When it comes to “prepping”, many among the elite take things to an entirely different level. As you will see below, the elite are willing to pay big money for cutting edge home security measures, luxury bomb shelters and superyacht getaway submarines. Some of the things that the elite are demanding for their own protection go beyond even what we would see in a James Bond film, and serving the prepping needs of the elite has become a multi-billion dollar business. Meanwhile, the media outlets that the elite own continue to mock the rest of us for getting prepared. All the time we see headlines like this one that appeared in a major American news source: “Preppers: Meet the paranoid Americans awaiting the apocalypse“. Well, if we are paranoid for setting aside some extra food and supplies for the future, what does that make the people that you will read about in this article?
The elite live in a world that is completely different from the world that you and I live in. In wealthy enclaves of major global cities such as London, elitists are willing to shell out massive amounts of money to ensure that everyone else is kept out. The following comes from an article that was just published a few hours ago by the London Evening Standard entitled “The paranoid world of London’s super-rich: DNA-laced security mist and superyacht getaway submarines“…
Business is booming because billionaires are a paranoid bunch. Take one who recently moved to Mayfair. ‘He wanted everything, from protection from cyber hacking through to physical intrusion and kidnapping,’ says Bond Gunning. ‘We ended up installing fingerprint-activated locks for family members and programmable keys for staff that limit the time they are allowed into the property and the rooms they are able to enter and exit.
‘Inside and outside we installed 24-hour monitored CCTV cameras that are so hi-tech they can tell the difference between a dog, cat and a person. In the garden there are thermal-imaging cameras that can detect heat sources in the undergrowth. One thing intruders can’t hide is the heat of their bodies.
‘Should an intruder evade the cameras or ignore the warnings they automatically broadcast, the property itself is protected by bulletproof glass and alarm sensors in all rooms. There is a bullet, gas and bombproof panic or safe room, with its own food and water, medical supplies and communications, and an impregnable supply of fresh air. Just in case the family cannot make it there in time, key rooms are sealed by reinforced shutters.’
But for many elitists, those kinds of extreme security measures are simply not enough. That is why sales of “luxury doomsday shelters” are absolutely soaring. If “the end of the world” arrives unexpectedly, high net worth individuals want to know that there will be somewhere for them and their families to go. The following is an excerpt from an article about one such facility located in Indiana…
As we roll down US Highway 41 in Terre Haute, Indiana , my guide insists I give him my iPhone. Then he tosses me a satin blindfold. The terms of our trip were clear—I wasn’t to know where we were going or how we got there.That’s because we’re on our way to the undisclosed location of an underground bunker designed to survive the end of the world, whatever form that apocalypse takes.
When I remove my blindfold, I am standing in a grassy clearing looking at a boxy concrete structure that serves as the entrance to a Cold War–era government communications facility gutted and reborn as Vivos Indiana. This is the Ritz Carlton of doomsday shelters, a hideout where residents can wait out a nuclear winter or a zombie apocalypse in luxury and style while the rest of humanity melts and disintegrates. The living area has 12-and-a-half-foot ceilings, sumptuous black leather couches, wall art featuring cheerful Parisian street scenes, towering faux ferns, and plush carpets. Faith Hill croons from a large-screen TV set in front of three rows of comfy beige reclining chairs. The cupboards are stocked with 60 varieties of freeze-dried and canned foodstuffs; an evening meal might include spaghetti aglio e olio topped with skillet fried steak chunks, a fresh tomato-and-zucchini salad fresh from the hydroponic garden, and decadent turtle brownies. An eight-by-nine bedroom is designed for four people (there are larger units for six) and comes with double-queen bunks clothed in 600-thread-count ivory sheets and duvet covers worthy of a four-star hotel, a comparison highlighted on the Vivos website.
That sounds lovely.
But normal people like us cannot afford something like that. It will only be the elite that will be able to afford to hole up in underground bunkers while the world above descends into madness.
Other elitists will be taking off in their superyachts and heading out into the open ocean when things really start falling to pieces. And if their superyachts are threatened, some of them even have “getaway subs”. Here is more from the Evening Standard…
The ultimate vehicle of choice is no longer an armoured limousine or a private jet. They’re so Noughties. If you want bragging rights these days, you need your own submarine, which floats out of a sub-sea compartment in your superyacht. ‘It’s a toy, but if the worst happened, it could also be an escape route,’ says one prominent London tycoon with a weakness for Monaco-berthed superyachts — provided they have military-grade radar jammers and missile and torpedo defences.
So exactly why are so many among the elite so concerned about their own security these days?
Why are so many of them going to such extraordinary lengths to prepare for worst case scenarios?
Do they know something that the rest of us do not?
In a previous article, I included a quote from an article in the Mirror that was published earlier this year entitled “Panicked super rich buying boltholes with private airstrips to escape if poor rise up“…
Robert Johnson, president of the Institute of New Economic Thinking, told people at the World Economic Forum in Davos that many hedge fund managers were already planning their escapes.
He said: “I know hedge fund managers all over the world who are buying airstrips and farms in places like New Zealand because they think they need a getaway.”
The next time that someone criticizes you for prepping, just point out what the elite are doing.
Clearly, many of them are deeply concerned that something may be coming.
So are you preparing?
If so, what are you preparing for?
Please feel free to join the discussion by posting a comment below…
The biggest bank in the western world has just come out and declared that the global economy is “already in a recession”. According to British banking giant HSBC, global trade is down 8.4 percent so far this year, and global GDP expressed in U.S. dollars is down 3.4 percent. So those that are waiting for the next worldwide economic recession to begin can stop waiting. It is officially here. As you will see below, money is fleeing emerging markets at a blistering pace, major global banks are stuck with huge loans that will never be repaid, and it looks like a very significant worldwide credit crunch has begun. Just a few days ago, I explained that the IMF, the UN, the BIS And Citibank were all warning that a major economic crisis could be imminent. They aren’t just making this stuff up out of thin air, but most Americans still seem to believe that everything is going to be just fine. The level of blind faith in the system that most people are demonstrating right now is absolutely astounding.
