2016

The Financial Crisis Of 2016 Rolls On – China, Oil, Copper And Junk Bonds All Continue To Crash

Buy Sell - Public DomainNever before have we seen a year start like this.  On Monday, Chinese stocks crashed once again.  The Shanghai Composite Index plummeted another 5.29 percent, and this comes on the heels of two historic single day crashes last week.  All of this chaos over in China is one of the factors that continues to push commodity prices even lower.  Today the price of copper fell another 2.40 percent to $1.97, and the price of oil continued to implode.  At one point the price of U.S. oil plunged all the way down to $30.99 a barrel before rebounding just a little bit.  As I write this article, oil is down a total of 6.12 percent for the day and is currently sitting at $31.13.  U.S. stocks were mixed on Monday, but it is important to note that the Russell 2000 did officially enter bear market territory.  This is yet another confirmation of what I was talking about yesterday.  And junk bonds continue to plummet.  As I write this, JNK is down to 33.42.  All of these numbers are huge red flags that are screaming that big trouble is ahead.  Unfortunately, the mainstream media continues to insist that there is absolutely nothing to be concerned about.

A little over a year ago, I wrote an article that explained that anyone that believed that low oil prices were good for the economy was “crazy“.  At the time, many people really didn’t understand what I was trying to communicate, but now it is becoming exceedingly clear.  On Monday, one veteran oil and gas analyst told CNBC that “half of U.S. shale oil producers could go bankrupt” over the next couple of years…

Half of U.S. shale oil producers could go bankrupt before the crude market reaches equilibrium, Fadel Gheit, said Monday.

The senior oil and gas analyst at Oppenheimer & Co. said the “new normal oil price” could be 50 to 100 percent above current levels. He ultimately sees crude prices stabilizing near $60, but it could be more than two years before that happens.

By then it will be too late for many marginal U.S. drillers, who must drill into and break up shale rock to release oil and gas through a process called hydraulic fracturing. Fracking is significantly more expensive than extracting oil from conventional wells.

Since the last recession, the energy industry has been the number one producer of good paying jobs in this country.

Now that those firms are starting to drop like flies, what is that going to mean for employment in America?

Just today, a huge coal company filed for bankruptcy, and so did a U.S. unit of commodity trading giant Glencore.  The following comes from Zero Hedge…

While the biggest bankruptcy story of the day is this morning’s chapter 11 filing by Arch Coal, one which would trim $4.5 billion in debt from its balance sheet while handing over the bulk of the post-reorg company to its first-lien holders as part of the proposed debt-for-equity exchange, the reality is that the Arch default was widely anticipated by the market.

However, another far less noted and perhaps far more significant bankruptcy filing was that of Sherwin Alumina Co., a U.S. unit of commodity trading giant Glencore PLC, whose troubles have been extensively detailed on these pages. The stated reason for this far more troubling chapter 11 was “challenging market conditions” which is one way to describe an industry in which just one remaining U.S. smelter will be left in operation after Alcoa shut down its Warrick Country smelting ops last week.

A spokesman for Glencore, which owns the entire business, said the commodities producer and trader is “supportive of the restructuring process undertaken by Sherwin and is hopeful of an outcome that will allow for the continued operation of the Sherwin facility.”

We desperately need prices for oil and other commodities to rebound significantly.  Unfortunately, that does appear to be likely to happen any time soon.  In fact, according to CNN we could soon see the price of oil fall quite a bit more…

The strengthening U.S. dollar could send oil plunging to $20 per barrel.

That’s the view of analysts at Morgan Stanley. In a report published Monday, they say a 5% increase in the value of the dollar against a basket of currencies could push oil down by between 10% and 25% — which would mean prices falling by as much as $8 per barrel.

If prices for oil and other commodities keep falling, what is going to happen?

Well, Gina Martin Adams of Wells Fargo Securities says that what is happening right now reminds her of the correction of 1998…

Recent market volatility has dredged up memories of previous times of turmoil, most notably the 2008 crisis. But Gina Martin Adams of Wells Fargo Securities has been reminded of another, less dramatic correction year — 1998.

Adams posits that the current economic environment is suffering from themes that also played out in 1998, including falling oil prices, a rising U.S. dollar and troubles in emerging markets. Consequently, stocks may see a similar move to the 1998 correction, which saw a 20 percent drop for stocks over six weeks.

To me, it is much more serious than that.  Just before U.S. stocks crashed horribly in 2008, we saw Chinese stocks crash, the price of oil crashed, commodity prices crashed, and junk bonds crashed really hard.

All of those things are happening again, and yet most of the “experts” continue to refuse to see the warning signs.

