Experts Warn That The “Scariest” Stock Market Signals Are Flashing Red

So many top professionals in the financial industry are sounding the alarm about a coming stock market crash right now.  And there certainly have been rumblings in 2018 – not too long ago we had a three day stretch that was called “the tech bloodbath”, and during that time Facebook had the worst day for a single company in stock market history.  But we haven’t seen the really big “crash” yet.  Many have been waiting for it to happen for several years, and some people out there are convinced that it is never going to come at all.  Of course the truth is that we are in perhaps the largest stock market bubble that our nation has ever seen, and all other large stock market bubbles have always ended with a major price collapse.  So whether it happens immediately or it takes a little while longer, it is inevitable that stock prices will eventually return to their long-term averages.

Doug Ramsey, the chief investment officer at Leuthold Group, is one of those that is sounding the alarm.  Unlike price to earnings ratios, price to sales ratios are very hard to manipulate, and he has pointed out that price to sales ratios are higher than we have ever witnessed before.

In particular, when you look at the median stock price to sales ratio, it is the highest that it has ever been and it is twice as high as it was in February 2000

He also shared a chart which he claims is “unfit for a family-friendly publication” that shows how in terms of median price to sales ratio, the S&P 500 is twice as expensive as it was in 2000.

“Overvaluation in 2000 was highly concentrated; today it is pervasive, with the median S&P 500 Price/Sales ratio of 2.63 times more than double the 1.23 times prevailing in February 2000.

To me, that number is absolutely stunning, and it shows that we have a long, long way to fall.

As I have said before, stock prices need to fall by 40 or 50 percent just to get into a neighborhood where they will begin to make sense again.

And something else that Ramsey has pointed out is that in 2018 stocks are behaving very much like they did just before the dotcom bubble crashed

Ramsey admits that history isn’t the best guide for the future but the S&P 500’s performance since it touched its peak on Jan. 26 is closely mirroring what happened 18 years ago.

“In the earlier case, a volatile five-month upswing that began in mid-April ultimately fell just a half-percent short of the March 24th high by early September. This year, a similarly choppy, six-month rebound has taken the S&P 500 to within 1% of its January 26th high,” Ramsey said.

Another major indicator that is “flashing red” is correlation.

Just prior to the last two stock market crashes, stock prices began to wildly diverge.  While some stocks were still going up, others were cratering big time.  This lack of uniformity is often a sign that big trouble is on the horizon.  The following comes from CNBC

In January 2001, before tech went bust, stocks diverged as growth flourished. Everything named dotcom boomed, but old line industries puttered.

There hasn’t been such a divergence between stocks in the overall market since then, not even during the Great Recession.

Well, guess what is happening right now?

James Paulsen, also with the Leuthold Group, is warning that correlation “is at one of the lowest levels in the post-War era”

“Correlation is at one of the lowest levels in the post-War era,” said James Paulsen, chief investment strategist at Leuthold Group. “The combination is damaging. We now have record low correlation at the same time we have high valuations, and the combination is bad for the market.”

“When you have this situation of the lowest quintile correlation against the highest quintile valuation since 1952, you have 10 percent declines on average,” said Paulsen.

When the stock market finally crashes, a lot of people are going to complain that nobody warned them in advance that it was coming, but in reality anybody that cannot see it coming from a mile away must be blind.

There is no question that it is coming.  The only question is how soon it will get here.

And it certainly doesn’t help that a trade war has erupted which is greatly disrupting global commerce.

For example, a giant cargo ship carrying 20 million dollars worth of soybeans has been circling in the ocean off the coast of China for over a month because it missed the tariff deadline by just a few hours

The Peak Pegasus, which is owned by JPMorgan Asset Management, left Seattle on June 8 on a monthlong voyage to the northeastern Chinese city of Dalian. The trade war between the US and China was erupting just as it left, with President Donald Trump imposing tariffs on billions of dollars’ worth of Chinese imports.

The US ship was due to deliver its 70,000-tonne cargo on July 6, The Guardian reported, but missed the tariff deadline. The Peak Pegasus arrived about five hours after China imposed retaliatory tariffs on US goods including soybeans.

Somebody is going to lose a tremendous amount of money in that deal.

