Lawrence McDonald
@Convertbond
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NY Times Bestselling Author, "When Markets Speak" on sale date is March 26, 2024. Long-time @RealVision @CNBC Contributor, founder of the @BearTrapsReport
New York, NY
Joined March 2009
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Last Seen Profiles
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Special thanks to our entire team. “When Markets Speak” is one of the best selling business books in the world. We appreciate all the support. Here’s a look behind the scenes. Gratitude.
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Midterm Election, Most House Seats Lost by President's Party in Power
2010 Obama: -63
1994 Clinton: -52
1958: Eisenhower: -48
1974 Ford (Nixon): -48
1966 Johnson: -47
1946 Truman: -45
2006 Bush: -30
1950 Truman: -29
1982 Reagan: -26
2018 Trump: -26
*NY Times data since 1946
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Met Charle Munger in Omaha in the years after Lehman - he said:
"Larry, never, ever tell anyone about your problems, 90% of the people really don't care... The other 10% are glad you have them."
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Progress, Bitcoin - a $500B crash and no one is begging for a bailout...
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Is there a term for this?
GDP Economic Growth: -1.4%
CPI Inflation: 8.5%
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Drawdowns
Facebook -75%
Disney -48%
Fedex -50%
Tesla -46%
Nvidia -60%
Nike -50%
Netflix -58%
Amazon -46%
All-Time Highs
T-Mobile
McDonald´s
Northrop Grumman
Amylyx Pharm
Pepsi
UnitedHealth
Merck
*You won´t see internal divergence like this more than once or twice a decade
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Breaking news, when you pay human beings NOT to work it is very hard to get them back into the labor force.
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After living through the Lehman fraud - there is one ultimate takeaway - this era will go down as a period where central banks fueled con-men and women - Saylor (MSTR) and Wood (ARKK) - to prey on retail investors - FACT - Mark my words.
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Black Monday - working for my Dad’s brokerage firm, on October 19, 1987:
Me: “I really need to sell x shares of IBM”
Trader: “$98 bid”
Me: “But.. But, my machine says $122”
Trader: “Well, sell it to your machine then.”
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*BIDEN ADMIN: CAN WORK WITH ENERGY COMPANIES TO SURGE SUPPLY - Bloomberg
*PIONEER'S SHEFFIELD: EVEN IF BIDEN REQUESTS MORE OIL, SHALE CANNOT RESPOND. - Bloomberg
*"VP Harris did indeed call for banning fracking during the primary campaign." - Axios
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Market rally since
@realDonaldTrump
won the election now exceeds all other newly elected US Presidents since at least WW2, + up 25.4%
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True Story - October 19, 1987
Me: “I need to sell x shares of IBM”
Trader: “$98 bid”
Me: “my machine says $119”
Trader: “Well, sell it to your machine then.”
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Dow Jones Industrial Average
Nov 2017: 24,300
Nov 2016: 17,900
Nov 2014: 17,900
What’s going on here?
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What happens to Gold when the Fed stops hiking rates?
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Would You Desribe the State of the US economy in Excellent- Good shape?
2017: 66%
2016: 29%
2015: 37%
2014: 31%
2013: 30%
Quinnipiac Poll
via
@cvpayne
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Never forget, we live in a world where "insider trading" is illegal, but Fed policy path leaks to Wall. St. Journal reporters move asset prices in the hundreds of billions of dollars.
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The last time inflation was here, February 1982 - the Fed Funds Rate was 15%.
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Gold is money, everything else is credit.
JP Morgan, during the panic of 1907.
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Gold is money, everything else is credit.
JP Morgan, the panic of 1907.
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Dear Equities,
$1M in T-Bills, Interest Paid
February
2023: $51K
2022: $6k
Best regards,
Cash
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Gets very little coverage:
If
@realDonaldTrump
didn’t land the September Debt Limit - continuing budget resolution deal with “Chuck and Nancy”, there would be no tax reform (bill passage) in 2017
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How the Game Works
December 2020 - "Coinbase Picks Goldman Sachs to Lead Upcoming IPO"
November 2021: November COIN was a "Buy" and Goldman raised the price target to $387.
June 2022: GS Downgrades to Sell from Buy - price target now $45.
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True Story - working for my Dad’s brokerage firm, October 19, 1987
Me: “I need to sell x shares of IBM”
Trader: “$98 bid”
Me: “My machine says $119”
Trader: “Well, sell it to your machine then.”
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Interest rates up --- bonds prices down.
$1 million invested in this Apple AAPL bond is now worth $600k, duration risk is on stage here. Now think of all those mortgage-backed securities on bank balance sheets.
