Those that were hoping for an “economic renaissance” in the United States got some more bad news this week. It turns out that the U.S. economy is in significantly worse shape than the experts were projecting. Retail sales unexpectedly declined in March, total business sales have fallen again, and the inventory to sales ratio has hit the highest level since the last financial crisis. When you add these three classic recession signals to the 19 troubling numbers about the U.S. economy that I wrote about last week, it paints a very disturbing picture. Virtually all of the signs that we would expect to pop up during the early chapters of a major economic crisis have now appeared, and yet most Americans still appear to be clueless about what is happening.
Even I was surprised when the government reported that retail sales had actually fallen in March. Consumer spending is a very large part of our economy, and so if consumer spending is slowing down already that certainly does not bode well for the rest of 2016. The following comes from highly respected author Jim Quinn…
The Ivy League educated “expert” economists expected March retail sales to increase by 0.1%. They only missed by $6 billion, as retail sales FELL by 0.3%. They have fallen for three straight months. At least gasoline sales were strong, as prices have risen 22% since mid-February. That should do wonders for the finances of American households. If you exclude gasoline sales, retail sales fell by 0.4%. As the chart below reveals, the year over year change in retail sales has been at or near recessionary levels for most of 2015, and into 2016.
You can view the chart that he was referring to right here. In addition to a decline in retail sales, total business sales have also been falling, and this is another classic recession signal. The following comes from Wolf Richter…
Total business sales fell again in February, the Commerce Department reported today. They include sales by manufacturers, retailers, and wholesalers of all sizes across the US economy. This measure is far broader than the aggregate sales by publicly traded companies, which too have been falling.
At $1.284 trillion in February, total business sales were down an estimated 0.4% from January, adjusted for seasonal and trading-day differences but not for price changes. And they were down 1.4% from the already beaten-down levels of February last year. They’re back where they’d first been in November 2012!
Yes, the stock market has been on quite a run for the past several weeks, but that temporary rebound is not based on the economic fundamentals.
The truth is that the real economy is definitely starting to slow down substantially. If you want to break it down very simply, less stuff is being bought and sold and shipped around the country, and that tells us far more about what is coming in the months ahead than the temporary ups and downs of stock prices.
Another huge red flag is the fact that the inventory to sales ratio in the U.S. has hit the highest level that we have seen since the last financial crisis…
The crucial inventory-to-sales ratio, which tracks how long unsold inventory sits around in relationship to sales, is now at a mind-bending 1.41. That’s the level the ratio spiked to in November 2008, after the Lehman bankruptcy in September had put the freeze on the economy.
Inventories represent prior sales by suppliers. When companies try to reduce their inventories, they cut their orders. Suppliers see these orders as sales. As their sales slump, suppliers adjust by cutting their own orders, thus causing the sales slump to propagate up the supply chain. They all react by cutting their expenses. And if it lasts, they’ll cut jobs. Inventory corrections have a nasty impact on the overall economy.
Because sales have slowed down, inventories are starting to pile up to alarmingly high levels. And when companies see that business is slowing down, they start to let people go.
Somehow, most of the talking heads on television don’t seem too alarmed by this.
But ordinary Americans are beginning to become alarmed about what is happening. In fact, the percentage of Americans that believe that the U.S. economy is “getting worse” is now the highest it has been since last August…
One of the more glaring examples of how strong pessimism has become is Gallup’s U.S. Economic Confidence Index. The measure gauges the difference between respondents who say the economy is improving or declining. The most recent results are not good.
Fully 59 percent say the economy is “getting worse” against just 37 percent who say it is “getting better.” That gap of 22 percentage points is the worst since August, according to Gallup, which polled 3,542 adults.
Personally, I thought that we would be a little further down the road by now, but without a doubt a new economic downturn has begun in America.
It’s funny – yesterday I took time out to write an article about the horrible suffering that ISIS sex slaves are enduring, and a few of my critics took that as a sign that there must not be enough bad economic news to write about.
Well, the truth is that this isn’t the case at all. The global economic meltdown is steaming along, even if it is moving just a little bit slower than many of us had originally anticipated. We are moving in the exact direction that myself and many others had warned about, and the rest of 2016 is looking quite ominous for the global economy.
So hopefully everyone (including the critics) is using whatever time we have left wisely. Because I definitely wish the very best for everyone during the exceedingly hard times that are coming.