If you take an honest look at the numbers, there is no debate that we are in far worse shape than we were just before the financial crisis of 2008.  Our debt levels are much higher, stock prices are way more inflated, and financial institutions have become even more reckless.  None of the long-term problems that plagued us back in 2008 have been fixed.  Instead, the current system was patched up and all of the bubbles were re-inflated.  Unfortunately, our attention spans are so short these days, and for most people 2008 seems like ancient history at this point.

But without a doubt a much worse crisis than 2008 is on the way, and most people are going to be absolutely blind-sided by it.

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

A Very Scary Christmas And An Incredibly Frightening New Year

Can you hear that?  It almost sounds like a little bit of peace and quiet.  This year, the holiday season has been fairly uneventful, and for that we should be very grateful.  But it isn’t going to last long.  2012 is going to be a much more difficult year for the U.S. economy and the global financial system than 2011 has been.  So if things are going well for you right now, enjoy this little bubble of peace and tranquility while you can.  Because while things may look calm on the surface right now, the truth is that this is a very scary Christmas for financial professionals and world leaders.  Most of them know how fragile the global financial system is at the moment.  Most of them know that we are living in the greatest bubble of debt, leverage and financial risk that the world has ever seen.  As I wrote about the other day, world leaders would not be throwing huge bailouts around like crazy if everything was going to be just fine.  The truth is that we are rapidly approaching another financial crisis that may end up being even worse than the horrific crash of 2008.

Despite unprecedented efforts by the European Central Bank, the yield on 10 year Italian bonds is nearly up to 7 percent again.

Keep an eye on the yield on 10 year Italian bonds.  That is going to be one of the most important financial numbers in the world in the coming months.

But Italy is not the only problem.  The reality is that several European governments are teetering on the verge of default right now.  Meanwhile, confidence in the European financial system has been absolutely shattered and a devastating credit crunch has set in.  Nobody (other than the ECB) wants to loan money to the banks and the banks are massively cutting back on loans to businesses and consumers.  This is causing the money supply to fall.  The ECB is trying to hold things together with chicken wire and duct tape, but it isn’t going to work.

In major financial centers such as the City of London, this is a very scary Christmas and the outlook for the new year looks very frightening.  Because financial activity has dried up so dramatically, a number of firms are already shutting down.  The following comes from a recent Bloomberg article….

London’s stockbrokers are shrinking as Europe’s sovereign debt crisis and competition from international firms squeezes revenue and fees.

“This isn’t just a blip, this is much worse,” said Tim Linacre, who is stepping down as chief executive officer of Panmure (PMR) Gordon & Co., a 135-year-old brokerage. “It’s a desert for activity, which is why you are seeing some firms throw in the towel.”

In the past month, Altium Capital closed its securities unit. Evolution Group Plc (EVG), Merchant Securities Group Plc, Arbuthnot Securities Ltd. and Collins Stewart Hawkpoint Plc have all accepted takeover offers from larger competitors.

“It feels worse than any other time,” said Lorna Tilbian, an executive director at Numis Corp. who began her career in 1984. “All I hear about is people putting up a white flag.”

Many out there are wondering if we are about to face another crisis like the one we saw back in 2008.

Unfortunately, none of the underlying problems that caused that crisis were ever really fixed.

We did not learn from history so now we are in for another round of pain.

In fact, Chris Martenson believes that this next crisis will be even worse than 2008….

There are clear signs of a liquidity crunch in the asset markets right now, and the question I keep hearing is, Is this 2008 all over again?

No, it’s worse. Much worse.

In 2008 there was a lot more faith and optimism upon which to draw. But both have been squandered to significant degrees by feckless regulators and authorities who failed to properly address any of the root causes of the first crisis even as they slathered layer after layer of thin-air money over many of the symptoms.

Anyone who has paid attention knows that those “magic potions” proved to be anything but. Not only are the root causes still with us (too much debt, vast regional financial imbalances, and high energy prices), but they have actually grown worse the entire time.

Frightening stuff.

A couple of months ago, I wrote about the coming derivatives crisis that could potentially wipe out the entire global financial system.

When the next great financial crisis strikes, there is going to be a lot of focus on derivatives once again.

Top global financial authorities such as Ben Bernanke continue to insist that derivatives are perfectly safe.

But there are other voices in the financial world that are warning that we are heading for financial armageddon.  For example,just check out what Mark Faber is saying….

