Remember This Friday The 13th – Americans Are More Optimistic About The Stock Market Than They Have Ever Been Before

Happy days are here again for the U.S. economy – at least temporarily.  On Friday, U.S. stocks hit another brand new record high.  It seems like we are saying that almost every day lately, and most investors are absolutely thrilled by this seemingly endless surge.  Global stocks are surging too – today world stocks hit a new record high for the 4th consecutive day in a row.  But of course it isn’t just stock prices that are rising.  As the week ended, pretty much everything was up, and we also got some good news about consumer sentiment.  According to the new University of Michigan survey that was just released, U.S. consumers are the most optimistic about the economy that they have been since 2004

The consumer sentiment index, a survey of consumers by The University of Michigan, rose to 101.1 in October, far ahead of the 95 economists polled by Reuters anticipated.

“Consumer sentiment surged in early October, reaching its highest level since the start of 2004,” Richard Curtin, chief economist for the Surveys of Consumers, said in a statement.

And according to that same survey, we have never been more confident that the stock market will continue to go up than we are right now

Americans have never been more confident that that stock market will rally further in the next 12 months…

Of course it kind of makes sense why U.S. consumers would be feeling so good about the markets.  After all, stocks have only seemed to go up and up and up since the end of the last financial crisis.

But as I have written about so frequently in recent months, our financial markets are even more primed for a crash than they were in 2008, and we have received warning after warning that stock valuations are ridiculously inflated and must come crashing down at some point.

Plus, the “real economy” continues to send us some very troubling signals.  The U.S. economy lost jobs last month for the first time in seven years, and we just learned that General Motors is laying off more workers

Starting in mid-November and going through the rest of the year, General Motors will close its Detroit-Hamtramck assembly plant – its only remaining factory in its hometown – and lay off about 1,500 workers, “people familiar with the plan” told the Wall Street Journal. When the plant does resume production, output will be cut by 20%, and 200 people will be out of a job.

Back in 1999, the plant produced over 200,000 Cadillacs and Buicks a year. This year, it might barely produce 80,000 vehicles.

The truth is that we are in the terminal phase of the greatest debt bubble in human history, and all over the planet prominent names in the financial world are warning about what is just around the corner.  For example, German finance minister Wolfgang Schäuble is deeply concerned about what he is seeing

Outgoing German finance minister Wolfgang Schäuble has warned that spiraling levels of global debt and liquidity present a major risk to the world economy.

In an interview with the Financial Times, Schäuble said there was a danger of “new bubbles” forming due to the trillions of dollars that central banks have pumped into markets.

He also warned of risks to stability in the eurozone, particularly those posed by bank balance sheets burdened by the post-crisis legacy of non-performing loans.

And James Rickards is completely convinced “that a financial crisis is certainly coming”…

The bottom line is that a financial crisis is certainly coming. In my latest book, The Road to Ruin, I use 2018 as a target date primarily because the two prior systemic crises, 1998 and 2008, were 10 years apart. I extended the timeline 10 years into the future from the 2008 crisis to maintain the 10-year tempo, and this is how I arrived at 2018.

Yet I make the point in the book that the exact date is unimportant. What is most important is that the crisis is coming and the time to prepare is now. It could happen in 2018, 2019, or it could happen tomorrow. The conditions for collapse are all in place.

It’s simply a matter of the right catalyst and array of factors in the critical state. Likely triggers could include a major bank failure, a failure to deliver physical gold, a war, a natural disaster, a cyber–financial attack, and many other events.

If you look at how stock prices have behaved so far this year, it looks suspiciously just like the bubble that formed in 1987 just before the market crashed.

The conditions for an absolutely historic stock market crash already exist, and they have existed for quite some time.  None of our long-term problems have been solved, and with each passing day this colossal financial bubble just keeps getting bigger and bigger and bigger.

I definitely concur with James Rickards.  A major financial crisis “is certainly coming”, and because of all the irrational optimism that we are witnessing at the moment most Americans will be completely and utterly blindsided by what is ahead.

Michael Snyder is a Republican 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.

