Ron Paul Warns That When The “Biggest Bubble In The History Of Mankind” Bursts It Could “Cut The Stock Market In Half”

When this bubble finally bursts, will we witness the biggest stock market crash in U.S. history?  “The bigger they come, the harder they fall” is a well used phrase, but I think that it is very appropriate in this case.  From a low of 6,443.27 on March 6th, 2009, we have seen the Dow nearly quadruple in value since the last financial crisis.  It has been a remarkable run, and it has lasted far longer than virtually any of the experts anticipated.  But what goes up must come down eventually.  This stock market bubble was almost entirely fueled by easy money from the Federal Reserve, and now that easy money has been cut off.  The insiders can see the handwriting on the wall and they are getting out of the market at a pace that we haven’t seen since 2008.  Could it be possible that the day of reckoning is finally at our door?

Of course we have been hearing warnings like this for a very long time.  In fact, I have been warning about a market crash for a very long time.  Just the other day, one of my readers insisted that if something was going to take place that “it would have happened by now”.  In the Internet age, we have been trained to have very short attention spans, but financial bubbles don’t care about the length of our attention spans.  They all inevitably come to a bitter end, but they don’t reach that end until they are good and ready.

And without a doubt we are on borrowed time, but meanwhile so many of us that are continually warning about what we are facing are getting a lot of heat for it.

For instance, when Ron Paul told CNBC that the stock market is “the biggest bubble in the history of mankind”, he was strongly criticized for it, but he was 100 percent correct…

This market is in the “biggest bubble in the history of mankind,” and when it bursts, it could cut the stock market in half, he told CNBC’s “Futures Now” Thursday.

If the Dow only plummets to about 12,000 or so during the coming downturn we will be exceedingly fortunate, because the truth is that stock prices need to fall by at least that much just to get us into the neighborhood where stock prices will start to make sense once again.

Today, sales to stock price ratios are hovering near all-time highs.

The same thing is true for earnings to stock price ratios and GDP to stock price ratios.

The only other times these ratios have been so elevated were just before major stock market crashes.

In the end, these ratios always, always, always return to their long-term averages eventually.

It may take many years, but it always happens.

So what factors led Ron Paul to make such an ominous prognostication?  The following comes from CNBC

“The Congress spending and the Federal Reserve manipulation of monetary policy and interest rates — debt is too big, the current account is in bad shape, foreign debt is bad and it’s not going to change,” he said.

Paul isn’t alone in his critique. A number of politicians have voiced concern over ballooning deficits, including current House Speaker Paul Ryan, who raised a warning on the nation’s debt in 2012.

Of course it isn’t just the U.S. that is drowning in debt.

According to the Institute of International Finance, total global debt just hit a brand new record high of 247 trillion dollars

Every quarter the Institute of International Finance publishes a new number of the total amount of global debt outstanding, and every quarter the result is the same: a new record high

Today was no exception: according to the IIF’s latest Global Debt Monitor, the amount of debt held in the world rose by the biggest amount in two years during the first quarter of 2018, when it grew by $8 trillion to hit a new all time high of $247 trillion, up from $238 trillion as of Dec. 31, 2017 and up by $30 trillion from the end of 2016.

Global debt has been rising much, much faster than global GDP, and at this point there is three times as much debt in the world as there is money.

There is no possible way that all of that debt can ever be paid off.  The only way that the party can continue is for debt to continue growing faster than global GDP, and everyone knows that is simply not sustainable in the long-term.

So an absolutely monumental “adjustment” is coming.  You can call it a “crash”, a “collapse” or anything else that you would like, but just as certainly as you are reading this article it is coming.

It is just a matter of time.

But for now, the talking heads on television continue to insist that everything is just fine and that the stock market still has more room to go up

There’s still room for stock markets to rise and worries of an impending recession are premature, according to Berenberg Capital Markets’ chief economist.

“Even if profits peaked in (the first quarter of) 2018, which remains uncertain, history suggests the stock market has room to appreciate,” Mickey Levy, Berenberg’s chief Americas and Asia economist, said in a client note this week. He pointed to data demonstrating how in every economic expansion since the mid-1970s, the S&P 500 index went on to appreciate for a “significant period” after corporate profits peaked.

I wish that CNBC would have me on just one time so that I could refute some of these guys.

Since 1913, the Federal Reserve has gone through 18 rate hiking cycles.  In 18 out of 18 cases, those rate hiking cycles have ended in either a recession or a market crash.

Do you really think that the 19th time will be different?

10 years ago, virtually everyone thought that the “boom times” would last forever too.  But they didn’t.  Instead, we plunged into the greatest economic and financial crisis since the Great Depression, but at this point 2008 seems like ancient history to most people.

Yet again we have fooled ourselves into thinking that the good times will just continue to keep on rolling, and once again our society will be in for a very rude awakening when the inevitable crash finally arrives.

Michael Snyder is a nationally syndicated writer, media personality and political activist. He is publisher of The Most Important News and the author of four books including The Beginning Of The End and Living A Life That Really Matters.

The U.S. Trade War With China Officially Goes To The Next Level As Financial Markets Around The World Continue To Implode

Up until now, the U.S. trade war with China has simply been a bunch of threats and counter-threats, but now things are about to get very real.  On Friday, the first round of U.S. tariffs on Chinese goods becomes official, and these tariffs are going to fundamentally alter the economic relationship between the two largest economies on the entire planet.  Over the past several decades, U.S. consumers have loved gobbling up super-cheap goods from China, and the Chinese have used many of the dollars that they have been accumulating to fund our exploding national debt.  This symbiotic relationship has been bad for the United States in a lot of ways, and something had to be done, but in the short-term this trade war is going to be enormously painful.  Sadly, most Americans are completely oblivious to what is happening.  The following comes from Bloomberg

President Donald Trump is preparing to slap tariffs on Chinese goods early Friday, the first shot in a trade war between the world’s two biggest economies.

Tariffs on $34 billion of Chinese goods are scheduled to take effect at 12:01 a.m. in Washington, the U.S. Trade Representative confirmed in an email Thursday. The milestone marks a new and damaging phase in a conflict that has roiled markets and cast a shadow over the global growth outlook.