In fact, the mainstream media is full of articles that are telling people not to panic while the financial markets crumble all around them…

There’s no need to make big moves in response to the recent volatility. “Regular folks should take on a long-term view and avoid trying to anticipate short-term market movements,” says Stephen Horan, the managing director of credentialing at CFA Institute. “There is almost no evidence to suggest that professionals can do it effectively and a plethora of evidence suggesting individuals do it poorly.”

They want “regular folks” to keep holding on to their investments as the “smart money” dumps their stocks at a staggering pace.

A little more than six months ago, I predicted that “our problems will only be just beginning as we enter 2016”, and that is turning out to be dead on correct.

The financial crisis that began during the second half of last year is greatly accelerating, and yet most of the population continues to be in denial even though the average stock price has already fallen by more than 20 percent.

Hopefully it will not take another 20 percent decline before people begin to wake up.

What Really Happened In 2015, And What Is Coming In 2016…

2015 2016 - Public DomainA 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…

JNK

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…

Oil - Federal Reserve

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…

Price Of Copper

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…

Brazil Stock Market

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…

Canada Stock Market

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…

China Stock 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.

He lost 7.8 billion dollars in 2015.

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…

Inventory To Sales Ratio - Federal Reserve

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…

Velocity Of Money M2

A big reason for this is the ongoing decline of the middle class.  In 2015, we learned that middle class Americans now make up a minority of the population for the first time ever.

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.

60 percent!

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…

2015 Was The Worst Year For The Stock Market Since 2008

New Year's Eve - Public DomainIt’s official – 2015 was a horrible year for stocks.  On the last day of the year, the Dow Jones Industrial Average was down another 178 points, and overall it was the worst year for the Dow since 2008.  But of course the Dow was far from alone.  The S&P 500, the Russell 2000 and Dow Transports also all had their worst years since 2008.  Isn’t it funny how these things seem to happen every seven years?  But compared to other investments, stocks had a relatively “good” year.  In 2015, junk bonds, oil and industrial commodities all crashed hard – just like they all did just prior to the great stock market crash of 2008.  According to CNN, almost 70 percent of all investors lost money in 2015, and things are unfolding in textbook fashion for much more financial chaos in 2016.

Globally, over the past 12 months we have seen financial shaking unlike anything that we have experienced since the last great financial crisis.  During the month of August markets all over the world started to go haywire, and at one point approximately 11 trillion dollars of financial wealth had been wiped out globally according to author Jonathan Cahn.

Since that time, U.S. stocks rebounded quite a bit, but they still ended red for the year.  Other global markets were not nearly as fortunate.  Some major indexes finished 2015 down 20 percent or more, and European stocks just had their second worst December ever.

I honestly don’t understand the “nothing is happening” crowd.  The numbers clearly tell us that a global financial crisis began in 2015, and it threatens to accelerate greatly as we head into 2016.

Actually, there are a whole lot of people out there that would be truly thankful if “nothing” had happened over the past 12 months.  For example, there are five very unfortunate corporate CEOs that collectively lost 20 billion dollars in 2015…

Five CEOs of companies in the Russell 1000 index, including Nicholas Woodman of camera maker GoPro (GPRO), Sheldon Adelson of casino operator Las Vegas Sands (LVS) and even the famed investor Warren Buffett of Berkshire Hathaway (BRKA), lost more money on their companies’ shares than any other CEOs this year, according to a USA TODAY analysis of data from S&P Capital IQ.

These five CEOs were handed a whopping collective $20 billion loss on their company stock in 2015. Each and every one of these CEOs lost $1 billion or more – based on the average number of shares they’ve owned this year.

The biggest loser of the group was Warren Buffett.

He lost an astounding 7.8 billion dollars in 2015.

Do you think that he believes that “nothing happened” this past year?

And if “nothing happened”, then why are hedge funds “dropping like flies” right now?  The following comes from Zero Hedge…

Two days, ago we noted that hedge funds are now dropping like flies in a year in which generating alpha has become virtually impossible for the majority of the vastly overpaid 2 and 20 “smart money” out there (and where levered beta is no longer the “sure thing” it used to be when the Fed was pumping trillions into stocks) when we reported that Seneca Capital, the $500 million multi-strat hedge fund belonging to Doug Hirsh (of Sohn Investment Conference fame), is shutting down.

