Stock Market Crash

2015 Was The Worst Year For The Stock Market Since 2008

December 31, 2015December 31, 2015 by Michael

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

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

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

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

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

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

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

The biggest loser of the group was Warren Buffett.

He lost an astounding 7.8 billion dollars in 2015.

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

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

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

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

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

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

Meanwhile, underlying economic conditions continue to deteriorate.

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

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

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

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

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

The next big surprise was the Chicago purchasing manager index…

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

Any reading below 50 signals a contraction in business activity.

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

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

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

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

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

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

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

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

The Rate Hike Stock Market Crash Has Thrown Gasoline Onto An Already Raging Global Financial Inferno

December 20, 2015December 20, 2015 by Michael

If the stock market crash of last Thursday and Friday had all happened on one day, it would have been the 7th largest single day decline in U.S. history. On Friday, the Dow Jones Industrial Average was down 367 points after finishing down 253 points on Thursday. The overall decline of 620 points between the two days would have been the 7th largest single day stock market crash ever experienced in the United States if it had happened within just one trading day. If you will remember, this is precisely what I warned would happen if the Federal Reserve raised interest rates. But when news of the rate hike first came out on Wednesday, stocks initially jumped. This didn’t make any sense at all, and personally I was absolutely stunned that the markets had behaved so irrationally. But then we saw that on Thursday and Friday the markets did exactly what we thought they would do. The chief economist at Gluskin Sheff, David Rosenberg, is calling the brief rally on Wednesday “a head-fake of enormous proportions“, and analysts all over Wall Street are bracing for what could be another very challenging week ahead.

When the Federal Reserve decided to lift interest rates, they made a colossal error. You don’t raise interest rates when a global financial crisis has already started. That is absolutely suicidal. It is the kind of thing that you would do if you were trying to bring down the global financial system on purpose.

Surely the “experts” at the Federal Reserve can see what is happening. Junk bonds have already crashed, just like they did in 2008. The price of oil has crashed, just like it did in 2008. Commodity prices have crashed, just like they did in 2008. And more than half of all major global stock market indexes are already down at least 10 percent for the year so far.

You don’t raise interest rates in that kind of an environment.

You would have to be utterly insane to do so.

The Federal Reserve has thrown fuel onto a global financial inferno that is already raging, and things could spiral out of control very rapidly.

As far as this upcoming week is concerned, we have now entered “liquidation season”. Investors are going to be pulling their money out of poorly performing hedge funds before the end of the calendar year, and as CNBC has pointed out, more hedge funds have already failed in 2015 than at any point since the last financial crisis…

Liquidation season occurs when clients of poorly performing hedge funds ask for their money back. It tends to occur at the end of a quarter or year. In response, hedge funds must sell stocks in the open market to raise the money that needs to be returned to investors.

That means if a hedge fund performed poorly this year; it is probably flooded with liquidation requests right now. In fact, there have been more failed hedge funds this year than any time since 2008.

The dominoes are starting to fall. We have already seen funds run by Third Avenue Management, Stone Lion Capital Partners and Lucidus Capital Partners collapse. Amazingly, there are some people out there that are still attempting to claim that “nothing is happening” even in the midst of all of this chaos.

As they say, “denial” is not just a river in Egypt.

And this crisis is going to get even worse as we head into 2016. Egon von Greyerz, the founder of Matterhorn Asset Management, is convinced that we will soon see “one disaster after another”…

Greyerz predicts, “I think we will have one disaster after another, first in the junk bond market, then in emerging markets and, after that, the subprime markets. Subprime car loans and student loans I see as another massive problem area. It is going to be one thing after another that will unravel. Since 2008, when the world almost went under, we have printed or increased credit by 50% or by $70 trillion, and the world economy is still struggling to survive. I think the real change in confidence will come down when markets come down. . . . I think things will come down very quickly.”

And I think that he is right on target. The global financial system is more interconnected today than ever before, and when one financial institution fails, it inevitably affects dozens of others. And the failures that we have already seen are already spreading a wave of fear and panic that may be difficult to stop. The following comes from Business Insider, and I think that it is a pretty good explanation of what we could see next…

Funds such as Third Avenue and Lucidus close, liquidating their portfolios.
Investors, spooked by the closures and the risk that they might not be able to get their money out of these funds, make a rush for the exits while they still can.
That creates even more selling pressure.
Funds sell the assets that are easiest to sell as they look to reduce risk, which pushes the selling pressure from the risky parts of the market to the higher-quality part of the market.
Things evolve from there.

