Speaker 1: With the recent crash in markets and the coming election
Speaker 1: and potential wars, many investors are really scared. They're expecting
Speaker 1: a big market crash to come any day.
Speaker 2: And of course it's no wonder.
Speaker 1: We have many economic indicators like the yield curve inversion,
Speaker 1: we can unemployment, we have us slowing home sales, and
Speaker 1: they're all showing us that recession is imminent. But while
Speaker 1: those might be really good indicators of where the economy
Speaker 1: is going, they're not good at showing where asset prices
Speaker 1: are going. And the best indicator for that is right
Speaker 1: now flashing a giant green arrow.
Speaker 2: Well, at least you know what you're looking for.
Speaker 1: So in this video, I'm going to break down the
Speaker 1: event that's coming this year in twenty twenty four that's
Speaker 1: going to have the biggest impact on asset prices, and
Speaker 1: no it's not the election. Right, I'm going to show
Speaker 1: you the prices. I'm going to show you the levels.
Speaker 1: I'm going to show you what's expected to happen. But
Speaker 1: we're going to look at the data. We're going to
Speaker 1: look at the facts of other previous cycles like the
Speaker 1: one that's setting up right now. Now, once you see
Speaker 1: this data and you understand its impact on asset prices
Speaker 1: in markets. They're going to have a completely different view
Speaker 1: than you know, all the talking heads that are pedaling
Speaker 1: their fear for you.
Speaker 2: So let's go.
Speaker 1: All right, so jumping right in, we are going to
Speaker 1: look at the money. It's always about the money, right,
Speaker 1: So we're going to look at the money.
Speaker 2: And as I talk about all the time, now, liquidity.
Speaker 2: So liquidity.
Speaker 1: When there's more money in the system, more liquid in
Speaker 1: the system, than prices tend to go up. And when
Speaker 1: there's less liquidity, then prices tend to go down. Now
Speaker 1: it's very simple, but it's not. It's not that easy
Speaker 1: to understand all the millions of reasons why pricing can.
Speaker 2: Go up or down.
Speaker 1: But let's look at a giant one right now, and
Speaker 1: this is the United States government's piggy bank. Sort of
Speaker 1: like this a little bit different than you have in
Speaker 1: your kid.
Speaker 2: Now.
Speaker 1: Of course, the government sort of like a business has
Speaker 1: income right taxes, and they have expenses that they spend,
Speaker 1: and they keep the difference their money. They're piggy bank,
Speaker 1: and they keep it in the bank. Not Wells Fargo,
Speaker 1: JP Morgan, not city bank. They keep it at the
Speaker 1: federal reserve of course, all right, and this is known
Speaker 1: as the TGA or what we called the Treasury General Account.
Speaker 1: Right now, a lot of people don't know what the
Speaker 1: TGA is. It's the government's bank acount, okay. And what
Speaker 1: we can see is that there's a lot of money
Speaker 1: sit in that bankcount. But the important piece that we're
Speaker 1: going to break down is how much money is there,
Speaker 1: how has that money been used in the past, what
Speaker 1: have we seen through other types of cycles, and what
Speaker 1: do we expect is going to happen based off of
Speaker 1: the information they've given us and what's historical. Now, I
Speaker 1: do want to just give a quick shout out here
Speaker 1: to Thomas. Thomas writes these great tweet threads over on Twitter,
Speaker 1: and so I've taken some of the charts from his
Speaker 1: Twitter thread. We'll link to it down and below in
Speaker 1: the description if you want to read the entire thread
Speaker 1: that he put together is pretty good. But just real quickly,
Speaker 1: you can go on to pretty much anywhere Trading View
Speaker 1: or whatever this is from the FED directly and you
Speaker 1: can look at the Treasury General Account. Now, it did
Speaker 1: get really high in twenty twenty, like everything else did,
Speaker 1: so you can see we sort of have this baseline
Speaker 1: around here. This was this twenty twenty anomaly. Now these
Speaker 1: red arrows that are put on the screen here is
Speaker 1: tax time. This is April of twenty two or twenty one,
Speaker 1: April twenty two, April twenty three. And you can see
Speaker 1: that there's these spikes every year right when we get
Speaker 1: that when the taxes come in. But what we can
Speaker 1: see right now is that this level has pretty much
Speaker 1: been flat lined here, which is sort of rare. You
Speaker 1: can see it's usually pretty volatile, right coming in from
Speaker 1: taxes spending down up, from taxes spinning down, and we've
Speaker 1: had this pretty flat area. There's about seven hundred and
Speaker 1: seventy billion dollars little less than a trillion. We might
Speaker 1: see some of the peaks about seven hundred and seventy
Speaker 1: billion dollars in that. Now, one thing to understand is
Speaker 1: the mechanics of how this works when the treasury TGA.
