Even with massive financial interventions nothing is contained.
October 14 (King World News) – Gregory Mannarino, writing for the Trends Journal: THERE IS SOMETHING VERY WRONG WITH THE PICTURE WALL STREET IS PAINTING.
AND THE GREAT DIVERGENCE IS WIDENING FASTER…
MAJOR KEY POINT. The Fed/Treasury Complex HAS now completely weaponized the financial system against our country, our economy, and the US middle class… all of which are being sacrificed to keep cash flowing into risk assets/the stock market.
And the economic effect is devastating.
Last week consumer CON-fidence FELL AGAIN! And is deteriorating at a pace not seen since the “financial crisis.”
Household financial stress TODAY is now EXCEEDING that of the financial crisis.
Oil remains above $100 per barrel.
And geopolitical tensions are continuing to escalate across the world’s most critical energy transportation routes.
The disconnect/gap between rising asset prices, (stocks), and mounting financial system pressure, accelerated currency devaluation, artificially suppressed rates, VAST debt expansion, ALONG WITH OFF THE RICHTER SCALE deficits ARE BLEEDING OUT across the entire US economy and the middle class is getting BLASTED again on a scale not seen since the 2008 financial crisis/Great Recession.
THE GIANT ELEPHANT IN THE ROOM.
As you are well aware, if there is one part of this “market” I want you watching above all others, it is the US Treasury market…
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A QUICK REVIEW.
During the past week, the benchmark 10yr Treasury yield surged to 5.36%, its highest level since 2002.
THEN CAME A MASSIVE US TREASURY “INTERVENTION” WITH AT LEAST 4 BILLION IN DEBT PURCHASES. And with that, the US 10yr CRATERED… dropping to 5.24% which sent stocks higher.
NOTHING IS CONTAINED.
MAJOR KEY POINT. The Fed/Treasury Complex is actively managing market “liquidity” through debt buybacks up hundreds of percent, while the Federal Reserve itself is sustaining “monetary policy” liquidity facilities/reserve management purchases (backdoor QE).
WITH THAT, THE STRUCTURAL DEBT FINANCING PROBLEM CONTINUES TO WORSEN.
AND NONE OF THESE ACTIONS, ELIMINATES THE UNDERLYING DEBT OR THE INTEREST REQUIRED TO SERVICE IT.
EVEN WITH RATES BEING ARTIFICIALLY SUPPRESSED, US DEBT AND DEFICITS ARE EXPANDING AT A RECORD PACE.
Who wins and who loses?
- Stock prices can/and will likely continue higher AS LONG AS, they can keep bond yields from a rapid uncontrolled rise.
- That same mechanism is MASSIVELY INFLATIONARY… therefore, wiping out the purchasing power of the currency, and further blasting the consumer and the US economy across the board faster.
MORE “INTERVENTION” REQUIRED…
If increasingly aggressive intervention becomes necessary, (COUNT ON IT, AS THE FED ITSELF ADMITTED THAT IT IS PREPARING FOR DEBT MARKET DYSFUNCTION), that would be an unmistakable EVEN STRONGER WARNING of deeper financial system stress… which would hit the economy/middle class even harder but, it could also potentially INCREASE/WIDEN the gap between the economy and the stock market…. AND THE GREAT DIVERGENCE WILL AGAIN WORSEN.
AS YOU KNOW, THIS HAS GONE GLOBAL.
MAJOR KEY POINT. European sovereign bond markets have also been experiencing significant pressure.
Why is this so important?
Because government bond markets are ALL interconnected through global capital flows, banking institutions, and currency markets.
AND NOW THE IMF (International Monetary Fund), HAS ISSUED A NEW WARNING.
The IMF is warning that global public debt is approaching historic extremes (their words not mine). Hitting levels NOT BEEN SEEN BEFORE EVER.
Then We Have This…
THE AMERICAN CONSUMER WIPE-OUT IS RAPIDLY WORSENING.
MAJOR KEY POINT. Friday’s October University of Michigan Consumer Sentiment Index fell again… hitting to 46.3, compared with 48.1 in September with the Current Economic Conditions Index declined to 44.7, a record low. (Worse than that of the 2008 “financial crisis.”)
Stock prices are near records.
And yet even with all this, stock prices continue to rise…
THAT………….. IS THE GREAT DIVERGENCE BECOMING MORE VISIBLE IN REAL TIME.
AND IT GETS EVEN WORSE…
The lower tier middle-class. (Lower-middle-class household incomes in the US range is from $30,001 to $58,020), indicates sharp deterioration in households.
THEN WE HAVE THIS….
The Federal Reserve released its 2025 Survey of Consumer Finances, comparing family finances with conditions in 2022…
The share of US families reporting late loan payments increased from 12.2% to 19.6%.
MAJOR KEY POINT. And this leads us directly to what I believe is one of the most important questions facing the US economy.
Here is THE question…
How much longer can higher middle class income households offset the financial deterioration of the US economy?
The truth is this… even upper-level middle-class households are breaking, as the economy continues to worsen faster…
Now again consider the stock market as the “Great Divergence” widens.
Friday’s stock market gains capped another positive week for the major indexes. The S&P 500 advanced 1.2% for the week. The Dow gained about 0.9%. The Nasdaq rose approximately 0.6%.
AS YOU ALL ARE VERY WELL AWARE.
A STRONG STOCK MARKET DOES NOT MEAN A STRONG ECONOMY.
IN FACT………….. ITS JUST THE OPPOSITE.
- AS DEBT EXPANDS, STOCKS TRADE ON HIGHER MULTIPLES.
- AS THE CURRENCY LOSES PURCHASING POWER, IT COSTS MORE DOLLARS TO BUY ANYTHING, EVEN SHARES OF STOCKS.
- BOND YIELD SUPPRESSION FORCES CASH TO SEEK YIELD, AND THEREFORE PUSHES CASH INTO RISK ASSETS/STOCKS.
- AS FOR THE ECONOMY/MIDDLE CLASS… 1, 2, AND 3 ABOVE, EACH ACT IN CONCERT WITH THE OTHER AS A WIPE-OUT MECHANISM/WRECKING MACHINE.
HERE ARE TWO WARNING SIGNALS EVERY LION SHOULD BE WATCHING.
1. THE 10YR TREASURY YIELD. Does it move back toward the recent 5.36% high? Or even higher? Or does it drop on more Fed/Treasury Complex intervention?
2. BRENT CRUDE AND GLOBAL ENERGY SUPPLY. Does oil remain above $100? Climb further? Or retreat on some kind of political headline propaganda?
FINAL MAJOR KEY POINTS.
FINANCIAL SYSTEM PRESSURE IS RISING WITH UNPRECEDENTED FED/TREASURY INTERVENTION ATTEMPTING TO KEEP IT “CONTAINED.”
WITH THAT, EVEN AS THE COST OF FINANCING HYPER-BALLOONING US DEBT IS SUPPRESSED VIA LOWER RATES AND THEREFORE FURTHER/FASTER CURRENCY PURCHASING POWER DESTRUCTION, THE NEGATIVE CONSEQUENCES WILL SPREAD THROUGHOUT THE ECONOMY FASTER…
AND US THE MIDDLE-CLASS WIPE-OUT WILL WORSEN… FASTER.
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