This will ignite a historic and terrifying stock market crash.
September 16 (King World News) – Gregory Mannarino, writing for the Trends Journal: Brent crude is now trading around $108 per barrel. US crude is above $100. If you are staring only at the oil price, then you are missing the story.
The oil shock has escaped the oil market.
MAJOR KEY POINT. Oil shock is now moving through transportation, food, inflation, AND the bond/debt market.
If bond yields continue to spike, (and do so in an uncontrolled manner despite unpresented Fed/Treasury complex intervention…)
Then… the stock market WILL be hit with A MAJOR… (AND I MEAN MAJOR…) REPRICING EVENT ON AN EPIC SCALE.
WARNING: THE ENERGY SECTOR IS LOSING ITS ABILITY TO ABSORB THE SHOCK.
The US/Iran war is not a brief disruption…
(what was sold to We The American People was a quick 4-5 week “campaign.”)
Which is now a SEVEN MONTH LONG WAR with no end in sight.
And with that… markets, AND THE US ECONOMY, cannot simply “wait it out.”
The buffers that have cushioned the initial shock have not just diminished…. THEY ARE VANISHING.
Saudi Arabia’s East West pipeline, one of the critical routes capable of bypassing the strait of Hormuz was hit by drones and shut down.
MAJOR KEY POINT. At the same time, commodity vessel traffic through the strait fell into the single digits per day.
Before the war, 125-130 large commercial vessels per day passed through the strait, carrying roughly one fifth of the world’s crude oil and LNG supply.
THE BOND/DEBT MARKET…. IT AS WELL HAS LOST THE ABILITY TO “WAIT OUT” THE WAR…
Listen to the greatest Egon von Greyerz audio interview ever
by CLICKING HERE OR ON THE IMAGE BELOW.
The US 10yr Treasury yield reached 4.99%. This is where the situation potentially moves from economically painful to financially violent.
Why?
Because A rapidly rising 10yr yield changes the valuation equation for virtually every financial asset.
MAJOR KEY POINT. If the 10yr moves from 5.0% to 5.15% to 5.30% or higher, but does so gradually/slowly, (in a controlled manner…) the stock market may not rollover into a violent repricing event.
However… if we see an uncontrolled spike, meaning 20,30, even 50 basis points jump in a single day followed by another…
THEN we are looking at a MAJOR repricing event which WILL send the stock market into a freefall… and I MEAN FREEFALL.
WARNING: THE ENERGY SHOCK IS REACHING FOOD JUST AS WE WARNED IT WOULD.
MAJOR KEY POINT. Fuel surcharges on US grain rail shipments have risen 153% from a year ago. Read that again…
US grain rail shipments have risen 153% from a year ago.
Those fuel surcharges now represent roughly 11% of total rail transportation costs for corn and soybeans. AND ITS FAR FROM OVER.
Here is the chain. Oil… diesel… rail… agriculture. (AND IT WILL WORSEN FROM HERE).
WARNING: THE FISCAL MACHINE IS GETTING WORSE AT EXACTLY THE WRONG TIME.
Now… lets overlay the federal debt problem.
The US fiscal year deficit through August stands at $1.97 trillion. THAT IS already greater than the entire prior fiscal year’s $1.775 trillion deficit.
Year to date interest expense is running at $143 billion, or 13%, above a year ago.
THE SYSTEM HAS DEVOLVED INTO SELF-CANNIBALISM… DEVOURING ITSELF MORE AND MORE JUST TO SURVIVE ANOTHER DAY.
MAJOR KEY POINT. The US Treasury can attempt to improve bond market liquidity, (and it’s doing so right now). Buying back the same debt its issuing…
THE TREASURY HAS TRIPLED THE SIZE OF ITS LONG END BUYBACK OPERATIONS FROM $2 BILLION TO AS MUCH AS $6 BILLION.
And yet… bond yields continue to rise.
Why?
Because The Treasury cannot “buy back” its way out of basic fiscal arithmetic. AND… every proposed “solution” increasingly, and exponentially worsens/bleeds off to another part of the system.
THE CONVERGENCE HAS NOW BECOME ONE FEEDBACK LOOP.
MAJOR KEY POINT. HERE ARE THE TWO NUMBERS I AM CURRENTLY WATCHING.
Brent at $108, and the 10yr near 5%.
Why am I watching those numbers?
Because if they accelerate together, and Brent starts pushing toward $120 while the 10yr Treasury yield breaks decisively above 5%, we WILL have two enormous pressures hitting simultaneously…
1. The energy shock attacks the real economy from below.
2. The bond market attacks asset valuations from above.
MAJOR KEY POINT. That is where the possibility of a mass financial “revaluation event” becomes REAL… and no longer theoretical.
- The bond market is approaching a critical threshold. (AGAIN… IT’S NOT SO MUCH THE NUMBER, BUT HOW FAST WE GET THERE).
- The debt machine is ballooning itself/devouring itself just to maintain the illusion of normal function.
- Energy corridors are becoming increasingly choked off.
- Transportation costs are moving into food. (This WILL worsen from here).
- Technology valuations are sitting underneath a rapidly rising discount rate.
This is the exact convergence we have been warning about to all those who will listen.
HIGHER ENERGY. HIGHER INFLATION. HIGHER BOND YIELD PREMIUM AS INVESTORS NO LONGER VIEW US DEBT AS A SAFE HAVEN ASSET.
FINAL MAJOR KEY POINT. “Beyond Scorched Earth” is not about one spectacular event.
It is about multiple pressure systems beginning to reinforce one another.
And right now?
THAT PROCESS IS ACCELERATING.
$200-$300 Silver
To listen to why Nomi Prins, who has been so accurate with her gold and silver price predictions, believes the price of silver will hit $200-$300 in the next 12-24 months CLICK HERE OR ON THE IMAGE BELOW.
Gold, Silver, Oil, Bonds, Stocks, Currencies
To listen to Alasdair Macleod discuss gold, silver, oil, bonds, stocks, currencies and more CLICK HERE OR ON THE IMAGE BELOW.
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