I feel as though the financial markets are carefully and systematically setting the stage for the next leg down in this current depression.
1. Money Supply
2. Material Prices
3. Housing Activity
4. Bond Market Pressures
5. Stock Prices
6. Job Market
When Phil Jackson entered the NBA Finals as coach of the Lakers he had won 100% of the playoff series he coached after winning game 1; he was 47-0. This was disturbing to me when the Celtics lost game 1 of the series. True to history, the Lakers ended up winning and his streak remained perfect.
The ECRI weekly leading indicators are measured by a single number placed on a graph. When the number crosses above 0 and goes positive it usually means we have entered a period of economic growth and is positive for the stock market.
When the number crosses below -10 on the chart it means the economy is heading for recession and contracting, which is very negative for the stock market. How often has this occurred after crossing below -10? 100% of the time. The same record as Phil Jackson.
The chart below shows that was have just hit -6.9 on the ECRI. The fall has been breathtaking and at the current rate we will be at -10 in less than 3 weeks. ( I will update this information as we progress forward)
Outside of the brief period during the credit crisis in the fall of 2008, the 10 year treasury bond is now at the lowest point since 1962. It crossed under 3.11% this week, which signals to the markets the fear and distrust in the system, similar to what we saw leading into the last credit crisis.
As I stated above this paints a very dangerous picture for the economy and credit markets moving forward. The dominoes are now set and we wait to see what will represent the small push the markets need to topple.