Oil

The Oil Price Collapse Is Yet Another Sign That Economic Activity Is Crashing Dramatically All Over The World

The insanity that we are currently witnessing in the financial markets is difficult to believe.  Personally, even though I operate a website called “The Economic Collapse Blog” and I write about these things every day, when someone told me that the price of oil had fallen below minus 30 dollars a barrel on Monday I initially didn’t think that it could possibly be true.  Yes, I always knew that it was theoretically possible that the price of oil could go into negative territory, but we had never seen such a thing actually happen before.  And I knew that a crunch was coming as futures contracts expired, but I certainly did not expect the extreme carnage that we witnessed on Monday …

West Texas Intermediate crude for May delivery fell more than 100% to settle at negative $37.63 per barrel, meaning producers would pay traders to take the oil off their hands.

This negative price has never happened before for an oil futures contract. Futures contracts trade by the month. The June WTI contract, which expires on May 19, fell about 18% to settle at $20.43 per barrel. This contract, which was more actively traded, is a better reflection of the reality in the oil market. The July contract was roughly 11% lower at $26.18 per barrel.

When global economic activity is rising, that usually creates an increased demand for oil.

And when global economy activity is declining, the demand for oil also tends to drop.

Thanks to the coronavirus lockdowns, global demand for oil has dropped to levels that are absolutely unprecedented.  The amount of oil that is being produced is far, far greater than the amount that the world can use right now, and storage space has been rapidly running out.

Speculators that found themselves stuck with oil contracts that they were not able to resell went into panic mode on Monday, and that created the most memorable day for oil trading in history.

I would like to share what a couple of experts are saying about this absolutely crazy oil price crash.  This first comment comes from Wolf Richter…

It seems some oil trading firms and hedge funds were caught on the wrong side of heavily leveraged bets, and couldn’t roll over their contracts due to a liquidity crunch and horrible market conditions in that space. But if they can’t sell the contracts by tomorrow, they’ll have to take delivery of the physical oil at the delivery point for NYMEX futures, namely in Cushing, Oklahoma.

The delivery time is in May. But storage in Cushing for May seems to have been spoken for, and now these traders see that they have no place to go with this oil that they might have to take delivery of in May.

And this next comment comes from Roger Diwan…

What is happening today is trades or speculators who had bought the contract are finding themselves unable to resell it, and have no storage booked to get delivered the crude in Cushing, OK, where the delivery is specified in the contract.

This means that all the storage in Cushing is booked, and there is no price they can pay to store it, or they are totally inexperienced in this game and are caught holding a contract they did not understand the full physical aspect of as the time clock expires.

The contract roll and liquidity crunch that made the extreme sell-off today possible but it DOESN’T necessarily represent futures market conditions: NYMEX June settled today at $21.13.

Last week, Russia, Saudi Arabia and other major oil producers cut a deal to significantly reduce global oil production, but it wasn’t nearly enough to match the nightmarish decline in global economic activity that we have been witnessing.

So right now oil producers are pumping far more oil than the world can currently use, and that has become a massive problem.

And if things don’t turn around quickly, we could soon see hundreds of bankruptcies in the energy industry…

Many oil companies took on too much debt during the good times. Some of them won’t be able to survive this historic downturn.

In a $20 oil environment, 533 US oil exploration and production companies will file for bankruptcy by the end of 2021, according to Rystad Energy. At $10, there would be more than 1,100 bankruptcies, Rystad estimates.

In the short-term, what the energy industry desperately needs is for the lockdowns to end and for people to resume their normal economic patterns.

But as one analyst has pointed out, getting people to do that would be extremely difficult even if all of the lockdowns were lifted immediately…

“The government can declare whatever they want in terms of encouraging people to get out and do stuff,” said Willie Delwiche, investment strategist at Baird. “Whether or not broad swaths of society do that remains to be seen. It’s going to take seeing people start to get out and do stuff again. That will be the necessary positive development, not just declaring getting things open.”

In the long run, the good news for the energy industry is that there are several reasons why the price of oil will eventually be going back up to higher levels.

First of all, economic activity will rise as lockdowns are lifted all over the world, and hopefully all of the lockdowns will be over by the end of this calendar year.

Secondly, central banks and national governments around the globe are flooding the system with massive amounts of fresh money, and this will eventually cause very painful inflation.  But for the energy industry this will actually turn out to be a good thing because it will cause upward pressure on oil prices.

Thirdly, it is just a matter of time before a major war erupts in the Middle East, and once that happens the price of oil will immediately shoot into the stratosphere.

So the truth is that this is just a temporary downturn for the energy industry, but a lot of energy companies are so deep in debt that they may not be able to ride this storm out.

