Speaker 1: Hello, Welcome back to another episode of The Mark Moss Show.
Speaker 1: We're always talking about building your wealth, building your freedom,
Speaker 1: and protecting both because times are changing and they are
Speaker 1: changing fast. Today, I want to talk about what happened
Speaker 1: last week with an almost failed US Treasury auction. Now
Speaker 1: that may sound very boring, but trust me, it is not.
Speaker 1: We are coming very close to the end game. As
Speaker 1: a matter of fact, mainstream has finally picked up on
Speaker 1: this narrative and they are calling for the endgame. In
Speaker 1: the endgame could be coming in the next ninety days.
Speaker 1: As a matter of fact, we have a chart that
Speaker 1: we are watching that predicts when this end game could come.
Speaker 1: That endgame is when, yes, the government runs out of money.
Speaker 1: We have a failed treasury auction, and even worse can happen. Now,
Speaker 1: let's dig into all this. What actually happened last week?
Speaker 1: How bad is it? What is the trend showing us?
Speaker 1: What is this chart that we're watching, What happens in
Speaker 1: ninety days that could cause us all to fall apart
Speaker 1: unless some big things are happening and done, which I
Speaker 1: think they will. Of course, I'm an inflation bowl. I'm
Speaker 1: gonna explain to you why all of that works. What's
Speaker 1: the big news here? Right off the bat, The big
Speaker 1: news is that last week we saw the US treasury
Speaker 1: auction almost fail, and so what does that mean. So
Speaker 1: the government is spending more than they're bringing in. You
Speaker 1: know that they finance that through deficits, the deficit spending.
Speaker 1: There is the amount of shortage that they have, and
Speaker 1: they finance that through borrowing money. The way they borrow
Speaker 1: money is by selling bonds, So then people have to
Speaker 1: come buy those bonds. Now, prices are always the equilibrium
Speaker 1: of supply and demand. So if there's more supply, if
Speaker 1: the government's trying to sell more debt, then there is demand,
Speaker 1: then there are buyers. The price has to go up
Speaker 1: to enhance entice the buyers. And that's exactly what we
Speaker 1: saw and it was catastrophic. As a matter of fact,
Speaker 1: it was the worst treasury auction that we've seen since
Speaker 1: twenty eleven. And the treasuries, what the government had to
Speaker 1: pay went up up so high that it created a
Speaker 1: massive tel I'm going to break this down. And it
Speaker 1: was so bad that the credit rating agencies Moodies came
Speaker 1: out and move the sentiment of the government down to negative,
Speaker 1: citing the very fact that they have unsustainable debt and
Speaker 1: they can't afford it. As a matter of fact, we
Speaker 1: saw Moody's, which is the one that did this. They
Speaker 1: lowered its outlook on the US credit rating to negative.
Speaker 1: It went from stable to negative, citing large fiscal deficits
Speaker 1: and a decline in debt affordability. So it is not
Speaker 1: crazy people like me on the internet, on YouTube and
Speaker 1: podcasts seeing this thing. The credit rating agency says, these
Speaker 1: large fiscal deficits, the amount of debt that you're short
Speaker 1: every year, and the declining in the affordability of your
Speaker 1: debt are major problems. Of course, the government didn't like it.
Speaker 1: President Biden got all mad about it. But look, it
Speaker 1: is what it is, they said. I said, it's a
Speaker 1: rising concern for investors, contributing to a sell off that
Speaker 1: took US government bond prices to the lowest level in
Speaker 1: sixteen years. According to the chief economist from the US
Speaker 1: at Natoxis, deficits will remain large as an interest costs
Speaker 1: take up a larger share of the budget. The debt
Speaker 1: burden will continue to grow. And it's not just continue
Speaker 1: to grow. It turns into a debt spiral. It turns
Speaker 1: into a coil that winds up and gets power and
Speaker 1: then blasts off. So we're going to talk about that,
Speaker 1: but let's just talk about what happened first of all.
Speaker 1: All right, So I don't want to go exactly all
Speaker 1: the way through exactly how this works, but let's just
Speaker 1: take a look at exactly what happened last week. So
Speaker 1: what we saw is that again the Treasury, we went
Speaker 1: to market to try to raise this money. Now there's
Speaker 1: a couple of things that are important that I want
Speaker 1: to start with first. So first of all, it's not
Speaker 1: just you and I seeing this. It's not just a
Speaker 1: moody seeing this. The Treasury itself already knows this. And
Speaker 1: how do I know that they know this. It's because
Speaker 1: they've said so. And what they're doing is they're trying
Speaker 1: to game the system. So what they do is they
Speaker 1: announce how much they're going to be borrowing. So what
Speaker 1: we saw is that the Treasury announced they would be
Speaker 1: borrowing seven hundred and seventy six billion for the fourth
Speaker 1: quarter of twenty twenty three. And the reason why it's
Speaker 1: important is because they announced that they're going to be
Speaker 1: borrowing less than they had borrowed the prior quarter. Seventy
Speaker 1: six billion dollars less. So what they're trying to say is, look, look,
Speaker 1: our deficit spending is going down. We're borrowing less money
Speaker 1: than we borrowed last time. Instead of eight hundred and
Speaker 1: fifty billion, now it's only seven hundred and seventy six billion. Okay,
Speaker 1: big deal, But they're trying to show that it's going down.