The numbers say that the global economy has not been in this bad shape since the devastating recession that shook the world in 2008 and 2009. According to HSBC, “we are already in a dollar recession”…
Global trade is also declining at an alarming pace. According to the latest data available in June the year on year change is -8.4%. To find periods of equivalent declines we only really find recessionary periods. This is an interesting point. On one metric we are already in a recession. As can be seen in Chart 3 on the following page, global GDP expressed in US dollars is already negative to the tune of USD 1,37trn or -3.4%. That is, we are already in a dollar recession.
Here is the chart that Zero Hedge posted along with the quote above. As you can see, the only time global GDP expressed in U.S. dollars has fallen faster in recent years was during the horrible recession of seven years ago…
But there are still a whole lot of incredibly clueless people running around out there claiming that “nothing is happening” even though more signs of trouble are erupting all around us every single day.
For instance, just today CNBC published an article entitled “The US is closer to deflation than you think“, and Twitter just announced that it plans to lay off 8 percent of its entire workforce.
But of course the biggest problems are happening in “emerging markets” right now. The following is an excerpt from an article that was just published in a major British news source entitled “The world economic order is collapsing and this time there seems no way out“…
Now act three is beginning, but in countries much less able to devise measures to stop financial contagion and whose banks are more precarious. For global finance next flooded the so-called emerging market economies (EMEs), countries such as Turkey, Brazil, Malaysia, China, all riding high on sky-high commodity prices as the China boom, itself fuelled by wild lending, seemed never-ending. China manufactured more cement from 2010-13 than the US had produced over the entire 20th century. It could not last and so it is proving.
China’s banks are, in effect, bust: few of the vast loans they have made can ever be repaid, so they cannot now lend at the rate needed to sustain China’s once super-high but illusory growth rates. China’s real growth is now below that of the Mao years: the economic crisis will spawn a crisis of legitimacy for the deeply corrupt communist party. Commodity prices have crashed.
Money is flooding out of the EMEs, leaving overborrowed companies, indebted households and stricken banks, but EMEs do not have institutions such as the Federal Reserve or European Central Bank to knock up rescue packages. Yet these nations now account for more than half of global GDP. Small wonder the IMF is worried.
It is one thing for The Economic Collapse Blog to warn that “the world economic order is collapsing”, but this is one of the biggest newspapers in the UK.
I was writing about these emerging market problems back in July, but at that time very few really understood the true gravity of the situation. But now giant banks such as Goldman Sachs are calling this the third stage of the ongoing global financial crisis. The following comes from a recent CNBC piece entitled “Is EM turmoil the third wave of the financial crisis? Goldman thinks so“…
Emerging markets aren’t just suffering through another market rout—it’s a third wave of the global financial crisis, Goldman Sachs said.
“Increased uncertainty about the fallout from weaker emerging market economies, lower commodity prices and potentially higher U.S. interest rates are raising fresh concerns about the sustainability of asset price rises, marking a new wave in the Global Financial Crisis,” Goldman said in a note dated last week.
The emerging market wave, coinciding with the collapse in commodity prices, follows the U.S. stage, which marked the fallout from the housing crash, and the European stage, when the U.S. crisis spread to the continent’s sovereign debt, the bank said.
You know that it is late in the game when Goldman Sachs starts sounding exactly like The Economic Collapse Blog. I have been warning about a “series of waves” for years.
When will people wake up?
What is it going to take?
The crisis is happening right now.
Of course many Americans will refuse to acknowledge what is going on until the Dow Jones Industrial Average collapses by several thousand more points. And that is coming. But let us all hope that day is delayed for as long as possible, because all of our lives will become much crazier once that happens.
And the truth is that many Americans do understand that bad times are on the horizon. Just check out the following numbers that were recently reported by CNBC…
The CNBC All-America Economic Survey finds views on the current state of the economy about stable, with 23 percent saying it is good or excellent and 42 percent judging it as fair. About a third say the economy is poor, up 3 points from the June survey.
But the percentage of Americans who believe the economy will get worse rose 6 points to 32 percent, the highest level since the government shutdown in 2013. And just 22 percent believe the economy will get better, 2 points lower than June and the lowest level since 2008, when the nation was gripped by recession.
If you want to believe that everything is going to be just fine somehow, then go ahead and believe that.
All I can do is present the facts. For months I have been warning about this financial crisis, and now it is playing out as a slow-motion train wreck right in front of our eyes.
We are moving into a period of time during which events are going to start to move much more rapidly, and life as we know it is about to change in a major way for all of us.
Hopefully you have already been preparing for what is about to come.
If not, I wouldn’t want to be in your position.
Those that watched their stocks steadily increase in value for years are now seeing all of that “wealth” disappear at a staggering pace. The only way you actually make money in the stock market is if you get out in time, and many Americans are discovering that all or most of their gains have already been wiped out. At this point, the Dow Jones Industrial Average has dipped below where it was at the end of the 2013 calendar year. That means that nearly two years of gains have already been obliterated. On Friday, the Dow was down another 272 points, and it is now down more than 2200 points from the peak of the market back in May. For months, I have been detailing how things were setting up for this kind of financial crash in textbook fashion, and now events are playing out just as I warned. But this is just the beginning – what is coming next is going to shock the world.
We have already seen the 8th largest and 10th largest single day stock market crashes in all of U.S. history happen within the past few weeks. In fact, it was actually the very first time that we have ever seen the Dow fall by more than 500 points on consecutive trading days.