For the U.S. economy as a whole, it is critical for all of us to understand that things are never going to go back to exactly the way they were before COVID-19 came along.  All of the financial dominoes are starting to tumble, all of the economic momentum is heading in the wrong direction, and there will be many more challenges that we will have to face after this current pandemic is over.

There will be a lot more wild ups and downs in the months ahead, but this is what an economic collapse looks like, and it is just getting started.

About the Author: I am a voice crying out for change in a society that generally seems content to stay asleep. My name is Michael Snyder and I am the publisher of The Economic Collapse Blog, End Of The American Dream and The Most Important News, and the articles that I publish on those sites are republished on dozens of other prominent websites all over the globe. I have written four books that are available on Amazon.com including The Beginning Of The End, Get Prepared Now, and Living A Life That Really Matters. (#CommissionsEarned) By purchasing those books you help to support my work. I always freely and happily allow others to republish my articles on their own websites, but due to government regulations I need those that republish my articles to include this “About the Author” section with each article. In order to comply with those government regulations, I need to tell you that the controversial opinions in this article are mine alone and do not necessarily reflect the views of the websites where my work is republished. The material contained in this article is for general information purposes only, and readers should consult licensed professionals before making any legal, business, financial or health decisions. Those responding to this article by making comments are solely responsible for their viewpoints, and those viewpoints do not necessarily represent the viewpoints of Michael Snyder or the operators of the websites where my work is republished. I encourage you to follow me on social media on Facebook and Twitter, and any way that you can share these articles with others is a great help.  During these very challenging times, people will need hope more than ever before, and it is our goal to share the gospel of Jesus Christ with all many people as we possibly can.

6 Of The Last 8 U.S. Recessions Were Preceded By Oil Price Spikes – Damage To Saudi Oil Industry Could Take “Months” To Repair

When the price of oil rises dramatically, that tends to be really bad for the U.S. economy.  Because we are so spread out and goods are transported over such vast distances, our economy is particularly vulnerable to oil price shocks, and that is one reason why the events that we just witnessed in the Middle East are so alarming.  According to an article that was published by the Federal Reserve Bank of San Francisco in 2007, five of the last seven U.S. recessions that had occurred up to that time “were preceded by considerable increases in oil prices”.  Since that article was published in 2007, the recession that began in 2008 hadn’t happened yet, and of course that recession was immediately preceded by the largest oil price spike in history.  So that means that six of the last eight U.S. recessions were preceded by oil price spikes, and now we may be facing another one.  It is being reported that it may take “months” for Saudi Arabia to fully repair the damage that was done to their oil industry, and that could fundamentally alter the balance of supply and demand in the global marketplace.

Yesterday, I discussed why high oil prices are so bad for our economy.  When the price of oil is too high, it can cause inflation and hurt economic growth simultaneously.  The article from the Federal Reserve Bank of San Francisco that I mentioned in the last paragraph tried to explain why this happens in very basic economic terms…

Oil price increases are generally thought to increase inflation and reduce economic growth. In terms of inflation, oil prices directly affect the prices of goods made with petroleum products. As mentioned above, oil prices indirectly affect costs such as transportation, manufacturing, and heating. The increase in these costs can in turn affect the prices of a variety of goods and services, as producers may pass production costs on to consumers. The extent to which oil price increases lead to consumption price increases depends on how important oil is for the production of a given type of good or service.

Oil price increases can also stifle the growth of the economy through their effect on the supply and demand for goods other than oil. Increases in oil prices can depress the supply of other goods because they increase the costs of producing them. In economics terminology, high oil prices can shift up the supply curve for the goods and services for which oil is an input.

Needless to say, the unprecedented attack on Saudi oil production facilities was going to cause the price of oil to rise substantially.  In fact, when global markets opened up on Sunday evening we witnessed quite a dramatic spike…

In an extraordinary trading day, London’s Brent crude leaped almost $12 in the seconds after the open, the most in dollar terms since their launch in 1988. Prices subsequently pulled back some of that initial gain of almost 20%, but rallied again as traders waited in vain for an Aramco statement clarifying the scale of damage.

So where is the price of oil going from here?

One analyst quoted by Oilprice.com believes that we could soon see it hit $80 a barrel, and others believe that it could move up toward $100 a barrel not too long from now.

In the days ahead, global markets will be watching Saudi Arabia very carefully.  The longer it takes them to resume normal production levels, the higher the price of oil will go.

According to Bloomberg, one analyst is already publicly admitting that “full resumption could be weeks or even months away”…

All eyes are on how fast the kingdom can recover from the devastating strike, which knocked out roughly 5% of global supply and triggered a record surge in oil prices. Initially, it was said that significant volumes of crude could begin to flow again within days. While Aramco is still assessing the state of the plant and the scope of repairs, it currently believes less than half of the plant’s capacity can be restored quickly, said people familiar with the matter, asking not to be identified because the information isn’t public.

