Junk Bonds Are Going To Tell Us Where The Stock Market Is Heading In 2015

Dominoes - Public DomainDo you want to know if the stock market is going to crash next year?  Just keep an eye on junk bonds.  Prior to the horrific collapse of stocks in 2008, high yield debt collapsed first.  And as you will see below, high yield debt is starting to crash again.  The primary reason for this is the price of oil.  The energy sector accounts for approximately 15 to 20 percent of the entire junk bond market, and those energy bonds are taking a tremendous beating right now.  This panic in energy bonds is infecting the broader high yield debt market, and investors have been pulling money out at a frightening pace.  And as I have written about previously, almost every single time junk bonds decline substantially, stocks end up following suit.  So don’t be fooled by the fact that some comforting words from Janet Yellen caused stock prices to jump over the past couple of days.  If you really want to know where the stock market is heading in 2015, keep a close eye on the market for high yield debt. (Read More...)

There Is Hope In Understanding That A Great Economic Collapse Is Coming

Hope Despair - Public DomainIf you were about to take a final exam, would you have more hope or more fear if you didn’t understand any of the questions and you had not prepared for the test at all?  I think that virtually all of us have had dreams where we show up for an exam that we have not studied for.  Those dreams can be pretty terrifying.  And of course if you were ever in such a situation in real life, you probably did very, very poorly on that test.  The reason I have brought up this hypothetical is to make a point.  My point is that there is hope in understanding what is ahead of us, and there is hope in getting prepared.  Since I started The Economic Collapse Blog back in 2009, there have always been a few people that have accused me of spreading fear.  That frustrates me, because what I am actually doing is the exact opposite of that.  When a hurricane is approaching, is it “spreading fear” to tell people to board up their windows?  Of course not.  In fact, you just might save someone’s life.  Or if you were walking down the street one day and you saw someone that wasn’t looking and was about to step out into the road in front of a bus, what would the rational thing to do be?  Anyone that has any sense of compassion would yell out and warn that other person to stay back.  Yes, that other individual may be startled for a moment, but in the end you will be thanked warmly for saving that person from major injury or worse.  Well, as a nation we are about to be slammed by the hardest times that any of us have ever experienced.  If we care about those around us, we should be sounding the alarm. (Read More...)

A Full-Blown Economic Crisis Has Erupted In Russia

Vladimir PutinThe 8th largest economy on the entire planet is in a state of turmoil right now.  The shocking collapse of the price of oil has hit a lot of countries really hard, but very few nations are as dependent on energy production as Russia is.  Sales of oil and natural gas account for approximately two-thirds of all Russian exports and approximately 50 percent of all government revenue. So it should be no surprise that the fact that the price of oil has declined by almost 50 percent since June is absolutely catastrophic for the Russian economy.  And when you throw in international sanctions, wild money printing by the Central Bank of Russia and unprecedented capital flight, you get the ingredients for an almost perfect storm.  But those of us living in the western world should not be too smug about what is happening in Russia, because the nightmare that is unfolding over there is just a preview of the economic chaos that will soon envelop the whole world. (Read More...)

We Just Witnessed The Worst Week For Global Financial Markets In 3 Years

Global Financial Markets Crash - Public DomainIs this the start of the next major financial crisis?  The nightmarish collapse of the price of oil is creating panic in financial markets all over the planet.  On June 16th, U.S. oil was trading at a price of $107.52.  Since then, it has fallen by almost 50 dollars in less than 6 months.  This has only happened one other time in our history.  In the summer of 2008, the price of oil utterly collapsed and we all remember what happened after that.  Well, the same patterns that we witnessed back in 2008 are happening again.  As the price of oil crashed in 2008, so did prices for a whole host of other commodities.  That is happening again.  Once commodities started crashing, the market for junk bonds started to implode.  That is also happening again.  Finally, toward the end of 2008, we witnessed a horrifying stock market crash.  Could we be on the verge of another major one?  Last week was the worst week for the Dow in more than three years, and stock markets all over the world are crashing right now.  Bad financial news continues to roll in from the four corners of the globe on an almost hourly basis.  Have we finally reached the “tipping point” that so many have been warning about? (Read More...)

14 Facts That Prove That The Number Of Children Living In Poverty This Christmas Is At A Record High

Children - Public DomainDid you know that 65 percent of all children in the United States live in a home that receives aid from the federal government?  We live at a time when child poverty in America is exploding.  Yes, the U.S. economy is experiencing a temporary bubble of false stability for the moment, but even during this period of false stability the gap between the wealthy and the poor continues to rapidly expand and the middle class is being systematically destroyed.  And sadly, this is having a disproportionate impact on children.  This is happening for a couple of reasons.  First of all, poorer households tend to have more children than wealthier households.  Secondly, most people tend to have children when they are in their young adult years, and right now young adults are being absolutely hammered by this economy.  As a result, things just continue to get even worse for children living in this country.  Here are 14 facts that show that the number of children in America living in poverty this Christmas is at an all-time record high… (Read More...)

Not Just Oil: Guess What Happened The Last Time Commodity Prices Crashed Like This?…

Financial Crisis - Public DomainIt isn’t just the price of oil that is collapsing.  The last time commodity prices were this low was during the immediate aftermath of the last financial crisis.  The Bloomberg Commodity Index fell to 110.4571 on Monday – the lowest that it has been since April 2009.  Just like junk bonds, industrial commodities are a very reliable leading indicator.  In other words, prices for industrial commodities usually start to move in a particular direction before the overall economy does.  We witnessed this in the summer of 2008 when a crash in commodity prices preceded the financial crisis in the fall by a couple of months.  And right now, we are witnessing what may be another major collapse in commodity prices.  In recent weeks, the price of copper has declined substantially.  So has the price of iron ore.  So has the price of nickel.  So has the price of aluminum.  You get the idea.  So this isn’t just about oil.  This is a broad-based commodity decline, and if it continues it is really bad news for the U.S. economy. (Read More...)

Anyone That Believes That Collapsing Oil Prices Are Good For The Economy Is Crazy

Oil - Public DomainAre much lower oil prices good news for the U.S. economy?  Only if you like collapsing capital expenditures, rising unemployment and a potential financial implosion on Wall Street.  Yes, lower gasoline prices are good news for the middle class.  I certainly would rather pay two dollars for a gallon of gas than four dollars.  But in order to have money to fill up your vehicle you have got to have an income first.  And since the last recession, the energy sector has been the number one creator of good jobs in the U.S. economy by far.  Barack Obama loves to stand up and take credit for the fact that the employment picture in this country has been improving slightly, but without the energy industry boom, unemployment would be through the roof.  And now that the “energy boom” is rapidly becoming an “energy bust”, what will happen to the struggling U.S. economy as we head into 2015? (Read More...)

New Law Would Make Taxpayers Potentially Liable For TRILLIONS In Derivatives Losses

Derivatives - Banksters - Public DomainIf the quadrillion dollar derivatives bubble implodes, who should be stuck with the bill?  Well, if the “too big to fail” banks have their way it will be you and I.  Right now, lobbyists for the big Wall Street banks are pushing really hard to include an extremely insidious provision in a bill that would keep the federal government funded past the upcoming December 11th deadline.  This provision would allow these big banks to trade derivatives through subsidiaries that are federally insured by the FDIC.  What this would mean is that the big banks would be able to continue their incredibly reckless derivatives trading without having to worry about the downside.  If they win on their bets, the big banks would keep all of the profits.  If they lose on their bets, the federal government would come in and bail them out using taxpayer money.  In other words, it would essentially be a “heads I win, tails you lose” proposition. (Read More...)

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