Speaker 1: But here's the thing. They're lying. And what do I mean
Speaker 1: by they're lying. What we can see is that they
Speaker 1: announce this number, but they go back and revise it later. Oh,
Speaker 1: turns out we needed to borrow more. We're going to
Speaker 1: borrow more than we had projected, and every quarter it's
Speaker 1: the same thing. It's not just that we see it.
Speaker 1: The Treasury actually told us this. Let's break this down.
Speaker 1: So what we can see is that they came out
Speaker 1: with an announcement and they said that, you know, we're
Speaker 1: going to be borrowing less money than projected. But there's
Speaker 1: more in this that I want to unpack. And what
Speaker 1: is that. Well, there's three things, three points that were
Speaker 1: in the statement from Janet l in the Treasury that
Speaker 1: I think we need to break down. First off, the
Speaker 1: first thing they said is quote primary dealers explicitly noted
Speaker 1: a high degree of uncertainty overall around the deficit and
Speaker 1: growth forecasts, reinforcing the Treasury's need to maintain flexibility in
Speaker 1: their issuance strategy. That's what this is what Jane Allen
Speaker 1: Treasury said. So what does that mean, Well, the primary
Speaker 1: dealers who's that? That's the banks. This is like the
Speaker 1: Golden Sacks. These are the buyers of last resort. These
Speaker 1: are the buyers that the government mandates to buy the
Speaker 1: debt for them. So they're saying that these buyers of
Speaker 1: last resort at the banks are seeing this high degree
Speaker 1: of uncertainty around the deficit and the growth forecast. Exactly
Speaker 1: what Moody said. So yelling herself is saying, we see
Speaker 1: they're saying this, and so what it means is that
Speaker 1: they're admitting that the primary dealers are uncomfortable with this.
Speaker 1: They're admitting that they're concerned about the demand for these treasuries.
Speaker 1: They're concerned with being stuck with this. They don't want
Speaker 1: to do that. Remember this point. We're going to come
Speaker 1: back to it at the end when we break down
Speaker 1: some of the math. Point Number two is that the
Speaker 1: Treasury anticipates that one additional quarter of increases to cupon
Speaker 1: auction sizes will likely be needed beyond the increases announced today.
Speaker 1: So what does that mean? That's what I was just saying.
Speaker 1: Every single time they announce how much they need to borrow,
Speaker 1: they go back and revise that. So what they're saying
Speaker 1: is that the Treasury is expecting to add to the
Speaker 1: amount they need to borrow this quarter beyond these estimates.
Speaker 1: So they're telling you right there that they're basically lying
Speaker 1: to you. They're saying, Hey, we're probably going to have
Speaker 1: to to this, so we're going to show you the
Speaker 1: short number we're probably going to add to it. I
Speaker 1: don't know who they're really fooling by this. I mean,
Speaker 1: you know, I'm just some guy on the internet here
Speaker 1: and I see that every month or every quarter they
Speaker 1: go back and revise this. They're telling us that they're
Speaker 1: going to do it right here, Who are they really
Speaker 1: fooling here? Number three, they said that the Treasury continues
Speaker 1: to make significant progress on its plans to implement a
Speaker 1: regular buyback program in twenty twenty four. That's the big one.
Speaker 1: What are they saying. They're saying that the Treasury is
Speaker 1: ready to implement a program to buy back their own debt,
Speaker 1: basically buy their own debt, sort of like what Japan does,
Speaker 1: sort of like a snake eating its own tail. What
Speaker 1: they're saying is, we're not done here. We have many
Speaker 1: more magic tricks up our sleeve. This is something I
Speaker 1: talk about a lot. You know, there's lots of brilliant
Speaker 1: market analysts out there, way more brilliant than me. One
Speaker 1: of my favorites has been Harry Dent Junior. I've read
Speaker 1: like five of his books. His research is so good
Speaker 1: I believe actual his research is correct. His assumptions have
Speaker 1: been wrong. His research is right, his assumptions are wrong.
Speaker 1: He's continually called for a crash, a crash, a crash,
Speaker 1: a crash, crash that never comes. And the reason why
Speaker 1: it never comes is because he just continues to fail
Speaker 1: to realize how many more tricks the FED has up
Speaker 1: their sleeve. If things worked normally, he would be right.
Speaker 1: But they don't. And what they're telling us right here
Speaker 1: is they have more magic tricks up their sleeve. This
Speaker 1: is why Harry Dan's wrong, This is why Peter Shift's wrong.
Speaker 1: This is why all of these people calling the Michael
Speaker 1: Burry's are wrong. They're all confists to happen, but they
Speaker 1: fail to realize how many more tricks they have up
Speaker 1: their sleeve. If you just tune in, you're listening to
Speaker 1: the Markmas Show. I have a whole lot more to
Speaker 1: cover when I come back about what is going on
Speaker 1: with the treasuries and where we're going. You don't want
Speaker 1: to miss it, don't go away, I'll we're back, all right,
Speaker 1: welcome back. If you just tune in, you're listening to
Speaker 1: the Mark mass Show. We're talking about what happened last
Speaker 1: week where we almost had a failed auction. So let's
Speaker 1: break down how that happened. So there was a thirty
Speaker 1: year auction, so you have everything from t bills up
Speaker 1: the bonds, and that's the duration anywhere from months to
Speaker 1: years or decades in this matter. And they sell these entranches.