”Damage to the Abqaiq facility is more severe than previously thought,” said Amrita Sen, chief oil analyst at Energy Aspects Ltd. “While we still believe up to 50% of the 5.7 million barrels a day of output that has been disrupted could return fairly swiftly, full resumption could be weeks or even months away.”

That is really bad news, and that is assuming that there won’t be any more attacks like we just witnessed.

If there are more attacks, Saudi oil production could be far lower than normal for an extended period of time, and that would be catastrophic for the global economy.

Most Americans don’t realize this, but a lot of Saudi oil actually gets shipped to the west coast.  The following comes from Fox Business…

Drivers in California, however, could be hit the hardest. Nearly half of what Saudi Arabia exports to the U.S. is sent to the West Coast, as reported by Reuters. In the year that ended in June, the West Coast imported an average of about 11.4 million barrels of Saudi crude every month – much of which went to California refineries.

The Golden State already has among the highest average gasoline prices in the country – at $3.63 per gallon as of Monday.

We are going to see higher gasoline prices right away, but in the short-term we should be able to handle them okay.

But if there are more attacks like the one we just saw, or if a major war breaks out in the Middle East, the price of gasoline could easily spike to levels that we have never seen in this country before.

The U.S. economy was already deeply struggling even before the attack in Saudi Arabia, and so this could definitely push us over the edge.  We should all be getting prepared for an extended economic downturn, because it looks like that is precisely what we could be facing.

Hopefully we won’t see any more attacks on oil production facilities, but the attack on Saturday clearly demonstrated how extremely vulnerable such facilities are to terror attacks.  And with Middle East tensions currently at an all-time high, USA Today is warning that our future “may well get much rockier soon”…

The new threat is tension among nations in the region, as well as the ability to attack based on new and relatively simple technology. Drones can be flown long distances carrying weapons just powerful enough to attack oil facilities. Middle East tensions are severe enough that attempts at similar attacks are not over.

Oil futures do not trade based on the present. They trade on forecasts about oil supply and demand in the future. The future looks rocky and may well get much rockier soon.

We are truly in uncharted territory, and we desperately need peace and calm to prevail in the Middle East.

Sadly, that is not likely to happen, and every new wave of violence is going to mean more economic pain for all of us.

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.

If You Think The Price Of Oil Is Skyrocketing Now, Just Wait Until The War Starts…

In the aftermath of the most dramatic attack on Saudi oil facilities that we have ever seen, the price of oil has exploded higher.  The Wall Street Journal is calling this attack “the Big One”, and President Trump appears to be indicating that some sort of military retaliation is coming.  Needless to say, a direct military strike on Iran could spark a major war in the Middle East, and that would be absolutely devastating for the entire global economy.  Just about everything that we buy has to be moved, and moving stuff takes energy.  When the price of oil gets really high, that tends to create inflation because the price of oil is a factor in virtually everything that we buy.  In addition, a really high price for oil also tends to slow down economic activity, and this is something that we witnessed just prior to the financial crisis of 2008.  And if this crisis in the Middle East stretches over an extended period of time, it could ultimately result in a phenomenon known as “stagflation” where we have rapidly rising prices and weaker economic activity simultaneously.  The last time we experienced such a thing was in the 1970s, and nobody really remembers the U.S. economy of the 1970s favorably.

The damage caused by the “drone attacks” in Saudi Arabia was immense.  According to the Daily Mail, “huge plumes of black smoke” could be seen pouring out of a key Saudi oil facility…

Infernos raged at the plant in Abqaiq, Bugayg, and the country’s second largest oilfield in Khurais yesterday morning after Tehran-backed Houthi rebels in Yemen fired a flurry of rockets.

Huge plumes of black smoke could be seen coming from the oil facility.

Houthi rebels in Yemen have publicly taken responsibility for the attacks, but they may or may not be telling the truth.

At this point, U.S. Secretary of State Mike Pompeo is completely rejecting that explanation, and he is claiming that there is “no evidence the strikes had come from Yemen”…

Secretary of State Mike Pompeo blamed Iran for coordinated strikes on the heart of Saudi Arabia’s oil industry, saying they marked an unprecedented attack on the world’s energy supply.

The strikes shut down half of the kingdom’s crude production on Saturday, potentially roiling petroleum prices and demonstrating the power of Iran’s proxies.

Iran-allied Houthi rebels in neighboring Yemen claimed credit for the attack, saying they sent 10 drones to strike at important facilities in Saudi Arabia’s oil-rich Eastern Province. But Mr. Pompeo said there was no evidence the strikes had come from Yemen.

And according to Reuters, another unnamed “U.S. official” told them that the attacks came from “west-northwest of the targets”…

The U.S. official, who asked not to be named, said there were 19 points of impact in the attack on Saudi facilities and that evidence showed the launch area was west-northwest of the targets – the direction of Iran – not south from Yemen.

