| Why debt yields will continue to climb.Debt yields are going beyond our expectations to the upside which will lead to interest rate tightening with 75 points from the Fed very likely today. This will collapse the value of bonds faster particularly junk debt – see our interview with Danielle Di Martino Booth that premiered in January 2022 here |
| As the junk debt accelerates, institutions may panic and at this point we may be looking at a debt system failure. When that happens bankruptcies occur with the big name “lame duck” corporations like General Electric, IBM, and all the companies that have borrowed money to buy back their own stock, finding their debt repayments unaffordable as their earnings also turn further down.We are at hyper dot com valuations, in terms of Market Cap to GDP. in an environment where the system is imploding, which will be super asset value deflationary.Everything is a sell and the ‘safe haven’ item that everyone runs to is the Dollar. This could lead to a Dollar super spike and debt collapse combined, has knock-on effects on the viability of banks. People may not be able to service their mortgages, and may give up their homes and panic sell. BlackRock, Vanguard etc. will be the ‘bottomless overdraft’ buyers, of housing and land, out of cash reserves they built during the CV19 pandemic when 7 trillionUSD was pumped into the system.This will create an overall asset devaluation environment on all physical assets including industrial and precious metals.Nasdaq 1D Head and Shoulders |
| Dollar cost averaging into precious metals may be a better long run safe haven, although price may short run fall. Wait for a collapsing market before lump sum buying at possible extreme lows, premiums may be high and availability thin.It will also ignite the USD/Korean Won, and especially the USDJPY, Yen with a highly indebted Japan, attempting to sustain its debt market. |
| How does this crisis differ from previous financial crises? We have a target for Italian debt which is leading panic in the Eurozone.ITALY Government Bonds 10Y |
| The dot com boom was a HYPER valuation specific to tech stocks, that saw very low rates in stimulus.The GFC (2008) was largely a valuation on property together with contaminated debt proliferated through the banking system creating a banking system/property crisis, that lead to low rates and QE1/2/3/4 as well, in chunks of 100Bn.CV19 was an event driven sudden crash, occurring shortly after Repo rate concerns in 2019 Sep/Oct, this lead not only to a hyper stimulatory rate environment, but a further & far more substantial 7TrnUSD in stimulus, a super inflationary amount of money, that drove assets up relentlessly to the glee of ‘Robinhood, Call option Buyers’.Bitcoin has only existed in a larger QE environment, now it’s facing a major pivot in the viability in the debt markets.It is the early easy ‘High Beta’ sell, in a risk off pivot environment, it is full of battered by inflationary living costs, retail traders.Tesla and Apple for example are only just starting to sell off and may be worth half or even a third of their current stock value, in a full loss of liquidity system. The dollar is dominating. Why? Because debt is rerating down & the US is the one driving the FED rate up, (under the guise of fighting Inflation) that is seeing debt valuations collapse.The billionaires have borrowed super cheap, and hold assets, and now the debt will be devalued after rates spiking up, pushing every small player and retail layman out of the game on unaffordable interest payments on declining assets, they can no longer hold.The huge, scaled money will buy at the bottom and buy everything: You’ll own nothing and be happy as the WEF preaches. Blackrock, Vanguard, Amazon & Bill Gates all buying land and property.Watch our full deep dive YouTube |
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Warm wishes, Francis & The Market Sniper Team |