Financial Bubble

We Witnessed The 3rd Largest Point Crash In Stock Market History On The Same Day That The 3rd Most Powerful Hurricane To Ever Hit The U.S. Made Landfall

October 10, 2018October 10, 2018 by Michael

If you don’t believe in “coincidences”, what are we supposed to make of this? On Wednesday, the 3rd most powerful hurricane to ever hit the United States made landfall in the Florida panhandle. Entire communities were absolutely shredded as Hurricane Michael came ashore with sustained winds of 155 miles per hour. You can find the entire article that I just posted about this massive storm right here. In this article, I am going to focus on what just happened on Wall Street. At the exact same time that Hurricane Michael was causing chaos in the Southeast, an October stock market crash was causing havoc in the Northeast. The Dow Jones Industrial Average was down 831 points, which was the 3rd largest single day point crash in stock market history. Of course it isn’t as if we hadn’t been repeatedly warned that this was coming, and the truth is that it looks like this is only the start of the financial shaking.

In fact, international financial markets are in a state of chaos as I write this article. Asian markets are a sea of red, and at this moment Dow futures are way down.

So it appears likely that Wednesday’s nightmare may extend into Thursday as well.

But before we look ahead too much, let’s talk about the utter carnage that we just witnessed.

According to Bloomberg, the 500 wealthiest people in the world lost 99 billion dollars on Wednesday…

Plunging global markets lopped $99 billion from the fortunes of the world’s 500 wealthiest people on Wednesday, the year’s second-steepest one-day drop for the Bloomberg Billionaires Index.

Amazon.com Inc. founder Jeff Bezos lost $9.1 billion, the most of anyone on the index, as shares of the online retailer fell the most in more than two years. The plunge lowered Bezos’s net worth to $145.2 billion, its lowest since July.

Can you imagine losing that much money on a single day?

The Dow Jones Industrial Average has now fallen for four out of the last five trading sessions, and for the month as a whole all three of the major indexes are way down…

Stocks have fallen sharply this month. For October, the S&P 500 and the Dow are down more than 4.4 percent and 3.3 percent, respectively. The Nasdaq, meanwhile, has lost more than 7.5 percent.

Tech stocks are being hit particularly hard. In fact, tech stocks just had their worst day in more than seven years…

Technology stocks got clobbered on Wednesday, suffering their worst day in more than seven years, as concerns over rising interest rates punished the overall market, particularly shares of companies that have been the best performers.

The S&P 500 Information Technology Index closed at $1,220.62, down 4.8 percent, marking the biggest decline since August 18, 2011, when the index dropped 5.3 percent. All 65 members of the index fell.

At this point, 330 out of the 505 stocks that make up the S&P 500 are already more than 10 percent below their 52-week highs.

That means that about two-thirds of all S&P 500 stocks are officially in correction territory.

And 140 of those stocks are already down more than 20 percent from their 52-week highs, and that means that they are officially in bear market territory.

So why is this happening?

Many of the “experts” are pointing to the dramatic rise in interest rates…

Nervousness had been building for days on Wall Street. The catalyst was the recent spike in the yield on a closely watched government bond to a seven-year high.

The 10-year Treasury note — whose key rate impacts the pricing on things ranging from fixed-rate mortgages to stocks to virtually every financial asset on the planet — recently climbed above 3.25 percent for the first time since May 2011. And when you add the threat of higher borrowing costs on things like houses and cars and corporate debt to the economic obstacles caused by the U.S. trade war with China, all it takes is a whiff of weakness to set a major sell-off in motion.

A week ago, I warned my readers that rapidly rising rates could spark a market sell-off, and now it is happening with a ferocity that is absolutely breathtaking.

Needless to say, President Trump was not thrilled by the market crash on Wednesday, and he is pointing the blame at the Federal Reserve…

President Donald Trump slammed the Federal Reserve as “going loco” for its interest-rate increases this year in comments hours after the worst U.S. stock market sell-off since February.

Trump said in a telephone interview on Fox News late Wednesday night the market plunge wasn’t because of his trade conflict with China: “That wasn’t it. The problem I have is with the Fed,” he said. “The Fed is going wild. They’re raising interest rates and it’s ridiculous.”

“That’s not the problem,” he said of the trade standoff. “The problem in my opinion is the fed,” he added. “The fed is going loco.”