12 Critical Events That Are Going To Happen Over A 40 Day Period From August 21st To September 30th

We are about to witness an extremely unusual convergence of events that many believe could represent a major turning point for our nation.  By now you have probably heard that on August 21st a total solar eclipse will move across the entire continental United States for the first time in decades.  In fact, we have not seen a total solar eclipse cross from the west coast to the east coast in 99 years.  And it will be the very first total solar eclipse that is only visible in this country since the United States first became a nation.  Starting with that event, there is going to be a whole lot going on until we reach the end of September.  The following are 12 critical events that are going to happen over a 40 day period from August 21st to September 30th…

August 21 – The “Great American Eclipse” will sweep across portions of Oregon, Idaho, Wyoming, Montana, Nebraska, Iowa, Kansas, Missouri, Illinois, Kentucky, Tennessee, Georgia, North Carolina and South Carolina.  Seven years later, another very unusual total solar eclipse will move across our nation, and when you plot the paths of both eclipses on a map, they form a giant “X” right over the center of the United States.

August 23 – A FEMA exercise known as “EarthEX2017” will simulate “catastrophes such as mega earthquakes, cyber terrorism or high altitude electromagnetic pulse attacks”

An exercise sponsored by FEMA and the U.S. Department of Energy set to take place on August 23 called EarthEX2017 will wargame responses to catastrophes such as mega earthquakes, cyber terrorism or high altitude electromagnetic pulse attacks.

The exercise will simulate a “subcontinent-scale, long duration power outage, with cascading failures of all other infrastructures,” according to the official Earth Ex website.

“Black sky events” are defined as, “Catastrophic occurrences caused by man or nature that bring society to its knees.”

September 1 – This marks the start of FEMA’s annual “National Preparedness Month“.

September 1 – The U.S. State Department’s ban on U.S. citizens traveling into North Korea goes into effect.  Many are concerned that this is yet another sign that we are moving toward war with North Korea.

September 11 – This will be the 16th anniversary of 9/11.

September 20 – Rosh Hashanah begins at sunset.

September 21The UN International Day Of Peace

September 23 – This is the date of what has become known as “the Revelation 12 sign”.  If you are not familiar with this alignment yet, the following is a very brief summary

On September 23rd a unique astronomical alignment of the Sun, Moon, constellation Virgo, constellation Leo, and planets Jupiter, Mars, Mercury, and Venus is going to fulfill this passage from the book of Revelation:

And a great sign appeared in heaven: a woman clothed with the sun, with the moon under her feet, and on her head a crown of twelve stars.  She was pregnant and was crying out in birth pains and the agony of giving birth.

September 24 – Very important national elections will be held in Germany.

September 29 – Yom Kippur begins at sunset, and it concludes on September 30th.  Of course September 30th will be the end of a 40 day period that began back on the day of the Great American Eclipse on August 21st.

September 29 – U.S. Treasury Secretary Steven Mnuchin says that the debt ceiling will be breached on this day if Congress does not raise it by then.

September 30 – If Congress does not pass a budget by the end of this day, there will be a government shutdown just like we witnessed in 2013.

On top of everything else, the month of September is when the Federal Reserve is scheduled to begin unwinding  their 4.5 trillion dollar balance sheet

The other big market force that could ruffle markets is clearly the Fed, which is expected to begin the untested task of unwinding its $4.5 trillion balance sheet in September.

In addition, it is very interesting to note that a large asteroid will come within 4,200 miles of our planet on October 12th…

The asteroid has not been seen since its 2012 discovery, when it sped past Earth at about one-fourth the distance from Earth to the moon. It’s been too distant and too faint to be detected over the last five years. As it starts to approach Earth this summer, large telescopes will be used to detect it and re-establish the asteroid’s precise trajectory.

The asteroid, known as 2012 TC4, could come as close as 4,200 miles to Earth, NASA said. That’s actually fairly close, when you consider that the moon is about 239,000 miles away.

So what does all of this mean?

I don’t know, but I am sure that I will receive even more criticism for putting this list together.  Those of us that monitor global events and warn about where things are headed are often highly criticized.  But in this day and age, we desperately need independent thinkers that are willing to challenge the system.  Way too often people just go with the herd and will believe whatever the mainstream media tells them to think.

