Why Are Investors Pulling Money Out Of Global Stock Funds At The Fastest Pace Since The Last Financial Crisis?

We haven’t seen anything like this since the financial crisis of 2008.  Investors are taking money out of global stock funds at a pace that we haven’t seen in 10 years, and many believe that this is a harbinger of tough times ahead.  Global stocks lost about 10 trillion dollars in value during the first half of 2018, and an even worse performance during the second half of the year will almost certainly push the global financial system into panic mode.  U.S. stocks have been relatively stable, and so most Americans are not too alarmed about what is happening just yet.  But if you look back throughout history, emerging market chaos is often an early warning signal that a major global crisis is on the horizon, and that is precisely what is happening right now.  Financial markets in emerging markets all over the planet are in the process of melting down, and the losses are becoming quite dramatic.

As stock prices around the planet start to plummet, investors are pulling money out of global stock funds very, very rapidly.  The following comes from CNBC

Investor money is hemorrhaging out of global stock funds at a pace not seen since just after the financial crisis exploded.

Global equity funds have seen outflows of $12.4 billion in June, a level not seen since October 2008, according to market research firm TrimTabs. Lehman Brothers collapsed in September of that year, triggering the worst economic downturn since the Great Depression and helping fuel a bear market that would see major indexes lose more than 60 percent of their value.

Does this automatically mean that another major financial crisis is on the way in the United States?

No, but it is definitely not a good sign.

As CNBC also noted, investors have been taking tremendous amounts of money out of one emerging market ETF in particular…

The iShares emerging market ETF has seen $5.4 billion in outflows in June, the most of any fund, according to ETF.com.

“U.S. dollar strength and persistent underperformance seem to be driving fund investors away from non-U.S. equities,” TrimTabs said in a note.

The list of emerging market economies that are in crisis mode is beginning to get really long.  Argentina, Venezuela, Turkey, Brazil and South Africa are some of the more prominent examples.

If the chaos in emerging markets continues to intensify, the rush for the exits is going to become a stampede.  Not too long ago, I discussed the fact that the “smart money” was getting out of stocks at a pace that we haven’t seen since just before the last financial crisis, and it isn’t going to take too much to set off a full-blown financial avalanche.

In the general population, most people still seem to think that the financial system is in good shape.  But in many ways, the first half of 2018 was the worst half of a year for the global financial system since the financial crisis of 2008.  The following summary of the carnage that we have witnessed over the last 6 months comes from Zero Hedge

  • Bitcoin Worst Start To A Year Ever
  • German Banks At Lowest Since 1988
  • Onshore Yuan Worst Quarter Since 1994
  • Argentine Peso Worst Start To A Year Since 2002
  • US Financial Conditions Tightened The Most To Start A Year Since 2002
  • Global Systemically Important Banks Worst Start To A Year Since 2008
  • Global Stocks Worst Start To A Year Since 2010
  • China Stocks Worst Start To A Year Since 2010
  • German Stocks Worst Start (In USD Terms) Since 2010
  • Global Economic Data Disappointments Worst Since 2012
  • Emerging Markets, Gold, Silver Worst Start To A Year Since 2013
  • High Yield Bonds Worst Start To A Year Since 2013
  • Offshore Yuan Worst Month Since Aug 2015
  • Global Bonds Worst Start To A Year Since 2015
  • Treasury Yield Curve Down Record 16 Of Last 18 Quarters

And as I mentioned above, global stocks lost about 10 trillion dollars in value over the last 6 months.

When the Federal Reserve hikes interest rates, it puts a lot of financial stress on emerging markets.  It becomes much more expensive to take out dollar-denominated loans, and it also becomes much more expensive to pay back existing dollar-denominated debts.

But the Fed has not listened to appeals from the rest of the world, and has decided to accelerate the pace of rate hikes instead.

Meanwhile, the trade wars that the United States has started with other nations continue to escalate.  Here are the latest developments

U.S. farmers and food producers are in the cross-hairs of a global trade conflict that shows no signs of abating anytime soon — and things are about to escalate in a big way on Sunday.

New tariffs will be imposed by Canada on beef, and more retaliation will come this week when China and Mexico take aim at pork. China’s also planning a 25 percent tariff on soybeans on July 6 in addition to hikes on pork duties, and Mexico’s 20 percent levy on “the other white meat” is set to begin July 5.

Meanwhile, the European Union’s initial duties worth $3.2 billion took effect June 22. Most of the duties amount to 25 percent, and include a variety of U.S. products, including motorcycles, boats, whiskey and peanut butter.

If nobody gives in, economic activity will start to slow down substantially.  This is what CNN says that we should expect…

Here’s how the dominoes could fall: First, businesses would be hit with higher costs triggered by tariffs. Then, companies won’t be able to figure out how to get the materials they need. Eventually, confidence among executives and households would drop. Businesses would respond by drastically scaling back spending.

A perfect storm is starting to emerge, and investors are getting spooked.

If financial problems continue to get worse in emerging markets, and if the Federal Reserve continues to raise interest rates, and if these trade wars continue to grow, it is only a matter of time before we have a major market catastrophe in the United States.

The storm clouds on the horizon have just kept getting darker and darker, and many analysts all over the nation agree that this is the gloomiest that things have looked since 2008.

Hopefully a way can be found to turn things around, but I wouldn’t count on it…

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

The Stock Market Falls Another 724 Points! What In The World Is Happening On Wall Street?

We just witnessed the 5th largest single day stock market crash in U.S. history.  On Thursday the Dow Jones Industrial Average plunged 724 points, and many believe that this is just the beginning of another huge wave down for stock prices.  After this latest dramatic decline, the Dow is now down 3.1 percent so far in 2018, and overall it is down 9.99 percent from the all-time high in January.  A 10 percent decline is officially considered to be “correction” territory, and that means that we are just about there.