“I am convinced the whole derivatives market will cease to exit. Will become zero. And when it happens I don’t know: you can postpone the problems with monetary measures for a long time but you can’t solve them… Greece should have defaulted – it would have sent a message that not all derivatives are equal because it depends on the counterparty.”

That is very strong language.

Faber also believes that the stock market is going to get hit really, really hard during the coming crisis….

“I am ultra bearish. I think most people will be lucky if they still have 50% of their money in 5 years time. You have to have diversification – some real estate in the countryside, some gold and some equities because if you think it through, say Germany 1900 to today, we had WWI, we had hyperinflation, WWII, cash holders and bondholders they lost everything 3 times, but if you owned equities you’d be ok. In equities in general you will not lose it all, it may not be a good investment, unless you put it all in one company and it goes bankrupt.”

Some of the top financial officials in the entire world have also used some very scary language in recent weeks.

The head of the International Monetary Fund, Christian Lagarde, recently stated that we could soon see conditions “reminiscent of the 1930s depression” and that no country on earth “will be immune to the crisis”….

“There is no economy in the world, whether low-income countries, emerging markets, middle-income countries or super-advanced economies that will be immune to the crisis that we see not only unfolding but escalating”

But most people are so busy opening up the cheap plastic presents under their Christmas trees (that were mostly made overseas) that they aren’t even paying attention to these warnings.

Look, when the money supply falls significantly it is almost impossible to avoid a recession.  Just look at the historical numbers.

Unfortunately, money supply numbers all over Europe are falling dramatically right now as an article in the Telegraph recently noted….

All key measures of the money supply in the eurozone contracted in October with drastic falls across parts of southern Europe, raising the risk of severe recession over coming months.

Confidence in the banking system in Europe has never been this low in the post-World War II era.  Sadly, most people simply do not understand how bad things have gotten for major European banks.  One Australian news source recently put it this way….

“If anyone thinks things are getting better, they simply don’t understand how severe the problems are,” a London executive at a global bank said. “A major bank could fail within weeks.”

Others said many continental banks, including French, Italian and Spanish lenders, were close to running out of the acceptable forms of collateral, such as US Treasury bonds, that could be used to finance short-term loans.

Some have been forced to lend out their gold reserves to maintain access to US dollar funding.

The outlook is very ominous.

Financial professionals all over the globe are telling us what is coming if we are willing to listen.

The following comes from a report recently produced by Credit Suisse’s Fixed Income Research unit….

“We seem to have entered the last days of the euro as we currently know it. That doesn’t make a break-up very likely, but it does mean some extraordinary things will almost certainly need to happen – probably by mid-January – to prevent the progressive closure of all the euro zone sovereign bond markets, potentially accompanied by escalating runs on even the strongest banks.”

The first six months of 2012 are going to be a very key time.  National governments and big European banks are scheduled to roll over huge mountains of debt.  But if they can’t find any takers that could bring the global financial system to a moment of great crisis very quickly.

The following is how former hedge fund manager Bruce Krasting recently described the problem that Italy is facing….

At this point there is zero possibility that Italy can refinance any portion of its $300b of 2012 maturing debt. If there is anyone at the table who still thinks that Italy can pull off a miracle, they are wrong. I’m certain that the finance guys at the ECB and Italian CB understand this. I repeat, there is a zero chance for a market solution for Italy.

But even if we don’t see a formal default by a major European nation such a Italy, that doesn’t mean that major European banks are going to make it through the crippling recession that has now begun in Europe.

Charles Wyplosz, a professor of international economics at Geneva’s Graduate Institute, is absolutely convinced that we are going to see some major European banks collapse….

“Banks will collapse, including possibly a number of French banks that are very exposed to Greece, Portugal, Italy and Spain.”

Authorities in Europe are saying the “right things” publicly, but privately they are preparing for the worst.

As the Telegraph recently reported, the British government is now making plans based on the assumption that a collapse of the euro is only “just a matter of time”….

A senior minister has now revealed the extent of the Government’s concern, saying that Britain is now planning on the basis that a euro collapse is now just a matter of time.

Yes, we are heading for a huge financial collapse and massive economic trouble.

So enjoy the good times while we still have them.

They are not going to last too much longer.