Never let someone else do your thinking for you.  Investigate things for yourself and come to your own conclusions.  Learning to think critically is one of the most important skills that you can have, and you will find that it is one of the most common traits among those that are truly “awake” to what is going on in the world.

The truth is out there, and if you diligently seek it you will eventually find it.

Michael Snyder is a Republican 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.

The Dow Closes At A Record High For The 9th Straight Time But Experts Warn That A Stock Market Crash Could Be Imminent

The bigger they come, the harder they fall.  On Monday, the Dow Jones Industrial Average closed at a record high for the ninth straight session.  It has been a remarkable run, but many experts are pointing out that big trouble is brewing under the surface.  As you will see below, 79 components of the S&P 500 have already dropped more than 20 percent below their 52-week highs, and it is mostly just a handful of high flying tech stocks that are still propping up the market at this point.  Over the past several weeks, I have been documenting so many of the prominent voices that are loudly warning about an imminent stock market crash, and in this article you will hear some more of these warnings.  There is no way that stock prices can keep going up like this, and when the inevitable correction does arrive it is going to be exceedingly painful for millions of investors.

When the market is about to turn in a major way, one of the key things to watch is market breadth, and according to Brad Lamensdorf market breadth has now turned “exceedingly negative”

Market breadth, a measure of how many stocks are rising versus the number that are dropping, has turned “exceedingly negative,” according to Brad Lamensdorf, a portfolio manager at Ranger Alternative Management. Lamensdorf writes the Lamensdorf Market Timing Report newsletter and runs the AdvisorShares Ranger Equity Bear ETF HDGE, -0.70% an exchange-traded fund that “shorts” stocks, or bets that they will fall.

“As the indexes continue to produce a series of higher highs, subsurface conditions are painting an entirely different picture,” Lamensdorf wrote in the latest edition of the newsletter.

When Lamensdorf uses the phrase “exceedingly negative”, he is not exaggerating at all.  As I mentioned above, 79 components of the S&P 500 are already in a bear market

According to an analysis of FactSet data, 79 components of the S&P 500 are trading at least 20% below their 52-week high; a bear market is typically defined as a 20% drop from a peak.

Another key measure that I like to keep my eye on is Robert Shiller’s cyclically adjusted price-to-earnings ratio.  At this point, it is roughly at the same level as it was just before the stock market crash of 1929, and the only time it has been higher was during the peak of the dotcom bubble.

This is why so many investors are making extremely large bets that a major correction is imminent.  History tells us that stocks are likely to only go down from here.  And when stocks do start falling, the price action could become quite violent.  In fact, Barry James is comparing this current market to the Yellowstone supervolcano

Warning: A correction in the market is “inevitable” and there are three key factors that could spark chaos on Wall Street, according to James Advantage Fund president Barry James.

The investor likened the market to Yellowstone National Park’s famous supervolcano, which many believe is close to eruption.

Of course not everyone agrees with James.  Michael Wilson of Morgan Stanley insists that everything is just fine and that “there continues to be a level of skepticism that seems out of whack with what is actually happening”.

In the end, we will see how the coming months play out.

Over the past several years, there have been two primary trends that have been relentlessly driving up stock prices.  One of these trends has been an unprecedented level of stock buybacks.  And so far this year, hundreds of billions of dollars worth of stock buybacks have already been announced

Through May, some $390 billion in buybacks have been announced this year, $13 billion more than at this time in 2016, according to figures compiled by Jeffrey Yale Rubin at Birinyi Associates, a stock market research firm.

June 28 was the biggest single buyback announcement day in history. That was when 26 banks disclosed buybacks worth $92.8 billion, largely a response to having just passed the stress tests administered by the Federal Reserve Board. That figure blew past the previous record of $56.4 billion announced on July 20, 2006.

