We are about three weeks into 2016, and we are witnessing things that we have never seen before. There were two emergency market shutdowns in China within the first four trading days of this year, the Dow Jones Industrial Average has never lost this many points within the first three weeks, and just yesterday we learned that global stocks had officially entered bear market territory. Overall, more than 15 trillion dollars of global stock market wealth has been wiped out since last June. And of course the markets are simply playing catch up with global economic reality. The Baltic Dry Index just hit another new all-time record low today, Wal-Mart has announced that they are shutting down 269 stores, and initial jobless claims in the U.S. just surged to their highest level in six months. So if things are this bad already, what will the rest of 2016 bring?
The Dow was up just a little bit on Thursday thankfully, but even with that gain we are still in unprecedented territory. According to CNBC, we have never seen a tougher start to the year for the Dow than we have in 2016…
The Dow Jones industrial average, which was created in 1896, has never begun a year with 12 worse trading days. Through Wednesday’s close, the Dow has fallen 9.5 percent. Even including the 1.3 percent gains as of noon Thursday, the Dow is still down nearly 8 percent in 2016.
But even with the carnage that we have seen so far, stocks are still wildly overpriced compared to historical averages. In order for stocks to no longer be in a “bubble”, they will still need to decline by about another one-third. The following comes from MarketWatch…
Data from the U.S. Federal Reserve, meanwhile, say U.S. nonfinancial corporate stocks are now valued at about 90% of the replacement cost of company assets, a metric known as “Tobin’s Q.” But the historic average, going back a century, is in the region of 60% of replacement costs. By this measure, stocks could fall by another third, taking the Dow all the way down toward 10,000. (On Wednesday it closed at 15,767.) Similar calculations could be reached by comparing share prices to average per-share earnings, a measure known as the cyclically adjusted price-to-earnings ratio, commonly known as CAPE, after Yale finance professor Robert Shiller, who made it famous.
Of course the mainstream media doesn’t seem to understand any of this. They seem to be under the impression that the bubble should have lasted forever, and this latest meltdown has taken them totally by surprise.
Ultimately, what is happening should not be a surprise to any of us. The financial markets always catch up with economic reality eventually, and right now evidence continues to mount that economic activity is significantly slowing down. Here is some analysis from Brandon Smith…
Trucking freight in the U.S. is in steep decline, with freight companies pointing to a “glut in inventories” and a fall in demand as the culprit.
Morgan Stanley’s freight transportation update indicates a collapse in freight demand worse than that seen during 2009.
The Baltic Dry Index, a measure of global freight rates and thus a measure of global demand for shipping of raw materials, has collapsed to even more dismal historic lows. Hucksters in the mainstream continue to push the lie that the fall in the BDI is due to an “overabundance of new ships.” However, the CEO of A.P. Moeller-Maersk, the world’s largest shipping line, put that nonsense to rest when he admitted in November that “global growth is slowing down” and “[t]rade is currently significantly weaker than it normally would be under the growth forecasts we see.”
In addition, another very troubling sign is the fact that initial jobless claims are starting to surge once again…
The number of Americans applying for unemployment benefits in mid-January reached seven-month highs, perhaps a sign that the rate of layoffs in the U.S. has risen slightly from record lows.
Initial jobless claims climbed a seasonally adjusted 10,000 to 293,000 in the seven days stretching from Jan. 10 to Jan 16, the government said Thursday. That’s the highest level since last July.
Since the last recession, the primary engine for the creation of good jobs in this country has been the energy industry.
Unfortunately, the “oil boomtowns” are now going bust, and workers are being laid off in droves. As I mentioned the other day, 42 North American oil companies have filed for bankruptcy and 130,000 good paying energy jobs have been lost in this country since the start of 2015. And as long as the price of oil stays in this neighborhood, the worse things are going to get.
A lot of people out there still seem to think that this is just going to be a temporary downturn. Many are convinced that we will just go through another tough recession and then we will come out okay on the other side. What they don’t realize is that a number of long-term trends are now reaching a crescendo.
For decades, we have been living wildly beyond our means. The federal government, state and local governments, corporations and consumers have all been going into debt far faster than our economy has been growing. Of course this was never going to be sustainable in the long run, but we had been doing it for so long that many of us had come to believe that our exceedingly reckless debt-fueled prosperity was somehow “normal”.
Unfortunately, the truth is that you can’t consume far more than you produce forever. Eventually reality catches up with you. This is a point that Simon Black made extremely well in one of his recent articles…
Economics isn’t complicated. The Universal Law of Prosperity is very simple: produce more than you consume.
Governments, corporations, and individuals all have to abide by it. Those who do will thrive. Those who don’t will fail, sooner or later.
When the entire financial system ignores this fundamental rule, it puts us all at risk.
And if you can understand that, you can take simple, sensible steps to prevent the consequences.
Sadly, the time for avoiding the consequences of our actions is now past.
We are now starting to pay the price for decades of incredibly bone-headed decisions, and anyone that is looking to Barack Obama, the Federal Reserve or anyone else in Washington D.C. to be our savior is going to be bitterly disappointed.
And as bad as things have been so far, just wait until you see what happens next.
2016 is the year when everything changes.
Never before have we seen a year start like this. On Monday, Chinese stocks crashed once again. The Shanghai Composite Index plummeted another 5.29 percent, and this comes on the heels of two historic single day crashes last week. All of this chaos over in China is one of the factors that continues to push commodity prices even lower. Today the price of copper fell another 2.40 percent to $1.97, and the price of oil continued to implode. At one point the price of U.S. oil plunged all the way down to $30.99 a barrel before rebounding just a little bit. As I write this article, oil is down a total of 6.12 percent for the day and is currently sitting at $31.13. U.S. stocks were mixed on Monday, but it is important to note that the Russell 2000 did officially enter bear market territory. This is yet another confirmation of what I was talking about yesterday. And junk bonds continue to plummet. As I write this, JNK is down to 33.42. All of these numbers are huge red flags that are screaming that big trouble is ahead. Unfortunately, the mainstream media continues to insist that there is absolutely nothing to be concerned about.
