That’s a big part what’s happening now, and we’ll start with our move.
After nearly 200,000 words and 300,000-page views generated from over 100 Critical Signals Reports, we’re moving our reports (and an exciting new service) into an whole new phase at www.SignalsMatter.com.
Starting now, at www.SignalsMatter.com, you’ll be able to receive the same unparalleled U.S. and global market intelligence that you’ve enjoyed at the Critical Signals Report and even more. Take a look-it speaks for itself.
Described in recent CSRs, we’ve been hard at work at SignalsMatter.com to bring you a continuous flow of market and trading intelligence that’s miles ahead of the big banks and white-gloved experts. We’re dedicated to our mission of making the best service and intel available to all wallet-types.
This service also includes continuous and improved and greatly expanded updating on What’s Happening Now, Weekly Action Items, our Global Heat Map, Market Watch, Daily Best Charts , updated Sector Watch signals, What’s Ahead, our industry-leading Storm Tracker, and, of course, the Your Portfolio service, which gives direct signals on precise allocations, constantly updated to stay ahead of these markets, bull or bear.
SignalsMatter.com even provides subscribers with your own Market School, penned and filmed with simple yet blunt market lessons by yours truly.
Finally, Signals Matter provides a web-based tool that will enable you to do you own due diligence on investment picks, without leaving the site, by charting securities of interest with nearly 30 optional overlays and technical indicators, along with focused news feeds to keep you in the know. You’ll be able to be your own analyst, or leave the driving to us – your call.
Folks, we said this would be worth the wait, and we feel you’ll immediately agree.
We’ll be here at CSR until month’s end, so we look forward to your continued readership and wonderful comments in the next few weeks, both here at CSR and at SignalsMatter.com.
A New Risk: The Coronavirus
The coronavirus was top in the news last week, and now seems to be a much larger issue than was originally reported by the Chinese (no surprise there), the media, and even our own initial thoughts, based on the evidence then at hand.
In short, the virus could be much more dangerous than was originally reported, as death tolls are now surpassing the SARS virus numbers.
And yes, if the coronavirus goes even more viral globally, global GDP growth (lead by China) will be in for a hit.
The Chinese government, much like the dying Soviet regime during the Chernobyl disaster, has hidden its faults and embarrassments in handling the outbreak behind classic dishonesty and centralized incompetence.
Should this crisis get out of hand, it could become a massive threat to the country’s social and economic stability. In other words… Uh-oh.
The U.S. Fed was on record calling the virus a “new risk” to global growth last week.
China (the gorilla in the room when it comes to trade as well as transparency) could be in for a severe economic shock that will hammer growth, cutting the year-on-year numbers from 6% in Q4 2019 to half as much for Q1 2020, impacting Asia first and the rest of us next when it comes to global commerce.
The White House, in a stream of hope-selling late in the week, indicated that China’s Xi Jinping had reassured the U.S. that Beijing would stick to its purchase goals which were outlined in the phase one trade deal.
We’ll see. China can only do what it can do under such adverse and corrupt circumstances.
Here’s the rub, though: The coronavirus has risen to the level of an “outlier event,” or black swan that finance jocks call “tail risk” – a form of portfolio risk that can move markets (and your portfolio) more than three standard deviations from the norm, triggering all manner of market chaos and market moves.
Such sudden moves would include a flight to the U.S. dollar (which we’re already seeing and which hurts U.S. exports), sharp declines in trade and commodity prices, along with a whole lot less appetite for risk, which we saw on Friday when the Dow Jones tumbled by 277 points, almost 1%, clouding an otherwise sunny week for stocks, including, of course, Tesla…
Storm Tracker Is Watching
It has its eye on outliers like the coronavirus, as the impact spreads through changes in GDP growth, trend patterns, leading indicators, yield curves and our other critical indicators and pulse-checks.
Storm Tracker has since ticked up from 30% to 35% in the last two weeks…
We invite you to take a look at Storm Tracker by heading over to our new home at www.SignalsMatter.com and get your free download, How Signals Matter Storm Tracker Protects YOUR Portfolio. It will walk you step-by-step through the most trustworthy recession indicator out there.
Another Risk Ahead: Yield Curve Control
We do want to touch base on one other risk that’s Happening Now, namely late-cycle Yield Curve Control.
