Return of the Bond Vigilantes? With Tony Greer

0:00Hey, everyone. Today's Real Vision Daily Briefing is sponsored by Crane Shares Lanshares. Learn back to The Real Vision Daily Briefing. With me today is Tony Greer, editor of the Morning Navigator newsletter. Hi, Tony. How are you, Maggie? What's cooking? Oh, there's quite a lot cooking, isn't there, if you look across the boards today. So we had a big spike in bond yields, 10-year and 30-year, now back at levels last seen in 2007. That spooked equities. We saw the Dow and S &P off over 1%, although they're actually a little bit off the lows. But it was an ugly looking day, the NASDAQ down closer to 2%.

0:59And we had the VIX up. At one point, I think it was up 15%. It also settled back just a little bit, but we saw that moving higher. When you look across everything that's happening, a lot of conversations we know happening across social media and in message boards, what do you make of the trading action today? Oh, man, Maggie, today was a wild day, really exciting day for me. And I'm going to say that when Maggie comes on and says bond vigilantes, we are approaching a bottom of this treasury slide. And I'm not trying to poke fun, but that's the kind of sentiment that you see and feel at the bottom of the move in treasuries, right?

1:35Today, we had a three sigma puke in the long bond with rates approaching a big round resistance number at 5%. We had a two sigma puke in the US treasuries in 10 year, right? So we have a new high there. We've got the curve steepening to minus 35 basis points. We've got the VIX responding with a move up to 20, which we haven't seen since May. We've got the dollar on the highs, but not making a new high with that capitulative spike in rates. We are getting towards the end of this move now. And I mean that in the stock and the bond sell off. I really feel like we are at least starting to see the whites of their eyes in the equity market in terms of the sellers.

2:21I mean, today we saw two sigma sector pullbacks in financials, cybersecurity, internet, software, airlines, high yield bonds, consumer discretionary. So we see another large magnitude move. We see the tick index get slammed to minus 1 ,700 or so today. We've got the VIX in the 20s, the S &P below the 200-day, but coming into horizontal support levels. To me, we're getting to the late stages of this particular equity sell-off, Maggie. That's what I'm seeing. That's so interesting. So let's talk about equities. You sent over a chart. We're going to put it up. So is there a feeling, do you have the sense, what's making you think we're toward the end of it?

3:03Is it because you're watching levels? Is it because of sentiment? In other words, is there money waiting for something like this, which we certainly have heard, or are people going to get nervous and it feed on itself? Walk me through why you think it's a turning point. Well, it's kind of a combination of things that we've seen, right? I think the chart is really, really relevant, right? There's a head and shoulders in the S &P. We broke the neckline a couple of weeks ago when we broke down through the 100-day moving average. We slid to the 200-day moving average. Now we've got the real VIX spike.

3:39Now we've got the real move in treasuries. Now we've got another, like maybe I think this is like the fifth or sixth tick index in the last seven or eight days that's been greater than minus 1 ,500. So we've got a cluster of tick bombs that all indicate kind of agnostic selling in the stock market or really heavy across the board bid whacking. And so when you get to situations like that and you'll see, I'm sure by tomorrow, with CNN's fear and greed will be at extreme fear. The S &P has broken technically its 200-day moving average on a closing basis. And we've seen that before on other tests of the 200-day moving average where the S &P will come through that level and kind of maybe a few points below it.

4:23And then the move lower will start tailing off. And the next thing you know, we'll be consolidating around the 200-day. And everybody is still going to be super bearish waiting for that next leg down. And I think that that's where we're going to have a tradable bottom. I really do. And I'm not talking about a move right through the highs. I'm just talking about a significant 200 to 300 point S &P bounce from here. And from there, we can be into sort of the middle of the next range that we set. But that's what it feels like to me, Maggie. I don't get terminally bearish after days like this and a big, huge VIX spike.

