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September 2015 Sure Started Off With Quite A Bang, Eh?

Bang Explosion - Public DomainAfter enduring their worst August in 17 years, U.S. stocks are off to their worst start to a September in 13 years.  Just yesterday, I declared that we would be entering the “danger zone” this month, and it didn’t take long for the action to begin.  Historically, this month is the worst month of the year for stocks, and most of the biggest stock market crashes throughout our history have come in the fall.  On Tuesday, the Dow plunged another 469 points, and it is now down more than 10 percent from the peak of the market back in May.  That means that we have officially entered “correction” territory.  Asian stocks also crashed hard on Tuesday, so did European stocks, and the price of oil plummeted about 8 percent.  For a long time, there have been a lot of people out there that have been warning that a financial crisis would happen in the second half of 2015, and they are being proven right.  It is actually happening.

Of course there will be plenty of ups and downs still to come.  I cannot emphasize enough that we should fully expect waves of panic selling and waves of panic buying.  This always happens during any market crash.

For instance, just consider what happened when the tech bubble crashed.  The following analysis comes from Graham Summers

In a six month period, investors moved stocks down 19%, up 8%, then down 27%, then up 21%, then down 22%, then up 34%, then down 17%, then up 16%, then down 28%, then up 16%, and finally down 17%. Only at that point did stocks break their trendline for the bubble (the blue line) and it became obvious that the bubble had burst.

My point with all of this is that even when the bubble was both very specific AND obvious, the collapse was neither quick nor clean. There were several large 20%+ crashes, but overall, it was a roller coaster with jarring rallies that gradually wore its way down.

It was a full-blown market collapse, and yet there were moments when the market absolutely skyrocketed.

The same thing happened in 2008.  In fact, the best two days in stock market history were right in the middle of the last financial crisis.

So don’t be fooled by what happens on any one particular day.  Huge up days and huge down days are both red flags.

If the market is going to recover any time soon, what we need are nice quiet days without much volatility.  Unfortunately, that is not likely to happen any time soon because a tremendous amount of damage has already been done and some massive imbalances have already developed.  I like how Richard Smith put it recently…

Serious damage has been done to the financial markets in the past two weeks – very serious. Don’t let anyone tell you otherwise.

No one should be kidding themselves that what’s happened in the past two weeks is just a little late summer blip – building up some energy to rally into the fall and winter. I’m not saying it couldn’t happen but it isn’t the odds play.

Everywhere I look, technical damage has been done – and it’s like nothing we’ve seen since 2008.

Yes, the mainstream media is telling everyone that they shouldn’t panic and that everything will be just fine, but those that study the charts for a living know what is really happening.  For months, I have been telling you over and over that things were setting up in textbook fashion for another financial crisis, and other experts have been seeing the exact same things that I have been seeing.  For example, just consider what Louise Yamada told CNBC

Looking at a chart of the S&P 500, Louise Yamada noted that momentum has been declining for four months, which by her work, is a “classic” sell signal.

“This is suggesting to me that we are looking at a bear market,” said Yamada said Tuesday on CNBC’s “Futures Now.” Yamada noted that the last two times the market saw a similar shift in momentum were in January 2008 and June 2000.

Right now, a lot of people are very confused about what to do.  Those that told them to buy stocks in the first place are telling them to buy even more stocks.  And of course the mainstream media is telling them that everything is going to be just wonderful after this “correction” runs its course.  But at the same time a lot of people have a gut feeling that things are about to get really bad.

Personally, I think that what John Hussman shared in his recent newsletter contains a lot of wisdom…

“If you’re taking more equity risk than you can actually tolerate if the market goes south, setting your portfolio right isn’t a market call – it’s just sound financial planning. It’s only fun to be reckless if you also turn out to be lucky. Market conditions are now more hostile than at any time since the 2007 peak. If you want to be speculating, and you can tolerate the outcome, then you’re not taking too much equity risk in the first place. But it’s one or the other. Can you tolerate a 40-55% market loss over the next 18 months or so? If not, take this opportunity to set things right. That’s not the worst-case scenario under present conditions; it’s actually the run-of-the-mill historical expectation.”

