WTF?! Global Bankers Just Guaranteed a Global Financial Crisis (Again), Here’s Why

The European Central Bank just made the biggest policy mistake since July of 2008 when they were hiking rates in a slowing economy in response to rising inflation. And three months later, in October of 2008, they were slashing rates as we're headed right into the midst of the financial crisis. And today, they're repeating the same mistake over again, which is setting up. And wait until you see the data that means we could be months away from another financial crisis. But today, the big news, President Trump has cancelled all strikes on Iran. And that sent stocks higher and the dollar lower. But don't believe what you see in the markets. Because when you see the data from today, we've got the producer price index, we've got jobless claims. What it says is the US economy is now past the point of no return. But does that mean there's no opportunities in the market? Well, stay tuned. I've got the latest updates on the technicals and where I see the opportunities. Because the deposit rate by the ECB was lifted to 2.25% from 2% as anticipated. Now, the ECB reiterated that it won't pre-commit, but said it remains well positioned to navigate the current unpredictability, meaning they're already setting up to raise rates. But I want you to understand that this was a massive policy mistake. And let's take a look at some US data here because I want you to see the parallels of the path we're headed in. Let's take a look at this first chart. We've got the consumer price index in blue against the federal funds rate in red. Let's go back to the 91 recession. What did we see? Inflation was rising as we headed into that. And the response by the Federal Reserve was to raise rates. You can see it again going into the dot-com bubble. The two were running a tandem. Now, how about as we headed into the financial crisis? Well, the Fed got a little wiser and stopped raising rates as inflation turned down. But it was too little too late. And wait until I show you why. As we move forward to 2022, we see the same net effect. And now inflation is rising. And this time the ECB is raising rates. Now, we won't hear from the Fed until next week. But right now, what you can see is the Fed is repeating the exact same pattern of July 2008, except this time they're expecting a completely different outcome. And the shock is starting to broaden throughout the economy, with direct costs being obvious, with indirect costs also showing up. Noting that she's rejecting the idea that Thursday's unanimous decision was a preemptive move. Well, of course it was preemptive. We already knew that because the market was telling the ECB they had to hike rates. And we know that central bankers do what the market tells them to do. But there's a problem. Because underneath here, there's a real serious issue, not just with the European economy, but the global economy. And I want you to understand why, despite the fact that the stock market is rebounding today on News of Iran, that the underlying data says that we've got problems that perhaps were now months away. Because the consumer price index will keep that in blue, now we're going to overlay total income from production and non-supervisory employees by multiplying weekly hours times hourly earnings. That's shown in red on a year-over-year rate of change. And I want you to see what happens going into every recession or every slowdown, and why hiking rates was such bad policy. Because going into the 1991 recession, you note that inflation was outpacing wage growth. And what happens when you get that dynamic is demand gets crushed, spending dries up, and next thing you know, the economy slows down, the labor market breaks, and you're headed right into recession. But keep in mind, the response by the Fed and the ECB, of course, were going to raise rates. Now again, let's move forward to the dot-com bubble. You'll note that inflation was rising, but wages during that period didn't keep pace, again, right into the dot-com bubble. We can see around 2004 to 2006, it started to happen again, but inflation came down, but it was too little too late. We headed then into the financial crisis, whereas now we know that the ECB is making the same mistake it did back then. How about 2012? We can see we almost faced a double-dip recession, had everything to do with inflation and wages. Why do we see a market correction in 2022? Same dynamic. And today, with inflation taking off and expected to head higher and stay elevated, you can see that not only is the ECB making the same mistake, but the risk is we're going to see other central bankers around the world chase inflation at the same time that we already know that workers cannot afford higher prices. And the main risk would not be to take that kind of decision, because if you let inflation start running out without control, it becomes a much more difficult situation to bring it back to the level of price stability, Christine said. But I disagree with that completely, because in order for inflation to take off, people have to be able to afford higher prices. They have to have the income, the wages, the money to spend. And what we're seeing very clearly in the data right now is nobody can afford higher prices. In fact, the bond market in Europe even confirmed it. European bonds held their gains after the ECB's announcement, with a 10-year yield, three basis points lower at 3.05%, euro steady against the dollar. Now, normally, this is very important, because the bond market is making a very clear signal here. They're saying, look, ECB, you want to raise rates? Go ahead, raise them all