Investors

28 Signs Of Economic Doom As The Pivotal Month Of September Begins

September 2, 2019 by Michael

Since the end of the last recession, the outlook for the U.S. economy has never been as dire as it is right now. Everywhere you look, economic red flags are popping up, and the mainstream media is suddenly full of stories about “the coming recession”. After several years of relative economic stability, things appear to be changing dramatically for the U.S. economy and the global economy as a whole. Over and over again, we are seeing things happen that we have not witnessed since the last recession, and many analysts expect our troubles to accelerate as we head into the final months of 2019.

We should certainly hope that things will soon turn around, but at this point that does not appear likely. The following are 28 signs of economic doom as the pivotal month of September begins…

#1 The U.S. and China just slapped painful new tariffs on one another, thus escalating the trade war to an entirely new level.

#2 JPMorgan Chase is projecting that the trade war will cost “the average U.S. household” $1,000 per year.

#3 Yield curve inversions have preceded every single U.S. recession since the 1950s, and the fact that it has happened again is one of the big reasons why Wall Street is freaking out so much lately.

#4 We just witnessed the largest decline in U.S. consumer sentiment in 7 years.

#5 Mortgage defaults are rising at the fastest pace that we have seen since the last financial crisis.

#6 Sales of luxury homes valued at $1.5 million or higher were down five percent during the second quarter of 2019.

#7 The U.S. manufacturing sector has contracted for the very first time since September 2009.

#8 The Cass Freight Index has been falling for a number of months. According to CNBC, it fell “5.9% in July, following a 5.3% decline in June and a 6% drop in May.”

#9 Gross private domestic investment in the United States was down 5.5 percent during the second quarter of 2019.

#10 Crude oil processing at U.S. refiners has fallen by the most that we have seen since the last recession.

#11 The price of copper often gives us a clear indication of where the economy is heading, and it is now down 13 percent over the last six months.

#12 When it looks like an economic crisis is coming, investors often flock to precious metals. So it is very interesting to note that the price of gold is up more than 20 percent since May.

#13 Women’s clothing retailer Forever 21 “is reportedly close to filing for bankruptcy protection”.

#14 We just learned that Sears and Kmart will close “nearly 100 additional stores” by the end of this year.

#15 Domestic shipments of RVs have fallen an astounding 20 percent so far in 2019.

#16 The Labor Department has admitted that the U.S. economy actually has 501,000 less jobs than they previously thought.

#17 S&P 500 earnings per share estimates have been steadily falling all year long.

#18 Morgan Stanley says that the possibility that we will see a global recession “is high and rising”.

#19 Global trade fell 1.4 percent in June from a year earlier, and that was the biggest drop that we have seen since the last recession.

#20 The German economy contracted during the second quarter, and the German central bank “is predicting the third quarter will also post a decline”.

#21 According to CNBC, the S&P 500 “just sent a screaming sell signal” to U.S. investors.

#22 Masanari Takada is warning that we could soon see a “Lehman-like” plunge in the stock market.

#23 Corporate insiders are dumping stocks at a pace that we haven’t seen in more than a decade.

#24 Apple CEO Tim Cook has been dumping millions of dollars worth of Apple stock.

#25 Instead of pumping his company’s funds into the stock market, Warren Buffett has decided to hoard 122 billion dollars in cash. This appears to be a clear indication that he believes that a crisis is coming.

#26 Investors are selling their shares in emerging markets funds at a pace that we have never seen before.

#27 The Economic Policy Uncertainty Index hit the highest level that we have ever seen in the month of June.

#28 Americans are searching Google for the term “recession” more frequently than we have seen at any time since 2009.

The signs are very clear, but unfortunately we live at a time when “normalcy bias” is rampant in our society.

If you are not familiar with “normalcy bias”, the following is how Wikipedia defines it…

The normalcy bias, or normality bias, is a belief people hold when considering the possibility of a disaster. It causes people to underestimate both the likelihood of a disaster and its possible effects, because people believe that things will always function the way things normally have functioned. This may result in situations where people fail to adequately prepare themselves for disasters, and on a larger scale, the failure of governments to include the populace in its disaster preparations. About 70% of people reportedly display normalcy bias in disasters.^[1]

For most Americans, the crisis of 2008 and 2009 is now a distant memory, and the vast majority of the population seems confident that brighter days are ahead even if we must weather a short-term economic recession first. As a result, most people are not preparing for a major economic crisis, and that makes us extremely vulnerable.

In 2008 and 2009, the horrible financial crisis and the bitter recession that followed took most Americans completely by surprise.

It will be the same this time around, even though the warning signs are there for all to see.

About the author: Michael Snyder is a nationally-syndicated writer, media personality and political activist. He is the author of four books including Get Prepared Now, The Beginning Of The End and Living A Life That Really Matters. His articles are originally published on The Economic Collapse Blog, End Of The American Dream and The Most Important News. From there, his articles are republished on dozens of other prominent websites. If you would like to republish his articles, please feel free to do so. The more people that see this information the better, and we need to wake more people up while there is still time.

Guess What Warren Buffett Is Doing With His Money Right Now?