Secondly, central banks have been pumping trillions upon trillions of dollars into the global financial system, and this has perhaps been the biggest reason for the surge in stock prices.  But now central banks are starting to pull back, and that could mean big trouble very soon.  The following comes from Matt King

With asset prices displaying a high degree of correlation with central bank liquidity additions in recent years, that feedback loop makes the economy, upon which both corporate profitability and bank net interest margins depend, more reliant on central banks holding markets together than almost ever before. That delicate balance may well be sustained for the time being. But with central banks beginning to move, however gingerly, towards an exit, is it really worth chasing the last few bp of spread from here?

Throughout our history we have seen financial bubbles come and go, but we never seen to learn from our mistakes.  Right now, Warren Buffett is sitting on nearly 100 billion dollars in cash in anticipation of being able to buy up financial assets for a song after a crash happens, but meanwhile multitudes of ordinary Americans continue to pour vast quantities of money into stocks even at such absurd valuations.

Despite all of the warnings, many will be caught unprepared when the music stops playing.  Just like all of the other financial manias in our history, this one will come to a bitter end too.  The following comes from the New York Times

In the late 1960s the mania was for the “nifty 50” American companies like Disney and McDonald’s, which had been the “go-go” stocks of that decade. In the late 1970s it was for natural resources, from gold to oil. In the late 1980s it was stocks in Japan, and in the late 1990s it was the dot-com boom. Last decade, investors flocked to mortgage-backed securities and big emerging markets from Brazil to Russia. In every case, many partygoers were still in the market when the crash came.

In life, timing is everything, and those that got out of the market in time are going to end up being very happy that they did so.

But those that stay in too long are going to see their “paper wealth” disappear in a blinding flash, and there won’t be any way to get it back once it is gone.

Michael Snyder is a Republican 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.

Remember This Milestone: The Dow Jones Industrial Average Hits 22,000 For The First Time In U.S. History

The Dow hit the 22,000 mark for the first time ever on Wednesday, and investors all over the world greatly celebrated.  And without a doubt this is an exceedingly important moment, because I think that this is a milestone that we will be remembering for a very long time.  So far this year the Dow is up over 11 percent, and it has now tripled in value since hitting a low in March 2009.  It has been quite a ride, and if you would have told me a couple of years ago that the Dow would be hitting 22,000 in August 2017 I probably would have laughed at you.  The central bankers have been able to keep this ridiculous stock market bubble going for longer than most experts dreamed possible, and for that they should be congratulated.  But of course the long-term outlook for our financial markets has not changed one bit.

Every other stock market bubble of this magnitude in our history has ended with a crash, and this current bubble is going to suffer the same fate.

But many in the mainstream media are still encouraging people to jump into the market at this late hour.  For example, the following comes from a USA Today article that was published on Wednesday…

“It’s still not too late to get in,” says Jeff Kleintop, chief global investment strategist at Charles Schwab, based in San Francisco. “The gains are firmly rooted in business fundamentals, not false hopes.”

I honestly don’t know how anyone could say such a thing with a straight face.  We have essentially been in a “no growth economy” for the past decade, and signs of a new economic slowdown are all around us.

But even though price/earnings ratios and price/sales ratios are at some of the highest levels in history, some analysts insist that the stock market still has more room to go up

On the flip side, investors with time to ride out any short-term market storm should not rule out getting in the market now. Economies around the globe are improving and are boosting the profitability of corporations in the U.S. and abroad, says Chris Zaccarelli, chief investment officer at Cornerstone Financial Partners in Charlotte, N.C.

Zaccarelli won’t even rule out Dow 25,000 by the end of 2018.

Personally, I believe that it is far more likely that we would see Dow 15,000 by the end of 2018, but over the past couple of years the bulls have been right over and over again.

But the only reason why the bulls have been right is because of unprecedented intervention by global central banks.

Today, the Swiss National Bank owns more than a billion dollars worth of stock in each of the following companies: Apple, Alphabet, Microsoft, Amazon, Exxon Mobil, Johnson & Johnson and Facebook.

So where does a central bank like the Swiss National Bank get the money to purchase all of these equities?

It’s easy – they just print the money out of thin air.  As Robert Wenzel has noted, they simply “print the francs, exchange them for dollars and make the purchases”.

If I could create as much money as I wanted out of thin air and use it to buy stocks I could relentlessly drive up stock prices too.

