The Scary Ghost of 2007 Appears

An Ominous Parallel to 2022 [The Daily Reckoning] October 05, 2022 [WEBSITE]( | [UNSUBSCRIBE]( The Scary Ghost of 2007 Appears - Has the market bottomed?... - Time may not be on your side… - The Fed might be tightening four times more than it realizes… [GONE: your shot at 102% gains in 6 days…]( Hate to say, “I told you so”… But we’ve sent you a countless number of emails trying to draw your attention to this unprecedented [wealth-building opportunity.]( And according to our file, you still didn’t take action. And that’s a shame. Because you just missed your shot at a 102% gain in 6 days – in the middle of a market selloff. That’s the bad news. The good news? We’re issuing a brand-new buy alert right now with money-doubling potential. [And you can go here now to get in position to receive it before you miss out again.]( [LEARN MORE]( Portsmouth, New Hampshire October 5, 2022 [Jim Rickards] JIM RICKARDS Dear Reader, Stocks are up big again today, and the Dow has regained about 1,500 points since Friday. Both the S&P 500 and Nasdaq Composite Index have followed similar paths. Has the market bottomed? All I can say is don’t count on it. As a colleague reminded me today: The S&P 500 in 2022 is currently following the script of the 2007 bear market with 75% accuracy. If the pattern continues to play out, we’ll see a baby relief rally over the next month… followed by a complete meltdown by November/December. You might want to keep that in mind before jumping back into the market. But the Fed has conditioned investors well. Every retail and institutional investor knows what to do when stock markets crash. Buy the dips! Just wait until the drawdown hits bottom, buy stocks by the truckload and enjoy the ride when the next rally begins. This is a more aggressive version of the “buy and hold” strategy where you don’t sell on the way down and just wait for stocks to recover and get you back to even. Then you can enjoy further gains from there. But it can be a long wait. 15 Years to Break Even The Nasdaq hit 4,907 on March 13, 2000, and then crashed by over 80%. The index did not regain that 4,907 level until April 2015. That was a 15-year wait to get “even.” Some investors died waiting. But hey, the stock market did climb back! Still, there are two implicit assumptions behind both the buy-the-dips and the buy-and-hold strategies. The first is that the market always goes up over reasonable time frames. The second is that the Fed has your back. In periods of real distress, the Fed will do “whatever it takes” including rate cuts, QE, asset purchases, guarantees and more to keep markets afloat. These assumptions have been almost exactly right since 2008. The Fed really did intervene in 2008 (with zero rates), 2009-2014 (with QE) and again in 2020 (during COVID) to keep markets afloat. The stock market crashed 30% in March 2020 during the first phase of COVID, but regained all of those losses and hit new highs within six months. Buy the dips and buy and hold both worked fine. But do those assumptions still hold? [**Urgent Note From Jim Rickards – Your Response Is Requested By 10/4**]( I’ve just made a [massive change]( to Strategic Intelligence. This is one of the biggest changes to a newsletter in the history of our business… As far as I know, nothing like it has been done before. What’s going on? In short, I’m adding 3 exciting new additions to [this all-new “Pro level”]( of Strategic Intelligence. And as a current subscriber, I don’t want to see you miss out. That’s why — for a very limited time, until the timer below hits 0 — you’ll be able to [upgrade your subscription to this new “Pro level” by clicking here.]( Seriously. [Just click here now to see how to claim your upgrade.]( [Click here to learn more]( Once the timer hits 0, however, it’ll be too late… you’ll miss out. I’d hate to see you left behind. [>> Click here before it’s too late.]( [LEARN MORE]( The Fed Doesn’t Always Have Investors’ Backs Markets don’t always go up. From 1969–1982, the stock market went nowhere. It started and ended that period at around 1,000 on the Dow. Of course, there were ups and downs and ways to make money along the way, but there was a 13-year period when stocks went nowhere (adjusted for inflation, stocks actually fell over 50% during that 13-year stretch). And there were times when the Fed did not have your back. Stocks fell over 80% from October 1929–June 1932 and the Fed essentially did nothing. Stock markets did not recover their 1929 highs until 1954, a full 25 years later. Are we in one of those periods when the buy-the-dips crowd will get burned? The Nasdaq has fallen over 30% since last November. The S&P 500 and the Dow have each fallen more than 20% since last January. The economy is in a recession. Meanwhile, the Fed is tightening, not easing. The Fed is on an aggressive campaign of interest rate hikes and further monetary tightening through quantitative tightening, QT. The Fed raised interest rates 0.25% in March, 0.50% in May and 0.75% in June, July and September. That sequence brought rates from 0.0% to 3% in six months. The Fed has never before imposed three consecutive 0.75% rate hikes. Now it has. That’s the fastest tempo of rate hikes since the early 1980s. The approximately $1 trillion per year reduction in the base money supply (that’s what QT is) is estimated to have the same effect as another 1.0% rate hike. Put together, what we are witnessing is tight money on steroids. And the Fed says they may not cut rates until 2024 at the earliest. But is the Fed actually tightening even more than it realizes? [Stunning New Prediction for 2022]( You’re going to want to [see this]( America’s #1 futurist just came out with a stunning new prediction for what could happen in 2022. And surprise, it’s got nothing to do with Trump. Or trade wars. Or the ongoing gyrations on Wall Street. In fact, this could be your one chance to ignore all that upsetting “fake news”… and get back to the business of getting exceedingly rich instead. [It’s all in the forecast you’ll find at this link — click now.]