We Just Witnessed The Greatest One Day Global Stock Market Loss In World History

Money Burning - Public DomainMore stock market wealth was lost on Friday than on any other day in world history.  As you will see below, global investors lost two trillion dollars on the day following the Brexit vote.  And remember, this is on top of the trillions that global investors have already lost over the past 12 months.  It is important to understand that the Brexit vote was not the beginning of a new crisis – it has simply accelerated a global financial crisis that started last year and that was already in the process of unfolding.  As I noted on Friday, we have been waiting for “the next Lehman Brothers moment” that would really unleash fear and panic globally, and now we have it.  The next six months should be absolutely fascinating to watch.

According to CNBC, the total amount of money lost on global stock markets on Friday surpassed anything that we had ever seen before, and that includes the darkest days of the financial crisis of 2008…

Worldwide markets hemorrhaged more than $2 trillion in paper wealth on Friday, according to data from S&P Global, the worst on record. For context, that figure eclipsed the whipsaw trading sessions of the 2008 financial crisis, according to S&P analyst Howard Silverblatt.

The prior one day sell-off record was $1.9 trillion back in September of 2008, Silverblatt noted. According to S&P’s Broad Market Index, combined market capitalization is currently worth nearly $42 trillion.

And of course many of the wealthiest individuals on the planet got absolutely hammered.  According to Bloomberg, the 400 richest people in the world lost a total of $127.4 billion dollars on Friday…

The world’s 400 richest people lost $127.4 billion Friday as global equity markets reeled from the news that British voters elected to leave the European Union. The billionaires lost 3.2 percent of their total net worth, bringing the combined sum to $3.9 trillion, according to the Bloomberg Billionaires Index. The biggest decline belonged to Europe’s richest person, Amancio Ortega, who lost more than $6 billion, while nine others dropped more than $1 billion, including Bill Gates, Jeff Bezos and Gerald Cavendish Grosvenor, the wealthiest person in the U.K.

Could you imagine losing a billion dollars on a single day?

I am sure that Bill Gates and Jeff Bezos are not shivering in their boots quite yet, but what if the markets keep on bleeding like they did in 2008?

On the other hand, globalist magnate George Soros made a ton of money on Friday because he had positioned himself for a Brexit ahead of time.  The following comes from the London Independent

The billionaire who predicted Brexit would bring about “Black Friday” and a crisis for the finances of ordinary people appears to have profited hugely from the UK’s surprise exit from the EU.

George Soros is widely known as the man who “broke” the Bank of England in 1992, when he bet against the pound and made a reported £1.5bn.

Although the exact amount Mr Soros has gained after Brexit is not known, public filings show he doubled his bets earlier this year that stocks would fall.

So what will happen on Monday when the markets reopen?

Personally, I don’t think that it will be as bad as Friday.

But I could be wrong.

In early trading, Dow futures, S&P 500 futures and Nasdaq futures are all down

Dow futures fell by 90 points in early trading, while S&P 500 futures slipped 11 points, and NASDAQ futures dipped 24 points. Gold futures rose, in a reflection of sustained demand for safe-haven assets.

And at this moment, the British pound is getting absolutely crushed.  It is down to 1.33, and I would expect to see it fall a lot lower in the weeks and months to come.

Why?

Well, the truth is that now that the British people have voted to leave the EU, the globalists have to make it as painful as possible on them in order to send a warning to other nations that may consider leaving.  I think that a recent article by W. Ben Hunt explained this very well…

What’s next? From a game theory perspective, the EU and ECB need to crush the UK. It’s like the Greek debt negotiations … it was never about Greece, it was always about sending a signal that dissent and departure will not be tolerated to the countries that matter to the survival of the Eurozone (France, Italy, maybe Spain). Now they (and by “they” I mean the status quo politicians throughout the EU, not just Germany) are going to send that same signal to the same countries by hurting the UK any way they can, creating a Narrative that it’s economic death to leave the EU, much less the Eurozone. It’s not spite. It’s purely rational. It’s the smart move.