Another way should have been found to deal with our trade imbalances with China, because a trade war is not going to work.

Instead of giving in, the Chinese are promising to respond with measures of “equal scale, equal intensity”, and President Trump is already pledging to hit the Chinese with another 500 billion dollars in tariffs if the Chinese hit back in this manner…

Aboard Air Force One on his way to a rally in Montana, Trump told reporters he would also consider imposing additional tariffs on $500 billion in Chinese goods, should Beijing retaliate.

Once these escalations begin, where will they end?

The Chinese can really, really hurt us by dumping our debt and by cutting off our access to rare earth elements.

Would they really go that far?

And what would Trump do in response if the Chinese pull the trigger and decide to “go nuclear”?

It would be hard to overstate the pain that these tariffs will cause for U.S. businesses.  In fact, Bloomberg is reporting that some sectors are already being hit really hard in anticipation of what is going to happen…

The tariffs are already having an effect. As an example, Chinese companies are reselling U.S. soybeans, and Chinese companies are expected to cancel most of the remaining soybeans they have committed to buy from the U.S. in the year ending Aug. 31, once the extra tariffs take effect.

Of course the U.S. is not just fighting a trade war with China.  The United States has decided to wage trade wars with almost all of the major economic powers around the world simultaneously, and economic experts in France are warning that this could plunge the globe into a new economic crisis that “would likely be as devastating for the world economy as the 2008-2009 recession”

A full-scale trade war would likely be as devastating for the world economy as the 2008-2009 recession, warned France’s Council of Economic Advisors, a body which gives input to the country’s prime minister.

The United States and China could see a permanent loss of three percent of economic output and the European Union (EU) four percent in the case of a full-blown trade war, it estimated on Tuesday.

The wheels are in motion, and it is going to take a miracle to reverse course now.

In fact, it is being reported that “global trade is already collapsing”

While the US prepares to unleash its latest salvo in the trade war against China at midnight tonight, business surveys suggest that global trade is already collapsing

JPMorgan’s Global Purchasing Managers’ Index (PMI) data suggest that trade growth has already slowed dramatically this year, as tensions over tariffs have escalated.

To get an idea of what they are talking about, just check out this chart.

And this comes at a time when financial markets around the planet are already imploding.  According to Egon von Greyerz, stock markets in China, Brazil and Turkey are already hovering around bear market territory…

But change starts in the periphery where very few are looking. Look at China where the Shanghai composite is down 23% since January. And look at Brazil where the Bovespa is off 17% so far this year and Turkey which has lost 20%.

What is important to understand is that most major markets are now looking extremely vulnerable, be it Japan, Germany or the US. Fundamentally most markets are overvalued with the help of central bank liquidity. Also, technically we are not far from crashes in most markets. Whilst there is always a possibility of a last hurrah, it looks like all markets have topped, including the US, and that later in 2018 we will see major falls. Once the bear markets start, they are likely to turn into secular trends that last many years and result in falls of 75% to 95%. Difficult to believe for most investors today, but nobody in 1929 believed that the Dow would fall 90% in the ensuing years and take 25 years to recover.

If our trade wars continue to escalate, and if the Federal Reserve continues to raise interest rates, and if civil unrest continues to grow in major cities all across America, it is only a matter of time before U.S. markets implode as well.

During a recent interview, Michael Pento was asked when things might really start falling apart, and he pointed to the month of October

“Well, I have put a check on the calendar for October because of the fact the rate of quantitative tightening goes to $50 billion per year, because the trade war will reach a crescendo, then because I believe, unfortunately because I am conservative, the Republicans lose the House of Representatives, because the Chinese credit boom will be in full reverse by October.

It is a confluence of events coming in October… we’ve already entered into the beginnings of a bear market around the world. The top 22 banks in the world are in a bear market. There are many, many examples of banks around the world that are in a bear market. You have a bear market in Chinese shares. 20% of the S&P 500 is in a bear market. This is an incipient bear market that is already beginning. I believe it manifests clearly to even the people on CNBC by October.

In the end, the exact timing does not matter that much, because if we continue down the road that we are on right now it is only a matter of time before disaster strikes.

We simply cannot continue to enjoy a massively inflated debt-fueled standard of living if we decide to provoke all of the other nations that are funding our debt by starting trade wars with them.

What we are doing does not make any sense at all, and there will most certainly be severe consequences in the not too distant future.

Michael Snyder is a nationally syndicated writer, media personality and political activist. He is the author of four books including The Beginning Of The End and Living A Life That Really Matters.

We Are Witnessing Unusual Stock Market Behavior That Is Unlike Anything That We Have Seen Since 2008

We have not seen Wall Street this jumpy since just before the great financial crisis of 2008.  As I have explained so many times before, when the waters are calm and there is low volatility, markets tend to go up.  And when the waters are choppy and volatility starts to spike, markets tend to go down.  That is why the behavior that we have been witnessing from investors during the first two quarters of 2018 is so alarming.  A high level of market turnover is often a sign of big trouble ahead, and according to Bloomberg our financial markets “are churning at the fastest rate since 2008″…

From junk bonds to emerging-market stocks, market turnover is through the roof, reaching multi-year highs. Within the S&P 500 Index, investors traded more than $2.9 trillion worth of shares in each of the past two quarters, a feat last achieved in early 2008.

Bloomberg is not prone to hyperbole, and so when they say that “market turnover is through the roof”, I hope that you will take that statement seriously.

We truly are facing a scenario that Wall Street has never seen before.  The Wilshire 5000 stock index to nominal GDP ratio has been hovering near all-time highs, and what that tells us is that stock prices are more overvalued today than they have been at any other point in modern American history.  Meanwhile, all sorts of red flags continue to indicate that big trouble is on the horizon, but most investors are ignoring those red flags.

But if you look closely, it is becoming clear that the most savvy investors are getting out while the getting is good.  In a previous article, I explained that the “smart money” is getting out of stocks at a pace that we have not seen since just before the last financial crisis.  Fortunately for them, the “dumb money” has been willing to buy what they are selling at these massively inflated prices.