If you have been waiting for the next financial crisis to arrive, you can stop, because it is already unfolding right in front of our eyes.

The only question is how bad it is going to become.

In the final analysis, I find myself agreeing quite a bit with Charles Hugh Smith, the author of “A Radically Beneficial World: Automation, Technology and Creating Jobs for All“. He believes that the ridiculous monetary policies of the Federal Reserve have played a primary role in setting the stage for this new crisis, and that now this giant financial “Death Star” that they have created “is about to blow up”…

By slashing rates to zero, the Fed ruthlessly eliminating safe returns for savers, pension funds, insurers and the millions of people with 401K retirement nesteggs. In effect, the Fed-Farce has pushed everyone into risk assets–and then played another Dark Side mind-trick by masking the true dangers of these risky assets.

As oil-sector debt blows up, as junk bonds blow up, and emerging markets blow up, we are finally starting to see the real costs of going over to the Dark Side of endless credit expansion and throwing the gasoline of near-zero interest rates on the speculative fires of financialization.

The Fed’s hubris has led it to the Dark Side, and now its Death Star of impaired debt, phantom collateral, speculative frenzy and bogus mind-tricks is about to blow up.

Personally, instead of saying that it “is about to blow up”, I would have said that it is already blowing up.

We have already seen trillions upon trillions of dollars of wealth wiped out around the world.

Energy companies are failing, giant hedge funds are going under, and the 7th largest economy on the entire planet has already plunged into “an outright depression“.

Everyone that warned of financial disaster in the second half of 2015 has been proven right, but this is just the beginning. Now that the Federal Reserve has thrown gasoline onto the fire, our problems are only going to accelerate as we head into 2016.

So for the upcoming year, let us hope for the best, but let us also prepare for the worst.

The Global Commodity Crash Tells Us That A Major Deflationary Financial Crisis Is Imminent

December 10, 2015December 10, 2015 by Michael

If we really are plunging into a deflationary global financial crisis, we would expect to see commodity prices crash hard. That happened just before the great stock market crash of 2008, and that is precisely what is happening once again right now. On Thursday, the Bloomberg Commodity Index closed at 79.1544. The last time that it closed this low was 16 years ago. Not even during the worst moments of the last recession did it ever get so low. Overall, the Bloomberg Commodity Index is down more than 28 percent over the past 12 months, and it has plummeted by more than half since mid-2011. As a result of this stunning commodity collapse, extremely large mining companies such as Anglo American are imploding, giant commodity trading firms such as Glencore and Trafigura are in full-blown crisis mode, and huge portions of the global financial system are in danger of utterly collapsing.

In recent days, I have been trying to stress that many of the exact same patterns that we witnessed just prior to the great stock market crash of 2008 are happening once again. This includes the staggering crash of commodity prices that we are currently witnessing, and even CNN acknowledges that there are parallels to what we experienced seven years ago…

The last time raw materials like copper and oil were this cheap, an economic depression loomed just around the corner.

It’s no secret that commodities in general have had a horrendous 2015. A nasty combination of overflowing supply and soft demand has wreaked havoc on the industry.

But prices for everything from crude oil to industrial metals like aluminum, steel, copper, platinum, and palladium have collapsed even further in recent days.

As I mentioned above, this crash in prices is hitting mining companies really hard. Just this week, the fifth largest mining company in the entire world announced a massive restructuring and will be laying off tens of thousands of workers…

In the latest example of just how bad things have gotten, Anglo American–the world’s fifth largest miner–just kitchen sink-ed it, announcing a sweeping restructuring, a massive round of layoffs, and a dividend cut. The company will reduce its assets by some 60% while headcount will be cut by a whopping 85,000 or, nearly two-thirds.

Overall, the U.S. has lost approximately 123,000 good paying jobs from the mining sector since the end of 2014. And if commodity prices stay low, this sector is going to continue to bleed good paying jobs.

Meanwhile, investors have been dumping the debt of any companies that have anything to do with commodities. This has significantly contributed to the emerging junk bond crisis that I discussed in my last article. As I write this, a high yield bond ETF known as JNK has fallen all the way down to 34.31, which is the lowest that it has been since the last recession. For much more on the junk bond implosion, I would encourage you to read an article that Wolf Richter just put out entitled “Bond King Gets Antsy as Junk Bonds, Which Lead Stocks, Spiral to Heck“.

