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Stocks Began Falling Right At This Time Of The Year Just Prior To The Last Financial Crisis

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Stock Market Crash Bear - Public DomainHave you heard of the saying “sell in May and go away”?  Traditionally, the period from May through October has been a time of weakness for stocks.  In fact, on average stocks hit their lowest point of the year on October 27th.  And most people don’t remember this, but the Dow Jones Industrial Average actually began plunging right at this time of the year just prior to the financial crisis of 2008.  Most people do remember the huge stock crash that happened in the fall of that year, but the market actually started to slide in May.  Throughout the first four and a half months of 2008, stocks moved up and down in a fairly narrow range, and the Dow closed at a short-term peak of 13,028.16 on May 19th.  From there it was all downhill for the rest of the year.  So will a similar thing happen in 2015 as we approach the next great financial crisis?  Since March 20th, the Dow Jones Transportation Average has already fallen by almost 800 points.  So will the Dow Jones Industrial Average soon follow?  Well, only time will tell, but the Dow was down 190 points on Tuesday.  Signs of trouble are popping up all over the place, and the “smart money” is getting out while the getting is good.

The chart that I have posted below shows how the Dow Jones Industrial Average performed during 2008.  As you can see, stocks began plummeting long before the financial crisis in the fall.  From May 19th through early July, the Dow fell by about 2,000 points.  Should we expect to see a similar pattern this summer?…

Dow Jones Industrial Average 2008

Like I stated earlier in this article, red flags and warning signs are starting to pop up all over the place.  The following are just a few of the trouble signs that we have seen this week…

-On Tuesday, the VIX (a closely watched measure of market volatility) jumped by the highest percentage that we have seen so far in 2015.  As I have explained so often before, markets tend to go up in calm markets and they tend to go down in volatile markets.  So the fact that volatility is on the rise is not a good sign.

-The U.S. dollar index is surging again.  In fact, we just witnessed the largest seven day rise in the U.S. dollar index since the collapse of Lehman Brothers.  This is another indication that big trouble is ahead.  For much more on this, please see my previous article entitled “Guess What Happened The Last Time The U.S. Dollar Skyrocketed In Value Like This?…

-Thanks to the ongoing Greek crisis, the euro is falling again.  It just hit a fresh one-month low, and if I am right it is going to go quite a bit lower as the European financial crisis intensifies.

-In the U.S., orders for durable goods have fallen year over year for four months in a row.  When orders for durable goods start going negative for a few months, it is usually a signal that we are entering a recession.

-After rebounding a little bit, the price of crude oil is falling again.  It just hit a new one-month low, and the number of oil rigs in operation has declined for 24 weeks in a row.  Once again, this is highly reminiscent of what happened back in 2008.

-Unfortunately, it isn’t just oil that is declining.  A whole host of other commodity prices are going down right now as well.  This happened just prior to the financial crisis of 2008, and it is a sign that we are heading into a deflationary economic slowdown.

The reason why I talk so much about what happened the last time around is that we should be able to learn from it.

Looking back, there were so many warning signs leading up to the financial crisis of 2008 but most people totally missed them.  Now, so many of those exact same signs are appearing once again, but they are being ignored.

Only this time the global financial system is in far worse shape than it was back in 2008.  Debt levels all over the planet have absolutely exploded over the past seven years, and the debt to GDP ratio for the entire world is now up to a mind blowing 286 percent.  In the United States, our national debt has approximately doubled since just prior to the last recession, and at this point it is mathematically impossible to pay it off.  We are in the midst of the greatest stock market bubble of all time, the greatest bond bubble of all time (76 trillion dollars) and the greatest derivatives bubble of all time.  Anyone that cannot see the trouble that is approaching is willingly blind.

In the western world, we have extremely short attention spans and we suffer deeply from something called “normalcy bias”.  The following is how “normalcy bias” is defined by Wikipedia

The normalcy bias, or normality bias, is a mental state people enter when facing a disaster. It causes people to underestimate both the possibility of a disaster and its possible effects. This may result in situations where people fail to adequately prepare for a disaster, and on a larger scale, the failure of governments to include the populace in its disaster preparations.

The assumption that is made in the case of the normalcy bias is that since a disaster never has occurred then it never will occur. It can result in the inability of people to cope with a disaster once it occurs. People with a normalcy bias have difficulties reacting to something they have not experienced before. People also tend to interpret warnings in the most optimistic way possible, seizing on any ambiguities to infer a less serious situation.

That is such a perfect description of what is happening in the western world today.  But just because things have always been a certain way in our past does not mean that they will continue to be that way in the future.  A great economic storm is rapidly approaching, and the signs of the times are all around us.

