Credit Flow Investor

Based on the last 3 weeks (12wks at +1.2%) and continuing on current curve..

I have seen this all before. The FED and gov’t have been benefiting from WS for years ..the ‘virtuous’ cycle. Oil and gas have remained low and everyone has been benefiting.

Quick summary:

1. SPY loses momentum (YoY)
2. Oil and Gas become speculations (the first signal of pre-recession)
3. Economy weakens
4. Bonds start to move (primary tracker)

BEFORE a recession, Oil and SPY become speculations that cease to ‘help’ the economy. SPY has a hiccup and then retraces plus 1%. SPY becomes a ‘pump and dump’ operation. That’s why the recession is not seen as every hiccup is followed by it going higher. BUT it is also true that SPY starts losing momentum before a recession; for example YoY starts to slow considerably which also signals the oil and gas market.

So when the recession arrives, very few are prepared and poo poo it. However, the bond market is more sane and starts to move up reflecting the real economy and coming recession.

SPY and Oil go through ‘surges’ so they lose their ‘steadiness’ while bonds become more smooth and steady. That’s why you can see all going up at the same time but there is only one true winner. In the mini-cycles before the big crunch, SPY and Oil crack in a deflationary phase and TLT pushes up quickly.

The economic ‘system’ works but after each recession it rebounds slower and slower.

High commodity prices ‘solve’ themselves with increased production and falling demand.

Many in US benefit from increased fracking (needs higher prices to justify) which increases new production quickly.

Water can be pumped into wells. Oil sands increase production quickly and Saudi can also increase easily.

BUT it can take 3 months to come down…

AND compared to 2022…there’s no savings cushion or big wage rises or easy credit to cushion the blow.

This will weaken the economy.

CPI 3.3 YoY

Fed to continue on hold..longer.

Now -3.1% after rebound

Q2 +11.2% Q3 +6.9% Q4 +2.7%

Q1 -6.2%

Q2 will be low as well with rebound in Q3 and Q4

As there are no straight lines and markets will oscillate before the big crunch..

When the conditions occur from May- onwards…

I could never figure out the riddle of 2007-2008 until I realized that WS switches to milk Oil and Gas when stocks start failing. Oil and Gas are speculations to WS in this environment …the economy be damned.

SPY was just +2% in 2007.

This solves 2008 when oil spiked in a weak (neg GDP) economy weakening the economy further. Gold also rose first starting years before in 2004.

The years 2023-2025 had strong SPY but weak gasoline especially….another riddle if you don’t know.

The smart ones started buying gold who knew that SPY would weaken and WS would switch to Oil Gas and Gold.

The problem contains the Fed as they can’t drop rates too quickly especially the magical 2.0% level.

Advantage to TLT being late to the party as these conditions become obvious. Gold is the first mover.

TLT starts to rise in general pricing in the coming bad economy and recession. Hence, the idea of TLT to SPY ratio being the tracker along with change of SPY (weak) being low.

Eventually, the big deflation hits when SPY is sold off 50% along with everything (margin calls)

except bonds.

4 standard deviations means 99.9% percentile

1 SD = 6.27%….Average price $3.64…Feb $2.91

And weekly gas change has leveled…+0.7%

This game is all about patience waiting for the right conditions.

People don’t want to face the truth…its idiocracy! …No more Oh my! Neg payrolls! panic….drop rates! This is your 2025.

But 2026 is bad news for them relying on high SPY 2023-2025 to rescue everything!

SPY will now have negative slope for 8 months…

Short term crisis ending….gasoline now flat for 5 days straight….

Weak Economy + Weak SPY + No Fed = Hiccup (deflationary drop)

Negative slope on SPY weakens economy so rate rise not needed. This is an oil and gas matter.