17 Quotes About The Coming Global Financial Collapse That Will Make Your Hair Stand Up

Is the world on the verge of another massive global financial collapse?  Yes.  The western world is drowning in an ocean of debt unlike anything the world has ever seen before, and our financial markets are gigantic casinos that are dependent on huge mountains of risk and leverage remaining very stable.  In the end, this house of cards that has been built on a foundation of sand is going to come crashing down in a horrifying manner.  Usually in this column I go on and on about why things will soon get much worse.  But today I am going to take a bit of a break.  Today, I am going to let some of the top financial professionals in the world tell you why things will soon get much worse.  Many of the quotes that you are about to read just might make the hair on the back of your neck stand up.  Most people out there have no idea what is about to happen.  Most people out there are working hard and are busy preparing for the holidays and they are hopeful that the economy will turn around soon.  But that is not going to happen.  We are heading for another major global financial collapse, and when it happens the U.S. economy is going to get even worse.

The epicenter for the coming global financial collapse is almost certainly going to be in Europe.  As you will see below, financial professionals all over the world are sounding the alarm about Europe.  It is a disaster that everyone can see coming but that nobody seems to be able to prevent.

Of course the failure of the “supercommittee” in the United States certainly is not helping matters.  There is already talk that we may soon see another downgrade for U.S. debt.  It is hard to even describe how incompetent the U.S. Congress is.

There is a tremendous lack of leadership both in the United States and in Europe right now.  The financial world is more interconnected than ever before, and when the financial dominoes start to fall it is going to take a miracle to keep a complete and total disaster from unfolding.

So when the time comes, who is going to step forward and provide that leadership?

That is a really, really good question.

Right now, panic and fear are spreading like wildfire in the financial world and nobody knows for sure what is going to happen next.

But one thing is for certain.  Pessimism is growing stronger by the day.

The following are 17 quotes about the coming global financial collapse that will make your hair stand up….

#1 Credit Suisse’s Fixed Income Research unit: “We seem to have entered the last days of the euro as we currently know it. That doesn’t make a break-up very likely, but it does mean some extraordinary things will almost certainly need to happen – probably by mid-January – to prevent the progressive closure of all the euro zone sovereign bond markets, potentially accompanied by escalating runs on even the strongest banks.”

#2 Willem Buiter, chief economist at Citigroup: “Time is running out fast.  I think we have maybe a few months — it could be weeks, it could be days — before there is a material risk of a fundamentally unnecessary default by a country like Spain or Italy which would be a financial catastrophe dragging the European banking system and North America with it.”

#3 Jim Reid of Deutsche Bank: “If you don’t think Merkel’s tone will change then our investment advice is to dig a hole in the ground and hide.”

#4 David Rosenberg, a senior economist at Gluskin Sheff in Toronto: “Lenders are finding it difficult to finance their day-to-day operations with short-term funding. This is a lot like 2008 but with more twists.”

#5 Christian Stracke, the head of credit research for Pimco: “This is just a repeat of what we saw in 2008, when everyone wanted to see toxic assets off the banks’ balance sheets”

#6 Paul Krugman of the New York Times: “At this point I’d guess soaring rates on Italian debt leading to a gigantic bank run, both because of solvency fears about Italian banks given a default and because of fear that Italy will end up leaving the euro. This then leads to emergency bank closing, and once that happens, a decision to drop the euro and install the new lira. Next stop, France.”

#7 Paul Hickey of Bespoke Investment Group: “More and more, we are hearing anecdotal comments from individual and professionals that this is the most difficult environment they have ever experienced as the market is like a fish flopping around after being taken out of the water.”

#8 Bob Janjuah of Nomura International: “Germany appears to be adamant that full political and fiscal integration over the next decade (nothing substantive will happen over the short term, in my view) is the only option, and ECB monetisation is no longer possible. I really think it is that clear and simple. And if I am wrong, and the ECB does a U-turn and agrees to unlimited monetisation, I will simply wait for the inevitable knee-jerk rally to fade before reloading my short risk positions. Even if Germany and the ECB somehow agree to unlimited monetisation I believe it will do nothing to fix the insolvency and lack of growth in the eurozone. It will just result in a major destruction of the ECB‟s balance sheet which will force an ECB recap. At that point, I think Germany and its northern partners would walk away. Markets always want short, sharp, simple solutions.”

#9 Dan Akerson, CEO of General Motors: “The ’08 recession, which was a credit bubble that manifested itself through primarily the real estate market, that was a serious stress….This is much more serious.”