The official added that Saudi officials had indicated they had seen signs that cruise missiles were used in the attack, which is inconsistent with the Iran-aligned Houthi group’s claim that it conducted the attack with 10 drones.

Of course drones don’t have to travel in a straight line, and cruise missiles don’t either, and so we may never know for sure where the attacks originated.

But we do know that the Houthi rebels in Yemen are being backed by Iran, and we also know that the Shia militias in Iraq are also being backed by Iran.

So whether the attacks originated in Yemen, southern Iraq or Iran itself, it is not going to be too difficult for U.S. officials to place the blame on the Iranians, and we should expect some sort of military response.

In fact, President Trump posted the following message to Twitter just a little while ago…

Saudi Arabia oil supply was attacked. There is reason to believe that we know the culprit, are locked and loaded depending on verification, but are waiting to hear from the Kingdom as to who they believe was the cause of this attack, and under what terms we would proceed!

Of course U.S. airstrikes against Iran itself could ultimately spark World War 3, and most Americans are completely clueless that we could literally be on the precipice of a major war.

According to the Saudis, the equivalent of 5.7 million barrels a day of oil production were affected by the attacks.  Saudi Arabia typically produces about 9.8 million barrels a day, and so that is a really big deal.

When the markets reopened on Sunday night, oil futures exploded higher.  In fact, according to Zero Hedge this was the biggest jump ever…

With traders in a state of near-frenzy, with a subset of fintwit scrambling (and failing) to calculate what the limit move in oil would be (hint: there is none for Brent), moments ago brent reopened for trading in the aftermath of Saturday’s attack on the “world’s most important oil processing plant“, and exploded some 20% higher, to a high of $71.95 from the Friday $60.22 close, its biggest jump since futures started trading in 1988.

As I write this article, the price of Brent crude is currently sitting at $66.89, although at least one analyst is warning that the price of oil could soon shoot up to “as high as $100 per barrel” if the Saudis are not able to quickly resume their previous level of production…

The oil market will rally by $5-10 per barrel when it opens on Monday and may spike to as high as $100 per barrel if Saudi Arabia fails to quickly resume oil supply lost after attacks over the weekend, traders and analysts said.

Saudi officials have already told us that they anticipate that a third of the lost oil output will be restored on Monday.

But because of the extensive damage that has been done, restoring the remainder of the lost output could take “weeks” or even “months”.

In the short-term, President Trump has “authorized the release of oil from the Strategic Petroleum Reserve“, and that should help stabilize prices somewhat.

However, if a full-blown war with Iran erupts, nothing is going to be able to calm the markets.  In such a scenario, the price of oil could easily explode to a level that is four or five times higher than it is today, and that would essentially be the equivalent of slamming a baseball bat into the knees of the global economy.

The times that we are living in are about to become a whole lot more serious, but most Americans are not even paying attention to these absolutely critical global events.

In fact, even the mainstream media seems to believe that the new allegations against Supreme Court Justice Brett Kavanaugh are more important.

That is because they don’t understand what is really happening.

Trust me, keep a close eye on the Middle East, because things are about to start breaking loose there in a major way.

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.

3 Things That Happened Just Before The Crisis Of 2008 That Are Happening Again Right Now

Real estate, oil and the employment numbers are all telling us the same thing, and that is really bad news for the U.S. economy.  It really does appear that economic activity is starting to slow down significantly, but just like in 2008 those that are running things don’t want to admit the reality of what we are facing.  Back then, Fed Chair Ben Bernanke insisted that the U.S. economy was not heading into a recession, and we later learned that a recession had already begun when he made that statement.  And as you will see at the end of this article, current Fed Chair Jerome Powell says that he is “very happy” with how the U.S. economy is performing, but he shouldn’t be so thrilled.  Signs of trouble are everywhere, and we just got several more pieces of troubling news.

Thanks to aggressive rate hikes by the Federal Reserve, the average rate on a 30 year mortgage is now up to about 4.8 percent.  Just like in 2008, that is killing the housing market and it has us on the precipice of another real estate meltdown.

And some of the markets that were once the hottest in the entire country are leading the way down.  For example, just check out what is happening in Manhattan…

In the third quarter, the median price for a one-bedroom Manhattan home was $815,000, down 4% from the same period in 2017. The volume of sales fell 12.7%.

Of course things are even worse at the high end of the market.  Some Manhattan townhouses are selling for millions of dollars less than what they were originally listed for.

Sadly, Manhattan is far from alone.  Pending home sales are down all over the nation.  In October, U.S. pending home sales were down 4.6 percent on a year over year basis, and that was the tenth month in a row that we have seen a decline…

Hope was high for a rebound (after new-home-sales slumped), but that was dashed as pending home sales plunged 2.6% MoM in October (well below the expected 0.5% MoM bounce).