4:56Yeah, I think that's really important. We look at treasuries. Talk to me a little bit about what you're seeing there. I mean, we brought up the bond vigilantes, and you're totally right. And we were discussing that as well. And by the way, just take a look at the conversations across social media, right? I mean, this is like people are licking their lips. Like, this is it. They're back. It's what we've been waiting for. It was a big move. What's driving there? Like, what's driving the momentum? Is it concern about debt or is it something else? What's your sense of what's happening with the 10-year?

5:30And Brian, while Tony's talking, maybe you can go to the platform and just pull up the 10-year yield. I mean, we saw the 10 and the 30 go to those 2007 levels. But maybe you can just pull up the 10-year yield as he walks us through this. So to me, Maggie, the bond market has been significantly pricing in how the Fed left off last week, if you ask me. This is kind of a continuation of the move that was started at the FOMC meeting when Powell said, I forgot what his actual comment was. now, but it was about rates being higher for longer. And the market's still adjusting to that, right? But the adjustment is before our eyes, right?

6:07We're 10 % off of the highs of the S &P here, right? So adjusting to higher yields is something that happens quite often during a bull market run. And I think that that's what's going to happen. And the reason I think that also is because yields have gotten to this, we're at historic levels now. It's the third year in a row of bonds being down. They're down significantly. And now we just saw this large magnitude capitulative slide. So that to me, it looks where that's probably the last of the short-term selling. Bond volatility spiked just like stock market volatility spiked. And the market just consistently pricing in higher inflation for longer, higher yields for longer.

6:48But at some point, there's going to be that trade is going to reach its nadir. At some point, if the economy weakens and we slip into a recession, the Fed's going to pivot and pivot sharply, right? And say, OK, we're not going to keep rates that high for that much longer because we've got this recession problem that they'll eventually be able to point to in the data. So that's kind of how I'm reading it. That would be a pivot in rates. And that would probably set stocks into a rebounding mode. And so I'm trying to get a little bit ahead of that and buy when there's a little bit of blood in the streets.

7:19And I think that we're getting within the seventh, say, within the eighth or ninth inning of a tradable bottom in the S &P. It may not be today, but I think that we're there within the next couple of sessions, quite honestly. Yeah. And we do have some data coming out. We have ADP Wednesday, and then we've got the big jobs number on Friday. That's going to be really important as an indicator. Do you think that the Fed is comfortable with where rates are going? I mean, they've said higher for longer, but you think they're comfortable with it moving higher? and at this rate of change? I think they have a big problem on their hands, right?

7:57The inflation genie is out of the bottle. We're seeing the oil commodity prices come barking back, even against a stronger dollar and weakening commodities kind of across the board. We see natural gas come to life in the fall season here, right ahead of a potential, you know, natural gas always bubbles up in the winter. So if it starts bubbling up in the fall, you may as well start keeping an eye on it just in case there's a major move afoot. So those are all inflationary factors that are going to sort of backwardly reflect in the CPI data that we're going to see. And so that's kind of going to put upward pressure on the data, upward pressure on yields, a lot of pressure on Jerome Powell.

8:37And especially if the economy shows signs of, say, manufacturing weakness with all these high input costs, then they've got a bigger problem, right? Then they've got to lower rates and figure out how to keep the inflation genie in the bottle. So that's going to be another challenge. And I would imagine they might go to some more alternative terms other than just the interest rate markets if that happens. So I feel like we're getting to a little bit of a turning point here. We're getting to a little bit of a capitulation in the bond market. At least finally, there is a large magnitude move at the bottom that we could point to and say, hey, maybe that was the actual puke right there.

9:12I've seen on Twitter there's a lot of people throwing the idea of 13 % reels out there. I forgot who coined it. But that's going to shake up the bond market even further into this dislocation that we see today. So one of them is going to mark the bottom. I'd love to see a red to green day in treasuries where we know that that was an exhaustion print on the opening. But you can't always get what you want in the markets, right, Maggie? You got to take what they give you. That's absolutely right. You tell us that all the time, Tony. Gilles Jolie asking a question. I think there's a better place to find the answer.