August 28, 2019 by Michael

Does Warren Buffett believe that a major financial crisis is coming? In life, what people do is far more important than what they say, and what Warren Buffett is doing with his money right now speaks volumes. During the second half of 2019, a lot of the “experts” are warning about the possibility of a market crash, and corporate insiders have been selling stocks at a rate that we haven’t seen since the last financial crisis. There appears to be a widespread belief that the market is about to take a really negative turn, and we haven’t seen this sort of a “race for the exits” in a very long time. But when there is a lot of fear on Wall Street, that can sometimes be an opportunity to make a lot of money. Warren Buffett certainly hasn’t been afraid to “zig” when others are “zagging” over the years, and if he believed that there were great opportunities in the marketplace right now he would not hesitate to strike. But as you will see below, he’s not doing that.

Warren Buffett is the most famous investor in America today, but if you are not familiar with him, the following is a pretty good introduction from Wikipedia…

Warren Edward Buffett (/ˈbʌfɪt/; born August 30, 1930)^[2] is an American business magnate, investor, speaker and philanthropist who serves as the chairman and CEO of Berkshire Hathaway. He is considered one of the most successful investors in the world^[3]^[4] and has a net worth of US$82 billion as of July 18, 2019, making him the third-wealthiest person in the world.^[5]

Buffett was born in Omaha, Nebraska. He developed an interest in business and investing in his youth, eventually entering the Wharton School of the University of Pennsylvania in 1947 before transferring and graduating from the University of Nebraska at the age of 19. He went on to graduate from Columbia Business School, where he molded his investment philosophy around the concept of value investing that was pioneered by Benjamin Graham. He attended New York Institute of Finance to focus his economics background and soon after began various business partnerships, including one with Graham. He created Buffett Partnership, Ltd in 1956 and his firm eventually acquired a textile manufacturing firm called Berkshire Hathaway, assuming its name to create a diversified holding company. In 1978, Charlie Munger joined Buffett and became vice chairman of the company.^[6]^[7]

Buffett became one of the wealthiest people in the entire country by aggressively investing his money. His keen instincts have enabled him to make the right move far more often than not, and that is why what he is doing with his money right now has so many people concerned.

Instead of pumping his company’s cash into the stock market, Buffett has decided to hoard it. In fact, Berkshire Hathaway currently has 122 billion dollars that is just sitting there and doing nothing at all…

Warren Buffett, known for being one of the world’s most prescient investors, has kept quiet on whether U.S. equities are too expensive at a time when the global economy is slowing, Bloomberg reports. But he’s reportedly hoarding a record $122 billion in cash at Berkshire Hathaway Inc., leading to some speculation that he sees a recession on the horizon, or at least is sending some sort of warning. The cash pile is more than half the value of Berkshire’s $208 billion portfolio of public companies, and the only time that percentage has reportedly been higher since 1987 was in the years leading up to the 2008 financial crisis.

Yet again, we are talking about something that hasn’t happened since the last financial crisis.

Red flags are popping up all around us, and yet most people are choosing not to pay attention.

If Buffett believed that an “economic boom” was coming and that stock prices were going to go higher, sitting on a giant mountain of cash wouldn’t make any sense at all.

But if he believed that the market was about to crash and that stock prices would soon be far cheaper than they are now, having a mammoth cash hoard would make all of the sense in the world.

Of course Buffett is not the only one that can see what is coming. Earlier today, a CNBC article lamented the fact that there has been a “sudden pullback” in spending among wealthy individuals all over America…

From real estate and retail stores to classic cars and art, the weakest segment of the American economy right now is the very top. While the middle class and broader consumer sections continue to spend, economists say the sudden pullback among the wealthy could cascade down to the rest of the economy and create a further drag on growth.

Luxury real estate is having its worst year since the financial crisis, with pricey markets like Manhattan seeing six straight quarters of sales declines. According to Redfin, sales of homes priced at $1.5 million or more fell 5% in the U.S. in the second quarter. Unsold mansions and penthouses are piling up across the country, especially in ritzy resort towns, with a nearly three-year supply of luxury listings in Aspen, Colorado, and the Hamptons in New York.

When an economic crisis is ahead, the correct thing to do is to reduce spending, and obviously that is precisely what many at the top of the economic pyramid have decided to do.

Meanwhile, millions of other Americans do not understand what is happening, and they just assume that everything is going to be just fine somehow.

A lot of people out there seem to believe that the problems that caused the last financial crisis were “fixed” and that the good times will just keep on rolling for many years to come.

Perhaps the blind optimists will be proven right and Warren Buffett will be proven wrong this time.

It is theoretically possible that this could happen, but I certainly wouldn’t bet on it.

We Are Being Warned That The Last Week Of August “Could Be Highly Volatile” For Global Financial Markets

August 25, 2019 by Michael

Are things about to break loose in a major way? At the end of last week, the trade war between the United States and China escalated dramatically, and investors all over the globe really started freaking out. Unfortunately, developments over the weekend have only made things worse, and that means that this could be a very “interesting” week for global financial markets. As I write this article, stock prices around the world are plunging, the price of gold is spiking and the Chinese yuan is crashing. There is clearly a lot of fear out there right now, and at this point even CNBC is warning that the last week of this month “could be highly volatile”…

The final week of August — the bittersweet end of summer for many— could be highly volatile, as markets fret over the economy and the latest developments in trade wars.

Of course things can swing rapidly from moment to moment in this environment. President Trump could say something in a few hours that temporarily gives investors some hope, and that could cause markets to swing wildly upward for a little while. Everyone is on edge right now, and every piece of significant news is likely to cause gyrations in the marketplace.

