom, which as
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good sign as anyone. And we got divergences which everywhere so a long winter.
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But a lot of this is just is really it's telling us get out
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of the equities right now short term, even though it's going to go up,
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the risk risk is too much. And if you flip to the next
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chart, we will have all sorts of charts go behind it. But the
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next one. Sure. Remember what Bernard Baruch said, I got rich make
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it, letting the other guy make the last ten percent exactly that this is
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a classic period that we're in. I'm a big fan of John Houseman from
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a technical or from a fundamental standpoint. There's phenomenal work. And when he
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puts out a charge like this from a fundament I'm not talking about technicals,
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I'm not talking about global mackerel, which my comments have been generally at so
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far. He's all his signals are saying there's something here right now in this
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period of time. This doesn't mean this market's going to sell off tomorrow.
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It could drag out for it. But I don't know what the period's going
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to be. But it does tell me that what's going to trigger it has
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to be a shock that comes to the market out of nowhere, something that's
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unexpected, because right now it'll run until something hits it. I felt I
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went through that in the Dot com bubble. I saw it back in eighty
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six. It takes a shock, and there are some things that could shock
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the market. That's when people's belief in something is suddenly as questioned, it's
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a false belief they have. It's my opinion. This is I'm guessing it'll
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be inflation. We do not believe in any stretch and measure inflation has been
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beaten and specifically in services inflation. And if that's the case, then when
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the Fed says higher for longer, it could be much longer, or it
12:16
could be have to take rates up again a little higher, not not dramatically,
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but a little higher. Just anything in that could really be a trigger.
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That didn't mean to go on there carry any questions on what jumps out
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to you? Uh not really. You know it's looking pretty bubblicious out there.
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Well we listened to. The next chart is something that really explains why
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is the amount the liquidity that we have right now in the market is just
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a model. You pump bout six point seven trillion dollars and it goes out
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through into the market, through the through the gen the Treasury's general account,
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where we where they control where it's going. Read some of these bills,
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these bills like the Inflation Reduction Act, like it almost gives them carte blanche
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to send the money wherever they want, and it's being targeted. And that's
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just a but behind it. The this church shows us has showed where stage
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one at the top and stage two at the bottom, where we watch Yellen
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all the time, we don't how we it's what Yellen's doing with the general
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account and for since we got the cap on the cat, it really wasn't
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but the debt crisis. When we had that discussion last June, what she
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what she's been doing is is she's grown the general account, but she's kept
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she's issued at a short term duration, which pushed the the the reverse repo
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market from two point seven trillion down to around four hundred billion. And that
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money has flowed right through short term bills and out into the out into the
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market, and that's what's been keeping it going. Now it's come all the
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way down to as I said, maybe three to four hundred billions left.
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It's get it's getting. The completity was starting to tighten. And what she
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did next is she arbitraged. I don't mean to get too techy a book
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that some of our listeners just made like want to know the details. She
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allowed the big banks to arbitrage. On the left here the BTFP, the
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Bank Term Funding Program, so that the difference in spread, the big banks
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were able to pull out about sixty billion dollars fifty two billion to be precise,
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dollars before they slammed it down. Now that fifty two billion dollars is
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literally infinite money to the major banks, who then landed out to the hedge
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funds and some of the money market funds who then leverage it up. There's
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about fifteen of them, and that money and you follow the red curve goes
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back in where they now can buy longer term and immediately she's now putting out
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or three year, five year, seven year, and ten year money.
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And so it's almost unlimited now of the money that she has to take us
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through this election. Here. And as you're showing this slide here, you
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know, everybody talks about the financial conditions tightening, lose. They never tightened
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it. Look at the green. This is the this is the fits chart.
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They've always been extremely loose in spite of quantitative tightening. And if you
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notice on the far right, it's starting to loosen even further. And that's
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what we've been going through. That's at the root of what's been pushing this
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this incredible expansion and the market up their play. It's an electioneer. We
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all know that. Any questions there here, Kerrie, the jump, notte
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edge, No, just that it's kind of a shell game. While the
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interest rate has gone up and now it's stayed where it is for quite a
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while. The net effect is more money is flowing into the system. Oh,
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without question. And you know they what people get. I think it
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confused about the banks have tightened credit. Absolutely, we tighten the credit,
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but the financial conditions are saying, I don't worry about that. There's so
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much liquidity from ten or twelve years of quantitative easing. Ever mind six white
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seven trillion that bidnomics is pumped into the system. There's so much money it
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doesn't know where to go, and so it's willing to take And this goes
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back to the original trifecta. It's willing to take risk it ordinarly would never
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take before. Yeah, well it's uh, it's heads they win. Tells
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we all lose, right, Wally, Yeah, but remember they're not buying
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protection yet in the skews and that sort of thing, but they will be
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very quickly starting to protect themselves. Well that's what they do, hey,
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So that's all. The only loser is the capitulation of the last people to
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the party, in other words, the people that have been buying from Christmas
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on that are still there. And I just put a newsletter this morning showing
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the rate at which the money's coming out of the high tech the mag seven
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right now. And this is tip theoretically the spart money. They just don't
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want to take that. They've said, I'm taking the risk off the table.
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But don't forget during the dot com the market peaked in March, the
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IDEs of March, they're right in there. But it rebounded and came back
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up at September. Then wasn't a new hide that was then that capitulation happened.