And just within the last 24 hours, another very prominent hedge fund has collapsed.  SAB Capital, which once managed more than a billion dollars, is shutting down after huge losses this year.  Here is more from Zero Hedge…

It turns out that despite our intention, the question was not rhetorical because just a few hours later Bloomberg answered when it reported that the latest hedge fund shutdown casualty was another iconic, long-term investor: Scott Bommer’s SAB Capital, which as of a year ago managed $1.1 billion, and which after 17 years of managing money and after dropping roughly 11% in the first eight month of 2015, has decided to return all outside client money, and converting the hedge fund into a family office (after all one has to preserve one’s offshore tax benefits).

Overall, 674 hedge funds shut down during the first nine months of this year, and the final number for 2015 will actually be far higher because the rate of closings has accelerated as we have approached the end of this calendar year.  When the final numbers come in, I would not be surprised to hear that 1,000 hedge funds had closed up shop in 2015.

Meanwhile, underlying economic conditions continue to deteriorate.

Corporate profits are steadily falling, the bond distress ratio just hit the highest level that we have seen since September 2009, and corporate debt defaults have risen to the highest level that we have seen since the last recession.

And this week we got a couple of new numbers that indicate that the U.S. economy is slowing down much faster than anticipated.

The first big surprise was the Dallas Fed’s general business activity index…

The Dallas Fed’s general business activity index plunged to -20.1 in December from -4.9 in November. This was much worse than the -7.0 expected by economists.

Any reading below 0 signals contraction, and this index has been below 0 all year.

The next big surprise was the Chicago purchasing manager index…

The Chicago purchasing manager index unexpectedly plunged to 42.9 in December, its lowest reading since July 2009.

Any reading below 50 signals a contraction in business activity.

This was down from 48.7 in November and much worse than the 50.0 expected by economists.

When the final numbers for the fourth quarter are in a few months from now, I believe that they will show that the U.S. economy officially entered recession territory at this time.

And the truth is that deep recessions have already started for some of the other biggest economies on the planet.  For example, I recently wrote about the deep troubles that Canada is now experiencing, and things have already gotten so bad in Brazil that Goldman Sachs is referring to that crisis as “an outright depression“.

Many people seem to assume that since I have a website called “The Economic Collapse Blog” that I must want everything to fall apart.  But that is not true at all.  I love my country, I enjoy my life, and I would be perfectly content to spend 2016 peacefully passing the time here in the mountains with my wonderful wife.  The longer things can stay somewhat “normal”, the better it is for all of us.

Unfortunately, for decades we have been making incredibly foolish decisions as a society, and the consequences of those decisions are now catching up with us in a major way.

Jonathan Cahn likes to say that “a great shaking is coming”, and I very much agree with him.

In fact, I think that it is going to be here a lot sooner than most people think.

So buckle up, because I believe that 2016 is going to be quite a wild ride.

58 Facts About The U.S. Economy From 2015 That Are Almost Too Crazy To Believe

58The world didn’t completely fall apart in 2015, but it is undeniable that an immense amount of damage was done to the U.S. economy.  This year the middle class continued to deteriorate, more Americans than ever found themselves living in poverty, and the debt bubble that we are living in expanded to absolutely ridiculous proportions.  Toward the end of the year, a new global financial crisis erupted, and it threatens to completely spiral out of control as we enter 2016.  Over the past six months, I have been repeatedly stressing to my readers that so many of the exact same patterns that immediately preceded the financial crisis of 2008 are happening once again, and trillions of dollars of stock market wealth has already been wiped out globally.  Some of the largest economies on the entire planet such as Brazil and Canada have already plunged into deep recessions, and just about every leading indicator that you can think of is screaming that the U.S. is heading into one.  So don’t be fooled by all the happy talk coming from Barack Obama and the mainstream media.  When you look at the cold, hard numbers, they tell a completely different story.  The following are 58 facts about the U.S. economy from 2015 that are almost too crazy to believe…

#1 These days, most Americans are living paycheck to paycheck.  At this point 62 percent of all Americans have less than 1,000 dollars in their savings accounts, and 21 percent of all Americans do not have a savings account at all.

#2 The lack of saving is especially dramatic when you look at Americans under the age of 55.  Incredibly, fewer than 10 percent of all Millennials and only about 16 percent of those that belong to Generation X have 10,000 dollars or more saved up.

#3 It has been estimated that 43 percent of all American households spend more money than they make each month.

#4 For the first time ever, middle class Americans now make up a minority of the population. But back in 1971, 61 percent of all Americans lived in middle class households.

#5 According to the Pew Research Center, the median income of middle class households declined by 4 percent from 2000 to 2014.

#6 The Pew Research Center has also found that median wealth for middle class households dropped by an astounding 28 percent between 2001 and 2013.

#7 In 1970, the middle class took home approximately 62 percent of all income. Today, that number has plummeted to just 43 percent.