A little over a year ago, I wrote an article that explained that anyone that believed that low oil prices were good for the economy was “crazy“. At the time, many people really didn’t understand what I was trying to communicate, but now it is becoming exceedingly clear. On Monday, one veteran oil and gas analyst told CNBC that “half of U.S. shale oil producers could go bankrupt” over the next couple of years…
Half of U.S. shale oil producers could go bankrupt before the crude market reaches equilibrium, Fadel Gheit, said Monday.
The senior oil and gas analyst at Oppenheimer & Co. said the “new normal oil price” could be 50 to 100 percent above current levels. He ultimately sees crude prices stabilizing near $60, but it could be more than two years before that happens.
By then it will be too late for many marginal U.S. drillers, who must drill into and break up shale rock to release oil and gas through a process called hydraulic fracturing. Fracking is significantly more expensive than extracting oil from conventional wells.
Since the last recession, the energy industry has been the number one producer of good paying jobs in this country.
Now that those firms are starting to drop like flies, what is that going to mean for employment in America?
Just today, a huge coal company filed for bankruptcy, and so did a U.S. unit of commodity trading giant Glencore. The following comes from Zero Hedge…
While the biggest bankruptcy story of the day is this morning’s chapter 11 filing by Arch Coal, one which would trim $4.5 billion in debt from its balance sheet while handing over the bulk of the post-reorg company to its first-lien holders as part of the proposed debt-for-equity exchange, the reality is that the Arch default was widely anticipated by the market.
However, another far less noted and perhaps far more significant bankruptcy filing was that of Sherwin Alumina Co., a U.S. unit of commodity trading giant Glencore PLC, whose troubles have been extensively detailed on these pages. The stated reason for this far more troubling chapter 11 was “challenging market conditions” which is one way to describe an industry in which just one remaining U.S. smelter will be left in operation after Alcoa shut down its Warrick Country smelting ops last week.
A spokesman for Glencore, which owns the entire business, said the commodities producer and trader is “supportive of the restructuring process undertaken by Sherwin and is hopeful of an outcome that will allow for the continued operation of the Sherwin facility.”
We desperately need prices for oil and other commodities to rebound significantly. Unfortunately, that does appear to be likely to happen any time soon. In fact, according to CNN we could soon see the price of oil fall quite a bit more…
The strengthening U.S. dollar could send oil plunging to $20 per barrel.
That’s the view of analysts at Morgan Stanley. In a report published Monday, they say a 5% increase in the value of the dollar against a basket of currencies could push oil down by between 10% and 25% — which would mean prices falling by as much as $8 per barrel.
If prices for oil and other commodities keep falling, what is going to happen?
Well, Gina Martin Adams of Wells Fargo Securities says that what is happening right now reminds her of the correction of 1998…
Recent market volatility has dredged up memories of previous times of turmoil, most notably the 2008 crisis. But Gina Martin Adams of Wells Fargo Securities has been reminded of another, less dramatic correction year — 1998.
Adams posits that the current economic environment is suffering from themes that also played out in 1998, including falling oil prices, a rising U.S. dollar and troubles in emerging markets. Consequently, stocks may see a similar move to the 1998 correction, which saw a 20 percent drop for stocks over six weeks.
To me, it is much more serious than that. Just before U.S. stocks crashed horribly in 2008, we saw Chinese stocks crash, the price of oil crashed, commodity prices crashed, and junk bonds crashed really hard.
All of those things are happening again, and yet most of the “experts” continue to refuse to see the warning signs.
In fact, the mainstream media is full of articles that are telling people not to panic while the financial markets crumble all around them…
There’s no need to make big moves in response to the recent volatility. “Regular folks should take on a long-term view and avoid trying to anticipate short-term market movements,” says Stephen Horan, the managing director of credentialing at CFA Institute. “There is almost no evidence to suggest that professionals can do it effectively and a plethora of evidence suggesting individuals do it poorly.”
They want “regular folks” to keep holding on to their investments as the “smart money” dumps their stocks at a staggering pace.
A little more than six months ago, I predicted that “our problems will only be just beginning as we enter 2016″, and that is turning out to be dead on correct.
The financial crisis that began during the second half of last year is greatly accelerating, and yet most of the population continues to be in denial even though the average stock price has already fallen by more than 20 percent.
Hopefully it will not take another 20 percent decline before people begin to wake up.
We have never had a year start the way that 2016 has started. In the U.S., the Dow Jones Industrial Average and the S&P 500 have both posted their worst four-day starts to a year ever. Canadian stocks are now down 21 percent since September, and it has been an absolute bloodbath in Europe over the past four days. Of course the primary catalyst for all of this is what has been going on in China. There has been an emergency suspension of trading in China two times within the past four days, and nobody is quite certain what is going to happen next. Eventually this wave of panic selling will settle down, but that won’t mean that this crisis will be over. In fact, what is coming is going to be much worse than what we have already seen.
On Thursday I was doing a show with some friends, and we were amazed that stocks just seemed to keep falling and falling and falling. The Dow closed down 392 points, and the NASDAQ got absolutely slammed. At this point, the Dow and the NASDAQ are both officially in “correction territory”, and some of the talking heads on television are warning that this could be the beginning of a “bear market”. But of course some of the other “experts” are insisting that this is just a temporary bump in the road.
But what everyone can agree on is that we have never seen a start to a year like this one. The following comes from CNN…
The global market freakout of 2016 just got worse.
The latest scare came on Thursday as China’s stock market crashed 7% overnight and crude oil plummeted to the lowest level in more than 12 years.