I love it.

I absolutely love it.

Could it be possible that we will soon see supporters chant “end the Fed” at Trump rallies?

No president has ever openly criticized the Federal Reserve like this, and I greatly applaud Trump for doing so.

And he is precisely correct – the Federal Reserve is the problem.

Nobody has more power over the performance of the U.S. economy than the Federal Reserve does, and the only way that our long-term economic and financial problems will ever be fixed is if the Federal Reserve is shut down.

So I hope that President Trump’s feud with the Federal Reserve gets as heated as possible. I hope that the Federal Reserve becomes a central issue during the 2020 presidential election, and I hope that every Trump supporter in the entire country will urge Trump to make a promise to shut down the Federal Reserve.

The Federal Reserve is a deeply insidious system that has turned America into a nation of debt slaves, and it is definitely time to end that sick and twisted debt-based system and return this nation to a solid financial foundation.

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

The Last Days Warrior Summit is the premier online event of 2018 for Christians, Conservatives and Patriots. It is a premium-members only international event that will empower and equip you with the knowledge and tools that you need as global events begin to escalate dramatically. The speaker list includes Michael Snyder, Mike Adams, Dave Daubenmire, Ray Gano, Dr. Daniel Daves, Gary Kah, Justus Knight, Doug Krieger, Lyn Leahz, Laura Maxwell and many more. Full summit access will begin on October 25th, and if you would like to register for this unprecedented event you can do so right here.

Ron Paul Is Warning That A 50% Stock Market Decline Is Coming – And That There Is No Way To Stop It

October 7, 2018October 7, 2018 by Michael

Is Ron Paul about to be proven right once again? For a very long time, Ron Paul has been one of my political heroes. His willingness to stand up for true constitutional values and to keep saying “no” to the Washington establishment over and over again won the hearts of millions of American voters, and I wish that there had been enough of us to send him to the White House either in 2008 or in 2012. To this day, I still wish that we could make his classic work entitled “End The Fed” required reading in every high school classroom in America. He was one of the few members of Congress that actually understood economics, and it is very sad that he has now retired from politics. With the enormous mess that Washington D.C. has become, we sure could use a lot more statesmen like him right now.

But even though he has retired from politics, Ron Paul is still speaking out about the most important issues of the day. And what he recently told CNBC is extremely ominous.

The following comes from a CNBC article entitled “Ron Paul: US is barreling towards a stock market drop of 50% or more, and there’s no way to prevent it”…

According to the former Republican Congressman from Texas, the recent jump in Treasury bond yields suggest the U.S. is barreling towards a potential recession and market meltdown at a faster and faster pace.

And, he sees no way to prevent it.

Of course lots of such predictions are flying around these days.

In fact, at this point even the IMF is warning of a “second Great Depression”.

So when it actually takes place it won’t be much of a surprise. However, I do believe that many will be surprised by the ferocity of the coming crash. According to Ron Paul, stock prices could end up falling by up to 50 percent…

Paul is a vocal Libertarian known for an ardent grassroots fanbase that propelled him to multiple presidential runs, as well as his grim warnings about the economy. Yet he has been warning investors for years that an epic drop of 50 percent or more will eventually hit the stock market. He predicted the February correction, but not in size and scope.

Actually, stock prices need to fall by at least 50 percent in order for stock valuations to get close to their long-term averages.

In the end, if stocks only fall by 50 percent we will be extremely fortunate. Stock valuations always, always, always return to their long-term averages eventually, and usually they fall below those averages during a period of adjustment.

And the mood on Wall Street has definitely changed. The euphoria that we once witnessed is now gone, and instead it has been replaced by a gnawing sense that a really big downturn is coming. In his most recent piece, John Hussman compared it to the fading out of a pop song…

In recent days, the combination of extreme valuations and unfavorable market internals has been joined by acute dispersion in daily trading data that often occurs within a few days of pre-collapse peaks in the market. My opinion is that the music has already quietly faded out like the end of a pop song, in a wholly uneventful way, and that even a surprise push to further highs would be marginal.

And he concluded his most recent piece with this very chilling statement…

For now, and until market conditions shift, there’s an open trap door under the equity market, and it’s a very long way down.

The end of last week was very bad for the markets, and so Monday and Tuesday will be key.

If stock prices continue to fall, this could be the beginning of a race for the exits.

