David Skarica: The Federal Debt Tsunami is Coming to Crush the Markets this Year

Tom welcomes back David Skarica, publisher and founder of Stockchart of the Day, about a potential threat to market stability. Skarica sees increased frothiness in the market, with Bitcoin ETFs being launched and widespread optimism about Bitcoin reaching 150k - 300k, similar to the behavior seen in 2017 and 2021. He warns that investors should be cautious about the current state of the market and consider investing in assets that can protect their wealth during market downturns. Skarica points out that the top 10 largest stocks now account for 29% of total market cap, similar to the height of market bubbles, with stocks like NVIDIA and Apple trading based on growth rather than sales. He suggests looking at NVIDIA's chart and other related stocks to understand the market better. The US government has been issuing more short-term debt instead of taking advantage of low long-term interest rates, which could lead to problems when the debt needs to be rolled over in the future. The market is demanding higher returns on US debt due to increasing debt levels and higher spending, leading to a potential sovereign debt crisis in the US. Commodities and gold markets are also anticipating this potential crisis, with commodities near resistance levels and gold breaking out. Skarica discusses the reissuing of debt and the potential for a shorter maturity on those bonds due to the real rate of return. He notes that there is currently more demand for two-year treasury bonds, which have a fixed market and yield 4.6%, compared to 10-year bonds, which are subject to price fluctuations and have lower yields. Skarica warns of the risk of buying long-term bonds, as demonstrated by the TLT ETF, which has decreased in value by 40% while only offering a 0.5% yield. David discusses the potential convergence of various economic cycles, including a debt cycle and a Dow theory cycle, and what this could mean for the price of gold and the capital expenditure (CAPEX) cycle in the mining industry. He suggests that loose monetary policy and QE tend to lead to investment in sectors that were not the focus of the previous market bubble, such as emerging markets, commodities, and inflation-protected sectors. Timestamp References:0:00 - Introduction0:34 - Threats and Markets4:38 - Recent Market Rally10:40 - Corporate Vs Gov't Debt16:58 - Maturities & Bonds26:00 - Dow Transport Avg27:40 - Rates & Market Forces31:21 - Debt Monetization33:28 - Japanese Yen Chart36:29 - Liquidity & Demand38:20 - Fed Talk & Rates41:08 - Soros & Efficient Mkts.44:30 - Bulls & Bear Documentary45:47 - Gold & CAPEX Cycle50:43 - Irrational Markets?55:52 - The Green Dream59:55 - Fun/Risky Markets1:02:27 - Wrap Up Talking Points From This Epsiode * Investor caution is urged due to market frothiness and potential threat to stability. * Top 10 largest stocks account for 29% of total market cap, similar to past market bubble peaks. * US sovereign debt crisis possible due to increasing debt levels, higher spending, and demand for higher returns on debt. Guest Links:YouTube: https://youtube.com/@scotdayTwitter: https://twitter.com/DavidSkaricaPatreon: https://www.patreon.com/stockchartoftheday David Skarica is the Founder and Editor of Stock Chart Of The Day a popular newsletter known for its stellar performance in both up and down markets. Skarica entered the financial markets at a very young age and became the youngest person on record to pass the Canadian Securities Course at the age of eighteen.