The Dow dropped 392 points on Thursday. The S&P 500 fell 2.4%, while the Nasdaq tumbled 3%.
The wave of selling has knocked the Dow down 911 points, or more than 5% so far this year. That’s the worst four-day percentage loss to start a year on record, according to FactSet stats that go back to 1897.
When CNN starts sounding like The Economic Collapse Blog, you know that things are really bad. I particularly like their use of the phrase “global market freakout”. I might have to borrow that one.
Even some of the biggest and most trusted stocks are plummeting. For instance, Apple dropped to $96.45 on Thursday. It is now down a total of 28 percent since hitting a record high of more than 134 dollars a share back in April.
So that means that if someone put all of their retirement money into Apple stock last April (which may have seemed like a really good idea at that time), by now more than one-fourth of that money is gone.
For months, I have been warning that the exact same patterns that we witnessed just prior to the great stock market crash of 2008 were happening again. To me, the parallels between 2008 and 2015/2016 were just uncanny. And now other very prominent names are making similar comparisons. According to the Washington Post, George Soros says that the way this new crisis is unfolding “reminds me of the crisis we had in 2008″…
Influential investor George Soros said that China had a “major adjustment problem” on its hands. “I would say it amounts to a crisis,” he told an economic forum in Sri Lanka, according to Bloomberg News. “When I look at the financial markets, there is a serious challenge which reminds me of the crisis we had in 2008.”
Don’t get me wrong – I am certainly not a supporter of George Soros. My point is that we are starting to hear a lot of really ominous talk from a lot of different directions. All over the world, people are starting to understand that the next great financial crisis is already here.
As I write this tonight, I just feel quite a bit of sadness. A lot of hard working people are going to lose a lot of money this year, and that includes people that I know personally. I wish that my voice had been clearer and louder. I wish that I could have done more to get people to understand what was coming. I wish that my warnings could have made more of a difference.
I just think about how I would feel if everything that I had worked for all my life was suddenly wiped out. And that is what is going to end up happening to some of these people. When you lose everything, it can be absolutely debilitating.
You only make money in the markets if you get out in time. And unfortunately, most of the general population will be like deer in the headlights and won’t know which way to move.
There will be up days for the markets in our near future. But don’t be fooled by them. It is important to remember that some of the greatest up days in U.S. stock market history were right in the middle of the stock market crash of 2008. So don’t let a rally fool you into thinking that the crisis is over.
The financial crisis that began in the second half of 2015 is now accelerating, and everything that we have witnessed over the past few days is just a natural extension of what has already been happening.
Personally, I am just really looking forward to this weekend when I will hopefully get caught up on some rest. Plus, my Washington Redskins will be hosting a playoff game on Sunday, and if they find a way to win that game that will put me in a particularly positive mood.
It is good to enjoy these simple pleasures while we still can. Unprecedented chaos is coming this year, and we are all going to need strength and courage for what is ahead.
Did you see what just happened in China? For the second time in four days, a massive stock market crash has caused an emergency shutdown of the markets in China. On both Monday and Thursday, trading was suspended for 15 minutes when the CSI 300 fell 5 percent, and on both days the total decline very rapidly escalated to 7 percent once trading was reopened. Once a 7 percent drop happens, trading is automatically suspended for the rest of the day. I guess that is one way to keep the stock market from crashing – you just don’t let anyone trade. And of course the panic in China is causing other markets to go haywire as well. As I write this, the Nikkei is down 324 points and Hong Kong is down 572 points.
The amazing thing is that trading was only open in China for about 15 total minutes tonight. Here is how CNBC described what just happened…
China’s stocks were suspended from all trade on Thursday after the CSI300 tumbled more than 7 percent in early trade, triggering the market’s circuit breaker for a second time this week.
That drop-kicked stock markets across Asia, which were already wallowing after a weaker open amid concerns over China’s economic slowdown and its depreciating currency as well as falling oil prices.
On the mainland, the Shanghai Composite tumbled 7.32 percent by at the time of the halt, while the Shenzhen Composite plummeted 8.34 percent. The CSI300, the benchmark index against which China’s new circuit breakers are set, plunged 7.21 percent. If that index rises or falls 5 percent, the market halts all trade for 15 minutes. If it moves 7 percent, trading will be suspended for the rest of the day. In total Thursday, China shares only traded around 15 minutes.
How will European and U.S. markets respond to the chaos in Asia when they open?
That is a very good question. I think that everybody will be watching.
Already, the Dow Jones Industrial Average is down about 500 points for the year. The financial crisis that began in the second half of 2015 is now accelerating as we enter 2016, and nobody is quite sure what is going to happen next.
One key to watch is what happens with the S&P 500.
2000 is kind of like a giant line in the sand on the S&P 500. On Wednesday we saw the market hover around that psychologically-important number, and there is a whole lot of resistance right there. If we break solidly through 2000 and start plunging toward 1900, that is going to break things wide open.
The primary reason for the stock market crash in China on Thursday was another stunning devaluation of the yuan. This explanation from Zero Hedge is very helpful…
Following the collapse of offshore Yuan to 5 year lows and decompression to record spreads to onshore Yuan, The PBOC has stepped in and dramatically devalued the Yuan fix by 0.5% to 6.5646. This is the biggest devaluation since the August collapse. Offshore Yuan has erased what modest bounce gains it achieved intraday and is heading significantly lower once again. Dow futures are down 100 points on the news.
PBOC fixes Yuan at its weakest since March 2011… with the biggest devaluation since August
A massive devaluation of the yuan was also one of the primary reasons for the market turmoil that we saw back in August. The Chinese are playing games with their currency, and this is causing havoc in the global marketplace.
Meanwhile, we have received some other very troubling news about the global economy over the past few days…
-The price of oil continues to collapse. As I write this, the price of U.S. oil is down to $33.26 a barrel. Those that follow my writing regularly already know that this is a really bad sign for the global economy.