you want. But there was no reaction. Because normally, when you see a central bank raise rates, what happens? You see, of course, the market rates go up as well. But when market rates don't follow, well, let's take a look. We've got the consumer price index still in blue, now overlaid against two-year treasury yields in red. And I want you to see the prevailing view is, if inflation is going up, yields need to go up. And in a hot economy where demand is outpacing supply, that makes perfect sense. But when it's the opposite, and that's what we're seeing right now, I want you to note that going into the 91 recession, as inflation was rising, what was happening? Two-year yields were declining. You can see it happen again going into the dot-com bubble. How about the financial crisis? Inflation was surging due to rising energy costs, which sounds very familiar to right now. And what happened? Yields started to drop. And now, yields have been on a downward trend. The market's saying in the short term, they need to go up. But if they start to fall, and that was the key thing about what was happening in Europe today. With bond rates going down, it tells you very clearly that the bond market is not convinced that this is going to work. They see that the ECB is making a similar mistake to 2008. And that means yields are about to come crashing down. And in the months to follow, we're going to see the ECB chasing them right to the downside. And the new outlook from the ECB also points to dwindling economic growth as inflation and higher borrowing costs sap buying power. So even in their own notes, they're admitting to the policy mistake. They say, look, we see growth slowing. We see prices rising, which is the classic case of stagflation. It's also exactly what happens in energy shocks. And the response shouldn't be to raise rates. It should be to lower rates. So you can see now the European Union on the exact same path they were right before the financial crisis. But let's turn to the U.S. because right now with the market rallying today, everybody's breathing a sigh of relief saying, look, what's happening in Europe can't happen here. But when you start to see the data, it's just a completely different picture. Because U.S. producer prices are now rising at the fastest pace since November of 2022, suggesting that inflation from the input side is going to scream out of control. And because producers are getting squeezed at the margin, it's going to be passed on to consumers. And now you can see the same replay that's happening in Europe is starting to happen here. But before we dive into that, you might be wanting to see how do I make money trading this market? How do I get the edge? Well, our subscribers and our trading reports, we've got that. Back on the 22nd, we told our subscribers to buy IGV. This is a software ETF. And on the third, we got stopped out for a 7.65% gain. Now, if we take a look at the chart, we told them to buy right in here. And we said, look, raise your stop loss levels along the way. And their stops did all the heavy lifting. They didn't have to watch their computer screen every day. They didn't have to check for instant updates. Now, with the market rallying today, we're seeing some amazing potential setups here start to build. And I'd love for you to get in on them. Now, all you have to do, grab those links in the description below, sign up for one of my trading systems, use the link, use the code for the free 30-day trial, start making money in the market, just like my subscribers will show you the edge that they're using to get ahead. Because the producer price index has increased 6.5% from a year earlier. That's the most since November of 2022. And the core, now this is key, that excludes food and energy. And I know, of course, we all have to use those. But there's a point to this that I want you to see is when you see, of course, food and energy outpacing the core, it's an exact example of demand destruction. And that's the problem here because it only, now I know, only increased 4.9% from a year earlier. But let's take a look at this chart because this really drives the idea home. Now, normally what you see is the two are running in tandem. You have, of course, PPI, final demand in blue, the core excluding food and energy in red. But what I want you to see, there are periods where the producer price index in blue outpaces the core. What happens? Producer prices come down. In fact, if you go back to around January 2022, you can see the same dynamic. What happened? Everybody thought that inflation was going to keep screaming higher. The core PPI said no, started to roll over, and the headline PPI came down. Now look what's happening. The headline PPI is outpacing, but the core growth is slowing, suggesting that this inflationary pulse isn't going to last a whole lot longer. So you can start tying this right back to the ECB and Christine Lagarde and say, clearly there's a policy mistake brewing here because they think inflation is going to continue to rise and that they need to tighten rates to constrict demand. But the problem is wages aren't keeping pace, which is what I want you to understand. It's already constricting demand because when wages don't go up, the cure for higher prices was higher prices. The problem is they're likely going higher, at least in the wrong places because food prices meanwhile rose 0.6%. That's the most in three months. And as we all know, grocery costs have been moving higher thanks to a combination of factors, including bad weather that doesn't look like it's going to get better. The war on tariffs that we're not sure when it's going to be over. And