Speaker 1: When the treasury account is full, cash is out of
Speaker 1: the market. It's on the sidelines. It's dormant, as I said, right,
Speaker 1: So it's like.
Speaker 2: Money in the bank.
Speaker 1: It can be spent whenever they want to spend it,
Speaker 1: but it's not actively incentivizing spending at that time. Now,
Speaker 1: if we will look at the TGA Treasury General account levels,
Speaker 1: we can start to get a sort of better idea
Speaker 1: of where things are now and more importantly, where they
Speaker 1: might go historically. Now, typically you might think that as
Speaker 1: the TGA account is rising, as there's more money piloting
Speaker 1: into that account, that's typically bad for liquidity levels. So
Speaker 1: you know tax time, as I showed you how it
Speaker 1: starts to spike around tax time, well, it has to
Speaker 1: go from my account, my personal account, business acount, or
Speaker 1: yours to the government. And that means that I now
Speaker 1: have less money to invest into my business or to
Speaker 1: spend for my family or whatever it is. And so
Speaker 1: that money is being sucked out of the economy and
Speaker 1: it's going.
Speaker 2: To the government.
Speaker 1: I like to stay that the government cannot give something
Speaker 1: that it has not taken. The government doesn't create, All
Speaker 1: it does is redistribute. So it's literally taking it away
Speaker 1: from you and I productive members of society, and it
Speaker 1: goes into their account. So that is typically bad. It's
Speaker 1: sucking liquidity out. When we see TGA is draining, then
Speaker 1: that is good for liquidity. That means that now the
Speaker 1: TGA that the government is now pushing the money back
Speaker 1: onto main street. Because remember the government redistributes, They take
Speaker 1: it from me and you, from my business, and then they.
Speaker 2: Give it to whoever they want.
Speaker 1: So they're taking it, sucking out, giving it back, pushing
Speaker 1: it back.
Speaker 2: So that would be good, good for liquidity anyway.
Speaker 1: All right, Now, what we can see is the TGA.
Speaker 1: The government estimates where they expect their bank account levels
Speaker 1: to be. So they said that by the end of
Speaker 1: Q three, twenty twenty four, they expect it to have
Speaker 1: about eight hundred and fifty billion, which is about seven
Speaker 1: hundred and seventy billion right now. So they expect the
Speaker 1: TGA to go up between now and the end of
Speaker 1: Q three, which is pretty interesting because we don't have
Speaker 1: any you know, big tax dates coming up, and they
Speaker 1: expect by the end of Q four, so by the
Speaker 1: end of this year to be at about seven hundred billion,
Speaker 1: which is a little bit lower than we're ride today. Now,
Speaker 1: this estimate is completely wrong, just like every other estimate
Speaker 1: that the government puts out. The Treasury also puts out
Speaker 1: their borrowing requirements every quarter, and yeah, they're wrong, every
Speaker 1: single one. They have to go back and revise them
Speaker 1: when no one's paying attention all the economic gated the
Speaker 1: BLS puts out, it's always wrong. They go back and
Speaker 1: revise that, and these numbers are way off, and we're
Speaker 1: going to take a look at that and why that's important. Now,
Speaker 1: just to kind of put this into perspective with a
Speaker 1: chart that you can see again, this goes back to
Speaker 1: the t TG account and so we're right here at
Speaker 1: this blue dot, and they're expecting that the end of
Speaker 1: Q three we're here a little bit higher, and by
Speaker 1: Q four we're here a little bit lower. So we're
Speaker 1: going to stay right in this range. Apparently according to them.