But if stock prices rebound a bit, it means that we could have some more time.

And keep an eye on junk bonds. They crashed really hard just before the financial crisis of 2008, and they are starting to slip here in October 2018.

A full-blown junk bond panic would definitely be a very clear sign that a major market crash is imminent.

As I write this, all of the markets in Asia are down. Chinese stocks have fallen almost 3 percent, and that is very troubling news.

But whether a massive crisis erupts right now or not, the truth is that there is no way that we are going to avoid the consequences of our actions.

At this moment we are in the terminal phase of the biggest debt bubble in human history. In fact, total indebtedness in the United States has increased by more than 2 trillion dollars over the past 12 months…

In total, indebtedness of consumers, corporations, and all governments has grown by $2.04 trillion over the past four quarters. And they’re going to be paying higher interest rates on this ballooning debt. In other words, debt service costs are going to rise substantially.

All of this debt has fueled a short-term bubble of relative “prosperity”, but meanwhile all of our long-term problems just continue to get worse.

There is no possible way that our debt bubble can continue to grow much faster than the overall economy indefinitely. In fact, we have already been defying the laws of economics for way too long.

Eventually all debt bubbles burst, and when this one bursts we are going to experience economic pain on a scale that America has never seen before.

If You Read Between The Lines, Global Economic Leaders Are Telling Us Exactly What Is Coming

August 20, 2018 by Michael

Sometimes, a strongly-worded denial is the most damning evidence of all that something is seriously wrong. And when things start to really get crazy, “the spin” is often the exact opposite of the truth. In recent days we have seen a lot of troubling headlines and a lot of chaos in the global financial marketplace, but authorities continue to assure us that everything is going to be just fine. Of course we witnessed precisely the same thing just prior to the great financial crisis of 2008. Federal Reserve Chair Ben Bernanke insisted that a recession was not coming, and we proceeded to plunge into the worst economic downturn since the Great Depression. Is our society experiencing a similar state of denial about what is ahead of us here in 2018?

Let me give you a few examples of some recent things that global economic leaders have said, and what they really meant…

–Tesla Motors CEO Elon Musk: “We are definitely not going bankrupt.”

Translation: “We are definitely going bankrupt.”

Tesla is a company that is supposedly worth 51 billion dollars, but the reality is that they are going to zero. They have been bleeding massive amounts of cash for years, and now a day of reckoning has finally arrived. A severe liquidity crunch has forced the company to delay payments or to ask for enormous discounts from suppliers, and many of those suppliers are now concerned that Tesla is on the verge of collapse…

Specifically, a recent survey sent privately by a well-regarded automotive supplier association to top executives, and seen by the WS , found that 18 of 22 respondents believe that Tesla is now a financial risk to their companies.

Meanwhile, confirming last month’s report that Tesla is increasingly relying on net working capital, and specifically accounts payable to window dress its liquidity, several suppliers said Tesla has tried to stretch out payments or asked for significant cash back. And in some cases, public records show, small suppliers over the past several months have claimed they failed to get paid for services supplied to Tesla.

–Shark Tank billionaire Mark Cuban: “I’ve got a whole lot of cash on the sidelines.”

Translation: “I believe that the stock market is about to crash.”

Mark Cuban is not stupid. Like Warren Buffett, he is sitting on giant piles of cash as he waits for stock valuations to return to their long-term averages. And when “something happens”, Cuban insists that he is “ready, willing and able” to make some bold moves…

Billionaire entrepreneur Mark Cuban told CNBC on Monday that he’s holding much more cash than he normally does because he’s concerned about the stock market and U.S debt levels.

“I’m down to maybe four dividend-owning stocks, two shorts, and Amazon and Netflix. I’ve got a whole lot of cash on the sidelines,” Cuban said on “Fast Money Halftime Report.” “[I’m] ready, willing and able if something happens” to invest.

–Deutsche Bank: We need our employees to “take every opportunity to restrict non-essential travel” in order to cut costs.

Translation: We are on the verge of collapse, and we have got to save every single penny that we can right now.

If you follow my work on a regular basis, you already know that I have been extremely hard on Deutsche Bank. The biggest bank in Europe is teetering on the brink, and this latest move is more evidence that their days are numbered…

Forget the days of traveling first class to meet clients: Deutsche Bank, which following major management upheaval in the past year, is telling its employees to take the bus whenever possible.