*About the author: Michael Snyder is the founder and publisher of The Economic Collapse Blog. Michael’s controversial new book about Bible prophecy entitled “The Rapture Verdict” is available in paperback and for the Kindle on Amazon.com.*
Has the U.S. economy gotten better over the past six months or has it gotten worse? In this article, you will find solid proof that the U.S. economy has continued to get worse over the past six months. Unfortunately, most people seem to think that since the stock market has rebounded significantly in recent weeks that everything must be okay, but of course that is not true at all. If you look at a chart of the Dow, a very ominous head and shoulders pattern is forming, and all of the economic fundamentals are screaming that big trouble is ahead. When Donald Trump told the Washington Post that we are heading for a “very massive recession“, he wasn’t just making stuff up. We are already seeing lots of things happen that never take place outside of a recession, and the U.S. economy has already been sliding downhill fairly rapidly over the past several months. With all that being said, the following are 19 facts that prove things in America are worse than they were six months ago…
#1 U.S. factory orders have now declined on a year over year basis for 16 months in a row. As Zero Hedge has noted, in the post-World War II era this has never happened outside of a recession…
In 60 years, the US economy has not suffered a 16-month continuous YoY drop in Factory orders without being in recession. Moments ago the Department of Commerce confirmed that this is precisely what the US economy did, when factory orders not only dropped for the 16th consecutive month Y/Y, after declining 1.7% from last month
#3 It is being projected that corporate earnings will be down 8.5 percent for the first quarter of 2016 compared to one year ago. This will be the fourth quarter in a row that we have seen year over year declines, and the last time that happened was during the last recession.
#4 Total business sales have fallen 5 percent since the peak in mid-2014.
#5 S&P 500 earnings have now fallen a total of 18.5 percent from their peak in late 2014.
#6 Corporate debt defaults have soared to the highest level that we have seen since 2009.
#9 51 oil and gas drillers in North America have filed for bankruptcy since the beginning of last year, and according to CNN we could be on the verge of seeing the biggest one yet…
Shale oil driller SandRidge Energy (SD) warned there was “substantial doubt” it would survive the oil downturn. The Oklahoma City company said this week it is exploring a potential Chapter 11 bankruptcy filing.
Based on its $3.6 billion of debt, SandRidge would be the biggest North American oil-focused company to go bust during the current downturn, according to a CNNMoney analysis of stats compiled by law firm Haynes and Boone.
#10 According to Challenger, Gray & Christmas, job cut announcements by major firms in the United States were up 32 percent during the first quarter of 2016 compared to the first quarter of 2015.
#11 Consumers in the United States accumulated more new credit card debt during the 4th quarter of 2015 than they did during the entire years of 2009, 2010 and 2011 combined.
#12 Existing home sales in the U.S. were down 7.1 percent during the month of February, and this was the biggest decline that we have witnessed in six years.
#14 The Restaurant Performance Index in the U.S. recently dropped to the lowest level that we have seen since 2008.
#15 Major retailers all over the country are shutting down hundreds of stores as the “retail apocalypse” accelerates.
#16 If you take the number of working age Americans that are officially unemployed (8.1 million) and add that number to the number of working age Americans that are considered to be “not in the labor force” (93.9 million), that gives us a grand total of 102 million working age Americans that do not have a job right now
#17 Since peaking during the 3rd quarter of 2014, U.S. exports of goods and services have been steadily declining. This is something that we never see outside of a recession…
#18 The cost of everything related to medical care just continues to skyrocket even though our wages are stagnating. According to the Social Security Administration, 51 percent of all American workers make less than $30,000 a year, and yet the cost of medical care just hit a brand new all-time high…
#19 Our government debt continues to spiral out of control. At this point it is sitting at a staggering total of $19,218,516,838,306.52, but when Barack Obama first entered the White House it was only 10.6 trillion dollars. That means that our government has been stealing an average of more than 100 million dollars an hour from future generations of Americans every single hour of every single day since Barack Obama was inaugurated…
How in the world can anyone look at those numbers and suggest that everything is okay?
I simply do not understand how that could be possible.
Part of the problem is that Americans have been trained to be irrationally optimistic. It is fine to have an optimistic outlook on life, but when it causes you to throw logic and reason out the window that is not good.
For example, you can be “optimistic” about your ability to fly all you want, but if you step off a 10 story building you are going to take a very hard fall to the ground.
Similarly, you can ignore all of the facts and pretend that our economic prosperity is sustainable all you want, but it won’t change the fundamental laws of economics.
On a personal note, I would like to thank everyone that has helped make my new book the #1 new release in Christian eschatology on Amazon.com. I understand that a lot of my secular readers are not going to understand my fascination with Bible prophecy, and that is okay. I felt that I needed to write this book to address some very serious errors that are being taught in churches all over America today, and I also wanted to inspire believers to face the great hardships and persecution that are coming.
Just because very difficult times are approaching does not mean that it will be time to run and hide. My wife and I always live our lives with no fear, and when things get crazy we believe that it will be an opportunity to do even more good. We believe that the greatest chapters of our lives are still ahead of us, and we want people to understand why they can look forward to the future even though great darkness is rising all around us.
So yes, I definitely carry a message of warning.
But I also bring a message of hope.
As we look toward the future, there is much to be concerned about, but there are also things happening that are worth getting extremely excited about.
It is when times are the darkest that the light is needed the most, and very soon light will be greatly, greatly needed in the United States of America.