I also want to point out that we are now less than two weeks away from the end of the Shemitah year.

If you are still not familiar with the concept of the Shemitah year, please see my previous article entitled “The Shemitah: The Biblical Pattern Which Indicates That A Financial Collapse May Be Coming In 2015“.

Even though the stock market crashed in September 2001 at the end of a Shemitah year, and in September 2008 at the end of another Shemitah year, and it is crashing again in September 2015, somehow there are still people out there that do not think that this is real.

Well, I am here to tell you that this is very real.  But if you won’t listen to me, perhaps you will consider the findings of Israeli mathematician Thomas Pound.  The following comes from an outstanding piece that was just published by WND

After a friend told him about the seven-year Sabbatical cycle to the stock market, Pound again set out to see if the theory held up under statistical scrutiny.

Applying the same ANOVA test to the Shemitah cycle, Pound’s research revealed that the sabbatical years were the only group of years in which the market cycle averages consistent significant losses since 1871.

He also found that, in Shemitah years, the difference in loss was greater than that noted in professor Shiller’s decennial cycle.

“Statistically, it appears that the calendar years in which the Sabbatical year ends are worse than the other six years, and that difference is significant based on the data I have,” Pound told Breaking Israel News.

Look, I know that this may not fit with how you currently view the world.

The truth is that a whole bunch of weird stuff is about to happen that may not fit with how you currently view the world.

But if you honestly want to discover the truth, then you have got to go wherever the evidence ultimately leads you.

So what do you think about all of this?  Please feel free to join the discussion by posting a comment below…

CNN Tells Americans That The Stock Market Is Not Going To Crash

CNN Newsroom - Photo by Doug WaldronOn Wednesday we witnessed the third largest single day point gain for the Dow Jones Industrial Average ever.  That sounds like great news until you realize that the two largest were in October 2008 – right in the middle of the last financial crisis.  This is a perfect example of what I wrote about yesterday.  Every time the market crashes, there are huge up days, huge down days and giant waves of market momentum.  Even though the Dow was up 619 points on Wednesday, overall we are still down more than 2,000 points from the peak of the market.  During the weeks and months to come, we are going to see many more wild market swings, but the overall direction of the market will be down.

Sadly, the mainstream media is still peddling the lie that everything is going to be just fine.  So millions upon and millions of Americans are just going to sit there while their investments get wiped out.  In the six trading days leading up to Wednesday, Americans lost a staggering 2.1 trillion dollars as stocks plunged, and the truth is that this nightmare is only just beginning.

Early on Wednesday morning, CNN published an article entitled “Why U.S. stocks aren’t headed for a crash“.  I had to laugh when I saw that headline.  If CNN is going to make this kind of a claim, they better have something very solid to base it on.  But instead, these are the five reasons we were given for why the stock market is not going to collapse…

1. “The U.S. economy isn’t on the verge of a recession.”

This is exactly what all of the “experts” told us back in 2007 and 2008 too.  In America today, the homeownership rate is at a 48 year low, 46 million Americans go to food banks, and economic growth has slowed to a standstill (and that is if you actually buy the highly manipulated official numbers).  The truth, of course, is that things continue to progressively get worse as our long-term economic decline continues to unfold.  For much more on this, please see my previous article entitled “12 Ways The Economy Is Already In Worse Shape Than It Was During The Depths Of The Last Recession“.

2. “China’s effect on U.S. is limited.”

Really? Go to just about any major retail store and start reading labels.  You will likely find far more things that were “made in China” than you will American-made products.  The global economy is more interconnected than ever before, and the Chinese stock market is the second largest on the entire planet.  Of course what is happening in China is going to affect us.

3. “American businesses are doing pretty well (outside of energy).”

