The Single Most Important Item For Investors in the Capital Markets

Phoenix Capital Research's picture

The single most important item for investors to understand is collateral. Specifically, how there is a huge shortage of high-grade collateral backstopping the trillions in derivatives trades owned by the TBTFs


The senior most assets backstopping the $600 trillion derivatives market are SOVEREIGN BONDS: US Treasuries, Japanese Government Bonds, German Bunds.


By keeping interest rates near zero, and pumping over $10 trillion into the financial system since 2007, the world’s Central Banks have forced investors to misprice the most prized collateral backstopping the entire derivatives system: SOVEREIGN BONDS.


SO what happens when the current bond bubble bursts and we begin to see bonds falling and yields rising?


Another collateral scramble begins… this time with a significant portion of the interest rate derivative market (over 80% of the $600 TRILLION derivative market) blowing up.


At that point, rising yields is the last thing we need to worry about. The assets backstopping a $600 trillion market themselves will be falling in value… which means that the real crisis… the crisis to which 2008 was the warm up, will be upon us.


This is why Central Banks are so committed to keeping rates low. This is also why all Central Bank policy has largely benefitted the large financial institutions (the Too Big To Fails) at the expense of Main Street…




To return to our initial question (is this just a temporary top in stocks or THE top?), THE top is what we truly have to watch out for because it will indicated that:


1)   The Grand Monetary experiment of the last five years is ending.

2)   THE Crisis (the one to which 2008 was just a warm up) is beginning.



Indeed, the chart for the DJIA says it all:


This is an expanding wedge pattern. It predicts an eventual move in the Dow back down to 5,000 or even lower depending on the timing of things.


This will likely be accompanied by:


1)   Rampant margins calls and demands for higher grade collateral

2)   The yield on the 10-year note hitting 1% or lower.

3)   Markets being closed

4)   Banks being frozen (similar to what happened in Cyprus)


When will this happen? What will trigger it? I don’t know. No one else does either. But this chart is dangerous. And investors should keep it in mind.


For a FREE Special Report on how to prepare your portfolio for a bear market collapse, visit us at:


Best Regards


Phoenix Capital Research






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kurt's picture

Haven't you heard? They invented Anti-Gravitanium. Its being warehoused now and, as a store of value, MORE than collateralizes the quadrillions of worthless paper.

Here's how it works:

One cubic centimeter has the "lift" of one average sized man. That is halved by the mechanism which extracts the anti-gravity. Thus, we can move or carry, say, 100 pounds with one cube. With this it is easy to calculate the equivalent in hydrocarbon energy expense cancelled or "saved." Each cube has a half life of 200 years and the support mechanism is being shrunk as we speak.

The cost is derived from the difficulty and expense of finding and refining the material which only exists off planet.

ebworthen's picture

Yes, the FED is propping parasitic financial institutions and doesn't care one whit for individual citizens.



stormsailor's picture

he fails to mention that an expanding wedge can break to the upside.  and his lines are not drawn correctly, if they were it would mean we are at the top right now.  so if it breaks higher on the monthly, the market could get really crazy.  


80 billion a month can but a lot of stauks.  the damn shame is that poor working shlups stuffing their coin into ira's, 401k's, mutual funds, etc. and all of them buying this overpriced inflated dogshit market.


my best guess is it will bust to the upside for the 2014 elections,  and then slaugher the sheep time.


a world wide g-20 ponzi, and an epic ass-fucking.  when it happens you don't want to be all in currency. gold, land, antiques, art, emeralds, uncut diamonds, ammo, guns, diesel fuel, etc. all physical of course.

new game's picture

rather just go to the casino and play 7 card...

AdvancingTime's picture

The fiscal cliff was about small numbers compared to the Derivatives Tsunami, bond market, and dollar market bubbles. According to the Office of the Comptroller of the Currency’s fourth quarter report for 2011, about 95% of the $230 trillion in US derivative exposure held by four US financial institutions: JP Morgan Chase Bank, Bank of America, Citibank, and Goldman Sachs.