On August 25th, I warned that there would be some huge rebound days where we would see lots of “panic buying”, and on August 26th we witnessed the 3rd largest single day stock market increase in all of U.S. history.
Headlines all over America trumpeted the “fact” that the stock market had “recovered”, but the mainstream media failed to mention that the only two better days for the stock market were right in the middle of the stock market crash of 2008.
In this article, I explained that this is exactly the type of market behavior that we expect to see during a full-blown market meltdown. There are going to be even more violent swings in the market in the weeks ahead, but the general direction will be down.
Friday was definitely another down day. The following is how Zero Hedge summarized the carnage…
- Dow Industrials lowest weekly close since April 2014
- Dow Transports lowest weekly close since May 2014
- S&P 500 lowest weekly close since Oct 2014’s Bullard lows
- Nikkei dumped over 7% this week – worst week since April 2014
- Utilities collapsed 5.1% this week – worst week since March 2009
- Financials lowest weekly close since Oct 2014’s Bullard lows
- Biotechs lowest weekly close since Feb 2015
- Investment Grade Corporate Bond Spreads worst since June 2013
- Treasury Curve (2s30s) flattened 6bps today – biggest drop in 2 weeks.
- JPY strengthened 2.4% on week against the USD – strongest week since August 2013 (up 4.5% in 3 weeks) – major carry unwind!
I wish I could tell you that things are going to get better, but I can’t do that. There are some giant financial bubbles that are starting to unwind, and this process is going to take time to fully unfold.
And this is truly a global phenomenon. Chinese stocks have been crashing horribly, Japanese stocks just had their worst week in over a year, Canada and much of South America are plunging into recession, and Europe is probably in worse shape than everyone else if you look at the fundamentals.
Even though U.S. stocks have already fallen substantially, the truth is that they easily have much farther to fall. Yale economics professor Robert Shiller believes that we could actually soon see the Dow plunge all the way to 11,000…
In what amounts to an ominous message for Wall Street, Robert Shiller, a Yale economics professor and author of Irrational Exuberance, doled out some serious bear talk this morning.
Shiller told CNBC Thursday morning that “this is a dangerous time” for the stock market.
Shiller, who has a reputation for calling market tops, warned that the Dow Jones industrial average, which closed Wednesday at 16,351, could fall as low as 11,000, a potential drop of more than 30% from current levels.
At the moment, the Dow is sitting just above 16,000, which is an exceedingly important psychological level.
If the Dow breaks below 16,000 and stays there for a few days, it is quite likely that full-blown panic will set in.
And once we see the Dow dip below 15,000, people will be going insane.
Another key indicator to watch is the VIX (the CBOE Volatility Index). If you are not familiar with the VIX, here is a pretty good definition from Investopedia…
The ticker symbol for the Chicago Board Options Exchange (CBOE) Volatility Index, which shows the market’s expectation of 30-day volatility. It is constructed using the implied volatilities of a wide range of S&P 500 index options. This volatility is meant to be forward looking and is calculated from both calls and puts. The VIX is a widely used measure of market risk and is often referred to as the “investor fear gauge.”
Right now it is sitting at 27.80. If the VIX rises above 40 and stays there, that will be a major red flag.
We have entered “the danger zone“, and events are going to start moving very rapidly now. If you have been listening to the warnings, you are going to understand why things are happening and you are going to know what to do.
Unfortunately, most people are going to have that “deer in the headlights” look because they will not understand what is happening and they will be frozen by fear.
Stay tuned to this website and to End Of The American Dream because things are about to get very weird and I will do my best to explain them as the coming weeks and months play out.
So what do you think the rest of September will bring?
Please feel free to join the discussion by posting a comment below…
Is 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.
I have never done anything like this before. Ever since I started The Economic Collapse Blog in late 2009, I have never issued any kind of “red alert” for any specific period of time. As an attorney, I was trained to be level-headed and to only come to conclusions that were warranted by the evidence. So this is not something that I am doing lightly. Based on information that I have received, things that I have been told, and thousands of hours of research that have gone into the publication of more than 1,300 articles about our ongoing economic collapse, I have come to the conclusion that a major financial collapse is imminent. Therefore, I am issuing a RED ALERT for the last six months of 2015.
To clarify, when I say “imminent” I do not mean that it will happen within the next 48 hours. And I am not saying that our problems will be “over” once we get to the end of 2015. In fact, I believe that the truth is that our problems will only be just beginning as we enter 2016.
What I am attempting to communicate is that we are right at the door of a major turning point. About this time of the year back in 2008, my wife and I went to visit her parents. As we sat in their living room, I explained to them that we were on the verge of a major financial crisis, and of course the events that happened a few months later showed that I was right on the money.
This time around, I wish that I could visit the living rooms of all of my readers and explain to them why we are on the verge of another major financial crisis. Unfortunately, that is not possible, but hopefully this article will suffice. Please share it with your friends, your family and anyone else that you want to warn about what is coming.
Let’s start with a little discussion about the U.S. economy. Most of the time, when I use the term “economic collapse” what most people are actually thinking of is a “financial collapse”. And we will talk about the imminent “financial collapse” later on in this article. But just because stocks have recently been hitting all-time record highs does not mean that the overall economy has been doing well. This is a theme that I have hammered on over and over again. It is my contention that we are in the midst of a long-term economic collapse that has been happening for many years, that is happening as you read this article, and that will greatly accelerate over the coming months.
