Bonds Signal Stock Rally Running On Fumes

Stocks had their worst day in six weeks on Thursday and the bond market was right there to confirm it.

The 10-year note closed with a yield of 0.59% on Thursday, the third-lowest close in history (lowest, 0.54%, 3/9/20). The 30-year saw its lowest close since the end of April, checking in at 1.24%.

Altogether, the treasury complex has been crammed down to a 115-basis point spread, significantly flattening the curve, a signal for more challenging times at hand.

Overall, bonds have not been playing along with the recent market recovery. As the NASDAQ soared to new highs, treasury bonds were latent, barely budging off the lows set down in March. What the flight into the safety of bonds tells the go-go equity community is that their rally has no long-term legs even though the Federal Reserve has set up more than a handful of equity-boosting schemes that buy up corporate, municipal, and junk bonds at overpriced levels just to keep the stock market rally going.

Because of the Fed's recalcitrance toward any kind of sanity in stocks, bonds prices will remain high and stocks will continue to rise. It's all part of the scheme by the government to keep stocks in bubble-land in order to not trigger a complete loss of faith in the Fed, debt-based fiat currency, fractional reserve banking and a crisis in public and private pensions, most of which are severely underfunded and heavily invested in Wall Street's darling stocks.

It's a recipe for disaster, or at least delaying a disaster until the bills come due and all the institutional money has left the building, leaving retail investors with smaller 401k accounts and pension funds with a big fat hole in their actuarial tables.

Anybody who has studied charts just a little bit should be able to point out the fallacies in the recent "V"-shaped stock market bounce and extrapolate out six months to a year of slower economic growth, or, putting it correctly, declining GDP, lower earnings for the S&P 500, rampant unemployment, and currency debasement on a level not seen since the Weimar Republic or the more recent hyperinflation in Zimbabwe.

According to the Shiller PE ratio - otherwise known as CAPE - stocks are currently trading at levels equivalent to those seen on Black Tuesday in 1929. Only during the dotcom mania of 1999-2000 was the CAPE ratio higher. The March downturn was barely a blip on the CAPE chart. Stocks were already overvalued. Today, as the recovery from the COVID crisis and government lockdowns has not even begun, they are even more overvalued, setting up a condition ripe for another waterfall event like the one in March.

All that's keeping stocks from imploding to more reasonable levels are the Fed's emergency measures and the massive stimulus already on the books from the federal government, with more on the way. At the federal level, the Fed's money printing and profligate spending by congress and the president are not about getting Democrats or Republicans elected in November. The graft and corruption hasn't taken sides. It's about all of them fearing for their coveted positions atop the gravy train, where they make the rules and don't have to keep them, where they benefit from insider knowledge, where they live in luxury while the rest of the country devolves into violence, disruption, and poverty.

Government officials, Fed operatives, and wealthy investors are getting their bread buttered on both sides while Main Street and Joe Sixpack get the crust and crumbs.

Trillions to Wall Street and a $1200 check for the rest of you. Sounds like a campaign slogan Bill Gates, Jeff Bezos, and Warren Buffet could get behind.

The solution is rejecting the false facade presented by Wall Street and their cohorts in Washington, DC. Cutting back on expenses, opting out of public education, becoming more self-reliant, and buying gold, silver, and hard assets will free Americans from the tyranny of monetary fakery and fiscal irresponsibility.

Have a nice weekend.

At the Close, Thursday, July 23, 2020:
Dow: 26,652.33, -353.47 (-1.31%)
NASDAQ: 10,461.42, -244.68 (-2.29%)
S&P 500: 3,235.66, -40.36 (-1.23%)
NYSE: 12,510.87, -58.23 (-0.46%)