In the latest indignity to befall the bank’s employees, in a memo sent by Deutsche Bank CFO James von Moltke, the biggest European bank – if certainly not by market cap – urged employees to “take every opportunity to restrict non-essential travel” until the end of the year adding that “with your help, we will meet our cost-reduction targets.”

–Italian Cabinet Undersecretary Giancarlo Giorgetti: “I hope that the quantitative easing program will go forward.”

Translation: If the ECB does not buy our bonds, the Italian financial system is toast.

Italy will almost certainly be the fulcrum of the next European financial crisis, and the truth is that the EU will not have enough money to bail Italy out once it collapses.

So the Italians desperately need the ECB to continue buying their bonds, and the new Italian government seems to understand this very well…

Italian Cabinet Undersecretary Giancarlo Giorgetti said he hopes the European Central Bank’s quantitative easing program will be extended to help protect the country from financial speculators.

Italy also needs to be credible to help shield itself, Giorgetti said in an interview with newspaper Il Messaggero. After the Genoa bridge disaster, the country may boost its extra spending request to the European Union, he said.

Signs of trouble continue to erupt in the United States as well. The trade war is taking a huge toll on businesses of all sizes, and sometimes it is rural America that is being hurt the most.

For instance, the looming closure of the Element Electronics factory in Winnsboro, South Carolina would be absolutely crippling for that community…

TVs at the plant are made out of components that are imported from China, and the tariffs make assembling the TVs here a losing proposition, the company has said. The company is fighting for a waiver but is bracing for shutdown.

Winnsboro is the seat of Fairfield County, where a third of the population lives in poverty. Unemployment among its nearly 23,000 residents is second highest in the state, and, despite periodic rebounds, the population has fallen steadily over the past century.

“This is going to be a ghost town,” Winnsboro resident Herbert Workman said.

In this day and age, we are trained to be optimistic, and that can be a good thing.

But there comes a point when blind optimism causes us to lose touch with reality, and many believe that we have already crossed that threshold.

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

According To The “Buffett Indicator”, The Stock Market Is More Primed For A Crash Than It Has Ever Been Before

August 1, 2018 by Michael

Warren Buffett’s favorite indicator is telling us that stocks are more overvalued right now than they have ever been before in American history. That doesn’t mean that a stock market crash is imminent. In fact, this indicator has been in the “danger zone” for quite some time. But what it does tell us is that stock valuations are more bloated than we have ever seen and that a stock market crash would make perfect sense. So precisely what is the “Buffett Indicator”? Well, it is actually very simple to calculate. You just take the total market value of all stocks and divide it by the gross domestic product. When that ratio is more than 100 percent, stocks are generally considered to be overvalued, and when that ratio is under 100 percent stocks are generally considered to be undervalued. The following comes from MSN…

That being said, the Buffett Indicator, while it’s not a flawless indicator, does tend to peak during hot stock markets and bottom during weak markets. And as a general rule, if the indicator falls below 80%-90% or so, it has historically signaled that stocks are cheap. On the other hand, levels significantly higher than 100% can indicate stocks are expensive.

For context, the Buffett indicator peaked at about 145% right before the dot-com bubble burst and reached nearly 110% before the financial crisis.

So where are we today?

Right now we are at almost 149 percent, which is the highest level ever recorded…

Where does the Buffett Indicator stand now? It may surprise you to learn that, at nearly 149%, the total market cap to GDP ratio has never been higher. It’s even higher than the 145% peak we saw during the dot-com bubble.

In recent days we have seen a “tech bloodbath”, but that was nothing compared to what is eventually coming. Ultimately, the stock market would need to fall by at least one-third in order for prices to be properly balanced again.

And it appears that Warren Buffett is taking his own advice. His company is currently sitting on more than 100 billion dollars in cash…

Having said that, it does seem like Buffett himself is paying attention and agrees that the market is generally expensive. After all, the lack of attractive investment opportunities has resulted in Berkshire Hathaway accumulating nearly $110 billion of cash and equivalents on its balance sheet. Plus, Buffett has specifically cited valuation when discussing the absence of major acquisitions lately.

Warren Buffett didn’t become one of the wealthiest men in America by being stupid. He knows that valuations are absurd right now, and he is waiting to strike until valuations are not so absurd.