#8 There are still 900,000 fewer middle class jobs in America than there were when the last recession began, but our population has gotten significantly larger since that time.

#9 According to the Social Security Administration, 51 percent of all American workers make less than $30,000 a year.

#10 For the poorest 20 percent of all Americans, median household wealth declined from negative 905 dollars in 2000 to negative 6,029 dollars in 2011.

#11 A recent nationwide survey discovered that 48 percent of all U.S. adults under the age of 30 believe that “the American Dream is dead”.

#12 Since hitting a peak of 69.2 percent in 2004, the rate of homeownership in the United States has been steadily declining every single year.

#13 At this point, the U.S. only ranks 19th in the world when it comes to median wealth per adult.

#14 Traditionally, entrepreneurship has been one of the primary engines that has fueled the growth of the middle class in the United States, but today the level of entrepreneurship in this country is sitting at an all-time low.

#15 For each of the past six years, more businesses have closed in the United States than have opened.  Prior to 2008, this had never happened before in all of U.S. history.

#16 If you can believe it, the 20 wealthiest people in this country now have more money than the poorest 152 million Americans combined.

#17 The top 0.1 percent of all American families have about as much wealth as the bottom 90 percent of all American families combined.

#18 If you have no debt and you also have ten dollars in your pocket, that gives you a greater net worth than about 25 percent of all Americans.

#19 The number of Americans that are living in concentrated areas of high poverty has doubled since the year 2000.

#20 An astounding 48.8 percent of all 25-year-old Americans still live at home with their parents.

#21 According to the U.S. Census Bureau, 49 percent of all Americans now live in a home that receives money from the government each month, and nearly 47 million Americans are living in poverty right now.

#22 In 2007, about one out of every eight children in America was on food stamps. Today, that number is one out of every five.

#23 According to Kathryn J. Edin and H. Luke Shaefer, the authors of a new book entitled “$2.00 a Day: Living on Almost Nothing in America“, there are 1.5 million “ultrapoor” households in the United States that live on less than two dollars a day. That number has doubled since 1996.

#24 46 million Americans use food banks each year, and lines start forming at some U.S. food banks as early as 6:30 in the morning because people want to get something before the food supplies run out.

#25 The number of homeless children in the U.S. has increased by 60 percent over the past six years.

#26 According to Poverty USA, 1.6 million American children slept in a homeless shelter or some other form of emergency housing last year.

#27 Police in New York City have identified 80 separate homeless encampments in the city, and the homeless crisis there has gotten so bad that it is being described as an “epidemic”.

#28 If you can believe it, more than half of all students in our public schools are poor enough to qualify for school lunch subsidies.

#29 According to a Census Bureau report that was released a while back, 65 percent of all children in the U.S. are living in a home that receives some form of aid from the federal government.

#30 According to a report that was published by UNICEF, almost one-third of all children in this country “live in households with an income below 60 percent of the national median income”.

#31 When it comes to child poverty, the United States ranks 36th out of the 41 “wealthy nations” that UNICEF looked at.

#32 An astounding 45 percent of all African-American children in the United States live in areas of “concentrated poverty”.

#33 40.9 percent of all children in the United States that are being raised by a single parent are living in poverty.

#34 There are 7.9 million working age Americans that are “officially unemployed” right now and another 94.4 million working age Americans that are considered to be “not in the labor force”.  When you add those two numbers together, you get a grand total of 102.3 million working age Americans that do not have a job right now.

#35 According to a recent Pew survey, approximately 70 percent of all Americans believe that “debt is a necessity in their lives”.

#36 53 percent of all Americans do not even have a minimum three-day supply of nonperishable food and water at home.

#37 According to John Williams of shadowstats.com, if the U.S. government was actually using honest numbers the unemployment rate in this nation would be 22.9 percent.

#38 Back in 1950, more than 80 percent of all men in the United States had jobs.  Today, only about 65 percent of all men in the United States have jobs.

#39 The labor force participation rate for men has plunged to the lowest level ever recorded.

#40 Wholesale sales in the U.S. have fallen to the lowest level since the last recession.

#41 The inventory to sales ratio has risen to the highest level since the last recession.  This means that there is a whole lot of unsold inventory that is just sitting around out there and not selling.

#42 The ISM manufacturing index has fallen for five months in a row.

#43 Orders for “core” durable goods have fallen for ten months in a row.

#44 Since March, the amount of stuff being shipped by truck, rail and air inside the United States has been falling every single month on a year over year basis.

#45 Wal-Mart is projecting that its earnings may fall by as much as 12 percent during the next fiscal year.

