The uniformed are crushed by money supply growth

Here is why the lower and middle classes struggle to achieve considerable wealth over a life time.


Chart 1 - The US M2 money supply growth has been incredible over time. The greater the supply of money there is, the less the purchasing power of that money. This chart shows the folks with the most wealth do better than those with less, or, in other words, the folks who are closer to the creation of the money are better informed on how to maintain their wealth while the money itself suffers diminishing returns. Simply put, it's the informed vs. the uniformed, and the informed are winning! 

Chart 2 - Here is why the money supply must maintain its rapid growth rate. Money must be created to allow the exploding US federal debt to be absorbed by investors. When the US federal debt could not be absorbed by investors, the Federal Reserve bank purchased the excess (or money printing, BRRRR!). 

Chart 3 - Here is how the informed defend their purchasing power against the exploding creation of money supply (and Federal debt). The informed invest in gold and the stock market. Investing property has not held up well, hence why the uniformed do poorly vs the informed.

Chart 4 - Of course the sophisticated informed investor selects the better performing asset classes like the technology stocks (!COMPQ). Of course the best performing asset classes since 2011 have been Bitcoin and Ethereum, but as we know these assets swing up and down with massive volatility.

It's hard to think that those who create the massive new money supply are not informing those who know how to generate wealth from it. After all, the US election cycle depends on a massive injection of newly created money. 

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US Election Year Cash Bazooka

This is an US election year and the stage will be set to keep asset price up.



These folks think due to a slowing employment market the FED will be forced to cut and the result will be a crash up. Risk on!

via @TomasOnMarkets, China liquidity cycle is about to kick off, this is good for commodities.

These two global liquidity measures show we are entering the plenty phase of money supply. 

Yellow, brown and early blue seem to be great for risk on.

and via @CrossBorderCapital global BRRRR is on a up swing.

The political connected @amlivemon sums up the thinking in Washington and how they fiddle with the markets. It is just crazy!

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Bitcoin 2025 price targets

Let's review where Bitcoin can reach during this Wyckoff markup phase into 2024/25.
 

Historically, $BTC moves to the upper blue line moving average bands (as before, like A and B). This would be a target range of $188,000 USD to $350,000 USD. However, in  2021 (C) price stumbled and failed to mirror prior price achievements. 


Chart 1 - Upper band target for BTC

Several things happened in 2021 that can be blamed for the $BTC underachieving :

1) China banned crypto (for x number of times).

2) President Trump called $BTC a scam (see video below). Also, during Trump's presidential term, Fed Chair Powell met with Coinbase CEO Brian Armstrong in May (via the Powell calendar notes), and shortly after this meeting, $BTC price smashed 30% lower.  Therefore, one can assume large sell orders hit the market after Fed Chairman Powell's meeting with Coinbase, on the back of President Trump's blessing. 


President Trump back in 2021 (video CNBC):

Now things have changed in 2024, both Biden and Trump camps realise that BTC capital gains help keep the US government afloat. Trump is now a fan! So maybe we can expect a target similar to A and B (Chart 1) as prior performances of $BTC markup rallies. 



Chart 2 - Wyckoff Cause and Effect at work in BTC price action. 

The coming US dollar liquidity wave is now arriving in the markets for the 2024 election year.

1) China is now supporting its housing market.
2) BOJ is now supporting the Yen.
3) Yellen has a full TGA account to buy US Treasuries bonds.
4) Yellen has engineered bank balance sheets to buy more US Treasuries bonds.
5) The FED is slowing moving policy to defend growth first, rather than fighting inflation first.
6) US economic funding via fiscal means is exploding (deficits are not shrinking). 

So, why wouldn't BTC print a price over $350,000 USD ?

Lets watch!







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Fed panic signal to watch for

The canary warning for a possible risk off market will come from higher unemployment, with a bond market sell off, followed by a significant FED rate cut.


Jay Powell (Chairman of the Federal Reserve) said if the unemployment rate reaches +4.0% (currently 3.8% to 3.9%), the FED inflation goals will have to be sacrificed to attend to employment goals. 

Confirmed employment risk will occur when unemployment continuing claims continue to rise.

A leading data point for continuing claims is the NBER small business future hiring plans survey. Recently, this has jumped higher (note: the data on the chart is inverted), and if it holds these levels, it signals higher continuing claims in the months ahead. 

