Financial Crisis

This Is What A Pre-Crash Market Looks Like

The only other times in our history when stock prices have been this high relative to earnings, a horrifying stock market crash has always followed.  Will things be different for us this time?  We shall see, but without a doubt this is what a pre-crash market looks like.  This current bubble has been based on irrational euphoria that has been fueled by relentless central bank intervention, but now global central banks are removing the artificial life support in unison.  Meanwhile, the real economy continues to stumble along very unevenly.  This is the longest that the U.S. has ever gone without a year in which the economy grew by at least 3 percent, and many believe that the next recession is very close.  Stock prices cannot stay completely disconnected from economic reality forever, and once the bubble bursts the pain is going to be unlike anything that we have ever seen before.

If you think that these ridiculously absurd stock prices are sustainable, there is something that I would like for you to consider.  The only times in our history when the cyclically-adjusted return on stocks has been lower, a nightmarish stock market crash happened soon thereafter…

The Nobel-Laureate, Robert Shiller, developed the cyclically-adjusted price/earnings ratio, the so-called CAPE, to assess whether stocks are likely to be over- or under-valued. It is possible to invert this measure to obtain a cyclically-adjusted earnings yield which allows one to measure prospective real returns. If one does this, the answer for the US is that the cyclically-adjusted return is now down to 3.4 percent. The only times it has been still lower were in 1929 and between 1997 and 2001, the two biggest stock market bubbles since 1880. We know now what happened then. Is it going to be different this time?

Since the market bottomed out in early 2009, the S&P 500 has been on a historic run.  If this rally had been based on a booming economy that would be one thing, but the truth is that the U.S. economy has not seen 3 percent yearly growth since the middle of the Bush administration.  Instead, this insane bubble has been almost entirely fueled by central bank manipulation, and now that manipulation is being dramatically scaled back.

And the guys on Wall Street know what is coming.  For example, Joe Zidle says that this bull market is now in “the ninth inning”…

Joe Zidle, of Richard Bernstein Advisors, is arguing that the bull market has entered the bottom of the ninth inning.

“This is a late-cycle environment,” Zidle said on CNBC’s “Futures Now” recently.

“In innings terms, they’re not time dependent. An inning could be shorter or they could be longer. It just really depends,” the strategist said.

This bubble has lasted for much longer than it ever should have, and everyone understands that a day of reckoning is coming.

In fact, earlier today I came across an article on Zero Hedge that contained an absolutely remarkable quote from Eric Peters…

“We are investing as if 1987 will happen tomorrow, because it will,” said the CIO. “But we need to be long, or we’ll be out of business,” he explained, under pressure to perform. “So we construct option trades that are binary bets.” Which pay X profit if stocks rally, and cost Y if markets fall. No more and no less.

“What you do not want is a portfolio whose losses multiply depending on the severity of a decline.” That’s what most people have today. “At the last stage of the cycle, you want lots of binary bets. Many small wins. Before the big loss.”

“Are we at the start or the end of the ‘Don’t know what I’m buying’ cycle?” asked the same CIO. “No one knows.” But we’re definitely within it.

“When their complex swaps drop 40%, and prime brokers demand more margin, investors will cry ‘It’s not possible!’ But anything is possible.” The prime brokers will hang up and stop them out.

In case you don’t remember, in 1987 we witnessed the largest one day percentage decline in U.S. stock market history.

When it finally happens, millions upon millions of ordinary Americans will be completely shocked, but most insiders know that the other shoe is going to drop at some point.

In particular, watch financial stock prices very closely.  Last month, Richard Bove issued a chilling warning about bank stocks…

One of Wall Street’s most vocal bank analysts is troubled by the rally in financials.

The Vertical Group’s Richard Bove warns that the overall market is just as dangerous as the late 1990s, and he cites momentum — not fundamentals — as what’s driving bank stocks to all-time highs.

“If we don’t get some event in the economy or in politics or in somewhere that is going to create more loan volume and better margins for the banks, then yes, they would come crashing down,” Bove said Monday on CNBC’s “Trading Nation.” “I think that the risk in these stocks is very high at the present time.”

It isn’t going to take much to set off an unstoppable chain of events.  Our financial markets are even more vulnerable than they were in 2008, and the right trigger could unleash a crisis unlike anything we have ever seen in modern American history.

Unfortunately, most Americans keep getting fooled by the artificial boom and bust cycles that the central banks create.  Right now most people seem to have been lulled into a false sense of security, and they truly believe that everything is going to be okay.