But overall the trend is clearly down. U.S. stocks have now fallen for four weeks in a row, and many are becoming deeply concerned about what September will bring.

And for many U.S. businesses, this trade war has turned into a complete nightmare. Executives crave predictability, but now everywhere we look there is chaos, and this is causing a lot of headaches for business leaders…

Businesses crave predictability so they can make informed decisions and plan for the future. Many companies that depend on Chinese manufacturers and consumers have already shifted supply chains out of the country and taken other steps to reduce their exposure to China. And while Mr. Trump’s tweets are unlikely to trigger immediate changes, more uncertainty is unwelcome.

“Continued escalation and rhetoric are harmful to American businesses, workers and farmers,” said Tom Linebarger, chief executive of Cummins Inc., which makes diesel engines. Cummins pays a tariff on components it imports from its own plants in China for engines assembled at U.S. factories by American workers. The tariffs amount to a tax paid by Cummins’ customers, he said.

Unfortunately, nobody can no longer deny that global economic activity is really starting to slow down. We just learned that global trade was down 1.4 percent in June from a year earlier, and that represented the largest decline that we have seen since the last financial crisis…

World trade volume – a measure of imports and exports of merchandise across the globe – declined in its zigzag manner in June to the lowest level since October 2017, according to the Merchandise World Trade Monitor by CPB Netherlands Bureau for Economic Policy Analysis. The index was down 1.4% from June 2018. This small year-over-year decline is the biggest year-over-year decline since the Financial Crisis, and it’s a reversal from the heady growth in 2017 and 2018 that had topped out at 6.7%.

I have been using phrases like “since the last financial crisis” and “since the last recession” in almost every article recently. We are seeing so many things happen that we haven’t seen for a decade or longer, and yet most Americans still don’t seem to understand that we have a real crisis on our hands.

If the U.S. and China were to mend their relationship and agree to a comprehensive trade deal, that would certainly help things.

Unfortunately, that isn’t going to happen.

In fact, both sides appear to be digging in even more. For example, the White House just told us that President Trump “regrets not raising the tariffs higher”…

When asked if Trump had second thoughts about Friday’s move to escalate the trade war with China, Trump said “Yup.” “I have second thoughts about everything,” he added.

Hours later, the White House issued a statement saying that Trump meant to say that he wished he had raised tariffs on Beijing even higher.

“His answer has been greatly misinterpreted. President Trump responded in the affirmative – because he regrets not raising the tariffs higher,” White House spokeswoman Stephanie Grisham wrote in a statement.

And the Chinese are warning that we should not “underestimate the determination” of the Chinese people and that they will be the ones to “have the last laugh”…

On Saturday, China’s commerce ministry issued a statement calling on Washington not to “misjudge the situation and underestimate the determination of Chinese people” after US President Donald Trump announced new tariffs on Chinese imports.

“The US should immediately stop its wrong action, or it will have to bear all consequences,” the statement said.

At the same time, a sharply worded commentary in the official party mouthpiece, People’s Daily, said China had the strength to continue the dispute and accused Washington of sacrificing the interests of its own people. Published under the pseudonym “Wuyuehe”, the piece described the latest tariff measures by the US as “barbaric”. The op-ed said China’s own tariffs on $75 billion worth of American products, announced late on Friday, were a response to America’s unilateral escalation of the trade conflict, and vowed that China was determined to fight back “until the end”.

“China’s will to defend the core interests of the country and the fundamental interests of the people is indestructible, and will not fear any challenge,” the author wrote, promising that “history will prove that the side on the path of fairness and justice will have the last laugh.”

As I have repeatedly warned, there isn’t going to be a trade deal before the 2020 presidential election.

So that means that things are going to get progressively worse, and we need to be prepared for a lot of economic pain.

At this point, even U.S. Senator Lindsey Graham is telling us that the American people are just going to have to “accept the pain that comes with standing up to China”…

Sen. Lindsey Graham, R-S.C., said on Sunday that Democrats should not criticize President Trump for taking on China over trade as they have complained for years about Beijing’s policies but done nothing.

“Every Democrat and every Republican of note has said China cheats,” Graham said on CBS News’ “Face the Nation.” “The Democrats for years have been claiming that China should be stood up to, now Trump is and we’ve just got to accept the pain that comes with standing up to China.”

Sadly, the truth is that the American people are not well equipped to deal with pain. We have been spoiled by decades of debt-fueled “prosperity”, and even a relatively minor economic downturn would result in a massive national temper tantrum.

Right now our nation is a seething cauldron of anger and frustration, and the mainstream media is stirring the pot on a daily basis. It isn’t going to take much to spark an explosion, and this will especially be true the closer we get to the next presidential election.

The season of “the perfect storm” is upon us, and what is coming next is going to be one of the most chaotic chapters in modern American history.

$1,400,000,000,000 Gone In Less Than A Week – Stock Market In Turmoil As The Trade War Dramatically Escalates

August 5, 2019August 5, 2019 by Michael

Our trade war with China has begun to spiral out of control, and as a result global financial markets have been thrown into a state of turmoil. On Monday, the Dow Jones Industrial Average fell 767 points, and that represented the sixth-largest single day stock market decline in all of U.S. history. To put that into perspective, the biggest single day decline during the financial crisis of 2008 was just 777 points. So what we witnessed on Monday was definitely very serious. And the Nasdaq just got absolutely monkey-hammered as well. On a percentage basis, it was down even more than the Dow was, and it has now fallen for six days in a row. We have not seen a losing streak that long for the Nasdaq since President Trump was elected, and some analysts are convinced that even more chaos is on the way.