And he knows that another recession is inevitably coming. I wrote about some of the trouble signs yesterday, and more trouble signs seem to pop up on a daily basis now.

Earlier today, CNN published an article entitled “Two recession warning signs are here”…

Home sales have declined in four of the past five months as housing prices have grown — but paychecks have remained stagnant. Many people can’t afford to buy homes, and those who can are taking on a lot of debt to get into them.

I feel really bad for those that purchased a home in recent months, because those poor people are getting in right at the top of the bubble. The housing bubble is about to burst in a major way, and there will be a tremendous amount of pain afterwards.

And we received more bad news about the housing market on Wednesday. According to Redfin, housing demand plunged 9.6 percent in June…

The long list of housing headwinds is finally taking its toll on potential buyers. Housing demand fell 9.6 percent in June, compared with June 2017, according to a monthly index from Redfin. That is the largest decline since April 2016.

CNN’s second “warning sign” is the fact that the yield curve is about to invert…

The Federal Reserve, which is finishing up its two-day meeting Wednesday, is expected to raise its target rate two more times this year. Higher rates have boosted short-term US Treasury bond rates. But the longer-term bond rates haven’t risen along with the shorter-term rates, because investors are growing wary about the economy over the long haul.

With two more interest rate hikes planned, the Fed could boost short-term rates higher than long-term ones, inverting the so-called yield curve. An inverted yield curve has preceded every recession in modern history.

If you don’t understand the yield curve or you just want a deeper examination of this issue, please see my previous article entitled “Beware – The Last 7 Times The Yield Curve Inverted The U.S. Economy Was Hit By A Recession”.

In recent weeks, there has been renewed interest in my economics website as people begin to wake up and understand that a major economic crisis is looming. Of course the truth is that we are way, way overdue for a stock market crash and another recession. The only thing that is surprising is that it took us so long to get here.

Sadly, most people are still very much asleep. Average Americans spend most of their waking hours staring at either a television or a computer screen, and the big media companies control almost all of the media that we are so voraciously consuming. Instead of thinking for themselves, most people simply regurgitate what they have been fed by the media giants, and we are never going to turn things around if we continue to allow “the matrix” to tell us what to think.

The Buffett Indicator is very simple, but it is also very accurate. If you want to do well in the stock market, you want to buy low and sell high, and right now we are in absurdly high territory. Stock valuations always return to their long-term averages eventually, and many believe that the coming stock market crash is going to arrive sooner rather than later.

They Are Calling It “The Tech Bloodbath” – 10 Facts About This Tech Stock Crash That Will Take Your Breath Away

July 31, 2018 by Michael

Thanks to crashing tech stocks, Americans have lost hundreds of billions of dollars in paper wealth over the past three trading days. As you will see below, we have just witnessed “the biggest market cap loss in history”, and many analysts believe that this is only just the beginning. At this point, even the mainstream media is fearing the worst. CNN is boldly proclaiming that “the tech bloodbath is here”, and there is a flood of mainstream articles giving advice to investors about how to ride out this crisis. But the amount of money that has already been lost is absolutely huge, and it isn’t going to take much to turn this panic into a full-blown stampede. In a lot of ways, what we are watching is very reminiscent of 2001. When the original tech bubble burst, the crash was so rapid and so dramatic that many ordinary investors were not able to react in time. As I have explained so many times before, markets tend to go down a whole lot faster than they go up, and the events of the last three trading days have been completely breathtaking.

A lot of people are responding as if this tech stock crash is a complete surprise, but the truth is that it shouldn’t be a surprise at all.

The only surprise is that the bubble lasted for as long as it did.

Even after the declines of the past three days, some of these tech companies still have some of the most absurd valuations that we have ever seen. There has been warning after warning that something like this could happen, but the optimists on Wall Street wanted to believe that the party would never come to an end.

Well, now the party is ending, and people are starting to understand the gravity of what we are facing. The following are 10 facts about this “tech bloodbath” that are almost too crazy to believe…

#1 The 10 leading U.S. tech companies lost an astounding 82.7 billion dollars in stock value on Monday.

#2 Overall, FANG stocks have lost 220 billion dollars in stock value over the last 3 trading days. According to Zero Hedge, that represents “the biggest market cap loss in history”.

#3 Last Thursday, Facebook had the worst day for a single company in the history of the stock market.