-The Baltic Dry Index just hit another brand new all-time record low. Global trade is absolutely imploding, and this is having a devastating impact on China and other major exporting nations.
-U.S. manufacturing is contracting at the fastest pace that we have seen since the last recession. This is precisely what we would expect to see during the early stages of a new crisis.
-U.S. manufacturing imports are also contracting at the fastest pace that we have seen since the last recession. It appears that “the almighty U.S. consumer” is not going to save the global economy after all.
In 2015, trillions of dollars of stock market wealth was wiped out globally. Now this new global financial crisis is picking up speed, and many of the “experts” seem absolutely stunned by what is happening.
But most of my readers are not surprised. That is because I have been breaking down the signs that have been warning us of this new crisis in excruciating detail for months. The financial carnage that we have witnessed around the globe this week is simply a logical progression of what has already been happening.
To be honest, though, even I have been stunned by what has happened in China this week. I can’t say that I expected an emergency shutdown of the Chinese markets two times within the first four trading days of the year.
Panic and fear are beginning to grip the global marketplace, and once that starts to happen events become very difficult to predict.
Let us hope that things settle down soon, but I wouldn’t count on it.
As I have said before, 2016 is the year when everything changes, and we are going to see things take place over the next 12 months that are going to shock the world.
This week, Barack Obama sent a guided missile destroyer into disputed waters in the South China Sea to see if the Chinese would start shooting at it. Yes, this is what he actually did. Fortunately for us, the Chinese backed down and did not follow through on their threats to take military action. Instead, the Chinese have chosen to respond with very angry words. The Chinese ambassador to the United States, Cui Tiankai, says that what Obama did was “a very serious provocation, politically and militarily.” And as you will see below, a state-run newspaper stated that China “is not frightened to fight a war with the US in the region”. So why in the world would Obama provoke the Chinese like this? Yes, the Chinese claims in the South China Sea are questionable. But there are other ways to resolve things like this. My friend Rick Wiles began his radio broadcast yesterday by suggesting that these kinds of actions show that Barack Obama has become “mentally unstable”, and I would have to agree. You don’t risk military confrontations that could potentially spark World War III unless you have a really good reason to do so.
The Global Times is a Chinese state-run newspaper that has very close ties to the Communist party. After Obama’s provocation in the South China Sea, it published an editorial entitled “After the show, it’s time for US destroyer to leave“. The following is the most alarming portion of that editorial…
In face of the US harassment, Beijing should deal with Washington tactfully and prepare for the worst. This can convince the White House that China, despite its unwillingness, is not frightened to fight a war with the US in the region, and is determined to safeguard its national interests and dignity.
Beijing ought to carry out anti-harassment operations. We should first track the US warships. If they, instead of passing by, stop for further actions, it is necessary for us to launch electronic interventions, and even send out warships, lock them by fire-control radar and fly over the US vessels.
Another major Chinese newspaper also responded very angrily…
The People’s Liberation Army Daily, China’s leading military newspaper, used a front-page editorial to accuse the US of sowing chaos in countries such as Afghanistan and Iraq.
“Cast-iron facts show that time and again the United States recklessly uses force and starts wars, stirring things up where once there was stability, causing the bitterest of harm to those countries directly involved,” the newspaper said, according to Reuters.
But the Obama administration is not backing down.
In fact, CNN is reporting that the decision has already been made to send even more patrols cruising by the disputed islands.
What do you think that will do to our delicate relationship with China?
Most Americans assume that an actual shooting war between the United States and China is not even within the realm of possibility, but many of our leaders see things very differently. For instance, just check out what CIA Deputy Director Michael Morell thinks…
The current posturing in the area has led to heightened tensions between the world’s preeminent military powers, and in May Former CIA Deputy Director Michael Morell told CNN that the confrontation indicates there is “absolutely” a risk of the U.S. and China going to war sometime in the future.
And Barack Obama’s good buddy George Soros has warned that the threat of a third world war involving the United States and China is very real…
Earlier this year, billionaire investor George Soros also cautioned that the ruling Communist Party may see fit to rally its population around an external threat in order to head off a societal collapse in the aftermath of an economic implosion.
“There is a real danger that China will align itself with Russia politically and militarily, and then the threat of third world war becomes real,” said Soros.
Needless to say, if our relationship with China breaks down that is going to be really, really bad for the global economy. China accounts for more global trade than anyone else in the world, and the U.S. is number two.
And already we are witnessing a slowdown in global trade which is more than just a little bit alarming. So far in 2015 total global trade is down 8.4 percent, U.S. exports are down 11 percent, and Chinese imports during the month of September were down a whopping 20.4 percent from a year earlier.
So what do you think that an actual shooting war between the two great economic superpowers would do?
Meanwhile, the Obama administration continues to move toward sparking World War III in the Middle East as well. On Tuesday, we learned that Obama has authorized “direct action on the ground” in Iraq and in Syria. That means that our boys and girls could potentially end up in combat in areas inside Syria where the Russians are currently conducting operations. The following comes from NBC News…
Defense Secretary Ashton Carter said Tuesday that the U.S. will begin “direct action on the ground” against ISIS forces in Iraq and Syria, aiming to intensify pressure on the militants as progress against them remains elusive.
“We won’t hold back from supporting capable partners in opportunistic attacks against ISIL, or conducting such missions directly whether by strikes from the air or direct action on the ground,” Carter said in testimony before the Senate Armed Services committee, using an alternative name for the militant group.
When pressed, Carter admitted that U.S. soldiers “will be in harm’s way, no question about it“.
Wasn’t Obama supposed to be the president that brought all of our troops home and ended all of the wars?
Instead, his arrogance just seems to grow by the day and he is threatening to plunge the entire planet into World War III.
So what do you think of Barack Obama’s recent “foreign policy decisions”?