So why are commodity prices falling so rapidly?

Many analysts are pointing to the economic slowdown in China as the primary reason. For years, the Chinese economy voraciously gobbled up commodities from sources all over the planet, but now things are changing. The Chinese economy is really, really slowing down, and some recently released numbers give us some clues as to the true extent of that slowdown…

-Chinese exports fell 6.8 percent in November on a year over year basis after being down 6.9 percent on a year over year basis in October.

-Chinese imports were down 8.7 percent in November on a year over year basis.

-Chinese manufacturing activity has been contracting for nine months in a row.

-Last week, the China Containerized Freight Index plummeted to 718.58 – the lowest level ever recorded.

And of course it isn’t just China. Goldman Sachs says that the seventh largest economy on the entire planet, Brazil, has plunged into a “depression“. And as I pointed out the other day, of the 93 largest stock market indexes in the entire world, an astonishing 47 of them (more than half) are down at least 10 percent year to date.

Even though stocks slid in the U.S. this week, the major indexes still seem somewhat stable. But this is a bit of an illusion. Yes, the biggest names on Wall Street are still flying high for the moment, but shares of a multitude of smaller and mid-size firms have been plummeting. At this point, nearly 70 percent of all U.S. stocks are already below their 200 day moving averages. This is yet another thing that we would expect to see just before the bottom falls out for stocks.

Everything that I have been writing about this week (see here and here) is perfectly consistent with all of my warnings from earlier this year.

We are plunging into a deflationary financial crisis in textbook fashion. And if the Federal Reserve actually does decide to go ahead with an interest rate hike next week that is just going to make things even worse.

But most people are not patient enough to watch a process play out. Most people that write about “the coming economic collapse” hype it up like it is going to be some sort of big Hollywood blockbuster that is going to happen over a week or a month and then be over. That is definitely not the way that I see things.

To me, “the economic collapse” is something that has been happening for decades, that is still in the process of happening right now, and that will continue to happen as we move forward into the future. The long-term trends that are ripping our economy to shreds continue to intensify, and our leaders are not doing anything to fix our underlying fundamental problems.

And the financial crisis that I warned would start during 2015 and accelerate in 2016 has already begun. More than half of all major global stock market indexes are down by at least 10 percent year to date, and some of them have plummeted by more than 30 or 40 percent. Trillions of dollars of wealth has been wiped out around the globe, and this is just the beginning.

All of the numbers tell us the same thing.

Big trouble is ahead.

My job is to inform you of these things. What you choose to do with this information is up to you.

Guess What Happened The Last Time Junk Bonds Started Crashing Like This? Hint: Think 2008

December 8, 2015December 8, 2015 by Michael

The extreme carnage that we are witnessing in the junk bond market right now is one of the clearest signals yet that a major U.S. stock market crash is imminent. For those that are not familiar with “junk bonds”, please don’t get put off by the name. They aren’t really “junk”. They simply have a higher risk and thus a higher return than other bonds of the same type. And yesterday, I explained why I watch them so closely. If stocks are going to crash, you would expect to see a junk bond crash first. This happened in 2008, and it is happening again right now. On Monday, a high yield bond ETF known as JNK crashed through the psychologically important 35.00 barrier for the very first time since the last financial crisis. On Tuesday, high yield bonds had their worst day in three months, and JNK plummeted all the way down to 34.44. When I saw this I was absolutely stunned. This is precisely the kind of junk bond crash that I have been anticipating that we would soon witness.

Normally, stocks and junk bonds track one another very closely, but just like before the 2008 crash, they have become decoupled in recent months. Anyone that even has an elementary understanding of the financial world knows that this cannot continue indefinitely. And when they start converging once again, the movement could be quite violent.

When I chose to use the word “carnage” to open this article, I was not exaggerating what is going on in the junk bond market one bit. On Tuesday evening, Jeffrey Gundlach used the exact same word to describe what is happening…

Jeffrey Gundlach, the widely followed investor who runs DoubleLine Capital, said on a webcast on Tuesday that the junk bond market has come under severe selling pressure ahead of the Federal Reserve’s policy meeting next week.