But every time before when the market has looked like this a crash has always followed, and this time will be no exception.

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

The Stock Market Has Gone Up More Than 5 Trillion Dollars Since Donald Trump Was Elected

One year ago we witnessed the greatest miracle in political history, and since that time we have also witnessed one of the greatest miracles in financial history.  On November 8th, 2016 the Dow closed at 18,332.74. On Wednesday, it closed at 23,563.36.  U.S. stocks have increased in value by about 5.4 trillion dollars since Donald Trump was elected, and I don’t think that we have seen anything quite like this ever before.  So does Donald Trump deserve the credit for this unprecedented stock market run?  Many experts are at least giving him part of the credit…

Greg Valliere, chief global strategist at Horizon Investments, says outgoing Federal Reserve chair Janet Yellen deserves “much of the credit” because the Fed’s policy of low interest rates has helped maintain a good economy and “favors stocks over other investments.”

But Trump, he adds, “gets some credit for establishing a pro-business climate in Washington.” Trump also gets kudos for rolling back business regulations and pushing for a big tax cut for U.S. corporations, which investors say will boost corporate profitability.

Without a doubt, a Trump victory was a good thing for the financial markets, but politicians need to be careful not to take too much credit for soaring stock prices.

Because if they take credit when stocks go up, then they also have to be willing to take the blame when they go down.

The primary reason why stock prices have gone up so much over the past several years is due to unprecedented intervention by global central banks.  They have literally pumped trillions of dollars that they have created out of thin air into the financial markets, and of course that was going to drive up asset prices.

But now global central banks are reversing course in unison, and we will see if financial markets around the world can maintain these dizzying levels without artificial support.

Because the truth is that whenever price/earnings ratios have ever gotten this high throughout history, a horrifying stock market crash has always followed.  There is no way that stock prices can stay at these levels without central bank support, and the trillions of dollars in paper gains that we have seen up to now can potentially be wiped out very rapidly.

Just look at a company like Snapchat.  This is a company that is supposedly worth 15.4 billion dollars at the moment, and yet it is bleeding hundreds of millions of dollars a quarter.  The following numbers come from Wolf Richter…

Snap Inc., the parent company of Snapchat, reported late Tuesday that its revenues in the third quarter rose 62% from a year ago, to $208 million, while its net loss more than tripled to $443 million. How? It wasn’t easy, but here’s how they did it:

  • Cost of revenues, $211 million, exceeds revenues, a troublesome indicator. Most of it is what Snap pays Alphabet for hosting its content in the Google Cloud.
  • Research and development expenses, $239 million, also exceed revenues.
  • Sales and marketing expenses, $102 million, to push those Snapchat Spectacles? More on those in a moment.
  • General and administrative expenses: $118 million

Total expenses of $670 million, against revenues of $208 million. That’s what I call a business model.

I want to be very clear about what I am going to say next.

Snapchat’s business model is terribly broken, and this is a company that is going to zero.

Ultimately, those that hold Snapchat stock to the very end will lose everything.  Instead of 15 billion dollars, this is a company that won’t be worth 15 cents.

Speaking of going to zero, Sears just announced that they are getting rid of up to 140 more stores.  We have already set an all-time record for retail store closings in 2018, and the “retail apocalypse” that we are witnessing is only going to continue to accelerate.

But at least the stock market continues to set new record highs, right?

Don’t be fooled by the headlines.  The artificial stock market bubble is living on borrowed time, and meanwhile the “real economy” continues to struggle.

When the stock market finally crashes, it will not be Donald Trump’s fault.

Let me say that again.

When the stock market finally crashes, it will not be Donald Trump’s fault.

The Federal Reserve and other global central banks created this artificial bubble, and they will be to blame for the carnage that is caused when it bursts.

And as the next great financial crisis unfolds, my hope is that people will finally be sick enough of these “boom and bust cycles” that we will be able to get rid of the Federal Reserve for good.

We need people to understand that the design of our financial system is fundamentally flawed, because if we never treat the root cause of our problems we will always be chasing symptoms.

There is a better way, and my hope is that in the aftermath of the next crisis we can start to get there.