Guess what Donald Trump is saying now? Last week, I discussed how Robert Kiyosaki and Harry Dent are warning that a major crisis is inevitable, but I didn’t expect Donald Trump to come out and say essentially the exact same thing. On Saturday, the Washington Post released a stunning interview with Donald Trump in which he boldly declared that we heading for a “very massive recession”. He also warned that we are currently in “a financial bubble” and that “it’s a terrible time right now” to be investing in stocks. These are things that you may be accustomed to hearing on The Economic Collapse Blog, but to hear them from the frontrunner for the Republican nomination is another thing altogether.
Whether you plan to vote for Donald Trump or not, at least we can all appreciate that he doesn’t talk like a politician. He tells it like he sees it, and he told the Washington Post that he considers the official unemployment rate that is put out by the Obama administration to be completely fraudulent…
“First of all, we’re not at 5 percent unemployment. We’re at a number that’s probably into the twenties if you look at the real number,” Trump said. “That was a number that was devised, statistically devised to make politicians — and, in particular, presidents — look good. And I wouldn’t be getting the kind of massive crowds that I’m getting if the number was a real number.”
And before you dismiss this, perhaps you should consider that the Federal Reserve also considers the government unemployment number to be so inaccurate that they secretly have been calculating the unemployment rate on their own…
Because it distrusted the Labor Department’s unemployment statistics, the Federal Reserve — without any fanfare — started calculating its own jobless rate two years ago.
And the Fed’s calculation, called the Labor Market Conditions Index, or LMCI, shows that the US unemployment rate in February was 5.8 percent. That’s much higher than the 4.9 percent official jobless rate reported by the Labor Department.
Of course if truly honest numbers were being used, the unemployment rate would not be anywhere close to this range. According to John Williams of shadowstats.com, the broadest measure of unemployment is currently sitting at 22.9 percent.
And just last week I showed my readers that 23.2 percent of all Americans in their prime working years do not have a job right now, and that inactivity rates for both men and women in the U.S. are currently far higher than they were during the last recession.
So when Donald Trump says that we are at an unemployment number “that’s probably into the twenties”, I would have to rate that statement as mostly true.
Of course things are about to get a whole lot worse. According to Challenger, Gray & Christmas, job cut announcements by major firms were up 32 percent during the first quarter of 2016 compared to the first quarter of 2015.
When big corporations are doing well, they tend to hire more people. But when their earnings start to go down, one of the very first things they tend to do is to lay people off.
Sadly, that is what we are starting to see right now. According to Wolf Richter, it is being projected that corporate earnings per share for the first quarter will decline a whopping 8.5 percent compared to one year ago…
Even analysts who estimate pro-forma, ex-bad-items, non-GAAP earnings that S&P 500 companies propagate to look better and that these analysts use to inflate their stock-price targets, just threw in the towel on the quarter.
They expect these inflated earnings per share for the first quarter to plunge 8.5% from a year ago, according to FactSet. If this holds after S&P 500 companies report their ex-bad-items earnings, it would be the worst EPS decline since Q3 2009.
It would also be the fourth quarter in a row of year-over-year earnings declines, a phenomenon that last happened during the Great Recession from Q4 2008 through Q3 2009.
In the past, we have almost always seen corporate profit margins peak and start declining before a recession hits. The following chart comes from Jesse Felder, and it shows that this has happened prior to almost every recession in the post-World War II era, and now it is happening again…
Why can’t more people see this?
For months, I have been pointing out to my readers how history is repeating. The exact same patterns that have happened just prior to previous recessions are happening again, but most people just refuse to see the truth.
Yes, U.S. stocks rebounded substantially in March, but that was not based on the economic fundamentals. Just look at the following chart from Zero Hedge. At some point stock prices and corporate earnings will start converging once again. There is simply no way in the world that stock prices can stay disconnected from reality indefinitely…
So when Donald Trump says that we are in “a financial bubble” and that “it’s a terrible time right now” to be investing in stocks, I would have to rate those statements as absolutely true.
I would also have to rate his statement that we are heading toward a “very massive recession” as absolutely true as well, and legendary investor Jim Rogers agrees with me. In fact, he recently told Bloomberg that there is “a 100 percent probability that the U.S. economy would be in a downturn within one year“.
For a legendary investor such as Jim, that is quite a bold statement to make. And of course most American families already feel like they are in an economic downturn. This is something that my wife and I talked about during our most recent show…
The truth is that the U.S. economy has never even gotten close to recovering to the level it was at just prior to the last recession, and now the next major crisis is upon us.
But this new crisis is not going to be like the last one. It is going to be much, much worse before it is all said and done, and what is coming is going to bring America to her knees. This is something that I discuss in my new book. The economic devastation that is coming is going to be unlike anything that any of us have ever known, and it is going to shake America to the very core.
So enjoy the remaining days of “normal life in America” while you still can.