Our financial markets have become a giant charade, and central bank intervention is the biggest reason why FAANG stocks have vastly outperformed the rest of the market.  The following comes from David Stockman

Needless to say, the drastic market narrowing of the last 30 months has been accompanied by soaring price/earnings (PE) multiples among the handful of big winners. In the case of the so-called FAANGs + M (Facebook, Apple, Amazon, Netflix, Google and Microsoft), the group’s weighted average PE multiple has increased by some 50%.

The degree to which the casino’s speculative mania has been concentrated in the FAANGs + M can also be seen by contrasting them with the other 494 stocks in the S&P 500. The market cap of the index as a whole rose from $17.7 trillion in January 2015 to some $21.2 trillion at present, meaning that the FAANGs + M account for about 40% of the entire gain.

Stated differently, the market cap of the other 494 stocks rose from $16.0 trillion to $18.1 trillion during that 30-month period. That is, 13% versus the 82% gain of the six super-momentum stocks.

If global central banks continue to buy millions of shares with money created out of thin air, they may be able to keep this absurd bubble going for a while longer.

But if the Fed and other central banks start pulling back, we could see a market tantrum of epic proportions.  In fact, almost every single time throughout history when the Federal Reserve has attempted a balance sheet reduction it has resulted in a recession

The Fed has embarked on six such reduction efforts in the past — in 1921-1922, 1928-1930, 1937, 1941, 1948-1950 and 2000.

Of those episodes, five ended in recession, according to research from Michael Darda, chief economist and market strategist at MKM Partners. The balance sheet trend mirrors what has happened much of the time when the Fed has tried to raise rates over a prolonged period of time, with 10 of the last 13 tightening cycles ending in recession.

“Moreover, outside of the 1920s and 1930s, there is no precedent for double-digit annual declines in the balance sheet/base that will likely begin to occur late next year,” Darda said in a note.

President Trump is going to get a lot of credit if the stock market keeps going up and he is going to get a lot of blame if it starts going down.

But the truth is that he actually has very little to do with what is really going on.

This stock market bubble was created by the central banks, and they also have the power to kill it if they desire to do so.

And once this bubble bursts, we may be looking at a crisis that makes 2008 look like a Sunday picnic.

Goldman Sachs and others are already warning that this stock market rally is on borrowed time.  Let’s hope that it can continue at least for a little while longer, but in the end there is no possible way that this story is going to end well.

Michael Snyder is a Republican 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.

Goldman Sachs Says That There Is A 99 Percent Chance That Stock Prices Will Not Keep Going Up Like This

Analysts at Goldman Sachs are saying that it is next to impossible for stock prices to keep going up like they have been recently.  Ever since Donald Trump’s surprise election victory in November, stocks have been on a tremendous run, but this surge has not been matched by a turnaround in the real economy.  We have essentially had a “no growth” economy for most of the past decade, and ominous signs pointing to big trouble ahead are all around us.  The only reason why stocks have been able to perform so well is due to unprecedented intervention by global central banks, but they are not going to be able to keep inflating this bubble forever.  At some point this absolutely enormous bubble will burst and investors will lose trillions of dollars.

The only other times we have seen stock valuations at these levels were just before the stock market crash of 1929 and just before the dotcom bubble burst in 2000.  For those that think that they can jump into the markets now and make a lot of money from rapidly rising stock prices, I think that it would be wise to consider what analysts at Goldman Sachs are telling us.  The following is from a CNBC article that was published on Monday…

Investors may be in for disappointing market returns in the decade to come with valuations at levels this high, if history is any indication.

Analysts at Goldman Sachs pointed out that annualized returns on the S&P 500 10 years out were in the single digits or negative 99 percent of the time when starting with valuations at current levels.

Do you really want to try to fight those odds?

Unfortunately, it appears that is precisely what a lot of investors are planning to do.  In fact, Schwab says that they are opening new accounts “at levels we have not seen since the Internet boom of the late 1990s”

New accounts are at levels we have not seen since the Internet boom of the late 1990s, up 34% over the first half of last year. But maybe more important for the long-term growth of the organization is not so much new accounts, but new-to-firm households, and our new-to-firm retail households were up 50% over that same period from 2016.