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Your 401k has been hijacked…
Largest 25 Stocks - Valuation
2023: $18.4T
2013: $5.5T
*Ten years ago, no stock made up more than 3% of the S&P 500, today 5 do. - Bespoke data.
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If you use the same metrics inside the CPI formula that Paul Volcker gawked at in the early 1980s, inflation is running at 14.145%, a real theft purchasing power.
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The "Crash of 22"
*Carnage under the Nasdaq surface
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Never, ever forget - the fundamental foundation of capitalism is to let the charlatans, the hubris filled pretenders, and bad guys fail. For most of the last 20 years we are living in a society where this is NOT the case. There is a price to pay for this charade. It’s coming.
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November 2017 vs 2016
Dow Jones Industrial Average
23,602 v 17,883 (+31.9% high to low)
NFIB Business Optimism
103.0 v 94.9
Consumer Confidence
125.9 v 100.8
Bloomberg data
cc
@DonaldJTrumpJr
@stevenmnuchin1
@realDonaldTrump
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A corrupt plutocracy on Stage - Nancy Pelosi’s husband purchased more than $2 million of $TSLA shares last week - ahead of this epic move - Theft in plain sight.
“one of the lawmaker's biggest equity investments this year” - Forbes
cc
@elonmusk
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*BLACKSTONE DEFAULTS ON €531M CMBS AFTER PROPERTY SALES DELAYED
*”Credit leads equities”, rinse repeat…
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I believe Bank of America is insolvent with a 6% Fed funds rate, leverage explodes. If your core capital is impaired, any losses on tertiary assets (credit cards, commercial real estate, asset backed securities) are exponential painful.
Veteran banker calling for "TARP 2.0" in Op-Ed to help banks with steep unrealized losses on their securities holdings
Proposal would lend up to $1 Trillion against securities that have lost value to Fed's "meteoric increase" in interest rates
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Biden is now officially in Jimmy Carter territory.
*Inflation is as high as the 1970s - 1980s. Using the CPI formula trafficked in those days, inflation is above 14%, matching the height of the worst consumer price pressure era.
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With US Treasuries at 5%, Bank of America is close to 45x levered, at 6-7% infinitely levered.
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*FED'S KAPLAN, ROSENGREN TO SELL ALL STOCKS AMID ETHICS CONCERNS - Bloomberg
Central Bankers trading stocks - Why in the name of God´s green earth did it take a public shaming on Twitter to inflict common sense?
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.
@MMFlint
In 2001 Venezuela was the richest country in South America; it is now among the poorest
via
@TheEconomist
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October 19, 1987, a Day to Never Forget
Me: “I need to sell x shares of IBM”
Trader: “$98 bid”
Me: “My machine says $119”
Trader: “Well, sell it to your machine then.”
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October 19, 1987
Me: I need to sell x shares of IBM
Trader: $98 bid
Me: My machine says $119
Trader: Well, sell it to your machine then
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October 19, 1987 - a Day to Never Forget
Me: "I need to sell x shares of IBM"
Trader: "$98 bid"
Me: "My machine says $119"
Trader: "Well, sell it to your machine then"
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Be careful trading stocks when major developed market bonds are trading like this. There is NOTHING more dangerous, than academics who have NEVER taken a professional risk, never actually sat in a risk-taking seat - but now sitting on trillions of pounds and dollars of risk.
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CITIGROUP IS SAID TO EXIT DISTRESSED-DEBT TRADING BUSINESS
*talk about a signal, wow.
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In the History on Mankind
1. A ton of coal has never been worth more than it is today.
2. The planet has never used more coal.
3. China is building more coal plants than exist in the Western world.
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.
@JeffBezos
Dear Jeff, one of the smartest human beings, who’s ever walked on two legs on this planet 🌏 is selling stock like it’s his last meal before the electric chair? What does he know?
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To all the Wall St. traders who were in college or diapers during the 2008 and 2000 credit and equity market drawdowns, what we've seen over the last week was definitely a taste. At your pinnacle, climax of fear, you must do the exact opposite of what you want to do. BUY!
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Interest on $1M in US T-Bills
Jan 2023: $46k
Jan 2022: $3k
* “56% of Americans can't cover a $1,000 emergency expense with savings” CNBC, January 2022. Wealthy investors just got a colossal pay raise vs. the lower / middle class consumer up against inflation.
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Dear Mr. Powell,
Close to $11T US Treasury bonds maturing - next 24 months, need to be refinanced.
Funding Rate
Current: 1.6% to 1.9%
New: 3.4% to 4.6%
*interest as a % of the budget explodes from 8% to nearly 17%.
**interest (blue) below is a very conservative estimate.
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Friday was a Significant day - Bank of Japan intervention and a Federal Reserve Policy path shift, it was an inside job. Three things you need to know:
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Global mutations and personal freedom, tied at the hip.