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

The Federal Reserve Has Just Given Financial Markets The Greatest Sell Signal In Modern American History

Why have stock prices risen so dramatically since the last financial crisis?  There are certainly many factors involved, but the primary one is the fact that the Federal Reserve has been creating trillions of dollars out of thin air and has been injecting all of that hot money into the financial markets.  But now the Federal Reserve is starting to reverse course, and this has got to be the greatest sell signal for financial markets in modern American history.  Without the artificial support of the Federal Reserve and other global central banks, there is no possible way that the massively inflated asset prices that we are witnessing right now can continue.

The chart below comes from Sven Henrich, and it does a great job of demonstrating the relationship between the Fed’s quantitative easing program and the rise in stock prices.  During the last financial crisis the Fed began to dramatically increase the size of our money supply, and they kept on doing it all the way through the end of October 2017…

Unfortunately for stock traders, the Federal Reserve has now decided to change course, and that means that the process that has created these ridiculous stock prices is beginning to go in reverse.  In fact, according to Wolf Richter this reversal just started to go into motion within the past few days…

On October 31, $8.5 billion of Treasuries that the Fed had been holding matured. If the Fed stuck to its announcement, it would have reinvested $2.5 billion and let $6 billion (the cap for the month of October) “roll off.” The amount of Treasuries on the balance sheet should then have decreased by $6 billion.

And that’s what happened. This chart of the Fed’s Treasury holdings shows that the balance dropped by $5.9 billion, from an all-time record 2,465.7 billion on October 25 to $2,459.8 billion on November 1, the lowest since April 15, 2015

Does anyone out there actually believe that the immensely bloated balance sheet that the Fed has accumulated can be unwound without having an enormous negative impact on Wall Street?

And even more frightening is the fact that central banks all over the planet appear to be acting in coordinated fashion.  I really like how Brandon Smith made this point…

An observant person, however, might have noticed that central banks around the world seem to be acting in a coordinated fashion to remove stimulus support from markets and raise interest rates, cutting off supply lines of easy money that have long been a crutch for our crippled economy.  The Bank of England raised rates this past week, as the Federal Reserve indicated yet another rate hike in December.  The Europeans Central Bank continues to prep the public for coming rate hikes, while the Bank of Japan has assured the public that “inflation” expectations have been met and no new stimulus is necessary.  If all of this appears coordinated, that is because it is.

When interest rates are low and central banks are injecting money directly into the financial system, that tends to promote economic activity.

But when they raise interest rates and pull money out of the financial system, the exact opposite is true.

At this point Americans are more optimistic about the stock market than they have ever been before, and it is at this exact moment that the Fed is pulling the financial markets off of life support.

And it isn’t as if the “real economy” ever recovered in any meaningful way.  Most American families are still living paycheck to paycheck, and a new economic crisis would push millions more out of the middle class.

For a long time I have been warning that the only reason why stock prices ever got this high was because of the central banks, and I have also been warning that they could crash the markets if they wanted to do so.

Hopefully there is nothing nefarious going on, but I do find it very strange that all of the major global central banks are moving toward tightening at the exact same time.

If things go south for the global economy in the months ahead, we will know exactly where to point the blame…

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

Remember This Friday The 13th – Americans Are More Optimistic About The Stock Market Than They Have Ever Been Before

Happy days are here again for the U.S. economy – at least temporarily.  On Friday, U.S. stocks hit another brand new record high.  It seems like we are saying that almost every day lately, and most investors are absolutely thrilled by this seemingly endless surge.  Global stocks are surging too – today world stocks hit a new record high for the 4th consecutive day in a row.  But of course it isn’t just stock prices that are rising.  As the week ended, pretty much everything was up, and we also got some good news about consumer sentiment.  According to the new University of Michigan survey that was just released, U.S. consumers are the most optimistic about the economy that they have been since 2004…

The consumer sentiment index, a survey of consumers by The University of Michigan, rose to 101.1 in October, far ahead of the 95 economists polled by Reuters anticipated.

“Consumer sentiment surged in early October, reaching its highest level since the start of 2004,” Richard Curtin, chief economist for the Surveys of Consumers, said in a statement.

And according to that same survey, we have never been more confident that the stock market will continue to go up than we are right now…

Americans have never been more confident that that stock market will rally further in the next 12 months…

Of course it kind of makes sense why U.S. consumers would be feeling so good about the markets.  After all, stocks have only seemed to go up and up and up since the end of the last financial crisis.

But as I have written about so frequently in recent months, our financial markets are even more primed for a crash than they were in 2008, and we have received warning after warning that stock valuations are ridiculously inflated and must come crashing down at some point.

