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THIS WEEK’S EDITORIAL
US TREASURY YIELD CURVE ANALYSIS: The US Treasury Yield Curve is a critical piece of financial information. It represents the US sovereign bond market which is the largest national market globally. Currently, the value of US Treasuries Outstanding amount to around US$30.8 Trillion. But $6.6 Trillion of that is owned by other Government agencies. Thus, the Net value is around US$24 Trillion. Private investors are the owners. That is a huge market (about half the value of the US stock markets). But the total value of the broad US Bond markets is greater than the total of the US stock markets.
The US Corporate Bond market is around $10 Trillion, the Municipal Bond market is about $4 Trillion (‘Munis’), Asset Backed Securities (ABS) (cars, equipment, student loans, CDO’s) and Federal Agency Securities (Fannie Mae, Freddy Mac, Farm Credit, FHLB) are $3 Trillion, Mortgage Backed Securities (MBS) are $12 Trillion. The total is about US$54 Trillion. Thus, Government backed Treasuries are almost half of the total at $24 Trillion.
The total market capitalization of all of the U.S. stock markets is currently $48.3 Trillion as at March 31st, 2022. That market value is the total market cap of all U.S.-based public companies listed in the New York Stock Exchange, the Nasdaq Stock Market and the OTCQX U.S. Market (the “OTC” market) and the total market value of the US housing market is around $36 – 40 Trillion. Let’s summarize the approximate values.
- US Treasury Securities (Net) issued by the Treasury (Notes, Bills and Bonds) $24 Trillion
- Corporate Bonds $10 Trillion
- Municipal Bonds $4 Trillion
- Mortgage Backed Securities $12 Trillion
- Asset Backed and Federal Agency Securities $3 Trillion
- Total Market Capitalization of Stocks $48 Trillion
- US Housing Market $40 Trillion
The US Treasuries Sovereign Bond Yield Curve represents the yields of all Treasury issued securities from 1 month duration to 30 years. The Curve is normally positive — with longer Bonds showing higher yields than short duration bonds (called Bills and Notes). Investors are normally rewarded with higher returns for leaving their money at the Treasury until a longer dated maturity date.
Inversion of the Curve represents a powerful warning sign. If an investor can receive a higher return for their investment by buying short dated Treasury issued bonds compared to a lower return for buying long dated bonds, then there exists no premium for investing in the future of the nation.
This observation called inversion, it encapsulates the information contained within the shape of the Yield Curve. It clarifies a societal wide doubt about future prospects because it rewards the short term investor over the long term investor.
In such rare situations, the price and value of all assets comes under question but especially of stocks. Stock prices have a component for past performance and another component for future performance. Companies with a solid track record of rewarding investors and a convincing prospect of better future returns should theoretically have rising share prices. And vice versa. If the future is increasingly uncertain, stock prices should fall (theoretically).
The US Treasury Yield Curve is currently flat from 3 Months to 30 Years. However, thankfully, the 1 month yield is at 2.3744% — lower than the 3 month (2.8405%) and 30 year yields (3.189%). So, theoretically, the curve has not yet inverted. These quoted yields are correct from BOOM’s data sources to the end of trade on Friday 26th August. Thus, we do not have inversion but we are close.
If CPI inflation continues to fall from here month by month and quarter by quarter, then the future will become brighter, the yield curve should then assume a more positive shape and stock prices should rise.
The latest figures available show consumer prices in the US in July unchanged from June, after rising at a 17-year high rate of 1.3% in the previous period. This collapse to Zero in the monthly number was a shock for the investing community but, nonetheless, it happened. Nobody was expecting such a collapse in inflation.
The next data point will be revealed on the 13th September. BOOM expects it to be close to Zero but as with all predictions, readers must take it with a grain of salt. BOOM has a solid record in such matters but generally avoids making predictions. Why? Because the future is always uncertain.