The 3 month and or the 10 year Treasury note can signal rate cuts are near by their immediate significant sell down. The last three FED rate cutting cycles (years 2000, 2007 and 2019) either the 3 month or the 10 year Treasury paper sold down hard before the FED cut rates. In all three circumstances, continuing claims showed a greater risk to employment by trending higher.   

Not all rate cuts lead to a hard risk off recession corrections. Yes, 2007 (housing crisis) and 2019 (COVID) surely did, but 2000 started off mild and was later assisted by middle east war risks (resulting in higher oil prices). The reader should notice how late stocks reacted in all years referenced (2000, 2007 and 2019) after both the 3 month and 10 year Treasury markets sold down.

POINT: The bond market new first!

Rising rates, holding rates on pause after hikes, or even the first 75 basis rate cut are not all ways bearish for risk on assets. But when the 3 month TBill rate is falling faster than the 10 year Treasury bond (yield curve steeping) then this will be clearly seen as the dawn of risk off. 

This point is keep an eye on the 3 month, 10 year and leading employment data for clues for the dawn of risk off for asset markets. 

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Gold stocks ready to move

The FED at the March 2024 FOMC suggested that this rate hiking cycle has peaked.



Chart 1 - Interest rates may have peaked for this cycle. This is important as precious metals need to know higher rates are over and are likely on the way down. 

Chart 2 - HUI to GOLD ratio. Shows extreme undervaluation of gold stocks to the gold metal. Confirmed by the current cycle low. 

Chart 3 - Japanese Yen suggests a weaker US dollar is expected in the months ahead. 

 Chart 4 - The long term Dow daily cycle looks ready to extend. Gold stocks require the wider stock market to rise at the same time. 

Chart 5 - Junior gold stocks Richard Wyckoff bottom accumulation looks fantastic and ready to explode higher.

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Long term bond games will send investors into gold

The mighty US of A has $10,000,000,000 (trillion) of US dollar debt to sell this year.


It is only February 2024, and the 20 yr and 30 yr bonds are not being swamped with demand. 


Chart 1 - Ugly auction, this trend will continue until Yellen bends the knee.

Chart 2 - 10 yr interest rates near multi decade highs.

It seems that with interest rates near 4.25% (10 yr) and the US dollar (DXY) near $105, this does not encourage foreign investors to buy long term US Treasuries. Therefore, either or both the interest rate needs to rise and/or the US dollar needs to fall to encourage investors to by 20 yr and 30 yr US Treasury auctions. 


Chart 3 - Rev Repo has fallen from $2.2 trillion to near zero.

The US Department of Treasury has been using the cash in the temporary reverse repo to transfer US debt to investors as TBills. This will be over by April 2024. Next, they can use the Treasury checking account (TGA) for another $800M. Then what? A much lower US dollar is an option.

Of course a trending lower US dollar will fuel gold move to higher, this of course will improve the profits of gold and silver stocks. 

Chart 4 - XAU building higher lows.

Chart 5 - GDXJ base building.

Also, US corporations are soon to hit a re financing wall with much higher interest rates (up 100%). Higher interest expenses will result in fewer people employed. Rising unemployment in an election year will not be attractive, hence another good reason to lower interest rates and the US dollar.


Chart 6 - Corporate interest expense to explode soon.

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2024 soft landing working it

Can it last? Can the US Gov keep the plates spinning until US 2024 elections.



Chart 1 - Gov debt holding up business activity. 

Chart 2 - Gov doing all the hiring!

Chart 3 - ISM Services PMI holding up business, manufacturing recession continues (or going to Mexico)

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Market moving macro in 2024

It is time for the FED to hire Jordan Belfort (Wolf of WallStreet fame) to sell US government debt.
After all, Jordan Belfort is a man who can sell tea to China.


Chart 1 - The red line generates the income to pay interest on the blue line. If the rate of change of debt growth and the cost of debt are an ever increasing burden on the cash flow generated by growth, something is going to structurally break. Gold near $2,000 USD is a bargain (same price as 2011)!

Chart 2 - Here is a smarter chart of Chart 1 above. When the fat red line sinks and falls below zero, this is a period of time when the rate of change in debt growth is much faster than GDP (not adjusted for inflation). Gold says this matters. The gold price moves higher in such an environment. 

Chart 3 - China CPI is in deflation (CPI below zero). The FED broke China! President Xi recently visited the USA and met with some heavy hitters to help re-inflate China. It is mostly likely to coordinate Chinese stimulus with US election year stimulus. China cannot afford the negative effects of prolonged deflation periods.  

ZH summary says it all.