So why are stock prices falling so much?  Well, USA Today is blaming the potential for a trade war with China, the latest Facebook scandal and “the impact of rising interest rates on the economy”…

U.S. stocks sold off sharply Thursday, with the Dow tumbling more than 700 points amid growing fears of a trade fight between the U.S. and its trading partners after President Trump said he will impose billions of dollars in tariffs on Chinese imports.

The heavy selling on Wall Street was exacerbated by continued weakness in shares of Facebook as well as concerns about the impact of rising interest rates on the economy.

Of course the possibility of a trade war between the two largest economies on the planet is certainly the greatest concern that the markets are grappling with at the moment.  According to Ian Winer, any sign of retaliation by China “will really spook people”…

“A global trade war, whether it’s real or perceived, is what’s weighing on the market,” said Ian Winer, head of equities at Wedbush Securities. “There’s this huge uncertainty now. If China decides to get tough on agriculture or anything else, that will really spook people.”

Trump announced tariffs on about $50 billion worth of Chinese imports on Thursday afternoon. It’s not clear which products will be hit, but the action is aimed at curbing China’s troubling theft of US intellectual property.

And we can be quite sure that China will retaliate.

In fact, before the end of the day on Thursday the Chinese embassy boldly declared that China will “fight to the end”

The Chinese embassy released a statement late Thursday saying China “would fight to the end..with all necessary measures.”

What people need to understand is that China has been taking advantage of us for decades.

For example, many U.S. vehicles cost three times as much in China because of all the tariffs that China slaps on them.  But we have been allowing China to flood our shores with giant mountains of super cheap goods with no tariffs at all.

This is why we have been buying far more from China than they have been buying from us.  It has been an unfair playing field.  As a result of our massive trade deficit with China, they have been systematically getting wealthier and we have been getting poorer.

Since China joined the WTO in 2001, we have lost more than 70,000 manufacturing facilities and millions of good paying jobs.  We have to beg China to lend us back a lot of the money that we send to them, and as a result the Chinese now own more than a trillion dollars of our national debt.

So we simply cannot afford to continue to allow China to take advantage of us, but if we start standing up to them it is inevitable that they will strike back. Here are just a few of the things that they could do

1. Impose higher tariffs on all US exports to China

2. Restrict market access for US firms in China

3. Provide preferential treatment to US competitors

4. Restrict US travels by Chinese nationals

5. Sell US treasuries and buy other government bonds

But what is the alternative?

Should we just continue to allow China to walk all over us?

Hopefully we can negotiate with China without causing a horrible trade war, because without a doubt trade wars are not good for the global economy

Trade wars are bad for the global economy, as they cause prices that consumers and businesses pay for goods and services to rise. A rise in inflationary pressures could prompt the U.S. central bank to speed up its pace of interest rate hikes, which could slow economic growth. Trade skirmishes can also hurt U.S. exports and corporate earnings.

And in the short-term, any news about a potential trade war will continue to rattle the financial markets.  At this point more than half of the companies on the S&P 500 are already in “correction territory”, and dozens of companies are already down at least 20 percent from their one year highs…

The U.S. stock market is under pressure once again, with more than half the S&P 500 falling into correction territory.

More than 275 components in the broad index were down at least 10 percent from their 52-week highs as of 11:04 a.m. ET. Of those companies, 84 were in bear-market territory, or down at least 20 percent from their one-year high.

As most of you already know, my race for Congress is extremely close and voting day is on May 15th.  If you would like to send someone to Washington that understands the long-term economic and financial challenges that we are facing, I would very much encourage you to get involved.  If you would like to make a financial contribution, there are several ways that you can do that…

Donate By Credit Card Online: https://secure.anedot.com/michaelsnyderforcongress/donate

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Donate By Check: Make your check out to “Michael Snyder For Congress” and send it to the following address…

Michael Snyder For Congress
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Bonners Ferry, ID 83805

We have already seen more financial shaking in 2018 than we have during any year since the great financial crisis of 2008.

Hopefully things will settle down in the days ahead, but I wouldn’t count on it.  Our long-term economic and financial problems are really starting to catch up with us, and Donald Trump is trying to navigate our ship through some very rough waters.

As always, let us hope for the best, but let us also get prepared for the worst.

Michael Snyder is a pro-Trump candidate for Congress in Idaho’s First Congressional District.  If you would like to help him win on May 15th, you can donate online, by Paypal or by sending a check made out to “Michael Snyder for Congress” to P.O. Box 1136 – Bonners Ferry, ID 83805.  To learn more, please visit MichaelSnyderForCongress.com.

The Dow Jones Industrial Average Falls Another 420 Points As Investors Panic About A Potential Trade War

Many had been hoping that the financial shaking on Wall Street that we witnessed in February would subside in March, but so far that is definitely not the case.  On Thursday, the Dow fell another 420 points as investors fretted about the potential for a trade war.  Over the past month, we have seen many days when stock prices have been way down and other days when stock prices have been way up.  This is precisely the sort of wild volatility that we would expect to see if a major financial crisis was brewing, and the truth is that our financial system is far more vulnerable today than it was back in 2008.

Many Americans have assumed that the U.S. economy must be in great shape since the stock market has just kept going up for the past several years.  But the reality of the matter is that stock prices are no longer connected to economic reality whatsoever.  The U.S. economy has not grown by 3 percent or more in 12 years, but stock prices have been shooting into the stratosphere thanks to relentless central bank intervention.

But what goes up must eventually come down, and on Thursday we witnessed another stunning decline

The Dow Jones industrial average closed 420.22 points lower at 24,608.98 after rising more than 150 points earlier in the day. The 30-stock index fell as much as 586 points.

The S&P 500 declined 1.4 percent to end at 2,677.67 — erasing its year-to-date gains — with industrials as the worst-performing sector. It also briefly broke below its 100-day moving average, a key technical level. The Nasdaq composite fell 1.3 percent to 7,180.56 and dipped below its 50-day moving average.

So why did this happen?