We see a similar spike in the “churn rate” when we look at emerging markets.  In fact, Bloomberg says that we have not seen this much volatility in emerging market stocks since the international financial crisis of 1998…

It’s a similar story for developing-nation assets at the mercy of a strengthening U.S. dollar and trade tensions. Volume on the MSCI Emerging Market index reached $1.9 trillion in the three months through June, the most since 1998 when a wave of currency devaluations and defaults ripped through emerging economies from Thailand to Russia.

As I mentioned a couple of days ago, global stocks lost approximately 10 trillion dollars in value during the first six months of 2018.

Just think about that.

10 trillion dollars is almost half of the U.S. national debt.

If global stocks continue to fall at a similar pace during the second half, it is only a matter of time before U.S. stocks get absolutely slammed.

One of the emerging markets that is showing significant signs of trouble is India.  According to Bloomberg, India’s banks are now dealing with 210 billion dollars of bad debts…

India’s nearly $1.7 trillion formal banking sector is coping with $210 billion of soured or problem loans, and some regional banks have been ensnared in fraud scandals.

If U.S. banks had 210 billion dollars of bad debts that would be a big problem.

In India, a number like that is a complete and utter financial catastrophe that is not going to be easy to clean up.

According to CNBC, most of the bad loans are owned by India’s state-controlled banks…

India’s public-sector financial institutions control about 70 percent of all banking assets in the country, but they have the highest exposure to soured loans amounting to as much as $150 billion. In fact, the 21 state-owned banks had stressed loans of about 8.26 trillion rupees ($120 billion) as of Dec. 31, Reuters reported. Private sector lenders, meanwhile, reportedly had a bad loan pile of just about 1.1 trillion rupees.

Things have already gotten so bad in India that some people are starting to panic.

In fact, it is being reported that ATMs in some areas of the nation have been “running dry”…

On top of that, ATMs in some parts of the country have been reported to be running dry in recent days. There’s an unusually high demand for cash, according to the Finance Ministry. The rupee shortage is being blamed on everything from farm spending to looming elections and hoarding by some families.

This is yet another example that shows that it always pays to not put all of your eggs in one basket.  In the event of a major emergency, you will want access to cash, and you cannot necessarily count on your bank to always be there for you.

As we move forward into the second half of 2018, red flags continue to appear on an almost daily basis.  The Federal Reserve is steadily raising interest rates, civil unrest is erupting in the streets of America, and the Trump administration is starting trade wars with virtually everyone else on the planet.

In the end, these trade wars are going to prove to be very painful for U.S. businesses.  Earlier today, CNBC posted a piece about the impact that tariffs are likely to have on our pork producers…

U.S. pork producers are about to be bitten by a second batch of hefty retaliatory tariffs from China and Mexico — and that has some large producers predicting they could lose big money and be forced to invest overseas.

Executives say the pork industry has been expanding in recent years, in part on the expectation of export opportunities that would continue to support growth. However, the threat of a trade war is adding uncertainty and driving fear. One in 4 hogs raised in the U.S. is sold overseas, and the Chinese are the world’s top consumers of pork.

As I write this article, I can hear fireworks going off in the background.  The 4th of July is always a time for celebration, and without a doubt many Americans are extremely optimistic right now.

But as I have just explained, major storm clouds are gathering, and it isn’t going to take much to push the U.S. economy into another major crisis.

Michael Snyder is a nationally syndicated writer, media personality and political activist. He is the author of four books including The Beginning Of The End and Living A Life That Really Matters.

Why Are Investors Pulling Money Out Of Global Stock Funds At The Fastest Pace Since The Last Financial Crisis?

We haven’t seen anything like this since the financial crisis of 2008.  Investors are taking money out of global stock funds at a pace that we haven’t seen in 10 years, and many believe that this is a harbinger of tough times ahead.  Global stocks lost about 10 trillion dollars in value during the first half of 2018, and an even worse performance during the second half of the year will almost certainly push the global financial system into panic mode.  U.S. stocks have been relatively stable, and so most Americans are not too alarmed about what is happening just yet.  But if you look back throughout history, emerging market chaos is often an early warning signal that a major global crisis is on the horizon, and that is precisely what is happening right now.  Financial markets in emerging markets all over the planet are in the process of melting down, and the losses are becoming quite dramatic.

As stock prices around the planet start to plummet, investors are pulling money out of global stock funds very, very rapidly.  The following comes from CNBC

Investor money is hemorrhaging out of global stock funds at a pace not seen since just after the financial crisis exploded.

Global equity funds have seen outflows of $12.4 billion in June, a level not seen since October 2008, according to market research firm TrimTabs. Lehman Brothers collapsed in September of that year, triggering the worst economic downturn since the Great Depression and helping fuel a bear market that would see major indexes lose more than 60 percent of their value.

Does this automatically mean that another major financial crisis is on the way in the United States?

No, but it is definitely not a good sign.

As CNBC also noted, investors have been taking tremendous amounts of money out of one emerging market ETF in particular…

The iShares emerging market ETF has seen $5.4 billion in outflows in June, the most of any fund, according to ETF.com.

“U.S. dollar strength and persistent underperformance seem to be driving fund investors away from non-U.S. equities,” TrimTabs said in a note.

The list of emerging market economies that are in crisis mode is beginning to get really long.  Argentina, Venezuela, Turkey, Brazil and South Africa are some of the more prominent examples.

If the chaos in emerging markets continues to intensify, the rush for the exits is going to become a stampede.  Not too long ago, I discussed the fact that the “smart money” was getting out of stocks at a pace that we haven’t seen since just before the last financial crisis, and it isn’t going to take too much to set off a full-blown financial avalanche.

