Anyone that tries to tell you that a global financial crisis is not happening is not being honest with you. Right now, there are 27 major global stock markets that have declined by double digit percentages from their peaks earlier this year. And this is truly a global phenomenon – we have seen stock market crashes in Asia, Europe, South America, Africa and the Middle East. But because U.S. stocks are only down less than a thousand points from the peak earlier this year, most Americans seem to think that everything is just fine.
The truth, of course, is that everything is not fine. We are witnessing a pattern similar to what we saw back in 2008. Back then, Chinese stocks and other major stock markets started crashing first, and then U.S. stocks followed later.
And it appears that we may have entered the next leg down for markets in the western world this week. The Dow was down another 252 points on Thursday, and all of the major stock indexes in the U.S. are now negative for the year except for the NASDAQ. Unless there is a major turnaround in the coming weeks, the six year winning streak for U.S. stocks is likely over.
But when you step back and look at what has been happening globally, a much more ominous picture emerges. I spent much of the afternoon looking at stock market charts for the largest economies all over the globe. What I discovered was financial carnage that was much worse than I anticipated.
It turns out that there are 27 major global stock markets that have fallen by more than 10 percent from peaks that were set earlier this year. If you want to verify this information for yourself, just go to Trading Economics. As you can see, many of these stock market declines have been quite impressive…
1. China: down more than 30 percent
2. Saudi Arabia: down 26 percent
3. Germany: down about 13 percent
4. United Kingdom: down close to 12 percent
5. Spain: down 15 percent
6. Brazil: down more than 22 percent (13,000 points overall)
7. Kuwait: down 14 percent
8. Turkey: down 16 percent
9. India: down close to 12 percent
10. Chile: down 11 percent
11. Columbia: down about 30 percent
12. Peru: down more than 40 percent
13. Bulgaria: down more than 20 percent
14. Greece: down more than 30 percent
15. Poland: down about 19 percent
16. Malaysia: down 10 percent
17. Egypt: down 32 percent
18. Indonesia: down 18 percent
19. Canada: down 12 percent
20. Ukraine: down 45 percent
21. Morocco: down 13 percent
22. Ghana: down 17 percent
23. Kenya: down 27 percent
24. Australia: down 13 percent
25. Nigeria: down more than 30 percent
26. Taiwan: down 15 percent
27. Thailand: down 20 percent
We have not seen numbers like these since 2008, and trillions of dollars of stock market wealth has been wiped out globally. So the “nothing is happening” crowd is simply dead wrong. Stocks are already crashing all over the planet. Just because the big U.S. stock market crash has not happened quite yet does not mean that a major global financial crisis is not happening.
But do you know what is crashing here in this country?
At this point, yields on the riskiest junk bonds have risen to levels that we have not seen since the last financial crisis. As I have discussed repeatedly, yields on junk bonds spiked dramatically just before the stock market crash of 2008, and now it is happening again…
This is precisely the kind of behavior that we would expect to see if a major U.S. stock market crash was imminent. Personally, I watch the junk bond market very, very closely because it is such a key leading indicator. And according to Jeffrey Snider, it appears that “something” is starting to cause junk bonds to sell off at an alarming pace…
There isn’t much as far as confirmation, but it increasingly appears as if “something” just hit the triple hooks (CCC) in the junk bond bubble. At least as far as one view of it, Bank of America ML’s CCC implied yield, there was a huge selloff that brought the yield to a new cycle high (low in price) above even the 2011 crisis peak.
But just like in 2008, a lot of people will not heed the warnings because they don’t have the patience to watch long-term trends play out.
We live in a society where we expect constant instant gratification. We have instant coffee, video on demand and 48 hour news cycles. If something does not happen immediately, most of us quickly lose patience.
On my other website, I include a lot more stories about things that are trending in the news. For example, earlier today I wrote about the horrible shootings in San Bernardino, California and I explained why I believe that Islamic terror is now more of a threat to the American people than ever before.
But on this website I like to take a broader view of things. For months, I have been warning that conditions were perfect for another major global financial crisis, and since that time events have been unfolding in textbook fashion.
And as you can see from the numbers above, we have already entered a new global financial crisis. If you tried to tell someone in China, Brazil or Saudi Arabia that a financial crisis was not happening, they would just laugh at you. We need to start learning that the world doesn’t revolve around the United States.
Of course the U.S. is heading for tremendous difficulties as well. This is something that I covered yesterday. All of the fundamental economic numbers are absolutely screaming “recession”, and yet most of the “experts” are still forecasting good things for the coming year.
Those that do not learn from history are doomed to repeat it. None of the problems that caused the crisis the last time around have been fixed, and most of our “leaders” seem blind to what is happening at this moment even though the exact same patterns that played out in 2008 are playing out once again right in front of our eyes.
If you have been waiting for the next global financial crisis, you can stop, because it is already here.
As we move toward the end of 2015, let us hope for the best, but let us also get prepared for the worst.