Well, the mainstream media is placing the blame for Thursday’s decline on Trump’s new tariffs

President Trump said Thursday he will impose heavy tariffs on imported steel and aluminum that could increase American jobs in those sectors but also raise prices.

The actions could hurt a number of industries including automakers and suppliers, boat and plane manufacturers and even beer companies.

There’s also concern the move could trigger a “trade war” in which countries would retaliate by imposing tariffs, or other measures, in response.

Yes, there will be some adjustments in the short-term, but Trump is quite correct to impose these sorts of tariffs on nations that are taking advantage of us.

For decades we have allowed China and other major exporting countries to greatly take advantage of us, and as a result we have lost more than 70,000 manufacturing facilities and millions of good paying jobs.

Of course China and other countries that have been taking advantage of us may try to strike back after being hit by these new tariffs, and many fear that this could result in a trade war.  The following comes from CNBC

“One of the largest fears we have is we’ve got tariffs. We could have trade wars, and it could blow up NAFTA negotiations, and nobody wins a trade war,” said Art Hogan, chief market strategist at B. Riley FBR.

We are always going to need to trade with the rest of the world, but we need trade agreements that are fair.

In the end, we simply cannot sacrifice American companies and American middle class jobs just to make the rest of the world happy with us.  I fully support President Trump’s America First agenda, and when I go to Washington I am going to work very hard to help President Trump bring jobs back to this country.

Michael Snyder is a pro-Trump candidate for Congress in Idaho’s First Congressional District.  If you would like to help him win on May 15th, you can donate online, by Paypal or by sending a check made out to “Michael Snyder for Congress” to P.O. Box 1136 – Bonners Ferry, ID 83805.  To learn more, please visit MichaelSnyderForCongress.com.

The Dow Falls 1,032 Points! Has The Financial Crisis Of 2018 Officially Arrived?

We haven’t seen this kind of a bloodbath on Wall Street since the great financial crisis of 2008.  Prior to this week, the largest single day decline for the Dow Jones industrial average that we had ever seen was 777 points.  That record was absolutely shattered on Monday when the Dow fell 1,175 points, and on Thursday the Dow dropped another 1,032 points.  This was the third decline greater than 500 points within the last five trading days, and the Dow is poised to post its worst week since the dark days of October 2008.  So is this just a “correction”, or has the financial crisis of 2018 officially arrived?

At this point, many of the experts are pointing to the bond market as the primary reason why stock prices are crashing.  The following comes from CNBC

There’s a not-so-quiet rebellion going on in the bond market, and it threatens to take 10-year yields above 3 percent much faster than expected just a few weeks ago.

As a result, the bumpy ride for stocks could continue for a while.

And without a doubt, analysts such as Jeff Gundlach clearly warned that there would be big trouble for stocks as bond yields rose…

Gundlach had correctly predicted that if the 10-year U.S. Treasury note yield went above 2.63 percent, U.S. stock investors would be spooked.

“Clearly, the market gets shaky when the 10-year hits 2.85 percent,” Gundlach said. “Just look at this week, and today. Makes one consider what could be coming if 10s push over 3 and 30s (30-year Treasury bond) over 3.22 percent.”

The 10-year yield is currently trading around 2.83 percent. Gundlach said it is “hard to love bonds at even a 3 percent” yield. “Rising interest rates are a problem and the U.S. is in debt and there is massive bond supply,” Gundlach said.

Moving forward, it will be important to keep a close eye on bond yields.  Every time they start going back up, we are likely to see stock prices go down

“We’re in a vicious cycle here. If the yields go up, you have to sell stocks. If you sell stocks, and they crash, yields come back down,” said Art Hogan, chief market strategist at B. Riley FBR.

The bond market’s struggle to price in higher interest rates has been kneecapped each time the stock market reacts and sells off. Strategists expect the two markets to ultimately find an equilibrium but not without more sharp swings.

This is one of the reasons why the budget deal going through Congress right now is such a bad idea.  Hundreds of billions of dollars of additional spending on top of what we are already doing is going to push up bond yields, and that is just going to make the pressure on Wall Street even worse.

Of course the folks over at the Federal Reserve could intervene, but they don’t seem inclined to do that at this point.  Late last year the Fed finally removed artificial life support from the financial system, and at first everything seemed to be going well.  But now a new crisis is brewing, and we shall see if the Fed still remains determined to keep raising rates.  The following comes from Peter Schiff

The Fed were dragging their feet in raising rates while Obama was president.  They talked about raising rates but at the end of the day, they barely moved them up. The pace of hikes has increased since Trump was elected, but part of the reason for that…I mean, the media is not talking down the economy; if anything they’re overhyping the economy.  Everybody’s talking about how strong the economy is, how everything is great. Everybody is taking credit for this great economy. The Fed wants to take credit for it, Trump wants to take credit for it, so if everybody wants to talk about how great the economy is, the Fed doesn’t have any excuse if it doesn’t raise rates…in order to keep up the pretense that the economy is as strong as everybody thinks, the Fed is in this box where it has to raise rates.

But they [the Fed] can’t tell the truth that it’s really a bubble, and if we raise rates, we’re gonna prick it, so they’re kinda in this bind.  And they are still telegraphing that they’re gonna raise rates three or four times this year.  And that is the problem.

It has been my contention for a very long time that the greatest financial bubble in human history would not be able to continue without artificial support from the Fed and other global central banks.

Once the Fed finally ended their artificial support for the markets late last year, I anticipated that there would be trouble, but stock prices continued to rise through the holiday season.

But now reality is setting in, and investors are rushing like mad for the exits.  I really like how Brandon Smith described the current state of affairs in his recent article…

After I predicted the election of Donald Trump, I also predicted that central banks would begin pulling the plug on life support for equities markets. This did in fact take place with the Fed’s continued program of interest rate increases and the reduction of their balance sheet, which effectively strangles the flow of cheap credit to banking and corporate institutions that fueled stock buybacks for years. Without this constant and ever expansionary easy fiat, there is nothing left to act as a crutch for stocks except perhaps blind faith. And blind faith in the economy always ends up being smacked down by the ugly realities of mathematics.