Additionally, Pending Home Sales fell 4.6% YoY – the 10th consecutive month of annual declines…

When something happens for 10 months in a row, I think that you can safely say that a trend has started.

Sales of new homes continue to plummet as well.  In fact, we just witnessed a 12 percent year over year decline for sales of new single family houses last month…

Sales of new single-family houses plunged 12% in October, compared to a year ago, to a seasonally adjusted annual rate of 544,000 houses, according to estimates by the Census Bureau and the Department of Housing and Urban Development.

With an inventory of new houses for sale at 336,000 (seasonally adjusted), the supply at the current rate of sales spiked to 7.4 months, from 6.5 months’ supply in September, and from 5.6 months’ supply a year ago.

If all of this sounds eerily similar to 2008, that is because it is eerily similar to what happened just before and during the last financial crisis.

Up until now, at least the economic optimists could point to the employment numbers as a reason for hope, but not anymore.

In fact, initial claims for unemployment benefits have now risen for three weeks in a row…

The number of Americans filing applications for jobless benefits increased to a six-month high last week, which could raise concerns that the labor market could be slowing.

Initial claims for state unemployment benefits rose 10,000 to a seasonally adjusted 234,000 for the week ended Nov. 24, the highest level since the mid-May, the Labor Department said on Thursday. Claims have now risen for three straight weeks.

This is also similar to what we witnessed back in 2008.  Jobless claims started to creep up, and then when the crisis fully erupted there was an avalanche of job losses.

And just like 10 years ago, we are starting to see a lot of big corporations start to announce major layoffs.

General Motors greatly upset President Trump when they announced that they were cutting 14,000 jobs just before the holidays, but GM is far from alone.  For a list of some of the large firms that have just announced layoffs, please see my previous article entitled “U.S. Job Losses Accelerate: Here Are 10 Big Companies That Are Cutting Jobs Or Laying Off Workers”.

A third parallel to 2008 is what is happening to the price of oil.

In 2008, the price of oil shot up to a record high before falling precipitously.

Well, now a similar thing has happened.  Earlier this year the price of oil shot up to $76 a barrel, but this week it slid beneath the all-important $50 barrier…

Oil’s recent slide has shaved more than a third off its price. Crude fell more than 1% Thursday to as low as $49.41 a barrel. The last time oil closed below $50 was in October 4, 2017. By mid morning the price had climbed back to above $51.

Concerns about oversupply have sent oil prices into a virtual freefall: Crude hit a four-year high above $76 a barrel less than two months ago.

When economists are asked why the price of oil is falling, the primary answer they give is because global economic activity is softening.

And that is definitely the case.  In fact, we just learned that economic confidence in the eurozone has declined for the 11th month in a row…

Euro-area economic confidence slipped for an 11th straight month, further damping expectations that the currency bloc will rebound from a sharp growth slowdown and complicating the European Central Bank’s plans to pare back stimulus.

In addition, we just got news that the Swiss and Swedish economies had negative growth in the third quarter.

The economic news is bad across the board, and it appears to be undeniable that a global economic downturn has begun.

But current Fed Chair Jerome Powell insists that he is “very happy about the state of the economy”…

Jerome H. Powell, the Federal Reserve’s chairman, has also taken an optimistic line, declaring in Texas recently that he was “very happy about the state of the economy.”

That is just great.  He can be as happy as he wants, and he can continue raising interest rates as he sticks his head in the sand, but nothing is going to change economic reality.

Every single Fed rate hiking cycle in history has ended in a market crash and/or a recession, and this time won’t be any different.

The Federal Reserve created the “boom” that we witnessed in recent years, but we must also hold them responsible for the “bust” that is about to happen.

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

“The Outlook For The Global Economy Has Deteriorated”: Oil, Copper And Lumber Are All Telling Us The Next Economic Downturn Is Here

Oil, copper and lumber are all telling us the exact same thing, and it isn’t good news for the global economy.  When economic activity is booming, demand for commodities such as oil, copper and lumber goes up and that generally causes prices to rise.  But when economic activity is slowing down, demand for such commodities falls and that generally causes prices to decline.  In recent weeks, we have witnessed a decline in commodity prices unlike anything that we have witnessed in years, and many are concerned that this is a very clear indication that hard times are ahead for the global economy.

Let’s talk about oil first.  The price of oil peaked in early October, but since that time it has fallen more than 25 percent, and the IEA is warning of “relatively weak” demand out of Asia and Europe…

The International Energy Agency said on Wednesday that while US demand for oil has been “very robust,” demand in Europe and developed Asian countries “continues to be relatively weak.” The IEA also warned of a “slowdown” in demand in developing nations such as India, Brazil and Argentina caused by high oil prices, weak currencies and deteriorating economic activity.