Plus, the “real economy” continues to send us some very troubling signals.  The U.S. economy lost jobs last month for the first time in seven years, and we just learned that General Motors is laying off more workers…

Starting in mid-November and going through the rest of the year, General Motors will close its Detroit-Hamtramck assembly plant – its only remaining factory in its hometown – and lay off about 1,500 workers, “people familiar with the plan” told the Wall Street Journal. When the plant does resume production, output will be cut by 20%, and 200 people will be out of a job.

Back in 1999, the plant produced over 200,000 Cadillacs and Buicks a year. This year, it might barely produce 80,000 vehicles.

The truth is that we are in the terminal phase of the greatest debt bubble in human history, and all over the planet prominent names in the financial world are warning about what is just around the corner.  For example, German finance minister Wolfgang Schäuble is deeply concerned about what he is seeing…

Outgoing German finance minister Wolfgang Schäuble has warned that spiraling levels of global debt and liquidity present a major risk to the world economy.

In an interview with the Financial Times, Schäuble said there was a danger of “new bubbles” forming due to the trillions of dollars that central banks have pumped into markets.

He also warned of risks to stability in the eurozone, particularly those posed by bank balance sheets burdened by the post-crisis legacy of non-performing loans.

And James Rickards is completely convinced “that a financial crisis is certainly coming”…

The bottom line is that a financial crisis is certainly coming. In my latest book, The Road to Ruin, I use 2018 as a target date primarily because the two prior systemic crises, 1998 and 2008, were 10 years apart. I extended the timeline 10 years into the future from the 2008 crisis to maintain the 10-year tempo, and this is how I arrived at 2018.

Yet I make the point in the book that the exact date is unimportant. What is most important is that the crisis is coming and the time to prepare is now. It could happen in 2018, 2019, or it could happen tomorrow. The conditions for collapse are all in place.

It’s simply a matter of the right catalyst and array of factors in the critical state. Likely triggers could include a major bank failure, a failure to deliver physical gold, a war, a natural disaster, a cyber–financial attack, and many other events.

If you look at how stock prices have behaved so far this year, it looks suspiciously just like the bubble that formed in 1987 just before the market crashed.

The conditions for an absolutely historic stock market crash already exist, and they have existed for quite some time.  None of our long-term problems have been solved, and with each passing day this colossal financial bubble just keeps getting bigger and bigger and bigger.

I definitely concur with James Rickards.  A major financial crisis “is certainly coming”, and because of all the irrational optimism that we are witnessing at the moment most Americans will be completely and utterly blindsided by what is ahead.

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

Top Financial Expert Warns Stocks Need To Drop ‘Between 30 And 40 Percent’ As Bankruptcy Looms For Toys R Us

Will there be a major stock market crash before the end of 2017?  To many of us, it seems like we have been waiting for this ridiculous stock market bubble to burst for a very long time.  The experts have been warning us over and over again that stocks cannot keep going up like this indefinitely, and yet this market has seemed absolutely determined to defy the laws of economics.  But most people don’t remember that we went through a similar thing before the financial crisis of 2008 as well.  I recently spoke to an investor that shorted the market three years ahead of that crash.  In the end his long-term analysis was right on the money, but his timing was just a bit off, and the same thing will be true with many of the experts this time around.

On Monday, I was quite stunned to learn what Brad McMillan had just said about the market.  He is considered to be one of the brightest minds in the financial world, and he told CNBC that stocks would need to fall “somewhere between 30 and 40 percent just to get to fair value”…

Brad McMillan — who counsels independent financial advisors representing $114 billion in assets under management — told CNBC on Monday that the stock market is way overvalued.

“The market probably would have to drop somewhere between 30 and 40 percent to get to fair value, based on historical standards,” said McMillan, chief investment officer at Massachusetts-based Commonwealth Financial Network.

McMillan’s analysis is very similar to mine.  For a long time I have been warning that valuations would need to decline by at least 40 or 50 percent just to get back to the long-term averages.

And stock valuations always return to the long-term averages eventually.  Only this time the bubble has been artificially inflated so greatly that a return to the long-term averages will be absolutely catastrophic for our system.

Meanwhile, trouble signs for the real economy continue to erupt.  As noted in the headline, it appears that Toys R Us is on the brink of bankruptcy…

Toys R Us has hired restructuring lawyers at Kirkland & Ellis to help address looming $400 million in debt due in 2018, CNBC had previously reported, noting that bankruptcy was one potential outcome.