Without artificial support, gravity will try to pull stock valuations back to their long-term averages.  That would mean a decline for the Dow of at least 10,000 more points, but major financial institutions are so highly leveraged and Wall Street has become such a giant casino that our system literally cannot handle that sort of a decline.

The only way that the game can continue is for the Fed and other global central banks to intervene and prop up the absurd financial bubble that they originally created.

Absent that, this crisis is likely to go from bad to worse, and we may soon find ourselves facing a financial panic unlike anything that we have ever seen before.

Michael Snyder is a pro-Trump candidate for Congress in Idaho’s First Congressional District, and you can learn how you can get involved in the campaign on his official website. His new book entitled “Living A Life That Really Matters” is available in paperback and for the Kindle on Amazon.com.

Just A Coincidence?: The Dow Goes From Being 567 Points Down To 567 Points Up At The Closing Bell

Seriously?  We were expecting that Tuesday would be an unusual day on Wall Street, and that was definitely the case.  At the low point, the Dow Jones industrial average was down 567 points, but at the closing bell it was up 567 points.  That is a swing of more than 1000 points, but what is more surprising is the exact symmetry of those numbers.  Is this just some sort of bizarre coincidence?

At the opening bell, stock prices collapsed and many were concerned that we were heading for another really bad day for investors.  According to CNBC, the Dow was down 567 points at the lowest point…

The Dow Jones industrial average opened with a big whoosh lower, then rallied all the way back. As of 3:41 p.m. ET, the Dow is 600 points higher and trading at a new session high. At its session low it was down by 567 points.

But then momentum shifted and the Dow soared.  By the end of the Day, the Dow Jones industrial average was up 567 points.  The following comes from CNN

The Dow plunged 567 points at the open on Tuesday and briefly sank into correction territory — a drop of 10% from its record high. But those losses quickly vanished, and the index ended the day up 567.

It was the Dow’s biggest point gain since August 2015 and the fourth-largest in history. The percentage gain of 2.3% is the biggest since January 2016.

It is not unusual to see market swings of this magnitude during times of high volatility.  Even during times of panic, at some point the sellers get exhausted and investors looking for buying opportunities come surging in.  On Tuesday, this shift in momentum came almost immediately after the opening

“I thought we were going to see the bottom within five minutes of when we opened. I think that’s basically what we’re seeing,” said Ed Keon, portfolio manager at QMA, the quantitative and dynamic asset allocation business of PGIM. “At these levels, stocks represent pretty good value and we’re adding to equity exposure.” Keon said it’s too early to call a bottom but he expects that the worse is over.

But just because the Dow was up more than 500 points today does not mean that the crisis is over.

It is important to remember that there are wild swings both ways during any market crisis.  For example, 9 of the 20 best days in stock market history were right in the middle of the financial crisis of 2008.  So if a new financial crisis is indeed brewing, we would certainly expect to see days when the Dow rises dramatically.

Markets tend to do well when things are calm, and they tend to go down when things get choppy.  So the fact that there was such volatility on Wall Street today is not a good sign.

Hopefully things will settle down, because the markets will not be able to handle too much more shaking.  There is so much leverage on Wall Street today, and as Carl Icahn recently told CNBC, one of these days all of this leverage is “going to blow up the market”…

Billionaire Carl Icahn told CNBC on Tuesday there are too many exotic, leveraged products for investors to trade, and one day these securities are going to blow up the market.

The market is a “casino on steroids” with all these exchange-traded funds and exchange-traded notes, he said.

These funds, especially the leveraged ones, are the “fault lines” that will eventually lead to an earthquake on Wall Street, he said. “These are just the beginnings of a rumbling.”

Wednesday will be a key day.  If the markets are nice and calm, that will be a really good sign.

But if we see tremendous movement in one direction or the other, that could indicate that more shaking is on the way.

In any event, the absurdly inflated stock prices of today are simply not sustainable.  Stock valuations always return to their long-term averages eventually, and that will be true in this case as well.

What goes up must come down, and we have certainly witnessed this with Bitcoin and other cryptocurrencies lately.  As far as stocks are concerned, the best that we can hope for in the long-term is a soft landing, but history tells us that is usually not how giant financial bubbles come to an end.

Michael Snyder is a pro-Trump candidate for Congress in Idaho’s First Congressional District, and you can learn how you can get involved in the campaign on his official website. His new book entitled “Living A Life That Really Matters” is available in paperback and for the Kindle on Amazon.com.

-1,175 Points! We Just Witnessed The Largest One Day Stock Market Crash Ever

The mainstream media seems so surprised that the stock market is crashing, but the truth is that it isn’t a surprise at all.  In fact, this crash is way, way overdue.  If the Dow Jones industrial average fell another 10,000 points, stock prices would still be overvalued.  I have been warning and warning and warning that this would happen, because stock valuations always return to their long-term averages eventually.  On Monday, the Dow was down a staggering 1,175 points, which was the largest single day decline that we have ever seen by a very wide margin.  In fact, it shattered the old record by nearly 400 points.

Shortly after 3 PM, all hell broke loose on Wall Street.  The Dow dropped by more than 800 points in just 10 minutes.  At one point on Monday, the Dow was down nearly 1,600 points, but a brief rally cut those losses roughly in half.  However, the rally did not last long and stock prices collapsed hard as the market closed.  At this moment, the Dow is already down more than 2,200 points from the peak of the market, and we are not too far from officially entering “correction” territory.

Once stocks start falling, it can trigger a massive rush for the exits, and that is what happened on Monday.  In particular, investors started to panic once the Dow broke through the 50-day moving average

“As soon as we broke the 50-day moving average … we saw volatility spike,” said Jeff Kilburg, CEO of KKM Financial. “It’s just been downhill from there.”

