Bond Market Getting Hammered As Longs Throw In The Towel | The Economic Ninja
Summary
Transcript
The bond market’s melting up. Rates are going up. It’s going to affect everything from mortgage rates to everything. We buy it in our lives. Between Jerome Powell and O. Biden, and I said it, they are trying their hardest to keep things at bay, to keep things here. Let’s adjust the camera here. Let’s boom to keep things looking positive, to get you thinking that everything they did was good, that biodynomics worked, that the economy is going to have that soft landing, but it’s actually imploding right now.
We have a massive banking crisis happening. It has started in 2023. It’s happening right now. I know it’s not in the headlines, but you’re going to find out soon enough. Things are bad. And the bond market, the longs are throwing in the towel because rates are going higher. And so the value of their holdings, the bonds that they purchased, let’s say a day ago or couple days before that, are going down in value.
Even if it’s unrealized losses. That’s less money that they’ve got to play with in this game we call the stock market or the bond market. Okay. The story out of zero hedge is really important because I want you to think back to what Jerome Powell said last August. They don’t even need to raise rates anymore. The bond market’s doing it for them. And what most people thought was, oh, yes, finally, you’re going to stop raising rates because all they care about is lowering rates.
Right. But here’s what’s very important to understand. When they say the bond market’s going up completely opposite of what the Fed’s doing, right. That means that people are scared. They are demanding more money in the form of interest from the government to loan the money. That’s very, very bad that’s happening right now. We are in a moment where we see gold at an all time high, bitcoin right off its all time highs.
It’ll be back up there pretty soon before you know it. And sure, yeah, you see the S and P and you see the Dow hitting those all time highs, but that’s, that’s an increase of inflation. That’s because people are diving in the stock markets, begging for yield similar to what we saw in the 2023 bank run when people were pulling all their deposits out to shove them into money market accounts because they’re like, we have to get yield because we’re losing money to inflation, which is a hidden tax type one.
If you agree with that, this story out of zero hedge is really important to pay attention to because of this very situation, says bond longs throw in towels. Upturn becomes, becomes undeniable. Positioning in us treasuries is becoming less long as the risk of persistently higher yields increases from a cyclical strong us and global economy. Leading data have been vindicated in projecting a us and global cyclical upturn. That coincident data are now unequivocally confirming.
Monday’s release of the March ISM showed the index is back into expansion territory, matching the message from the manufacturing PMI. The US manufacturing ISM is not only the best cyclical barometer of us growth, it is also the best single gauge of global growth. Given this sector’s outsize importance to the world economy. Now a lot of people would think when they hear that, they go, this is great. That means ninja.
There’s no crash, the economy is growing. You always have this interesting time where before a collapse things expand. I call them a blow off top during anything, any cycle. Real estate, we’ve just recently seen that where the velocity of transactions, so little transactions happening. But it’s that everyone’s focusing on the lowest price tier of homes. Oh look, they went up 1%. No, that doesn’t matter. Look at all the top end of the inventory collapsing in price because nobody has that much money.
Everybody’s got this much money, but not everybody has this much, right? And so it’s that little bit, that little run, but it’s fake, it’s nothing. It’s like bitcoin on certain days when it goes up 10%. But it’s because there’s so little volume. There’s so few people out there trying wanting to sell it, and there’s more people wanting to buy it, which means it pops and everyone gets excited.
But the second anybody of substance any big accounts go into sell, it collapses the market. I’ve seen this myself, where I’m the whale. I’m the one trying to sell three times the daily volume on the stock market. I’m not joking. There’s been times where I’ve done that in canadian markets on certain assets. And I’m like man, I can’t even liquidate what I’ve got. And so I’d have to do it in small little tranches just to be able to get it out there so I don’t crash the price or freak a bunch of traders out that are trying to buy the stock.
This is how economies work. Economics works, right? Supply and demand. But if you’ve got some demand and you’ve got a ton of supply, you got to ink it out there. Well, so a lot of people would think, well, no, this is great. You know, the economy’s strong. No, you see, our GDP right now is based solely off of government spending. The government’s spending a ton of money on war.
And they’re put building a ton of warehouses right now and factories in America. They’re not staffed. They’re not full. Okay? They don’t have businesses in them right now because they’re scared that we’re gonna lose the manufacturing base in Taiwan when China invades them. So we’re trying as fast as we can to get those semiconductor companies over here. There’s so much at play right now, and most people don’t realize it.
And this is an exciting time. Now think about this. It says here the new orders to inventory ratio is a very good short term leading indicator for the ISM that’s been turning up for several months. But even before that, there were strong signs from longer leading data that the slip in the ISM was likely to be short lived. The chart below, I can’t show you the chart right now, but it says bond investors might be getting the message that recession risk as a consequence is very low and that inflation risk may be higher than they initially thought.
So here’s the deal right now. That phrase right there is full speculation because I can guarantee you a lot of bond investors are saying, I’m not willing to put out ten years of my money for whatever the rate is today. I want more interest. So they’re holding off. That’s proven. That is absolutely 100% proven by the fact that we have seen a handful of bond auctions that the government’s put on in the last year where no one showed up.
And the tail, you know, being the, let’s say they’re offering, you know, 4% on a bond or 2%, whatever the. And by, let’s say 4%, hey, we’re going to offer 4% on x bond, right? With a maturity of x times ten, whatever it is. They go, nobody shows up and they go, crap. Let’s do. Let’s do a little bit more in the interest rate. A little bit more.
And by the end of the day, they’ve, like, had to increase by 25 basis points. And now they got to pay everybody that bid on that bond for that auction, that extra interest. And that’s the tail. So it’s been proven many times. There are people less and less countries, less and less investors, less and less funds showing up to buy us government debt. Okay? So that’s the fear part.