Let me give you just one quick example. When an economy is healthy, money tends to circulate fairly rapidly. I buy something from you, then you take that money and buy something from someone else, etc. In a stable and growing economy, people generally feel good about things and they are not afraid to spend. But during hard times, the exact opposite happens. That is why the velocity of money almost always slows down during a recession. As you can see from the chart below, the velocity of money has indeed gone down during every recession since 1960. Once a recession is over, the velocity of money is supposed to go back up. But a funny thing happened after the last recession ended. The velocity of money continued to go down, and it has now hit an all-time record low…
This is the kind of chart that you would expect from a very sick economy. And without a doubt, our economy is sick. Even the official government numbers paint a picture of an economy that is deeply troubled. Corporate profits have declined for two quarters in a row, U.S. exports plunged by 7.6 percent during the first quarter of 2015, U.S. GDP contracted by 0.7 percent during the first quarter, and factory orders have declined year over year for six months in a row.
If the stock market was connected to reality, it would be going down. But instead, it has just kept going up. As I discussed yesterday, this is a classic case of an irrational financial bubble. If I was writing an economic textbook and I wanted to include an example of what a run up to a major financial crash looks like, it would be hard to come up with anything more ideal than what we have watched unfold over the last six months. Just about every pattern that has popped up prior to previous stock markets crashes is happening again, and this is something that I have written about so much that many of my readers are sick of it.
And without a doubt, our financial markets are primed for a crash.
Only two times before has the S&P 500 been up by more than 200 percent over a six year time frame.
The first was in 1929, and the stock market subsequently crashed.
The second was in 2000, right before the dotcom bubble burst.
And by just about any measure that you can possibly imagine, stocks are massively overvalued right now.
For instance, just check out the chart posted below. It comes from Doug Short, and it shows that the ratio of corporate equity prices to GDP has only been higher one time since 1950. That was in 2000 just before the dotcom bubble burst…
Let’s take a look at another chart. This one comes from Phoenix Capital Research, and it shows that the CAPE ratio (cyclically adjusted price-to-earnings ratio) has rarely been higher. In fact, the only times that it has been higher we have seen stock market crashes immediately afterwards…
Yale economics professor Robert Shiller is also deeply concerned about the CAPE ratio…
I think that compared with history, US stocks are overvalued. One way to assess this is by looking at the CAPE (cyclically adjusted P/E) ratio that I created with John Campbell, now at Harvard, 25 years ago. The ratio is defined as the real stock price (using the S&P Composite Stock Price Index deflated by the CPI) divided by the ten-year average of real earnings per share. We have found this ratio to be a good predictor of subsequent stock market returns, especially over the long run. The CAPE ratio has recently been around 27, which is quite high by US historical standards. The only other times it has been that high or higher were in 1929, 2000, and 2007—all moments before market crashes.
But the CAPE ratio is not the only metric I watch. In my book Irrational Exuberance (3rd Ed., Princeton 2015) I discuss several metrics that help judge what’s going on in the market. These include my stock market confidence indices. One of the indicators in that series is based on a single question that I have asked individual and institutional investors over the years along the lines of, “Do you think the stock market is overvalued, undervalued, or about right?” Lately, what I call “valuation confidence” captured by this question has been on a downward trend, and for individual investors recently reached its lowest point since the stock market peak in 2000.
Other valuation indicators produce similar results. This next chart is another one from Doug Short, and it shows the average of four of his favorite valuation indicators. As you can see, there is only one other time when stocks have been more overvalued than they are today according to the average of his four favorite indicators, and that was just before the stock market crashed when the dotcom bubble burst…
Another one of the things that indicates that a financial bubble is happening is the level of margin debt. Whenever margin debt has gone over 2.25% of GDP a stock market crash has always followed, and today it is far above that level. As you can see from the chart below, there have been three major peaks in margin debt in modern U.S. history. One was just before the dotcom bubble burst, one was just before the financial crisis of 2008, and the third is happening right now…
Something else that we would expect to see prior to a major financial crisis is a decoupling of high yield debt and stocks. This is something that happened just prior to the stock market crash of 2008, and it is happening again right now. The following chart comes from Zero Hedge, and it demonstrates this brilliantly…
Are you starting to get the picture?
And as I discussed yesterday, the smart money is beginning to pull their money out of stocks while they still can. According to USA Today, mutual fund investors have pulled more money out of stocks than they have put into stocks for 16 weeks in a row…
In a sign of stock market nervousness on Main Street, mutual fund investors have yanked more money out of U.S. stock funds than they put in for 16 straight weeks.
The last time domestic stock funds had positive net cash inflows was in the week ending Feb. 25, according to data from the Investment Company Institute, a mutual fund trade group.
In the week ended June 17, the most recent data available, mutual funds that invest in U.S. stocks suffered net outflows of $3.45 billion, according to the ICI.
Since late February, U.S. stock funds have suffered estimated outflows of nearly $55 billion. Those net withdrawals come despite the fact the benchmark Standard & Poor’s 500 hit a fresh record high of 2130.82 on May 21 and the Dow Jones industrial average notched a fresh record on May 19.
But it isn’t just stocks that are going to crash during the next financial crisis. Bonds are going to crash as well, but what I am concerned about most of all are derivatives.
Derivatives are going to play a starring role in the next major financial crisis. I cannot emphasize this enough. In fact, if you want to listen for just one word on the news that will let you know that things have started to really unravel, just listen for the word “derivatives”. This form of legalized gambling is going to crush “too big to fail” banks all over the planet during the next major financial downturn. The “too big to fail” banks in the U.S. alone have 278 trillion dollars of total exposure to derivatives, but they only have 9.8 trillion dollars in total assets. To say that they are being “reckless” is a massive understatement.
For much more on the coming derivatives crisis, please see my previous article entitled “Warren Buffett: Derivatives Are Still Weapons Of Mass Destruction And ‘Are Likely To Cause Big Trouble’“.