In the general population, most people still seem to think that the financial system is in good shape.  But in many ways, the first half of 2018 was the worst half of a year for the global financial system since the financial crisis of 2008.  The following summary of the carnage that we have witnessed over the last 6 months comes from Zero Hedge

  • Bitcoin Worst Start To A Year Ever
  • German Banks At Lowest Since 1988
  • Onshore Yuan Worst Quarter Since 1994
  • Argentine Peso Worst Start To A Year Since 2002
  • US Financial Conditions Tightened The Most To Start A Year Since 2002
  • Global Systemically Important Banks Worst Start To A Year Since 2008
  • Global Stocks Worst Start To A Year Since 2010
  • China Stocks Worst Start To A Year Since 2010
  • German Stocks Worst Start (In USD Terms) Since 2010
  • Global Economic Data Disappointments Worst Since 2012
  • Emerging Markets, Gold, Silver Worst Start To A Year Since 2013
  • High Yield Bonds Worst Start To A Year Since 2013
  • Offshore Yuan Worst Month Since Aug 2015
  • Global Bonds Worst Start To A Year Since 2015
  • Treasury Yield Curve Down Record 16 Of Last 18 Quarters

And as I mentioned above, global stocks lost about 10 trillion dollars in value over the last 6 months.

When the Federal Reserve hikes interest rates, it puts a lot of financial stress on emerging markets.  It becomes much more expensive to take out dollar-denominated loans, and it also becomes much more expensive to pay back existing dollar-denominated debts.

But the Fed has not listened to appeals from the rest of the world, and has decided to accelerate the pace of rate hikes instead.

Meanwhile, the trade wars that the United States has started with other nations continue to escalate.  Here are the latest developments

U.S. farmers and food producers are in the cross-hairs of a global trade conflict that shows no signs of abating anytime soon — and things are about to escalate in a big way on Sunday.

New tariffs will be imposed by Canada on beef, and more retaliation will come this week when China and Mexico take aim at pork. China’s also planning a 25 percent tariff on soybeans on July 6 in addition to hikes on pork duties, and Mexico’s 20 percent levy on “the other white meat” is set to begin July 5.

Meanwhile, the European Union’s initial duties worth $3.2 billion took effect June 22. Most of the duties amount to 25 percent, and include a variety of U.S. products, including motorcycles, boats, whiskey and peanut butter.

If nobody gives in, economic activity will start to slow down substantially.  This is what CNN says that we should expect…

Here’s how the dominoes could fall: First, businesses would be hit with higher costs triggered by tariffs. Then, companies won’t be able to figure out how to get the materials they need. Eventually, confidence among executives and households would drop. Businesses would respond by drastically scaling back spending.

A perfect storm is starting to emerge, and investors are getting spooked.

If financial problems continue to get worse in emerging markets, and if the Federal Reserve continues to raise interest rates, and if these trade wars continue to grow, it is only a matter of time before we have a major market catastrophe in the United States.

The storm clouds on the horizon have just kept getting darker and darker, and many analysts all over the nation agree that this is the gloomiest that things have looked since 2008.

Hopefully a way can be found to turn things around, but I wouldn’t count on it…

Michael Snyder is a nationally syndicated writer, media personality and political activist. He is the author of four books including The Beginning Of The End and Living A Life That Really Matters.

18 Times The Fed Has Gone Through A Rate Hiking Cycle, And 18 Times It Has Caused A Huge Stock Market Decline And/Or A Recession

Since 1913, the Federal Reserve has engaged in 18 distinct interest rate hiking campaigns, and in every single one of those instances the end result was a large stock market decline, a recession, or both.  Now we are in the 19th rate tightening cycle since 1913, but many of the experts are insisting that things will somehow be different this time.  They assure us that the U.S. economy will continue to grow and that stock prices will continue to soar.  Of course the truth is that if something happens 18 times in a row, there is a really, really good chance that it will happen on the 19th time too.  For years I have been trying to get people to understand that our country has been on an endless roller coaster ride ever since the Fed was created back in 1913.  Things can seem quite pleasant when the economy is on one of the upswings, but the downswings can be extremely painful.

It was economist Lance Roberts that pointed out this correlation between rate hiking cycles and economic troubles.  When I came across his most recent article, it really got my attention

A sustained interest rate hiking campaign, as undertaken by the Fed, has always resulted in negative stock market returns.

Always. Not usually, not might-be-correlated-to. Always. As in, 18 out of 18 times. Until now. When we’ve had the single highest percentage increase in history (93.33% peak to trough, so far).

To support his claims, he posted this chart

So far, however, there hasn’t been a huge stock market drop or a recession during this rate hiking cycle.

Has something changed?

Is the 19th time going to be fundamentally different?

Roberts believes that the unprecedented intervention by the Fed that we have seen in recent years that has fueled corporate buybacks has successfully “delayed the inevitable stock market correction”

So what gives? Of course, it’s the Fed. Having kept interest rates near zero for years on end and having filled corporate coffers with super cheap debt used to fuel market-bubble-sustaining corporate buybacks, the Fed has delayed the inevitable stock market correction.

I definitely agree with Roberts – a colossal stock market correction is inevitably coming.

And the warning signs are all around us.  As I have discussed so many times before, junk bonds are often an early warning sign for a major financial crisis, and it is extremely interesting to note that it looks like Deutsche Bank is planning a “fire sale” of their energy junk bonds.  The following analysis comes from Zero Hedge

Bloomberg reports that Deutsche is planning to sell the loan book as a whole and has marketed it to North American and European peers, said one of the people. The portfolio is expected to sell for par value, said the people, who asked not to be identified because they weren’t authorized to speak publicly; good luck with that!

The bank’s energy business is expected to wrap up on June 30, one of the people said. The bank has been an active lender in the energy space in the past year, participating in the financing of companies including Peabody Energy Corp. and Coronado Australian Holdings Pty., according to data compiled by Bloomberg.

So to summarize: Moody’s is warning that when the economy weakens we will see an avalanche of defaults like we haven’t seen before; Corporate debt-to-GDP and investor risk appetite is reminding a lot of veterans of previous credit peaks; and now the most desperate bank in the world is offering its whole junk energy debt book in a firesale… just as high yield issuance starts to slump.

Wow.

To me, that is one of the strongest indications yet that things are about to take a major turn for the worse for the global financial system.