Other waves of selling were triggered once the 25,000 and 24,000 barriers on the Dow were breached.  In order to protect against losing too much money, many investors have stop losses set at psychologically-important levels.  The following comes from MarketWatch

Amplifying the slump was computer-programmed trade set to dump shares at certain levels. According to traders, the Dow DJIA, -4.60% was set to trigger trades once it fell below 25,000 and 24,000, for example, and 2,700 for the S&P 500.

Markets almost always go down faster than they go up, and once panic begins to spread on Wall Street it doesn’t take much to create a massive stampede.

In the end, this next financial crisis will be far worse than it should have been.  The Federal Reserve and other global central banks have endlessly manipulated the financial markets, and they created the biggest financial bubble in human history.

When an irrational financial bubble is growing, it can seem like things are wonderful.  But all such bubbles eventually burst, and the bursting of the bubble often does far more damage than the good that was accomplished by the manipulation of the markets.

So was there anything specific that caused the panic on Wall Street on Monday?

Yes, interest rates are rising, but as Bloomberg has noted, there wasn’t really anything noteworthy in the news that triggered the selling…

While Friday’s market rout came amid U.S. wage data on Friday that pointed to quickening inflation, which would lead to higher rates and, in turn, rising borrowing costs for companies, the selling Monday came amid few major data points.

“I think sentiment was a little too optimistic,” said Brad McMillan, chief investment officer for Commonwealth Financial Network. “What was driving the market up in January? It wasn’t the fundamentals, as good as they were, it was excessive confidence.”

Ultimately, time simply runs out on all irrational financial bubbles.  It is interesting to note that the Tulip price index began to crash on this exact date in 1637, and we may look back and point to February 5th as the key moment when the “financial crisis of 2018” started.

Once again, let us hope for some type of a bounce tomorrow.  Often stock prices do rebound quite a bit after an enormous decline, and many are hoping that stock prices will soar on Tuesday.

But so far the news after the market closed in New York has all been bad.  For example, CNBC is reporting that XIV has fallen more than 80 percent after hours…

An exchange-traded security which is supposed to be a bet on calm markets was collapsing after hours.

The VelocityShares Daily Inverse VIX Short-Term exchange-traded note (XIV) is down more than 80 percent in extended trading Monday. The security, issued by Credit Suisse, is supposed to give the opposite return of the Cboe Volatility index (VIX), the market’s widely followed turbulence gauge.

And as I write this article, it looks like markets all over Asia are going to be way down at the opening.

If stock prices keep collapsing, it could actually cause a major financial crisis.  So many financial institutions are deeply leveraged today, and many of them simply would not be able to handle a stock market decline of 30, 40 or 50 percent.

In particular, if things start to really unravel it will be important to pay special attention for any mention of “derivatives” in the financial news.  Once those dominoes start falling, we will see financial pain on a scale unlike anything that we have ever seen before in U.S. history.

Also, let us not forget that trouble signs continue to emerge for the “real economy”.  Just today, we learned that another major retail chain has filed for bankruptcy

Bon-Ton Stores, the corporate parent of several department store chains, tumbled into Chapter 11 bankruptcy protection as the company seeks a fresh lease on life.

Bon-Ton, whose brands include Boston Store, Carson’s, Elder-Beerman and Younkers, had been on a fast track toward bankruptcy court after it recently announced plans to close 47 of its 260 stores.

I cannot stress enough that what happened on Monday is not a surprise.  The only surprise is that it took this long to happen.

Stock valuations need to fall another 40 or 50 percent just to get back to their long-term averages, and whether that happens very rapidly or takes an extended period of time, the truth is that stock valuations will return to those long-term averages.

Unfortunately for us, the central banks have created a bubble of such enormity that it could potentially collapse the entire global financial system when it finally fully bursts.

Let us hope for calmer markets on Tuesday, but let us also be mindful that at some point we are going to pay an exceedingly great price for years and years of horribly foolish decisions.

Michael Snyder is a pro-Trump candidate for Congress in Idaho’s First Congressional District, and you can learn how you can get involved in the campaign on his official website. His new book entitled “Living A Life That Really Matters” is available in paperback and for the Kindle on Amazon.com.

-666 Points: We Just Witnessed The 6th Largest Single Day Stock Market Decline In U.S. History

On Friday, the Dow Jones Industrial Average fell 666 points (665.75 points to be precise), and many are pointing out that this was the 6th largest single day crash that we have ever seen.  This decline happened on the 33rd day of the year, and it was the worst day for the stock market by far since President Trump entered the White House.  I have been repeatedly warning that we are way overdue for a stock market crash, and many are concerned that we may be on the precipice of another great financial crisis.  We shall see what happens on Monday, because that will set the tone for the rest of the week.  If we see another huge decline early Monday morning, that could easily set off full-blown panic selling on Wall Street.

Rising interest rates appear to have been the trigger for the enormous market drop on Friday.  The following comes from the New York Post

“We all know that many bull markets have ended by the Federal Reserve as they raise the rates to the point of slowing the economy down perhaps too much,” Quincy Krosby, chief market strategist at Prudential Financial, told The Post.

“It’s come on quickly and it caught the market off guard,” Krosby said.

The Dow sell-off brought it below the 26,000 plateau — to 25,520.96 — the biggest points drop since Dec. 1, 2008.

It is quite rare for the market to drop this much in a single day.  The largest single daily decline was a 777 point drop in 2008, and overall the Dow has fallen by more than 600 points less than 10 times throughout history

The index posted a loss of nearly 666 points, its sixth-worst decline ever on a points basis.

The last time the index posted a drop of more than 600 points was June 24, 2016, the day after the Brexit vote.

The eight other times the Dow closed more than 600 points lower all took place in the last 18 years. Half occurred during the financial crisis in 2008.