A lot of people are using this time to party, but if you are wise you are using it to prepare.
For the first time ever, total credit card debt in the United States is approaching a trillion dollars. Instead of learning painful lessons from the last recession, Americans continue to make the same horrendous financial mistakes over and over again. In fact, U.S. consumers accumulated more new credit card debt during the 4th quarter of 2015 than they did during the years of 2009, 2010 and 2011 combined. That is absolutely insanity, because other than payday loans, credit card debt is just about the worst kind of debt that consumers could possibly go into. Extremely high rates of interest, combined with severe penalties and fees, can choke the financial life out of almost any family in no time at all.
These days, most Americans use credit cards for various purposes, and they can be very convenient.
And if you pay them off every single month, they don’t become a problem.
Unfortunately, a lot of people are not doing this. According to CNBC, total U.S. credit card debt rose by an astounding 71 billion dollars last year alone…
Last year, credit card debt in the U.S. surged by approximately $71 billion to $917.7 billion, according to a new study from CardHub.com. The research also found that most of the debt accrued in 2015 came in the fourth quarter, when Americans tacked on more than $52 billion.
“With 7 of the past 10 quarters reflecting year-over-year regression in consumer performance, evidence is mounting to support the notion that credit card users are reverting to pre-downturn bad habits,” CardHub CEO Odysseas Papadimitriou said in a statement.
And as noted above, things were particularly gruesome during the 4th quarter of last year.
According to Alternet, Americans added more credit card debt during those three months than during the entire years of 2009, 2010 and 2011 combined…
Not since we headed into the Great Recession of 2008 have we been quite so loosey-goosey with our credit cards, racking up debt with stunning speed. Of our 4Q totals, CardHub notes, “during this one quarter, we added more debt than in 2009, 2010 and 2011 put together.” That brings dollars owed to credit card companies by each debt-saddled American family up to $7,879, the highest since the Great Recession.
I can’t even begin to describe how unwise this is. When I was in my twenties, I made the same mistakes that so many other Americans are making right now. I very foolishly racked up large balances on my credit cards, and it took years of extremely painful payments to fix those mistakes.
In America today, 37 percent of all households maintain credit card balances from month to month, and the average level of credit card debt for those households is $15,700. The following comes from CBS Minnesota…
According to NerdWallet, 37 percent of American households have credit card debt, which is defined as not paying off the full balance every month. Using data from the Federal Reserve of New York, U.S. Census and its own poll, NerdWallet found the average balance for those in credit debt is $15,700.
What most people don’t realize is that by letting balances run from month to month, you can end up paying just about as much in interest as you did for the original purchases.
For the sake of simplicity in calculating the cost of the average credit card debt, let’s assume an APR of 16% and a fixed payment. We’ll also assume a minimum payment of 2% of the principal balance of $15,762, the average as of the end of 2015, or $315.
Based on those terms — and assuming you don’t add any more to your credit card balance — it would take 84 months, or seven years, to pay off the balance in full. During that time, you’ll pay $10,402 in interest — about two-thirds of the original balance — for a total of $26,164. This averages out to about $124 in interest per month.
The scenario above assumes that all payments are made on time. But a single late payment can trigger higher interest rates, penalties and fees that can be absolutely suffocating.
In fact, some people end up paying back three, four or five times as much as they originally borrowed to the credit card companies.
If you use credit cards for convenience or to buy things online or to automatically pay bills, that is fine. Just don’t let balances accumulate. As you can see, that can be financial suicide.
And as we head into a new global recession, you definitely don’t want to be saddled with high levels of debt. All of us have little luxuries that we can cut back on, and now is not the time to be living on the financial edge.
Just look at some of the troubling signs that we have seen in the news in recent days…
-The U.S. oil and rig count just dropped to the lowest level ever recorded
-One Houston CEO told employees that he was laying off that we have entered a “depression”
-It is being reported that 35 percent of all oil and gas companies around the world are at risk of falling into bankruptcy
Did you know that there are some U.S. states that have already officially fallen into recession? Economic activity all over the planet is in the process of slowing down, and there are some areas of the country that are really starting to feel the pain. In particular, any state that is heavily dependent on the energy industry is hurting right now. During the years immediately following the last recession, the energy industry was the primary engine for the growth of good paying jobs in America, but now that process is completely reversing. All over the U.S. energy companies are going under, and thousands upon thousands of good jobs are being lost.
As economists size up the chances of the first nationwide slump since 2009, pockets of the country are already contracting. Four states — Alaska, North Dakota, West Virginia and Wyoming — are in a recession, and three others are at risk of prolonged declines, according to indexes of state economic performance tracked by Moody’s Analytics.
The three additional states that are “at risk of prolonged declines” are Louisiana, New Mexico and Oklahoma. What all of those seven states have in common is a strong dependence on the energy industry. Last year, 67 oil and gas companies in the United States filed for bankruptcy, and approximately 130,000 good paying energy jobs were lost.