You know by now, and from all of our Market Reports, that in the wake of the late 2019 repo disaster, the Fed has pilled-on even more quantitative easing (QE) tailwinds to increase market complacency and straighten out the U.S. yield curve, which just won’t stop trying to invert.
We know that yield curves forecasted every recession since WW II (explained in the five-part Storm Tracker Series) 12 months out.
With that in mind, take a really careful look at the yield curves below for a display of what we are talking about when referring to Yield Curve Control.
The brown curve in the chart below plots U.S. Treasury yields six months ago – this was the ugly inversion that scared everyone.
The green curve plots yield three weeks ago. This was the far prettier slope attributed to the Fed for jumping in with even more QE to straighten the curve. Nice.
But now look at the ugly troughing/sinking yellow yield curve happening in real-time… it’s inverting again!
They just can’t get off the steroids.
Last week as well, the Senate sent a letter to Federal Reserve Chairman Jerome Powell seeking answers about this kind of ongoing (and extremely expensive) central bank intervention, especially when it comes to yield curve support and emergency repo intervention.
Remember when the Fed underestimated liquidity needs and overnight repo rates spiked, which required hundreds of billions of dollars to be pumped back into the money markets via a combination of repo loans and outright purchases of Treasury bills?
Worry is ramping up that we could see this movie again.
Former Fed Vice Chairman Stanley Fischer and ex Swiss National Bank chief Philipp Hildebrand opined last week that “unprecedented policy coordination” may be needed to deal with the next downturn, including central banks explicitly financing bigger government budget deficits.
In short: Expect the money printers to go into over-drive yet again, as we are facing a deadly dollar shortage in the credit markets.
In short, we’re low on dollar and rates ammo.
Think about it. The short-term Fed Funds Rate closed last week at 1.59%. But it takes at least a 3%-rate cut to get out of a recession.
Sadly, rates today aren’t even high enough to cut a measly 3%…
Nevertheless the narrative continues to be the same: Borrow, spend, reduce taxes.
Where Will All This Take Us?
Finishing up, you may ask just where the United States is headed in all of this.
Take a look at this last chart below for clues.
It displays yield curves for the U.S., the Eurozone, Japan, and China. We explained this elsewhere in greater detail, but for now, just take a look at the yield curves for the Eurozone and Japan at the bottom of the chart.
Out six to eight years, they are in negative interest rate territory, which is just plain crazy, and a deep warning indicator that the global markets – and central banks – are slowly running out of magical bullets.
And remember this: If our rates and bond yields go to zero or below, we’ll no longer be the best yielding horse in the global glue factory, but rather just another pile of glue…
Foreigners will have no interest in our debt, and yet we survive off issuing debt. Who will buy it? The Fed, of course, with more printed dollars.
This is alarming.
Long discourse made simple, the coronavirus could be the trigger that slows growth to levels below the currently anemic 2% annual rate (that’s before inflation, which means when adjusted for inflation, there’s just mathematically no growth at all).
That’s going to induce the Fed (and central banks globally) to pile on more QE, which is a tailwind for those holding gold as a long-term hedge against fiat currency risk.
Storm Tracker will track all of this and flash a higher defensive cash allocation. Remainder Allocations (described for Subscribers at www.SignalsMatter.com) will become conservative, as they have in recent weeks.
Before we sign off, we wanted to express our sincere appreciation for your continuing comments, especially Dean M.’s query last week on how we would explain the failure of gold to play a leading role, along with bonds, in providing protection against a likely decline in stocks and a dangerous monetary situation?
There’s a lot we discuss, Dean – here and here on gold – but think of gold this way: When there’s a fire in the bond theater (as in a global margin call on all the debt now in the system), just about everything gets sold in a desperate attempt to flee the scene and raise liquidity.
Lots of corporate bond holders will then have no buyers for their bonds, and they’ll get burned.
Come Join Us, We’ll Arm You with the Fire Alarms
We’ll continue to inform you via the Critical Signals Report through February, but if you’d like to get a head start, come on over to www.SignalsMatter.com and we’ll look for you on the other side where What’s Happening Now, What’s Ahead and Your Portfolio are continuously updated for Subscribers.
In the meantime, be watchful, stay informed and stay safe.
Matt & Tom
2 responses to “Yield Curves Are Moving – So Are Matt and Tom!”
February 10 2020