“We are looking at real carnage in the junk bond market,” Gundlach said. Gundlach also said it was too early to buy high-yield junk bonds and energy debt securities. “I don’t like things when they go down every single day.”

Sometimes a chart can be extremely helpful in understanding what is going on. The following chart was posted by Zero Hedge on Tuesday, and it shows that yields on the riskiest junk bonds are heading into the stratosphere…

And for those that are not familiar, it is important to note that when yields go up, bond prices go down. So the chart above is what a “crash” looks like.

Another “leading indicator” that I watch is the behavior of Dow Transports.

Dow Transports started crashing before the Dow Jones Industrial Average did back in August, and now it is happening again…

Dow Transports are in reverse. Down over 3% today, the biggest drop since the Black Monday collapse, Trannies are now below the lows of the Bullard bounce from October 2014 and down a shocking 16% in 2015. This would be the first four-quarters-in-a-row drop in Transports since 1994 and the worst year since 2008…

In addition, we are also seeing trouble signs erupt at major financial institutions just like we did during the run up to the 2008 crash. For example, I have been concerned about Morgan Stanley for quite a while, and on Tuesday we learned that they have just laid off more than a thousand workers…

Struggling Morgan Stanley slashed 1,200 jobs around the world in recent days, a person familiar with the matter told CNNMoney.

The cuts were broad-based and eliminated 25% of the positions within the fixed income and commodities businesses, the person said. Those divisions are grappling with tumbling trading revenue and shrinking fees.

Morgan Stanley also eliminated about 730 back-office jobs like human-resources and IT positions.

Virtually all of the things that we would expect to see just prior to a 2008-style stock market crash are happening right now.

If just two or three leading indicators were flashing red, we could have a really good debate about what they might mean.

But the fact that virtually all of the numbers are screaming a warning at us should mean that the debate is over. Anyone with an open mind should be able to very clearly see what is coming next.

Very quickly, let me give you just 10 signs that indicate that we are right on the precipice of a major recession and a very substantial financial downturn…

1. Global GDP growth has gone negative for the first time since 2009.

2. Corporate earnings growth has turned negative.

3. S&P 500 net profit margins are steeply declining. According to Tony Sagami, “since 1973, there has been only one 60 bps decline in S&P 500 net profit margin that didn’t lead to a recession.”

4. In October, U.S. imports of goods declined by 6.6 percent on a year over year basis.

5. In October, U.S. exports of goods declined by 10.4 percent on a year over year basis.

6. U.S. manufacturing is contracting at the fastest pace that we have seen since the last recession.

7. Corporate debt defaults have risen to the highest level that we have seen since the last recession.

8. Credit card numbers that were recently released show that holiday sales have gone negative for the first time since the last recession.

9. The velocity of money in the United States has dropped to the lowest level ever recorded.

10. Of the 93 largest stock market indexes in the entire world, 47 of them (slightly more than half) have already plunged at least 10 percent year to date.

Just like in 2008, other global financial markets are imploding ahead of a U.S. collapse.

On Tuesday, the Dow Jones Industrial Average was down another 162 points, but we are still within 1000 points of the market peak that was set earlier this year. We are still in far better shape than most of the rest of the world, but that will soon change.

I can’t think of a single leading indicator that is telling us that everything is going to be okay. All of the numbers are pointing to major trouble ahead. So I hope that you are being smart and doing what you can to get prepared while there is still time.

Alarm Bells Go Off As 11 Critical Indicators Scream The Global Economic Crisis Is Getting Deeper

December 2, 2015December 2, 2015 by Michael

Economic activity is slowing down all over the planet, and a whole host of signs are indicating that we are essentially exactly where we were just prior to the great stock market crash of 2008. Yesterday, I explained that the economies of Japan, Brazil, Canada and Russia are all in recession. Today, I am mainly going to focus on the United States. We are seeing so many things happen right now that we have not seen since 2008 and 2009. In so many ways, it is almost as if we are watching an eerie replay of what happened the last time around, and yet most of the “experts” still appear to be oblivious to what is going on. If you were to make up a checklist of all of the things that you would expect to see just before a major stock market crash, virtually all of them are happening right now. The following are 11 critical indicators that are absolutely screaming that the global economic crisis is getting deeper…

#1 On Tuesday, the price of oil closed below 40 dollars a barrel. Back in 2008, the price of oil crashed below 40 dollars a barrel just before the stock market collapsed, and now it has happened again.

