Disclaimer: The following is for INFORMATION PURPOSES ONLY and is not financial advice.
At this time, we are issuing a BLACK MONDAY ALERT. This does not guarantee a stock market crash on Monday but means that the conditions are very favorable (Central Banking intervention notwithstanding).
Our followers know this market move was not unexpected. In fact, we warned that the bond market was signalling a turn lower a day BEFORE the overall markets started to sink last week. As the week ended, we had the largest drop in the markets since Brexit and by some measures, since the last financial crisis. Keep in mind this comes on the heels of the most overbought, highest credit risk market in the history of mankind. This combination of such a massive market bubble, followed by such a big drop is a recipe for a major market crash.
To us, this is not a surprise. This has been coming a long way off. The markets started to turn lower in 2015 with some historic drops in it's own right (remember that -1000 down day on the DOW?). By many observations, the market was crashing at that time, and we thought that was the next financial crisis. But just as things were heating up, the central banks (specifically the BOJ and the ECB) both stepped in with even MOAR stimulus and managed to keep the markets going to where we are today.
Theoretically, the central banks could keep this going for a while. They could continue to expand their balance sheets, taking turns buying each others bonds, and equities while expanding their balance sheets in the form of national debt. This could go on as long as 1) central banks continued to collude, 2) the citizens don't realize what is happening leading to a revolt, and 3) REAL inflation (the cost of goods and services to the average citizens) does not get out of control.
So far, while inflation has been most of the stock markets gain (see central banks balance sheets compared to the stock market below), the inflation has been limited (and I say that with a grain of salt) to the stock market. Yes, there has been inflation in the real economy and we see this with the cost of housing and food prices especially. Have you noticed food packaging/serving sizes getting smaller? That is stealth inflation. Unfortunately, CPI doesn't do a good job of tracking inflation as much as it does justifying why the FED has been able to get away with ramping up the national debt at an exponential rate (more than half of the national debt was created in just the last 10 years).
Inflation has been managed by 1) keeping interest rates low, and 2) central banks buying bonds. The latter is really irresponsible and should be illegal. It's akin to taking out another credit card to pay of the balance of your first credit card in order to keep your credit from going into default. You go deeper into debt in the process and eventually you can't get any more credit cards.
Now Central Banks have an endless supply of credit cards in the form of the money... err I mean CURRENCY they create (there is a difference). However, at some point the currency loses value and bond prices fall. When bonds fall, yields go up. Interest rates are tied to yields. As interest rates go up, the cost of the debt (like that debt on your credit card) get's more expensive to pay off. Defaults begin to mount. This drives the currency down even further and interest rates even higher until the market finds a bottom.
Those who have been following us should know this by now but it's worth repeating. It's an essential part of basic economics that most people were never taught (by design). If people had a clue about basic economics (or even recent history), they would have thrown a fit with regard to where we are today.
It's no secret that the dollar has been losing value. There are many reasons for this and despite what the talking heads said in Davos a couple weeks ago, it's not a good thing and it didn't happen overnight. It's steadily losing it's value since the market started to crash in 2015. It spent a good portion of 2016 and all of 2017 consolidating and in recent weeks resumed it's technical downtrend.
This is a very important development. It was confirmed earlier in the week when we witnessed HYG (high yield bonds or credit markets), LQD (corporate bonds), and TLT (20 year treasuries) all resume their downtrend on the weekly/monthly chart. It sends a strong signal that the 30year bond market is ending.
The problem we face today is that the bond market can't move lower without triggering defaults across the financial spectrum but especially with credit cards, student loans, corporate debt, high yield debt (includes subprime auto) to name a few. You see, despite what the talking heads in Washington or the MSM have been saying, the problem is now worse than the height of the financial crisis of 2008 as there is more SYSTEMIC RISK in the market today than ever. They've been playing you like a fiddle. The sooner you realize this, the better off you'll be.
The truth is defaults have been on the rise for a while (months). The whole time, the market was making new highs. The financial markets were overheating while the real economy was blowing up. We've been reporting it the whole time it was happening but people just don't like hearing bad news especially when it flies in the face of their "EVERYTHING IS AWESOME" narrative. The same could be said for every financial bubble in history. They didn't call it the roaring 20's, the booming 90's, or the housing boom for nothing. All of these events led up to sharp market drops. The same can be said today except for one important fact. Never in the history of mankind has there been so much debt outstanding or so many bubbles at one time. I mean this when I say that it is the worst economic situation in history.
So that covers the bond market. And while defaults have an impact on the stock market in time, what gives with the stock market this week? Just because bonds are dropping off a cliff, it doesn't mean equities have to as well. In fact, if equities maintained their climb, it would just be business as usual. The dollar has been in decline since 2016. So why all of a sudden do equities drop now? Why are big stocks like AAPL falling when they had positive earnings?
This is where the plot thickens substantially. You see, there were other things happening this week. As the bond markets resumed their downtrend, there were two very important events. First there was the SOTU (State of the Union), where we heard once again how awesome everything is despite the fact that markets were falling before/after the address - a clear signal of who is to BLAME. Then the FISA memo was released on Friday and revealed some (but not all )of the inner workings of the deep state, how the DNC was involved in facilitating a politically motivated FISA warrant against Trump in an attempt to prevent him from becoming President.