“The outlook for the global economy has deteriorated,” the IEA wrote.

Meanwhile, the price of copper has been declining for quite some time now.  The price of copper also fell substantially just before the last recession, and many analysts are pointing out that “Dr. Copper” is now waving a red flag once again…

The message of weakening demand on the oil front was reinforced by the falling price of copper. The base metal is often referred to as “Dr. Copper” on its presumed ability to forecast the peaks and troughs of business cycles since it is used in different areas of the economy such as homes, factories and electricity generation. Copper has served as a leading indicator of both recessions and economic booms.

The price of lumber is a “third witness” that indicates that big trouble is looming.

Last month, lumber dropped more than 10 percent, and that was the biggest monthly drop that we have seen in more than 7 years…

In October, prices for softwood lumber in the U.S. dropped 10.3% – the largest decline since May 2011, according to the Producer Price Index (PPI) release by the Bureau of Labor Statistics. The producer price index for softwood lumber has fallen 21.2% since setting the cycle and all-time high in June.

If oil, copper and lumber are all telling us the same thing simultaneously, don’t you think that we should be listening?

At this point, even Bloomberg is admitting that the global economy is heading toward “a generalized slowdown”…

These developments suggest the synchronized growth that the global economy has enjoyed in recent years is likely to be replaced by a generalized slowdown. Just take a look at the data out of Japan and Germany this week, which showed the world’s third- and fourth-largest economies contracted in the third quarter.

How many signs is it going to take before people start understanding what is happening?

Wells Fargo just notified about 1,000 employees that they will be laid off.  Job losses are starting to mount, and it is likely that we will start to see these sorts of news stories on an almost daily basis now.

And as the shaking on Wall Street accelerates, we are going to see more financial firms get into trouble.  In fact, we just witnessed the total collapse of OptionSellers.com.  The following comes from a notice that they sent to investors informing them that they lost all their money and that the firm is being liquidated…

I am writing to give you an update on the situation here with your account.

We have spent the week unwinding our short natural gas call position as expediently as possible.

Today which was to be the final day of liquidation, the market flared as prices appear to have been caught in a “short squeeze.”

The speed at which it took place is truly beyond anything I have seen in my career. It overran our risk control systems and left us at the mercy of the market.

In short, it was a rogue wave and it overwhelmed us.

Unfortunately, this has resulted in a catastrophic loss.

Our clearing firm, FC Stone now requires us to liquidate all positions. We hoped to have this done today. If not, it will be completed tomorrow.

Your account could potentially be facing a debit balance as of tomorrow. OptionSellers.com will be processing fee credits over the course of the coming days to help alleviate debit balances. What these will be will be determined after all positions are cleared.

This has in effect, crippled the firm. At this point, our brokers at FC Stone have been assisting us in liquidation.

Our offices will remain open and we will all still be here to answer your questions and process account closings. We will do everything in our power to ease what discomfort we can.

I am truly sorry this has happened.

I will be updating you again via memo in 24 hours.

Regards,

OptionSellers.com

Those investors are among the first to be completely wiped out, but they certainly won’t be the last.

The ironic thing is that Americans are less concerned about another crisis than they have been at any point since 2008 at a time when they should be more focused on getting prepared than ever.

You know that it is really late in the game when even Jim Cramer of CNBC is saying that the U.S. economy is really slowing down.  A few of my readers wrote me after that article because they didn’t like the fact that I had quoted Jim Cramer.  But I don’t think that they really got my point.  I was not endorsing Jim Cramer as some sort of financial guru.  Rather, I was pointing out that even mainstream media celebrities that were previously cheerleaders for the economy are now recognizing the reality of what we are facing.

Global economic activity is slowing down, and things are shifting very rapidly now.  The weather is already getting very cold, the mood of the nation is very dark, and it would only take a very small push to send us completely tumbling over the edge.

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

Total Planetary Collapse: The World’s Vertebrate Population Has Fallen By An Average Of 60 Percent Since 1970

The clock is ticking for humanity, and it is not just because our financial system is heading for the biggest implosion that any of us have ever seen.  The truth is that we are literally running out of everything.  We will not have enough oil to meet our energy needs long before we get to the end of this century.  The lack of fresh water is already a major crisis in many parts of the world.  Our air and our soil are more polluted than they have ever been before.  And at this point we can barely feed the entire planet, but global demand for food is expected to escalate dramatically in the years ahead.  If we continue doing things the way that we have been doing them, a future filled with famine, civil unrest, environmental chaos and war appears to be inevitable.  We are literally on the verge of total planetary collapse, but because this is happening in slow-motion most people don’t feel an urgency to do anything about it.