#2 The price of copper has plunged all the way down to $2.04. The last time it was this low was just before the stock market crash of 2008.

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

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

#5 The Bloomberg U.S. economic surprise index is more negative right now than it was at any point during the last recession.

#6 Credit card data that was just released shows that holiday sales have gone negative for the first time since the last recession.

#7 As I mentioned yesterday, U.S. manufacturing is contracting at the fastest pace that we have seen since the last recession.

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

#9 In 2008, commodity prices crashed just before the stock market did, and late last month the Bloomberg Commodity Index hit a 16 year low.

#10 In the past, stocks have tended to crash about 12-18 months after a peak in corporate profit margins. At this point, we are 15 months after the most recent peak.

#11 If you look back at 2008, you will see that junk bonds crashed horribly. Why this is important is because junk bonds started crashing before stocks did, and right now they have dropped to the lowest point that they have been since the last financial crisis.

If just one or two of these indicators were flashing red, that would be bad enough.

The fact that all of them seem to be saying the exact same thing tells us that big trouble is ahead.

And I am not the only one saying this. Just today, a Reuters article discussed the fact that Citigroup analysts are projecting that there is a 65 percent chance that the U.S. economy will plunge into recession in 2016…

The outlook for the global economy next year is darkening, with a U.S. recession and China becoming the first major emerging market to slash interest rates to zero both potential scenarios, according to Citi.

As the U.S. economy enters its seventh year of expansion following the 2008-09 crisis, the probability of recession will reach 65 percent, Citi’s rates strategists wrote in their 2016 outlook published late on Tuesday. A rapid flattening of the bond yield curve towards inversion would be an key warning sign.

Personally, I am convinced that we are already in a recession. There is a lag in the official numbers, so often we don’t know that we are officially in one until it is well underway. For example, we now know that a recession started in early 2008, but in the summer of 2008 Ben Bernanke and our top politicians were still insisting that there was not going to be a recession. They were denying what was actually happening right in front of their eyes, and the same thing is happening now.

And of course if the government was actually using honest numbers, we would all be talking about the recession that never seems to end. According to John Williams of shadowstats.com, honest numbers would show that the U.S. economy has continually been in recession since 2005.

But just like in 2008, the “experts” at the Federal Reserve are assuring all of us that everything is going to be just fine. In fact, Janet Yellen is convinced that things are so rosy that she seems quite confident that the Fed will raise interest rates in December…

Federal Reserve Chair Janet Yellen signaled Wednesday that the Fed is all but certain to raise interest rates this month for the first time in nearly a decade, saying that gains in the economy and labor market have met the central bank’s goals.

Her comments at the Economic Club of Washington amount to the strongest indication the Fed has provided so far that it will take action at a December 15-16 meeting.

This is the exact same kind of mistake that the Federal Reserve made back in the late 1930s. They thought that the U.S. economy was finally recovering, and so interest rates were raised. That turned out to be a tragic mistake.

But this time around, any mistake that the Fed makes will have global consequences. The rising U.S. dollar is already crippling emerging markets all around the globe, and an interest rate hike will just push the U.S. dollar even higher. For much more on this, please see my previous article entitled “The U.S. Dollar Has Already Caused A Global Recession And Now The Fed Is Going To Make It Worse“.

Many people are waiting for “the big crash”, but the truth is that almost everything has crashed already.

Oil has crashed.

Commodities have crashed.

Gold and silver have crashed.

Junk bonds have crashed.

Chinese stocks have crashed.

Dozens of other stock markets around the world have already crashed.

But the “big event” that many are waiting for is the crash of U.S. stocks. And just like in 2008, it is inevitable that a U.S. stock crash will follow all of the other crashes that I just mentioned.

Sometimes I get criticized for issuing these kinds of alarms. But just think of how many people could have been helped if they would have known that the financial crisis of 2008 was going to happen ahead of time.

The exact same patterns that we experienced back then are playing out once again right in front of our eyes, and the more people that we can warn in advance the better.