And a different survey found that Millennial investors in particular are eager to pour money into the stock market

Furthermore, according to a June survey from Legg Mason, nearly 80% of millennial investors plan to take on more risk this year, with 66% of them expressing an interest in equities. About 45% plan to take on “much more risk” in their portfolios.

One of the fundamental tenets of investing is to buy low and sell high.  Those that are getting in at the peak of the market are going to get absolutely slaughtered.  Trillions of dollars of paper wealth will be completely wiped out by the coming crash, and I wish that I could get more people to understand what is about to happen.

I recently wrote about how some really big investors are betting millions upon millions of dollars that a major stock market crash is going to happen in the very near future.  The financial markets are far more primed for a crash than they were in 2008, and there are certainly a lot of potential “black swan events” that could push us over the edge.  In his most recent article, Simon Black listed some of the things that he is currently watching…

– North Korea is threatening to nuke the US
– Donald Trump is firing his entire cabinet
– The Federal Reserve has dropped interest rates to record lows and drowned the world in trillions of dollars of cash
– Debt levels are at record highs
– Entire banking systems, especially in Europe, are in need of massive bailouts
– The US government will run out of money in less than 90-days and hit the debt ceiling once again

You only make money in the stock market if you get out in time.  And since just before the crisis of 2008 I have never seen so many prominent names in the financial community warn about a coming stock market crash as I have over the last 90 days.  For example, legendary investor Jim Rogers is warning that there will almost certainly be a crash “this year or the next”, and that it will be “the worst in your lifetime and my lifetime”

The best-selling author expects the next financial crisis to be the “worst” he has ever seen.

“We’ve had economic problems in the U.S. or in North America every four to eight years since the beginning of the Republic so to say that we’re going to have a problem is not unusual,” he told Kitco News from the Freedom Fest conference in Las Vegas.

“I would expect it to start this year or the next…and it’s going to be the worst in your lifetime and my lifetime.”

What goes up must come down, and markets tend to go down a whole lot faster than they go up.

And in the environment that we are in today, caution is a very good thing.  I really like how billionaire Howard Marks put this the other day…

I think it’s better to turn cautious too soon (and thus perhaps underperform for a while) rather than too late, after the downslide has begun, making it hard to trim risk, achieve exits and cut losses.

Perhaps this will be the first giant financial bubble in our history to end smoothly, but I wouldn’t count on it.

In the end, I expect this one to end just like all of the others.  And I anticipate that the coming crisis will ultimately be worse than anything we have ever faced before because this current bubble has been artificially inflated for so long.

Hopefully stock prices will go up again tomorrow, but it would be exceedingly foolish to ignore all of the warnings.  Goldman Sachs says that there is a 99 percent chance that stocks cannot continue surging like this, and in this case I believe that Goldman Sachs is entirely correct.

Michael Snyder is a Republican 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.

A Mystery Investor Has Made A 262 Million Dollar Bet That The Stock Market Will Crash By October

One mystery trader has made an extremely large bet that the stock market is going to crash by October, and if he is right he could potentially make up to 262 million dollars on the deal.  Fortunes were made and lost during the great financial crisis of 2008, and the same thing will happen again the next time we see a major stock market crash.  But will that stock market crash take place before 2017 is over?  Without a doubt, we are in the midst of one of the largest stock market bubbles in U.S. history, and many prominent investors are loudly warning of an imminent stock market collapse.  It doesn’t take a genius to see that this stock market bubble is going to end very badly just like all of the other stock market bubbles throughout history have, but if you could know the precise timing that it will end you could set yourself up financially for the rest of your life.