Hopefully more people will start listening to the warnings, because we have almost run out of time to prepare.

  • Genada

    The market is throwing a fit because rates may go but the Fed would have to be insane to attempt it. Everything is about the central banks now. There is no free markets, just manipulation by the central banks.

    The market movement of today was interesting but the story that really highlights the insanity of our times is Charter buying Time Warner. Which is yet one more thing that couldn’t happen in a normal interest rate environment.

  • selaretus

    Byyyack, buucck, buck, byaaaaaaaaack…its….buck buck buck byaaaaaaack…….different this time. Byuck buck byaaaaaaaack!!!

    • Guest

      Could you please provide an English translation of your comment? It makes no sense to me.

      • alan

        Check his box for an egg!

    • Mike Smithy

      Just say “No” to crack.

      • T.

        LOL Smithy.

  • WhoKnows

    Last call for alcohol….One dance left….hangover to soon follow.

  • df NJ

    RE: “Now, so many of those exact same signs are appearing once again, but they are being ignored.”

    I don’t think the sub-prime mortgage market is as frothy as last time. Most people have refinanced to fixed rate mortgages so a rapid rise in rates will not cause a huge disruption. What signs are you seeing? At least with the housing market in New Jersey it doesn’t seem as crazy. My friend who does house closings says business has been steady. My mail order business sales are okay. I just got a nice job offer. I don’t know. For me it doesn’t feel like 2008. A lot of foreclosures have already been cycled. If only wage growth was a little stronger. And the percentage of people actually employed is way too low. But our government doesn’t care about workers anymore. Government by the rich, for the rich, screw the worker.

  • Paul

    Oh, say can you see by the dawn’s early light
    What so sadly we hailed at the economy’s last gleaming!
    Whose battered stripes and dim stars thru the middle class plight,
    O’er the congress we watched were so callously scheming!
    And the American people’s blank stare, the derivative bubbles bursting in air,
    Gave proof through the night that America’s debt crisis was still there.
    Oh, say does that star-spangled banner yet wave
    O’er the land of the fleeced and the home of the debt slave

    • XSANDIEGOCA

      Very well stated.

    • flautistmaniac

      America, America, God mend thine every flaw!

  • corey

    Rates will stay low for a very long time ahead. Companies will continue to borrow nearly free money to buy back more stocks, which will push the stock market up. Feds around the world are buying stocks. It’s all rigged and stocks will never collapse again

    • Joel

      Perfect example of Normalcy Bias…

      • Wise Man

        lol

  • Claudia

    So the signs appear to be pretty clear. What can the average Joe/Jane do to survive? I ask strictly from a financial point of view.

    • CRAT

      Same question I often ask; have never seen a satisfactory answer. Unless you are uber rich ( gold bars, foreign property, land, productive business, cash, etc). Well, am not uber rich, most advice has major downside and uncertainties. Look at the average Joe/Jane in Cyprus/Greece/Argentina, etc. Having foreign accounts in stable currencies was huge help-but when the dollar/euro/yen/yuan go kaput, what is stable currency? Even converting cash to gold has many downsides.

      • Genada

        You want advice anyone can follow and that doesn’t cost much other then time? Start a garden. Even if you have to get a few planters and do it in a small way it’s something. Buy in bulk and store some food in case of a emergency.

        The best thing one can do is take stock of one’s life and see what you can change. Do you enjoy high priced coffee? Cut back on it and save the money. Really put it away and do not spend it. There’s cutbacks almost everyone can do that can help them save money.

        People talk about gold and gold makes the least sense in a crisis. Why? It’s too expansive, your not going to want to trade gold for anything. Silver on the other hand, it’s pretty cheap and with just small cut backs to your spending you can afford a ounce per paycheck. Plus if all goes to hell, silver will be traded more then gold due to it being worth less.

        • With Fortitude

          People with gold and silver will probably be giving it to the people who are growing and raising food. Who knows where water may be in this exchange .

    • AzDi

      I have put a lot of money in food storage. I live in a rural area and have backup for just about everything. Food storage is better than gold as far as I am concerned.

  • Horiboyable .

    People are so funny. When I tell them of the danger ahead and there is a chance that they will lose all of their pensions, they either stick their head in the sand or change the subject. The reason for this is that they want to keep the status quo and with being confronted with this information it makes them think that they will have to take action to avoid it.
    I did the same thing for a while but when things started happening at my job I used it as an excuse to get motivated and strengthen my position. I down sized, well moved to a cheaper area and got rid of all my debt. I have no debt and have cash in hand. Its a hard thing to do, we lived in that house for 12 years and had a good network of friends but it had to be done. We are ready.