The Derivatives Tsunami is the result of the handful of fools and corrupt public officials who deregulated the US financial system. Today these four US banks have derivative exposure equal to 3.3 times world Gross Domestic Product.  This is something beyond science fiction or anything that can be comprehended. More about this subject below,

AdvancingTime's picture

This leaves us and the whole world open to massive contagion. Whether by design or merely as a byproduct of globalization we have weaved a web of financial transactions that circle the globe. Over the last several years as money was printed by the central Banks it was not contained in the countries where in was printed. This money flowed across borders influencing and distorting markets and prices across the world.

Some people have been calling for a "world currency" for years. the saying "one should never let a good crisis go to waste" means a meltdown with high levels of fear would present a perfect opportunity to advance this agenda down the field. Remember many people with agendas have a lot to gain when a major shift in the currency markets takes place. More on this subject below,

sosoome's picture

Is it just me or does this article make no sense?

If the collateral is sovereign bonds, and the bond bubble busts, how will we see "the 10-year note hitting 1% or lower"? If the bond bubble busts, won't that chase the herd into stocks?

It must be me...

JeffB's picture

I'm not sure about the 10 year note hitting 1%, unless perhaps it's Yellen redlining the money making machine trying to reinflate the bubble and not enough people wanting to take the bait when all hell is breaking loose.

From my own perspective, I doubt that a bursting bond bubble would chase a lot of money into stocks. There are multiple variables involved, of course, but if a lot of investors lose their shirts in the bond market, they would probably be scrambling to sell assets to cover margin calls or just out of fear. Stocks are typically more risky than bonds and if it's a real free fall, I doubt the market would tend towards a "risk on" mode. Also, rising interest rates are bad for business and skyrocketing rates and seized markets are terrible for business... other than perhaps gun running and private security businesses perhaps. Of course that's all just speculation on my part and I've been wrong on more than one occasion.

kaiserhoff's picture

Well said.  All bonds are likely to be toast.

I'm not a chartist, but the derivatives and capital issues are spot on.  There is essentially NO capital set aside, to back stop off exchange derivatives.  Bank balance sheets are lies agreed upon.

combatsnoopy's picture

drug dealers dont' trust thsi market. That speaks volumes...  
"He points out, correctly, that the number of FBI white-collar crime prosecutions has fallen by half since the 1990s. Antar (on behalf of the dealers) now speaks on white-collar fraud, often to law enforcement groups, runs a website on the topic and consults for law firms suing on behalf of investors. "

Stud Duck's picture

Another damn chart, what a waste of time on this one, so glad it was short!

combatsnoopy's picture

they're not even serious until they lose SFAS140 or REPO105.
This is the part that trips everyone up.  Bernanke can't fix this- he just makes the loan free for the bankers to do this with.

Fuh Querada's picture

define "market blowing up"
and those fancy blue lines on the chart don't mean jack shit.

0b1knob's picture

The problem with collateral is that its just another asset for the government to seize when TSHTF.

skwid vacuous's picture

doom and doom and more fukn doom, just buy the QQQ's ... no brainer, we are entering a new paradigm of techology...

Hephaestus's picture

Yep and we have had the tech to live rich easy lives for over 25 years now. The first GMFanuc robots were showing up in 1985. The creative and productive power of humans has been raised a full manitude with computers and robots but we are all poorer than we were in 1972. The game is rigged. The more we produce the more the bankers take. 

 Only 2% of Americans work on the farms growing all the food.

We have houses out the ass and plenty of fresh water to drink.

We could have paradise in America if we really wanted too.

Hephaestus's picture

Sorry for the spelling got a little tipsy last night waiting to see whats comming next in this LSD tainted Vaudvillian tunnel reality horror show:)

max2205's picture

He forgets the Fed runs the show...and the printer is on no matter what they say