How The Stage Is Being Set For America's Next Financial Crisis

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by Portfolio Armor
Tuesday, May 21, 2024 - 8:07
Chinese dumping Treasuries.

Why Next Time May Be Different (And Worse)

In our last post (Maybe the Biden Administration is Damaging The Dollar Intentionally), we included a chart showing Chinese dumping of Treasuries. 

British economist Philip Pilkington uses that chart as a jumping off point for the disturbing X thread below. He points out a key difference in Chinese ownership of U.S. Treasuries now: 

It used to be that these bonds were bought by China and other governments/central banks. These were stable buyers because it was part of their trade strategy - prop up the US trade deficit to sell more exports. Now increasingly they are bought by private foreign investors.

Unlike central banks, these private investors are rate-sensitive. Unlike during 2008, when Treasuries rallied as a haven trade, Pilkington warns that the next time we have a recession in the U.S., and the Fed cuts rates significantly, these Chinese private investors are going to dump their Treasuries. 

And that could lead to a decline in American living standards of about 27%. 

Hopefully, after the election Fed Chairman Powell will reach out to the winner and suggest a course correction (a combination of rate hikes and fiscal tightening) to avoid this scenario. Take the pain in 2025, so markets and the economy can recover by the midterm elections in 2026. 

Making Hay While The Sun Shines 

While the economy is still growing and markets are frothy, we're going to try to make some money. As regular readers know, we post our system's top names every Thursday night. 

Click on the image above to go to the post. 

And our weekly top names have returned 23.26% over the next six months, on average, since we started our trading Substack. 

Our system updates its top ten names every day the market is open though, and our #1 name as of Monday's close is reporting earnings this week. Later today, we plan to post an options trade on it, one with a potential upside of about 200% versus a potential downside of 100%. 

Check your inbox for it this afternoon, if you're subscribed to our trading Substack/occasional email list; if you're not subscribed, you can do so below. 


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