#46 The Business Roundtable’s forecast for business investment in 2016 has dropped to the lowest level that we have seen since the last recession.

#47 Corporate debt defaults have risen to the highest level that we have seen since the last recession.  This is a huge problem because corporate debt in the U.S. has approximately doubled since just before the last financial crisis.

#48 Holiday sales have gone negative for the first time since the last recession.

#49 The velocity of money in the United States has dropped to the lowest level ever recorded.  Not even during the depths of the last recession was it ever this low.

#50 Barack Obama promised that his program would result in a decline in health insurance premiums by as much as $2,500 per family, but in reality average family premiums have increased by a total of $4,865 since 2008.

#51 Today, the average U.S. household that has at least one credit card has approximately $15,950 in credit card debt.

#52 The number of auto loans that exceed 72 months has hit at an all-time high of 29.5 percent.

#53 According to Dr. Housing Bubble, there have been “nearly 8 million homes lost to foreclosure since the homeownership rate peaked in 2004”.

#54 One very disturbing study found that approximately 41 percent of all working age Americans either currently have medical bill problems or are paying off medical debt.  And collection agencies seek to collect unpaid medical bills from about 30 million of us each and every year.

#55 The total amount of student loan debt in the United States has risen to a whopping 1.2 trillion dollars.  If you can believe it, that total has more than doubled over the past decade.

#56 Right now, there are approximately 40 million Americans that are paying off student loan debt.  For many of them, they will keep making payments on this debt until they are senior citizens.

#57 When you do the math, the federal government is stealing more than 100 million dollars from future generations of Americans every single hour of every single day.

#58 An astounding 8.16 trillion dollars has already been added to the U.S. national debt while Barack Obama has been in the White House.  That means that it is already guaranteed that we will add an average of more than a trillion dollars a year to the debt during his presidency, and we still have more than a year left to go.

What we have seen so far is just the very small tip of a very large iceberg.  About six months ago, I stated that “our problems will only be just beginning as we enter 2016″, and I stand by that prediction.

We are in the midst of a long-term economic collapse that is beginning to accelerate once again.  Our economic infrastructure has been gutted, our middle class is being destroyed, Wall Street has been transformed into the biggest casino in the history of the planet, and our reckless politicians have piled up the biggest mountain of debt the world has ever seen.

Anyone that believes that everything is “perfectly fine” and that we are going to come out of this “stronger than ever” is just being delusional.  This generation was handed the keys to the finest economic machine of all time, and we wrecked it.  Decades of incredibly foolish decisions have culminated in a crisis that is now reaching a crescendo, and this nation is in for a shaking unlike anything that it has ever seen before.

So enjoy the rest of 2015 while you still can.

2016 is almost here, and it is going to be quite a year…

Guess What Happened The Last Time The Price Of Oil Plunged Below 38 Dollars A Barrel?

Question Mark Burning - Public DomainOn Monday, the price of U.S. oil dropped below 38 dollars a barrel for the first time in six years.  The last time the price of oil was this low, the global financial system was melting down and the U.S. economy was experiencing the worst recession that it had seen since the Great Depression of the 1930s.  As I write this article, the price of U.S. oil is sitting at $37.65.  For months, I have been warning that the crash in the price of oil would be extremely deflationary and would have severe consequences for the global economy.  Nations such as Japan, Canada, Brazil and Russia have already plunged into recession, and more than half of all major global stock market indexes are down at least 10 percent year to date.  The first major global financial crisis since 2009 has begun, and things are only going to get worse as we head into 2016.

The global head of oil research at Societe Generale, Mike Wittner, says that his “head is spinning” after the stunning drop in the price of oil on Monday.  Just like during the last financial crisis, we have broken the psychologically important 40 dollar barrier, and there are concerns that we could go much lower from here…

Price Of Oil - Public Domain

One analyst told CNBC that he believes that we could soon see the price of U.S. oil go all the way down to 32 dollars a barrel…

“We’re in a tug-of-war between a heavily shorted market and a glut of oil in the U.S. and globally, as Saudi Arabia continues to produce oil at elevated levels to maintain market share,” said Chris Jarvis at Caprock Risk Management, an energy markets consultancy in Frederick, Maryland.

“Couple this with a strengthening dollar as the market anticipates a U.S. rate hike this month, oil is heading lower with a near term target of $32 for WTI.”

Analysts at Goldman Sachs are even more pessimistic than that.  According to Business Insider, they are saying that we could eventually see the price of oil go below 20 dollars a barrel…

At OPEC’s meeting on Friday, member countries decided to set its production level at 31.5 million barrels per day, and did not agree on what the new limit should be.