Of course I am not the only one that is sounding the alarm about what is coming. Just consider what some very prominent individuals have been saying recently…
Ron Paul has just released a new video in which he warned all of us to “prepare for a bear market in bonds“.
Carl Icahn says that financial markets are “extremely overheated—especially high-yield bonds“.
Max Keiser recently told Alex Jones that a great financial collapse is coming.
Martin Armstrong says that his Economic Confidence Model predicts that the “Big Bang” is coming in “2015.75“.
Jeff Berwick of the Dollar Vigilante says that “we’re getting very, very close to the next crisis collapse” and he has specifically pointed to the month of September.
James Howard Kunstler has predicted that stocks are going to “crater in Q3 as faith in paper and pixels erodes“.
Lindsey Williams recently sent out an email alert in which he warned that his elite friend has told him that “they have a World Wide Financial Collapse scheduled between September and the end of December 2015“.
Gerald Celente has warned about “the Great Panic of 2015“.
Bill Fleckenstein has said that 2015 could be the year of the “big accident“.
Ray Gano has stated that we will see a financial collapse “probably starting in the third quarter of 2015″.
Legendary investor Jim Rogers recently said that he believes that “we will see some kind of major, major problems in the world financial markets” within the next year or two.
Alex Jones recently released a video in which he explained that he recently received “two different calls” from “extremely prominent wealthy people” warning him about what is coming by the end of this year and asking him why he isn’t leaving the United States “before October”.
Bible prophecy expert Joel C. Rosenberg has posted an ominous message on his personal blog in which he warned that “something is coming” and that “we must be ready”…
I feel a tremendous sense of urgency about this column.
The United States is hurtling towards severe trouble, and the events of the past few months — and what may be coming over the next few months — grieves me a great deal.
Something is coming. I don’t know what. But we all must be ready in every possible way.
When I read what Rosenberg wrote, it struck me that it was precisely how I have been feeling too.
In my entire life, I have never had such an ominous feeling about any period of time as I have about the last six months of 2015. Like Rosenberg, I feel a “tremendous sense of urgency”, and I feel a great need to warn as many people as I can.
And it isn’t just a financial collapse that I am concerned about. In a previous article, I detailed seven key events that we are going to witness before the end of this September…
Late June/Early July – It is expected that this is when the U.S. Supreme Court will reveal their gay marriage decision. Most believe that the court will rule that gay marriage is a constitutional right in all 50 states. There are some that believe that this will be a major turning point for our nation.
July 15th to September 15th – A “realistic military training exercise” known as “Jade Helm” will be conducted by the U.S. Army. More than 1,000 members of the U.S. military will take part in this exercise. The list of states slated to be involved in these drills includes Texas, Colorado, New Mexico, Arizona, Nevada, Utah, California, Mississippi and Florida.
July 28th – On May 28th, Reuters reported that countries in the European Union were being given a two month deadline to enact “bail-in” legislation. Any nation that does not have “bail-in” legislation in place by that time will face legal action from the European Commission. So why is the European Union in such a rush to get this done? Are the top dogs in the EU anticipating that another great financial crisis is about to erupt?
September 13th – This is Elul 29 on the Biblical calendar – the last day of the Shemitah year. Many are concerned about this date because we have seen giant stock market crashes on the last day of the previous two Shemitah cycles.
On September 17th, 2001 (which was Elul 29 on the Biblical calendar), we witnessed the greatest one day stock market crash in U.S. history up until that time. The Dow plummeted 684 points, and it was a record that held for exactly seven years until the end of the next Shemitah cycle.
On September 29th, 2008 (which was also Elul 29 on the Biblical calendar), the Dow fell by an astounding 777 points, which still today remains the greatest one day stock market crash of all time.
Now we are approaching the end of another Shemitah year. So will the stock market crash on September 13th, 2015? Well, no, because that day is a Sunday. So I guarantee that the stock market will not crash on that particular day. But as Jonathan Cahn has pointed out in his book on the Shemitah, sometimes stock market crashes happen just before the end of the Shemitah year and sometimes they happen within just a few weeks after the end of the Shemitah. So we are not just looking at one particular date.
September 15th – The 70th session of the UN General Assembly begins on this date. It is being reported that France plans to introduce a resolution which would give formal UN Security Council recognition to a Palestinian state. Up until now, the United States has always been the one blocking such a resolution, but Barack Obama is indicating that things may be much different this time around.
September 25th to September 27th – The United Nations is going to launch a brand new sustainable development agenda for the entire planet. Some have called this “Agenda 21 on steroids”. But this new agenda is not just about the environment. It also includes provisions regarding economics, agriculture, education and gender equality. On September 25th, the Pope will travel to New York to give a major speech kicking off the UN conference where this new agenda will be unveiled.
September 28th – This is the date for the last of the four blood moons that fall on Biblical festival dates during 2014 and 2015. This blood moon falls on the very first day of the Feast of Tabernacles, it will be a “supermoon”, and it will actually be visible in the city of Jerusalem. There are many that dismiss the blood moon phenomenon, but we have seen similar patterns before. For example, a similar pattern of eclipses happened just before and just after the destruction of the Jewish temple by the Romans in 70 AD.
In addition to everything above, quite a number of economic cycle theories that were developed by secular economists all point to big trouble for America between the years of 2015 and 2020. For more on this, please see my previous article entitled “If Economic Cycle Theorists Are Correct, 2015 To 2020 Will Be Pure Hell For The United States“.
Earlier today, I publicly announced that I was issuing a RED ALERT for the last six months of 2015 on the Alex Jones radio show. You can watch video of that interview right here. In this article (which is about three times as long as one of my normal articles) I have only shared a small fraction of the information that has led me to issue this red alert. But if you want to know more, and you are not afraid to really go down the rabbit hole, I would encourage you to check out a full two hour presentation that I did down in Dallas, Texas on the nightmarish years that are coming.