Speaker 1: So in the thirty year auction, they wanted to sell
Speaker 1: twenty four billion dollars of that. And what happens is
Speaker 1: there's something called a bid to cover ratio. It's a
Speaker 1: BTC and that means how many bids, how much demand
Speaker 1: is there for the supply that they're offering, and what
Speaker 1: this is usually represented in a number and we saw
Speaker 1: that this one came in at two point two four percent,
Speaker 1: which doesn't really maybe mean anything to you. So we
Speaker 1: have to sort of look at history and we can
Speaker 1: see this is typically around two point five or two
Speaker 1: point six, So to go from two point six to
Speaker 1: two point two, that's very low. And what we can
Speaker 1: see is that it looks like foreign demand was off,
Speaker 1: but really I don't think it's exactly that. So what
Speaker 1: do I mean by this? What we can see from
Speaker 1: the Treasury report is there's basically three tranches of buyers
Speaker 1: that they tell us. One they tell us about the
Speaker 1: primary dealer. The primary dealers again are these buyers of
Speaker 1: last resort. These are these banks. The second one is
Speaker 1: what we call direct bidders. These are institutions and these
Speaker 1: are individuals. And then third we have indirect bidders. Indirect
Speaker 1: bidters are the foreign demand. These are foreign buyers. And
Speaker 1: what we can see for this thirty year auction, if
Speaker 1: we look back through a few auctions of this year January, October,
Speaker 1: and now November, we can see that in January, the
Speaker 1: primary dealers, which are the buyers of last resort, the
Speaker 1: ones mandated to buy, took up nine percent of the
Speaker 1: bonds in November. They well, actually before we talk about
Speaker 1: let's let's talk. Let's let's talk. Okay, Well, let's talk
Speaker 1: with that. So they bought nine percent in January. In
Speaker 1: November they were forced to pick up almost twenty five percent,
Speaker 1: so they have to suck up the difference. They had
Speaker 1: to buy nine in January twenty five percent. So what happened, Well,
Speaker 1: the indirect bidders, which are the foreign buyers, in January
Speaker 1: picked up seventy five percent. In November, they only picked
Speaker 1: up sixty percent. The direct bidders picked up sixteen percent
Speaker 1: in January and picked up fifteen percent November, So the
Speaker 1: direct bidders were about the same percentage. It was the
Speaker 1: indirect bidders that fell off from seventy five percent to
Speaker 1: sixty percent, and so the primary dealers had to pick
Speaker 1: up the difference from nine to twenty five percent. But
Speaker 1: that's not the whole story. What I really want to
Speaker 1: show you is that it's the amount of auction that
Speaker 1: the amount being auctioned off, it's the supply. So what
Speaker 1: we can see is that the foreign buyers, the indirect bidders,
Speaker 1: actually bought more bonds in November than in January. So
Speaker 1: in January they bought thirteen point four billion. In November
Speaker 1: they bought fourteen point three billions. They actually bought an
Speaker 1: extra billion dollars worth of bonds. The problem isn't as
Speaker 1: much the demand side. There's still demand. They actually bought
Speaker 1: a billion dollars more than they bought before. The problem
Speaker 1: is there's too much supply. The problem is the treasury
Speaker 1: is spending way too much money and borrowing too much.
Speaker 1: This is very important. As we get to this later part,
Speaker 1: you're going to understand why. But the problem is the
Speaker 1: government cannot and just will not stop spending. We're now
Speaker 1: fighting multiple wars. Janet Yellen's out there saying we can
Speaker 1: fight multiple wars. Sure, we're fighting a war on in Ukraine.
Speaker 1: We're fighting a war on Israel. We're fighting a war
Speaker 1: on terrorism, We're fighting a war on obesity, we're fighting
Speaker 1: a war on poverty, we're fighting war, We're fighting every
Speaker 1: single war you can imagine. And we're spending more and
Speaker 1: more money. And the problem is is there's not enough
Speaker 1: people willing to buy that debt. Now, like I said,
Speaker 1: it's not a demand problem. The demand actually went up.
Speaker 1: They actually bought more, But what happened because there was
Speaker 1: more supply than there was demand. Then the price that
Speaker 1: they had to offer the Treasury I had to offer
Speaker 1: the buyers went up. Now, this is what happened. This
Speaker 1: is what showed. This is how it shows how bad
Speaker 1: this was. And so in this bid tocover ratio, since
Speaker 1: there was enough buyers, the price had to go up.
Speaker 1: So basically, the Treasury was hoping to sell this debt
Speaker 1: for less than what they had to do it what
Speaker 1: they had to sell it at, and the tail went
Speaker 1: up by five basis points, five basis points. This is
Speaker 1: what we call a gigantic tail, five basis points. We
Speaker 1: haven't seen that since, like I said, two thousand and eleven.
Speaker 1: So let's put this into context here a little bit.
Speaker 1: If we had a lower bid to cover ratio and
Speaker 1: it went up let's say six percent, we're at five.