9:43what affects bond yields other than central bank interest rates? And why are yields rising as interest rates have been held? Lots of things affect it. Certainly the amount of debt. We've got a lot of issuance coming to market. I would encourage you to go, rather than us discussing here, I would encourage you to go check out a couple of things on our platform. If you hadn't had a chance yet, bookmark it. Message me if you can't find it, and I will share it with you on the platform. Roger just did a great, Hearst just did a great recap of the entire crash and boom conversation we had. This was discussed, this question was discussed a lot.

10:19People feel differently about it too. A lot of people really concentrated on that debt issue, which is why we led with the vigilante question at the top. But other people have a different view on how that's all going to roll out. So go check that out. And if not, you can always plug into the Academy and And there's a couple of other essential pieces, anything from that content campaign. Luke Groman, David Rosenberg, go check them all out and you'll get some really, really great information on that, Gilles. So, Tony, we have a question about oil. So how does oil plug into all of this? There is no oil, Maggie.

10:58Sorry. There's no supply. Yeah, I say that facetiously, but Cushing is literally consistently plunging in the inventory level. So that's why WTI spreads have literally gone vertical in the last couple of weeks, I would say is fair. You know, the calendar went from the entire crude calendar went from$6 backward aided item to a$10 backward aided item in the span of a couple of weeks. That is a signal that the inventories are low. And so people are supplying themselves by getting long front to backs. And, you know, with Cushing inventory this low and with Saudi production and Russian production coming off the markets and look around and nobody sees an SPR seller because there's very little left to sell.

11:42Man, you know, that's an upside combination with alongside steady gasoline demand. I mean, that is a combination right there of a fairly solid oil market, right? At least one that's sideways to higher. And that's what we're seeing. So we got to a big range top at 94, 95, backed off. And I think that we'll probably back and fill in a sort of shallow dip that we've just seen and probably make another attack on the highs as inventories continue to draw, if they continue to draw. But it looks like that's the way we're going. Hey, everyone. We're going to take a quick break right now to hear a word from our partners.

12:15We'll be right back with more of the day's top analysis on the Real Vision Daily Briefing.

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13:23Trillinex, I think that answers your question. Oliver's saying your headset is the same color as his watch list. I think Oliver, a lot of people feel the same way. So you've got a lot of company today. We have a question from someone. We're still having this weird issue with everyone coming through as numbers. So my apologies. Asking, where do you see the biggest risk that your scenario of a tradable bottom might not be true? And we see a deeper pullback in the S &P. So what would maybe trigger this to be something more serious in terms of the downturn? It's all about the bond market from here.

14:00So today we saw a big steepening of twos, tens, which is what the VIX is reacting to. Today, 2's 10 steepened all the way to minus 35 basis points. That has been the move that has been encouraging the VIX to bubble up like this on this entire sell-off here as we price in higher yields, right? My risk from here, from this level of bond pukage is what? A bigger bond puke, right? Higher yields, right? That's the risk for me right now is that the curve continues steepening at this absurd pace that it's steepening. So as things get steeper in the bond market, I start to price in a lower probability that they can have another large magnitude slide from there.

14:43And whether it's right or wrong, that's how I'm going to trade this, because at some point you play the law of averages. And so after several months of puking and then a large magnitude move at the bottom, that's when I start to move my chips into the sort of bullish treasury camp and say, OK, there's a tradable bottom coming here. So if there's a tradable bottom, in my opinion, in treasuries, or at least we're getting close, then that's why I can stick with the long stock tradable bottom idea. If there's a slide or the curve, say, jumps to minus 10 basis points by Friday, there will be another VIX pop and probably another sell-off.