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Everything you need to know about today´s Fed policy path adjustment...
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S&P 500 "All-Time Highs
2019 - 2021: 117
2012: 0
2011: 0
2010: 0
2009: 0
2008: 0
2007: 9
2006: 0
2005: 0
2004: 0
2003: 0
2002: 0
2001: 0
2000: 4
1999: 35
1998: 47
1997: 45
via
@charliebilello
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It must be nice to be an airline CEO. You can recklessly engage in share buybacks to enrich yourself and when ur behavior catches up to u, np just tap the Fed & taxpayers. Capitalism without consequences is not capitalism.
Via
@tylerwinklevoss
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Buffett always said - “trannies don’t lie.”
*Dow Transportation Index (real economy stocks) many economic bellwethers are found there.
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Inflation - it's like trying to lose 20lbs. The first 10 come off like butter. The last ten are a root canal.
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.
@realDonaldTrump
U Michigan consumer confidence at 101.1 vs 95 expectations - Current conditions at 116.4, highest since 2000 - Bloomberg
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Off the Recent Lows
Orange Juice +45%
Natural Gas +43%
Sugar +41%
Gasoline +33%
Uranium +28%
Oil +24%
Lean Hogs +22%
Soybeans +16%
Iron Ore +15%
Coal +14%
Wheat +14%
*Bloomberg terminal data, lows since Dec.
**ALERT: Inflation expectations, US 5yr BEs, at a nine-year high.
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McDonald's is telling us the lower-income consumer is struggling vs. Chipotle CMG says all is well.
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Since Feb 9
VIX +39%
Bitcoin -15%
*Long crypto is a short equity volatility position, rinse repeat.
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September 2020: “Exxon Mobil replaced by a software stock CRM after 92 years in the Dow is a 'sign of the times'” - CNBC
Since
CRM -34%*
XOM +157%
*New lows.
Via
@BearTrapsReport
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Working at my Dad’s broker-dealer on October 19, 1987
Me: I need to sell x shares of IBM
Trader: $98 bid
Me: My machine says $119
Trader: Well, sell it to your machine then...
#BlackMonday
#Quotron
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JGBs - NO trades for three days - first time ever.
*a market in Japan, officially destroyed by a central bank holding close to 47% ($12.5T) of all government bonds. Coming to a country near you in 2032.
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EV Owners - in the Lithium Crosshairs
#teslastock
#TeslaCarriers
#ElectricVehicles
#lithiumionbattery
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US Federal Reserve accepts $1.1T in daily reverse repo operation. All Lehman needed was a $15B repo on September 15, 2008. Never would have failed today, NOT a chance.
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Drawdowns from Recent Highs:
Oil: -53%
Bitcoin: -46%
Delta Airlines: -46%
Tesla: -42%
Goldman: -40%
JP Morgan: -38%
Transports: -36%
Russell 2000: -35%
FANGs: -28%
S&P 500: -27%
Nasdaq 100: -25%
Amazon: -23%
Consumer Staples: -19%
Gold: -7%
Cash: 0%
via:
@BearTrapsReport
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One Year Ago - "Yellen advises G7 to "Go Big" in stimulus measures."
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Once again, credit leads equities - high yield has been leaking (wider spreads, higher yields, risk off) for weeks while stocks marched higher - listen to credit.
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They will throw some poor guy from Queens in the slammer for 3 years for buying a stock on a tip from his father-in-law, but hey, those "Super Users" of CPI data, no worries, all good...
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Oil is back on the 2018 highs with the US rig count left in the dust, handing control over price to the Russians and Saudi's comes with a high price.
*US oil production is -15% off 2020 levels. Stealth middle-class tax hike is on stage here.
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Wall St. Research and the S&P 500
4800: TINA - There is No Alternative
4600: Stocks climbing the Wall of Worry
4400: Stocks move higher in Rate Hiking Cycles
4200: Buy the Dip, Seasonally Bullish
4000: Too Many Bears Out There
3800: Don't Catch a Falling Knife
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1. Over 28% of ALL dollars EVER created were done so in 2020 - 2021.
2. In January - inflation jumped to its highest level since 1982.
3. Stop the gaslighting.
.
@SpeakerPelosi
: "When we're having this discussion, it's important to dispel some of those who say, well it's the government spending. No, it isn't. The government spending is doing the exact reverse, reducing the national debt. It is not inflationary."
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September 2020:
“Exxon Mobil has been replaced by a software stock CRM. After 92 years in the Dow Jones Industrial Average, it's a 'sign of the times'” - CNBC
Since:
CRM +15%
XOM +240%
via
@BearTrapsReport
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Over 40% of all dollars ever created were done so in 2020 - 2021.