Overall, 1.4 trillion dollars in stock market wealth has been completely wiped out in less than a week…

It took just four brutal trading days for a $1.4 trillion wipeout in the S&P 500 stock value. From the Federal Reserve’s disappointing comments on the future of interest rates to President Donald Trump’s surprise tariffs to China’s weaponizing of the yuan, the record-long bull market took a big hit in a relatively short time.

European stocks have been getting clobbered as well. In fact, they just experienced their largest two day decline in three years.

After Trump imposed another wave of tariffs on China at the end of last week, we knew that the Chinese would retaliate. But we expected that the retaliation would be at least somewhat proportional.

Instead, they decided to bring down the hammer.

When Chris Krueger was asked about China’s retaliation, he said that “on a scale of 1-10, it’s an 11”. The Chinese have announced that they are going to completely stop buying U.S. agricultural products, and they shocked global financial markets when they allowed the yuan to drop like a rock early on Monday. In response, the U.S. Treasury Department formally designated China as a “currency manipulator”, and it appears that any hopes for a trade deal between the United States and China before the 2020 presidential election are completely and utterly dead. For an extended analysis of these events, please see the article that I just posted entitled “China Just Went Nuclear In The Trade War, And There Is No Turning Back Now”.

All along, most investors seemed to believe that all of the angry talk would eventually fade and that the U.S. and China would be able to work things out.

But that didn’t happen, and now we have crossed the point of no return. Financial markets are finally starting to realize that this trade war is going to have very, very serious implications for major U.S. corporations, and this will especially be true for our largest tech companies.

Over the past two trading days, the big five tech companies have combined to lose 228 billion dollars in market value…

Tech’s big five companies lost $66 billion in market value on Friday, and Monday’s plunge brought the two-day drop to $228 billion. Apple had the biggest percentage decline, falling 5.2%. Apple told U.S. Trade Representative Robert Lighthizer in June that the latest proposed tariffs would hit “all of Apple’s major products.” Some analysts are projecting a significant impact.

Meanwhile, by the way, the price of gold has been soaring.

As I have repeatedly argued, something definitely needed to be done about China, but trying to bully them into making a deal was never, ever going to work.

They are a very proud people, and once we started repeatedly pushing them extremely hard, it was just a matter of time before they started pushing back…

“Your back is put against the wall and you’re constantly being attacked. Pride starts to kick in, and it’s not surprising China has started to assert some of its force,” said Greg Peters, head of multi sector and strategy at PGIM Fixed Income. “I’m not sure what that means in real terms. It’s not different than any other life situations. You push someone hard enough and they start pushing back. … I never thought it was a good idea to act like it’s a scorched earth policy – I win, you lose. I continue to think that was never viable for the Chinese.”

Being aggressive can be an effective negotiating tool, but if you push too hard and too fast you run the risk of completely alienating the other party.

That appears to be what has happened in this case, and now all hopes for a trade deal are completely dead. As Bonnie Glaser has noted, the “potential for compromise has past”…

“The timing couldn’t be worse,” said Bonnie Glaser, director of the China Power Project at the Center for Strategic and International Studies in Washington. “The potential for compromise has past. Both sides are digging in and both leaders are first and foremost concerned about their domestic audiences. Politics is in the lead.”

Hopefully the markets will bounce back on Tuesday. After being down quite a bit earlier, Dow Jones Industrial Average futures are trading slightly higher as I write this article.

However, the truth is that this crisis isn’t going away. There isn’t going to be a trade deal with China, and that is going to mean a tremendous amount of pain for the global economy.

When a financial bubble pops, usually there is some sort of trigger that causes it to happen. In 2008, it was the subprime mortgage meltdown. This time around, it looks like the trigger could be our trade war with China.

As I noted a few days ago, our financial markets are more primed for a crash than they have ever been before. And we are moving into the season when big crashes tend to happen.

Things have not looked this ominous since 2008, and a lot of investors are starting to get very nervous.

We shall see how the rest of this year plays out, but right now events certainly seem to be moving in a very alarming direction.

“The Stock Market Started To Fall In July…”

July 31, 2019 by Michael

Will we look back on the month of July as a critical turning point for the stock market? During the first half of 2019, stock prices soared to record high after record high even though we just kept getting one number after another that indicated that a new economic slowdown was starting. Because of the disappointing performance of the U.S. economy, it was believed that we would see a rate cut from the Federal Reserve on Wednesday, and that is precisely what happened. But instead of rejoicing, investors started to panic a bit, and the Dow Jones Industrial Average ended the day down 333 points. We will get into why that happened in just a little bit. But without a doubt it seems quite odd that the Fed’s very first rate cut since December 2008 actually caused stocks to go down. On a historical basis, interest rates are already very low right now, and so this greatly limits what the Fed will be able to do once the next recession officially begins. Of course most investors are not concerned with such considerations. What they really want is for interest rates to be pushed all the way to the floor as quickly as possible, and so they were quite disappointed with what they heard from Fed Chairman Jay Powell on Wednesday.