Speaker 1: Now you can just look back here, that has not
Speaker 1: been the case. We have not been in a range
Speaker 1: at all that long. But that's where they say we're
Speaker 1: at now. To get an idea of how this works,
Speaker 1: the TGA account works, let's just break this down. This
Speaker 1: is from macro alf and he says, right here, why
Speaker 1: does draining the TGA matter that much for markets and
Speaker 1: the US economy. So when the TGA is high, it's
Speaker 1: bad for markets. When the TJA is low or drained,
Speaker 1: it's good. So why why does it matter for markets
Speaker 1: to the economy? And he says, because draining the TGA,
Speaker 1: taking the money and pushing it back into the market
Speaker 1: is akin to throwing fresh money at the economy. Just
Speaker 1: dumping money into the economy, similar to deficit spending, which
Speaker 1: we've been doing a lot of that as well. So
Speaker 1: definicis spending as well as TGA spending, and also adding
Speaker 1: new liquidity to the interbank system similar.
Speaker 2: To QE or quantitative easing.
Speaker 1: So this whole time, no, we're tightening, we're tightening. No
Speaker 1: quantitative easing. Well maybe technically, but there's lots of ways
Speaker 1: that we get liquidity into the system.
Speaker 2: So how does it work.
Speaker 1: Well, he goes on to say, is sort of like
Speaker 1: this one two punch. So step one is the government
Speaker 1: drains down its tg at the FEDS right now seven
Speaker 1: hundred and seventy billion, they could drain that money down,
Speaker 1: hence lowering its equity position, but then injecting this fresh
Speaker 1: new money into the real economy, like this is the
Speaker 1: most inflationary could be. You know, analysts will argue that
Speaker 1: QI isn't really inflationary because it doesn't really get money
Speaker 1: into the actual market, or I'm sorry to the economy.
Speaker 1: QWI just gives money to the banks, but the maanks
Speaker 1: don't necessarily put it into the economy.
Speaker 2: Supposedly.
Speaker 1: There's a whole nother topic for another video, but here
Speaker 1: it's literally injecting this fresh money directly into the economy.
Speaker 2: That's what the government does.
Speaker 1: The economy equals households net worth goes up. Household net
Speaker 1: worth goes up, people have more money to spend.
Speaker 2: Step number two.
Speaker 1: Households now have more money that's good in the form
Speaker 1: of bank deposits, which end up back into the banking system.
Speaker 2: So if you get money, where do you put it?
Speaker 1: Of course, you put it into the bank, and hence
Speaker 1: banks also sit on a larger amount of reserves. So
Speaker 1: now the banks take the deposits, they have more reserves.
Speaker 1: What do banks do when they have more reserves, Well,
Speaker 1: how they're able to loan out even more money, which
Speaker 1: means even.
Speaker 2: More liquidity in the system.
Speaker 1: The Fed's balance sheet squares with less TGA perfectly offset
Speaker 1: by a.
Speaker 2: Higher amount of reserves.
Speaker 1: So now you can see how powerful this monetary mechanic
Speaker 1: combination is. So when they drain the TGA, it's literally
Speaker 1: throwing money directly into it. But they're saying that they're
Speaker 1: not going to drain it they're saying, by the it's
Speaker 1: actually going to go up and by the end of
Speaker 1: the year is going to be.
Speaker 2: About even That's what they say.
Speaker 1: But should we take them at their word or should
Speaker 1: we understand this a little bit more. I just saw
Speaker 1: the markets going to a tailspin and panic when Japan
Speaker 1: raised rates and this thing called a carry trade started
Speaker 1: to unwind. Now it doesn't really matter about that, but
Speaker 1: what we did see was brokerage accounts were frozen. We
Speaker 1: saw people unable to withdraw their bitcoin from their exchanges.
