Our Liberty Indicator Reveals a Huge Buying Opportunity

Andy Snyder|March 14, 2022

Welcome to the start of a big week.

In a little more than 48 hours, we will know the fate of the American economy. We’ll know just how bad this year’s recession will be.

On Wednesday, around 2 p.m. in Washington, Jay Powell will take to the stage and break the news. He’ll tell us what he and his team have decided to do about inflation.

Most Americans won’t bother to tune in. They know the Fed is spitting into a hurricane. With a world of far mightier forces pushing things around, its little rate hike won’t mean a thing.

As always, we beg readers to pay attention to a little-followed market metric. It’s what truly matters. It blows past the headlines. It pushes through the hype. And like a thermometer in an uncomfortable place… it tells the temperature of the economy from the inside out.

The rate of the 10-year Treasury is bandied about as if it were the end-all, be-all figure. But it tells only half the story. It tells us what the government’s debt pays us for a decadelong commitment.

It says nothing of what inflation quietly steals back.

These days… that’s huge.

Deeply Negative

It may not have mattered all that much in the disinflationary days of yore. But now that years of reckless monetary and fiscal policy have showed up looking for a fight… another figure is far more important.

It’s called the “real yield.”

Calculating it is simple. You take the yield on the 10-year Treasury and subtract the market’s expected rate of inflation over the same period.

As you can imagine, the second number is bigger than the first these days. The real yield on the 10-year Treasury is negative.

As I write, the figure is -0.88%. Last week, it was even worse… -1.04%.

It was just a hair away from its record low of -1.08%.

That tells us a few things, the most important of which is that money remains dirt cheap. In fact, when we factor in the effects of inflation, Uncle Sam continues to get paid to borrow money.

It’s a sweet deal.

With rates this low, it’s better for many companies to take on debt than to sit on cash.

That’s a very important notion. After all, artificially low interest rates are what fueled the massive bull market (a record-breaking boomer of a bull run) that started in March 2009.

Stocks doubled and then doubled again despite anemic GDP growth, largely because money was cheap and investors had no fair place for their cash but stocks.

This is also the trend that sent stocks on a soaring run from the March 2020 lows… when real rates first went negative.

Again, the economy was wobbling like a drunk stumbling out of a bar, yet prices rose and rose and rose.

That brings us to a critical chart… and the question that’s surely on your mind. What’s next?

The chart is not pretty.

We see stocks have dropped back to the levels of last summer. We see the S&P 500 is having no luck at all climbing out of its declining channel. The mid-channel trend line is solid resistance… not the support level we saw for many months.

And our beloved Liberty Indicator (the bottom part of the chart) has flatlined.

Buy Now

We don’t know what comes next. War is purposefully unpredictable.

Cities could be gone tomorrow. Or Putin could be.

But here’s what an old money man like us does know. Over the last 14 years, we were drooling each time we saw a dip like this.

Each of them turned into an enormous moneymaking opportunity.

Despite rumors to the contrary, money remains dirt cheap – almost record-breakingly cheap. The charts are hinting at locking in lows. And doves are once again circling the Fed.

It takes guts to buy when the world seems upside-down.

But nobody ever got rich buying at the top.