Which means China now has two options: pretend that the failed policies it has been doing (or pretending to do) so far has been successful, which it likely will until there is just too much blood on the streets, or it will finally capitulate and unleash the biggest fiscal stimulus ever seen in China: we are talking multiple trillions here, and in dollars not yuan, consequences be damned, because we are nearing the point of peak panic where Beijing will do anything at all to buy social order and stability for just a few more months. And once all those tens of trillions in Chinese deposits start fleeing, that's when the real meltup in non-fiat assets - read gold, silver, crypto, fine art, wines, etc - will truly start.

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Stock market cycle look into 2024

The well promoted US recession of 2023 did not happen, but will it happen in 2024.


Michael Howell of CrossBorder Capital says the liquidity is supportive of slow growth but no recession in 2024 or 2025.

Technical charts support this view, lets review:


Chart 1 - Shows three sine wave cycle should repeat for a fourth peak in 2025 Q1.

Chart 2 - Shows the Dow Jones working well through Gann Angles, Dow +45,000

Chart 3 - Crazy how the Wall 900 period cycle fits highs and lows.

Chart 4 - Richard Wyckoff Cause and Effect still working until it does it. Will an 'Effect Fail' happen in 2024, the trend says unlikely. But who knows which events will shape the world in the next year.

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Ethereum runs hot on new market liquidity

The US elections attract an easier market; this time there is another incentive to let the juice run.



The US presidential cycle runs for 4 years; the years before and after the election are the most market-friendly to the bulls, as politicians promise the kitchen sink. Typically, the incumbent will do all they can to ensure the economy is doing well before the election; they do this by making the monetary condition easier. One way to do this is to lower the US dollar.



Chart 1: US dollar (DXY)

The blue lines are US election dates (November). Both 2016 and 2020 saw a move to get the US dollar down in the 12 months prior to the election.

During the next 13 months the US Government has to fund the US deficit to the tune of $8 trillion dollars of existing and new debt. This means they need to find $8T USD out in the market place to buy this debt. There are many tricks the FED and TREASURY can do to do this, and one trick to lower the price of the US dollar debt to foreign investor by lowering the currency it is sold in (say DXY near $90), otherwise known as currency debasement.

Bert Dohmen of the Wellington posted this (2023-11-27): 

We just read that the federal government is running its largest deficit as a percentage of GDP outside of WWII period. Another great achievement!

And next year we are likely to see the greatest money creation out of thin air in the entire history of the US. The Fed has to create ways to finance the record deficits by the creation of new money.

That of course has inflationary implications. And that will plunge the bond market again, making the bond disaster even worse. Remember, last time we wrote the global bond market is $128 TRILLION. That is 128 billion times a billion dollars.

We conservatively estimate that they have unrealized paper losses of at least 60%. Therefore, the loss on the global bond market would be a staggering $77 TRILLION!!!

Debasement of the currency is a likely event to massive indebted sovereign states. Investors can protect themselves from this by investing in anti US dollar investment vehicles like: Gold, Silver, Oil, Crypto.



Chart 2 - Ethereum cycle is ready to run on currency debasement.

Chart 3 - Ethereum Channel support and resistance forecast or equal move forecast.

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Bitcoin working through channels

There is no need for complicated indicators when simple price channels will do.


The trick is to have software to draw the parallel price channels with great accuracy. 

We can see here (Chart 1) how two A-B-C channels are forecasting current price support and resistance levels.  


Chart 1 - Bitcoin

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The Dow is going Higher

The market professionals do not want the public positioned in the market better than they are.


Market professionals use the news to scare the public out of their hard earned winning positions. 


Let's face it:
- All the FED tightening has been offset with Dept Treasury and Rev Repo antics.
- Higher US 10 yr rates have caused trillions of book losses on bond investments around the world.
- The FED has broken the most important market in the world, the US Treasury market (Bofa Bond Move index > 140, DXY > 107)
- Inflation is sticky due to food and energy elements, also from monetary stimulus from billions in new interest income.


Unless WW3 or US 10 yr explodes 3% higher (see KINK in chart 1 below), the worst news is over, and now the FED will try and repair the damage done to their own bond market. After all, the US bond market is GOD. US Recession fears are over played while there are ongoing fiscal spending deficits into a US election year. 


Chart 1 - Dow Jones Cycle. Unless there is a kink the Dow should travel sideways to higher.

Chart 2 - The FED can not contain inflation and must bend a knee to it own bond market, on the back of rising gold and silver prices gold stocks still have room to move higher during the current up cycle.

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