And even former Federal Reserve chair Ben Bernanke is sounding quite pessimistic these days.  The following comes from a Bloomberg article entitled “Bernanke Says U.S. Economy Faces a ‘Wile E. Coyote’ Moment in 2020”

The stimulus “is going to hit the economy in a big way this year and next year, and then in 2020 Wile E. Coyote is going to go off the cliff,” Bernanke said, referring to the hapless character in the Road Runner cartoon series.

When you read that quote, alarm bells should have been going off in your head.

If his forecast is accurate, that means that the U.S. economy’s Wile E. Coyote moment will come just in time for the 2020 election

The timing of Bernanke’s possible slowdown would line up badly for Trump, who has called the current economy the best ever and faces reelection in late-2020.

Wouldn’t that be convenient for the elite?

U.S. voters tend to be extremely influenced by the performance of the economy, and so a major economic downturn would not bode well for Trump’s chances.

Similarly, if a major crisis erupts during the second half of this year, it will probably mean big problems for Republicans in November.  Timing is everything in politics, and when the next crisis comes most voters won’t even consider the fact that it had been building for a very, very long time.  All they will care about is who is in office at the time.

But for the moment, most of the “experts” are assuring us that things will be rosy for the foreseeable future.  For example, a couple of prominent analysts over at Goldman Sachs are saying that tech stock prices are likely to continue to rise

“Unlike the technology mania of the 1990s, most of this success can be explained by strong fundamentals, revenues and earnings rather than speculation about the future,” strategists Peter Oppenheimer and Guillaume Jaisson wrote in a note. “Given that valuations in aggregate are not very stretched, we do not expect the dominant size and contribution of returns in stock markets to end any time soon.”

And the optimists will continue to be right up until the moment that the bubble finally bursts.

Whenever the Federal Reserve starts raising rates, it always results in a bad ending.

This time will be no different, and anyone that is trying to convince you otherwise is just being delusional.

Michael Snyder is a nationally syndicated writer, media personality and political activist. He is the author of four books including The Beginning Of The End and Living A Life That Really Matters.

European Implosion Sends Panic Through Global Markets As George Soros Warns ‘We May Be Heading For Another Major Financial Crisis’

I told you to keep your eyes on Europe.  On Tuesday, widespread panic shot through European financial markets and this deeply affected U.S. markets as well.  The Dow Jones industrial average fell 391 points, and at this point the Dow and the S&P 500 have been down for three trading sessions in a row.  But the big news is what is happening over in Europe.  Tuesday’s crash represented the largest one day move for 2 year Italian bonds ever, and Italian bank stocks are now down a whopping 24 percent from their April highs.  Overall, European banks have fallen a total of 11 percent over the last four days, and it isn’t just banks in troubled countries such as Italy and Spain that are hurting.  The biggest bank in Europe, Deutsche Bank, just keeps on tumbling and is now just barely above all-time lows.  A few days ago when I wrote that the next global economic crisis “could be just around the corner”, there were some people that criticized me for making such a statement.  Well, as you will see below, now this fact has become so obvious that even George Soros is saying it.

Those that are ignoring what is going on in Italy are making a tragic mistake.  Italy is the third largest economy in the eurozone, and even the Wall Street Journal is admitting that its bond market is “in meltdown”…

Risk aversion is back. Italy is the focal point, with its bond market in meltdown, its politics in crisis after President Sergio Mattarella blocked the formation of an antiestablishment government, and its credit rating under threat.

That is all now making bigger waves: Europe’s deepening troubles and disappointing global growth signals are sparking a sudden rally in haven bonds like U.S. Treasurys.

The next financial crisis has already arrived in Europe, and the primary reason for this crisis has to do with the giant mess that Italy’s government has become.  The following summary of the current situation comes from CNBC

Italy has been without a government since an inconclusive vote in early March, with anti-establishment political groups abandoning their efforts to form a coalition over the weekend amid a dispute with the country’s head of state.

President Sergio Mattarella, who was installed by a previous pro-EU government, refused to accept the nomination of euroskeptic candidate Paolo Savona for economy minister on Sunday.

Instead, he set the country on a path to another snap vote by appointing former International Monetary Fund (IMF) official Carlo Cottarelli as interim prime minister.

Of course the Italian parliament will never accept Cottarelli, and it looks like we are heading for snap elections in either July or August.

What is at stake in these elections is of the utmost importance to all of Europe.  As Politico recently discussed, if the Italian people continue to move toward anti-establishment parties we could actually see Italy leave the euro or even leave the EU altogether…

Italy, the third-largest EU power once Britain leaves, may sooner or later be run by two parties who agree on little other than their apparent eagerness to break stuff. It could be Italy’s debt — a default in the trillions of euros. It could be the euro, if they follow through on past promises to hold a referendum on membership in the single currency. And what’s ultimately broken could be the EU as we know it, if any such referendum goes against Brussels, as most that have been held have done.

The EU survived Brexit, but there is a lot of doubt as to whether it could also survive a defection by Italy.

During a speech on Tuesday, George Soros soberly assessed the current state of affairs in Europe.  According to Bloomberg, at one point he stated that “we may be heading for another major financial crisis.”

It is unusual for Soros to have such a gloomy tone.  He really seemed to quite pessimistic about Europe’s future, and he even went as far to say that “everything that could go wrong has gone wrong”

The stark warning from the billionaire money manager comes as Italian bond yields have jumped to multi-year highs and major emerging economies including Turkey and Argentina are struggling to contain the fallout from runaway inflation. Soros, who has been the object of ire by the government of his native Hungary, saved his gloomiest outlook for the EU.

“Everything that could go wrong has gone wrong,” he said, citing the refugee crisis and austerity policies that catapulted populists into power, as well as “territorial disintegration” exemplified by Brexit. “It is no longer a figure of speech to say that Europe is in existential danger; it is the harsh reality,” he said.

I must admit that I agree with his assessment of the situation in Europe.  The EU most definitely is in “existential danger”, and I believe that we are in the beginning stages of the worst financial crisis in modern European history.