    • jakartaman

      They do this because they feel helpless to do anything

    • ray

      Some have gotten angry with me when I bring up our troubles, causes and reasons. I like to challenge people with questions and comparabilities to other versions of the economy, how it used to be vs now which are gone. People generally do not like to hear the truth when it hurts.

    • Nemnor

      In addition to people who “…stick their head in the sand or change the subject…”, many (even in this blog) who are aware of the major issues facing the USA (and the World), MISTAKENLY view the “trees” (i.e. “bad” government, the federal reserve, the banks, etc.) as the main reason/cause for the issues, and fail to see the “forest” (i.e. the wider economic system – which is now decadent) as the main root cause of the issues facing the USA (and the World).

      Decisions/actions of governments, central banks, businesses, “greedy” investors, etc., may indeed aggravate an already decadent economic system, but the decaying economic system itself, remains the main root cause of the major issues facing the USA (and the World).

      The world-wide economic system became decadent – due to reaching a stage of general over-production, and is now NOT able to generate long-term recovery by economic means alone. Hence, the reason places like Japan and Europe are (eventually) “doomed” – with virtually every corner of the Globe to follow.

      Consequently, any real solution must involve a fundamental change away from the current decadent economic system, to a sustainable alternative system that addresses the abundant needs of every “rational” individual (and not just of “the 1%”).

      There are those who think that governments and central banks simply have to stop “meddling”/”manipulating” the market/system, and then we can again have a “free market” system that will fix itself. WRONG… They are not aware that a stage of general over-production makes it impossible for the system to generate long-term recovery by economic means alone, and that the ONLY way the system can “survive” (for a while), at this decadent stage, is through the massive destruction of Capital (i.e. WW-III ?), and then have a “reconstruction boom” (just like the world experienced with WW-I and WW-II)

      • Yooper

        Capitalism is dying, that game has taken the world as far as it can go and is about over. However, consumerism is still the backbone to any economy. I think we’re about to see the alternative sustainable world wide system soon.

        The massive destruction of capital can happen without a shot fired and the massive transition to a more sustainable, equal world can begin. But not one before the other.

        Standardization will replace competition on many levels.

        • flautistmaniac

          Consumerism is not the backbone of the economy. That is Keynesian economics. Thrift, integrity, and honesty are the backbone of the economy. We are failing because we are dishonest in our dealings with our fellows. The only thing that can fix this is humble and honest hard work and sacrifice, starting with oneself and going from there.

          • Rebel

            I agree with you.

        • 35wormhole

          so you do want communism

          • Yooper

            It really doesn’t matter what I want, does it? I think the new economy that is coming will be a high bred never seen before, it will likely have parts of capitalism, socialism and yes communism, at least on the onset. I suspect whatever order comes it’ll evolve as our environment changes.

    • ian

      Not sticking their head in the sand at all….just tired of hearing these ‘sky is falling’ stories day in and day out.

  • Ellie Dempster

    The next Shemitah is on 9-13-15, and the last one was on 9-29-08, when the stock market went down 777 points, this was a sign from God and a warning, and now its coming again 7 years later.
    I urge you all to read this book and see what is coming for the next Shemitah in Sept 2015!!
    Look what happened in the Shemitah on 9-17-01 the stock market closed for a week after 9-11-01, and the day it opened it was the official Shemitah.
    This is God’s warning to America, you must read this book and check it out on youtube, Jonathan Cahn explains in a short video clip what he thinks might happen on 9-13-15 and how to prepare.
    Jonathan Cahn, who stunned millions across America and the world with the mysteries revealed in his New York Times best seller The Harbinger, now uncovers and reveals a new realm of astonishing mysteries so big they lie behind everything from world wars, the rise and fall of nations, economic recession and financial collapse, and your future. Discover the never-before revealed mystery of the towers, the key of cataclysms, the mystery of sevens, and much, much more. The Mystery of the Shemitah will amaze, stun, forewarn, and prepare you for what lies ahead…

    • LOL

      Watched that weird video and you will get a weird phone call, some girl tells you “7 Days” in a creepy voice, you got money through the mail at the end of those 7 Days.

      Srs tho, it just the banksters doing this, it is planned. No one said that Stalin´s 5 years plans were warnings, right?

    • Gay Veteran

      bilge

      • Free_man

        miscreant

        • Gay Veteran

          moron

          • Free_man

            Addlepate

          • Gay Veteran

            awwwwwwwwwww, it’s so cute when a troll learns a new word

          • Free_man

            Cur

          • Gay Veteran

            awwwwwwwwww, troll learned another word

          • Free_man

            Bug Chaser

    • CharlesH

      I read the Harbinger – fascinating information. I just started reading The mystery of the Shemitah.

