Stocks And Bonds Are At A Major Crossroad, Something Has To Give. By Gregory Mannarino
It appears that we have now entered a major crossroad with regard to the price action in the stock market, and the recent rally in the debt market.
Understand, The conflict between a rally in the stock market while at the same time having a rally in the bond market must resolve. The conflict between both the stock market and the bond market is made worse by the fact that we are seeing a rally in the bond market at the same time that the largest buyer of debt, the Federal Reserve, is removing itself from the purchases of bonds.
The rally in the bond market must be being fueled by institutional investors, who are also at the same time riding the upward momentum of the stock market. What this tells me is the stock market rally may soon run into a brick wall-and many investors will be caught on the wrong side of the trade.
The recent rally in the stock market seems to be being fueled by just a few companies on low-volume, and this should be a big tell that the stock market rally could possibly turn into a selloff on a dime.
The bigger take away here is the stock market rally will react to what the bond market is doing at one point. Moreover, if the rally in the bond market reverses, yields will rise and this could also put pressure on the stock market. Keep in mind that this does not have to happen tomorrow, next week, or even next month, but the fact remains that either the stock market or the bond market will react to what the other is doing at one point, they cannot both remain in sustained rallies at the same time.
Gregory Mannarino
while we are 7? years into a bull market in shares it is not much like previous ones. It has been slow and tempered by sluggish markets in europe. with this slow movement there still a lot of money that is trying to find a home. So I think there is room for the rally to continue in both the bond and stock market for a while yet, up to 2 years.
And I see it more likely that a revitalized europe will give a shot in the arm to the us stock market and it is bonds that will give way
I agree. You can have both if people are fleeing out of cash. Look at crypto currencies. The Ruble is up versus dollar, bond yields are down, stock prices are up nominally. The yields and stocks can be where they are if you know that people are fleeing the dollar. I disagree this time with Greg both can occur at same time. We are in new territory normal rules may not apply in this situation.
My understanding is that a large part of the money fleeing into cryptocurrencies, especially Bitcoin, is the Chinese trying to get their cash out of China before it is too late since the Chinese government is restricting the flow of the yuan out of China. I don't understand why they are restricting the flow?
I know that the Chinese are having money laundering issues. It is one reason for elevated housing prices in places like Vancouver B.C. They are hiding the money by parking it in housing. Then Canada started increasing the tax on foreign purchases of housing. They did this in an attempt to deflate the price increases. So they want to park their money somewhere so it started working itself into crypto.
Check my weekly silver calls every Sunday (today) with updates during the week on my blog guys. Cheers.
I also follow Greg for fundementals, but i use charts to trade.
People want to put their Cash "anywhere" except in Cash...
What person in their right mind would want to keep Cash...???
Well... Except in Pocket Change... You'll have to read my posts
to know more about my theory on Pocket Change... Don't forget
to check out my latest Blog titled "WHERE DO I GO TO TAKE OUT
A BITCOIN LOAN"...
@pocketechange
The Global elites, the Federal Reserve and many corrupt politicians are trying hard to convince people that cash is not a good thing any longer but that digital cash is the way to go. Look out below, because when cash currency is gone they will be able to not only know where you digital digits are being spent but they will be able to confiscate them or shut down your account for any reason they may offer. Another vehicle for them to take away more of your freedom. Whether the dollar will become worthless through hyper inflation or become more valuable via deflation is a extremely complex issue and depends on what these characters do to the monetary systems of the U.S. and the rest of the world. The only hope is for people to hedge their bets.
I'm on your side when it comes to Cash... My comment to Gregory was more about Federal Reserve (Debt) notes... Not the New (interest and debt free) Notes that will take their place... Read my Post about POCKET CHANGE... Thanks for such an in depth comment...
@pocketechange
While the timing is difficult to predict, the spot VIX with a 9 handle tells it all. Complacency at market tops while world disorder has never been higher.
Very good post sir. I have had to follow the the ^vix since my mistakes I made in 99 through March 2000. Watching the ^vix during the March 2000 tech/bubble and 2001 911 attack events, I made great moves acquiring holdings during double low bottom in October 02 and March 03. Also It does matter regarding the ^vix, as I made good moves during double bottom in October 08 and March 09. Never seen so many 9's days. Thanks for pointing out the canary in the mine.
@marketreport! First off, big fan of your stuff here. Saw your video on this the other day and it got me thinking. Then just a few minutes ago I read a Marketwatch report on this very thing. They noted the reason for this shift to the bond market from large institutional funds linked to the weak jobs numbers that came out and also the link to Trumps economic and more so tax plan failing to come about in the last 7 months. They stated the rise is stock prices is mainly led by a few big tech companies such as Apple, Facebook, and two others I can not remember. Any thoughts on this? Upvoted and followed, thanks again for the great content!
Aren't we at like 30 times earnings? Wasn't this the ball park of the Great Depression? Yeah, I'd say be very careful. Upvoted.
Are we as high as we were on 2000 or 2007?
Higher. We never seem to learn.
Thank-you Greg for all the work you put into giving out this important info.
2nd that thought. Greg is amazing. I watch his you tube almost daily.