4 Harbingers Of Stock Market Doom That Foreshadowed The 2008 Crash Are Flashing Red Again

November 11, 2015November 11, 2015 by Michael

So many of the exact same patterns that we witnessed just before the stock market crash of 2008 are playing out once again right before our eyes. Most of the time, a stock market crash doesn’t just come out of nowhere. Normally there are specific leading indicators that we can look for that will tell us if major trouble is on the horizon. One of these leading indicators is the junk bond market. Right now, a closely watched high yield bond ETF known as JNK is sitting at 35.77. If it falls below 35, that will be a major red flag, and it will be the first time that it has done so since 2009. As you can see from this chart, JNK started crashing in June and July of 2008 – well before equities started crashing later that year. A crash in junk bonds almost always precedes a major crash in stocks, and so this is something that I am watching carefully.

And there is a reason why junk bonds are crashing. In 2015 we have seen the most corporate bond downgrades since the last financial crisis, and corporate debt defaults are absolutely skyrocketing. The following comes from a recent piece by Porter Stansberry…

So far this year, nearly 300 U.S. corporations have seen their bonds downgraded. That’s the most downgrades per year since the financial crisis of 2008-2009. The year isn’t over yet. Neither are the downgrades. More worrisome, the 12-month default rate on high-yield corporate debt has doubled this year. This suggests we are well into the next major debt-default cycle.

Another thing that I am watching closely is the price of oil.

A massive crash in the price of oil preceded the stock market crash of 2008, and over the past year we have seen another dramatic crash in the price of oil.

Many had been expecting the price of oil to bounce back, but instead we are seeing new downward momentum. In fact, according to Business Insider the price of U.S. oil briefly dipped below $43 a barrel on Wednesday…

Crude oil was down nearly 3% in morning trade on Wednesday.

West Texas Intermediate crude oil futures in New York dropped to as low as $42.97 per barrel. Futures touched a $42-handle in the last week of October, but last traded near those levels for a considerable period in August.

Another thing that I am watching is the ongoing crash of other industrial commodities. This is something that also preceded the stock market crash of 2008, and it is a clear sign that global economic activity is really slowing down.

Prices for industrial commodities such as aluminum, tin, iron ore and coal are all crashing. But the commodity that has me most alarmed personally is copper.

Economists commonly refer to it as “Dr. Copper”, and there is a very good reason for that. Looking back over history, the price of copper often makes a significant move in one direction or the other before the overall economy does. And the price of copper almost always starts declining before stocks do.

As I write this, the price of copper has fallen to $2.21, and it is already lower than at any point since the last financial crisis. To get a better perspective regarding what I am talking about, just check out this chart. This is one signal that is absolutely screaming that a major financial crisis is imminent.

One more harbinger of financial doom on the horizon is the surging U.S. dollar. The U.S. dollar surged just before the financial crisis of 2008, and now it is happening again.

Most Americans don’t understand this, but the truth is that a rising U.S. dollar puts an incredible amount of stress on emerging markets all around the globe. Since the last financial crisis, many of these emerging markets have been on a massive debt binge, and much of that debt was denominated in U.S. dollars. Now that the dollar has increased in value, emerging market borrowers are finding that it takes much more of their own local currencies to service and pay back those debts. Defaults are rapidly rising, and emerging market economies all over the world (such as Brazil) have already plunged into recession.

If the Fed does follow through with an interest rate hike in December, that is going to make things even worse. The U.S. dollar will surge even more, and emerging markets will be in even more trouble.

At the same time that the dollar is getting stronger, the euro is getting weaker. An article that was posted by CNBC on Wednesday went so far as to state that “it is now looking like the euro reaching parity with the greenback is all but guaranteed”…

The prospect of the Fed hiking interest rates in December has pushed the dollar higher, and it is now looking like the euro reaching parity with the greenback is all but guaranteed.

Strategists, however, disagree on how quickly that will happen and how much more the dollar can appreciate in the near term. That depends, they say, on the Fed, and how fast it will raise interest rates in a world where other central banks are moving in the opposite direction toward easier policy.

Goldman Sachs analysts this week reiterated that they expect euro parity with the dollar by year-end though other strategists expect the decline in the common currency against the dollar to take longer.

Let’s see, who has been warning that this would happen for more than a year? Here are just a few examples…

July 19th: “For a long time, I have been repeating my prediction that the euro would fall to parity with the U.S. dollar.”

June 28th: “As I have warned repeatedly, the euro is heading for parity with the U.S. dollar, and at some point it will drop below parity.”

May 25th: “As I have warned so many times before, the euro is headed for parity with the U.S. dollar, and then it is going to go below parity.”