#10 Francesco Garzarelli of Goldman Sachs: “Pressures on Euro area sovereign bond markets have progressively intensified and spread like a wildfire.”

#11 Jim Rogers: “In 2002 it was bad, in 2008 it was worse and 2012 or 2013 is going to be worse still – be careful”

#12 Dr. Pippa Malmgren, the President and founder of Principalis Asset Management who once worked in the White House as an adviser to President Bush: “Market forces are increasingly determining what the options are and foreclosing on options policymakers thought they had. One option which is now under discussion involves permitting a country to temporarily leave the Euro, return to its native currency, devalue, commit to returning to the Euro at a better debt to GDP ratio, a better exchange rate and a better growth trajectory and yet not sacrifice its EU membership. I would like to say for the record that this is precisely the thought process that I expected to evolve,but when I proposed this possibility back in 2009, and again in September 2010, I had a 100% response from clients and others that this was “impossible” and many felt it was “ridiculous”. They may be right but this is the current state of the discussion. The Handelsblatt in Germany has reported this conversation, but wrongly assumes that the country that will exit is Germany. I think that Germany will have to exit if the Southern European states do not. Germany’s preference is to stay in the Euro and have the others drop out. The problem has been the Germans could not convince the others to walk away. But, now, market pressures are forcing someone to leave. Germany is pushing for that someone to be Italy. They hope that this would be a one off exception, not to be repeated by any other country. Obviously, though, if Italy leaves the Euro and reverts to Lira then the markets will immediately and forcefully attack Spain, Portugal and even whatever is left  of the already savaged Greeks. These countries will not be able to compete against a devalued Greece or Italy when it come to tourism or even infrastructure. But, the principal target will be France. The three largest French banks have roughly 450 billion Euros of exposure to Italian debt. So, further sovereign defaults are certainly inevitable, but that is true under any scenario. Growth and austerity will not do the trick, as ZeroHedge rightly points out. Ultimately, I will not be at all surprised to see Europe’s banking system shut for days while the losses and payments issues are worked out. People forget that the term “bank holiday” was invented in the 1930’s when the banks were shut for exactly the same reason.”

#13 Daniel Clifton, a policy strategist with Strategas Research Partners on the potential for more downgrades of U.S. debt: “We would expect further downgrades, a first downgrade from Moody’s and Fitch and possibly a second downgrade from S&P.”

#14 Warren Buffett on the problems in the eurozone: “The system as presently designed has revealed a major flaw. And that flaw won’t be corrected just by words. Europe will either have to come closer together or there will have to be some other rearrangement because this system is not working”

#15 David Kostin, equity strategist for Goldman Sachs: “The wide range of possible outcomes on both the super committee process and the unstable political economy in Europe drives our view that investors should assume the worst while hoping for the best.”

#16 Mark Mobius, the head of the emerging markets desk at Templeton Asset Management: “There is definitely going to be another financial crisis around the corner”

#17 Gerald Celente, founder of The Trends Research Institute: “The whole system is going down. Pull your money out your Fidelity account, your Scwhab accout, and your ETFs.”

Are you starting to get the picture?

When so many top financial professionals are freaking out like this, perhaps the rest of us should start paying attention.

They are telling us that “time is running out”.

They are telling us that “there is definitely going to be another financial crisis”.

They are telling us that this “is going to be worse” than 2008.

They are telling us that “the whole system is going down”.

Yes, a devastating financial collapse really is coming.  Just like in 2008, it will seem like the “end of the world” while it is happening, but it won’t be.  It will severely damage our financial system and our economy, but it will not finish us off.

Think of it this way.  When you build a sand castle at the beach, it doesn’t get totally wiped out by the first wave or the second wave that hits it.  Each wave does significant damage, but the destruction of your sand castle is a process.

It is the same thing with the U.S. economy.  We once had the most incredible economic machine that the world has ever seen.  It is constantly being gutted and the financial crisis of 2008 hit us really hard, but we are still doing okay.

After this next financial crisis we will be in even worse shape.  But we will still be breathing.

More “waves” will come after this next financial crisis.  If we continue on the road that we are on, our economy will progressively get worse and worse.

Not everyone will agree with this analysis, and that is okay.  In the end, time will reveal the truth to all of us.

Right now, we all need to get ready for the next wave that is about to hit us.  A lot of people are going to lose their jobs over the next few years.  Hopefully you are prepared for that.

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