The elite need a crisis now in order to show everyone that globalism is the answer and not the problem.  If the British people were allowed to thrive once they walked away, that would only encourage more countries to go down the exact same path.  This is something that the elite are determined to avoid.

The Brexit vote has barely sunk in, and Bank of America and Goldman Sachs are already projecting a recession for the United Kingdom.  Sadly, I believe that this is what we will see happen.

But it won’t just be the British that suffer.

On Friday, European banking stocks had their worst day ever.  In particular, Deutsche Bank fell an astounding 17.49 percent to an all-time record closing low of 14.72.  I have warned repeatedly about the implosion of Deutsche Bank, and this crisis could be the catalyst for it.

In addition, I have repeatedly warned about the slow-motion meltdown that is happening in Japan.  On Friday, Japanese stocks lost 1286 points, and the yen surged in the exact opposite direction that the government is trying to send it…

Tokyo, we have a problem.

Last week, market tumult stemming from the U.K.’s vote to quit the European Union drove the British pound to its weakest levels in three decades.

Yet it also sent investors flocking to traditional safe haven assets like the U.S. dollar, gold and the yen, the latter surging against every major currency as the results of Brexit became clear: Dollar/yen spiked from a Thursday high near 107 to a two-year low near 99.

Just like in 2008, there will be days when global markets will be green.  When that happens, it will not mean that the crisis is over.

If you follow my work closely, then you know that it is imperative to look at the bigger picture.  Over the past 12 months, there have been some very nice market rallies around the world, but investors have still lost trillions of dollars overall.

What happens on any one particular day is not the story.  Rather, the key is to focus on the long-term trends.

And without a doubt, this Brexit vote could be “the tipping point” that greatly accelerates our ongoing woes…

“Brexit is the biggest global monetary shock since 2008,” said David Beckworth, a scholar at the Mercatus Center at George Mason University, in a blog post on Friday. “This could be the tipping point that turns the existing global slowdown of 2016 into a global recession.”

We were already dealing with a new global economic crisis without the Brexit vote.  But what this does is it introduces an element of panic and fear that had been missing up until this current time.

And markets do not like panic and fear very much.  In general, markets tend to go up when things are calm and predictable, and they tend to go down when chaos reigns.

Unfortunately, I believe that we are going to see quite a bit more chaos for the rest of 2016, and the trillions that were lost on Friday may turn out to be just the tip of the iceberg.

Investors Start To Panic As A Global Bond Market Crash Begins

Panic Keyboard - Public DomainIs the financial collapse that so many are expecting in the second half of 2015 already starting?  Many have believed that we would see bonds crash before the stock market crashes, and that is precisely what is happening right now.  Since mid-April, the yield on 10 year German bonds has shot up from 0.05 percent to 0.89 percent.  But much of that jump has come this week.  Just a couple of days ago, the yield on 10 year German bonds was sitting at just 0.54 percent.  And it isn’t just Germany – bond yields are going crazy all over Europe.  So far, it is being estimated that global investors have lost more than half a trillion dollars, and there is much more room for these bonds to fall.  In the end, the overall losses could be well into the trillions even before the stock market collapses.

I know that for most average Americans, talk about “bond yields” is rather boring.  But it is important to understand these things, because we could very well be looking at the beginning of the next great financial crisis.  The following is an excerpt from an article by Wolf Richter in which he details the unprecedented carnage that we have witnessed over the past few days…

On Tuesday, ahead of the ECB’s policy announcement today, German Bunds sagged, and the 10-year yield soared from 0.54% to 0.72%, drawing a squiggly diagonal line across the chart. In just one day, yield increased by one-third!

Makes you wonder to which well-connected hedge funds the ECB had once again leaked its policy statement and the all-important speech by ECB President Mario Draghi that the rest of us got see today.