The period of relative stability that we have been enjoying is ending. What comes next is going to lead us into the worst period of time in modern American history. I wish that I was wrong about this.
But the goal is not to scare you. My wife and I live our lives with absolutely no fear, and that is my desire for all of my readers. There is hope in understanding what is happening and there is hope in getting prepared. Personally, my wife and I believe that the greatest chapters of our lives are ahead of us, and I hope that you have a similar outlook.
We need a generation of people that are willing to rise up and do great things even in the midst of all the chaos and darkness that is coming. It is when times are the darkest that the greatest heroes are needed.
So what will you choose to do when the next crisis comes?
Will you cower in fear, or will you rise up to meet the challenge?
Please feel free to tell us what you think by posting a comment below…
After all these years, the most famous investor in the world still believes that derivatives are financial weapons of mass destruction. And you know what? He is exactly right. The next great global financial collapse that so many are warning about is nearly upon us, and when it arrives derivatives are going to play a starring role. When many people hear the word “derivatives”, they tend to tune out because it is a word that sounds very complicated. And without a doubt, derivatives can be enormously complex. But what I try to do is to take complex subjects and break them down into simple terms. At their core, derivatives represent nothing more than a legalized form of gambling. A derivative is essentially a bet that something either will or will not happen in the future. Ultimately, someone will win money and someone will lose money. There are hundreds of trillions of dollars worth of these bets floating around out there, and one of these days this gigantic time bomb is going to go off and absolutely cripple the entire global financial system.
Back in 2002, legendary investor Warren Buffett shared the following thoughts about derivatives with shareholders of Berkshire Hathaway…
The derivatives genie is now well out of the bottle, and these instruments will almost certainly multiply in variety and number until some event makes their toxicity clear. Central banks and governments have so
far found no effective way to control, or even monitor, the risks posed by these contracts. In my view, derivatives are financial weapons of mass destruction, carrying dangers that, while now latent, are potentially lethal.
Those words turned out to be quite prophetic. Derivatives have definitely multiplied in variety and number since that time, and it has become abundantly clear how toxic they are. Derivatives played a substantial role in the financial meltdown of 2008, but we still haven’t learned our lessons. Today, the derivatives bubble is even larger than it was just before the last financial crisis, and it could absolutely devastate the global financial system at any time.
During one recent interview, Buffett was asked if he is still convinced that derivatives are “weapons of mass destruction”. He told the interviewer that he believes that they are, and that “at some point they are likely to cause big trouble”…
Thirteen years after describing derivatives as “weapons of mass destruction” Warren Buffett has reaffirmed his view that they pose a threat to the global economy and financial markets.
In an interview with Chanticleer this week, Buffett said that “at some point they are likely to cause big trouble“.
“Derivatives, lend themselves to huge amounts of speculation,” he said.
Most of the time, the big banks that do most of the trading in these derivatives do very well. They use extremely sophisticated computer algorithms that help them come out on the winning end of these bets most of the time.
But when there is some sort of unforeseen event that suddenly causes a massive shift in the marketplace, that can cause tremendous problems. This is something that Buffett discussed during his recent interview…
“The problem arises when there is a discontinuity in the market for some reason or another.
“When the markets closed like it was for a few days after 9/11 or in World War I the market was closed for four or five months – anything that disrupts the continuity of the market when you have trillions of dollars of nominal amounts outstanding and no ability to settle up and who knows what happens when the market reopens,” he said.
So if the markets behave fairly calmly and predictably, the derivatives bubble probably will not burst.
But no balancing act of this nature ever lasts forever. Just remember what happened in 2008. Lehman Brothers collapsed and then the financial system virtually froze up. According to Forbes, at that time almost everyone was afraid to deal with the big banks because nobody was quite sure how much exposure they had to these risky derivatives…
Fast forward to the financial meltdown of 2008 and what do we see? America again was celebrating. The economy was booming. Everyone seemed to be getting wealthier, even though the warning signs were everywhere: too much borrowing, foolish investments, greedy banks, regulators asleep at the wheel, politicians eager to promote home-ownership for those who couldn’t afford it, and distinguished analysts openly predicting this could only end badly. And then, when Lehman Bros fell, the financial system froze and world economy almost collapsed. Why?
The root cause wasn’t just the reckless lending and the excessive risk taking. The problem at the core was a lack of transparency. After Lehman’s collapse, no one could understand any particular bank’s risks from derivative trading and so no bank wanted to lend to or trade with any other bank. Because all the big banks’ had been involved to an unknown degree in risky derivative trading, no one could tell whether any particular financial institution might suddenly implode.
After the crisis, we were promised that something would be done about the “too big to fail” problem.
But instead, the problem of “too big to fail” is now larger than ever.
Since the last financial crisis, the four largest banks in the country have gotten approximately 40 percent larger. Today, the five largest banks account for approximately 42 percent of all loans in the United States, and the six largest banks account for approximately 67 percent of all assets in our financial system. Without those banks, we would not have much of an economy left at all.
Meanwhile, smaller banks have been going out of business or have been swallowed up by the big banks at a staggering rate. Incredibly, there are 1,400 fewer small banks in operation today than there were when the last financial crisis erupted.
So we cannot afford for these “too big to fail” banks to actually fail. Even the failure of a single one would cause a national financial nightmare. The “too big to fail” banks that I am talking about are JPMorgan Chase, Citibank, Goldman Sachs, Bank of America, Morgan Stanley and Wells Fargo. When you total up the exposure to derivatives that all of them currently have, it comes to a grand total of more than 278 trillion dollars. But when you total up all of the assets of all six banks combined, it only comes to a grand total of about 9.8 trillion dollars. In other words, the “too big to fail” banks have exposure to derivatives that is more than 28 times the size of their total assets.