After OPEC’s meeting, commodity strategists at Goldman put out a note saying that oil prices could plunge another 50% in the coming months, as the oil market tries to rebalance the supply and demand situation.

That may sound really good to you, especially if you fill up your gas tank frequently.  But the truth is that plunging oil prices are exceedingly bad for the U.S. economy as a whole.  In recent years, the energy industry has been the primary engine for the creation of good jobs in this country, and now those firms are having to lay off people at a frightening pace.  Not only that, CNBC’s Jim Cramer is warning that many of these firms may actually start going under if the price of oil doesn’t start going back up soon…

“This is not ‘longer and lower;’ this is ‘longer and much lower.’ There’s companies that are not going to be able to fund with futures; there’re companies that are not going to be able to get credit,” Cramer said on “Squawk on the Street.”

Cramer made his remarks after the Organization of the Petroleum Exporting Countries decided not to lower production on Friday.

“This was a devastating blow for the U.S. oil industry,” Cramer said.

On Monday, we witnessed another benchmark that we have not seen since the last financial crisis.

I watch a high yield bond ETF known as JNK very closely.  On Monday, JNK broke below 35 for the first time since the financial crisis of 2008.  Just like 40 dollar oil, this is a key psychological barrier.

So why is this important?

As I discussed last week, junk bonds crashed before stocks did in 2008, and now it is happening again.  If form holds true, we should expect U.S. stocks to start tumbling significantly very shortly.

Meanwhile, another notable expert has come forward with a troubling forecast for the global economy in 2016.  Just like Citigroup, Raoul Pal believes that there is a very significant chance that we will see a recession next year…

Former global macro fund manager Raoul Pal says there’s now a 65% chance of a global recession.

In July, Pal predicted that the Institute of Supply Management’s (ISM) manufacturing index would break the key level of 50 late in 2015.

On December 1, the ISM broke the 50 level for the first time since the 2008 recession, reaching 48.6.

“I use the ISM as a guide to the global business cycle, not just the US cycle,” Pal told Business Insider.

What amazes me is that so many people out there cannot see what is happening even though the next great crisis has already started.  The evidence is all around us, and yet so many choose to be willingly blind.

Instead of fixing our problems after the last crisis, we just papered them over with lots of money printing and lots more debt.  And of course all of this manipulation just made our long-term problems even worse.  I really like how Peter Schiff put it recently…

What’s happening is pretty much what we would anticipate. I don’t see from the data any real economic recovery, certainly not in the United States.

We’re spending more money, but it’s not because we’re generating more wealth. We’re generating more debt. We’re using that borrowed money to consume and so temporarily it feels that we’re wealthier because we get to spend all that money… but we have to come to terms with paying the bill.

The bills are going to come due. Right now interest rates are being kept at zero which makes it possible to service the debt even though it’s impossible to repay it… at least we can service it. But once interest rates go up then we can’t even service it let alone repay it. 

And then the party is going to come to an end.

Indeed – the party is coming to an end, and a new financial crisis is playing out in textbook fashion right in front of our eyes.

Hopefully you are already prepared for what is coming next, because it is going to be extremely painful for the U.S. economy.

JP Morgan And Citigroup Agree That The U.S. Economy Is Steamrolling Toward A Recession

Locomotive - Public DomainAs we approach the end of 2015, researchers at both JP Morgan and Citigroup agree that the probability that the U.S. economy will soon plunge into recession is rising.  Just last week, a member of the U.S. House of Representatives asked Janet Yellen about Citigroup’s assessment that there is a 65 percent chance that the United States will experience an economic recession in 2016.  You can read her answer below.  And just a few days ago, JP Morgan economists Michael Feroli, Daniel Silver, Jesse Edgerton, and Robert Mellman released a report in which they declared that “the probability of recession within three years” has risen to “an eye-catching 76%”…

“Our longer-run indicators, however, continue to suggest an elevated risk that the expansion is nearing its end, and our preferred model now puts the probability of recession within three years at an eye-catching 76%.”

The good news is that the economists at JP Morgan believe that a recession will probably not hit us within the next six months.  But due to steadily weakening economic conditions, they are convinced that one is almost certain to strike within the next few years…

“When we first wrote, only manufacturing sentiment was signaling an above-average probability of imminent recession,” they said. “But recent weakening in the Richmond Fed services survey and the ISM nonmanufacturing index have now pushed the nonmanufacturing sentiment probability up somewhat as well.”

In the short term, the note says that the 6-month likelihood is only 5%, but within a year it stands at 23%, in two years 48%, and in three years the “eye-popping” 76%.