Now the, the speculation is, oh, no, we’re going to get out of recession. No, it’s because the government data is so cooked. It’s like unemployment numbers. The government doesn’t care that you have to work two part time jobs because of screwed up fiscal policy. And here’s another thing I’ve got to say. You know this debacle that’s going on in California, think about this. Because it’s not just California and New York, right? It’s the federal government putting their hands in the cookie jar, too, and forcing companies to pay their employees benefits if they work in x amount, a certain amount of hours.
So the companies go, all right, fine, let’s just cut everybody’s hours. So now we’ve skated that. What about the government to go, okay, we’re going to now raise the minimum wage to x, okay. Companies like, all right, cool. We’ll just lay people off. See, the government should not be in companies if you don’t make enough money. We live in a free nation. You should just leave and get a better job.
Right? But what happens is the government doesn’t want that. The government wants to shove their little thumbs and hands in it because they make money every time they do. And they get more powerful because they’re, they’re essentially buying their voter base, right? But what the, the voters don’t understand is they’re also destroying your jobs by taking away your freedoms. Because people just get fat, dumb and happy sitting in their, their $20 an hour job and like, hey, this is cool, man.
And if I need more money, the government’s just gonna make my company pay me more. But you don’t realize all the people are being unemployed. But here’s the thing that’s even crazier right now. So the bond market’s going up, right? Hold on, let me grab a sip of coffee. The mark bond market is going up right now. Hold on. Don’t want to be rude. That’s going to interest rates.
Mortgage rates are going higher. It’s only to put more pressure on real estate market. Right? Like I’ve been talking about. It’s been my thesis all along. You have so many things hitting the real estate market. The greatest wealth effect in humans minds is real estate wealth effects. Second only to our, first only to whatever way you say it, stock market wealth effect, right? So you’ve got these. The government is out right now printing a trillion dollars every hundred days.
And I believe that within the next two years, you’re going to see the government printing a trillion dollars a month. And I know it sounds crazy. They can’t keep doing that. It’s no longer in effect. Why? Because countries are not buying our bonds. Okay? Bond market’s going up. All of this comes into play. Type two if this makes sense to you, type three if it doesn’t, if I’m explaining it properly, because I’m trying to break this down to such a simple level, not because you’re not intelligent, that I don’t believe that.
What I want to do is I want to reach everyone. I want to reach people that never thought of themselves as an entrepreneur or business owner. I want to reach people that never thought of themselves as an investor or people, especially people. And it probably is most people that never believe that they could be wealthy, okay? Because what I want to do is, once I break down these very, what seem to be complex systems, right, into simple edible chunks, you can then take those chunks and make better decisions when it comes to your future.
I mean, look at what’s going on. The gold rush hasn’t even started yet. We’re at, what, 2300 bucks? We talked about buying gold, and I was hammering it two years ago. Now I’m like, okay, I sort of talk about it a little bit. Then I was. I started diving back into crypto last fall, right? I’m like, all right, you need to start looking at this again, right? And figuring those cycles out.
And we still have quite some legs under bitcoin now that the ETF’s out. Now the ATF’s out. It’s a game changer, because get ready. There’s some ETF’s coming for Ethereum and probably XRP and maybe even Solana. That happens. Holy cow. The amount of money that’s going to shove into those markets is going to be insane. People’s faces will melt off. I’m not joking. It’ll be like the end of help me, raiders of Lost Ark.
So the whole time right now, and people, you know, like Dave Ramsey and Barbara Corcoran and Mister wonderful are all telling you that homes are about to explode. Please understand this. They only make money if you’re buying homes. This is how they became wealthy. They’re lying to you. They know exactly what’s going on. They’re selling their own homes. This is. I mean, I’m not even joking. Like, there are people out there that are cheerleaders for the real estate market.
And this story that I just showed you about the bond, bond longs throwing in the towel, ten years pushing up, that is going to make it very difficult to buy a house. And I’m telling you, I’m looking right now at the million plus range in homes and they’ve already taken a 20% to 40% bath in Nevada, in California, in Tennessee. Let me give you an example. I have a subscriber in Tennessee that shows me that his house has already dropped 50%.
Well, he’s in the multi million dollar range and I’m sure a lot of people don’t care about that range. I’ll just ask type five if you could care less what a $2 million home is worth today because you’re focusing on 500. Type six, if you’re like, no, that’s important. And I think it’s important for you to vote. And the reason why is because this, when you see the top ends of homes, the higher end of homes, just like what happened in 2007, start to fall.
That shows you what’s coming next. You see, because the real estate market’s going to collapse because of a liquidity crisis, because banks are not going to lend because of problems in the lending sector, and they’re seeing all homes starting to fall. And what’s even crazier is the average price and the median sale price, which take into account the lowest priced homes in the nation have fallen 8% since 2022.
This is awesome. As a matter of fact, it’s almost at the full length of the great Recession numbers yet you don’t see that in the news articles. Very few people understand how big of a deal this is and that’s why I want you to be ready for it. Now, I do believe, I’m not joking. The fed’s going to drop rates a couple of times, maybe three, and they’re going to probably be 325 basis point cuts.
They’re going to do it sometime in mid summer. And they’re going to tout President Obama. And I only say Biden because Obama’s running the place. So type ten, if you agree with that, they’re gonna tout and they’re gonna try and get a bunch of voters in, but we all know that’s not the case. And then what they’re gonna do, just like 1972, just like 1980, early nineties, and even a little brief moment, 99, 2000, those rates are gonna go from going down a little bit to spiking like you wouldn’t believe.
And that is where we are going to crush it in real estate when everyone else is freaking out and they will call us crazy. Trust me, you want to be in that crazy club. Hope you got something out of this. The economic ninja is out. .
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