Kirkland declined to comment.

Earlier Monday, Reorg Research, a news service focused on bankruptcy and distressed debt, reported Toys R Us could file for bankruptcy as soon as Monday.

This is yet another sign that 2017 is going to be the worst year for retail store closings in U.S. history.  I don’t know how anyone can look at what is happening to the retail industry (or the auto industry for that matter) and argue that the U.S. economy is in good shape.

But most Americans seem to base their opinions on how the economy is doing by how well the stock market is performing, and thanks to relentless central bank intervention, stock prices have just kept going up and up and up.

In so many ways, what we are watching today is a replay of the dotcom bubble of the late 1990s, and this is something that McMillan also commented on during his discussion with CNBC…

Part of McMillan’s thesis is rooted in his belief that the lofty levels of the so-called FANG stocks — Facebook, Amazon, Netflix and Google-parent Alphabet — seem reminiscent of the dot-com bubble in the late 1990s.

“I’ve been saying for about the past year, this year looks a lot like 1999 to me,” McMillan said on “Squawk Box.” “If you look at the underlying economics [and] if look at the stock market, the similarities are remarkable.”

I am amazed that so many big names continue to issue extremely ominous warnings about the financial markets, and yet most Americans seem completely unconcerned.

It is almost as if 2008 never happened.  None of our long-term problems were fixed after that crisis, and the current bubble that we are facing is far larger than the bubble that burst back then.

I don’t know why more people can’t see these things.  It has gotten to a point where “even Goldman Sachs is getting worried”…

The stock market bubble is now so massive that even Goldman Sachs is getting worried.

Let’s be clear here: Wall Street does best and makes the most money when stocks are roaring higher. So in order for a major Wall Street firm like Goldman to start openly worrying about whether or not the markets are going to crash, there has to be truly MASSIVE trouble brewing.

On that note, Goldman’s Bear Market indicator just hit levels that triggered JUST BEFORE THE LAST TWO MARKET CRASHES.

When things fall apart this time, it is going to be even worse than what we went through in 2008.  In the aftermath, we are going to need people that understand that we need to fundamentally redesign how our system works, and that is something that I hope to help with.  We cannot base our financial system on a pyramid of debt, and we cannot allow Wall Street to operate like a giant casino.  Our entire economy has essentially become a colossal Ponzi scheme, and it is inevitable that it is going to come horribly crashing down at some point.

But for now, the blind continue to lead the blind, and most Americans are not going to wake up until we have gone over the edge.

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

The Dow Falls 274 Points As ‘Eclipse Fever’ Hits The Financial Markets

Have we now entered a time of major financial shaking?  On Thursday, the Dow Jones Industrial Average was down 274 points.  The was the largest decline for the Dow since May, and high yield bonds were down dramatically as well.  Many are blaming the terror attack in Barcelona and “instability in the White House” for the downturn, but could “eclipse fever” also be a factor?  The closer that we get to the solar eclipse on August 21st, the weirder people seem to be getting.  You will see what I am talking about below.

But first let’s talk about the financial markets.  I have been warning that stocks are massively overvalued for quite a while now, and it turns out that the Federal Reserve very much agrees with me…

“Since the April assessment, vulnerabilities associated with asset valuation pressures had edged up from notable to elevated, as asset prices remained high or climbed further, risk spreads narrowed, and expected and actual volatility remained muted in a range of financial markets.”

Even the Fed is warning that we are in a bubble, and it is just a matter of time until that bubble bursts.

And anyone that is paying attention should be able to see the red flags all around us.  In fact, we have just witnessed the most “Hindenburg Omens” that we have seen since November 2007.  The technical indicators are absolutely screaming that a major downturn is dead ahead, and John P. Hussman is encouraging everyone to be cautious and to “consider watching from a safe location”…

Given obscene valuations, lopsided bullishness, and (importantly) clearly deteriorating internals, consider watching from a safe location.

We shall see what happens, but I tend to very much agree with Hussman.

Meanwhile, the closer that we get to August 21st, the crazier people seem to be getting.  The following comes from USA Today…

As citizen scientists collectively nerd-out ahead of Monday’s total solar eclipse, rogue observers of the spooky and weird are generating theories that the celestial event could usher in aliens, boost sightings of “interdimensional” creatures and perhaps even plunge us toward world destruction.

None of those things are going to happen, but there are some very odd things about this eclipse that are definitely worth noting.