Speaker 1: If it went up to six percent, that'd pretty much
Speaker 1: be a complete disaster. And what that would show the
Speaker 1: world is that there's so much dysfunction the treasury market
Speaker 1: that they can't trust it anymore. All right, That's what
Speaker 1: it would show. Now because of that, because the yield
Speaker 1: went up, then the bonds went up as well, and
Speaker 1: they moved so much where it went down, they moved
Speaker 1: in opposite. We're seeing these move and five basis point
Speaker 1: move is sort of like risk asset that might be
Speaker 1: something like we might see in the cryptocurrency markets, not
Speaker 1: the US treasury bond market. The US treasure bond is
Speaker 1: the global reserve asset. It's supposed to be what we
Speaker 1: would consider a risk free asset. It's supposed to be
Speaker 1: the most secure asset in the world. It's not supposed
Speaker 1: to trade like a like a cryptocurrency, it's not supposed
Speaker 1: to trade a like a meme stock. But yet here
Speaker 1: it is. And this is the problem. We haven't seen
Speaker 1: this much dysfunction in the treasury market since the two
Speaker 1: thousand and eight financial crisis. Now we can see this
Speaker 1: in an index called the move INDEXMOVE and it measures
Speaker 1: this high volatility and it shows us how bad the
Speaker 1: market conditions really are. And like I said, we haven't
Speaker 1: seen this much dysfunction. We haven't seen this much problems
Speaker 1: in this treasury market, in the largest, deepest, most risk
Speaker 1: free market in the world, since twenty ten. And so
Speaker 1: it's no doubt that we're seeing investors booped from both
Speaker 1: the amount of debt that the Treasury is trying to
Speaker 1: issue as well as how bad that auction went. But
Speaker 1: here's where things really get interesting. What we're witnessing is
Speaker 1: we're witnessing a showdown, a showdown of the Federal Reserve
Speaker 1: and the Treasury, the US government. I've been talking about
Speaker 1: this for a while. As a matter of fact, I
Speaker 1: made a video, I want to say it was late
Speaker 1: last year on my main YouTube, pianel Mark Moss talking
Speaker 1: about this exact thing, how the Fed and Treasury were
Speaker 1: at war. They were battling each other. You see, the
Speaker 1: Treasury wants to continue to spend money. They want to
Speaker 1: continue to pay for UBI, and pay for more for welfare,
Speaker 1: and pay you not to work, and they want to
Speaker 1: pay for wars, and they want to pay for all
Speaker 1: these things, but they don't have the money to do it.
Speaker 1: The Federal Reserve. They want the Federal Reserve to give
Speaker 1: them the money, but the Fed doesn't want to. Why
Speaker 1: because the Fed wants to control the dollar. They want
Speaker 1: the dollar to remain strong. They're also trying to fight inflation.
Speaker 1: If the Fed continues to give the Treasury more money
Speaker 1: to spend than inflation continues to go up. So the
Speaker 1: Treasury wants to spend money causing inflation. The Fed's trying
Speaker 1: to bring inflation down. That's the battle. And so what
Speaker 1: the FED is trying to do is trying to make
Speaker 1: you and I broke, so you and I spend less
Speaker 1: money to help bring inflation down. What the problem is,
Speaker 1: You and I aren't the ones causing the massive amounts
Speaker 1: of inflation. It's the Treasury doing this. But as the
Speaker 1: Treasury is trying to sell these and there's not enough
Speaker 1: people buying them, where are they getting the money to
Speaker 1: do that? Because right now the FED is in what
Speaker 1: we call QT, or quantitative tightening. So the FED doesn't
Speaker 1: want to buy these bonds right now. As a matter
Speaker 1: of fact, the FED wants to sell the bonds. And
Speaker 1: at the same time they want to sell the bonds,
Speaker 1: they're trying to raise the rates. But how can the
Speaker 1: Fed be selling bonds into the market when the Treasury
Speaker 1: is trying to sell bonds in the market and there's
Speaker 1: not enough buyers for them. Well, one of the ways
Speaker 1: they've been doing is the Treasury has been tapping into
Speaker 1: the reverse repo facility. Now reverse repo facility was over
Speaker 1: two trillion dollars and they've been taking the money from
Speaker 1: the reverse repor facility, and it's been drained going into
Speaker 1: the short end what we call t bills of this
Speaker 1: of this debt, and this has been tapped, and it's
Speaker 1: been draining at a pretty rapid rate, and we're down
Speaker 1: to about one point four trillion in that right now.
Speaker 1: The problem is, at the rate we're going, this is
Speaker 1: going to run out very soon, and we know the
Speaker 1: exact date at the current run rate. I'm going to
Speaker 1: talk about that in a second when I come back.
Speaker 1: If you're just tuning in, you listening to the Mark
Speaker 1: Mass Show, talking through what happened with the Treasury almost
Speaker 1: failed auction last week and what this means. I'll be
Speaker 1: back with more a minute. Don't go away, We're back,
Speaker 1: all right, Welcome back. If you're just tune in your
Speaker 1: listening to the Mark Mash Show. We're talking about what
Speaker 1: happened last week with the Treasury auction, how it almost failed,
Speaker 1: and what this means and what to expect moving forward. Now.
Speaker 1: I was saying that the Treasury has been pulling money.
Speaker 1: Money has been coming out. I want to say they're
Speaker 1: pulling out, but money's been coming out of this reverse
Speaker 1: repo facility. And going into these short dated tea bills.