15:18But that's when I get even more hungry to say, now we're getting toward the end of the bond sell-off. Because now we're finally seeing the capitulative kind of moves and not just the sort of grind to a new low in treasuries every day. This was a slide. So let's see what happens. Yeah. Worth noting that, and we'll talk a little bit about the dollar in a minute, but in this risked off environment that we had today, we did see Bitcoin pull back. We were talking about this yesterday with Noelle, that the fact that crypto has been kind of holding up, at least Bitcoin has been holding up even as the dollar is higher.

15:50We did see it go down. Not a lot of losses, less than 2%. I want to bring in two special guests right now as we pivot to crypto for a minute. And that is my colleagues, Ash Bennington and Artur Asinski. Not only do they watch everything that happens in the crypto space, but in the digital asset space for that matter, but they also happen to be authors of a brand new book that is out this weekend, actually sort of this weekend into today. Hello to both of you. Hello, Maggie. Thank you so much for being with us. Okay, so the book is called, you co-authored a book along with Elizabeth Bachman called Crypto Crackup, Sam Bankman-Fried, FTX and SBF's Weird Island Empire.

16:35And of course, the trial starts today. And there's been so much around this. I mean, this has been in the news consistently. You both covered it, of course, for Real Vision as this news and alleged fraud broke. But I'm curious, as you sat down and put it all together in a book, what jumped out at you, Ash? What surprised you the most writing the book? Well, I have to tell you, the one thing that surprised me the most today is just the fact that this is just a huge mainstream news story. For people who watch Real Vision Crypto and Real Vision Pro Crypto, we've been in the weeds with this story.

17:12We have one of the most informed audiences in the world on this topic. We've been covering this all along. But this has just become this huge breakout news story today. I was on CNN International this morning talking about the book. This is one of those stories where your buddies from high school keep pinging you on your phone. So it is just really one of these stories that really breaks through, I think, because of the nature of this criminal trial, the amount of attention that Sam Bankman-Fried has drawn, the amount of attention that the collapse of FTX has drawn, unfortunately, for very negative reasons to the crypto space, Maggie.

17:42Yeah, but there's something about this, isn't there, Artur? like some of the antics that went on, the character that he is himself. People are super intrigued. It seems like on how this could have even happened in the first place. What were some of the takeaways for you? Intriguing is the perfect word to describe it because Sam Bankrand-Fried, as we've learned through writing this book, is an incredibly complex, interesting, and obviously controversial character. we've seen so many different aspects of how he operated he never he was never a true crypto believer from what we've learned he basically found crypto as the best means to an end which in his case was getting incredibly wealthy and through a philosophy that he very closely followed effective altruism, the aim was to give it away in the end.

18:42Obviously, we all know how that worked out for him. But I think we really got a better sense of Sam the man. And it's a really, really interesting story. And I'm very curious to see how it all plays out in court. Yeah, because this is the opportunity to air it all. And I think one of the questions everyone always comes up with now, it's always hindsight's 2020 is how did he convince everybody that he was the real deal, right? How did this, regardless of whether he's found guilty of the crimes or not, right? He's got his day in court. This is all alleged right now. But how did it get that far, Ash?

19:22Like that, that seems to be what everyone's thinking about and how much of it was about him and how much of it was about what was going on in the industry at the time. What do you think the fallout from this all is? I mean, how intertwined are those two stories? Yeah, it's a great question, Maggie. Well, first, of course, innocent until proven guilty. That's why we have these trials to determine questions of guilt or innocence. Look, the bottom line is there are a lot of people in the crypto space who feel deeply betrayed by Sam Beckenfried, very angry about what happened. Look, the thing speaks for itself,$8 billion in lost customer funds.

19:55Archer pointed to this bizarre notion that Sam did not really seem to be a crypto true believer. You know, one of the most important things I think about this story is that cryptocurrency is ultimately about decentralized permissionless networks that don't rely on centralized entities like FTX and Alameda to act as intermediaries. We find ourselves in this kind of weird transitionary phase between this traditional finance world that we're in today, as people in the space would say, moving toward this true decentralized permissionless system of cryptocurrency. But in order to get there, there need to be these intermediary sort of steps.