In a previous article, I noted that the first major city in the United States that the eclipse will cross is named Salem.  Well, it turns out that the eclipse will actually cross a total of seven cities named Salem, and of course “Salem” is short for “Jerusalem”.

I also find it very interesting how much the number “33” is associated with this eclipse.  The following are just a few examples…

This solar eclipse is highly unusual for so many reasons and it occurs just 33 days before what may very well be the Great Sign.  It begins in the 33rd state, ends at the 33rd parallel, and occurs on the 233rd day of the year, which is 33 weeks and 2 days into 2017.  The eclipse will take 1 hour and 33 minutes to cross the country and occurs 133 days (inclusive) before the end of 2017.

And of course this solar eclipse begins a period of 40 days which will end with Yom Kippur on September 30th.  The following is an excerpt from a Charisma News article authored by Ron Allen which I think has some really good insights…

Teshuvah, the 40-day Jewish season of repentance, literally means to return to the presence of God, and is a time of introspection and a reminder of judgment. It begins on the first day of the sixth month known an Elul, and the solar eclipses that occur on Teshuvah add to the meaning of Teshuvah. The Teshuvah eclipses are signs of coming judgment, like the Trumpets eclipses, but they are also signs of unity in the presence of God. Thus, the Teshuvah eclipses are both an invitation to return to God and a warning of judgment.

During the totality of the eclipse, the sky will become dark and the stars will become visible. Right next to the eclipse, only 1.5 degrees away, the brightest star in the judgment constellation Leo (the lion), Regulus (treading under foot) reminds us that Christ, the lion of Judah, will put His enemies under His feet (1 Cor. 15:25). Southeast of the eclipse, the planet Mercury, the morning star laid low symbolic of Satan, will appear under the feet of Leo, adding to the warning of judgment.

So is this solar eclipse actually a warning that America should repent?

Many Christian leaders all over the nation believe that this is the case.  In fact, Billy Graham’s own daughter, Anne Graham Lotz, is one of them…

In light of Ezekiel 33:1-6 that commands a watchman to be faithful to warn others of the danger coming against the land, I feel compelled to issue the warning once again. The warning is triggered by the total solar eclipse of Aug. 21, 2017, nicknamed “America’s Eclipse.” For the first time in almost 100 years, a total solar eclipse will be seen from coast to coast in our nation. People are preparing to mark this significant event with viewing parties at exclusive prime sites. The celebratory nature regarding the eclipse brings to my mind the Babylonian King Belshazzar, who threw a drunken feast the night the Medes and Persians crept under the city gate. While Belshazzar and his friends partied, they were oblivious to the impending danger. Belshazzar wound up dead the next day, and the Babylonian empire was destroyed.

I do not know what will happen before, during or after the eclipse, but I do know that America is in very deep trouble.

If we continue on the path that we are currently on, there is no future for our nation.

Unfortunately, most Americans aren’t listening to the warnings.  Most people simply assume that America is far too powerful to ever fall, and they see absolutely no reason why we need to change our ways.

Hopefully we can get America to wake up, because time is rapidly running out.

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

The Dow Closes At A Record High For The 9th Straight Time But Experts Warn That A Stock Market Crash Could Be Imminent

The bigger they come, the harder they fall.  On Monday, the Dow Jones Industrial Average closed at a record high for the ninth straight session.  It has been a remarkable run, but many experts are pointing out that big trouble is brewing under the surface.  As you will see below, 79 components of the S&P 500 have already dropped more than 20 percent below their 52-week highs, and it is mostly just a handful of high flying tech stocks that are still propping up the market at this point.  Over the past several weeks, I have been documenting so many of the prominent voices that are loudly warning about an imminent stock market crash, and in this article you will hear some more of these warnings.  There is no way that stock prices can keep going up like this, and when the inevitable correction does arrive it is going to be exceedingly painful for millions of investors.

When the market is about to turn in a major way, one of the key things to watch is market breadth, and according to Brad Lamensdorf market breadth has now turned “exceedingly negative”…

Market breadth, a measure of how many stocks are rising versus the number that are dropping, has turned “exceedingly negative,” according to Brad Lamensdorf, a portfolio manager at Ranger Alternative Management. Lamensdorf writes the Lamensdorf Market Timing Report newsletter and runs the AdvisorShares Ranger Equity Bear ETF HDGE, -0.70% an exchange-traded fund that “shorts” stocks, or bets that they will fall.