#4 The amount of money that Facebook investors have lost is greater than the entire market value of some of the biggest corporations in America…

The gargantuan one-day loss in the social media company’s market value eclipses the total value of warehouse club Costco, drug maker Bristol-Myers Squibb, investment powerhouse Goldman Sachs, defense contractor Lockheed Martin and credit-card company American Express, according to Bloomberg data.

The wealth destroyed also is more than the total value of farm equipment maker Caterpillar, home-improvement retailer Lowe’s, coffee seller Starbucks and drugstore chain CVS.

#5 One prominent ETF manager is saying that he doesn’t “see us being heavily invested in Facebook ever again”.

#6 FANG stocks are collectively down more than 10 percent from the record high last month.

#7 The 5 most valuable companies in the United States are all in the tech sector and they are all located on a stretch between Silicon Valley and Seattle.

#8 Thanks to all of the panic, investors are being forced to pay more for Nasdaq downside protection than they ever have before.

#9 Morgan Stanley’s chief U.S. equity strategist is warning that “the selling has just begun and this correction will be biggest since the one we experienced in February.”

#10 One major investor has told CNBC that he believes that the major tech stocks could ultimately lose 30 or 40 percent of their value…

Ahead of Apple earnings scheduled for Tuesday evening, Larry McDonald, editor of the Bear Traps Report, warns to stay away from what has been one of the hottest areas of the market this year.

“These are stocks you want to run away from,” McDonald told CNBC’s “Trading Nation” on Friday. “I see potentially 30 percent to 40 percent downside on the FAANGs.”

Tech stocks led the way up during the first Internet bubble, and they also led the way down.

Will the same thing happen again this time around?

If some people think that the broader market will be immune as tech stocks continue to crash, they are just deceiving themselves. To a very large extent, it has been the tech industry that has been responsible for holding the market up in these troubled times. Right now the housing industry is slowing down substantially, we are in the midst of the worst “retail apocalypse” in American history, and big agriculture is being absolutely devastated by foreign tariffs.

There aren’t too many other bright spots for the U.S. economy at the moment, and so if the tech sector implodes we are going to see a lot of others go down with it.

Look, there is a reason why Mark Zuckerberg and other Facebook insiders dumped billions of dollars worth of Facebook stock in the months leading up to this crash. They all knew that trouble was brewing, and they wanted to get out while the getting out was good.

As I have told my readers so many times before, you only make money in the stock market if you get out at the right time, and those Facebook insiders picked the right time.

Earlier this month, Ron Paul warned that the stock market could be cut “in half” when the “biggest bubble in the history of mankind” finally bursts, and a lot of people laughed at him.

Are they still laughing now?

Hopefully the market will settle down tomorrow, and without a doubt we will see a bounce at some point. But it is certainly starting to feel like 2001 and 2008 all over again, but this time the bubble is far bigger than ever before.

How will this story ultimately end?

I think that we all know the answer, and it isn’t going to be pretty…

Ron Paul Warns That When The “Biggest Bubble In The History Of Mankind” Bursts It Could “Cut The Stock Market In Half”

July 15, 2018July 15, 2018 by Michael

When this bubble finally bursts, will we witness the biggest stock market crash in U.S. history? “The bigger they come, the harder they fall” is a well used phrase, but I think that it is very appropriate in this case. From a low of 6,443.27 on March 6th, 2009, we have seen the Dow nearly quadruple in value since the last financial crisis. It has been a remarkable run, and it has lasted far longer than virtually any of the experts anticipated. But what goes up must come down eventually. This stock market bubble was almost entirely fueled by easy money from the Federal Reserve, and now that easy money has been cut off. The insiders can see the handwriting on the wall and they are getting out of the market at a pace that we haven’t seen since 2008. Could it be possible that the day of reckoning is finally at our door?

Of course we have been hearing warnings like this for a very long time. In fact, I have been warning about a market crash for a very long time. Just the other day, one of my readers insisted that if something was going to take place that “it would have happened by now”. In the Internet age, we have been trained to have very short attention spans, but financial bubbles don’t care about the length of our attention spans. They all inevitably come to a bitter end, but they don’t reach that end until they are good and ready.

And without a doubt we are on borrowed time, but meanwhile so many of us that are continually warning about what we are facing are getting a lot of heat for it.