    • GSOB

      And not a word about Christ. That’s amazing….

  • Heinrich van Rooi

    On Disqus in April I have said that this bubble is going to burst in the 2nd half of May. well it Happened. I have also said that the Dow will make its High in May well that too had happened. I have also predicted that GDP wILL be lowered that has also happened….The market can still trade a bit higher but the damages has been done….

    • Mike Smithy

      I predict that stawks will trade sideways throughout the summer and then look out below in autumn.

    • none

      I predict that the terrorists would like to wait until after the elections. Then nail the country with attacks after OBAMA leaves office, andhe has done more damage..
      I do believe that the Federal land’s have been used as collateral to keep it going.

      • CharlesH

        I don’t agree with you and here’s why. America’s enemies know Obama is the weakest link in our security – he is their last best hope before the elections, where this time around a Republican will probably be elected and they don’t want to have to deal with that. Anything bad happening will probably happen on Obama’s watch – it’s not because they respect him – they mock him and they know he’s a weak leader.

  • Heinrich van Rooi

    What I have wrote in April,,, Under: How far Can Irrational Optimism Take the US Economy and ALSO : 11 Signs that we are Entering the Next face of the Global Economic Crisis.

  • chilller

    Yes,stocks did begin falling right at this time of the year just prior to the last financial crisis…but they didn’t have a massive, invasive military exercise planned throughout the nation last time. Are they telegraphing us the outcome this time or is it just a coincidence?

  • Rufus T Firefly

    6 years of predicting disaster, which has not happened, and 6 years of stock market gains. I will get worried when the preparation H brigade starts saying the market will go up.

  • XSANDIEGOCA

    Nothing will happen until Hillary is safe in the White House.

    • df NJ

      I guarantee you if that’s true she will be a ruthless tyrant.

      • XSANDIEGOCA

        You are absolutely correct. She will make Obama look tame.

        • alan

          Agree! She is running unopposed.

  • AZFan

    Im curious how do all of you invest your money when you say the stock market is going to collapse. I started buying slv and gld but what else? Thanks

    • df NJ

      Too many knives to catch in both directions.

    • Genada

      I doubt the stock market will collapse but think the economy will collapse. So let me just say that up front.

      I invest in stock that has a proven track record of paying a dividend. I do not worry about the price of the stock as far as it’s movements go. Up down, I care not. I only care that it pays a dividend. Companies with a proven track record and that have been able to keep paying the dividend with good or bad times. I just want the income stream, which can of course go down but it still remains even in bad times.

      I also take a segment of my money and invest in stocks of companies that I feel are rather beat down in sectors that are beat down that I feel can and will make a comeback. This is money I am fully willingly to lose, it’s nothing more then gambling. So right now I have money invested in several junior miners that if the price of gold/silver were to increase they would spike nicely.

      There’s two schools of thought on this blog I tend to notice. Those that say it’s all going to end as in prepare for end times and those that see there’s major problems but expect it to be dealt with in a manner that leaves society still working.

      If you think it’s the end, then guns, ammo, silver, gold, food and water.

      If you think that it’s going to be bad but it’s not the end. Then invest but be prepared for loses, never risk more then you can lose. Look for places you see value and be prepared to need to sit on your investment for the long term before seeing any return on your investment.

  • AZFan

    Obamas main goal is to ruin the country.

    • df NJ

      I think Obama’s main goal is more self serving than anything else. The Federal Reserve has much more power than Obama. Obama is pretty powerless actually.

      • AZFan

        But obama picks the fed leaders

        • df NJ

          lol

        • alan

          I am sure he is “advised” on who to pick.

  • Priszilla

    The financial markets work against engineering principles.
    In engineering, if it gets hot you turn the thermostat down, if it gets cold you start heating.

    In the stock market when one sells everybody sells. If one buys everybody wants to buy.

    If bankers would design cars you’d accelerate when there is an obstacle in front of you.

    • df NJ

      And no one ever games the system and the cameras in Atlantic City are only watching the customers.

    • JasonD

      I have to say I agree. The financial geniuses, AKA banksters and “MBA’s” have set up the financial system to be full of positive feedback loops. Have bad credit? Well, then we need to charge you more interest for your loan so that there is an even greater chance that you will default! Stock market drops some? This will trigger margin calls and increase the speed of decline!

    • ray

      They haven’t done that but one problem that is getting very bad is Banks are creating a bubble with subprime auto loans mostly built off pension funds. That bubble will be popping soon to.

  • Joss Smith

    It is Different this time . . . . because everything and every market is being manipulated !