If the price of oil does not go back up, this could be just the beginning. It is being reported that a whopping 35 percent of all oil and gas companies around the planet are at risk of falling into bankruptcy, and the financial institutions that have been backing these energy companies are getting very nervous.
Of course things could shift dramatically for oil and gas companies if World War 3 suddenly erupts in the Middle East, and that could literally happen at any time. But for the moment the outlook for the energy industry continues to be quite dreary.
Let us also keep in mind that the problems for the U.S. economy are not limited to the energy industry. According to CNBC, corporate profits in the United States have now declined for three straight quarters, and this is the very first time this has happened since the last recession…
With 87 percent of the S&P 500 reporting, total blended fourth-quarter earnings have shown a decline of 3.6 percent, according to FactSet. Assuming the trend holds up, it will mark the first time profits have fallen for three straight quarters since 2009.
But the road ahead doesn’t get any easier.
FactSet is now projecting that earnings will decline 6.9 percent in the first quarter, a stunning move lower over time considering that in September the expectation was for 4.8 percent growth.
As corporate profits fall, layoffs are starting to increase. Just the other day we learned that the number of job cuts in this country shot up 218 percent during the month of January according to Challenger, Gray & Christmas.
It is starting to look very much like 2008 all over again, and I am convinced that it will soon be much, much harder to find work in America.
Here are some more numbers that indicate that the U.S. is heading into a major economic slowdown…
–U.S. exports were down 7 percent on a year over year basis in December.
Well, if the U.S. economy is in such great shape, then why are some of the biggest retailers in the entire nation shutting down stores at a frightening pace. The following list of store closures comes from one of my previous articles…
-Wal-Mart is closing 269 stores, including 154 inside the United States.
-The Gap is in the process of closing 175 stores in North America.
-Aeropostale is in the process of closing 84 stores all across America.
-Finish Line has announced that 150 stores will be shutting down over the next few years.
-Sears has shut down about 600 stores over the past year or so, but sales at the stores that remain open continue to fall precipitously.
Perhaps things look fine for the moment in New York City or Washington D.C. or San Francisco or wherever it is that these “reporters” write their articles.
But for ordinary Americans that operate in the real world, the pain of this new economic downturn is already exceedingly apparent. Here is more from Bloomberg…
Dale Oxley doesn’t need to hear about rising odds of a U.S. recession to dread the future. For the West Virginia homebuilder, the downturn has already arrived.
“Everyone is going to have to tighten their belts,” said Oxley, the 48-year-old owner of a Charleston-area construction company. “The next couple of years are going to be difficult.”
Unfortunately for hard working Americans like Oxley, what we have seen so far is just the tip of the iceberg.
We have entered a long downturn that is ultimately going to be even more painful than the last recession was.
And everything changes if Saudi Arabia and Turkey get trigger happy and decide to invade Syria. If that happens, it could very well be the spark that sets off World War 3 and a full-blown meltdown of the global financial system.
We have not seen global economic activity fall off this rapidly since the great recession of 2008. Manufacturing activity is imploding all over the planet, global trade is slowing down at a pace that is extremely alarming, and the Baltic Dry Index just hit another brand new all-time record low. If the “real economy” consists of people making, selling and shipping stuff, then it is in incredibly bad shape. Here in the United States, the dismal economic numbers continue to stun all of the experts. For example, on Monday we learned that the Texas general business activity index just hit a six year low…
Economic activity in Texas keeps getting worse.
The general business activity index out Monday from the Dallas Federal Reserve for January was -34.6, a six-year low and much worse than economists had expected.
The forecast for the monthly index was -14, following a December reading of -21.6 (revised from -20.1) that was also worse than expected.
The last coal train to leave Erwin rolled slowly out of town just after at 3 p.m. Thursday, less than eight hours after CSX Transportation employees heard the news that rocked all of Unicoi County.
“Its a hard pill to swallow,” county Mayor Greg Lynch said. “Of course, we heard rumors that something was coming down. But never in my wildest dreams did I imagine they would just shut down and leave town.”
CSX delivered the news of its decision to immediately close Erwin’s 175-acre rail yard and abruptly end the employment of the facility’s 300 workers in a series of meetings with employees conducted at the start of their morning shifts.
It has been said that if you want to know what is really happening with the U.S. economy, just watch the railroads.
And right now, rail traffic all over the nation is falling to depressingly low levels.
With regard to the train freight article this morning, we have in Grand Junction, CO., literally hundreds of engines sidelined on the tracks. They are three deep on some tracks and easily number over 250. I have never seen this many engines on the tracks before and I feel this is just another indicator of the slowdown in shipping.
In case you are tempted to think that this is just anecdotal evidence, I want you to consider what is happening to the largest railroad company in the United States.