And today, the German 10-year yield jump to 0.89%, the highest since October last year. From the low in mid-April of 0.05% to today’s 0.89% in just seven weeks! Bond prices, in turn, have plunged!  This is the definition of a “rout.”

Other euro sovereign bonds have gone through a similar rout, with the Spanish 10-year yield soaring from 1.05% in March to 2.07% today, and the Italian 10-year yields jumping from a low in March of 1.03% to 2.17% now.

What this means is that the central banks are losing control.

In particular, the European Central Bank has been trying very hard to force yields down, and now the exact opposite is happening.

This is very bad news for a global financial system that is absolutely teeming with red ink.  Since the last financial crisis, our planet has been on the greatest debt binge of all time.  If we are moving into a time of higher interest rates, that is going to cause enormous problems.  Unfortunately, CNBC says that is precisely where things are headed…

The wild breakout in German yields is rocking global debt markets, and giving investors an early glimpse of the uneasy future for bonds in a world of higher interest rates.

The shakeout also carries a message for corporate bond investors, who have snapped up a record level of new issuance this year, and are now seeing negative total returns in the secondary market for the first time this year.

So why is this happening?

Why are bond yields going crazy?

According to the Wall Street Journal, financial regulators in Europe are blaming the ECB’s quantitative easing program…

A recent surge in government bond market volatility can be blamed on the quantitative easing program of the European Central Bank, according to one of Europe’s top financial regulators.

EIOPA, the body responsible for regulating insurers and pension funds in the European Union, has warned that the ECB’s decision to buy billions of euros’ worth of sovereign bonds, to kick-start the region’s economy, has caused markets to become choppier.

And actually this is what should be happening.  When central banks start creating money out of thin air and pumping it into the markets, investors should rationally demand a higher return on their money.  This didn’t really happen when the Federal Reserve tried quantitative easing, so the Europeans thought that they might as well try to get away with it too.  Unfortunately for them, investors are starting to catch up with the scam.

So what happens next?

Well, European bond yields are probably going to keep heading higher over the coming weeks and months.  This will especially be true if the Greek crisis continues to escalate.  And unfortunately for Europe, that appears to be exactly what is happening

Greece will not make a June 5 repayment to the International Monetary Fund if there is no prospect of an aid-for-reforms deal with its international creditors soon, the spokesman for the ruling Syriza party’s lawmakers said on Wednesday.

The payment of 300 million euros ($335 million) is the first of four this month totaling 1.6 billion euros from a country that depends on foreign aid to stay afloat.

Greece owes a total of about 320 billion euros, of which about 65 percent to euro zone governments and the IMF, and about 8.7 percent to the European Central Bank.

On Tuesday, Greece’s creditors drafted the broad outlines of an agreement to put to the leftist government in Athens in a bid to conclude four months of negotiations and release aid before the country runs out of money.

“If there is no prospect of a deal by Friday or Monday, I don’t know by when exactly, we will not pay,” Nikos Filis told Mega TV.

In fact, there are reports that both the ECB and the Greek government are talking about Greece going to a “parallel domestic currency”

Biagio Bossone and Marco Cattaneo write that according to several recent media reports, both the Greek government and the ECB are taking into consideration the possibility (for Greece) to issue a parallel domestic currency to pay for government expenditures, including civil servant salaries, pensions, etc. This could happen in the coming weeks as Greece faces a severe shortage of euros. A new domestic currency would help make payments to public employees and pensioners while freeing up the euros needed to pay out creditors.

If Greece defaults and starts using another currency, the value of the euro is going to absolutely plummet and bond yields all over the continent are going to start heading into the stratosphere.

That is why it is so important to keep an eye on what is going on in Greece.

But no matter what happens in Greece, it appears that we are moving into a time when there will be higher interest rates around the world.  And since 505 trillion dollars in derivatives are directly tied to interest rate levels, that could lead to a financial unraveling unlike anything that we have ever seen before in the history of our planet.

As I have warned about so many times before, 2008 was just the warm up act.

The main event is still coming, and it is going to be extraordinarily painful.

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