Speaker 1: The problem is, at the rate we're draining this facility down,
Speaker 1: it's looking to run out pretty quickly. As a matter
Speaker 1: of fact, at the current run rate we're at, this
Speaker 1: could be empty in the next ninety days. It's a
Speaker 1: pretty big deal. If that is empty and the Fed
Speaker 1: doesn't want to buy the debt, what's going to happen? Well,
Speaker 1: remember we talked about the statement that the Treasury put out,
Speaker 1: and in that statement they talked about a bond buy
Speaker 1: back program and talked about how they wanted to get
Speaker 1: it up and running. Well, my guess is that's the
Speaker 1: magic trick they have up their sleeve. If they run
Speaker 1: out of money in the reverse repol facility and the
Speaker 1: Fed won't buy it, what will they do, Well, they'll
Speaker 1: just buy it themselves. They'll just buy it themselves. They'll
Speaker 1: be able to buy whichever bonds they want to make
Speaker 1: sure there's enough liquidity in the treasury market. Who cares
Speaker 1: if nobody wants them, We'll just buy on ourselves, right,
Speaker 1: Why not? But how could you say? How could the
Speaker 1: Fed achieve what they're trying to achieve, which is selling
Speaker 1: off their bonds at a time when again there's no demand,
Speaker 1: and I don't see how their's a way. I don't
Speaker 1: see how the FED could possibly continue to raise rates
Speaker 1: in this environment and continue to sell off bonds at
Speaker 1: the same time. Now, this is what I've been saying.
Speaker 1: I made a video about it on my main YouTube,
Speaker 1: pianel Mark Moss, And today I saw a headline come
Speaker 1: out from what we call the Fed's mouthpiece, Nick Timrose.
Speaker 1: Nick Timrose is somebody that seems like the FED sort
Speaker 1: of leaks information to and then Timros leaks it out
Speaker 1: to the press. Why does this even happen, Well, because
Speaker 1: the FED doesn't want to surprise anybody. You know, I
Speaker 1: tell you what's going on, and I sort of read
Speaker 1: between the lines for a year. But it's not like
Speaker 1: this big secret. Guess the FED tells us this information.
Speaker 1: They have this information leaked out because they do not
Speaker 1: want to surprise the markets. They're trying to tell you
Speaker 1: months in advance of what's going to happen. So, for example,
Speaker 1: in November of twenty twenty one, they told us they
Speaker 1: were going to start raising rates. As soon as that happened,
Speaker 1: Bitcoin started selling off first, because it's the most sensitive
Speaker 1: to risk assets. Then the Nasdaq, which of the tech stocks,
Speaker 1: started selling off. But they didn't actually start raising rates
Speaker 1: until like February of the following year, so it was
Speaker 1: a couple of months. They told us they were going
Speaker 1: to do it, but they didn't actually do it for
Speaker 1: a couple of months. See, they want to give you
Speaker 1: plenty of time to start planning, so they're not trying
Speaker 1: to surprise the market, which is why they use people
Speaker 1: like Nick Timrose in the press to leak this information.
Speaker 1: And so today he said that the October payroll report
Speaker 1: and inflation report strongly suggests that the Fed's last rate
Speaker 1: rise was back in July. The big debate at the
Speaker 1: next FED meeting is shaping up to be over whether
Speaker 1: and how to modify the postmeding statement to reflect the
Speaker 1: obvious the central Bank is on hold, so the Fed whisper,
Speaker 1: he's telling us that the Fed is done hiking rates
Speaker 1: because how can they? How can they continue to raise
Speaker 1: rates when the government is raising this debt like crazy?
Speaker 1: How can they? And the answer is they can't. And
Speaker 1: the answer is it looks like they're going to formally
Speaker 1: announce that they're on hold. The next part is how
Speaker 1: can they continue to let bonds roll off of their book.
Speaker 1: How can they continue to sell bonds in the market
Speaker 1: when there's not enough people buying the bonds that there is.
Speaker 1: The answer is, I don't really see a way to
Speaker 1: do that. It looks like the Treasury again in this
Speaker 1: battle over Fed versus Treasury, it looks like the Treasury
Speaker 1: has the Fed boxed in right now. They got them
Speaker 1: kind of painted into a corner, if you will, because
Speaker 1: if the Fed, the Fed's sort of damned if you do,
Speaker 1: damn if you don't. If the Fed signals that pause
Speaker 1: were a pivot, what happens, Well, the equity markets, the
Speaker 1: risk on assets, the assets are going to go to
Speaker 1: the moon, and they're trying to avoid that. They're trying
Speaker 1: to they're trying to bring those down right now. But
Speaker 1: if they announce this pause or a pivot, they're going
Speaker 1: to run back up. If the Fed signals or moves
Speaker 1: right higher, then this is going to hurt the US treasuries,
Speaker 1: which is going to make it harder for the Treasury
Speaker 1: to borrow money. But it's already too hard for the
Speaker 1: Treasure to borrow money. If that happens, then the treasure
Speaker 1: would collapse under its own weight. For demand. So what
Speaker 1: do they do? Well, that's a big problem. This is
Speaker 1: the painted into a corner, if you will. We're stuck
Speaker 1: in this doom loop where if the treasury rates go up,
Speaker 1: So if the FED raises rates, then the interest that
Speaker 1: the Treasury has to pay goes up. If they have
Speaker 1: to pay more interest, then that creates a larger deficit.
Speaker 1: If there's a larger deficit, they have to take on
Speaker 1: more debt. If they take on more debt, then they
Speaker 1: have more long term yields going up, which means even
Speaker 1: larger deficits. And if there's even larger deficits, then they
Speaker 1: need more debt. And this is a vicious cycle, a flywheel.
