Is A Financial Crisis Coming? When This Happens Something Always Breaks

Michael Zuber (0:02)

Last week, we learned that every single time, the 10-year note has risen 50 basis points, or half a point, above its 200-day moving average, something broke. In fact, since 1970, this has occurred 15 times, I'm sorry, 16 times, with now being the 17th, and something has always broken. But when we had that discussion, I didn't have the facts. I didn't know what AKA broken meant. But I had a discussion with Taylor from Lifegoal Investments, somebody who has worked on Wall Street for over a decade, somebody who currently serves the top 1% of the 1%, and he has done some research and shared the list of the 16 things. I will go through it quickly, because I think it's important to understand that when debt costs rise substantially, again, half a percent over its 200-day moving average, something always breaks, and we just don't know what it is. So, and again, it is happening today for number 17

So if we go all the way back to October of 1974, that was the first time it occurred since 1970, and Franklin National blew up. You're going to hear a lot of names that you may not have heard before. That's because these folks are dead and gone. But these are essentially financial institutions who were not protected or had leverage or downside protection, and they were just wiped out as rates went higher quickly. So again, October 74, Franklin National. Next up, March 1980, First Pennsylvania. September 1981, S&P Bear Market, meaning 20 percent down or more.

July 82, Penn Square Bank. May of 1984, Continental Illinois. September 87, Flash Crash, Black Monday. April 90, 1990, SNL crisis. November 94, Peso crisis. Orange County bankruptcy. Does anybody remember Orange County going bankrupt? Yep, that occurred November of 94 August of 96, Southeast Asia crisis. January of 2000, Tech Bubble. May of 06, Housing Bubble. December 09, GFC. December 13, 2013, Emerging Markets. November 2018, Balance Sheet Runoff.

And then finally, 2023, Silicon Valley Bank, Signature Bank, and others. So again, it is not often we have a fact, i.e., the 10-year note rises 50 basis points over its 200-day moving average. That is perfect.

Again, it is possible it won't be perfect after today or after this instance, but I do think it is interesting to look at the last 16 times it happened. And again, something always breaks. All right, folks, we got the latest and greatest housing data, and the Doomers aren't going to like it. But what do Doomers like? I really don't know. Anybody know what they like? Do they ever smile? Or are they just curmudgeons who live in the dark, swampy areas? I don't know. They need to go outside and touch some grass.

We have Case Schiller up 1.9% year on year. FHFA up 2.6% year on year. As always with Case Schiller, remember, it is a lagging report. It is likely roughly two months old. We won't hear about today's market for another couple of months. But yes, very, very interesting.

We did get our first two updates on jobs. The big number will come out Friday. The Joltz Report came out and significantly disappointed. All right, what does that mean? Well, inside the Joltz Report, we are looking for signs that the job market is growing or shrinking. That is essentially what we look for the Joltz Report. And it disappointed. It came in at roughly 7 million. It was expected to come in at 7.23 million. So, it came in under. What does that mean? Well, generally speaking, it means employers are less excited about the future. That is not good. And again, it missed to the downside. However, on the flip side, ADP, or private payroll, beat expectations. Last month, just so you remember, it came in at 36,000, was a significant disappointment. It was expected to increase to 68,000. It actually came in at 90,000. So again, more than expected. The big number is Friday. It's always the BLS report. Did we add jobs? Did we revise last month? Because last month was a barn burner. Did the unemployment rate stay at 4.1 or go up? Lots of things to look at. We did get the PCE report today, but did we really?

Why do I say that? Well, if you don't know, the PCE calculation, the formula, the math's been tweaked.

Yes, the government is playing with the measurements, and guess what happens when they do that? They always seem to go lower. So what happened? Inside the report, they tweaked at least three input metrics. They tweaked legal services, they tweaked computer software and accessories, and they tweaked portfolio management and investment advice. They may have tweaked more, but those are the three that I found in my readings. And guess what, folks?