But considering the fact that we haven’t seen a rate cut in more than a decade, the truth is that investors should have been thrilled by what happened. When interest rates go down, that tends to promote more economic activity…

As expected, the Fed lowered its federal funds rate by a quarter-percentage point to a range of 2% to 2.25%. The move is likely to ripple through the economy and financial system, nudging down rates for credit cards, home equity lines and auto loans and theoretically sparking more economic activity. While the rate cut should aid borrowers, it will frustrate savers who were just starting to benefit from higher bank account yields.

And more economic activity usually results in higher corporate profits, and higher corporate profits usually result in higher stock prices.

So why isn’t Wall Street rejoicing?

Well, it is because Fed Chairman Jay Powell told the press that this rate cut was just “a mid-cycle adjustment to policy” and that he didn’t anticipate that this was “the beginning of a lengthy cutting cycle”.

Many on Wall Street had been anticipating that the Federal Reserve would keep on cutting rates after this rate cut, but as I detailed the other day, the only way that would make sense is if we were plunging into a recession.

And while the Fed is definitely willing to admit that there are some trouble signs, they are not willing to completely throw in the towel on the “booming economy” narrative just yet. The following comes from CNBC…

In approving the cut, the FOMC cited “implications of global developments for the economic outlook as well as muted inflation pressures.” The committee called the current state of growth “moderate” and the labor market “strong,” but decided to loosen policy anyway.

Needless to say, President Trump was not thrilled by what happened on Wednesday. He was hoping that this would be the beginning of a series of rate cuts, because the lower interest rates go the better chance he has of being re-elected.

In a two part tweet on Wednesday, Trump once again ripped into Jay Powell and the Federal Reserve…

What the Market wanted to hear from Jay Powell and the Federal Reserve was that this was the beginning of a lengthy and aggressive rate-cutting cycle which would keep pace with China, The European Union and other countries around the world….

….As usual, Powell let us down, but at least he is ending quantitative tightening, which shouldn’t have started in the first place – no inflation. We are winning anyway, but I am certainly not getting much help from the Federal Reserve!

And it will be very interesting to see if investors on Wall Street continue to vent their frustrations for the rest of the week.

At other times when Wall Street has been disappointed by the Fed, we have seen violent moves toward the downside, and it is entirely possible that such a scenario could play out once again.

In fact, one Morgan Stanley analyst had already been warning that the coming reversal “is likely to be sharper and deeper than one might expect”…

Echoing Guggenheim’s fears that US equities are in for a dramatic collapse, Morgan Stanley’s Mike Wilson warns that “…if equity markets fail one more time at our key resistance point, we believe the reversal is likely to be sharper and deeper than one might expect, even if the earnings recession is more benign than we expect.“

And Egon von Greyerz is even more pessimistic about what is right around the corner…

The messages from the ECB and the Fed couldn’t be clearer. They are seeing major problems in the financial system and in the world economy and they will do whatever it takes to save the system. But they will fail.

The autumn of 2019 will see a major shift in sentiment as markets turn from a secular bull to a secular bear. We are likely to see major crashes in many global stock markets. Virtually no one is prepared for this so there will be both panic and despair.

Of course the truth is that we have never been more perfectly primed for a stock market crash than we are right now, and things are lining up ideally for the sort of nightmare scenario that I have been warning about.

It is just a matter of time before all of our economic and financial bubbles burst, and when they do the pain is going to be off the charts. I think that the CEO of Overstock.com recently made this point very well…

Patrick Byrne, the CEO of online retailer Overstock.com, sounded an ominous note for the several years ahead as well. “I think it will be bad,” he said. “To be honest, I think that ’08 was the hors d’oeuvres course,” he said according to Fortune. Byrne, a longtime cryptocurrency enthusiast, compared what he anticipates will happen to the economy to what might happen to a bridge overloaded with too many vehicles. “It’s a little bit like asking me there’s a bridge that was designed to hold 20 cars passing over it at a time and there’s now 100 going over it,” Byrne said. “When’s it going to break? When’s it going to collapse? That’s really your answer.”

“I’m kind of shocked it’s gone on this long,” Byrne continued. “I think that we have deep, deep, structural, architectonic level problems in our economy that will surface.”

As Byrne aptly pointed out, the big surprise is that it has taken this long for everything to collapse.

We had far, far more time than we deserved to try to get things turned around, but we never actually fixed any of our long-term economic and financial problems.

Now the next crisis is at our door, and I believe that the remainder of this year will turn out to be quite “interesting” indeed.

Dow 27,000? I Think That We Have FINALLY Reached Peak Stock Market Absurdity

July 11, 2019 by Michael

Even though everything else seems to be going wrong, the stock market just continues to soar to new record highs. In fact, the Dow Jones Industrial Average closed above 27,000 for the first time ever on Thursday. Investors continue to relentlessly believe that bright days are ahead even though we are on the brink of a war with Iran, we are in the middle of a trade war with China, California has been hit by more than 10,000 earthquakes over the past week, and all of the economic numbers are screaming that a recession is dead ahead. There has certainly been a lot of craziness on Wall Street in recent years, but the truth is that stock prices have never been as absurd as they are right now. It is inevitable that a very painful reality check is coming, but for the moment investors are celebrating another historic landmark…

The 30-stock average broke above 27,000 for the first time in its history, rising 227.88 points, or 0.9% to 27,088.08. The Dow first closed above 26,000 in January of 2018, so it’s been a little more than a year-and-half trek between 1,000 point moves. The gains were largely driven by expectations the Fed will cut rates, insulating the market from a slowing economy and a trade battle with China.