So, as BOOM said just 2 weeks ago, either this is the very best time to buy the US stock market or perhaps the very worst time to do such a thing. The 16% recovery in stock buy-backs by corporations since Mid-June adds weight to the argument that this may be a buy zone of promise. However, the old Latin proverb always applies — caveat emptor — buyer beware.
TWO DARKEST CLOUDS MOVING AWAY: The two darkest clouds of Doom that have created so much uncertainty in the US economy and financial markets for the last two (almost three) years are now moving away.
“I am The Science” of Anthony Fauci is (finally) being revealed for what seems to be grand incompetence. His centralized control of public health management in the treatment of a respiratory virus was clearly a totalitarian methodology employed relentlessly. Some would say bombastically. The damage done to the US people and the US economy has been monumental.
His fear mongering and poor understanding of science will soon be a thing of the past because he has resigned from his office and will be gone by the end of the year. His removal will fuel optimism about the future. However, his ultimate fate will be determined by the courts of America where all will hopefully be revealed. One unelected man should never have been given such power in a democracy. Alternative management strategies should have been considered, especially ‘The Great Barrington Declaration’ which now has close to a million signatories. Reference: https://gbdeclaration.org/
The other dark cloud over the US in the last 2 – 3 years has been the now self-admitted incompetence of the CDC — the ‘Centers for Disease Control and Prevention’ — a government agency tasked with assisting the people of America in their quest for better health care. It has been led by that other great fearful merchant of DOOM, Rochelle Walensky, another unelected official.
In April 2022, Dr. Walensky announced the CDC was undergoing an external review following its mishandling of the pandemic. On August 17, 2022, she delivered a sweeping rebuke of her agency’s handling of the coronavirus pandemic, saying it had failed to respond quickly enough and needed to be overhauled.
On August 17th, a New York Times article was titled “Walensky, Citing Botched Pandemic Response, Calls for CDC Reorganization“. When the New York Times sees the light of day (at last), it is a signal for a better future.
Prior to that, on August 11th, the CDC reversed all its COVID-19 guidelines and is now suddenly advocating that US citizens take personal responsibility for everything in dealing with the still present Covid 19. This is counter to their previous policy of central control.
“Persons can use information about the current level of COVID-19 impact on their community to decide which prevention behaviors to use and when (at all times or at specific times), based on their own risk for severe illness and that of members of their household, their risk tolerance, and setting-specific factors. Education and messaging to help individual persons understand their risk for medically significant illness complements recommendations for prevention strategies based on risk.“
“persons who have had COVID-19 but are not vaccinated have some degree of protection against severe illness from their previous infection,” and therefore are not to be treated any differently than someone who has received the COVID jab.
The CDC also gave up on discrimination based on COVID-19 jab status, stating, its “COVID-19 prevention recommendations no longer differentiate based on a person’s vaccination status because breakthrough infections occur.” They also admitted natural immunity exists and works.
Walensky and Fauci will also have to answer for any possible crimes in American Courts of Law. Incompetence will not be an acceptable defense for either Fauci or Wallensky. And they certainly will not be able to say “we were just following orders”. Or perhaps they may? The question concerning foreign influence on the conduct of these senior public servants and their agencies must be put. And answers must be demanded.
Whatever the future destiny of these Dark Clouds of Doom, the fact is that they are now no longer running America into the ground. Optimism in the future can again grow to fuel the US economy and the US financial markets. Individual freedom can determine how each citizen will confront Covid 19. The President needs to affirm this as soon as possible.
Regarding the US “corrupted health agencies” — listen carefully to what Dr Paul Alexander says in this interview. “These people damaged the US and the world“ https://www.stewpeters.com/video/2022/08/breaking-exclusive-trump-hhs-senior-official-i-was-brought-to-dismantle-the-cdc/
MODERNA SUES PFIZER/BIONTECH: Another positive sign for the US economy is to be found in the case of Moderna now suing Pfizer and BioNTech over Patent infringement. Two lawsuits have been filed in U.S. federal courts and in Germany, where BioNTech is based. Moderna said it is seeking monetary damages for Pfizer/BioNTech’s alleged use of its patented technology.