Please feel free to share your perspective by posting a comment below…
When the global economy is doing well, the amount of stuff that is imported and exported around the world goes up, and when the global economy is in recession, the amount of stuff that is imported and exported around the world goes down. It is just basic economics. Governments around the world have become very adept at manipulating other measures of economic activity such as GDP, but the trade numbers are more difficult to fudge. Today, China accounts for more global trade than anyone else on the entire planet, and we have just learned that Chinese exports and Chinese imports are both collapsing right now. But this is just part of a larger trend. As I discussed the other day, British banking giant HSBC has reported that total global trade is down 8.4 percent so far in 2015, and global GDP expressed in U.S. dollars is down 3.4 percent. The only other times global trade has plummeted this much has been during other global recessions, and it appears that this new downturn is only just beginning.
For many years, China has been leading the revolution in global trade. But now we are witnessing something that is almost unprecedented. Chinese exports are falling, and Chinese imports are absolutely imploding…
Growth of exports from China has been dropping relentlessly, for years. Now this “growth” has actually turned negative. In September, exports were down 3.7% from a year earlier, the “inevitable fallout from China’s unsustainable and poorly executed credit splurge,” as Thomson Reuters’ Alpha Now puts it. Most of these exports are manufactured goods that are shipped by container to the rest of the world.
And imports into China – a mix of bulk and containerized freight – have been plunging: down 20.4% in September from a year earlier, after at a 13.8% drop in August.
This week it was announced that Chinese GDP growth had fallen to the lowest level since the last recession, and that makes sense. Global economic activity is really slowing down, and this is deeply affecting China.
So what about the United States?
Well, based on the amount of stuff that is being shipped around in our country it appears that our economy is really slowing down too. The following comes from Wolf Richter, and I shared some of it in a previous article, but I think that it bears repeating…
September is in the early phase of the make-or-break holiday shipping season. Shipments usually increase from August to September. They did this year too. The number of shipments in September inched up 1.7% from August, according to the Cass Freight Index.
But the index was down 1.5% from an already lousy September last year, when shipments had fallen from the prior month, instead of rising. And so, in terms of the number of shipments, it was the worst September since 2010.
It has been crummy all year: With the exception of January and February, the shipping volume has been lower year-over-year every month!
The index is broad. It tracks data from shippers, no matter what carrier they choose, whether truck, rail, or air, and includes carriers like FedEx and UPS.
What major retailers such as Wal-Mart are reporting also confirms that we are in a major economic slowdown. Wal-Mart recently announced that its earnings would fall by as much as 12 percent during the next fiscal year, and that caused Wal-Mart stock to drop by the most in 27 years.
And of course this is going to have a huge ripple effect. There are thousands of other companies that do business with Wal-Mart, and Reuters is reporting that they are starting to get squeezed…
Suppliers of everything from groceries to sports equipment are already being squeezed for price cuts and cost sharing by Wal-Mart Stores. Now they are bracing for the pressure to ratchet up even more after a shock earnings warning from the retailer last week.
The discount store behemoth has always had a reputation for demanding lower prices from vendors but Reuters has learned from interviews with suppliers and consultants, as well as reviewing some contracts, that even by its standards Wal-Mart has been turning up the heat on them this year.
“The ground is shaking here,” said Cameron Smith, head of Cameron Smith & Associates, a major recruiting firm for suppliers located close to Wal-Mart’s headquarters in Bentonville, Arkansas. “Suppliers are going to have to help Wal-Mart get back on track.”
Similar things are going on at some of the other biggest companies in America as well.
For instance, things have gotten so bad for McDonald’s that one franchise owner recently stated that the restaurant chain is “facing its final days”…
“McDonald’s announced in April that it would be closing 700 ‘underperforming’ locations, but because of the company’s sheer size — it has 14,300 locations in the United States alone — this was not necessarily a reduction in the size of the company, especially because it continues to open locations around the world. It still has more than double the locations of Burger King, its closest competitor.”
However, for the franchisees, the picture looks much worse than simply 700 stores closing down.
“We are in the throes of a deep depression, and nothing is changing,” a franchise owner wrote in response to a financial survey by Nomura Group. “Probably 30% of operators are insolvent.” One owner went as far as to speculate that McDonald’s is literally “facing its final days.”
Why would things be so bad at Wal-Mart and McDonald’s if the economy was “recovering”?
Come on now – let’s use some common sense here.
All of the numbers are screaming at us that we have entered a major economic downturn and that it is accelerating.
CNBC is reporting that the number of job openings in the U.S. is falling and that the number of layoffs is rising…
Job openings fell 5.3 percent in August, while a 2.6 percent rise in layoffs and discharges offset a 0.3 percent gain in hires. Finally, the amount of quits — or what Convergex calls its “take this job and shove it” indicator because it shows the percentage of workers who left positions voluntarily — fell to 56.6 percent from 57.1 percent, indicating less confidence in mobility.
And as I discussed the other day, Challenger Gray is reporting that we are seeing layoffs at major firms at a level that we have not witnessed since 2009.
We already have 102.6 million working age Americans that do not have a job right now. As this emerging worldwide recession deepens, a lot more Americans are going to lose their jobs. That is going to cause the poverty and suffering in this country to spike even more, if you can imagine that.
Just consider what authorities discovered on the streets of Philadelphia just this week…
Support is flooding in for a homeless Philadelphia family whose two-year-old son was found wandering alone in a park in the middle of the night.
Angelique Roland, 27, and Michael Jones, 24, were sleeping with their children behind cardboard boxes underneath the Fairmount Park Welcome Center in Love Park when the toddler slipped away.
The boy was found just before midnight and handed over to a nearby Southeastern Pennsylvania Transportation Authority police officer, who took him to the Children’s Hospital of Philadelphia.
He was wearing a green, long sleeve shirt, black running pants and had a diaper on, but did not have shoes or socks.