So what should be expect to see in the weeks ahead?

Well, here are three things to keep an eye on…

#1 The chaos is likely to continue for Italian financial markets.

#2 The euro is likely to continue to fall relative to the U.S. dollar.

#3 Trouble signs are likely to continue to erupt at European banking giants such as Deutsche Bank.

I have been warning about Italy, the euro and Deutsche Bank for a very long time, but because things didn’t fall apart right away a lot of people thought that the problems had been solved.

But just because something doesn’t happen in the short-term doesn’t mean that it isn’t going to happen.  The long-term trends that are destroying Europe’s financial system took a long time to mature, and we could all see what was happening, but now we have finally reached a major crisis point.

Of course the European elite could try to “extend and pretend” by pulling a few more tricks out of their sleeves, but at some point even they will lose control.  There is only so much that can be done, and those holding the reigns of power in Europe are almost out of ammunition.

Michael Snyder is a nationally syndicated writer, media personality and political activist. He is the author of four books including The Beginning Of The End and Living A Life That Really Matters.

The Stock Market Falls Another 724 Points! What In The World Is Happening On Wall Street?

We just witnessed the 5th largest single day stock market crash in U.S. history.  On Thursday the Dow Jones Industrial Average plunged 724 points, and many believe that this is just the beginning of another huge wave down for stock prices.  After this latest dramatic decline, the Dow is now down 3.1 percent so far in 2018, and overall it is down 9.99 percent from the all-time high in January.  A 10 percent decline is officially considered to be “correction” territory, and that means that we are just about there.

So why are stock prices falling so much?  Well, USA Today is blaming the potential for a trade war with China, the latest Facebook scandal and “the impact of rising interest rates on the economy”…

U.S. stocks sold off sharply Thursday, with the Dow tumbling more than 700 points amid growing fears of a trade fight between the U.S. and its trading partners after President Trump said he will impose billions of dollars in tariffs on Chinese imports.

The heavy selling on Wall Street was exacerbated by continued weakness in shares of Facebook as well as concerns about the impact of rising interest rates on the economy.

Of course the possibility of a trade war between the two largest economies on the planet is certainly the greatest concern that the markets are grappling with at the moment.  According to Ian Winer, any sign of retaliation by China “will really spook people”…

“A global trade war, whether it’s real or perceived, is what’s weighing on the market,” said Ian Winer, head of equities at Wedbush Securities. “There’s this huge uncertainty now. If China decides to get tough on agriculture or anything else, that will really spook people.”

Trump announced tariffs on about $50 billion worth of Chinese imports on Thursday afternoon. It’s not clear which products will be hit, but the action is aimed at curbing China’s troubling theft of US intellectual property.

And we can be quite sure that China will retaliate.

In fact, before the end of the day on Thursday the Chinese embassy boldly declared that China will “fight to the end”

The Chinese embassy released a statement late Thursday saying China “would fight to the end..with all necessary measures.”

What people need to understand is that China has been taking advantage of us for decades.

For example, many U.S. vehicles cost three times as much in China because of all the tariffs that China slaps on them.  But we have been allowing China to flood our shores with giant mountains of super cheap goods with no tariffs at all.

This is why we have been buying far more from China than they have been buying from us.  It has been an unfair playing field.  As a result of our massive trade deficit with China, they have been systematically getting wealthier and we have been getting poorer.

Since China joined the WTO in 2001, we have lost more than 70,000 manufacturing facilities and millions of good paying jobs.  We have to beg China to lend us back a lot of the money that we send to them, and as a result the Chinese now own more than a trillion dollars of our national debt.

So we simply cannot afford to continue to allow China to take advantage of us, but if we start standing up to them it is inevitable that they will strike back. Here are just a few of the things that they could do

1. Impose higher tariffs on all US exports to China

2. Restrict market access for US firms in China

3. Provide preferential treatment to US competitors

4. Restrict US travels by Chinese nationals

5. Sell US treasuries and buy other government bonds

But what is the alternative?

Should we just continue to allow China to walk all over us?

Hopefully we can negotiate with China without causing a horrible trade war, because without a doubt trade wars are not good for the global economy

Trade wars are bad for the global economy, as they cause prices that consumers and businesses pay for goods and services to rise. A rise in inflationary pressures could prompt the U.S. central bank to speed up its pace of interest rate hikes, which could slow economic growth. Trade skirmishes can also hurt U.S. exports and corporate earnings.

And in the short-term, any news about a potential trade war will continue to rattle the financial markets.  At this point more than half of the companies on the S&P 500 are already in “correction territory”, and dozens of companies are already down at least 20 percent from their one year highs…

The U.S. stock market is under pressure once again, with more than half the S&P 500 falling into correction territory.

More than 275 components in the broad index were down at least 10 percent from their 52-week highs as of 11:04 a.m. ET. Of those companies, 84 were in bear-market territory, or down at least 20 percent from their one-year high.

As most of you already know, my race for Congress is extremely close and voting day is on May 15th.  If you would like to send someone to Washington that understands the long-term economic and financial challenges that we are facing, I would very much encourage you to get involved.  If you would like to make a financial contribution, there are several ways that you can do that…

Donate By Credit Card Online: https://secure.anedot.com/michaelsnyderforcongress/donate

Donate By Paypal: https://donorbox.org/michael-snyder-for-congress

Donate By Check: Make your check out to “Michael Snyder For Congress” and send it to the following address…

Michael Snyder For Congress
PO Box 1136
Bonners Ferry, ID 83805

We have already seen more financial shaking in 2018 than we have during any year since the great financial crisis of 2008.

Hopefully things will settle down in the days ahead, but I wouldn’t count on it.  Our long-term economic and financial problems are really starting to catch up with us, and Donald Trump is trying to navigate our ship through some very rough waters.

As always, let us hope for the best, but let us also get prepared for the worst.

Michael Snyder is a pro-Trump candidate for Congress in Idaho’s First Congressional District.  If you would like to help him win on May 15th, you can donate online, by Paypal or by sending a check made out to “Michael Snyder for Congress” to P.O. Box 1136 – Bonners Ferry, ID 83805.  To learn more, please visit MichaelSnyderForCongress.com.

