"Yields Are Going To Crash Up"

CLUB/EDGE posts April 12th / Panic Hasn't Even Started Yet

CLUB/EDGE client note sent 9:05 AM Friday April 12th:

"Yields Are Going To Crash Up"

So this is what Geoffrey posted to me in slack DM this morning.

The currency is falling too much against commos.

Commos is short-hand for commodities.

He went on to explain his reasoning for the call - much like he did before he called the Silver squeeze March 28th - that is still running!

Principle of "alterations in the value of money" (Tooke)
Return in kind versus return in money
(second principle)

Currency hyper sensitive to rates
JPY (if they are not allowed to sell their UST garbage) and BTC would crash.

Bitcoiners have not figured out they own a currency not a commo
All assets very sensitive to rates - shitcos and non-cash-flow producing or fixed income (junk bonds) - would suffer.

Commodities-based companies with debt will benefit, as their debt melts away (like confetti) while their nominal sales rise.

Buffet borrowing in YEN to buy commodity trading company is exactly that.

My two cents:

My TREND-LONG-ONLY portfolio for clients has largely benefited from rising yields and inflation. These trend plays are multi-month, multi-year stock picks primarily asset-rich, low-debt, high FCF companies that are also leaders in their sectors. They will be hurt less than many speculative high-growth earnings players with lots of debt to finance in a rising rate environment.

But given my call for 6.5% 10Y yield for this year, combined with Geoffrey's warning, it is now time to seriously consider protecting capital and positioning for this bond/equity correction and potential yield spike - at least until we get FX & BOND INTERVENTION.

But that may not be until Yellen’s QRA April 30th, and even then, Craig has his doubts!

If you stay the course, consider focusing on equities tied to THINGS: Commodities, Commodity-tied companies, assets that benefit from rising yields.

Careful on Junk Bonds and ZERO coupon bond proxies: bitcoin and shit-coins and the like. Also Russell zombies - there are ~40% of them that will likely grow to 50-60%.

Large-moat tech monopolies (AMZN, GOOGL, MSFT ) will likely see flow or fall less, but I would like to confirm.

I am pretty comfortable saying speculative assets be damned.

Earnings Peak is likely upon us. Watch guidance most closely.

Banks are not winning any awards this morning post earnings. That bearish pattern in XLF I warned has firmly rolled over.

Geoffrey already posted in detailed thoughts on last FDIC quarterly review:

Banking (FDIC) is not nice and junk bond market bankruptcy rates are twice the long term average.

@TheWineSwine calls it "volatility laundering.". Love that expression.

Things seem under control for even longer than they otherwise would have.  Completely false sense of security…..
And then it happens, and it happens far worse than it otherwise would have.
Not good to ignore the symptoms.

My point in posting this warning is simple:

What is your plan if US yields crash up and not equities?

If you don't have one, it is time to get one.

CLUB/EDGE client note sent 1:20 PM Friday April 12th:

Panic Hasn't Even Started Yet

I scan my "ETF SECTOR" watchlist every day for clients.
It has 102 names so I can really get a feel for strength & weakness.

• VIX UP 25.35%

• VVIX UP 23.95%

• TLT UP a meager .78% and

• USO with UGA up less than 1%

ALL ELSE ARE RED AND/OR DEEPLY RED

That's how it works as I reminded in my post: Sharks Drown When Not Swimming:

And my experience has shown that:
IN LIEU OF ROTATION THERE WILL BE VOLATILITY.

So...
1st. Growth plays peter out then...
2nd. Value plays outperform then ...
3rd. Volatility reprices everything.

My "SPX $5340 or Bust" is likely bust.

So many do not believe markets are at risk. That the dip will be bought. I am clearly on the other side of that trade.

In fact, despite VIX elevated, and SPY at my FIRST price target of $510, I see a market crash having much higher odds than a crash up.

Consider that most markets/instruments haven't broken trend yet. They are THAT overbought.

Remember the many, many, many weeks I said:

"Market is Overbought But Not Broken"

NOW: Market is Overbought AND Broken

What's Next?

From Geoffrey:

"When the Yields crash up, $COIN and #BTC will totally implode. And Commos will stall for a while."

We already see commodities pausing - intraday selling in gold/silver which is what I expected/warned earlier this week.

And given Bitcoin is a currency not commodity, it is only a matter of time before it too gets devalued.

And then where will FOMO money go?

My bet: Back into CASH, T-Bills, Money Markets, Inflationary Assets + THINGS not paper.