Could you imagine sleeping on the streets and not even being able to provide your two-year-old child with shoes and socks?
These numbers that I write about every day are not a game. They affect all of us on a very personal level.
Just like in 2008 and 2009, millions of Americans that are living a very comfortable middle class lifestyle today will soon lose their jobs and will end up out in the streets.
In fact, there will be people that will read this article that this will happen to.
So no, none of us should be excited that the global economy is collapsing. There is already so much pain all around us, and what is to come is beyond what most of us would even dare to imagine.
Why has Barack Obama airdropped 50 tons of ammunition into areas that “moderate rebels” in Syria supposedly control? This is essentially the equivalent of poking the Russians directly in the eyes. Much of this ammunition will end up in the hands of those that the Russians are attempting to bomb into oblivion, and so to Russia it appears that we are attempting to make their job much harder. And of course the truth is that there aren’t really any “moderate rebels” in Syria at all. Nearly all of the groups that are fighting are made up primarily of radical jihadists and/or hired mercenaries. Personally, I don’t see anyone over there that you could call “the good guys”. At the end of the day, the U.S. supports just about anyone that wants to get rid of the Assad regime, and the Russians are working very hard to keep Assad in power. Just like the civil war in Ukraine, the conflict in Syria is in great danger of being transformed into a proxy war between the United States and Russia, and many fear that these conflicts could eventually be setting the stage for World War III.
The ferocity of Russian airstrikes in Syria has surprised observers all over the planet, and over the past couple of days these airstrikes have been extended to include some new areas…
Russian Air Forces have extended the range of their airstrikes on Islamic State positions in Syria to four provinces, focusing primarily on demolishing fortified installations and eliminating supply bases and the terrorists’ infrastructure.
Over the last 24 hours Russian aircraft have attacked terrorist positions in the Hama, Idlib, Latakia and Raqqa provinces of Syria. In total, 64 sorties targeted 63 Islamic State installations, among them 53 fortified zones, 7 arms depots, 4 training camps and a command post.
When I read reports like this, I am deeply troubled. The Obama administration claims that it has been bombing ISIS positions in Syria for over a year. So why in the world do these targets still exist?
Was the U.S. military incapable of finding these installations?
That doesn’t seem likely.
So why weren’t they destroyed long ago?
Did the Obama administration not want them destroyed for some reason?
What seems abundantly clear is that the Russians are doing what the Obama administration was either unwilling or unable to do. There is now mass panic among ISIS fighters, and thousands of them are fleeing the country…
An estimated 3,000 Islamic State fighters as well as militants from other extremist groups have fled Syria for Jordan fearing a renewed offensive by the Syrian army in addition to Russian airstrikes, a military official has told RIA news agency.
“At least 3,000 militants from Islamic State (IS, formerly ISIS/ISIL), al-Nusra and Jaish al-Yarmouk have fled to Jordan. They are afraid of the Syrian army having stepped up activities on all fronts and of Russian airstrikes,” the RIA source said.
The mainstream media in the United States is not talking much about this, are they?
But the U.S. media is reporting on this latest airdrop of ammunition to rebel groups in Syria. For example, the following comes from CNN…
U.S. military cargo planes gave 50 tons of ammunition to rebel groups overnight in northern Syria, using an air drop of 112 pallets as the first step in the Obama Administration’s urgent effort to find new ways to support those groups.
Details of the air mission over Syria were confirmed by a U.S. official not authorized to speak publicly because the details have not yet been formally announced.
C-17s, accompanied by fighter escort aircraft, dropped small arms ammunition and other items like hand grenades in Hasakah province in northern Syria to a coalition of rebels groups vetted by the US, known as the Syrian Arab Coalition.
If you were the Russians, how would you feel about this?
I know how I would feel.
And just as Joe Biden has previously admitted, the “moderate middle” in Syria simply does not exist. The following is an extended excerpt from a piece that was originally written by investigative journalist Nafeez Ahmed…
The first Russian airstrikes hit the rebel-held town of Talbisah north of Homs City, home to al-Qaeda’s official Syrian arm, Jabhat al-Nusra, and the pro-al-Qaeda Ahrar al-Sham, among other local rebel groups. Both al-Nusra and the Islamic State have claimed responsibility for vehicle-borne IEDs (VBIEDs) in Homs City, which is 12 kilometers south of Talbisah.
The Institute for the Study of War (ISW) reports that as part of “US and Turkish efforts to establish an ISIS ‘free zone’ in the northern Aleppo countryside,” al-Nusra “withdrew from the border and reportedly reinforced positions in this rebel-held pocket north of Homs city”.
In other words, the US and Turkey are actively sponsoring “moderate” Syrian rebels in the form of al-Qaeda, which Washington DC-based risk analysis firm Valen Globals forecasts will be “a bigger threat to global security” than IS in coming years.
Last October, Vice President Joe Biden conceded that there is “no moderate middle” among the Syrian opposition. Turkey and the Gulf powers armed and funded “anyone who would fight against Assad,” including “al-Nusra,” “al-Qaeda in Iraq (AQI),” and the “extremist elements of jihadis who were coming from other parts of the world”.
In other words, the CIA-backed rebels targeted by Russia are not moderates. They represent the same melting pot of al-Qaeda affiliated networks that spawned the Islamic State in the first place.
It has been well documented that many of these so-called “moderate rebel groups” in Syria have fought alongside ISIS and have sold weapons to them. So this false dichotomy that Barack Obama keeps trying to sell us on is just a giant fraud. The following comes from a recent Infowars report…
In September, 2014 a commander with the FSA admitted cooperating with ISIS and the al-Nusra Front.
“We are collaborating with the Islamic State and the Nusra Front by attacking the Syrian Army’s gatherings in … Qalamoun,” Bassel Idriss said. “Let’s face it: The Nusra Front is the biggest power present right now in Qalamoun and we as FSA would collaborate on any mission they launch as long as it coincides with our values.”