But if things are so good, then why is the Federal Reserve talking about cutting interest rates?

Sadly, the truth is that the Federal Reserve is considering rate cuts because the economic numbers have been disastrous lately. Global trade has fallen to the lowest levels that we have seen since the last recession, and manufacturing activity just continues to plummet. Here in the United States, manufacturing activity just hit the “lowest level in nearly three years”…

US manufacturing activity last month fell to its lowest level in nearly three years — well below the pace when President Donald Trump took office — another warning sign for the world’s largest economy as it marks the longest expansion on record.

The manufacturing slowdown was driven by weakening demand for US-made goods, with factories reluctant to produce stock they may not be able to sell, according to the Institute for Supply Management’s monthly survey.

Meanwhile, JPMorgan’s Global Manufacturing PMI just plunged to the lowest level in nearly seven years…

It’s a bloodbath. No matter where you look, global manufacturing surveys are signaling growth is over (and in most cases, outright contraction is upon us).

JPMorgan’s Global Manufacturing PMI fell to its lowest level for over six-and-a-half years and posted back-to-back sub-50.0 readings for the first time since the second half of 2012.

But in the bizarro environment that we find ourselves in, investors see those absolutely horrible numbers as evidence that the Fed will soon cut interest rates, and that means it must be a good time to buy stocks.

Every bad economic number just seems to fuel the feeding frenzy, and there certainly have been a lot of bad numbers in recent days.

For example, we just learned that small business employment has been falling at a rate that we haven’t seen “in over 9 years”…

The small business sector leads the cycle and employment here has plunged 61k in the past two months. Haven’t seen this in over 9 years; same decline we saw in Feb-March of 2008 when the consensus was busy calling for a soft landing.

That is terrible news, but for many investors that is a prime buying signal.

Everywhere we look we see signs of economic trouble. The auto industry is mired in the worst slump in a decade, home sales have slowed dramatically all over the nation, and we are pace to absolutely shatter the record for most retail stores closed in a single year. In fact, on Thursday we learned that another major retailer is completely liquidating…

Fashion accessory retailer Charming Charlie will close all its stores after going bankrupt for the second time in less than two years. More than 3,000 full- and part-time employees could lose their jobs.

Charming Charlie Holdings Inc. filed for Chapter 11 protection in Delaware with plans for going-out-of-business sales at about 261 stores, according to court documents. The chain expects the liquidation to take about two months.

But in an environment where “bad news is good news”, that is just another indication that this is a perfect time for investors to gobble up stocks like there is no tomorrow.

For months, I have been documenting the numbers that indicate that a new economic downturn has already begun. And one of the sectors where we can see this most clearly is in the trucking industry…

Freight rates have dipped year-over-year for six months straight while loads on the spot market, in which retailers and manufacturers buy trucking capacity as they need it, rather than through a contract, fell by 50.3% in June year-over-year. Truckers have also continued to warn of a “bloodbath” as they slash their profit expectations and companies file for bankruptcy.

Yet no matter how bad things get for the real economy, the euphoria on Wall Street never seems to end.

Investors just continue to relentlessly pour more money into stocks when everything is telling them to stop.

In fact, even the bond market is flashing warning sign after warning sign. The following example comes from CNN…

Something happened in the bond market last week that has occurred before five of the past six major market meltdowns.

The yield on the benchmark 30-year US Treasury bond — the lesser-known but still important fixed income cousin to the 10-year — briefly dipped below 2.5%. In other words, the 30-year was yielding less than the Federal Reserve’s short-term federal funds rate.

But until the next market meltdown actually happens, the irrational optimists on Wall Street are just going to continue to mock those of us that are warning that the party cannot continue indefinitely. Sadly, when the party on Wall Street finally ends it is likely to happen very suddenly, and the pain will be off the charts.

Let me say this one more time. You only make money in the stock market if you get out in time. If you are still holding on to your stocks after the big crash happens, it is not going to matter that the Dow once hit 27,000, because you will never see any of the money that you could have made if you had gotten out at the top of the market.

Trump Just Poked The Dragon In The Eye, And U.S.-China Relations Just Took An Ominous Turn For The Worse

June 6, 2019 by Michael

After what President Trump just did, the odds of the U.S. and China being able to reach a trade agreement this year officially just went from slim to none. For China, there is no issue more sensitive than the status of Taiwan. For the Chinese, it is unthinkable for anyone to even suggest that Taiwan is not a part of China, and the Chinese are prepared to defend their “one China” policy to the death if necessary. On the other hand, most Americans are entirely clueless about Taiwan. In fact, if you gave them a blank map of the world the vast majority of Americans wouldn’t even be able to find Taiwan thanks to our exceedingly poor system of public education. So for most Americans, a news story about how President Trump plans to sell 2 billion dollars worth of arms to Taiwan is completely and utterly meaningless. But for the Chinese, such news is a deep national insult…

The United States is pursuing the sale of more than $2 billion worth of tanks and weapons to Taiwan, four people familiar with the negotiations said, in a move likely to anger China as a trade war between the world’s two biggest economies escalates.

An informal notification of the proposed sale has been sent to the U.S. Congress, the four sources said on condition of anonymity because they were not authorized to speak about the possible deal.