Actually, they were doing pretty well for a while, but now things are turning.  Many large corporations are reporting declining orders, declining revenues and declining profits.  Unsold inventories are beginning to pile up and the pace of layoffs is starting to increase.  All of the things that we would expect to see just prior to another recession are happening.

4. “The Federal Reserve sounds cautious.”

This is laughable.  Ultimately, it isn’t going to matter much at all whether the Federal Reserve barely raises rates or not.  The era of “central bank omnipotence” is at an end.  Just look at what is happening over in Europe.  All of the quantitative easing that the ECB has been doing has not kept their markets from crashing in recent days.  Those that believe that the Federal Reserve can somehow miraculously keep the stock market from crashing this time around are going to end up deeply, deeply disappointed.

5. “Stock prices aren’t crazy high anymore.”

There is some truth to this last point.  Instead of stock prices being really, really, really crazy now they are just really, really crazy.  But as I have pointed out in many previous articles, the technical indicators are very clearly telling us that U.S. stocks still have a long, long way to go down.

But let’s hope that CNN is actually right – at least in the short-term.

Let’s hope that markets settle down and that things stabilize for at least a few weeks.

In order for that to happen, markets need to become a lot less volatile than they are right now.  The rollercoaster ride that we have been on in recent days has been extraordinary

The Dow traveled another 1,600 points during Tuesday’s trading session, adding to the 4,900 points the index traveled in down and up moves on Monday.

Markets tend to go up slowly and steadily when things are calm, and they tend to go down rapidly when things are volatile.

If you are rooting for a return of the bull market, you should be hoping for nice, boring trading days where the Dow goes up by about 100 points or so.  Wild swings like we have seen on Friday, Monday, Tuesday and Wednesday are very strong indicators that we have entered a bear market.

What we have been witnessing over the past week is almost unprecedented.  Just check out this piece of analysis from Bloomberg

By one metric, investors would have to go back 75 years to find the last time the S&P 500’s losses were this abrupt.

Bespoke Investment Group observed that the S&P 500 has closed more than four standard deviations below its 50-day moving average for the third consecutive session. That’s only the second time this has happened in the history of the index.

Of course after such a dramatic plunge it was inevitable that we were going to have a “bounce back day” where there was lots of panic buying.  Initially it looked like it would be Tuesday, but it turned out to be Wednesday instead.

But if you think that the big gain on Wednesday somehow means that the crisis is “over”, you are going to be sorely mistaken.

Personally, I am hoping that we at least see a bit of a pause in the action, but there is absolutely no guarantee that we will even get that.

As the markets have been flying around, more and more Americans are becoming curious about the potential for a full-blown stock market crash.  The following comes from Business Insider

This one’s pretty easy: according to Google search trends, more Americans are searching for “stock market crash” now that at any point since the last crash.

Right now, search traffic for the term “stock market crash” is hitting about 70% of the most volume this term has ever gotten through Google search.

And so while this data doesn’t convey absolute search volume for the term, we do know that Americans appear to be looking for information about a stock market crash at the highest level in about 7 years.

Very interesting.

In addition, Americans are also becoming more pessimistic about the overall economy.  According to Gallup, the level of confidence that Americans have about the future performance of the U.S. economy is the lowest that it has been in about a year.

And remember – it isn’t just U.S. markets that are starting to go crazy.  All over the planet stocks are crashing and recessions are starting.  In fact, I can’t remember a time when there has been this much economic chaos erupting all over the world all at once.

So can the U.S. resist the overall trend and pull out of this market crash?

Please feel free to share what you think by posting a comment below…

During Every Market Crash There Are Big Ups, Big Downs And Giant Waves Of Momentum

Tsunami Tidal Wave - Public DomainThis is exactly the type of market behavior that we would expect to see during the early stages of a major financial crisis.  In every major market downturn throughout history there were big ups, big downs and giant waves of momentum, and this time around will not be any different.  As I have explained repeatedly, markets tend to go up when things are calm, and they tend to go down when things get really choppy.  During a market meltdown, we fully expect to see days when the stock market absolutely soars.  Waves of panic selling are often followed by waves of panic buying.  As you will see below, six of the ten best single day gains for the Dow Jones Industrial Average happened during the financial crisis of 2008 and 2009.  So don’t be fooled for a moment by a very positive day for stocks like we are seeing on Tuesday.  It is all part of the dance.

