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