We can expect Pfizer/BioNTech will now probably file lawsuits against Moderna. And then the warring parties will turn vicious in launching attacks on each other in full view.
Now that the so called “vaccines” have been shown to offer little protection against infection and transmission of the SARS CoV2 virus (Covid), the next legal attacks will eventually come from the US government and they will be aimed at all of these companies, based upon the fact that they fraudulently represented their products to the government as “safe and effective” when they knew that they did not have sufficient evidence for such a statement.
Such actions should negate the agreements of indemnity entered into by the government with these companies. When that (hopefully) happens, the companies involved may not have sufficient cash reserves to defend all the government and class action lawsuits that will come their way. An avalanche of claims will erupt. Criminal actions can also be expected to be launched against the officers of those companies in due course. This story has a long way to go yet.
The crimes and misdemeanours committed against the people over the Covid so-called “pandemic” cannot go unpunished.
EUROPE AND UK HEADING TOWARDS ECONOMIC CRISIS: Meanwhile, Western Europe and the UK are steadily heading into a severe economic and societal crisis with food and energy costs rising to alarming levels.
But their political leaders continue to rage against Russia and continue to support the war, deflecting any blame onto Vladimir Putin’s shoulders. Putin had given them ample warning over 8 years about their ignorance of the Minsk Agreements. Eventually, that situation will have to be settled by a Peace Agreement.
So why not sue for Peace now rather than later? Is there no concern for the Ukrainian men who are being forced to the front lines and are paying with their lives? Children are also dying in the crossfire. But that does not seem to have any impact on the political leaders of the UK and Europe who seem intent in fueling the fire along with the United States.
The economic impacts of all these poor decisions will harm the nations of Europe for many years to come. Reliable energy supplies are essential for any modern economy to produce the goods and services which citizens expect. Without that, the productive sectors will be badly damaged.
In economics, things work until they don’t. Until next week. Make your own conclusions, do your own research. BOOM does not offer investment advice.
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BANKS DON’T TAKE DEPOSITS, THEY BORROW YOUR MONEY: LOANS CREATE DEPOSITS — that is how almost all new money is created in the economy (by commercial banks making loans). https://www.bankofengland.co.uk/quarterly-bulletin/2014/q1/money-creation-in-the-modern-economy Watch this short 15 minutes video and learn as Professor Richard Werner brilliantly explains how global banking systems really work. https://www.youtube.com/watch?v=EnC1UlnFLyI
AND Watch for 4 minutes, this Bank of England explanation: Money is essential to the workings of a modern economy, but its nature has varied substantially over time. This video describes what money is today. https://www.youtube.com/watch?v=ziTE32hiWdk
Most economists are unaware of this and even ignore the banking & finance sectors in their econometric models. EMAIL: gerry {at} boomfinanceandeconomics.com
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The crimes of the Medical Professionals, certain politicians and Media etc are not Misdemeanors by a country mile, they are Capital Crimes of Premeditated Murders, First Degree Felonies, Genocide and a Holocaust , with massive Censorship and Cover Ups. They cold blooded murdered millions with hypodermic needles instead of bullets. The Oligarchs are not done: they are destroying food and fuel for the same Genocidal reason.
It’s those 30 or so families that own the world (own large stakes in Vanguard, Blackrock and State Street) who are the villains in this implosion of the world. All others are their puppets, lackeys and lap dogs.
They own it all-central banks, finance, media, politicians, business, health, etc.
They evidently want a one world govt and are determined to see this disastrous plan impoverish the world to give themselves control and authority of the entire world and humanity itself. The deaths of millions and the theft of $trillions is their legacy.
They must be sought out and receive their due prosecution of the horrors they have inflicted upon the world.