At one point on Tuesday, the Dow was up over 400 points, and many of the talking heads on television were proclaiming that the stock market had “recovered”.  This is something that I predicted would happen yesterday

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.

No, everything is not “fine” now.  The extreme volatility that we are witnessing just tells us that more trouble is coming.  Early on Tuesday the market was “burning up energy” as short-term investors sought to “buy the dip”.  But now that wave of panic buying is subsiding and the Dow is only up 240 points as I write this.

Overall, the Dow is still down more than 2,200 points from the peak of the market.  Even though I specifically warned that a market crash was coming, I didn’t expect the Dow to be down this far in late August.  Even after the “rally” we witnessed today, we are still way ahead of schedule.

The truth is that what we have seen so far is just the warm up act.

The main event will unfold during the months of September through December, and right now most people could not even conceive of the things that we are going to see in 2016.

But all along, there are going to be days when stocks fly higher.  As I mentioned above, many of the “best days” in stock market history occurred right in the middle of the financial crisis of 2008 and 2009.  This is a point that Jim Quinn has made very eloquently…

Six of the ten largest point gains in the history of the stock market occurred between September 2008 and March 2009. That’s right. During one of the greatest market collapses in history, the market soared by 5% to 11% in one day, six times. Here are the data points:

2008-10-13: +936.42

2008-10-28: +889.35

2008-11-13: +552.59

2009-03-23: +497.48

2008-11-21: +494.13

2008-09-30: +485.21

Do you think these factoids will be shared with the public today on the stock bubble networks? Not a chance.

And all of the technical indicators are still screaming that U.S. stocks have a long, long way to fall.  For example, just check out this chart.  The long-term analysis has not changed one bit.

Often, it is the short-term news that drives markets on any particular day.  Tuesday began with another massive stock selloff in Asia

The Shanghai Composite, China’s main stock exchange, fell 7.6% on Tuesday – after losing 8.5% on what state media have called China’s “Black Monday”.

It was the worst fall since 2007 and caused sharp drops in markets in the US and Europe

Tokyo’s Nikkei index had a volatile day, closing 4% lower.

In another desperate attempt to stop the bleeding, the Chinese decided to cut interest rates

The People’s Bank of China has lowered its interest rate for the fifth time since November. The one-year lending has been reduced by 25 basis points to 4.6 percent; the one-year deposit rate has been cut by 25 basis points to 1.75 percent. The change comes into force on Wednesday.

This reduction in interest rates was cheered by investors all over the planet, and as a result there was a wave of panic buying in Europe and in the United States.

But none of the short-term activity changes the fact that global financial markets are absolutely primed for a giant crash.  I like how Bill Fleckenstein put it during a recent interview with King World News

I have no idea how this is going to play out, other than I know we are headed considerably lower. The fact that so few seem to understand what the actual problem is makes me even more confident about that point. It would seem that everyone is using the easy answer and blaming China, but that was just the catalyst. The market has been trading in a heavy sideways fashion for some time, expectations are way higher than can be met, the technical action has now deteriorated, and bad news actually matters at the same time that speculation has run rampant. As I have stated many times (and also noted the reasons why), you couldn’t create a more crash-prone environment if you specifically set out to do so.

What we can’t account for are “black swan events” which could greatly accelerate this financial crisis.

A war in the Middle East, a major natural disaster or a terror attack involving weapons of mass destruction are all examples of the kinds of things that could turn this market crash into full-blown market implosion.

As we move into the critical month of September 2015, I think that it is safe to say that we should all be ready to expect the unexpected.  Our world is becoming increasingly unstable, and I am extremely concerned about the period of time that we are heading into.