@marketreport We all heard a lot about how the major banks got the huge bail-out from TARP. And, then they just stashed all of that cash for themselves and it didn't help main street. Is this, perhaps, what they were all planning on saving it for to being with? To help the Central Banks "liquidate their balance sheet?" IDK enough about big banking to really make an informed comment here - I'm just an unusually "intuitive" thinker and, I'm trying to figure out what's going on here. The big thing that seems "different" in this current market is how much FIAT currency is actually out there, after all of this "quantitative easing." So... maybe THIS is how the wealth transfer is playing out. Whatever the case, getting your money into hard assets would seem beyond wise at this point in time.
The whole situation is complex. I believe they are setting the stage for the IMF to use their SDRs (Special Drawing Rights) to replace the dollar as the worlds reserve currency. The SDRs are backed by a basket of currencies. Could this be the end of the King Dollar? If the U.S. strengthens the dollar as Trump is trying to do by shoring up our potential economic and dollar demise, then maybe the dollar will not be replaced by the SDRs. Who knows???
It's not the stocks or the bonds, Gregg, it's the cryptocurrencies. There's where the music plays or do you like more to dance with Janet??! Everyone's bored and sick of rigged markets, and MSM telling how great everything is... - just to say: Old School! Take care! Elvis has already left the building.
This is what I think is happening with crypto currencies. The tech-savvy people who cannot enter the US bond market, who despise the over-topped US stock market, are turning to a different alternative to putting cash under the mattress or into land, gold, or silver. If the Internet exists for the next 50 years then Bitcoin is the new IBM or Apple stock.
I'm still a strong believer in Gold and Silver.
I do agree with you getting into crypto.
I'm learning everything,I ca ,and there's a lot, in understanding and buying as well as which "mattress" to put in under.
As much as I'm for it, just open an account with coinbase, so many mixed reviews, I'm going to try some small buys at first, but I still don't know enough to say anything for sure.
If the internet gets regulated to the point, which we can all be tracked by our digital footprint and if the damn governments get involved, will the tax it as you buy and sell, make you buy yearly licenses, could they make a legal form of coin outlawing the rest? I know I've got a lot to learn but right now these seem like good legit questions.
The US/UK/Cabal cannot stand any alternatives to the petro-dollar / narco-dollar / US Treasuries system. I fully expect legislation and regulations on crypto currencies in the form of taxes and tracking.
Don't trust any software "wallets" held on someone else's computer. Learn and get desktop wallets and hard/USB wallets.
You Are Right To Be Concern The Fed Is Researching And Producing Their Own Block Chain Payment Model, Called "Fedcoin" ! That Is Why I Don't Have Any ! I Buy Silver Something I Can Hold In My Hand !
If the government is desperate enough to start taxing and confiscating precious metals then an alternative is numismatic coins and gold/silver jewelry.
Ive been doing some reading the last 24 hours and watching videos about Gold Silver and crypto.
Yes I couldn't agree with you moreAlexxx, Silver is WAY undervalued and even with crypto being the thing to get into, problem is which one will prevail?
At least we all know silver and Gold will remain a store of wealth.
I have no doubt the governments will get involved and this wont be a free monetary system, they cannot allow it, and here is a very interesting video if you haven't watched it with cliff high. VERY INFORMATIVE
Silver should be at $600 and possibly could even? Just think if he is right, gold and silver 1:1 ratio!!
http://usawatchdog.com/crypto-currencies-show-global-reset-underway-clif-high/
Clif's prediction would have been right if Silver prices weren't rigged since decades. The biggest threat to the US-$ was Gold and Silver (remember Paul Volcker!) as real money, as a real store of value throughout centuries! And they still are a not-only-alternative but a "must have"! But in my opinion, Cryptos will bring the FIAT paper system down to its knees; it's only a matter of time depending on "when will the common citizen recognize that the 'hunger games' of inflation is stealing his money on a daily basis, and when will be the day they're losing trust!?" By the way... - Clif is one of the brightest and wisest man I've ever had the luck to listen to! Cheers!
Thank You For The Video! I Am Trying To Understand This Situation !
Have you seen the latest run in Japan where the government cut taxes on BTC and declared it as a currency; almost immediately hundreds of stores , airlines, etc. are accepting BTC, and the rush of the Japanese citizens was astonishing! The same will happen, maybe not as fast in Australia where the gov has also cut taxes on BTC. I'm absoluteley convinced - not because I'm a trader, I'm not - but because that disruptive nature within crypros, their ability to change social life in its core is what makes BTC"here to stay"!
IBM, Apple - you're right... - you will see. I bought Apple shortly after Microsoft safed them... - and I have the same feeling today! Good luck!
Why would any government cut taxes on anything? Sounds fishy!
I guess you mean the ulterior motive! The government does nothing ever for free motive. I agree to that. But in Japan's case, I think, it's because of the Greenback and his close ties to the price of the Yen; with cutting taxes on BTC and the side effect that many citizens are selling Yen for BTC the US $ has less influence on their economy; since WW2 Japan is nothing but a vassal state to America!
If we have a market crash it might very well bring down cryptocurriencies and precious metals at the same time due to people panicing and trying to cover their shorts.
It's like watching the advent of a head-on collision. You know it's coming.
What do you think about junk bonds? There have been in a bull market for several years.
I hate bonds. Period.