Inflation is still very sticky

With Core CPI above the Fed’s 2% target

This could be a MAJOR problem

A thread 🧵 2/ Core CPI is an inflation measure that excludes food and energy

You might wonder: why remove 2 essential categories?

US government debt market collapse has begun

This has MASSIVE implications for the economy

A thread 🧵 2/ US government bonds have broken below a 40-year uptrend

After experiencing one of the most painful bear market since the 1980s

WARNING: Housing defaults have skyrocketed

This is unlike anything we’ve seen in a decade

A thread 🧵 2/ The Fed had been on an unprecedented hiking cycle

Taking rates from near 0% to 5.5% in just 1.5 years

Interest rates have now been above the 10-year Treasury yield for the longest period since the 2008 Financial Crisis

This indicates tight monetary policy

Elections marked a turning point in 1928, 1972, & 2000

Each instance saw a market melt-up followed by a crash

2024 is following this blueprint very closely

This won’t end well…

A thread 🧵 2/ In Nov 1928, Herbert Hoover won the US presidential election

Amid one of the strongest stock market rallies ever seen

The euphoria carried on for a few months post-election

But eventually gave way to Black Tuesday and the Great Depression

Leading to nearly a decade of market decline

Bitcoin has returned +45% in just 17 days

The next move will catch most off-guard

Buckle up

A thread 🧵 2/ Bitcoin has finally done it

After 6 months of consolidation, Bitcoin has surged past its all-time high

Bitcoin has risen +35% in just 12 days

But can this rally go even higher?

A thread 🧵 2/ Bitcoin has been the best-performing financial asset since Trump's election victory

Gaining over 35% since election day

Trump's presidency is seen as a bullish signal for Bitcoin

US government debt market collapse has begun

This has MASSIVE implications for the economy

A thread 🧵 2/ US government bonds have broken below a 40-year uptrend

After experiencing one of the most painful bear market since the 1980s

Elections marked a turning point in 1928, 1972, & 2000

Each instance saw a market melt-up followed by a crash

2024 is following this blueprint very closely

This won’t end well…

A thread 🧵 2/ In Nov 1928, Herbert Hoover won the US presidential election

Amid one of the strongest stock market rallies ever seen

The euphoria carried on for a few months post-election

But eventually gave way to Black Tuesday and the Great Depression

Leading to nearly a decade of market decline

US debt is getting out of control

This could be a COSTLY mistake

A thread 🧵 2/ Since 1966, US debt has risen from $1 trillion to $35 trillion

With a staggering $3 trillion rise just in the last year alone

The stock market is in melt-up mode

With the S&P 500 at ATHs

Is there room for this rally to continue?

A thread 🧵 2/ Sharp market rises often happen after major bottoms

Where recovery triggers fast upward moves

But here, we’re seeing this momentum with the S&P at ATHs

Investors are concerned about a 2nd inflation wave

Steming from Trump’s corporate tax cuts

But data still points to disinflation for now

A thread 🧵 2/ Donald Trump has officially won the Presidential race

And one of his policy changes would be corporate tax cuts

This lowers business costs, increases profit margins, and boosts company earnings

Which is positive for the stock market

Inflation-adjusted S&P 500 is sending a WARNING sign

This won’t end well

A thread 🧵 2/ The S&P 500 is up over 65,000% since 1918

But when adjusted for inflation, the market's return falls to 5,000%

US government debt market collapse has started

This has MASSIVE implications for the economy

A thread 🧵 2/ US government bonds have broken below a 40-year uptrend

After experiencing one of the most painful bear market since the 1980s

Valuations are now more expensive than even 1929

This is a MAJOR warning sign for long-term investors

A thread 🧵 2/ The price of pretty much everything in the economy generally goes up over the long run

A home that cost $12,000 in 1960 now costs $400,000

The cost of a loaf of bread went from $0.2 in 1963 to around $2.2 today

Yields have just spiked aggressively

Last few spikes led to market corrections

Is this time different?

A thread 🧵 2/ In previous corrections (April 2024, Oct 2023, Aug 2022), rising government bond yields caused the pullback

Today, we’re seeing the same setup again

The 10-year Treasury yield is climbing rapidly

The Sahm Rule has been triggered

It's predicted the last 9 recessions

With 0 false signals since 1960

This won’t end well

A thread 🧵 2/ 2007 → Unemployment rate rose by 0.5% in the 6 months leading up to the 2008 Financial Crisis

The unemployment rate also rose 0.5% in the 6 months before the 2001 recession

Profit margins have 2x since the 1980s

But valuations have 4x during this period

This is NOT sustainable

A thread 🧵 2/ The market has reached quite expensive valuations

The Shiller price-to-earnings (P/E) ratio gives us a clearer picture this

It compares the S&P 500 to earnings

And provides a measure of the stock market’s expensiveness

S&P 500 has surged +40% in just 1 year

This also happened before the 1929 and 2000 crash

Is history about to repeat?

A thread 🧵 2/ Lately, the term “stock market melt-up” has been popping up more frequently in news

Some are getting excited, while others are warning that this could lead to disaster

This is one of the most expensive markets in 100+ years

It is more expensive than even the pre-1929 crash

And almost as expensive as the Dot Com bubble

The next crash will be very painful

A thread 🧵 2/ Understanding market valuations is tough for many investors

This is because the S&P 500 has a history of only moving up

Over time, stock prices rise, largely driven by increasing earnings

And this can make it seem like the market will always trend higher

This chart is making a lot of investors panic

But the data tells a different story for now

A thread 🧵 2/ Recently, some people have been comparing today’s market to the 1970s

If we overlay a 1970s chart on today’s interest rates, the similarities stand out

It’s easy to see why people get nervous when rates jump

But the data tells a different story

Everyone is now betting on a soft landing

This also happened in 2000 and 2008

We all know how they ended…

A thread 🧵 2/ In Feb 2007, the Federal Reserve Chair, Ben Bernanke, predicted a "soft landing" for US

Even the International Monetary Fund shared this optimistic outlook at the time

Both predictions came just before the Great Financial Crisis