The nice, comfortable period of relative stability that we have been experiencing for the past few years has come to an end.  I hope that you have enjoyed the good times while you still had them.

Now we are moving into a time of tremendous chaos and rapidly shifting conditions, and it is imperative that we all work very hard to get prepared for it while we still can.

BLACK MONDAY: The First Time EVER The Dow Has Dropped By More Than 500 Points On Two Consecutive Days

New York City Empire State Building - Public DomainOn 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…

Asian Markets

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.

European Markets

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.

U.S. Markets

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?

This 2 Day Stock Market Crash Was Larger Than Any 1 Day Stock Market Crash In U.S. History

Sunrise Globe Earth Planet Space - Public DomainWe witnessed something truly historic happen on Friday.  The Dow Jones Industrial Average plummeted 530 points, and that followed a 358 point crash on Thursday.  When you add those two days together, the total two day stock market crash that we just witnessed comes to a grand total of 888 points, which is larger than any one day stock market crash in U.S. history.  It is also interesting to note that this 888 point crash comes in the 8th month of our calendar.  Perhaps that is just a coincidence, and perhaps it is not.  It just struck me as being noteworthy.  This is the first time that the Dow has dropped by more than 300 points on two consecutive days since November 2008, and we all remember what was happening back then.  Overall, this was the worst week for the Dow in four years, and there have only been five other months throughout history when the Dow has fallen by more than a thousand points (the most recent being October 2008).  Of course we still have six more trading days left in August, so there is plenty of time remaining for even more carnage.

By itself, the 530 point plunge on Friday was the ninth worst stock market crash in all of U.S. history.  The following list of the top eight comes from Wikipedia

#1 2008-09-29 −777.68

#2 2008-10-15 −733.08

#3 2001-09-17 −684.81

#4 2008-12-01 −679.95

#5 2008-10-09 −678.91

#6 2011-08-08 −634.76

#7 2000-04-14 −617.77

#8 1997-10-27 −554.26

Another very interesting thing to note is that the largest stock market crash in U.S. history took place on the very last day of the Shemitah year of 2008, and now we are less than a month away from the end of this current Shemitah year.

It is funny how these strange “coincidences” keep happening.

The financial carnage that we witnessed on Friday was truly global in scope.  On a percentage basis, Chinese stocks crashed even more than U.S. stocks did.  Japanese stocks also crashed, so did stock markets all over Europe, and emerging market currencies all over the planet got absolutely destroyed.

The following is how Zero Hedge summarized what went down…

  • China’s worst week since July – closes at 5 month lows
  • Global Stocks’ worst week since May 2012
  • US Stocks’ worst week in 4 years
  • VIX’s biggest weekly rise ever
  • Crude’s longest losing streak in 29 years
  • Gold’s best week since January
  • 5Y TSY Yield’s biggest absolute drop in 2 years

Even though I specifically warned that this would happen, and have been explaining why it would happen on my website in excruciating detail for months, the truth is that I didn’t expect stocks to start crashing this quickly or this ferociously.

Normally, August is a fairly slow month in the financial world.  As I have discussed previously, most of the really noteworthy stock market crashes throughout history have taken place during the months of September and October.  So I thought that things wouldn’t start getting really crazy for another few weeks at least.

Financial markets tend to fall much faster than they go up, and I believe that we are moving into a time of extraordinary volatility.  There will be huge down days, and there will also be huge up days.  In fact, the three largest single day rallies in Dow history happened right in the middle of the financial crisis of 2008.  So don’t let what happens on any one particular day fool you.

An absolutely gigantic global financial bubble is beginning to burst, and stocks could potentially fall a very, very long way.  For instance, just consider what MarketWatch columnist Brett Arends has just written…

I don’t mean to be alarmist or to induce panic, but someone needs to tell the public that there is a plausible scenario in which the U.S. stock market now collapses by another 70% until the Dow Jones Industrial Average falls to about 5,000.

