I have written many times in the past that every time there is intervention (Conjuring up cash and buying stocks and bonds) the chasm between the PRICE of a stock or bond and its actual VALUE gets wider and wider. Since this has been going on for decades- and has really taken off since the 2008 meltdown the reversion to the mean will likely take on a new meaning for the word MEAN.

With many large companies buying back shares to goose up the price of their stocks and to also hide the fact that they are not performing as well as expected by reducing the outstanding shares and reporting earnings per share on less shares, the actual amounts have become astronomical. It also speaks volumes that instead of doing R&D and investing in new ventures they think the best use of their cash is to give an artificial boost to the share price- usually well-timed around C suite bonus time.

Add in the fact that the Fed and Treasury are scrambling to keep the bond “Markets” from imploding with who knows how many trillions and we have a toxic mix of NO PRICE DISCOVERY for virtually any asset class.

Keep in mind that as the Fed announces lower rates it only has control of the overnight rates that they can just say it and its done. All of the other maturities have to be bought with freshly created currency backed by nothing in what appears to be UNLIMTED amounts. This is EXTREMELY inflationary. Just wait until private corporations join this party and start issuing stablecoins!

This move will likely give a bit of a boost to stock and bond “markets” but will likely be short-lived. The reason for this is that, as prices for necessities rise, the economy will slow down even faster than it would have with higher rates. With higher rates people would be able to earn more interest, their dollar would be stronger (lower prices) and more purchasing power would lead to more economic activity virtually everywhere. Of course, stock and bond “markets” would get hammered and since those “in charge” own those assets- expect lower interest rates going forward as forecast by Mr. Powell yesterday.

If these shenanigans weren’t enough already, a truly unbelievable example of what I am talking about took place. Not that the Fed lowered rates- that was expected. No, this was Elon Musk buying $1 BILLION of Tesla stock. It was revealed on September 12th and led to a sharp rally in the shares.

The PRICE went up because of this purchase but what about the VALUE? Did that purchase do anything but goose the shares higher and give some extra courage to “investors” to drive the PRICE even further up? The chasm widens!

So what? Many may say that Elon may know something- and he just might. I believe it is far more likely that he was just trying to crush the short positions and hide the fact that the company is losing market share- particularly in China.

Another MAJOR reason I think this is important to mention is that this action just made it FAR more expensive for any “investor” to buy Tesla stock. The price is higher because of this but the VALUE you are purchasing has not changed. I cannot even guess how many times these types of things have happened in many, if not most, major companies.

Anyone who is investing in index funds in 401ks, pensions, etc. is buying this stock. Nice for the participant if you bought BEFORE the buy but there is no timing that takes place in most of these plans. The 1% play games and the ultimate target is YOU and ME.

The President and most in his administration want a lower dollar. This interest rate cut should expedite our race to a weaker currency which should lead to the cost of most goods rising far more than will be comfortable for most.

As the Fed lowered rates yesterday the “traders” were out in full force whipsawing just about all “markets.” The 30- year treasury yield crashed after the announcement which indicates MAJOR buying. I doubt seriously that any foreign entity would want to hold US 30- year debt so all indications are that “traders” were trying to front run the Fed. Another clue that this is true is that, just as fast as yields cratered, they bounced right back up- indicating major selling right after the initial buying.

To me, all of this is noise and “traders” who don’t produce any real value just manipulating prices for short-term gains. The liquidity provided by the Fed and their owners- the major banks make all of this possible for them and their friends while our LABOR and WAGES are made increasingly worthless with each keystroke conjuring up cash out of nowhere.

Keep this in mind. Those “in charge” are trying to get everyone into tokenized assets. To me, these stable coins which are backed by US dollars and treasuries are a claim on a dollar which is in itself a unit of debt. It appears they want us peons in cyber assets (which in the event of a prolonged power outage may not even exist) while the central banks and billionaires are buying real stuff like land, gold, silver, food, etc.

The mania is in AI, crypto, etc. but the VALUE appears to be in hard assets and the companies that produce goods that we need to survive.

Be Prepared!

Any opinions are those of Mike Savage and not necessarily of those of RJFS or Raymond James. Expressions of opinion are as of this date and are subject to change without notice. The information in this report does not purport to be a complete description of securities, markets or developments referred to in this material. The information has been obtained from sources deemed to be reliable, but we do not guarantee that the foregoing material is accurate or complete. Any information is not a complete summary or statement of all available data necessary for making an investment decision and does not constitute a recommendation. There is no guarantee that these statements, opinions, or forecasts provided herein will prove to be correct.

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