20:33And that's really where the paradox comes from, I think, in many ways. And so you ask this question about, well, how did this happen? How did this colossal failure occur? And I think the answer really is about this is a technology that's extremely, extremely early. There's enormous process, excuse me, potential in this space, but it's a process to get there. And for people who are true believers in the technology, we can see that vision. But getting there is a challenge. And I think that this was about the kind of frictional, transitional aspect of moving into this world. Yeah. But Artur, at the end of the day, this is probably, and the reason this is kind of jumping into the mainstream so much is it probably comes down to just good old greed, right?

21:15Which sort of is not exclusive to any asset class at all. It very well could be. and crypto is a nascent technology. And Jim Bianco, who the viewers of Daily Briefing know very well and whom we interviewed for the book, has said himself that this is not about crypto, but it is a high-flying sector, at least it was during the glory days of FTX. And that attracts all kinds of people who see an opportunity, see a way in. for various reasons, nefarious or not. So it very well could end up being just pure greed because we know that for some crypto was the best way to get incredibly wealthy. The side effects of that have been obviously tremendous and the impact on this space has been profound.

22:16We've got full sympathy to the victims of the collapse, But we're still seeing the effects of that. We're still seeing the impacts out of this collapse. And it's going to continue over the next few weeks as the trial plays out. We're going to take another quick break to hear a word from our partners. We'll be right back with more of the day's top analysis on the Real Vision Daily Briefing.

22:40Absolutely. Well, I can't wait to read it. I think anytime something like this happens, it benefits us all to really understand what went on. so that we can take the lessons away and try to put up some guardrails or be aware for the next time so we can learn. That's usually what happens, but you've got to dig in and understand it first. Not to mention the fact it's going to be a good primer for this trial, which should be full of fireworks since three of the people he worked with are testifying against him. So it's going to be a wild one to watch. Thanks so much, guys, and congratulations again.

23:13It is called Crypto Crackup, San Bankman, Freed, FTX, and SBF's Weird Island Empire. A lot of good juicy stuff in there, I'm sure. Get it on Amazon. Thanks, guys. Thank you. Appreciate it. Appreciate it. Tony, it's amazing. These guys managed to write a book while they're working full time and doing all the other stuff in their life. I love it. We got a lot of energy in this space. It's really impressive. Artur and Ash, good luck with the book sales. I will, for one, be buying several copies, and I can't wait to read it. Great work, guys. Thanks, guys. Appreciate it. Thank you. All right, let's get back to some questions, Tony.

23:48A lot of people are super interested in the fact that you're seeing this as an opportunity. Listen, anytime there's action like this, even though it's hard to watch sometimes if you're on the wrong side of it, this is what you guys do. You look for opportunity.

24:06Tony, I hear a lot of people saying that we will close the year higher because managers will be chasing the portfolio mix for their customers. What are your thoughts? Cut through the BS for us. Hey, that's how I'm playing it. I've been sort of an S &P bull all year with limited expectations because we're in a rising rate environment. The AI craze and the pop in NVIDIA caught me by surprise and kind of threw a real wrench in the works, but kind of helps your bullish S &P view. And so now that we've had an adjustment in yields, we've had a big adjustment in the curve and a big adjustment in the S &P, I'm looking for an early October bottom to trade right into the gorgeous seasonality of the fourth quarter S &P Santa rally.

24:55because I think that once we clear everybody out and have sentiment pinned at extreme fear for a little while at the beginning of the quarter, with all of the adjusting that has already taken place to the interest rate moves on the screen, that just leads me to believe that we're going to have a tradable bottom from here. So my chips are on the table. That's how I'm playing it. And like I said, I don't know if it's this day, this week even, but I am considering that this is toward the end of the sell-off and that we do end the year higher than this price. So it just kind of lines up to me where we've been in a pretty long, lengthy sell-off where we made the high in the NASDAQ in July.