The Dow Jones Industrial Average Falls Another 420 Points As Investors Panic About A Potential Trade War

Many had been hoping that the financial shaking on Wall Street that we witnessed in February would subside in March, but so far that is definitely not the case.  On Thursday, the Dow fell another 420 points as investors fretted about the potential for a trade war.  Over the past month, we have seen many days when stock prices have been way down and other days when stock prices have been way up.  This is precisely the sort of wild volatility that we would expect to see if a major financial crisis was brewing, and the truth is that our financial system is far more vulnerable today than it was back in 2008.

Many Americans have assumed that the U.S. economy must be in great shape since the stock market has just kept going up for the past several years.  But the reality of the matter is that stock prices are no longer connected to economic reality whatsoever.  The U.S. economy has not grown by 3 percent or more in 12 years, but stock prices have been shooting into the stratosphere thanks to relentless central bank intervention.

But what goes up must eventually come down, and on Thursday we witnessed another stunning decline

The Dow Jones industrial average closed 420.22 points lower at 24,608.98 after rising more than 150 points earlier in the day. The 30-stock index fell as much as 586 points.

The S&P 500 declined 1.4 percent to end at 2,677.67 — erasing its year-to-date gains — with industrials as the worst-performing sector. It also briefly broke below its 100-day moving average, a key technical level. The Nasdaq composite fell 1.3 percent to 7,180.56 and dipped below its 50-day moving average.

So why did this happen?

Well, the mainstream media is placing the blame for Thursday’s decline on Trump’s new tariffs

President Trump said Thursday he will impose heavy tariffs on imported steel and aluminum that could increase American jobs in those sectors but also raise prices.

The actions could hurt a number of industries including automakers and suppliers, boat and plane manufacturers and even beer companies.

There’s also concern the move could trigger a “trade war” in which countries would retaliate by imposing tariffs, or other measures, in response.

Yes, there will be some adjustments in the short-term, but Trump is quite correct to impose these sorts of tariffs on nations that are taking advantage of us.

For decades we have allowed China and other major exporting countries to greatly take advantage of us, and as a result we have lost more than 70,000 manufacturing facilities and millions of good paying jobs.

Of course China and other countries that have been taking advantage of us may try to strike back after being hit by these new tariffs, and many fear that this could result in a trade war.  The following comes from CNBC

“One of the largest fears we have is we’ve got tariffs. We could have trade wars, and it could blow up NAFTA negotiations, and nobody wins a trade war,” said Art Hogan, chief market strategist at B. Riley FBR.

We are always going to need to trade with the rest of the world, but we need trade agreements that are fair.

In the end, we simply cannot sacrifice American companies and American middle class jobs just to make the rest of the world happy with us.  I fully support President Trump’s America First agenda, and when I go to Washington I am going to work very hard to help President Trump bring jobs back to this country.

Michael Snyder is a pro-Trump candidate for Congress in Idaho’s First Congressional District.  If you would like to help him win on May 15th, you can donate online, by Paypal or by sending a check made out to “Michael Snyder for Congress” to P.O. Box 1136 – Bonners Ferry, ID 83805.  To learn more, please visit MichaelSnyderForCongress.com.

The Dow Falls 1,032 Points! Has The Financial Crisis Of 2018 Officially Arrived?

We haven’t seen this kind of a bloodbath on Wall Street since the great financial crisis of 2008.  Prior to this week, the largest single day decline for the Dow Jones industrial average that we had ever seen was 777 points.  That record was absolutely shattered on Monday when the Dow fell 1,175 points, and on Thursday the Dow dropped another 1,032 points.  This was the third decline greater than 500 points within the last five trading days, and the Dow is poised to post its worst week since the dark days of October 2008.  So is this just a “correction”, or has the financial crisis of 2018 officially arrived?

At this point, many of the experts are pointing to the bond market as the primary reason why stock prices are crashing.  The following comes from CNBC

There’s a not-so-quiet rebellion going on in the bond market, and it threatens to take 10-year yields above 3 percent much faster than expected just a few weeks ago.

As a result, the bumpy ride for stocks could continue for a while.

And without a doubt, analysts such as Jeff Gundlach clearly warned that there would be big trouble for stocks as bond yields rose…

Gundlach had correctly predicted that if the 10-year U.S. Treasury note yield went above 2.63 percent, U.S. stock investors would be spooked.

“Clearly, the market gets shaky when the 10-year hits 2.85 percent,” Gundlach said. “Just look at this week, and today. Makes one consider what could be coming if 10s push over 3 and 30s (30-year Treasury bond) over 3.22 percent.”

The 10-year yield is currently trading around 2.83 percent. Gundlach said it is “hard to love bonds at even a 3 percent” yield. “Rising interest rates are a problem and the U.S. is in debt and there is massive bond supply,” Gundlach said.

Moving forward, it will be important to keep a close eye on bond yields.  Every time they start going back up, we are likely to see stock prices go down

“We’re in a vicious cycle here. If the yields go up, you have to sell stocks. If you sell stocks, and they crash, yields come back down,” said Art Hogan, chief market strategist at B. Riley FBR.

The bond market’s struggle to price in higher interest rates has been kneecapped each time the stock market reacts and sells off. Strategists expect the two markets to ultimately find an equilibrium but not without more sharp swings.

This is one of the reasons why the budget deal going through Congress right now is such a bad idea.  Hundreds of billions of dollars of additional spending on top of what we are already doing is going to push up bond yields, and that is just going to make the pressure on Wall Street even worse.