And to a certain extent, the damage has already been done.  This week, the WWF released a report which found that the vertebrate population of the world has fallen by an average of 60 percent since 1970.  the following comes from NBC News…

The population of the planet’s vertebrates has dropped an average of 60 percent since 1970, according to a report by the WWF conservation organization.

The most striking decline in vertebrate population was in the tropics in South and Central America, with an 89 percent loss compared to 1970. Freshwater species have also significantly fallen — down 83 percent in that period.

You may be thinking that you are not a big fan of the WWF, and I certainly am not either.

But even if their numbers are off by half, we are still talking about a planetary disaster of unprecedented magnitude.

Vertebrates include all mammals, fish, birds, amphibians and reptiles.  Species after species is being wiped out, and enormous holes are forming in the global food chain.

I don’t know if I even have the words to describe what we are facing.  The chief executive of the WWF says that what we are experiencing is “death by a thousand cuts”…

The animals that remain will fight against warming oceans choked with plastic, toppled rain forests may zero out fragile species, and refuges such as coral reefs may nearly die off.

That will transform life as humanity knows it, said Carter Roberts, the chief executive of the WWF in the United States, if societies do not reverse course to protect the food, water and shelter needed for survival.

“The numbers are astonishingly bad,” Roberts told The Washington Post. “It’s death by a thousand cuts.”

There are a couple of other numbers from the report that I wanted to highlight.

First of all, the report states that nearly 6 billion tons of fish and invertebrates have been taken out of our oceans since 1950.  Today, over 4 billion people get at least some of their protein from eating fish, and if we do not start doing a better job of taking care of our oceans we are going to be facing a horrific planetary famine very soon.

Secondly, the report also claims that 90 percent of all seabirds in the world now have plastic in their stomachs.

Back in 1960, that number was sitting at just 5 percent.

We are literally filling up our oceans with our plastic waste, and in the process we are destroying our future.  For much, much more on this, please see my recent article entitled “There Are Trillions Of Pieces Of Floating Plastic In Our Oceans, And If We Don’t Stop All Marine Life Will Eventually Be Dead”.

The time to act is now, but it is extremely difficult to get the entire world to act in unison on anything, and most of the “environmental solutions” that are being proposed today are complete rubbish.

But “doing nothing” is certainly not an option either.  Without our natural environment, modern societies would cease to exist, and this is a point that the report made very clearly…

The report urged quick action to avoid irreversible change to the planet, including a shift to green energy and environmentally friendly food production.

“What is clear is that without a dramatic move beyond ‘business as usual’ the current severe decline of the natural systems that support modern societies will continue,” the report said.

And Tanya Steele was even more direct when she spoke with CNN…

Tanya Steele, the WWF’s chief executive in Britain, put it more bluntly to CNN: “We are the first generation to know we are destroying our planet and the last one that can do anything about it.”

Years ago, I remember watching a DVD entitled “Collapse” by Michael Ruppert.  I know that many of you probably watched it as well, because at the time it was very popular.  In that video, Ruppert made some excellent points about our limited natural resources.  But things have gotten so much worse than when he originally put that DVD out, and if he was alive today he would be absolutely horrified at how rapidly things have fallen apart.

Infinite growth is not possible on a planet with limited natural resources, and at this point we are literally running out of everything.

Will we be the generation that will be remembered for turning things around, or will we be the generation that will be remembered for destroying the Earth?

I would certainly like for it to be the former, but I have a feeling that it will turn out to be the latter.

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Crashing: Apple, Twitter, Oil, Commodities, Greek Stocks, Chinese Stocks

Crash - Public DomainThe month of August sure has started off with a bang.  Tech stocks are crashing, oil is crashing, industrial commodities are crashing, Greek stocks crashed the moment that the Greek stock market reopened for trading, and Chinese stocks continue to crash.  At this point we have not seen a broad crash of U.S. stocks yet, but it is important to note that the Dow is already down more than 700 points from the peak in May.  If it continues to slide like it has in recent days, it won’t be too long before we will officially reach “correction” territory.  Just a few days ago, I described August as a “pivotal month“, and so far that is indeed turning out to be the case.

A full-blown financial crisis has not erupted yet, but we are well on the way.  In this article, I want to look at a few of the “crashes” that are already happening…

Apple

This is more of a “correction” than a “crash”, but it is very noteworthy because it is happening to one of the most important U.S. stocks of all.  The price of Apple stock has already broken through the 200 day moving average, and at this point it is down nearly 11 percent from the peak…

Shares of Apple are down 10.9% from their highest point in a year — which places the stock squarely in what’s considered to be a correction. The unofficial definition of a correction is a 10% or greater drop from a recent high. Shares of Apple hit a 52-week (and all-time) high on $134.54 on April 28.