Their reign must be completely dismantled, bankrupted and they need to be imprisoned or executed for their crimes against the planet that has been occurring for over a century.
There will be no prosecution. There never is. We simply repeat history over and over again. The guilty are never punished or even identified. The wealthy psychopaths behind the scenes conspire to forward their agendas of eugenics and world domination, as they plan wars and pandemics. They are driven by a lust for power that when no longer satisfied by wealth acquisition, turns to mass destruction.
I believe the military leaders violated the Nuremburg Code and should stand trial before the World Court before hanging.
Pretty sure that was the drop in gas price which has already reversed in my area and is on the way back up. BTW, energy is usually excluded from the official Fed inflation but they will just go ahead and take that since it helps them out temporarily.
When the CDC says they are reorganizing what they really mean is they are making an even bigger power grab so the next time they try this they will see if they can make it stick.
Fauci might get thrown under the bus but don’t count on it because he has too many powerful peoples names he can drag under the bus with him.
There is a lawsuit against Pfizer for fraud and it could gain some ground if they can find an honest judge in our corrupt court system.
Summer was just a bit of a release on the leash. Something big is getting ready to happen.
I don’t know what this means but I’m sure it’s not meaningless.
https://www.catholicnewsagency.com/news/252093/pope-francis-instructs-vatican-entities-to-move-all-funds-to-vatican-bank-by-sept-30
In today’s Shit Ledger Gov. Murphy was pleased to announce that starting on Oct 1st the NJ State Gasoline Tax will be reduced by one penny. Nope, that’s not a typo. I’m soon to be rich!!!!
Don’t worry, you will be required to share that penny with the less fortunate🤣
All agreed MC – you speak the truth. I am waiting on tenter hooks to see their next move.
The system which allowed Mr. Fauci to thrive, and the Centre for Disease Control it’s dysfunctional role, is still in place. There will be other mandarins to fill the role of Mr. Fauci and the Centre for Disease Contol bureaucrats. The reason United Kingdom and European Lawmakers are focusing on Russia while their jurisdictions decline is obvious. They need to distract their citizens from their incompetent rule by turning their attention to foreign matters. It is an old political tactic.
“It is an old political tactic.” Yes indeed Matthew as old as time immemorial. There never was a time when the serfs were free of their yoke. But I live in hope that this time is different – waiting and watching.
As I stated in a previous comment, I am taken aback at the similarities between our current situation and the time period prior to WWI. In both cases, cartels of powerful men in Europe and the US conspired to drive Europe into ruin in order to realize their warped vision of a new world order.
In both cases, Europe was to be sacrificed and subject to great destruction.
In both cases, the governments of the US and Europe were under nearly complete control of the cartels. England was being run by William T. Stead, Reginald Brett, Cecil Rhodes, and of course Lord Rothschild, while the US was being run by JP Morgan, Rockefeller, and E House. Today, we have Klaus Schwab, Bill Gates, and Fauci,
In both cases, the US President was a puppet put into office to follow directions.
Just as in both contrived world wars, I am afraid this current series of planned events is destined to leave Europe in a state of mass destruction with millions dead and hundreds of millions suffering.
Ha ha, the pharmaceutical companies have fooled them all again. The suing of each other to determine who owns the Covid vaccines will protect them from being sued by the millions of victims while the court decides who actually owns the vaccines and therefore who can be sued. They will keep it there for years until all the memories have gone away. Most governments and people have short memories.
I like your take on this PP and believe you are likely right. It looks very much like a typical lawyer’s tactic from what I know of the skulduggery involved in the legal profession from personal experience.
I think the explanation for inversions is simple. The Economic outlook goes to shit (like for money supply, jobs and housing etc now mostly thank you FJB) and investors (really the rich exploiter class who produce nothing) want low risk short bonds with higher interest; they also sell their long bonds and get less cash for them (ie, lower interest). So the present short rates zoom up and long rates zoom down or walla walla bang bang an inversion (opposite of the normal). I want my banana.