To be honest, I believe that this assessment is far too optimistic, and it appears that researchers at Citigroup agree with me.  According to them, there is a 65 percent chance that the U.S. economy will plunge into recession by the end of next year.  Last week, Janet Yellen was asked about this during testimony before Congress…

In testimony before Congress’ Joint Economic Committee, Yellen was asked by Rep. Pat Tiberi about a piece of research released by Citigroup’s rates strategy team Monday.

Specifically, Tiberi, an Ohio Republican, wanted to know what Yellen made of Citi’s conclusion that there is a 65 percent chance of a U.S. recession in 2016.

“The economists said that they would assign about a 65 percent likelihood of a recession in the United States in 2016. Now, 65 percent sounds high to me, but I’m not an economist and I’m not the Fed chair. But zero risk might be too low as well. So what would you assign a risk level of a recession next year?” Tiberi asked.

So how did Yellen respond?

Her answer was about what you would expect…

“I absolutely wouldn’t see it as anything approaching 65 percent,” the central banker said.

This reminds me so much of what former Federal Reserve Chairman Ben Bernanke said when he was asked a similar question back in 2008…

“The Federal Reserve is not currently forecasting a recession.”

Later on, when the official numbers finally came out and all the revisions were done, we learned that the U.S. economy was already in a recession when he made that statement.

And when it is all said and done this time around, I believe that history will show that a new global recession had already started when Janet Yellen made her statement.

But don’t just take my word for it.  British banking giant HSBC is the largest bank in the western world, and they recently announced that the global economy has already entered a “dollar recession“.  According to HSBC, total global trade has fallen 8.4 percent so far this year, and global GDP expressed in U.S. dollars is down 3.4 percent.

If their figures are correct, a new global recession has definitely begun.

And without a doubt, we have already seen a tremendous amount of global financial turmoil.  This is something that I highlighted in my recent article entitled “27 Major Global Stocks Markets That Have Already Crashed By Double Digit Percentages In 2015“.  When Zero Hedge republished my article, several excellent charts were added that really illustrate how bad things have gotten, and I wanted to share a couple of them with you.  Of the 93 largest stock market indexes in the world, an astounding 47 of them (more than half) are down at least 10 percent year to date.  This first chart shows which ones fall into that category…

47 Out Of 93

Another chart that was added to the article by Zero Hedge shows how decoupled U.S. stocks have become from global stocks overall.  As you can see, U.S. stocks are not too far from recent highs at the moment, but global stocks overall are solidly in bear market territory…

US Stocks And World Stocks

Since mid-2015, trillions of dollars of stock market wealth has been wiped out globally.

Let that sink in for a moment.

The debate is over.  The “major financial collapse” that so many warned was imminent has actually happened.

It is just that U.S. stocks have not gotten the memo yet.  Up to this point they have defied gravity, but at some point U.S. stocks and world stocks will converge once again.

And if you want to see many of the reasons why U.S. stocks will soon take a big tumble, just check out this article.  There is no way that U.S. stocks will be able to defy the underlying economic fundamentals that are pummeling other global markets for much longer.  Just like in 2008, a global stock market slide that starts elsewhere will eventually hit the United States.  It is just a matter of time.

But once again, even though U.S. stocks are doing okay for the moment, that doesn’t negate the fact that more than half of all major global stock indexes are down by double digit percentages year to date.

We have not seen numbers like this since the great stock market crash of 2008, and it seems abundantly clear to me that the great financial shaking that so many warned was coming in 2015 is already happening.

And if JP Morgan and Citigroup are correct, what we have seen so far is just a preview of some very troubling times ahead.

Add 2 More Attacks To The List As The Year End Explosion Of Islamic Terror Continues

Terror - Public DomainDoesn’t it seem like there is another Islamic terror attack somewhere in the world almost every day now?  Today, there was a throat slashing at a subway station in London, and three female suicide bombers carried out a devastating attack in Chad that killed at least 27 and injured at least 90.  Inspired by the success of ISIS, radical Islamists all over the planet are rising up and striking vulnerable targets.  According to Wikipedia, there have been dozens of terror attacks worldwide so far this year, and the recent attacks in Paris and San Bernardino were some of the biggest news stories of 2015.  Unfortunately, I believe that this is just the beginning.  I am fully convinced that the seeds of terror that have been planted up until now will produce an increasingly bitter harvest as we head into 2016 and beyond.

The throat slashing that just happened in London is another in a series of seemingly random attacks that is creating fear all over Europe right now.  Reportedly, the attacker yelled “this is for Syria” as he struck at his victim…

A man was stabbed in the ticket hall at Leytonstone station this evening by another man who witnesses say shouted “This is for Syria” as he slashed his throat.