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So this may drag on for a while, but it doesn't mean it
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keeps on going. And we've kind of stalled here right now, and I
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think there'll be some corrections and some attempts at rally now as we go on.
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All right, our opinion, it's sharing that with you. So the
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GDP and GDI, so gross domestic product gross domestic income. They're diverging too
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big timing And for those that don't know what GDI is gross domestic income,
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it's it equals the GDP. Now there's a slight little discrepancy for timing and
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what selected, but since Bidenomics has come in, it's exploded in terms of
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the difference. And in a double accounting system, they're always supposed to equal.
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So if you're going to the next chart, it shows you just the
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magnitude and this is the government try and get the GDI numbers out of the
18:10
government. But anyway, this shows you the GDI on the left and the
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GDP on the right, showing you Q three and Q two of twenty three
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in the difference for example Q three one point five revised in the GDI,
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where's GDP was five percent? And then when you do a year over the
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year, how dramatic it's been. So the economy is saying GDP is really
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great, but why where's the GDI. And if you go to the next
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chart, it just says it's about printing money. It's not. We're not
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creating well. Actual fact, we're destroying well by the debt we're creating.
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And this chart says on the left is GDP on the writer's GDI. Because
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GDP measures herery as you will, well, no, and I know you
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know all this. It measures expenditures, what we're spending. So that's the
19:00
money that's coming in and where it's spent. In theory, everything that's spent
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should be some income somewhere, either to profits, to wages. The money
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flows out, so the income's on the right. So what's happening is inflation
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is really pushing up some of the income, but it's not really it's much
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much less than the money that we're spending on expenditures. And the reason basically
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is in the GDP formula, we borrow money. It's called investment income.
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Then it's difference. It's because the government has in the government spend it.
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It's G for government. That's the three elements consumption, government income. So
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the government spends it, we add it up again and then it goes as
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transfer payments for social security benefits, specific targets. That's called consumption. That
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goes up again. And that's what GI is really showing you. You're saying,
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hey, something seriously amiss here. And remember when this was all put
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together. We were on sound money, we were on a non feit currency.
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So the possibility when we had to settle in gold at the end of
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the year, said Pete, it's got a equal, But when we settle
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with credit, it doesn't equal. So the system is fundamentally lowed. But
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it's not in Wall Street's interest to tell you that, all right, And
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you can't keep on going when you have this way, when you're growing your
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national debt against GDP at this rate, it can't sustain. And that's assuming
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the GDP's reft, which means the day of looming is much much sooner than
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we think. And I'm not trying to be negative, I'm just being honest
20:33
here. Yeah. And the reason, if you notice, the thirty year
20:38
bond now is tracking exactly in line with what the credit default swap is for
20:45
the nation. So the yield on a thirty year and it goes almost down
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to the ten is mirroring the growth in our GDS. The yield rate that's
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going up as opposed to the CDs rate for it, that says money is
20:57
really frightened about our ability to continue to have foreigners hey for a debt.
21:03
And this goes back to your comment Harry about bitcoin and gold. That's a
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reflection of these charts you're just saying. They're saying the central banks are buying
21:15
gold big time, and some of the major players are beginning to get into
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gold right now, are only beginning. They're not even close to really buying
21:22
in, but they're starting to say, hey, I'm looking at it.
21:26
And you see that with the sales of the ETFs in bitcoin. All right,
21:30
Well, anyway, I did me. I went on on on here.
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I was loooking for some questions. Tell me where where you think we're
21:37
wrong? Carry No, I got to say, I agree, Yeah,
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you know, you just basically statistically proved what we've all known. Yes,
21:47
we know there's something wrong. It's like, but how do I conclusively see
21:52
it? And that's what I believe. These charts begin to tell you.
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We have all sorts of others that go behind it, but it's there if
21:57
you's the backs are there if you want to look, yeah, that's the
22:03
big if. Well, Gordon, just tell us where we find you.
22:06
By the way, if you're listening on the podcast, there's a link in
22:10
the show notes going to the dropbox that will give you all of these charts
22:15
gift from Gordon, and we'll put it in the YouTube description too. I
22:22
don't know if you'll be able to do it or not, but we'll put
22:25
the link to the charts there, even though you've been seeing them as well.
22:29
So Gordon, hey, just tell us where we find you, how
22:32
we connect with you on the web. Yeah, please, As you saw
22:34
on the chart so Matassi dot com. We have a free newsletter out weekly
22:41
with chart packages. Because everything I shown you things change, so you know,
22:47
that's where we kind of update what we're seeing and things that are that
22:49
are changing. And we welcome everybody to join us. All right, Hey,
22:53
if you have any questions, are you having problems downloading those charts,
22:57
shoot me an email k l Well at Carrie LUTs dot com. We'll get
23:00
you an answer. We'll get you a link, and all of this is
23:04
in the show notes to the site Financial Survival Network dot com. While you're
23:11
there, sign up for your free newsletter. Gordon, always a pleasure,
23:15
Thanks for stopping by, Thank you, carry, Thank you very much.
23:18
I enjoyed it. Thanks for listening to Carrie Letz's Financial Survival Network your solution
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to today's trying times. For the latest go to Financial Survivalnetwork dot com.
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