I want to be very clear about the fact that I do not know what will or will not happen by the end of October.  But one mystery investor is extremely convinced that market volatility is going to increase over the next few months, and if he is correct he will make an astounding amount of money.  According to Business Insider, the following is how the trade was set up…

  • To fund it, the investor sold 262,000 VIX puts expiring in October, with a strike price of 12.
  • The trader then used those proceeds to buy a VIX 1×2 call spread, which involves buying 262,000 October contracts with a strike price of 15 and selling 524,000 October contracts with a strike price of 25.
  • For reference, bullish call spreads are used when a moderate rise in the underlying asset is expected. Traders buy call options at a specific strike price while selling the same number of calls of the same asset and expiration date at a higher strike.
  • In a perfect scenario, where the VIX hits but doesn’t exceed 25 before October expiration, the trader would see a whopping $262 million payout.

I will be watching to see what happens.  If this mystery investor is correct, it will essentially be like winning the lottery.

But just because he has made this wager does not mean that he has some special knowledge about what is going to happen.

For example, just look at what Ruffer LLP has been doing.  They are a $20 billion investment fund based in London, and they have been betting tens of millions of dollars on a stock market crash which has failed to materialize so far.  But even though they have lost so much money already, they continue to make extremely large bearish bets

As of earlier this week, Ruffer had spent $119 million this year betting on a stock market shock, $89 million of which had expired worthless, according to data compiled by Macro Risk Advisors. The investor has gradually amassed holdings of about 1 million VIX calls through three occasions so far in 2017, and each time a significant portion expired at a loss.

Blame a subdued VIX for the futility. The fear gauge was locked in a range of 10 to 14 for the first three months of 2017, and while it has since climbed to as high as 15.96, it has been stuck well below 14 since a single-day plunge of 26% nine days ago. Earlier this week, the index closed at its lowest level since February 2007.

But that doesn’t mean Ruffer is giving up. Already loaded up on May contracts, the firm has continued to buy cheap VIX calls expiring later in the year — wagers costing about 50 cents.

I can understand why Ruffer has been making these bets.  In a rational world, stocks would have already crashed long ago.

The only way that stock prices have been able to continue to rise is because of unprecedented intervention by global central banks.  They have been pumping trillions of dollars into the financial markets, and this has essentially completely destroyed normal market forces.  The following comes from David Stockman

The Fed and its crew of traveling central banks around the world have gutted honest price discovery entirely. They have turned global financial markets into outright gambling dens of unchecked speculation.

Central bank policies of massive quantitative easing (QE) and zero interest rates (ZIRP) have been sugar-coated in rhetoric about “stimulus”, “accommodation” and guiding economies toward optimal levels of inflation and full-employment.

The truth of the matter is far different. The combined $15 trillion of central bank balance sheet expansion since 2007 amounts to monetary fraud of epic proportions.

In the “bizarro world” that we are living in today, many companies are trading at prices that are more than 100 times earnings, and some companies are actually trading at prices that are more than 200 times earnings.

Stock prices have become completely and totally disconnected from economic reality.  As I discussed the other day, U.S. GDP has only risen at an average yearly rate of just 1.33 percent over the past 10 years, but meanwhile stock prices have been soaring into the stratosphere.

Nobody in their right mind can claim that makes any sense at all.  Just like in 2000, and just like in 2008, this absolutely ridiculous stock market bubble will have a horribly tragic ending as well.

Once again, I don’t know what the exact timing will be.  Stocks could start crashing tomorrow, but then the Swiss National Bank could swoop in and buy 4 million shares of Apple just like they did during the months of January, February and March earlier this year.

The biggest players in this ongoing charade are the global central banks.  If they decide to keep pumping trillions of dollars into global financial markets, they may be able to keep the bubble going for a little while longer.

But if at any point they decide to withdraw their artificial assistance, those that have placed huge bets against the market are going to make absolutely enormous piles of cash.

Michael Snyder is a Republican 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.

Is Puerto Rico’s Economic Collapse A Ploy By Liberals To Permanently Shift The Balance Of Power In Congress?

Next month, citizens of Puerto Rico are going to vote on statehood, and the absolutely devastating economic collapse that is gripping the island could be enough to push pro-statehood forces over the edge to victory.  Of course Congress has the final say on whether Puerto Rico becomes a state or not, but it is going to be very difficult to deny Puerto Rico’s 3.4 million residents statehood if they strongly insist that they want it.  Needless to say, if Puerto Rico becomes the 51st U.S. state that would greatly benefit the Democrats, because the population of Puerto Rico is very liberal.