This arms sale barely made a blip in the U.S. news cycle, but over in China they are officially freaking out about this. According to one report, this deal would send “over 100 tanks and almost 2,000 missiles” to Taiwan…

The US, which is the main weapons dealer to Taiwan, would send over 100 tanks and almost 2,000 missiles to the island. There was outrage in China, who said they were seriously concerned after Taiwan’s defence ministry confirmed the sale. The move is believed to further heighten tensions between Beijing and Washington.

It comes days after Chinese defence minister Wei Fenghe said: “If anyone dares to split Taiwan from China, the Chinese military has no choice but to fight at all costs.”

You can do quite a bit of damage with 2,000 missiles.

Most Americans may not realize this, but the truth is that U.S.-China relations just took a really ominous turn for the worse.

And in addition to announcing this arms sale to Taiwan, President Trump also just threatened China with even more tariffs…

DONALD Trump threatened to hit China with tariffs on “at least” another $300bn worth of goods today – as a Beijing propaganda campaign painted the US as evil bullies.

Tensions between the world’s two largest economies have soared sharply since talks aimed at ending a festering trade war broke down in early May.

But trust me, the announcement of the arms sale to Taiwan was far, far more insulting to China than the tariff threat was.

On the Chinese side, they have decided to hit the U.S. right in the farm belt by “putting purchases of U.S. soybeans on hold”…

China is reportedly putting purchases of U.S. soybeans on hold amid the growing trade war with the U.S., according to a report from Bloomberg News. As the world’s largest soybean buyer, China’s move could ramp up the economic pressure on American farmers.

This has already been the worst year for U.S. farmers in decades, and this move by the Chinese is going to make things even worse. For much more on this, please see an article that I posted earlier today entitled “U.S. Farms Are Facing Their Worst Crisis In A Generation – And Now Here Comes Another Monster Storm”.

Also, anti-American rhetoric in China has now reached a fever pitch. According to CNN, the Chinese just issued an official alert warning Chinese travelers of “shooting, robbery and theft” in major U.S. cities…

On Tuesday, China’s Culture and Tourism Ministry warned its citizens of the risks of traveling to the US in an alert, citing frequent recent cases of “shooting, robbery and theft.”

On the same day, the country’s Foreign Ministry — along with China’s embassy and consulates in the US — issued a security alert for Chinese citizens, alleging “repeated harassment” of Chinese nationals in the US by local law enforcement officials.

Of course the Chinese are correct when they warn about the violence in our cities. For example, more than 50 people were shot in the city of Chicago last weekend alone.

In addition to the travel warnings, Chinese state media is doing all that it can to put the U.S. in a bad light. In fact, one major Chinese paper just called the United States the “enemy of the world”…

The new travel advice did not come in isolation.

China’s ruling Communist Party has launched a trade war propaganda campaign, with recent efforts — delivered via state media — focusing on US “trade bullying” and “hegemony.” In one noteworthy article, published Tuesday in party mouthpiece the People’s Daily, the US was labeled the “enemy of the world.”

Does it sound to you like the Chinese are ready to surrender and head back to the negotiating table?

No, the truth is that they are just getting angrier with every week that goes by. Most Americans don’t even know that we fought against the Chinese during the latter stages of the Korean War, but right now over in China those old battles against “the evil American invaders” are being publicly celebrated…

President Xi Jinping’s state media has even begun to refer to a very bloody battle between America and Chinese forces during the Korean War.

The 1952 battle of Triangle Hill – or Shangganling in Chinese – has been glorified in China for decades as a turning point in the war.

School children are told how the sacrifice of Chinese soldiers eventually led to the “defeat of the evil American invaders”.

At this point, most Americans may be vaguely aware that some sort of a trade war is going on, but over in China they are taking this deadly seriously. And without a doubt, the stage is being set for a full-fledged global showdown between the two superpowers.

This is not a game, and if things go badly we could potentially be facing apocalyptic consequences.

So hopefully Trump knows what he is doing, because right now things appear to be starting to spiral out of control very rapidly.

Economic Chaos Erupts! – Global Manufacturing Plunges, The Trade War Expands And The Nasdaq Enters Correction Territory

June 3, 2019 by Michael

The global economic slowdown is really starting to accelerate. Just within the past few days, we have gotten more really awful global manufacturing numbers, the trade war has expanded to more nations, and the Nasdaq has officially entered correction territory. We have not witnessed this sort of global economic environment since the Great Recession, and if the economic chaos continues to escalate it won’t take too much to spark a brand new financial crisis. Of course the global financial system is far more vulnerable than it was back in 2008, and so if we stay on the path that we are currently on we could be facing a nightmare scenario very rapidly.

Let’s talk about the manufacturing numbers first. The numbers coming out of Germany are already at a crisis level, and manufacturing is also now contracting in Japan, South Korea and China as well.

Overall, global manufacturing as a whole has now fallen into contraction territory for the first time in seven years…

Global manufacturing was the weakest since 2012 last month, a victim of mounting trade tensions and further reason to worry that the world economy is weakening.

With softness in Germany, Japan, the U.K. — as well as the lowest U.S. result in a decade — IHS Markit’s global Purchasing Managers Index fell to 49.8 in May, below the 50 level that divides expansion from contraction.

The reports underscore the growing threat posed by the escalating U.S.-China trade war, and they coincided with a fresh warning from Wall Street about recession risks.