It is important to keep in mind that Arends is not a “bear” at all.  He is a very level-headed analyst that tries to objectively look at all sides of things.

I sincerely hope that global financial markets will stabilize for at least a couple of weeks.  But there is absolutely no guarantee that will happen.

So many of the things that I have been warning about on this website and on End of the American Dream are starting to unfold right in front of our eyes.  If I am right, this is just the beginning.  I believe that we are moving into a time of unprecedented chaos, and our nation is about to be shaken to the core.

Hopefully you have been preparing for the storm that is coming for quite a while and you will not be surprised by what is about to happen.

Unfortunately, the same cannot be said for the vast majority of Americans.  Most of them are totally unprepared for what is coming, and they are going to be completely blindsided by the events that will unfold in the months ahead.

The relative calm of the past few years has lulled millions into a false sense of complacency.

If you are one of those that have dozed off, I have a word of warning for you…

Wake up and get ready.

It’s starting.

Why Are So Many People Freaking Out About A Stock Market Crash In The Fall Of 2015?

Manhattan Stock Market Crash In 2015 - Public DomainIs the stock market going to crash by the end of 2015?  Of course stock market crashes are already happening in 23 different nations around the planet, but most Americans don’t really care about those markets.  The truth is that what matters to people in this country is the health of their own stock portfolios and retirement accounts.  There are a lot of people out there that are very afraid of what could happen if the money that they have worked so hard to save gets wiped out in a sudden financial collapse.  And right now there is an unprecedented amount of buzz about the potential for a giant stock market crash by the end of this calendar year.  In fact, I don’t think that I have ever seen more experts come out with bold predictions that a stock market crash will happen within a very specific period of time.

The following is a sampling of some of the experts that have made very bold proclamations about the rest of this year over the past few weeks.  Many of these individuals are putting their credibility on the line by proclaiming that a stock market crash is just around the corner…

-Tom McClellan says that we are heading for an “ugly decline” and that there will be “nothing good for bulls for the rest of the year”

Tom McClellan loves doing what financial advisers tell you not to do. He tries to time the financial markets — to the exact day, if his charts align just right.

At the moment, they are telling him to be bullish on the stock market for all of his trading time frames, including those that trade every few days, weeks and months. But bulls should be ready to flee, as soon as this week.

That’s because McClellan said his timing models suggest “THE” top in stocks will be hit some time between Aug. 20 and Aug. 26. He expects “nothing good for the bulls for the rest of the year,” he said in a phone interview with MarketWatch.

McClellan doesn’t have a strong view on how far stocks could fall, just that it will probably be an “ugly decline” lasting into early 2016.

-Harry Dent recently stated that we are just “weeks away” from a “global financial collapse“.

-Gerald Celente says that “the global economy has collapsed” and he is “predicting that we are going to see a global stock market crash before the end of the year“.

-Larry Edelson insists that he is “100% confident” that a global financial crisis will be triggered “within the next few months”…

On October 7, 2015, the first economic supercycle since 1929 will trigger a global financial crisis of epic proportions. It will bring Europe, Japan and the United States to their knees, sending nearly one billion human beings on a roller-coaster ride through hell for the next five years. A ride like no generation has ever seen. I am 100% confident it will hit within the next few months.”

-Jeff Berwick, the editor of the Dollar Vigilante, says that there is “enough going on in September to have me incredibly curious and concerned about what’s going to happen“.

-Egon von Greyerz recently explained that he fears “that this coming September – October all hell will break loose in the world economy and markets“.

-Even the mainstream media is issuing ominous warnings now.  Just a few days ago, one of the most important newspapers in the entire world published a major story about the coming crisis under this headline: “Doomsday clock for global market crash strikes one minute to midnight as central banks lose control“.