Another three are thought to have been injured.

The Met Police said its counter-terrorism command unit is now investigating the incident.

Police said they used a taser on the suspect as he threatened others with a knife, before they managed to arrest him.

An alternate account of this attack in the Guardian sounds even more gruesome…

One person, who claims to have witnessed the attack, took to social media to reveal details of the horror. Laurynas Godvisa said: “So as I was going to Leytonstone station was dressed to go to Christmas dinner with people from work.

“As I walked down I just saw a lot of people running but I ignored it and kept walking to get my train, but suddenly what I saw I couldn’t believe my eyes and what I saw was I guy with a knife and a dead guy on the floor.

“I was so scared I ran for my life. After good 10-15 police came and got the guy and arrested him.

“And as he was coming out this is what he said: ‘This is what happens when you **** with mother Syria all of your blood will be spilled.’”

On a daily basis, we all rely on the fact that the people we encounter in public are not going to try to kill us.

But what happens when attacks start happening regularly at soft targets such as schools, churches, subway stations, shopping malls and sporting events?

It isn’t going to take many mass casualty events in the western world before people really start freaking out.

In other areas of the world, we already see these sorts of mass casualty events on a regular basis.  And I am not just talking about the Middle East.  For example, just check out what happened earlier today in Africa…

A deadly attack took the lives of at least 27 people in Africa. A local market on the island of Koulfoua, in Chad was struck, according to the BBC and AP, injuring at least 90.

A Chad police spokesman said three female suicide bombers carried out Saturday’s attack.

The Lake Chad region straddles the borders of Chad, Cameroon, Niger and Nigeria.

In Nigeria, Islamic terror has become a part of daily life.  It wasn’t always that way, but now Boko Haram is creating havoc all over the place.

Given enough time, the same thing would happen in the United States.  We have all seen what just happened in San Bernardino, and more radical Islamists are coming into this country all the time.  Sadly, the truth is that Sayed Farook and Tashfeen Malik are just the very small tip of a very large iceberg.

The mainstream media is keeping very quiet about the fact that Sayed Farook had been arguing with a 52-year-old pro-Israel Messianic Jewish Christian co-worker named Nicholas Thalasinos and had openly threatened to kill him.  A radical Muslim taking revenge on a conservative Christian because of what he believed doesn’t fit any of the “narratives” that the mainstream media is trying to push, and so that part of the story is being almost entirely ignored.  In fact, I just read an extremely long article on the attack by the Washington Post, and there was not a single mention of Thalasinos in the entire article.

But the mainstream media is telling us that Farook and Malik had both been radicalized, and it is being reported that Malik even went so far as to pledge her allegiance to ISIS.  The following comes from the Daily Mail…

New details have emerged about the radicalization of a Pakistani woman who along with her American husband killed 14 people in San Bernardino California and pledged allegiance to ISIS.

Tashfeen Malik who moved to the US last year when she married Syed Rizwan Farook, 28, had spent most of her life in Saudi Arabia and relatives say she began to be radicalized in college.

Relatives of Malik in Pakistan, estranged from their wealthy family members who live in Saudi Arabia, said she used to wear Western-style clothing but later switched to more traditional garments such as a burka, which covers the the entire body.

These kinds of radicals are moving to America on a constant basis now, and Barack Obama wants to accelerate this process.

During recent television appearances and on a DVD that I made earlier this year, I went on the record with my prediction that a horrible wave of Islamic terrorism was coming to America.

Unfortunately, what we have seen so far is just a preview.

Eventually we are going to see attacks on soft targets that are going to kill hundreds or even thousands.

And as the terrorists see the panic and fear that they are able to create, it will just embolden them to try to launch even bigger and more destructive attacks.

If you don’t think that this can happen in America, just look at what is already happening around the rest of the world.  From 2013 to 2014, the number of people around the world killed by terrorism increased by 80 percent, and this year the plague of Islamic terror has gotten even worse.

Our world is becoming increasingly unstable, and our society is extremely vulnerable to various forms of terrorism.  And as we have seen with Sayed Farook and Tashfeen Malik, anyone that is willing to commit extremely destructive acts of violent terrorism will suddenly become world famous.  Terrorists desperately want to focus attention on themselves, and they love to create fear, and in this day and age it is very easy to do both.

I wish that I could be more optimistic, but as we head into 2016 I have a feeling that this outbreak of Islamic terror is only going to get worse.  This is going to fundamentally change all of our lives, and we need to be ready to deal with that reality.

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