In July of 2014 a report in Stars and Stripes documented how the 1,000 strong Dawud Brigade, which had previously fought alongside the FSA against al-Assad, had defected in its entirety to join ISIS.
The same month factions within the FSA — including Ahl Al Athar and Ibin al-Qa’im — pledged services to the Islamic State.
Members of the Islamic State claim to cooperate with the FSA and buy weapons provided by the U.S.
“We are buying weapons from the FSA. We bought 200 anti-aircraft missiles and Koncourse anti tank weapons,” ISIS member Abu Atheer told al-Jazeera. “We have good relations with our brothers in the FSA. For us, the infidels are those who cooperate with the West to fight Islam.”
U.S. anti-tank weapons are playing a critical role in the Syrian conflict. As reported by the Washington Post, U.S.-made anti-tank missiles are being used by the rebels to destroy lots of Russian-made tanks that are being used by the Syrian army…
So successful have they been in driving rebel gains in northwestern Syria that rebels call the missile the “Assad Tamer,” a play on the word Assad, which means lion. And in recent days they have been used with great success to slow the Russian-backed offensive aimed at recapturing ground from the rebels.
Since Wednesday, when Syrian troops launched their first offensive backed by the might of Russia’s military, dozens of videos have been posted on YouTube showing rebels firing the U.S.-made missiles at Russian-made tanks and armored vehicles belonging to the Syrian army. Appearing as twirling balls of light, they zigzag across the Syrian countryside until they find and blast their target in a ball of flame.
Like I said earlier, this is looking more and more like a proxy war between the United States and Russia.
Could that be what Obama actually wants?
Obama is poking China in the eyes lately too. CNN is reporting that U.S. warships may soon be sailing into territorial waters around the Spratly Islands. These are islands that the Chinese government claims ownership over, but the U.S. government disputes that claim, and Obama seems determined to flex his muscles in the area…
The United States (US) may soon deploy war ships near China’s artificial islands in the South China Sea.
It wants to send a message that it does not recognize China’s territorial claims over the area.
This is according to a Financial Times report quoting a senior U.S. official who said its ships will sail within 12-nautical-mile zones that China claims as its territory around the Spratly Islands within the next two weeks.
If Obama sends warships into that area, there is a very real chance that they could get shot at. According to Newsweek, the Chinese are saying that they will not permit U.S. ships to violate those territorial waters under any circumstances…
“We will never allow any country to violate China’s territorial waters and airspace in the Spratly Islands, in the name of protecting freedom of navigation and overflight,” Foreign Ministry spokeswoman Hua Chunying said in response to a question about possible U.S. patrols. “We urge the related parties not to take any provocative actions, and genuinely take a responsible stance on regional peace and stability.”
Such exchanges appear to be moving China and the U.S. toward a much feared, yet long expected, military confrontation. Just as unsettling, both sides seem confident they can prevail.
Over the past couple of years our relations with China have really gone downhill very rapidly, and if the trading relationship between the two largest economies on the planet breaks down, that would have massive implications for the entire global economy.
In addition to everything above, the civil war in Ukraine continues to rage on. The United States funded, equipped, trained and organized the forces that violently overthrew the democratically-elected government in Ukraine, and then once those thugs (which actually included some neo-Nazis) took power, the Obama administration immediately recognized them as the legitimate government of Ukraine.
The Russians were absolutely infuriated by this, and they have been providing soldiers, equipment and supplies to the rebel groups that are fighting back against this new government. Of course the Russians deny that they are doing this, but it is exceedingly obvious that they are.
The rebel groups that the Russians have been backing have been doing very well and have been steadily taking ground, and this is not how the power brokers in D.C. envisioned things playing out in Ukraine. So in a desperate attempt to shift the momentum of the conflict, a bill is going through Congress that would provide “lethal military aid” to the government in Kiev. Initially the bill would have provided 200 million dollars in lethal aid, but now it has been upped to 300 million dollars. There are some that believe that the final figure will be significantly higher.
Once this bill gets passed, it will be an extremely important event. For the Russians, it will mean crossing a red line that never should have been crossed. You see, the truth is that Ukraine is Russia’s most important neighbor. Just imagine how we would feel if the Russians helped overthrow Canada’s government and then start feeding weapons to the new pro-Russian government that they helped install. That is exactly how the Russians view our meddling in Ukraine.
Earlier this year, I wrote an article in which I discussed an opinion poll that showed that 81 percent of all Russians now view the United States negatively, and only 13 percent of Russians have a positive view of this nation. Not even during the height of the Cold War were the numbers that bad.
The stage is being set for World War III, but most Americans are completely and totally oblivious to all of this because they are so wrapped up in their own little worlds.
Most Americans still seem to assume that the Russians and the Chinese are our “friends” and that any type of conflict between major global powers is impossible.
Well, the truth is that conflict has already begun in Ukraine and Syria, and tensions are rising with each passing day.
It won’t happen next week or next month, but we are on the road to World War III.
So what will the end result be? Please feel free to share your thoughts by posting a comment below…
On Monday, the Dow Jones Industrial Average plummeted 588 points. It was the 8th worst single day stock market crash in U.S. history, and it was the first time that the Dow has ever fallen by more than 500 points on two consecutive days. But the amazing thing is that the Dow actually performed better than almost every other major global stock market on Monday. In the U.S., the S&P 500 and the Nasdaq both did worse than the Dow. In Europe, almost every major index performed significantly worse than the Dow. Over in Asia, Japanese stocks were down 895 points, and Chinese stocks experienced the biggest decline of all (a whopping 8.46 percent). On June 25th, I was not kidding around when I issued a “red alert” for the last six months of 2015. I had never issued a formal alert for any other period of time, and I specifically stated that “a major financial collapse is imminent“. But you know what? As the weeks and months roll along, things will eventually be even worse than what any of the experts (including myself) have been projecting. The global financial system is now unraveling, and you better pack a lunch because this is going to be one very long horror show.