-The Bank for International Settlements and the IMF have jumped on the prediction bandwagon as well.  The following comes from a recent piece by Brandon Smith

The BIS warns that the world is currently defenseless against the next market crisis. I would point out that the BIS has a record of predicting economic crashes, including back in 2007 just before the derivatives and credit crisis began. This ability to foresee fiscal disasters is far more likely due to the fact that the BIS is the dominant force in global central banking and is the cause of crisis, rather than merely a predictor of crisis. That is to say, it is easy to predict disasters you yourself are about to initiate.

It is no mistake that the warnings from the BIS and the IMF tend to come too little too late, or that they are beginning to compose cautionary press releases today that sound much like what alternative analysts were saying a few years ago. The goal of these globalist organizations is not to help people prepare, only to set themselves up as Johnny-come-lately prognosticators so that after a collapse they can claim they warned us all, which can then be used as a rationalization for why they are the best people to administrate the economies of the planet as a whole.

So why are so many prominent voices now warning that a global financial crisis is imminent?

The answer is actually very simple.

A global financial crisis is imminent.

Back on June 25th, I issued a red alert for the last six months of 2015 before any of these other guys issued their warnings.

When I first issued my alert, things were still seemingly very calm in the financial world, and a lot of people out there thought that I was nuts.

Well, here we are just a couple of months later and all hell is breaking loose.  23 global stock markets are crashing, the price of oil has been imploding, a new currency war has erupted, industrial commodities are plunging just like they did prior to the market crash of 2008, a full-blown financial crisis has gripped South America with fear, and junk bonds are sending some very ominous signals.

In the U.S., things are beginning to slowly unravel.  The Dow was down another 162 points on Wednesday, and overall we are now down almost 1000 points from the peak of the market.  At this point, it isn’t going to take much to push us into a bear market.

So enjoy what is left of August.

September is right around the corner, and if the experts that I mentioned above are correct, then it is likely to be one wild month.

If History Is Any Indication, Junk Bonds And Copper Are Telling Us Exactly Where Stocks Are Heading Next

Stock Market - Public DomainYields on the riskiest junk bonds are absolutely soaring and the price of copper just hit a fresh six year low.  To most people, those pieces of financial news are meaningless.  But if you understand history, and you are aware of the patterns that immediately preceded previous stock market crashes, then you know how how huge both of those signs are.  During the summer of 2008, junk bond prices absolutely cratered as junk bond yields skyrocketed.  This was a very clear signal that financial markets were about to crash, and sure enough a couple of months later it happened.  Now the exact same thing is happening again.  The following comes from a Wall Street On Parade article that was posted on Tuesday entitled “Keep Your Eye on Junk Bonds: They’re Starting to Behave Like ‘08“…

According to data from Bloomberg, corporations have issued a stunning $9.3 trillion in bonds since the beginning of 2009. The major beneficiary of this debt binge has been the stock market rather than investment in modernizing the plant, equipment or new hires to make the company more competitive for the future. Bond proceeds frequently ended up buying back shares or boosting dividends, thus elevating the stock market on the back of heavier debt levels on corporate balance sheets.

Now, with commodity prices resuming their plunge and currency wars spreading, concerns of financial contagion are back in the markets and spreads on corporate bonds versus safer, more liquid instruments like U.S. Treasury notes, are widening in a fashion similar to the warning signs heading into the 2008 crash. The $2.2 trillion junk bond market (high-yield) as well as the investment grade market have seen spreads widen as outflows from Exchange Traded Funds (ETFs) and bond funds pick up steam.

And right now we are seeing the most volatility in the junkiest of the junk bonds.

The following comes from Wolf Richter, and my jaw just about dropped to the floor when I first saw this…

This chart of yields at the riskiest end of the junk bond market – bonds rated CCC and below – shows what happened. These bonds have been selling off over the past 12 months, with exception of the sucker rally earlier this year, and their yields more than doubled from less than 7.9% in June a year ago to 16.2% by Thursday evening. And Thursday was a massacre:

riskiest junk bonds

On Thursday, yields jumped 2.6 percentage points, from 13.58% to 16.18%, as these junk bonds plunged. Those kinds of single-day vertigo-inducing sell-offs are rare in normal times, and there haven’t been any since the Financial Crisis.