My readers have heard me explain over and over that markets tend to go down a lot faster than they go up.

Once a market landslide begins, the movement can be absolutely breathtaking.  But none of this should come as any sort of a surprise, because even the Washington Post admits that “speculation of a market pullback” has been seemingly everywhere in recent days…

The airwaves and online chatter have been flooded in recent weeks with speculation of a market pullback like the one that thundered in on Friday.

“It looks like the beginning of a market correction,” said Luke Tilley, chief economist at Wilmington Trust, the wealth and investment advisory arm of M&T Bank. “It’s not something that is very surprising, given the low volatility that we saw in 2017.”

Right now we are in the terminal phase of a historic “double bubble” in both stocks and bonds.  Many times we will see one or the other get clobbered on a particular day, but Friday was a “bloodbath” for all asset classes…

Yesterday’s US equity market collapse and simultaneous bond market bloodbath was the biggest combined loss since December 2015, but perhaps more ominously, the week’s combined loss in bonds and stocks was the worst since Feb 2009.

So what will next week bring?

Hopefully things will settle down and we will see the markets start to bounce back.  After a huge decline, that is often what happens.

But it would be foolish to ignore the fear that appears to be growing on Wall Street.  At this point, even Bloomberg is openly wondering if this “is the start of something big?”…

Looking at the week’s drumbeat, you can’t help but wonder, is this the start of something big? Warnings about valuations have been pouring forth from bears for so long that barely anyone listens anymore. With the S&P 500 up almost 50 percent in less than two years, some see the end of the blissfully easy money that equities have spewed out for 13 straight months.

“It’s the turning point of volatility,” said Jeffrey Schulze, chief investment strategist at Clearbridge Investments, which manages $137 billion. “We were all very fortunate to go through a year like 2017. But there’s a number of different dynamics this year that will make volatility more part of the equation than it has been in quite some time.”

If the stock market does crash in 2018, it will not be a surprise.

The only surprise will be that it took this long to happen.

As I have stated over and over again, stock prices would need to fall by at least 40 or 50 percent just to get valuations back to their long-term averages, and stock prices always return to their long-term averages eventually.

Hopefully our day of reckoning has not arrived and this financial bubble can continue for a little while longer.

But if financial markets do begin to crash horribly this year, nobody will be able to say that they were not warned well ahead of time.

Michael Snyder is a pro-Trump candidate for Congress in Idaho’s First Congressional District, and you can learn how you can get involved in the campaign on his official website. His new book entitled “Living A Life That Really Matters” is available in paperback and for the Kindle on Amazon.com.

Panic Grips U.S. Financial Markets As The Dow Falls 362 Points – Worst Drop In More Than A Year

It isn’t going to be a surprise when U.S. stock prices fall 50, 60 or 70 percent from where they are today.  The only real surprise is that it took this long for it to happen.  Even after falling 362 points on Tuesday, the Dow Jones industrial average is still ridiculously high.  In fact, the only two times in our entire history when stocks have been this overvalued were right before the stock market crash of 1929 and right before the dotcom bubble burst.  Not even before the financial crisis of 2008 were stock valuations as absurd as they are right now.

At one point on Tuesday, the Dow had declined by more than 400 points, and we have not seen this sort of panic in the stock market in a very long time.  In fact, we have to go all the way back to June 24, 2016 to find the last time that the Dow fell by at least this much.  The Dow has dropped by triple digits on back to back days for the first time since last April, and a lot of analysts are wondering what is coming next.

Of course most in the financial community have been waiting for some sort of a decline, because even mainstream analysts are openly admitting that what we have been witnessing is “not sustainable”

“We’ve had a unilateral move higher [in stocks] to start things off and people are realizing this is not sustainable,” said Art Hogan, chief market strategist at B. Riley FBR. “You’re also seeing some cracks in the global story with interest rates rising.”

But where will things go from here?

Some believe that this is just a bump in the road and that the markets still have room to grow.  But others are warning that this “is not the time to take on more risk”

Howard Marks warned investors about investing more funds in the stock market at its current level.

“We are living in a low return world, characterized by significant uncertainty,” Marks said on CNBC’s “Halftime Report” Tuesday. “This is not the time to take on more risk. Things have been going awful well for almost 10 years. That’s not the time to turn up the wick.”

And then there are the bears such as John Hussman that are warning that we are on the precipice of one of the worst stock market crashes in American history…

I expect the S&P 500 to lose approximately two-thirds of its value over the completion of this cycle. My impression is that future generations will look back on this moment and say “… and this is where they completely lost their minds.”

I agree with John Hussman’s assessment.  Stock prices would need to decline by at least 50 percent from current levels in order for stock valuations to get back to their long-term averages.

And even though it may take a while, stock prices always return to their long-term averages.

Nothing about the long-term outlook has changed.  I have been warning about a devastating stock market crash for a very long time, and I will continue to warn my readers about one.  Because whether it happens next week, next month or next year, the reality of the matter is that all throughout our history stocks have always crashed after stock valuations have soared to these kinds of irrational levels.

On a personal note, I want to apologize for not writing very much this month.  I just returned from a very long campaign trip, and our hard work on the campaign trail has prevented me from getting much work done.

The good news is that the campaign is going incredibly well.  We are far ahead of where we thought we would be at this point, and with less than four months to go the race is incredibly close.

On Sunday, the very first debate was held in Coeur d’Alene, and all of the candidates were there.  To say that the fireworks were flying would be a major understatement.  If you have not seen the debate yet, you can watch it on YouTube right here.

The overwhelming consensus was that we were the hands down winner of this six-way debate. Here are some of the comments that were made by people that were watching the debate online as it was happening…

-“Michael was leaps and bounds set apart from the herd of politicians on that panel”

-“Michael has been more knowledgeable, pro-active and touched more people with his conservative message than everyone else up there combined”

-“Michael outshines them all! It is not about the money! it is about the power of people and the deplorables are WIDE AWAKE these days and we want the the right leaders in Congress to support our President!!!!”