Twitter

If you want to see a real crash, just look at what is happening to Twitter.  The stock was down close to 6 percent on Monday, and overall it has fallen 58 percent since early last year.  The price of Twitter stock has never been lower than it is right now, and many investors are very apprehensive about what comes next…

Twitter shares hit a record low on Monday, closing down nearly 6% to $29.27.

That is 58% below their peak in January 2014.

Shares have fallen to their lowest point since the company went public in November 2014 weighed down by negative comments on growth from company executives that rattled investors. Its previous low was $30.50 in May 2014 as concerns over slowing user growth began to take a toll.

Of course there are tech companies that are in far worse shape than Twitter.  For example, just consider what is happening to Yelp.  Shares of Yelp recently plummeted 25 percent in a single day, and they are down about 70 percent over the past year.

Greece

The Greek government was quite eager to reopen their stock market this week.

Perhaps they should have waited longer.

On Monday, we witnessed the greatest stock bloodbath in Greek history.  The following comes from Reuters…

Greece’s stock market closed with heavy losses on Monday after a five-week shutdown brought on by fears that the country was about to be dumped from the euro zone.

Bank shares plummeted 30 percent before loss limits kicked in to stop investors selling any more. The main Athens stock index .ATG ended down 16.2 percent, recovering slightly after plunging nearly 23 percent at the open.

It was the worst daily performance since at least 1985 when modern records began, including a 15 percent fall when Wall Street crashed in 1987.

Puerto Rico

Things also continue to unravel for “America’s Greece”.  On Monday, a U.S. commonwealth territory defaulted on debt for the first time ever…

Puerto Rico’s Government Development Bank announced Monday that it was only able to make a partial payment on its Public Finance Corporation (PFC) debt service due over the weekend.

In response to the non-payment of the full service, Moody’s said it viewed the situation as a default.

“Due to the lack of appropriated funds for this fiscal year the entirety of the PFC payment was not made today (the first business day after the Saturday deadline),” GDB President Melba Acosta-Febo said in a statement. This was a decision that reflects the serious concerns about the Commonwealth’s liquidity in combination with the balance of obligations to our creditors and the equally important obligations to the people of Puerto Rico to ensure the essential services they deserve are maintained.”

China

As I noted the other day, the Shanghai Composite Index declined 13.4 percent during the month of July.  It was the worst month for stocks in China since October 2009.

On Monday, Chinese stocks were down another 1.11 percent.  Since closing at 5,166.35 on June 12th, the Shanghai Composite Index has fallen precipitously.  As I write this, it is sitting at just 3622.86.

Oil

In the months prior to the financial crisis of 2008, the price of oil crashed hard.

Now it is happening again.

In July, the price of oil plunged 21 percent.  That was the worst monthly decline that we have seen since October 2008.

And on Monday, the oil crash continued.  The following comes from Business Insider…

On Monday in New York, West Texas Intermediate (WTI) crude fell more than 4% and slipped below $45 per barrel, a level it hasn’t touched since March.

Brent crude oil, the international benchmark that joined WTI in a bear market last week, dropped more than 4%, below $50 per barrel for the first time since January.

Commodities

In recent weeks, I have been writing over and over about industrial commodities.  This is yet another striking similarity to the last financial crisis.  In 2008, they started crashing before stocks did, and now it is happening again…

We see the Bloomberg Commodities index now at a 13-year low. Copper is down 28 percent for the year, tin is down 30 percent, and nickel is down 44 percent.

This is a giant red flag that indicates that we are plunging into a deflationary cycle.  When global economic activity slows down, so does demand for industrial commodities.  I don’t understand why more people can’t see this.

I have been warning that a deflationary downturn was coming for a very long time, and so have others.  For instance, just consider the following excerpt from a recent article by Nicole Foss…

Our consistent theme here at the Automatic Earth since its inception has been that we are facing a very powerful deflationary depression, following on from the bursting of an epic financial bubble. What we have witnessed in our three decades of expansion and inflation is nothing short of a monetary supernova, and that period has been the just culmination of a much larger upward trend going back many decades at least. We have lived through a credit hyper-expansion for the record books, with an unprecedented generation of excess claims to underlying real wealth. In doing so we have created the largest financial departure from reality in human history.

Bubbles are not new – humanity has experienced them periodically going all the way back to antiquity – but the novel aspect of this one, apart from its scale, is its occurrence at a point when we have reached or are reaching so many limits on a global scale. The retrenchment we are about to experience as this bubble bursts is also set to be unprecedented, given that the scale of a bust is predictably proportionate to the scale of the excesses during the boom that precedes it. We have built an incredibly complex economic system, but despite its robust appearance it is over-extended, brittle and fragile after decades of fueling its continued expansion by feeding on its own substance.

Things continue to line up in textbook fashion for a major financial crisis during the fall and winter.

I hope that you are prepared for what comes next.

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