Speaker 1: Now that was a warning, but the reality of that
Speaker 1: happening is real, and so don't trust your bitcoin on
Speaker 1: an exchange. Secure it yourself, secure it properly. Now. I
Speaker 1: know it can seem overwhelming, but if you use a
Speaker 1: device like this, it can be very easy. This is
Speaker 1: a treasure hardware device, and basically what this does is
Speaker 1: keeps your private key secure and when you want to
Speaker 1: use it, you plug it into your computer. When you
Speaker 1: don't want to use it, you unplug it and put
Speaker 1: it back into your safe. I've been using this device
Speaker 1: Treasure for I don't know, six seven years, because I
Speaker 1: think it's the easiest to use and if it's complex,
Speaker 1: that creates problems.
Speaker 2: On its own.
Speaker 1: It's easy to use, it's fast to really set up,
Speaker 1: and it's open source so you can trust the software
Speaker 1: on there. So check out this treasure device. It's the easiest,
Speaker 1: it's the fastest way to secure your bitcoin, take custody
Speaker 1: of it yourself, and protect your private property.
Speaker 2: Check it out. There's a link down below.
Speaker 1: Okay, so if we take the historical view now, I
Speaker 1: want to go back in history to understand where we're
Speaker 1: going in the future.
Speaker 2: But I do want to just let you know I
Speaker 2: don't really care about.
Speaker 1: The end of Q three. I don't really care about
Speaker 1: the end of Q four. Typically I'm looking at least
Speaker 1: a year out. Most of my stuff, I'm looking three,
Speaker 1: five or ten years out. But let's just take a
Speaker 1: look at where we'll be in twenty twenty five, all right.
Speaker 1: So that's sort of what I've been talking about a
Speaker 1: lot with my qwave thesis. This quantitative leap that we're
Speaker 1: taking forward right now is really through the end of
Speaker 1: twenty twenty five. So right now we're looking at that,
Speaker 1: and if we want to know we're in twenty twenty five,
Speaker 1: we have to see, well, what's going to happen before.
Speaker 2: We get there.
Speaker 1: And there's a really big event coming up that you
Speaker 1: might have heard of before, and this is the debt
Speaker 1: ceiling showdown. The government gets together and says we need
Speaker 1: more debt. Of course we do, because we can't afford
Speaker 1: the debt we have, so we need more debt. President
Speaker 1: Biden was on the news saying, well, we need to
Speaker 1: have more debt because the US has never defaulted, and
Speaker 1: if we don't get more debt, how do we pay
Speaker 1: the old debt? Sort of like the definition of a
Speaker 1: Ponzi scheme. So the debt ceiling showdown comes and they
Speaker 1: argue over if we're going to raise it or not.
Speaker 1: Both sides grandstand about not wanting to spend more. There's
Speaker 1: some concessions made, and every single time it's been raised
Speaker 1: now there has been sometimes where it's gotten very close.
Speaker 1: We've seen some credit downgrades because of this. But this
Speaker 1: is basically what happens. And in this event, it almost
Speaker 1: always seems to happen, and it probably happened this year
Speaker 1: before the election, is that they can't come to an agreement,
Speaker 1: and so what happens is without passing an agreement, then
Speaker 1: there's no more debt. Available to no more funding develop
Speaker 1: for the government. So what happens in that event, Well,
Speaker 1: don't worry. The government has a piggy bang called the TDA.
Speaker 2: During that time, they will do what they.
Speaker 1: Call extraordinary measures, and they'll use the government bank account,
Speaker 1: the TGA to actually fund that gap where they can't
Speaker 1: get the debt ceiling. This happens most of the time.
Speaker 1: Now we can see this in this chart right here.
Speaker 1: Here's the TGA account again, and what we have right
Speaker 1: here in this first dotted line is where the debt
Speaker 1: ceiling showdown begins.