-“Michael Snyder was the hands down Winner!! Great Job!!”

-“Michael Snyder was full of fervor and he spoke from the spirit! He is not an established candidate, he’s a true statesman!”

There were dozens more like that, but I think that you get the point.  It was exceedingly difficult to get all of the candidates to agree to come to this event, because there were some that were afraid that this sort of thing might happen, and now it will be even harder to get all of them to come out for similar events in the future.

The bad news is that a couple of my opponents are better funded than we are, and we need to close that gap.  Thanks to a tremendous surge in interest in our campaign, we desperately need to print up more campaign materials.  If you would like to help us print up more signs, more brochures and more mailers, you can contribute online right here

https://www.michaelsnyderforcongress.com/contribute.html

May 15th is right around the corner, and if we all pull together we can win this race.  We need more people praying, more people volunteering, and more people donating.  This is our opportunity to take our government back, and if you believe in our positive conservative message, I truly hope that you will join our team.

Michael Snyder is a pro-Trump candidate for Congress in Idaho’s First Congressional District, and you can learn how you can get involved in the campaign on his official website. His new book entitled “Living A Life That Really Matters” is available in paperback and for the Kindle on Amazon.com.

The Next Financial Crisis Has Already Arrived In Europe, And People Are Starting To Freak Out

Did you know that the sixth largest bank in Spain failed in spectacular fashion just a few days ago?  Many are comparing the sudden implosion of Banco Popular to the collapse of Lehman Brothers in 2008, and EU regulators hastily arranged a sale of the failed bank to Santander in order to avoid a full scale financial panic.  Sadly, most Americans have no idea that a new financial crisis is starting to play out over in Europe, because most Americans only care about what is going on in America.  But we should be paying attention, because the EU is the second largest economy on the entire planet, and the euro is the second most used currency on the entire planet.  The U.S. financial system is already teetering on the brink of disaster, and this new financial crisis in Europe could turn out to be enough to push us over the edge.

If EU regulators had not arranged a “forced sale” of Banco Popular to Santander, we would probably be witnessing panic on a scale that we haven’t seen since 2008 in Europe right about now.  The following comes from the Telegraph

Spanish banking giant Santander has stepped in to the rescue ailing rival Banco Popular by taking over the failing lender for €1 in a watershed deal masterminded by EU regulators to avoid a damaging collapse.

Santander will tap its shareholders for €7bn in a rights issue to raise the capital needed to shore-up Popular’s finances in a dramatic private sector rescue of Spain’s sixth-largest lender.

It will inflict losses of approximately €3.3bn on bond investors and shareholders but crucially will avoid a taxpayer bailout.

But now that a “too big to fail” bank like Banco Popular has failed, investors are immediately trying to figure out which major Spanish banks may be the next to collapse.  According to Wolf Richter, many have identified Liberbank as an institution that is highly vulnerable…

After its most tumultuous week since the bailout days of 2012, Spain’s banking system is gripped by a climate of fear, uncertainty and distrust. Rather than allaying investor nerves, the shotgun bail-in and sale of Banco Popular to Santander on Tuesday has merely intensified them. For the first time since the Global Financial Crisis, shareholders and subordinate bondholders of a failing Spanish bank were not bailed out by taxpayers; they took risks in order to make a buck, and they bore the consequences. That’s how it should be. But bank investors don’t like not getting bailed out.

Now they’re worrying it could happen again. As Popular’s final days showed, once confidence and trust in a bank vanishes, it’s almost impossible to restore them. The fear has now spread to Spain’s eighth largest lender, Liberbank, a mini-Bankia that was spawned in 2011 from the forced marriage of three failed cajas (savings banks), Cajastur, Caja de Extremadura and Caja Cantabria.

On Thursday, shares of Liberbank dropped by an astounding 20 percent, and that was followed up by another 19 percent decline on Friday.

Spanish authorities responded by banning short sales of Liberbank shares, and that caused a short-term rebound in the stock price.

But we haven’t seen this kind of chaos in European financial markets in a very long time.

Meanwhile, Nick Giambruno is sounding the alarm about a much bigger bubble.  At this moment, more than a trillion dollars worth of Italian government bonds have negative yields…

Over $1 trillion worth of Italian bonds actually have negative yields.

It’s a bizarre and perverse situation.

Lending money to the bankrupt Italian government carries huge risks. So the yields on Italian government bonds should be near record highs, not record lows.

Negative yields could not exist in a free market. They’re only possible in the current “Alice in Wonderland” economy created by central bankers.

You see, the European Central Bank (ECB) has been printing money to buy Italian government bonds hand over fist. Since 2008, the ECB and Italian banks have bought over 88% of Italian government debt, according to a recent study.

The moment that the ECB stops wildly buying Italian bonds, the party will be over and the Italian financial system will crash.  Unfortunately for Italy, the Germans are pressuring the ECB to quit printing so much money, and the Germans usually get their way in these things.

But if the Germans get their way this time, we could be facing a complete and utter nightmare very quickly.  Here is more from Nick Giambruno

Once the ECB—the only large buyer—steps away, Italian government bonds will crash and rates will soar.

Soon it will be impossible for the Italian government to finance itself.

Italian banks—which are already insolvent—will be decimated. They hold an estimated €235 billion worth of Italian government bonds. So the coming bond crash will pummel their balance sheets.

It’s shaping up to be a lovely train wreck.

And all of this is happening in the context of a global economy that appears to be headed for a major downturn.

For example, the last time that global credit growth showed down this rapidly was during the last financial crisis

From peak to trough the deceleration in global credit growth is now approaching that during the global financial crisis (-6% of global GDP), even if the dispersion of the decline is much narrower. Currently 55% of the countries in our sample have experienced a -0.3 standard deviation deterioration in their credit impulse (median over 12 months) compared to 77% of countries in Dec ’09 when the median decline was -1.4 stdev.”