According to Wolf Richter, operating revenues for Union Pacific were down 15 percent last year…
Union Pacific, the largest US railroad, reported awful fourth-quarter earnings Thursday evening. Operating revenues plummeted 15% year over year, and net income dropped 22%.
It was broad-based: The only category where revenues rose was automotive (+1%). Otherwise, revenues fell: Chemicals (-7%), Agricultural Products (-12%), Intermodal containers (-14%), Industrial Products (-23%), and Coal (-31%). Shipment of crude plunged 42%.
So Union Pacific did what American companies do best: it laid off 3,900 people last year.
And of course we can see evidence of the emerging economic slowdown all around us pretty much wherever we look. Sprint just laid off 8 percent of its workforce, GoPro is letting go 7 percent of its workers, and Wal-Mart just announced the closure of 269 stores.
But instead of dealing with reality, there are a lot of irrational optimists that insist that things will start bouncing back any day now. For instance, CNBC is reporting that Goldman Sachs is forecasting that the S&P 500 will end up finishing the year back at 2,100…
Goldman, though, is sticking with its forecast that the S&P 500 will rebound and finish the year at 2,100, a rise of about 11 percent from current levels but basically no net gain for the full year.
It is easy to say something like that, but the actions of the big banks speak louder than words.
Bank of America and Citigroup reduced headcount the most, eliminating about 20,000 staffers between them, according to fourth-quarter earnings reports from each bank. The respective moves amount to 4.6 percent and 4 percent fewer workers at the banks. JPMorgan Chase reported in its earnings that it employs 6,700 fewer workers than a year ago.
And guess what?
The “too big to fail” banks did the exact same thing just before the great stock market crash of 2008.
Since June 2015, approximately 15 trillion dollars of global stock market wealth has been wiped out. After a brief respite at the end of last week, it appears that the global financial crisis is getting ready to accelerate once again.
On Monday, the price of oil dipped back under 30 dollars, the Dow was down another 208 points, and the Nikkei is currently down another 389 points in early trading.
Somewhere close to one-fifth of all global stock market wealth has already been wiped out.
We only have about four-fifths left.
But in the end, I can talk about these numbers until I am blue in the face and some people will still not get prepared.
Some people have so much faith in Barack Obama, the Federal Reserve and the mainstream media that they would literally follow them off a cliff.
By now, most of the people that believe that they should prepare for the coming crisis have already gotten prepared, and most of those that want to believe that everything is going to work out just fine somehow are never going to get prepared anyway.
What is going to happen is going to happen, and tens of millions of people are going to end up bitterly regretting not listening to the warnings when they still had the chance.
Something has just happened that has signaled a recession every single time that it has occurred since World War I. 16 times since 1919 there have been at least 8 month-over-month declines in industrial production during the preceding 12 month period, and in each of those 16 instances the U.S. economy has plunged into recession. Now that it has happened again, will the U.S. economy beat the odds and avoid a major economic downturn? I certainly wouldn’t count on it. As I have written about repeatedly, there are a whole host of other numbers that are screaming that a new recession is here, and global financial markets are crumbling. It would take a miracle of epic proportions to pull us out of this tailspin, and yet there are many people out there that are absolutely convinced that it will happen.
John Hussman is not one of them. In his most recent weekly comment, he examined this stunning correlation between month-over-month declines in industrial production and recessions. To me, what Hussman has presented is overwhelmingly conclusive…
Last week, following a long period of poor internals and weakening order surplus, we observed fresh declines in industrial production and retail sales. Industrial production has now also declined on a year-over-year basis. The weakness we presently observe is strongly associated with recession. The chart below (h/t Jeff Wilson) plots the cumulative number of month-over-month declines in Industrial Production during the preceding 12-month period, in data since 1919. Recessions are shaded. The current total of 10 (of a possible 12) month-over-month declines in Industrial Production has never been observed except in the context of a U.S. recession. Historically, as Dick Van Patten would say, eight is enough.
After looking at that chart, is there anyone out there that still doubts that the U.S. economy is in significant trouble?
Many estimates of U.S. GDP growth for the fourth quarter of 2015 are already just a small fraction of one percent. It would not be a surprise at all to see a negative number posted once it is all said and done.
And of course more bad news for the economy just keeps pouring in. So far this week we have learned that the growth rate of federal withholding taxes has turned negative, Johnson & Johnson plans has announced that it is eliminating 3,000 jobs, and BP has announced that it is eliminating 4,000 jobs.
Of course it is not exactly a surprise that BP is cutting jobs. At this point the entire energy industry is absolutely hemorrhaging workers. As I wrote about yesterday, 130,000 good paying energy jobs have been lost in the United States since the beginning of last year.
But now we are seeing major firms outside the energy industry cutting payrolls. Even financial giants such as Morgan Stanley are looking for ways to cut costs…
During a conference call, CEO James Gorman uttered a sentence that will most likely make the bank’s staff shudder.