    • alan

      Exactly. I don’t pay attention to any economic news. Nothing can be trusted as factual.

  • df NJ

    It’s being in a car accident. Time is slowing down.

  • RedPillPlease

    I can only wonder, all those voters who ridiculed Ron Paul in his last 2 or 3 presidential campaigns, having been duped by the media pundits … AGAIN, if they’re pondering the idea that if only they’d listened to their common sense instead of the boob tube, this financial straw camel would be off the shelf!

  • indigodream

    So many people want to know where to invest. Its really quite simple. 1- land that gives you dividends (food, water and shelter). 2- supplies (stuff that people need in the event of a crash, food shortage or hyperinflation). 3- protection 4- precious metals in small in denominations. Now you are ready for anything that may occur.

  • Indigodream

    BTW, when I said “protection” I meant weapons for defense, just in case your mind went somewhere else with it.

  • DJohn1

    If the market going down is deliberate, then the Fed will accelerate the down market.
    This means 12 percent interest instead of zero.
    It means a great deal of cash coming into the country to take advantage of the higher interest rates on money loaning.
    It also means a lot of retail stores going right out of business.
    Only the ones that have clear profits will be left.
    It means higher mortgage payments on anything that is adjustable.
    Same with cars.
    All of this is crazy. Right?
    Yet that is exactly what I expect to happen.

  • alan

    This is like reading palms, who knows what they will do to the markets from one day to the next. Does it even matter? They surely won’t let it drop far. All numbers are fudged so really it doesn’t make a difference.

  • Dear Troll making useless comments like : “6 year of prediction and still nothing happen”, “Always predicting doom and gloom and yet the stock are high”, etc, etc.

    Manifestly, like many troll reading this blog you still don’t get it.

    FIRST- The point is not to be right in your prediction, but to warn people of the underlying problem and prepare accordingly.It would be nuts to hope that those things have to happen, but if they happen the warning would have been given.

    SECONDLY – Michael NEVER predicted things would happen on this or that date. He gather information, analyze it and give a synthesis and an opinion of it for us to read – with the potential effect and an eventual time table. In short, he does precisely the job a real Reporter is supposed to be doing in the “News Media”.

    Up to us to act or not on what we read. But if you, dear Troll, don’t believe in it, then explain why you are still here reading it? Why do you even take the time to comment the same kind of comments? Is it not because, deep in you, you know something is wrong even if you write the opposite? If you don’t believe in what Michael is talking about – showing charts and facts – why do you even lose your time here? Go ahead, live your life, make money in the Stock Market (it is high), and stop coming on this blog. The time you lose trolling around is so much time you don’t make money (Time is money remember).

  • CharlesH

    Thanks Michael for all your hard work that you put into getting out invaluable information to those of us who want and need it. Seems to me that so many people are just going about business as usual almost like they’re in defiance of something bad happening. Whether it’s normalcy bias or not, I don’t know. It’s definitely not my definition of normal for sure. KEEP UP YOUR OUTSTANDING WORK MICHAEL!

    • GetReal4U2

      Agreed…it’s refreshing that an unbiased source of truth exists, in the liberal media nonsense they call “truth” these days…

  • Free_man

    There’s something missing in this article. Seems like there’s some information missing. Just a feeling, you know…

  • ABELINCOLNABELINCOLN

    +121 today,

  • GetReal4U2

    get ready…September approaches quickly…

  • watchmanonthetower

    Janet has indicated that she would not touch the rates this June. In the Fall, maybe….not now.

    But; what if she suddenly changes her mind? Decides the U3 is just fine and jacks those rates, even a skosh…what adverse economic effect might that have overall?
    Sucker punch? Market shock? Yawns?

    Add a TBA major event (a ‘brief’ EBT shutdown, for example) and we may indeed have a damn hot Summer. Good thing all those Jade Helm assets will be in place. Just in case of a ruckus or a riot…or by the time September gets here: massive civil unrest; worse case.

    We’ve learned that wherever we think the trigger will be; it’ll probably be something else – something we didn’t consider. So we’re compelled to conjecture about major players like Janet in a scenario like this…

    Two cents and all that.
    Cheers.
    ~Watchman

  • Ben

    So far, year to date for the Dow has been plus 1.57%.

  • Ben

    That figure is an absolute lie. Since March 20th, the Dow Jones shifted from 18,127.65 to 18,011.94 as of yesterday. If you can’t get basic chronological figures right that EVERYONE can see and investigate, I absolutely question the integrity of this site as well as your agenda.

  • Ben

    Why would you claim it dropped 800 points, but it clearly didn’t? That is rather disturbing to make up figures so blatantly.

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