here's the bigger issue of what's coming down the pipeline is fertilizer materials costs were up 28% from a year earlier. These costs absolutely getting passed on to consumers. There's just no way around it. So the problem is even if we see inflation start to roll over, the biggest expenses, energy and food are going to continue to hammer household budgets, meaning discretionary spending is going to drive in a big way. But it's not just a consumer that's getting hurt here. Let's take a look at this next chart, because what this is saying is corporate margins are getting squeezed in a big way. And this is a huge problem because it has a huge impact on the labor market. So you can see the CPI, PPI spread is signaling increased pressure here. When it goes negative, when you see those red bars, that means companies are being squeezed at the margin, producer prices outpacing consumer prices, indicating that they cannot pass on those higher prices. So what does this mean? Well, when you've got all your expenses, you can as a business and you can't pass on higher prices. And then you start laying off because the US jobless schemes jumped to 229,000. It's the highest since February. Now, keep in mind, historically, this number is still relatively low, but we also know that nonfarm payrolls were allegedly booming. Well, we know that's not the case because ADP said not a chance. We also see the small business said, look, we're not hiring this the worst in six years out there. But let's take a look because continuing claims, and this is approximately the number of people who are sitting on unemployment rose to 1.8 million in the previous week. And the challenge here is the longer people stay on continued claims, what happens? Their spending continues to dry up. And against higher prices, their spending power drops even more. And as they spend less and their benefits don't go as far, what happens? You see a start to spill over to the broad economy and into the labor market. But now I want to talk about what's going on in the market here, because today, again, President Trump signaled a truce, at least a pullback on attacks and the market shot higher. And I want to show you some technicals here. Let's look at the five day because you can't see this on a daily chart. And I drew this purple line here because it looked like we saw a bottom, everybody was panicking. Stocks were dropping. Then the next day, it rallied up in early trading. Everyone was bringing a sigh of relief. And what happened? Sellers came back in a big way and said, OK, this is it. And then overnight, they jumped back up. They were going sideways, holding the line and today spiked higher. But again, you can't see this on a daily chart. It's just not evident. Now I'm looking for a run right back up here to the 21 day moving average. If we put the 10 day volume profile line on, that should be right about where that is. It's 756. That's on SPY. If we look at the 30 day volume profile, this is the overhead resistance. This is where the market needs to break through right now. But is that where I see the opportunity at? Well, I'm going to show you something that nobody's looking. In fact, many of you said in the comments, this sector is dead. In fact, Oracle confirmed it. Let me give you the bear case here because they think software could come back in a big way. Now, Oracle stock tumbled after mixed results. Their CapEx came in hot. They're going to take on more debt. But here's the key point. This is why everyone's bearish on software. It's because their free cash flow was negative $23.7 billion for fiscal year 2026. But according to Oracle, they're not going to need to raise additional debt in the calendar year of 2026. They've already got a bunch of this planned for fiscal year 2027. So where's the opportunity? Well, let's take a look at IGV here. And I'm going to show you my charts here because caution proved well-timed. In fact, my subscribers got stopped out. IGV has since puked hard and is now trading back near the original breakout levels with short-term support coming into view. And you can see on this chart right here, this is right before the breakout level. Stocks have pulled back, setting up for a potential move higher. But what's the catalyst? Because you're saying, Steve, these companies are losing money. But yes, the issue here is, is there's a huge short interest on IGV and SMH. And in late May, the squeeze triggered a wave of panic short covering, but shorts remain elevated on a broader basis. And if software starts working again, these investors could find themselves chasing the move higher. Keep in mind, some of the biggest and best trades that I've ever made is being the contrarian, buying something that everybody is short. Now, let's take a look at the charts here, because we're not exactly seeing a perfect setup, but we're seeing the early potential here. The six-month volume profile is way down here. But see this green line? This is a 50-day moving average. So price came all the way back down, is holding support now, potentially looking to take off. If over the next couple of days we see price rally, and it doesn't have to go a whole lot higher, because you see how the volume tapers off? Well, that means this thing can get squeezed right back up to its recent highs, setting up for a potential big move. Now, I haven't put this trade on for my subscribers yet, but we're looking at, in fact, they put a ton of new trades on for today, all of them looking amazing. And you too can get on this. Again, grab those things in the description below. And with that, I'm Steve Edmeter. Thanks for watching. Thanks for being fans. Bye now.