For instance, when Ron Paul told CNBC that the stock market is “the biggest bubble in the history of mankind”, he was strongly criticized for it, but he was 100 percent correct…

This market is in the “biggest bubble in the history of mankind,” and when it bursts, it could cut the stock market in half, he told CNBC’s “Futures Now” Thursday.

If the Dow only plummets to about 12,000 or so during the coming downturn we will be exceedingly fortunate, because the truth is that stock prices need to fall by at least that much just to get us into the neighborhood where stock prices will start to make sense once again.

Today, sales to stock price ratios are hovering near all-time highs.

The same thing is true for earnings to stock price ratios and GDP to stock price ratios.

The only other times these ratios have been so elevated were just before major stock market crashes.

In the end, these ratios always, always, always return to their long-term averages eventually.

It may take many years, but it always happens.

So what factors led Ron Paul to make such an ominous prognostication? The following comes from CNBC…

“The Congress spending and the Federal Reserve manipulation of monetary policy and interest rates — debt is too big, the current account is in bad shape, foreign debt is bad and it’s not going to change,” he said.

Paul isn’t alone in his critique. A number of politicians have voiced concern over ballooning deficits, including current House Speaker Paul Ryan, who raised a warning on the nation’s debt in 2012.

Of course it isn’t just the U.S. that is drowning in debt.

According to the Institute of International Finance, total global debt just hit a brand new record high of 247 trillion dollars…

Every quarter the Institute of International Finance publishes a new number of the total amount of global debt outstanding, and every quarter the result is the same: a new record high

Today was no exception: according to the IIF’s latest Global Debt Monitor, the amount of debt held in the world rose by the biggest amount in two years during the first quarter of 2018, when it grew by $8 trillion to hit a new all time high of $247 trillion, up from $238 trillion as of Dec. 31, 2017 and up by $30 trillion from the end of 2016.

Global debt has been rising much, much faster than global GDP, and at this point there is three times as much debt in the world as there is money.

There is no possible way that all of that debt can ever be paid off. The only way that the party can continue is for debt to continue growing faster than global GDP, and everyone knows that is simply not sustainable in the long-term.

So an absolutely monumental “adjustment” is coming. You can call it a “crash”, a “collapse” or anything else that you would like, but just as certainly as you are reading this article it is coming.

It is just a matter of time.

But for now, the talking heads on television continue to insist that everything is just fine and that the stock market still has more room to go up…

There’s still room for stock markets to rise and worries of an impending recession are premature, according to Berenberg Capital Markets’ chief economist.

“Even if profits peaked in (the first quarter of) 2018, which remains uncertain, history suggests the stock market has room to appreciate,” Mickey Levy, Berenberg’s chief Americas and Asia economist, said in a client note this week. He pointed to data demonstrating how in every economic expansion since the mid-1970s, the S&P 500 index went on to appreciate for a “significant period” after corporate profits peaked.

I wish that CNBC would have me on just one time so that I could refute some of these guys.

Since 1913, the Federal Reserve has gone through 18 rate hiking cycles. In 18 out of 18 cases, those rate hiking cycles have ended in either a recession or a market crash.

Do you really think that the 19th time will be different?

10 years ago, virtually everyone thought that the “boom times” would last forever too. But they didn’t. Instead, we plunged into the greatest economic and financial crisis since the Great Depression, but at this point 2008 seems like ancient history to most people.

Yet again we have fooled ourselves into thinking that the good times will just continue to keep on rolling, and once again our society will be in for a very rude awakening when the inevitable crash finally arrives.

Are We Being Set Up For A Crash? Stocks Hit A Level Only Seen During The Bubbles Of 1929, 2000 And 2007

December 8, 2016December 8, 2016 by Michael

Will the financial bubble that has been rapidly growing ever since Donald Trump won the election suddenly be popped once he takes office? Could it be possible that we are being set up for a horrible financial crash that he will ultimately be blamed for? Yesterday, I shared my thoughts on the incredible euphoria that we have seen since Donald Trump’s surprise victory on November 8th. The U.S. dollar has been surging, companies are announcing that they are bringing jobs back to the U.S., and we are witnessing perhaps the greatest post-election stock market rally in Wall Street history. In fact, the Dow, the Nasdaq and the S&P 500 all set new all-time record highs again on Thursday. What we are seeing is absolutely unprecedented, and many believe that the good times will continue to roll as we head into 2017.