I have shared the following numbers with my readers before, but it is absolutely crucial that we all understand how exceedingly vulnerable our financial system really is. These numbers come directly from the OCC’s most recent quarterly report (see Table 2), and they reveal a recklessness that is almost beyond words…
Total Assets: $2,573,126,000,000 (about 2.6 trillion dollars)
Total Exposure To Derivatives: $63,600,246,000,000 (more than 63 trillion dollars)
Total Assets: $1,842,530,000,000 (more than 1.8 trillion dollars)
Total Exposure To Derivatives: $59,951,603,000,000 (more than 59 trillion dollars)
Total Assets: $856,301,000,000 (less than a trillion dollars)
Total Exposure To Derivatives: $57,312,558,000,000 (more than 57 trillion dollars)
Bank Of America
Total Assets: $2,106,796,000,000 (a little bit more than 2.1 trillion dollars)
Total Exposure To Derivatives: $54,224,084,000,000 (more than 54 trillion dollars)
Total Assets: $801,382,000,000 (less than a trillion dollars)
Total Exposure To Derivatives: $38,546,879,000,000 (more than 38 trillion dollars)
Total Assets: $1,687,155,000,000 (about 1.7 trillion dollars)
Total Exposure To Derivatives: $5,302,422,000,000 (more than 5 trillion dollars)
Since the United States was first established, the U.S. government has run up a total debt of a bit more than 18 trillion dollars. It is the biggest mountain of debt in the history of the planet, and it has grown so large that it is literally impossible for us to pay it off at this point.
But the top five banks in the list above each have exposure to derivatives that is more than twice the size of the national debt, and several of them have exposure to derivatives that is more than three times the size of the national debt.
That is why I keep saying that there will not be enough money in the entire world to bail everyone out when this derivatives bubble finally implodes.
Warren Buffett is entirely correct about derivatives – they truly are weapons of mass destruction that could destroy the entire global financial system at any time.
So as we move into the second half of this year and beyond, you will want to watch for terms like “derivatives crisis” or “derivatives crash” in news reports. When derivatives start making front page news, that will be a really, really bad sign.
Our financial system has been transformed into the largest casino in the history of the planet. For the moment, the roulette wheels are still spinning and everyone is happy. But sooner or later, a “black swan event” will happen that nobody expected, and then all hell will break loose.
Every great con game eventually comes to an end. For years, global central banks have been manipulating the financial marketplace with their monetary voodoo. Somehow, they have convinced investors around the world to invest tens of trillions of dollars into bonds that provide a return that is way under the real rate of inflation. For quite a long time I have been insisting that this is highly irrational. Why would any rational investor want to put money into investments that will make them poorer on a purchasing power basis in the long run? And when any central bank initiates a policy of “quantitative easing”, any rational investor should immediately start demanding a higher rate of return on the bonds of that nation. Creating money out of thin air and pumping into the financial system devalues all existing money and creates inflation. Therefore, rational investors should respond by driving interest rates up. Instead, central banks told everyone that interest rates would be forced down, and that is precisely what happened. But now things have shifted. Investors are starting to behave more rationally and the central banks are starting to lose control of the financial markets, and that is a very bad sign for the rest of 2015.
And of course it isn’t just bond yields that are out of control. No matter how hard they try, financial authorities in Europe can’t seem to fix the problems in Greece, and the problems in Italy, Spain, Portugal and France just continue to escalate as well. This week, Greece became the very first nation to miss a payment to the IMF since the 1980s. We’ll discuss that some more in a moment.
Over in Asia, stocks are fluctuating very wildly. The Shanghai Composite Index plunged by 5.4 percent on Thursday before regaining all of those losses and actually closing with a gain of 0.8 percent. When we see this kind of extreme volatility, it is a very bad sign. It is during times of extreme volatility that markets crash.
Remember, stocks generally tend to go up during calm markets, and they generally tend to go down during choppy markets. So most investors do not want to see lots of volatility. Unfortunately, that is precisely what we are witnessing all over the world right now. The following comes from the Wall Street Journal…
“Volatility over the last days has been breathtaking, especially in bond markets,” said Wouter Sturkenboom, senior investment strategist at Russell Investments. He said that it rippled through equity and currency markets, which overreacted.
The yield on the benchmark German 10-year bond touched 0.99%, its highest level since September, before erasing the day’s rise and falling back to 0.84%. The 10-year U.S. Treasury yield, which hit a fresh 2015 high of 2.42% earlier Thursday, recently fell back to 2.33%. Yields rise as prices fall.
Sometimes when bond yields go up, it is because investors are taking money out of bonds and putting it into stocks because they are feeling really good about where the stock market is heading. This is not one of those times. As Peter Tchir has noted, the huge moves in the bond market that we are now seeing are the result of “sheer panic in the market”…
In a morning note before the open, Brean Capital’s Peter Tchir wrote: “It is time to reduce US equity holdings for the near term and look for a 3% to 5% move lower. The Treasury weakness is NOT a ‘risk on’ trade it is a ‘risk off’ trade, where low yields are viewed as a risk asset and not a safe haven.” And Tom di Galoma, head of fixed-income rates and credit at ED&F Man Capital Markets, told Bloomberg, “This is sheer panic in the market from the standpoint of what’s been happening in Europe … Most of Wall Street is guarded here as far as taking on new positions.”
But this wasn’t supposed to happen.