The reason why so many people are freaking out about these numbers is because this is exactly what we would expect to see if we were entering a global recession.

Meanwhile, global financial markets are looking increasingly shaky. On Monday, the Nasdaq fell another 120 points and it has now officially entered correction territory…

Stocks ended mostly lower Monday, June’s first day of trading, amid reports that the U.S. government is planning to target a host of big tech companies with antitrust and business practice probes. Shares of Alphabet, Amazon, Facebook and Apple all weighed on the market during Monday’s session.

The Nasdaq dropped 1.6% to enter correction territory, closing more than 10% below its record high set in late April.

The term “correction territory” might not mean a lot to many of you, so let me put what is happening in terms you may understand.

On Monday alone, America’s most prominent tech stocks lost approximately 150 billion dollars in value. It looks like the Trump administration is getting ready to go to war with the big tech companies, and that is really, really bad news for tech investors. The following comes from Breitbart…

The Masters of the Universe got hit hard by investors on Monday. Like $150 billion hard.

Shares of the top tech giants fell sharply on Monday after reports that U.S. antitrust regulators had divided up oversight of the sector, with the Department of Justice assuming responsibility for Alphabet and Apple and the Federal Trade Commission taking on Facebook and Amazon. This triggered fears that the government could mount challenges to the business models of the companies.

Shares of Alphabet dived 6.1 percent on Monday after the Wall Street Journal reported that the Justice Department is in the early stage of preparing an antitrust probe of the company. Reuters reported that the Department of Justice is also looking into Apple’s business for possible antitrust violations.

Speaking of war, our trade conflict with China continues to escalate. The mainstream media hasn’t been talking much about it, but apparently the Chinese have decided to put purchases of U.S. soybeans “on hold” until a trade agreement is reached…

China, the world’s largest soybean buyer, has put purchases of American supplies on hold after the trade war between Washington and Beijing escalated, according to people familiar with the matter.

State-grain buyers haven’t received any further orders to continue with the so-called goodwill buying and don’t expect that to happen given the lack of agreement in trade negotiations, said the people, who asked not to be named because the information is private.

U.S. soybean farmers have been sitting on unprecedented amounts of soybeans in hopes that an end to the trade war would raise prices.

But instead, demand for U.S. soybeans is going to go through the floor, and this could potentially force thousands of soybean farmers into bankruptcy.

And in addition to our trade war with China, the Trump administration has apparently decided that now is a good time to start a trade war with Mexico…

From produce to cars, a wide variety of Mexican goods could become more expensive if Trump follows through on his threat to hit Mexican imports with tariffs that soon could climb to 25%. Trump wants to pressure Mexico into doing more to halt the flow of Central American migrants to the U.S. via the Mexican border.

The tariffs, set to begin June 10, would gradually climb to 25% on Oct. 1 if Mexico doesn’t take steps “to dramatically reduce or eliminate” the number of migrants, Trump said Thursday. Such a strategy would hurt American shoppers, the economy and stocks, experts say, just as U.S. growth is slowing and the threat of more tariffs on Chinese imports looms larger.

At least in this case the U.S. and Mexico are still talking, and so perhaps some kind of resolution can be reached.

On top of everything else, the Trump administration has also just decided to add India to the trade war as well…

Mr. Trump on Friday said India would be removed from the U.S.’s privileged-trading program called the Generalized System of Preferences on Wednesday. Under the decadeslong program meant for some developing economies, the U.S. had allowed India to avoid tariffs on certain exports to the U.S. in the interest of promoting tighter trade ties and development.

India, the U.S.’s ninth-largest trading partner, is a top beneficiary of the GSP program. Mr. Trump’s move will add tariffs of as much as 7% on Indian exports of goods like chemicals, auto parts and tableware to the U.S., which in 2018 accounted for more than 11%, or $6.3 billion, of India’s total exports of goods valued at $54.4 billion, according to the Congressional Research Service, a research agency for the U.S. Congress.

A global trade war is going to be incredibly painful for everyone, and this is all happening at a time when the global economy was already starting to slow down substantially.

Here in the United States, a lot of businesses are really starting to notice a big decline in economic activity. Here is just one example that was published on Zero Hedge earlier today…

Down here, in Texas, I am seeing a big drop in economic activity over the last 6 months. Our healthcare businesses’ volume over this period is at 629, down from 770, year-on-year, almost a 20% decline, and the worst six month decline in our 15 year history. We have been pulling out all of the stops for business development, cutting overhead, and running all the QC traps to determine if it is something within our business, within our local market, within our industry, or having to do with the economy in general.

In this period, we have seen seven competitors go out of business in our city. We have recently confirmed similar experiences with colleagues in Kentucky, Colorado, and elsewhere in Texas. One of them asked me, “If this is not temporary, what would the strategy be?” My response was, “Hunker in the bunker and wait for everyone else to die.”

This is what we have all been preparing for, and things are going to get progressively tougher in the months ahead.

Unfortunately, most Americans are completely and totally clueless about what is ahead. Today, 59 percent of all Americans are living paycheck to paycheck, and the truth is that the vast majority of us are entirely unprepared to go through another recession.

And of course many believe that what we are facing is going to be much worse than just a “recession”. A perfect storm is rapidly coming together, and the chaos that we have seen so far is nothing compared to what is rapidly approaching.

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