Speaker 2: This is where they start fighting, and.
Speaker 1: We can see they start spending down the tgaccount down, down, down,
Speaker 1: down down right here, this line right here is where
Speaker 1: an agreement is finally reached. Now this timeframe is about
Speaker 1: one hundred and forty days. Now we fast forward, the
Speaker 1: TJA gets replenished, kind of has this sideways action, and
Speaker 1: this dotted line right here is where they start fighting
Speaker 1: about the debt ceiling again.
Speaker 2: We're not going to raise it, we need to raise it, etc.
Speaker 1: And then they start spending down the TGA until they
Speaker 1: finally make a deal right here, about another one hundred
Speaker 1: and forty days.
Speaker 2: Now, it went.
Speaker 1: Up here, it goes up, it starts walking sideways, and
Speaker 1: this dotted line right here is guess what where the
Speaker 1: next debt ceiling showdown is going to begin. Now, what's
Speaker 1: interesting is this is January twenty twenty five. Now they
Speaker 1: predict that the TG will be higher by the end
Speaker 1: of the year, so maybe it'll be somewhere in this range.
Speaker 2: But when the debt ceiling debate or starts happening, what
Speaker 2: do you think happens based off of this?
Speaker 1: Most likely it starts trending down. Let me show you
Speaker 1: another chart. This is a little bit different historical lens.
Speaker 1: Again thanks to Thomas, I'm stealing his charts.
Speaker 2: We got this off of Twitter. I'm going to link
Speaker 2: to his.
Speaker 1: Full thread down below. What we can see here is
Speaker 1: when this happened. You can see it dropping right here,
Speaker 1: and each time we got to about.
Speaker 2: One hundred billion, same level.
Speaker 1: So it's important to understand what happened in the mechanics
Speaker 1: right here.
Speaker 2: But it's also important to.
Speaker 1: Understand the sort of empty level that they draw down to,
Speaker 1: because if we want to know where we end up here,
Speaker 1: what level will we be at?
Speaker 2: About one hundred billion?
Speaker 1: Now one hundred billion, how much did they say, would
Speaker 1: be in there by the end of the year.
Speaker 2: Now we can do some math, all right.
Speaker 1: Now, I also want to show you for historical purposes
Speaker 1: that this is where the government said we would end up.
Speaker 1: So again we have these dotted lines where the debt
Speaker 1: ceiling debate started.
Speaker 2: Here's where up.
Speaker 1: Now what's important is this is where we ended up. However,
Speaker 1: what the Treasury had forecasted.
Speaker 2: Where we'd end up was right here.
Speaker 1: Same thing here we get to hear they forecast we
Speaker 1: would be here, but we ended up down here. Now
Speaker 1: they're forecasting we're going to be here.
Speaker 2: But where do you think we're going to be?
Speaker 1: Well, if history is our guide, we're going to be
Speaker 1: right here in this range.
Speaker 2: The same thing. Now, why does all this matter?
Speaker 1: Well, it matters because we need to figure out where
Speaker 1: we're going in the form of liquidity. And the first
Speaker 1: thing we have to kind of figure out is where
Speaker 1: do we go? What are the lawmakers going to do?
Speaker 1: Now we have to remember, as I said, take into
Speaker 1: a consideration that we're also in an election here, So
Speaker 1: this is going to make this even more volatile, meaning,
Speaker 1: you know, is it going to be Republicans or Democrats
Speaker 1: are going to take over the presidency, who's going to
Speaker 1: retain the Senate of the House.
Speaker 2: I would imagine there's going to be even.
Speaker 1: More grand standing than we normally see, fighting over budgets,
Speaker 1: different parts of the budgets.
Speaker 2: And so if anything, this could.
Speaker 1: Probably exacerbate the situation. It could probably make the Treasury
Speaker 1: fund it for longer than they typically have, And if so,
Speaker 1: then they will have to continue to inject the money.
Speaker 1: So the question is how much will they have to inject.