Of course the last time global credit growth decelerated this dramatically, global central banks intervened on a scale that was unlike anything that we had ever seen before.

But this time around it is happening at a time when global central banks are very low on ammo

More importantly, back in 2009, not only China, but the Fed and other central banks unleashed the biggest injection of credit, i.e. liquidity, the world has ever seen resulting in the biggest asset bubble the world has ever seen. And, this time around, the Fed is set to hike for the third time in the past year, even as the ECB and BOJ are forced to soon taper as they run out of eligible bonds to monetize. All this comes at a time when US loan growth is weeks away from turning negative.

As such, what “kickstarts” the next spike in the credit impulse is unclear. What is clear is that if the traditional 3-6 month lag between credit inflection points, i.e. impulse, and economic growth is maintained, the global economy is set for a dramatic collapse some time in the second half.

There are so many experts that are warning about big economic trouble in our immediate future.  I would like to say that all of the experts that are freaking out are wrong, but I can’t do that.

I have not seen an atmosphere like this since 2008 and 2009, and everything points to an acceleration of the crisis as we enter the second half of this year.

Tech Stocks Experience Their Longest Losing Streak In 5 Years As Panic Begins To Grip The Market

S&P 500 tech stocks have now fallen for 9 days in a row.  The last time tech stocks declined for so many days in a row was in 2012, and that was the only other time in history when we have seen such a long losing streak.  As I have stated before, the post-election “Trump rally” is officially done, and the market is starting to roll over as investors begin to realize that all of the buying momentum has completely evaporated.  Tech stocks tend to be particularly volatile, and so the fact that they are starting to lead the way down should definitely be alarming to many in the investing community.

Of course it isn’t just tech stocks that are falling.  The Dow was down another 59 points on Wednesday, and the S&P 500 has closed beneath its 50 day moving average for the very first time since the election.  For those that have been waiting for a key technical signal before getting out of the market, there is one for you.

The price of gold was up again, and that is definitely not surprising in this geopolitical environment.  The closer we get to war the higher gold and silver prices will go, and if we actually get into a major conflict we will see them blast into the stratosphere.

Another key indicator that I am watching very closely is the VIX.  On Wednesday it shot up above 16 for the very first time since the day after Trump’s election victory, and many believe that it could soon go much higher.  The following is an excerpt from a CNBC report

The VIX measures the size of the S&P 500’s expected moves over the next 30 days, and consequently tends to run just a bit hotter than volatility over the past 30 days. Yet one-month realized volatility is just 6.7, meaning the VIX is at a roughly 9-point premium, which Chintawongvanich calls “highly unusual.”

That said, he notes that implied volatility was also at a large premium preceding the U.K. referendum to leave the EU and the U.S. presidential election. The obvious conclusion is that the market is now similarly preparing itself for the French presidential election, which is set to be held on April 23. Some fear that a populist candidate could prevail, which may cause more problems for the European Union and thus for economic stability.

As noted in that excerpt, the upcoming French election is absolutely huge.  If the election goes “the wrong way” according to the globalists, it could literally mean the end of the European Union as it is configured today.

And of course of even greater concern is the global march toward war.  It is being reported that North Korea is on the verge of a major nuclear weapons test, and such an act of defiance could be enough to push Donald Trump into conducting a major military strike.

But if Trump does hit North Korea, it is quite likely that North Korea will hit back.  The North Koreans are promising to use nuclear weapons in any conflict with the United States, and if Trump bungles this thing we could easily be looking at a scenario in which millions of people end up dead.

Things also continue to get more tense in the Middle East.  The Russians and the Iranians are promising to respond to any additional U.S. strikes “with force”, and on Wednesday Trump declared that our relationship with Russia “may be at an all-time low”.

Of course this came shortly after Secretary of State Rex Tillerson used similar language following his face to face meeting with Russian President Vladimir Putin

Secretary of State Rex Tillerson and Russian President Vladimir Putin held more than two hours of “very frank” talks Wednesday in the Kremlin amid tensions over a U.S. airstrike against a Syria air base blamed for last week’s deadly chemical attack.

In remarks to reporters after the meeting, Tillerson said he told the Russian leader that current relations between the two countries are at a “low point.”

If the Trump administration conducts any more strikes on Syria, it is quite likely that the Russians and Iranians will make good on their threats and will start firing back.

And once U.S. aircraft or U.S. naval vessels come under fire, the calls for war in Washington will become absolutely deafening.

Unfortunately, Trump is not likely to back down any time soon because the recent missile strike in Syria has dramatically boosted his popularity.  According to every recent survey, the American people overwhelmingly approve of what Trump did…

A Morning Consult/Politico poll released Wednesday found that 57% of Americans supported airstrikes in Syria, 58% supported establishing a no-fly zone over parts of Syria including strikes against Syria’s air-defense systems, and 63% of Americans thought the US should do more to end the Syrian conflict. Even more, 66% of respondents said they supported the Trump administration’s strike last week specifically.

This mirrored results of another recent poll from CBS News in which 57% of Americans said they approved of the US strike. A Pew Research Center survey from this week showed a similar level of support, with 58% of Americans approving of the strike.

Sadly, this is a time when the majority is dead wrong.  Many of those that are supporting military action against Syria now were vehemently against it when Barack Obama was considering it.

Even Donald Trump spoke out very strongly against military intervention in Syria in 2013, and he was quite right to do so, and so what has suddenly changed that now makes it okay?

There is nothing to be gained in Syria, but we could very easily end up in a direct military conflict with Russia, Iran and Hezbollah which could ultimately prove to be the spark that sets off World War III.

And of course a military strike on North Korea could also potentially spark a global war.  The first Korean War resulted in a direct military conflict between the United States and China, and the second Korean War could easily result in the exact same thing happening again.

Do the American people really want war with both Russia and China at the same time?

It has been said that you should be careful what you wish for, because you just might get it.