Speaker 1: We call it the debt death spiral. And so there's
Speaker 1: just no way the FED can absolutely win here. They
Speaker 1: could continue to do that and they could just completely
Speaker 1: destroy the government in the US Treasury, but then there's
Speaker 1: no Fed, and so what can they do? What is
Speaker 1: the likely scenario here? I don't know what's going to
Speaker 1: happen because my crystal ball doesn't work so well. But
Speaker 1: I can tell you what I think is likely to
Speaker 1: happen here based off of history of how the FED works,
Speaker 1: It seems like the FED is usually too slow to respond,
Speaker 1: just like they lowered rates too low and kept them
Speaker 1: at zero through the pandemic and through twenty twenty, and
Speaker 1: then when we saw that inflation was starting to rage on,
Speaker 1: they said, oh, no, inflation is not a problem. Oh,
Speaker 1: inflation is transitory. Oh it's going to go away. And
Speaker 1: they kept rates way too low for way too long.
Speaker 1: And now we're dealing with this problem, and so they'll
Speaker 1: probably keep rates way too high for way too long.
Speaker 1: At this point. They're going to try to manage that,
Speaker 1: but I would expect that these rates will stay way
Speaker 1: too high for too long. In this yield curve, you've
Speaker 1: been hearing about the yield curve in version showing that
Speaker 1: there's a recession coming. And as I've talked about, it's
Speaker 1: not the yield curb inverting, it's the problems when it uninverts,
Speaker 1: and I expect it to uninvert within the next couple
Speaker 1: of months. When that happens, then we'll see the price
Speaker 1: of bonds continue to probably take a massive hit. We're
Speaker 1: going to see a massive flight to hard assets and
Speaker 1: moneies like bitcoin and gold and other anti inflationary assets.
Speaker 1: And I think we're already starting to see this. So,
Speaker 1: for example, I've been talking about I think last week
Speaker 1: we talked about how it's almost sort of a scam.
Speaker 1: We have all the governments, the institutions, the sovereigns are
Speaker 1: having this massive rush to hard assets while you and
Speaker 1: I are being tricked into holding FIAT. You and I
Speaker 1: are being told, oh, there's this big crash coming and
Speaker 1: you want to be in cash right now, we're being
Speaker 1: tricked into buying US dollar nominated assets when everyone else
Speaker 1: is buying hard assets right now. What do I mean
Speaker 1: they're buying hard assets? Well, we talked about this. We
Speaker 1: can see the central banks around the world are net
Speaker 1: sellers of US treasuries. They don't want to hold their surplus.
Speaker 1: Right So, if you're a nation, you export goods and
Speaker 1: you receive back dollars, the difference is your surplus your profit.
Speaker 1: Where do you park that? Where do you park those
Speaker 1: hundreds billions dollars? Well, that typically has been held in
Speaker 1: US treasuries, but that's paper, that's FIAT, and they don't
Speaker 1: want to hold those paper FIAT when they know the
Speaker 1: government is continued to print so much more So that's
Speaker 1: why the central banks around the world have been net
Speaker 1: sellers of US treasuries and what are they buying. They're
Speaker 1: buying hard assets. They've been net buyers of gold, but
Speaker 1: they're not just buying gold. As a matter of fact,
Speaker 1: that Chinese have bought half of all the lithium mines
Speaker 1: in the world, So they want to buy hard assets
Speaker 1: in the ground. We have nations that have assets in
Speaker 1: the ground, like Saudi Arabia and even Russia saying we're
Speaker 1: not going to put out as much oil anymore. We
Speaker 1: would rather hold the oil in the ground than hold
Speaker 1: our surplus in US treasuries. So we're already seeing this
Speaker 1: mad rush USh to these hard assets. Meanwhile, we're watching
Speaker 1: you know, energy assets, hard assets and other assets going
Speaker 1: through the roof, and we're being misled. Now, what I
Speaker 1: want to do is I want to break down the
Speaker 1: three types of assets that we have. I want to
Speaker 1: break them down three different categories so you can you
Speaker 1: can think through how to do this. I want to
Speaker 1: walk you through a mental mindset on how you can
Speaker 1: think through this, how you can prepare your portfolio for
Speaker 1: what I think is coming ahead. Again, like I said,
Speaker 1: my crystal ball is a little foggy, so I don't
Speaker 1: know exactly, but I'm want to walk you through what
Speaker 1: I think is the most possible, the most probable, and
Speaker 1: what I'm doing to position myself for it. How I
Speaker 1: think through that, and how you can do the same,
Speaker 1: and more importantly, what you should be watching so you
Speaker 1: can see how all this unfolds. If you're just tuning in,
Speaker 1: you listening to the Mark mas Show, we're talking about
Speaker 1: how this failed treasury auction is sort of coming to
Speaker 1: a head and where this goes the next ninety days.
Speaker 1: Be aware of this. It's a big deal. I'll be
Speaker 1: back with more in a minute. Don't go away, I'll
Speaker 1: be back, all right, Welcome back. If you just tune in,
Speaker 1: you're listening to the Mark Moss Show, we're talking about
Speaker 1: what the heck happened last week with this almost failed
Speaker 1: US Treasury auction and what this means now I walk
Speaker 1: through all the mechanics of this. I talked about this
Speaker 1: eventual showdown that's coming, and I just don't see any
Speaker 1: way the Fed is able to continue to raise rates
Speaker 1: in this environment and continue to sell off bonds. There's
Speaker 1: just no way unless magically, Well there is a way.
Speaker 1: There's always a way, So what would it take magically
Speaker 1: the US government, the treasury would have to spend equal
Speaker 1: or less than the amount of money they're bringing in. Somehow,
Speaker 1: they'd have to shave about two trillion dollars per year
Speaker 1: off their spending. What would you say The odds of
Speaker 1: that are happening about zero, So that's not going to happen.