Puerto Rico does not get to vote in presidential elections, but they do help select the nominees for both parties.  In 2016, 58,764 votes were cast in the Democratic caucuses held in Puerto Rico, and only 36,660 votes were cast in the Republican primary.  As a state, it is doubtful whether Puerto Rico would send any Republican lawmakers to Washington for decades to come.

So if Puerto Rico becomes a state, the Democrats would add two new senators and probably four or five representatives.

Puerto Rico would be the 30th largest state in the entire country, and so it would instantly have more political power than 21 other U.S. states.

This upcoming vote on June 11th is going to be extremely important, and pro-statehood forces are working very hard to get a positive result.  The following info about the referendum in June comes from Wikipedia

The fifth referendum will be held on June 11, 2017 and will offer two options: “Statehood” and “Independence/Free Association.” It will be the first referendum not to offer the choice of “Commonwealth.” Newly-elected Governor Ricardo Rosselló is strongly in favor of statehood for Puerto Rico to help develop the economy and help to “solve our 500-year-old colonial dilemma … Colonialism is not an option …. It’s a civil rights issue … 3.5 million citizens seeking an absolute democracy,” he told the news media.[30] Benefits of statehood include an additional $10 billion per year in federal funds, the right to vote in presidential elections, higher Social Security and Medicare benefits, and a right for its government agencies and municipalities to file for bankruptcy. The latter is currently prohibited.[31]

At approximately the same time as the referendum, Puerto Rico’s legislators are also expected to vote on a bill that would allow the Governor to draft a state constitution and hold elections to choose senators and representatives to the federal Congress.[31]

Over the past decade, Puerto Rico has been suffering through a nightmarish economic recession that never seems to end.  The island was recently forced to declare the equivalent of bankruptcy because it is facing $123 billion in debt and pension obligations.  At this moment 46 percent of the residents of Puerto Rico are living below the poverty line, the unemployment rate is 11 percent, and authorities just announced that another 179 public schools will be closing down.

It has been argued that the Obama administration could have done much more to alleviate the economic problems in Puerto Rico but that it purposely chose not to do so.

Why?

Well, the worse economic conditions get in Puerto Rico, the better it is for pro-statehood forces.  Puerto Ricans are being told that becoming a state is the key to Puerto Rico’s long-term economic future, and at this point many are willing to do just about anything to get the economic suffering to end.  The following is a short excerpt from a New York Times article entitled “Amid Puerto Rico’s Fiscal Ruins, a New Push for Statehood“…

A vigorous push for statehood was a central campaign promise of Gov. Ricardo Rosselló, 38, who was inaugurated in January. Next month, he will ask residents to vote, in a nonbinding referendum, for statehood as part of a long-term fix for a commonwealth facing a period of severe austerity that is likely to include shuttered public schools, frozen salaries, slashed pensions and crimped investments in public health. The island remains in the grip of a recession that has lingered for much of the past decade.

Could it be possible that this is what liberals have wanted all along?

Could it be possible that Obama and his minions saw Puerto Rico as a chess piece that could be used to permanently shift the balance of power in Congress?

Of course if Puerto Rico becomes a state that would have implications for presidential elections as well.

In the end, it will be Congress that decides what the fate of Puerto Rico will be, but if the people of Puerto Rico truly want to become the 51st U.S. state it is going to be really hard to deny them that opportunity indefinitely.

Last year at their national conventions, the Democrats and the Republicans both took the position that the citizens of Puerto Rico should be able to make this decision for themselves.  But once faced with a final decision, it is inevitable that many Republican members of Congress would be opposed to statehood.

Personally, I believe that either independence or “free association” would be much better for Puerto Rico, and let us hope that the people of Puerto Rico choose that direction.

But when people are really hurting, they will often grasp any sort of olive branch that is being offered to them, and right now the progressives are really pushing statehood.

Of course for strategists on the left, the goal is not to help the suffering people of Puerto Rico.

Rather, the endgame is complete domination of the U.S. political system by any means necessary.