DJIA 100-year chart
Here is a 100-year channel the Dow has traded in since 1920. The remarkably long bull run reminds Raoul Pal, of Real Vision, of the 1999 time period right before the great sell-off in 2000. The fundamentals now appear worse and much more broken than the late 90’s. The Fed balance sheet is what props up the markets and has put banks in a tough spot. Based on our research, the treasury general account, TGA is buying treasury bonds-even B rated bonds-and inputting bank reserves. These bank reserves are dollar for dollar based on what banks can loan. However, if banks are tightening credit and reducing loans they make, due to the fundamentals, the Fed is ignoring, (low demand, historic unemployment, high corporate bankruptcies), those bank reserves don’t get to Main Street. So federal debt:GDP ratio is at all-time highs approaching 140%, while simultaneously the banks are sitting on bank reserves and not lending money to small business. This is deflationary. The quantitative easing (QE) is removing USD out of the economy and not replacing it. How can QE from the Fed keep asset prices high when the only money getting into the economy is at the Fortune 500 and FAANG stock levels?
Here is another chart below to further demonstrate what is happening to asset prices. It isn’t good.
SPX on its 10-month support level:
Dow Jones Industrial below its 14-month support level:
Yet Bitcoin is up 4.1% today and is printing a bull flag, which bodes well for tomorrow. Is it possible Bitcoin is going to decouple from Stocks in the near term? Time will tell. This could be a pivotal time for Bitcoin in the current bull run. To us it looks like things are about to get interesting. Maybe we have to wait until after the election, but that’s only 5 weeks away. Exciting times indeed! Neutral ATM in Stafford is safe and convenient to help you get off zero Bitcoin.
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