What has been most surprising to me is how well the stocks of the big Wall Street banks have been doing. It is no secret that those banks poured a tremendous amount of money into Hillary Clinton’s campaign, and Donald Trump had some tough things to say about them leading up to election day.

So you wouldn’t think that it would be particularly good news for those banks that Trump won the election. However, we seem to be living in “Bizarro World” at the moment, and in so many ways things are happening exactly the opposite of what we would expect. Since Trump’s victory, all of the big banking stocks have been skyrocketing…

Financial stocks in particular have been on fire. Citigroup (C) and JPMorgan Chase (JPM) are up about 20% since Donald Trump defeated Hillary Clinton — and that makes them laggards!

Morgan Stanley (MS) has gained more than 25%. So has troubled Wells Fargo (WFC), despite the lingering fallout from its fake account scandal. Bank of America (BAC) is up more than 30%.

And so is Goldman Sachs (GS) — the former employer of both Treasury Secretary nominee Steven Mnuchin and Trump chief strategist Steve Bannon.

But are these stock prices justified by the fundamentals?

Of course not, but during times of euphoria the fundamentals never seem to matter much. Stocks were incredibly overvalued before the election, and now they are ridiculously overvalued.

Earlier today, a CNBC article pointed out that the cyclically-adjusted price to earnings ratio has only been higher than it is today at three points in our history…

“The cyclically adjusted P/E (CAPE), a valuation measure created by economist Robert Shiller now stands over 27 and has been exceeded only in the 1929 mania, the 2000 tech mania and the 2007 housing and stock bubble,” Alan Newman wrote in his Stock Market Crosscurrents letter at the end of November.

Newman said even if the market’s earnings increase by 10 percent under Trump’s policies “we’re still dealing with the same picture, overvaluation on a very grand scale.”

And of course a historic stock market crash immediately followed each of those three bubbles.

So are we being set up for a huge crash in early 2017?

There are some out there that believe that this is purposely being orchestrated. For example, Mike Adams of Natural News believes that the markets “will be deliberately and destructively imploded under President Trump”…

Right now, the U.S. stock market is surging, with the Dow leaping toward 20,000, a number rooted in fiscal insanity and delusional expectations. There are no fundamentals that support a 20,000 Dow, but fundamentals have long since ceased to matter in a financial world hyperventilating on debt fumes while hallucinating about utopian economic models that will soon prove to generate fools instead of real wealth.

Today I’m going on the record with a prediction that I’ll offer with near absolute certainty: The rigged markets that now seem to defy gravity will be deliberately and destructively imploded under President Trump for all the obvious reasons. There will be financial chaos like we’ve never seen before: Investors leaping off tall buildings, banks declaring extended “holidays” that freeze transactions, and California pensioners slitting their wrists after they discover their promised pension funds were just vaporized by incompetent bureaucrats.

On the other hand, there are others that believe that Trump is just walking into a very bad situation and that a crash would be inevitable no matter who was president.

History tells us that there is no possible way that stock prices can stay at this irrational level indefinitely. But for now a wave of optimism is sweeping the nation, and many of those that are caught up in it will get seriously angry with you if you try to inject a dose of reality into the conversation.

But like I said yesterday, let’s hope that the optimists are correct. A survey that was just taken of 600 business executives found that 62 percent of them were optimistic about the U.S. economy over the next 12 months.

Incredibly, that number was sitting at just 38 percent the previous quarter.

For the moment, business leaders seem to be quite thrilled that we have a business executive in the White House.

Hopefully Donald Trump’s business experience will translate well to his new position. And it is certainly my hope that he is as successful as possible.

But even during the campaign Trump talked about how stocks were in a giant bubble, and the euphoria that we have seen since his election victory has just made that bubble even larger.

Throughout U.S. history, every giant financial bubble has always ended very badly, and this time around will not be any exception.

Trump may get the blame for it when it bursts, but the truth is that the conditions for the coming crisis have been building for a very, very long time.

Donald Trump Is Starting To Sound Just Like The Economic Collapse Blog (And That Is A Good Thing)

April 3, 2016April 3, 2016 by Michael

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.

It is absolutely maddening, and it is just more evidence of how “dumbed-down” our society has become.

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.

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