“Too many employees based in high-cost centers are doing work that can sensibly be done in lower-cost centers,” he said.
The whole environment is changing.
When things start to get tough, big corporations start to get rid of people. We saw this back in 2008, and it is starting to happen again right now.
And just like last time around, we are going to see millions of Americans lose their jobs during the hard years that are ahead of us.
But thankfully for the moment there is a brief lull in the action. The financial turmoil that has gripped the planet was calmed on Tuesday when China announced that their economy grew at a rate of 6.8 percent during the fourth quarter of 2015. This was right in line with expectations, and markets around the world responded positively to the news.
There is just one huge problem. Everyone knows that GDP figures coming out of China are essentially meaningless. If you believe that the Chinese economy actually grew at a 6.8 percent rate during the fourth quarter of 2015, then I have a bridge to sell you. Virtually every other number coming out of China over the past several months tells us that the Chinese economy is shrinking, and so that 6.8 percent figure is extremely questionable at best.
Do you want to know the last time the communist Chinese admitted to having a recession?
It was in 1976.
Over the past four decades, economic growth figures have become a source of great national pride for China. To admit that the economy is now imploding would bring great shame on the Chinese government and the nation as a whole, and so that must be avoided at all costs.
Yes, the numbers are fraudulent in the U.S. too. According to John Williams of shadowstats.com, if the U.S. was actually using honest numbers the last recession never would have technically ended.
But in China they take this to ridiculous extremes. The Chinese economy is fueled by exports, and Chinese exports have been down on a year over year basis for six months in a row. And the primary reason why commodity prices have been absolutely collapsing is because of the economic contraction in China.
Of course if China had released a GDP number that was honest, global markets would have crashed hard. So their lies are making everyone else feel a bit better for the moment, and every day of relative stability that we can enjoy from here on out is something to be thankful for.
As you read this article, markets all over Asia, Europe, South America and the Middle East are already in bear market territory. More than 30 percent of the market has been wiped out in Brazil and Hong Kong, more than 40 percent of the market has been wiped out in China and Italy, and about 50 percent of the market has been wiped out in Saudi Arabia.
We are already experiencing a major global financial crisis.
The only question remaining is how bad it will eventually become.
Let us hope for more days like this one that are relatively calm. But I wouldn’t count on things turning around significantly any time soon, because the economic fundamentals are telling us that big trouble is ahead.
A lot of people were expecting some really big things to happen in 2015, and most of them did not happen. But what did happen? It is my contention that a global financial crisis began during the second half of 2015, and it threatens to greatly accelerate as we enter 2016. During the last six months of the year that just ended, financial markets all over the planet crashed, trillions of dollars of global wealth was wiped out, and some of the largest economies in the world plunged into recession. Here in the United States, 2015 was the worst year for stocks since 2008, nearly 70 percent of all investors lost money last year, and it is being projected that the final numbers will show that close to 1,000 hedge funds permanently shut down within the last 12 months. This is what the early stages of a financial crisis look like, and the worst is yet to come.
If we were entering another 2008-style crisis, we would expect to see junk bonds crashing. When financial trouble starts, it usually doesn’t start with the biggest and strongest companies. Instead, it usually starts percolating on the periphery. And right now bonds of firms that are considered to be on the risky side of things are rapidly losing value.
In the chart below, you can see that a high yield bond ETF that I track very closely known as JNK started crashing in the middle of 2008. This crash began to unfold before the horrific crash of stocks in the fall. Investors that saw junk bonds crashing in advance and pulled their money out of stocks in time saved an enormous amount of money.
Now, for the very first time since the last financial crisis, we are seeing junk bonds crash again. In December, there was finally a sustained crash through the psychologically-important 35.00 level, and at this point JNK is sitting a bit below 34.00. This stunning decline is a giant red flag that tells us that stocks will soon follow in the exact same direction…
In 2015, Third Avenue Management shocked Wall Street when they froze withdrawals from a 788 million dollar mutual fund that was highly focused on junk bonds. Investors that couldn’t get their money out began to panic, and other mutual funds now find themselves under siege. If junk bonds continue to crash, this will just be the beginning of the carnage.
One of the big reasons why junk bonds are crashing is because of the crash in the price of oil. Over the past 18 months, the price of oil has plummeted from $108 a barrel to $37 a barrel.
There has only been one other time in all of history when we have ever seen an oil price crash of this magnitude. That was in 2008 – just before the greatest financial crisis since the Great Depression…
Why can’t people see the parallels?
Crashes are happening all around us, and yet so many of the “experts” seem completely blind to what is going on.
Unlike 2008, the price of oil is not expected to rapidly rebound any time soon. The following comes from CNN…
Crude prices dropped a whopping 35% last year and are hovering around $37 a barrel. That’s a level not seen since the global financial crisis.
It won’t get better any time soon. Most oil experts believe prices will bounce back in late 2016, but they expect more pain first.