Amazingly, the Federal Reserve is actually thinking about raising interest rates in this environment.

If that sounds like a really bad idea to you, that is because it is a really bad idea.

Raising interest rates would just add fuel to the fire of this junk bond rout.  DoubleLine Capital’s co-founder Jeffrey Gundlach agrees with me

To raise interest rates when junk bonds are nearly at a four-year low is a bad idea,” Gundlach said in a telephone interview.

Gundlach, widely followed for his prescient investment calls, said if the Fed begins raising interest rates in September, “it opens the lid on Pandora’s Box of a tightening cycle.”

Gundlach said the selling pressure in copper and commodity prices driven by worries over China’s growth outlook “should be a huge concern. It is the second-biggest economy in the world.”

Meanwhile, as Gundlach mentioned, the price of copper continues to plunge.

On Tuesday, it set a brand new six year low.  It is now the lowest that it has been since the days of the last financial crisis.

And as you can see from this excerpt from a recent Investment Research Dynamics article, the price of copper started crashing before the stock market crash of 2008…

I wanted to keep this simple and just look at what is considered perhaps the best barometer of global economic activity:

Copper Chart - Investment Research Dynamics

You’ll note that the price of copper is headed lower and is back to the price level where it was in the middle of 2008, right before the great financial collapse.  You’ll note that $3.6 trillion in Federal Reserve money printing – on top of trillions in Bank of Japan, ECB and People’s Bank of China money printing – has not been able to keep the price of copper from crashing again.

In case you haven’t figured it out by now, the global financial system is in real trouble.

Another sign that rough waters are ahead is the fact that global shipping has fallen into a dramatic slump.  The following comes from the Telegraph

World shipping has fallen into a deep slump over the late summer, dashing hopes of a quick recovery from the global trade recession earlier this year and heightening fears that the six-year economic expansion may be on its last legs.

Freight rates for container shipping from Asia to Europe fell by over 20pc in the second week of August, even though trade volumes should be picking up at this time of the year. The Shanghai Containerized Freight Index (SCFI) for routes to north European ports crashed by 23pc in five trading days.

Global economic activity is clearly slowing down, and there are 23 nations around the planet that are already experiencing stock market crashes.

The financial markets of the western world have not totally crashed just yet, but they are more leveraged and more vulnerable than ever.  The following comes from Zero Hedge

  • The REAL problem for the financial system is the bond bubble. In 2008 when the crisis hit it was $80 trillion. It has since grown to over $100 trillion.
  • The derivatives market that uses this bond bubble as collateral is over $555 trillion in size.
  • Many of the large multinational corporations, sovereign governments, and even municipalities have used derivatives to fake earnings and hide debt. NO ONE knows to what degree this has been the case, but given that 20% of corporate CFOs have admitted to faking earnings in the past, it’s likely a significant amount.
  • Corporations today are more leveraged than they were in 2007. As Stanley Druckenmiller noted recently, in 2007 corporate bonds were $3.5 trillion… today they are $7 trillion: an amount equal to nearly 50% of US GDP.
  • The Central Banks are now all leveraged at levels greater than or equal to where Lehman Brothers was when it imploded. The Fed is leveraged at 78 to 1. The ECB is leveraged at over 26 to 1. Lehman Brothers was leveraged at 30 to 1.
  • The Central Banks have no idea how to exit their strategies. Fed minutes released from 2009 show Janet Yellen was worried about how to exit when the Fed’s balance sheet was $1.3 trillion (back in 2009). Today it’s over $4.5 trillion.

As I explained during a recent interview with Kate Dalley of Fox News radio, what is coming should be obvious to anyone that is willing to look at the numbers honestly.

The global financial system is going to crash.

Yes, this crisis is going to take years to fully play out, but by the time it is all said and done it is going to be much worse than what we experienced back in 2008 and 2009.

So buckle up tight and hold on for your life, because we are in for one wild ride.

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