( [LEARN MORE]( Four Times More Tightening Than the Fed Realizes? I’m not normally one to cite the Council on Foreign Relations, but in this case I think their analysis is spot-on. Here’s an extensive excerpt from a recent article explaining how the Fed is dramatically underestimating the amount of tightening its balance sheet reductions in particular will cause: Powell has said that the monetary impact of balance sheet reduction is very uncertain; that there are only “rules of thumb.” Fed staff, however, have tried to quantify it. Using a theoretical model, they estimate that the $2.1 trillion in balance sheet runoffs scheduled through September 2024 will raise 10-year Treasury yields by 60 basis points. And that increase, they further calculate, will have roughly the same monetary-tightening effect as raising the short-term policy rate by 56 basis points. We, however, do not believe that the Fed staff have correctly identified this relationship. Specifically, we do not believe that a given movement in long-term rates (60bp) is equivalent in economic effect to a similar movement (56bp) in the Fed’s short-term policy rate. We believe that a 60bp rise in 10-year Treasury yields is equivalent to a rise in the Fed’s policy rate of four times that amount. Here is why. We’ve compared the output of the Fed staff’s model with actual empirical findings — findings obtained by an earlier group of Fed researchers. According to that earlier study, it takes a whopping 240bp rise in the policy rate to produce a 60bp rise in 10-year rates. If this relationship is correct, it means that the Fed’s total projected balance sheet runoffs will produce a tightening equivalent to hiking the policy rate by 240bp, and not 56bp… We put more credence in this earlier Fed estimate specifically because it measures the relationship among actual historical data, and is less subject to the “significant uncertainty,” which the later Fed study acknowledged in its modeling. If we are right, then, Powell, whose thinking is clearly being guided by the later study, is underestimating the tightening impact of balance sheet reduction by a factor of four. This analysis merely affirms my long-held conviction that the Fed has no idea what it’s doing. Unfortunately, they can do a lot of damage before they reverse course. The bottom line is we may be entering a new era, and we may be in a period that looks more like the 1930s or the 1970s than the 1990s or 2000s. Instead of buy the dip, “sell the rally” might be a much better strategy. Regards, [James Altucher] Jim Rickards for The Daily Reckoning P.S. Have you noticed the gold price lately? Gold was up over $30 today alone. Nervous investors are finally running toward hard assets for safety in today’s chaotic market environment. But gold is still dirt-cheap. That means investing in physical gold now at still-favorable prices will bring you great returns when gold really takes off. And I recommend you get yours from my friends at [Hard Assets Alliance.]( Hard Assets Alliance allows you to buy and take delivery of physical gold (and other precious metals) with exceptionally low costs. You can also buy and store your metal in your choice of five audited vaults worldwide. It’s the hands-down easiest way to get started with gold, silver and other metals. It’s FREE to sign up for an account. Once you’ve completed the short account-opening process, you’ll be able to shop for the metals you want to buy right away. They’re also extremely helpful and will answer any questions you may have. [Go here now to get started.]( Thank you for reading The Daily Reckoning! We greatly value your questions and comments. Please send all feedback to [feedback@dailyreckoning.com.](mailto:dr@dailyreckoning.com) [Brian Maher] [James G. Rickards]( is the editor of Strategic Intelligence. He is an American lawyer, economist, and investment banker with 35 years of experience working in capital markets on Wall Street. He is the author of The New York Times bestsellers Currency Wars and The Death of Money. [Paradigm]( ☰ ⊗ [ARCHIVE]( [ABOUT]( [Contact Us]( The Daily Reckoning is committed to protecting and respecting your privacy. We do not rent or share your email address. By submitting your email address, you consent to Paradigm Press, LLC. delivering daily email issues and advertisements. To end your The Daily Reckoning e-mail subscription and associated external offers sent from The Daily Reckoning, feel free to [click here.]( Please read our [Privacy Statement](. For any further comments or concerns please [contact us.]( If you are having trouble receiving your The Daily Reckoning subscription, you can ensure its arrival in your mailbox [by whitelisting The Daily Reckoning.]( © 2022 Paradigm Press, LLC. 808 Saint Paul Street, Baltimore MD 21202. 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