Goldman Sachs forecasts that oil will average about $38 a barrel in February, even lower than for most of 2015.
Meanwhile, the prices of industrial commodities have been crashing as well. For example, the chart below shows that the price of copper started crashing hard just before the great financial crisis of 2008, and the exact same thing is happening once again right before our very eyes…
Things are unfolding just as we would expect they would during the initial stages of a new global financial crisis.
And we have already seen a full blown stock market crash in many of the largest economies around the planet. For instance, just look at what has been happening in Brazil. The Brazilians have the 7th largest economy in the world, and Goldman Sachs says that they have plunged into an “outright depression“. In the chart below, you can see the sharp downturn that took place in August, and Brazilian stocks actually kept falling all the way through the end of 2015…
We see a similar thing when we look at our neighbor to the north. Canada has the 11th largest economy on the entire planet, and I recently wrote a lengthy article about the economic difficulties that the Canadians are now facing. 2015 was a very bad year for Canadian stocks as well, and they just kept falling steadily all the way through December…
Of course nobody can forget what happened to China. The Chinese have the second largest economy on the globe, and news about their economic slowdown in making headlines almost every single day now.
Last summer, Chinese stocks crashed about 40 percent, and they did manage to bounce back just a bit since then. But they are still down about 30 percent from the peak of the market…
And there is plenty more that we could talk about. European stocks just had their second worst December ever, and Japanese stocks are down about 500 points in early trading as I write this article.
Here in the United States, the Dow Jones Industrial Average, Dow Transports, the S&P 500 and the Russell 2000 all had their worst years since 2008. As I mentioned the other day, 674 hedge funds shut down during the first nine months of 2015, and it is being projected that the final total for the year will be up around 1000.
But we aren’t hearing much about this financial carnage on the news yet, are we?
Many people that I talk to still think that “nothing is happening”, but don’t you dare say that to Warren Buffett.
How would you feel if you lost 7.8 billion dollars in a single year?
The truth, of course, is that signs of financial chaos are erupting all around us. Corporate profits are plunging, the bond distress ratio just hit the highest level that we have seen since the last financial crisis, and corporate debt defaults have risen to the highest level that we have seen in about seven years.
If you run a business, you may have noticed that fewer people are coming in and it seems like those that do come in have less money to spend. Economic activity is slowing down, and inventories are piling up. In fact, wholesale inventories have now risen to the highest level that we have seen since the last recession…
Do you notice a theme?
So many things that have not happened in six or seven years are now happening again.
History may not repeat, but it sure does rhyme, and it astounds me that more people cannot see that 2015/2016 is looking eerily similar to a replay of 2008/2009.
Another number that I watch closely is the velocity of money. When an economy is running well, money tends to circulate efficiently through the system. But when an economy gets into trouble, people get scared and start holding on to their money. As you can see from the chart below, the velocity of money declined during every single recession since 1960. This is precisely what one would expect. And of course during the recession that started in 2008, the velocity of money plunged precipitously. But then a funny thing happened when that recession supposedly “ended”. The velocity of money just kept going down, and now it has fallen to an all-time record low…
But if you go back to 1971, 61 percent of all Americans lived in middle class households.
Meanwhile, the share of the income pie that the middle class takes home has also continued to shrink.
In 1970, the middle class brought home approximately 62 percent of all income. Today, that number has fallen to just 43 percent.
As the middle class is systematically destroyed, the number of Americans living in poverty just continues to grow. And those that often suffer the most are the children. It may be hard for you to believe, but the number of homeless children in the U.S. has increased by 60 percent over the past six years.
How in the world can anyone dare to claim that “things are getting better”?
Anyone that says that should be ashamed of themselves.
We are in the midst of a long-term economic collapse that is now accelerating once again.
Anyone that tries to tell you that “things are getting better” and that 2016 is going to be a better year than 2015 is simply not being honest with you.
A new global financial crisis erupted during the last six months of 2015, and this new financial crisis is going to intensify throughout the early months of 2016. Financial institutions will begin falling like dominoes, and this will result in a great credit crunch around the world. Businesses will fail, unemployment will skyrocket and millions will suddenly be faced with economic despair.
By the time it is all said and done, this new financial crisis will be even worse than what we experienced back in 2008, and the suffering that we will see around the world will be off the charts.
So does that mean that I am down about this year?
Not at all. In fact, my wife and I are greatly looking forward to 2016. In the midst of all the chaos and darkness, there will be great opportunities to do good and to make a difference.
What a great shaking comes, people go looking for answers. And I think that this will be a year when millions of people start to understand that our politicians and the mainstream media are not telling them the truth.
Yes, great challenges are coming. But now is not a time to dig a hole and try to hide from the world. Instead, this will be a time for those that have prepared in advance to love others, help others and show them the truth.
What about you?
Are you ready to be a light during the dark times that are coming?
Please feel free to join the conversation by posting a comment below…