Speaker 1: We know that they're here, now, we know that they
Speaker 1: say they might build it up a little bit, and
Speaker 1: the question is how far will they drain it down?
Speaker 2: Well, back to the math.
Speaker 1: If we're typically down to about one hundred billion each time,
Speaker 1: and we have about eight hundred billion, eight hundred and
Speaker 1: fifty billion, they draw it down to one hundred, that
Speaker 1: means there's about seven hundred and fifty billion that could
Speaker 1: get injected directly into the economy for you and I
Speaker 1: to spend.
Speaker 2: So what does that mean, Well, if.
Speaker 1: We have seven hundred and fifty billion injected, not into
Speaker 1: the banks like QE, I'm talking about being injected directly
Speaker 1: into the economy, directly into stimulus, into building programs, into
Speaker 1: more welfare things like that. It goes directly to the economy. Now,
Speaker 1: to put this into perspective, just to kind of normalize ourselves,
Speaker 1: because these numbers get so out of whack. In two
Speaker 1: thousand and eight, during the Great Financial Crash, where the
Speaker 1: entire global financial system, not just do US, global finance
Speaker 1: system was melting down. At the same time, the FED
Speaker 1: stepped into action to save the world. And at the
Speaker 1: time it was seven hundred billion that was spent in
Speaker 1: this tart program to do that seven hundred billion. This
Speaker 1: is more than that, and it is most likely coming our
Speaker 1: way in the next couple of months. So again, what
Speaker 1: happens if we see this it takes about, as we
Speaker 1: saw history, is about one hundred and forty day process
Speaker 1: of shoveling this money in seven hundred and fifty going
Speaker 1: directly to main street. What do you think is going
Speaker 1: to happen? Well, I put some arrows here. This is
Speaker 1: asset prices. Now, look, this is good and bad. Right,
Speaker 1: I'm not saying the economy is going to be fixed
Speaker 1: by this. Now, a lot of people that are losing
Speaker 1: their jobs, a lot of businesses that might suffer, they're
Speaker 1: going to get some help, right, they'll get stimulus that
Speaker 1: will be coming their way, so it's good for them overall.
Speaker 2: It's bad for the economy.
Speaker 1: But for asset prices, coin, tech stocks, real estate, I
Speaker 1: expect all this to go back up. Now, not everything
Speaker 1: moves up at the same time, and we do have
Speaker 1: to keep in mind that as more money is created,
Speaker 1: and as more money is injecting the system, it just
Speaker 1: diminishes the purchasing power of those dollars. So just because
Speaker 1: assets are going up doesn't necessarily mean you're getting richer. So,
Speaker 1: for example, as I break this down in the Investing
Speaker 1: black Hole, the S and P five hundred is basically
Speaker 1: just keeping your.
Speaker 2: Nose above water, just barely.
Speaker 1: But there's certain assets that will go up one times,
Speaker 1: five times, nine times what this liquidity will do. I
Speaker 1: broke it all down to this other video called the
Speaker 1: investing black Hole. I'm not going to go through it
Speaker 1: right now, but if you want to watch the investing
Speaker 1: black Hole video, I'm going to put it.
Speaker 2: Right up here for you.
Speaker 1: Go watch that video, because it's really the only place
Speaker 1: that you should be investing. But this is what I'm expecting.
Speaker 1: I'm expecting a massive liquidity increase, so don't get tricked,
Speaker 1: don't get faked out over the next month or two,
Speaker 1: the next quarter, two, keep your eye on the next
Speaker 1: I don't know, nine months to twelve months, because it's
Speaker 1: going to be a wild ride. Let me know what
Speaker 1: you think about this video in the comments down below.
Speaker 1: Of course, that's always give me thumbs up if you
Speaker 1: like it. If you don't give me a thumbs down,
Speaker 1: that's okay either way. At least tell me what you
Speaker 1: think of the comments. Subscribe if you're not already subscribed, And.
Speaker 2: That's what I got. Right to your success. I'm out.