“As the indexes continue to produce a series of higher highs, subsurface conditions are painting an entirely different picture,” Lamensdorf wrote in the latest edition of the newsletter.

When Lamensdorf uses the phrase “exceedingly negative”, he is not exaggerating at all.  As I mentioned above, 79 components of the S&P 500 are already in a bear market…

According to an analysis of FactSet data, 79 components of the S&P 500 are trading at least 20% below their 52-week high; a bear market is typically defined as a 20% drop from a peak.

Another key measure that I like to keep my eye on is Robert Shiller’s cyclically adjusted price-to-earnings ratio.  At this point, it is roughly at the same level as it was just before the stock market crash of 1929, and the only time it has been higher was during the peak of the dotcom bubble.

This is why so many investors are making extremely large bets that a major correction is imminent.  History tells us that stocks are likely to only go down from here.  And when stocks do start falling, the price action could become quite violent.  In fact, Barry James is comparing this current market to the Yellowstone supervolcano…

Warning: A correction in the market is “inevitable” and there are three key factors that could spark chaos on Wall Street, according to James Advantage Fund president Barry James.

The investor likened the market to Yellowstone National Park’s famous supervolcano, which many believe is close to eruption.

Of course not everyone agrees with James.  Michael Wilson of Morgan Stanley insists that everything is just fine and that “there continues to be a level of skepticism that seems out of whack with what is actually happening”.

In the end, we will see how the coming months play out.

Over the past several years, there have been two primary trends that have been relentlessly driving up stock prices.  One of these trends has been an unprecedented level of stock buybacks.  And so far this year, hundreds of billions of dollars worth of stock buybacks have already been announced…

Through May, some $390 billion in buybacks have been announced this year, $13 billion more than at this time in 2016, according to figures compiled by Jeffrey Yale Rubin at Birinyi Associates, a stock market research firm.

June 28 was the biggest single buyback announcement day in history. That was when 26 banks disclosed buybacks worth $92.8 billion, largely a response to having just passed the stress tests administered by the Federal Reserve Board. That figure blew past the previous record of $56.4 billion announced on July 20, 2006.

Secondly, central banks have been pumping trillions upon trillions of dollars into the global financial system, and this has perhaps been the biggest reason for the surge in stock prices.  But now central banks are starting to pull back, and that could mean big trouble very soon.  The following comes from Matt King…

With asset prices displaying a high degree of correlation with central bank liquidity additions in recent years, that feedback loop makes the economy, upon which both corporate profitability and bank net interest margins depend, more reliant on central banks holding markets together than almost ever before. That delicate balance may well be sustained for the time being. But with central banks beginning to move, however gingerly, towards an exit, is it really worth chasing the last few bp of spread from here?

Throughout our history we have seen financial bubbles come and go, but we never seen to learn from our mistakes.  Right now, Warren Buffett is sitting on nearly 100 billion dollars in cash in anticipation of being able to buy up financial assets for a song after a crash happens, but meanwhile multitudes of ordinary Americans continue to pour vast quantities of money into stocks even at such absurd valuations.

Despite all of the warnings, many will be caught unprepared when the music stops playing.  Just like all of the other financial manias in our history, this one will come to a bitter end too.  The following comes from the New York Times…

In the late 1960s the mania was for the “nifty 50” American companies like Disney and McDonald’s, which had been the “go-go” stocks of that decade. In the late 1970s it was for natural resources, from gold to oil. In the late 1980s it was stocks in Japan, and in the late 1990s it was the dot-com boom. Last decade, investors flocked to mortgage-backed securities and big emerging markets from Brazil to Russia. In every case, many partygoers were still in the market when the crash came.

In life, timing is everything, and those that got out of the market in time are going to end up being very happy that they did so.

But those that stay in too long are going to see their “paper wealth” disappear in a blinding flash, and there won’t be any way to get it back once it is gone.

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

Remember This Milestone: The Dow Jones Industrial Average Hits 22,000 For The First Time In U.S. History

The Dow hit the 22,000 mark for the first time ever on Wednesday, and investors all over the world greatly celebrated.  And without a doubt this is an exceedingly important moment, because I think that this is a milestone that we will be remembering for a very long time.  So far this year the Dow is up over 11 percent, and it has now tripled in value since hitting a low in March 2009.  It has been quite a ride, and if you would have told me a couple of years ago that the Dow would be hitting 22,000 in August 2017 I probably would have laughed at you.  The central bankers have been able to keep this ridiculous stock market bubble going for longer than most experts dreamed possible, and for that they should be congratulated.  But of course the long-term outlook for our financial markets has not changed one bit.