*Federal Reserve United States Money Supply M2
Dec 2021: $21.8T
Jan 2020: $15.4T
$6.4T / $15.4T = 41%.
#Inflation
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Bitcoin is worthless, artificial gold, it is ingenious and blockchain is important but bitcoin has no unique value at all it doesn’t produce anything. You can stare at it all day and no little bitcoins come out or anything like that. It’s a delusion basically.
Buffett on CNBC
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The Open
Nasdaq -3%
Bitcoin +0.5%*
Platinum +1%
Gold +2%
Silver +3%
Palladium +5%
Brent +7%
*Interesting divergence here (Bitcoin > Nasdaq by a lot), speaks to the run on banks in Russia.
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Nearly 13 years after Lehman it takes a globally recognized financial institution half a week to calculate losses on a hit from one family office?
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Three Years - Since April 2021
Gold +38%
Bitcoin +6%
*Entry points matter...
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Drawdowns
1999: It took two years to achieve a 49% decline and 7 years to get back to even.
2007: It took 2 years to achieve a 57% decline and 6 years to get back to even.
2020: It took 31 DAYS to achieve a 32% decline, and --- to get back to even?
Via
@BearTrapsReport
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Off the Recent Lows
Iron Ore +48%
Silver +38%
Copper +35%
Uranium +32%
Aluminum +25%
Corn +20%
Gold +19%
Sugar +14%
Oil +16%
Coal +8%
Wheat +2%
*On Oct 21, 2022 - the Fed softened the path forward with a leak to the WSJ, this is how you nearly guarantee sustained inflation.
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Uber up 44% in 33 days, the S&P 500 “inclusion” front-running slime show over passive investors is 10x more destructive to society than “insider” trading, but no one cares. Why?
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Never, ever invest in the present. It doesn’t matter what a company is earning, what they have earned. You must visualize the situation 18 months from now, and whatever that is, that’s where the price will be, not where it is today.
Stan Druckenmiller
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"The Fed is designed to be nonpartisan"
Janet Yellen
Rate Hikes During 2016 Election Year: 0
Rate Hikes Since the Election: 2
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GOLDMAN SACHS TO SELL $9 BILLION IN BANK-BOND SALES SPREE - Bloomberg
*GS in a rush to sell bonds, lock-in yield says a lot about where they think interest rates are moving. What do they know?
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Wall St. Equity Research and Tesla $TSLA
Mar 2020: $400 “Sell”
Feb 2020: $800 “Buy”
June 2019: $180 “Sell”
Dec 2018: $380 “Buy”
April 2018: $245 “Sell”
June 2017: $390 “Buy”
#Comedy
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"Inflation Reduction Act" will go down as the largest middle - lower-middle-class tax hike in US history.
*THE IRS WILL BEGIN SCRUTINIZING INCOMES LESS THAN $20K FROM PEOPLE SELLING ITEMS ON EBAY OR COLLECTING MONEY VIA VENMO.
* $80 billion in increased IRS funding over 10yrs.
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Post-Lehman crisis levels will be even LESS than normal 2024-30. Going back thousands of years there are only two ways civilizations get out of a colossal hole;
A) Debt jubilee, defaults
B) Inflate your way out.
*the powers that be have clearly chosen the latter.
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In Q4, we had $100T of global wealth in bonds sub 2% and long duration equities - Nasdaq 100. In less than 120 days - nearly $10T has just been wiped out in the largest bond crash in dollar terms of all time, anyone care?
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A Passive Overdose
Apple Price to Sales
2023: 8.04x
2013: 2.40x
2003: 0.69x
1993: 0.32x
*2007 high was 5.9x, 2000 high was 2.8x, Bloomberg data.
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Give the Money Back
Q: How many countries donated $1M+ to the Clinton Foundation but also embrace the death penalty for homosexuals?
A: 8
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Dear Central Banks -
When you see suppress the true, market driven cost of capital for longer and longer periods of time. You incentivize the HTM yield reach across the banking system. Then you juice rates 500bps in 13 months to “fight” inflation and light it all on 🔥 fire.
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"Why is Blackstone paying Tony Soprano yields (11%) for liquidity, trying to avoid an asset fire sale to meet redemptions. This says a lot about the current state of play Larry. Memories of Buffett - GS in 2008."
CIO London in our live chat on Bloomberg.
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"Our liquidity position is strong, we are adequately capitalized."
Alan Schwartz, Bear Stearns, March 2008
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High Convexity - when interest rate risk meets credit risk.
UK 0.5% due 2061
Government Bonds - a $970M position in late 2021 plunged to $240M this week. Beware - there are staggering losses out there. The victims have NOT floated to the surface as of yet.
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