After watching the Federal Reserve be able to successfully use quantitative easing to drive down interest rates, the European Central Bank decided to try the same thing. Unfortunately for them, investors are starting to behave more rationally. The central banks are starting to lose control of the financial markets, and bond yields are soaring. I think that Peter Boockvar summarized where we are currently at very well when he stated the following…
I’ve said this before but I’m sorry, I need to say it again. What we are witnessing in global markets is the inherent contradiction writ large that is modern day monetary policy where dangerously ZIRP, NIRP and QE are considered conventional policies. The contradiction is simply this: the desire for higher inflation if fulfilled will result in higher interest rates that central banks are trying so hard and desperately to suppress.
Outside of the short end of the curve, markets will always win for better or worse and that is clearly evident now. The ECB is getting their first taste of the market talking back and in quite the violent way. In the US, the bond market is watching the Fed drag its feet (its never-ending) with wanting to raise interest rates and finally said enough is enough. The US Treasury market is tightening for them. Since mid April, the 5 yr note yield is higher by 40 bps, the 10 yr is up by 55 bps and the 30 yr yield is up by 65 bps.
And if global investors continue to move in a rational direction, this is just the beginning. Bond yields all over the planet should be much, much higher than they are right now. What that means is that bond prices potentially have a tremendous amount of room to go down.
One thing that could accelerate the global bond crash is the crisis in Greece. Negotiations between the Greeks and their creditors have been dragging on for four months, and no agreement has been reached. Now, Greece has missed the loan payment that was due to the IMF on June 5th, and it is asking the IMF to bundle all of the payments that are due this month into one giant payment at the end of June…
Greece has asked to bundle its four debt payments to the International Monetary Fund that fall due in June so that it can pay them in one batch at the end of the month, Greek newspaper Kathimerini reported on Thursday.
The request is expected to be approved by the IMF, the newspaper said. That would mean Greece does not have to pay the first tranche of 300 million euros that falls due on Friday.
Greece faces a total bill of 1.5 billion euros owed to the IMF over four installments this month.
Of course that payment will not be made either if a deal does not happen by then. And with each passing day, a deal seems less and less likely. At this point, the package of “economic reforms” that the creditors are demanding from Greece is completely unacceptable to Syriza. The following comes from an article in the Guardian…
Fresh from talks in Brussels, Tsipras faced outrage on Thursday from highly skeptical members of his own Syriza party. A five-page ultimatum from creditors, presented by the European commission president, Jean-Claude Juncker, was variously described as shocking, provocative, disgraceful and dishonourable.
“It will never pass,” said Greece’s deputy social security minister, Dimitris Stratoulis. “If they don’t back down, the country won’t be lost … there are alternatives that would cost less than our signing a disgraceful and dishonourable agreement.”
Ultimately, I don’t believe that we are going to see an agreement.
Well, I tend to agree with this bit of analysis from Andrew Lilico…
The Eurozone does not want to make any compromise with the current Greek government because (a) they don’t believe they need to because Greek threats to leave the euro are empty both because internal polling suggests Greeks don’t want to leave and because if they did leave that doesn’t really constitute any threat to the euro; (b) because they (particularly perhaps Angela Merkel) believe that under enough pressure the Greek government might collapse and be replaced by a more cooperative government, as has happened repeatedly before in the Eurozone crisis including in Italy and Greece itself; and (c) because any deal with Greece that is seen to involve or be presentable as any victory for the Greek government would threaten the political positions of governments in several Eurozone states including Spain, Portugal, Italy, Finland and perhaps even the Netherlands and Germany.
Furthermore, it’s not clear to me that the Eurozone creditors at this stage would have much interest in any deal based upon promises, regardless of how much the Greek had verbally surrendered. Things have gone too far now for mere words to work. They would need to see the Greeks deliver actions — tangible economic reforms and tangible, credible primary surplus targets and a sustainable change in the long-term political mood within Greece that meant other Eurozone states might eventually get their money back. That is almost certainly not doable at all with the current Greek government. The only deal possible would be with some replacement Greek government that had come in precisely on the basis that it did want to do a deal and did want to pay the creditors back.
On the Syriza side, I see no more appetite for a deal. They believe that austerity has been ruinous for the lives of Greeks and that decades more austerity would mean decades more Greek economic misery. From their point of view, default or even exit from the euro, even if economically painful in the short term, would be better than continuing with austerity now.
You can read the rest of his excellent article right here.
Without a deal, the value of the euro is going to absolutely plummet and bond yields over in Europe will go through the roof. I am fully convinced that this is the beginning of the end for the eurozone as it is currently constituted, and that we stand on the verge of a great European financial crisis.
And of course the financial crisis that is coming won’t just be in Europe. The global financial system is more interconnected than ever, and there are tens of trillions of dollars in derivatives that are tied to foreign exchange rates and 505 trillion dollars in derivatives that are tied to interest rates. When this giant house of cards collapses, the central banks won’t be able to stop it.
In the end, could we eventually see the entire central banking system itself totally collapse?
That is what Phoenix Capital Research believes is about to happen…
Last year (2014) will likely go down in history as the “beginning of the end” for the current global Central Banking system.
What will follow will be a gradual unfolding of the next crisis and very likely the collapse of the Central Banking system as we know it.
However, this process will not be fast by any means.
Central Banks and the political elite will fight tooth and nail to maintain the status quo, even if this means breaking the law (freezing bank accounts or funds to stop withdrawals) or closing down the markets (the Dow was closed for four and a half months during World War 1).
There will be Crashes and sharp drops in asset prices (20%-30%) here and there. However, history has shown us that when a financial system goes down, the overall process takes take several years, if not longer.
We stand at the precipice of the greatest economic transition that any of us have ever seen.
Even though things may seem very “normal” to most people right now, the truth is that the global financial system is fundamentally flawed, and cracks in the system are starting to appear all over the place.
When this system does collapse, it will take most people entirely by surprise.
But it shouldn’t.
All con games eventually fall apart in the end, and we are about to learn that lesson the hard way.