Of course the folks over at the Federal Reserve could intervene, but they don’t seem inclined to do that at this point.  Late last year the Fed finally removed artificial life support from the financial system, and at first everything seemed to be going well.  But now a new crisis is brewing, and we shall see if the Fed still remains determined to keep raising rates.  The following comes from Peter Schiff

The Fed were dragging their feet in raising rates while Obama was president.  They talked about raising rates but at the end of the day, they barely moved them up. The pace of hikes has increased since Trump was elected, but part of the reason for that…I mean, the media is not talking down the economy; if anything they’re overhyping the economy.  Everybody’s talking about how strong the economy is, how everything is great. Everybody is taking credit for this great economy. The Fed wants to take credit for it, Trump wants to take credit for it, so if everybody wants to talk about how great the economy is, the Fed doesn’t have any excuse if it doesn’t raise rates…in order to keep up the pretense that the economy is as strong as everybody thinks, the Fed is in this box where it has to raise rates.

But they [the Fed] can’t tell the truth that it’s really a bubble, and if we raise rates, we’re gonna prick it, so they’re kinda in this bind.  And they are still telegraphing that they’re gonna raise rates three or four times this year.  And that is the problem.

It has been my contention for a very long time that the greatest financial bubble in human history would not be able to continue without artificial support from the Fed and other global central banks.

Once the Fed finally ended their artificial support for the markets late last year, I anticipated that there would be trouble, but stock prices continued to rise through the holiday season.

But now reality is setting in, and investors are rushing like mad for the exits.  I really like how Brandon Smith described the current state of affairs in his recent article…

After I predicted the election of Donald Trump, I also predicted that central banks would begin pulling the plug on life support for equities markets. This did in fact take place with the Fed’s continued program of interest rate increases and the reduction of their balance sheet, which effectively strangles the flow of cheap credit to banking and corporate institutions that fueled stock buybacks for years. Without this constant and ever expansionary easy fiat, there is nothing left to act as a crutch for stocks except perhaps blind faith. And blind faith in the economy always ends up being smacked down by the ugly realities of mathematics.

Without artificial support, gravity will try to pull stock valuations back to their long-term averages.  That would mean a decline for the Dow of at least 10,000 more points, but major financial institutions are so highly leveraged and Wall Street has become such a giant casino that our system literally cannot handle that sort of a decline.

The only way that the game can continue is for the Fed and other global central banks to intervene and prop up the absurd financial bubble that they originally created.

Absent that, this crisis is likely to go from bad to worse, and we may soon find ourselves facing a financial panic unlike anything that we have ever seen before.

Michael Snyder is a pro-Trump candidate for Congress in Idaho’s First Congressional District, and you can learn how you can get involved in the campaign on his official website. His new book entitled “Living A Life That Really Matters” is available in paperback and for the Kindle on Amazon.com.

Just A Coincidence?: The Dow Goes From Being 567 Points Down To 567 Points Up At The Closing Bell

Seriously?  We were expecting that Tuesday would be an unusual day on Wall Street, and that was definitely the case.  At the low point, the Dow Jones industrial average was down 567 points, but at the closing bell it was up 567 points.  That is a swing of more than 1000 points, but what is more surprising is the exact symmetry of those numbers.  Is this just some sort of bizarre coincidence?

At the opening bell, stock prices collapsed and many were concerned that we were heading for another really bad day for investors.  According to CNBC, the Dow was down 567 points at the lowest point…

The Dow Jones industrial average opened with a big whoosh lower, then rallied all the way back. As of 3:41 p.m. ET, the Dow is 600 points higher and trading at a new session high. At its session low it was down by 567 points.

But then momentum shifted and the Dow soared.  By the end of the Day, the Dow Jones industrial average was up 567 points.  The following comes from CNN

The Dow plunged 567 points at the open on Tuesday and briefly sank into correction territory — a drop of 10% from its record high. But those losses quickly vanished, and the index ended the day up 567.

It was the Dow’s biggest point gain since August 2015 and the fourth-largest in history. The percentage gain of 2.3% is the biggest since January 2016.

It is not unusual to see market swings of this magnitude during times of high volatility.  Even during times of panic, at some point the sellers get exhausted and investors looking for buying opportunities come surging in.  On Tuesday, this shift in momentum came almost immediately after the opening

“I thought we were going to see the bottom within five minutes of when we opened. I think that’s basically what we’re seeing,” said Ed Keon, portfolio manager at QMA, the quantitative and dynamic asset allocation business of PGIM. “At these levels, stocks represent pretty good value and we’re adding to equity exposure.” Keon said it’s too early to call a bottom but he expects that the worse is over.

But just because the Dow was up more than 500 points today does not mean that the crisis is over.

It is important to remember that there are wild swings both ways during any market crisis.  For example, 9 of the 20 best days in stock market history were right in the middle of the financial crisis of 2008.  So if a new financial crisis is indeed brewing, we would certainly expect to see days when the Dow rises dramatically.

Markets tend to do well when things are calm, and they tend to go down when things get choppy.  So the fact that there was such volatility on Wall Street today is not a good sign.

Hopefully things will settle down, because the markets will not be able to handle too much more shaking.  There is so much leverage on Wall Street today, and as Carl Icahn recently told CNBC, one of these days all of this leverage is “going to blow up the market”…

Billionaire Carl Icahn told CNBC on Tuesday there are too many exotic, leveraged products for investors to trade, and one day these securities are going to blow up the market.

The market is a “casino on steroids” with all these exchange-traded funds and exchange-traded notes, he said.

These funds, especially the leveraged ones, are the “fault lines” that will eventually lead to an earthquake on Wall Street, he said. “These are just the beginnings of a rumbling.”

Wednesday will be a key day.  If the markets are nice and calm, that will be a really good sign.

But if we see tremendous movement in one direction or the other, that could indicate that more shaking is on the way.

In any event, the absurdly inflated stock prices of today are simply not sustainable.  Stock valuations always return to their long-term averages eventually, and that will be true in this case as well.

What goes up must come down, and we have certainly witnessed this with Bitcoin and other cryptocurrencies lately.  As far as stocks are concerned, the best that we can hope for in the long-term is a soft landing, but history tells us that is usually not how giant financial bubbles come to an end.

Michael Snyder is a pro-Trump candidate for Congress in Idaho’s First Congressional District, and you can learn how you can get involved in the campaign on his official website. His new book entitled “Living A Life That Really Matters” is available in paperback and for the Kindle on Amazon.com.