Trump took this personally and is getting tired of the McCarthiest Russian meddling scandal that continues to this very minute despite any real evidence to support these claims. Instead it's a logical fallacy of argument ad nauseum in the MSM where if you say something enough times, people believe it. Let me assure you, if there was any evidence, we'd know about it by now.
Trump is many things. He's a narcissist. He is a pathological liar. He is charismatic. Like many politicians, he knows how to say what people want to hear. But he's not a Washington insider as we can see from the actions of the DNC, the DOJ, and the FBI. He was not pre-selected by the ruling class. Despite Trump trying to work with the ruling class by way of attacking Syria (where the MSM creamed all over themselves with high praise) and the tax bill that was recently passed, they do not control him like they do Pence or Hillary or most every other politician on the Hill.
Folks, the deep state is real. If you question this, then FOLLOW THE MONEY. Understand that BRIBERY IS LEGAL IN AMERICA and see for yourself who is in control.
Despite campaigning that central banks were reckless and that this has been mainly a false recovery (true statements), Trump quickly changed his narrative (we said he's pathological) and took credit for the stock market rise since he was elected. Then he passed the tax plan into law. Despite all of the actions that have created this "everything bubble" that preceded Trump, he now OWNS the economy. The ruling class elite now have the perfect fall guy to blame the next economic catastrophe on and this will guarantee a one term presidency and possibly an impeachment. And if that doesn't work, we don't rule out a "plan B" courtesy of the CIA. Lord knows they've done it many times before both domestically and internationally. Why would this time be any different?
SO WHAT HAPPENS NEXT?
While Central Banks CAN step in like they've done many times since 2008 and just buy up all the equities and bonds by creating more money out of thin air and adding it to their respective national debt, I'm not convinced they will. I believe they want to pin this on Trump. Then, after the market has crashed and the economy is in ashes, they will provide us with a savior from the two party system which they control to act on our behalf and rescue the economy by way of even more central banking stimulus, combined with widespread censorship (Orwellian thought police), and predictive crime algo's courtesy of A.I. (they arrest you BEFORE you commit the crime). Freedom of speech, the right to bare arms, the right to privacy, the right to a speedy trial, will all be countermanded by other laws like NDAA and new legislation the likes of Orwell's "Animal Farm". It's already happening. If you don't see it for yourself, they you might want to start paying more attention to what is being reported in alternative media and become more adept at critical thinking and spotting logical fallacies because the MSM has become a full blown propaganda machine.
In other words, they are going to crash the market ON PURPOSE while profiting from it on the way down like they did during the financial crisis (remember Hank Paulson LAUGHING about it afterward?) in order to restore their control of the Presidency while furthering their agenda of the neo-feudalist police state. They will continue to extract every ounce of wealth from the masses until they have total control and we are all living under prison guard. We will ALL be slaves.
Or not. Maybe I've just read too many articles on Zero Hedge or RT.
Personally, I don't see that happening. Even if they get rid of Trump and declare martial law, I think it's going to be a lot harder this time around to get control of the public. If you thought Occupy Wall St. or the Tea Party movement was a big deal, wait until you see what happens after the next financial crisis. I do not anticipate people putting up with big banks, central banks, corrupt politicians, or the MSM. Folks are going to be PISSED esp. when they are starving because of food shortages or find out via Wikileaks that this was all orchestrated by a corrupt powerful few colluding together to push their agenda. Revolution, civil war, riots, terrorist attacks, looting, social collapse, are ALL ON THE TABLE. Maybe that's what the ruling class wants. Maybe this gives them the perfect reason to step in with the police state. Maybe folks will be happy to hand over their civil rights in exchange for some pesticide laden, GMO, rations and an end to the violence.
If so, those people don't deserve to be free. They deserve what they get.
Maybe this provides some perspective into why we are not looking forward to the days/weeks ahead. We anticipate a large move lower and the central banks to refrain from more intervention. However, if the central banks DO intervene, then bonds and/or stocks could bounce again like they did in 2015. I just don't see that happening though. They need this downturn to occur in order to allow the defaults to clear the system and the NEED someone to blame it on. Now is as good a time as ever.
If you value your life and that of your family, get your money out of the bank. Get it out of the markets. Diversify into hard assets like gold/silver, items that have utility like guns, tools, and blockchain technology. Consider leaving the United States. You don't want to be here when this all goes down. And there is no guarantee that the US won't start a nuclear war in the process in an attempt to distract people from what is happening at home. Understand that the people who run the deep state are psycopaths.
We are still bullish on precious metals and crypto's. Still very bearish on the stock market and bonds. Until I see central banks step in, it looks like the "everything bubble" is about to pop... and it's NOT going to be pretty.
Act Accordingly,
The Market Vigilante
p.s. The more AWARE you become, the more insane you appear to those who are still ignorant. In anticipation of some folks calling us out as batshit crazy, we have included some recommended viewing in order to help you see the truth for yourself.
Rule from the Shadows - The Psychology of Power
America's False Flag Attacks by Abby Martin
The Deep State: The Unelected Shadow Government
We Are Change | What Is The Deep State? Explained
What Is The Deep State? James Corbett on Financial Survival
Eisenhower Farewell Address (Best Quality) - 'Military Industrial Complex' WARNING