Our world has not seen a day quite like Monday in a very, very long time. Let’s start our discussion where the carnage began…
For weeks, the Chinese government has been taking unprecedented steps to try to stop Chinese stocks from crashing, but nothing has worked. As most Americans slept on Sunday night, the markets in China absolutely imploded…
As Europe and North America slept on Sunday night, Chinese markets went through the floor — the Shanghai Composite index of stocks fell by 8.49%, the biggest single-day collapse since 2007.
It wasn’t alone. Hong Kong’s Hang Seng fell 5.17%, and Japan’s Nikkei fell 4.61%. Stocks in Taiwan, the Philippines, Singapore, and Thailand also tumbled.
Things would have been even worse in China if trading had not been stopped in most stocks. Trading was suspended for an astounding 2,200 stocks once they hit their 10 percent decline limits.
Overall, the Shanghai Composite Index is now down close to 40 percent from the peak of the market, and the truth is that Chinese stocks are still massively overvalued when compared to the rest of the world.
That means that they could very easily fall a lot farther.
The selling momentum in Asia carried over into Europe once the European markets opened. On a percentage basis, all of the major indexes on the continent declined even more than the Dow did…
In Europe, the bloodbath from Friday continued unabated. The German Dax plunged 4.7%, the French CAC 40 5.4%, UK’s FTSE 100 dropped 4.7%. Euro Stoxx 600, which covers the largest European companies, was down 5.3%.
But wait… Europe is where the omnipotent ECB and other central banks have imposed negative deposit rates. The ECB is engaged in a massive ‘whatever it takes” QE program to inflate stock markets. But it’s not working. Omnipotence stops functioning once people stop believing in it.
Even before U.S. markets opened on Monday morning, the New York Stock Exchange was already warning that trading would be halted if things got too far out hand, and it almost happened…
The thousands of companies listed by the New York Stock Exchange and Nasdaq Stock Market will pause for 15 minutes if the Standard & Poor’s 500 Index plunges 7 percent before 3:25 p.m. New York time. The benchmark got close earlier, falling as much as 5.3 percent.
There were other circuit breakers in place for later in the day if too much panic selling ensued, but fortunately none of those were triggered either. Here is more from Bloomberg…
Another circuit breaker kicks in if the S&P 500 extends its losses to 13 percent before 3:25 p.m. If the plunge reaches 20 percent at any point during today’s session, the entire stock market will shut for the rest of the day.
When the U.S. markets did open, the Dow plunged 1,089 points during the opening minutes of trading. If the Dow would have stayed at that level, it would have been the worst single day stock market crash in U.S. history by a wide margin.
Instead, by the end of the day it only turned out to be the 8th worst day ever.
And in case you are wondering, yes, investors are losing a staggering amount of money. According to MarketWatch, the total amount of money lost is now starting to approach 2 trillion dollars…
As of March 31, households and nonprofits held $24.1 trillion in stocks. That’s both directly, and through mutual funds, pension funds and the like. That also includes the holdings of U.S.-based hedge funds, though you’d have to think that most hedge funds are held by households.
Using the Dow Jones Total Stock Market index DWCF, -4.21% through midmorning trade, that number had dropped to $22.32 trillion.
In other words, a cool $1.8 trillion has been lost between now and the first quarter — and overwhelmingly, those losses occurred in the last few days.
Unfortunately, U.S. stock prices are still nowhere near where they should be. If they were to actually reflect economic reality, they would have to fall a lot, lot lower.
For example, there is usually a very strong correlation between commodity prices and the S&P 500, but in recent times we have seen a very large divergence take place. Just check out the chart in this article. At this point the S&P 500 would have to fall another 30 to 40 percent or commodities would have to rise 30 or 40 percent in order to close the gap. I think that the following bit of commentary sums up where we are quite nicely…
“Markets are afraid of further economic weakness in China, further pain in global commodity markets and uncertain about Fed and PBoC policy — what they will do and what the impact will be,” Societe Generale’s Kit Juckes wrote on Monday. “The divergence between global commodity prices and equities is not a new theme but the danger now is that they begin to re-correlate – as they did when the dotcom bubble burst in 2000 and what had previously been an emerging market crisis became a US recession.”
And commodities were absolutely hammered once again on Monday.
For instance, the price of U.S. oil actually fell below 38 dollars a barrel at one point.
What we are watching unfold is incredible.
Of course the mainstream media is bringing on lots of clueless experts that are talking about what a wonderful “buying opportunity” this is. Even though those of us that saw this coming have been giving a detailed play by play account of the unfolding crisis for months, the talking heads on television still seem as oblivious as ever.
What is happening right now just doesn’t seem to make any sense to the “experts” that most people listen to. I love this headline from an article that Business Insider posted on Monday: “None of the theories for the Black Monday market crash add up“. Yes, if you are willingly blind to the long-term economic and financial trends which are destroying us, I guess these market crashes wouldn’t make sense.
And if stocks go up tomorrow (which they probably should), all of those same “experts” will be proclaiming that the “correction” is over and that everything is now fine.
But don’t be fooled by that. Just because stocks go up on any particular day does not mean that everything is fine. We are in the midst of a financial meltdown that is truly global in scope. This is going to take time to fully play out, and there will be good days and there will be bad days. The three largest single day increases for the Dow were right in the middle of the financial crisis of 2008. So one very good day for stocks is not going to change the long-term analysis one bit.
It isn’t complicated. Those that follow my writing regularly know that I have repeatedly explained how things were setting up in textbook fashion for another global financial crisis, and now one is unfolding right in front of our eyes.
At this point, everyone should be able to very clearly see what is happening, and yet most are still blind.
Why is that?