Speaker 1: So what happens Well, as we've already talked about, the
Speaker 1: FED mouthpiece Nick Timrose, what we call the Fed Whisper,
Speaker 1: has come out and said that it looks like the
Speaker 1: FED is done hiking rates. At the same time we
Speaker 1: saw this week the new CPI numbers came out, the
Speaker 1: consumer price inflation data came out, and it looks like
Speaker 1: the FED has won the war on inflation. Pretty interesting
Speaker 1: timing for these reports to come out, because the FED
Speaker 1: has to stop tightening, they have to stop raising rates,
Speaker 1: they have to stop still enough bonds, but they can't
Speaker 1: do that if inflation is still raging. So it's pretty
Speaker 1: interesting the new CPI reports come out showing that they've
Speaker 1: basically won the war on inflation at the same time
Speaker 1: that Timrose, the FED Whisper, is coming out and saying
Speaker 1: that they're done again. Like I said, the problem is
Speaker 1: that if the FED comes out and announces a pause
Speaker 1: or a pivot, then we're going to see risk assets
Speaker 1: take off. So don't look for them to come out
Speaker 1: and officially announce it. Instead, it's going to be through
Speaker 1: some stealth ways. So like, for example, the Treasury is
Speaker 1: creating this new funding facility where they're going to buy
Speaker 1: their own bonds, this bond buy back program, and they'll
Speaker 1: buy that. Maybe the FED will give them some money
Speaker 1: off the books. Right, they're going to say this is
Speaker 1: not QE, but it is QI. So technically QE works
Speaker 1: a certain way, it's a certain function, but non technically
Speaker 1: or I guess technically, even though QE has to work
Speaker 1: a certain way, Ultimately, what it does is it adds
Speaker 1: more liquidity to the system. What it also does is
Speaker 1: it shows that the Fed's willingness, the Fed's willingness to
Speaker 1: bail out or fund the liquidity in the system. And
Speaker 1: so whether they don't do it through the exact mechanism
Speaker 1: that's technically called quantitative easing, if they do it a
Speaker 1: certain way, it still achieves the same results. Now, a
Speaker 1: lot of this is what they do through what we
Speaker 1: call job owning, where the Fed's trying to move the
Speaker 1: markets based off of just what they're saying. So they're
Speaker 1: trying to tell you that they'll do something even though
Speaker 1: they haven't, and so we can see that what they
Speaker 1: do has an effect on the markets. Whether it's technically
Speaker 1: quantity of easy or not doesn't really matter. It achieved
Speaker 1: the same result. So that's what we'll see. So for example,
Speaker 1: in March of twenty twenty three, because they had jacked
Speaker 1: up the rates so high, we saw banks starting to fail.
Speaker 1: You remember that, we saw Silicon Valley Bank, We saw
Speaker 1: whatever the banks were, the Felt three banks, some Restronto Banks,
Speaker 1: Silvergate Bank, Silicon Valley Bank, and I think First Republic
Speaker 1: Bank all failed. And what they do well, they created
Speaker 1: a new funny facility called the BTFP and it wasn't QE,
Speaker 1: but it sort of injected a few hundred billion dollars
Speaker 1: liquid into the system to keep the whole thing from
Speaker 1: crashing down. Now, I did a whole video on my
Speaker 1: main YouTube channel breaking this down the difference of how
Speaker 1: the FED functions in the market today and how it's
Speaker 1: changed since two thousand and eight. So I don't have
Speaker 1: it in front of me, but just some basic math
Speaker 1: was in two thousand and eight. We saw the housing
Speaker 1: market actually start melting down in two thousand and six.
Speaker 1: So in two thousand and six we saw building permits,
Speaker 1: which is a leading indicator. If you're not pulling building permits,
Speaker 1: then you're not going to be building in the future, obviously,
Speaker 1: and we saw those drop by twenty six percent in
Speaker 1: two thousand and six. But yet they didn't do anything.
Speaker 1: It took about like a year and a half before
Speaker 1: they started to like lower rates. The trigger for the
Speaker 1: great financial crash in two thousand and eight was really
Speaker 1: bear Stearns going bankrupt, and it took them, I want
Speaker 1: to say, was it about eight or nine months before
Speaker 1: they did anything, and they organized a baillout of like
Speaker 1: one hundred million dollars, so it took eight or nine months.
Speaker 1: Now fast forward and look at this in twenty twenty three,
Speaker 1: when the banks failed, within six days they moved up.
Speaker 1: They moved and had this money set up, this funding
Speaker 1: and fifth fully set up. So they went from taking
Speaker 1: you know, seven eight months to now taking six days.
Speaker 1: So it shows the willingness of them to act. In
Speaker 1: twenty twenty we saw them instantly moving to the markets
Speaker 1: and set up multiple funding facilities. In fact, I think
Speaker 1: there was thirteen funding facilities. They were actively buying even
Speaker 1: stocks into the market. They were buying bonds, they're buying
Speaker 1: mortgage backed securities, they're buying all these things. Then they
Speaker 1: even went a step further and they started setting up
Speaker 1: dollar swap lines. So now all the other banks around
Speaker 1: the world will give you money as well. Think of
Speaker 1: this as like credit cards. Think about if the banks
Speaker 1: just sent you out, like, hey, here's five new credit cards.
Speaker 1: If anything were to happen to you where you know,
Speaker 1: you can't make your car payment, your house payment, whatever,
Speaker 1: just put it on the credit card, no big deal.