Every other stock market bubble of this magnitude in our history has ended with a crash, and this current bubble is going to suffer the same fate.

But many in the mainstream media are still encouraging people to jump into the market at this late hour.  For example, the following comes from a USA Today article that was published on Wednesday…

“It’s still not too late to get in,” says Jeff Kleintop, chief global investment strategist at Charles Schwab, based in San Francisco. “The gains are firmly rooted in business fundamentals, not false hopes.”

I honestly don’t know how anyone could say such a thing with a straight face.  We have essentially been in a “no growth economy” for the past decade, and signs of a new economic slowdown are all around us.

But even though price/earnings ratios and price/sales ratios are at some of the highest levels in history, some analysts insist that the stock market still has more room to go up…

On the flip side, investors with time to ride out any short-term market storm should not rule out getting in the market now. Economies around the globe are improving and are boosting the profitability of corporations in the U.S. and abroad, says Chris Zaccarelli, chief investment officer at Cornerstone Financial Partners in Charlotte, N.C.

Zaccarelli won’t even rule out Dow 25,000 by the end of 2018.

Personally, I believe that it is far more likely that we would see Dow 15,000 by the end of 2018, but over the past couple of years the bulls have been right over and over again.

But the only reason why the bulls have been right is because of unprecedented intervention by global central banks.

Today, the Swiss National Bank owns more than a billion dollars worth of stock in each of the following companies: Apple, Alphabet, Microsoft, Amazon, Exxon Mobil, Johnson & Johnson and Facebook.

So where does a central bank like the Swiss National Bank get the money to purchase all of these equities?

It’s easy – they just print the money out of thin air.  As Robert Wenzel has noted, they simply “print the francs, exchange them for dollars and make the purchases”.

If I could create as much money as I wanted out of thin air and use it to buy stocks I could relentlessly drive up stock prices too.

Our financial markets have become a giant charade, and central bank intervention is the biggest reason why FAANG stocks have vastly outperformed the rest of the market.  The following comes from David Stockman…

Needless to say, the drastic market narrowing of the last 30 months has been accompanied by soaring price/earnings (PE) multiples among the handful of big winners. In the case of the so-called FAANGs + M (Facebook, Apple, Amazon, Netflix, Google and Microsoft), the group’s weighted average PE multiple has increased by some 50%.

The degree to which the casino’s speculative mania has been concentrated in the FAANGs + M can also be seen by contrasting them with the other 494 stocks in the S&P 500. The market cap of the index as a whole rose from $17.7 trillion in January 2015 to some $21.2 trillion at present, meaning that the FAANGs + M account for about 40% of the entire gain.

Stated differently, the market cap of the other 494 stocks rose from $16.0 trillion to $18.1 trillion during that 30-month period. That is, 13% versus the 82% gain of the six super-momentum stocks.

If global central banks continue to buy millions of shares with money created out of thin air, they may be able to keep this absurd bubble going for a while longer.

But if the Fed and other central banks start pulling back, we could see a market tantrum of epic proportions.  In fact, almost every single time throughout history when the Federal Reserve has attempted a balance sheet reduction it has resulted in a recession…

The Fed has embarked on six such reduction efforts in the past — in 1921-1922, 1928-1930, 1937, 1941, 1948-1950 and 2000.

Of those episodes, five ended in recession, according to research from Michael Darda, chief economist and market strategist at MKM Partners. The balance sheet trend mirrors what has happened much of the time when the Fed has tried to raise rates over a prolonged period of time, with 10 of the last 13 tightening cycles ending in recession.

“Moreover, outside of the 1920s and 1930s, there is no precedent for double-digit annual declines in the balance sheet/base that will likely begin to occur late next year,” Darda said in a note.

President Trump is going to get a lot of credit if the stock market keeps going up and he is going to get a lot of blame if it starts going down.

But the truth is that he actually has very little to do with what is really going on.

This stock market bubble was created by the central banks, and they also have the power to kill it if they desire to do so.

And once this bubble bursts, we may be looking at a crisis that makes 2008 look like a Sunday picnic.

Goldman Sachs and others are already warning that this stock market rally is on borrowed time.  Let’s hope that it can continue at least for a little while longer, but in the end there is no possible way that this story is going to end well.

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

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