Speaker 1: If they would just send us all out, you know,
Speaker 1: one hundred thousand dollars in credit cards that we could
Speaker 1: just use if we needed, that would probably insulate us
Speaker 1: so we wouldn't have this recession. And that's exactly what
Speaker 1: they've done. They went around and gaven all these swap
Speaker 1: lines out to all these banks. Now it's not just
Speaker 1: the friendly nations. I think there's about thirteen nations or
Speaker 1: I should say central banks that we have these open
Speaker 1: with at the same time. And so we've seen this
Speaker 1: fundamental transformation of how these central banks work in the markets,
Speaker 1: and not just how they work, but even the speed
Speaker 1: and timing of how they work. And so they've gone
Speaker 1: from this sort of reactive lagging approach to now a
Speaker 1: pre emptive moving in advance to prevent these things from happening.
Speaker 1: And so my base case is that we have massive
Speaker 1: amounts of inflation in front of us. My base case
Speaker 1: is that we do not have a deflationary crash where
Speaker 1: everything falls in half and home prices are worth fifty
Speaker 1: percent and stocks worth fifty percent. I believe we have
Speaker 1: an inflationary crash. Now. Either way, a crash is bad. Right.
Speaker 1: A crash is bad because prices will move up more
Speaker 1: than an income and we won't have enough money to
Speaker 1: pay for the things that we want to maintain our
Speaker 1: quality of life. So if you lose your job, your
Speaker 1: quality of life goes down because you can't buy the
Speaker 1: same things, or you get a lower paying job, you
Speaker 1: can't buy the same things. But if prices go up,
Speaker 1: you're also in the same boat. You could still have
Speaker 1: your same job, but prices have gone up so much
Speaker 1: you can't afford those things. See, either way, a deflationary
Speaker 1: or inflationary crash is bad. I'm expecting an inflationary crash. Now,
Speaker 1: could there be a deflationary crash? First? There certainly could be,
Speaker 1: And this is what most people think. So even the
Speaker 1: Harry Dents and the leaderships of the world think that
Speaker 1: we'll have this big crash he's calling Harry dentis calling
Speaker 1: for an eighty percent market crash, and then he thinks
Speaker 1: that the FED will come in and blow this sky high.
Speaker 1: I don't think that's That's not my base case. It's
Speaker 1: certainly possible. I'm not putting that out of the realm
Speaker 1: with possibility. It's certainly possible. I don't think that's the
Speaker 1: most probable scenario of my case. I think we sort
Speaker 1: of just continue to trudge along, continue to move sideways,
Speaker 1: chop back and forth. We see a lot of volatility.
Speaker 1: Potentially we see some big swings, some ten to fifteen
Speaker 1: percent swings. I don't think we see the sixty eighty
Speaker 1: percent like Harry Dent says, and I believe that will
Speaker 1: cause the FED to blow this sky high. Now, going
Speaker 1: back to charting this since two thousand and eight, we
Speaker 1: saw that the FED intervening in the market to tune
Speaker 1: of about one point two trillion dollars. It's about seven
Speaker 1: eight hundred billion roughly the first bellout package total amount
Speaker 1: of one point two billion in two thousand and eight,
Speaker 1: and it took the markets. The market's dropped sm P
Speaker 1: five hundred dropped about sixty percent and took about seven
Speaker 1: years to recover its high. In twenty twenty, because the
Speaker 1: FED moved so fast, the market didn't drop sixty percent
Speaker 1: and only dropped thirty percent, dropped half as much and
Speaker 1: instead of taking seven six seven years to recover, it
Speaker 1: took six or seven months to recover. You seeing how
Speaker 1: they changed the way they interacted to the market, and
Speaker 1: the market didn't fall as far and it recovered much faster.
Speaker 1: It was to the tune of about ten trillion. Instead
Speaker 1: of one trillion, it was ten trillion. I believe that
Speaker 1: the FED will have to intervene, probably to the tune
Speaker 1: of fifteen to twenty trillion, and so instead of a
Speaker 1: thirty percent drop, maye we'll see a fifteen percent drop.
Speaker 1: But it's what happens after that, you see. After two
Speaker 1: thousand and eight, stocks gold went on to make crazy
Speaker 1: knew all time highs. After twenty twenty, stocks went on
Speaker 1: to make even crazier a new toime all time Hyes,
Speaker 1: risk assets like bitcoin et cetera. And I leave in
Speaker 1: twenty twenty four. If this happens, it'll be the same thing.
Speaker 1: I don't know what happens in the next to nine
Speaker 1: months or twelve months. I firmly believe that in the
Speaker 1: next three to five years, home prices are up fifty percent,
Speaker 1: gasoline prices, food prices, all those prices are fifty percent.
Speaker 1: Bick Wind's up to three hundred percent. That's what I
Speaker 1: think happens now between now and then. I don't know.
Speaker 1: It's anybody's guess. Potentially, there's so many black swans out
Speaker 1: there that this could catch the FED off guard, but
Speaker 1: it looks to me like they're preempting it, and we're
Speaker 1: seeing it from the Treasury announcement right here. Anyway, you
Speaker 1: listen to the Mark Mas Show breaking down this FED
Speaker 1: Treasury auction, what happened, and what I think happens in
Speaker 1: the future. That's what I got for you today. Hopefully
Speaker 1: have enjoyed this. Leave me a review on the podcast
Speaker 1: if you're listening, And that's what I got. Until next time,