In August 2014, just a little bit over a year ago, the EUR/USD was sitting above 1.30. At that time very few people out there would have ever imagined we would be talking about parity just a little more than a year later.

This is just the beginning of a time of great financial volatility. The things that we are going to witness in the months and years to come are going to be absolutely unprecedented. A massive global debt super-cycle is coming to an end, and the pain that this is going to mean for the global economy is almost too great to put into words.

Expert That Correctly Predicted Market Moves In July, August And September Says Stocks Will Crash In November

October 21, 2015October 21, 2015 by Michael

When someone is right over and over and over, eventually people start paying attention. Personally, I have learned to tune out the “forecasts” of most “economic experts” out there. As an attorney, I was trained to be skeptical, and I have found that most forecasts about what the financial markets are going to do are not worth the paper they are printed on. However, once in a while something comes along that really gets my attention. Over the past few days, I have seen a number of references to the remarkable forecasts of Bo Polny of Gold 2020 Forecast. In recent months he has correctly predicted that U.S. stocks would begin to drop in July, that there would be a huge plunge in August and that that the month of September would be rather uneventful. Now he is saying that he expects “November to be a complete meltdown on the U.S. and world markets”. Just because he has been right in the past does not guarantee that he will be correct this time around, but lots of people (like me) are starting to pay attention.

So how does Polny come to his conclusions? Well, he uses something that most of us hated when we were in school – mathematics. The following comes from the Daily Sheeple…

Cyclical analyst Bo Polny of Gold 2020 Forecast utilizes advanced mathematical formulas and years of cyclical analysis to make forecasts about global stock markets. In late July he noted that U.S. stock markets had hit a top and that investors should prepare for a rapid down-move in the Dow Jones and other indexes. As we now know, that prediction has come to pass.

But while many on Wall Street panicked, Polny noted that the crash was not yet imminent and that the month of September would be relatively calm, with no major moves up or down forecast to occur. Once again, his analysis proved accurate.

I want to stress that I do not know if he will be right this time around. When trying to forecast the future of the markets, there are thousands of moving pieces, and many of them cannot be accounted for easily. But without a doubt the markets are perfectly primed for a major crash, so it would not surprise me in the least if he did turn out to be correct.

And as I mentioned above, Polny does have a solid track record of accuracy…

*****

Bo’s model appears to have an impressive track record of accurate predictions, including the following:

Price of gold reaching $1900 in 2011
China’s stock market peak in April 2015
Hong Kong market peak on April 29 2015
U.S. stock market drop beginning in July 2015
Sharp drop in the stop market in August 2015
U.S. stock market uneventful in September 2015

*****

If Polny is right again this time, next month will be the most significant month for global financial markets since the crash of 2008. Here is more from Z3News…

*****

In an interview with Future Money Trends on October 17 2015, he made the following comments:

“Now we are expecting the next leg down on the U.S. and world markets on the dollar. What we are forecasting now is the lows of August are all going to break. They could break in the month of October yet, but we believe they will break no problem into November. We expect November to be a complete meltdown on the U.S. and world markets.”

He also posted the following statements on his website:

“If you thought the crash of August 2015 was bad; November 2015 is expected to usher in the START of the US Stock, Dollar, and Treasuries Market MELTDOWN!!!”

“The end of this year ushers in the start of an Economic Meltdown that is to last years! The U.S. Dollar, Treasuries, and Stock Market bomb is set to blow in November 2015!”

*****

Polny is projecting that stocks could ultimately fall by as much as 70 percent by the time it is all said and done. You can watch a full interview where he discusses these things right here.

Meanwhile, early signs of the kind of trouble that Polny is warning about continue to pop up.

On Wednesday, the stock price of one of the largest pharmaceutical companies in the world absolutely crashed after a report came out claiming that it was in danger of suffering the same fate as Enron…

Hedge fund darling Valeant Pharmaceuticals is getting hammered after short-selling-firm Citron Research published a report comparing it to Enron.

The Canadian drug company’s stock was last down about 25% at around $110. It had fallen as low as $88.50.

The stock has been popular among hedge funds.

It ranked No. 10 on Goldman Sachs’ stocks that “matter most” to hedge funds list for the second quarter. According to Goldman, 32 funds had the stock as one of their top-10 stock holdings.

And this week we learned that construction machinery giant Caterpillar has now reported global sales declines for 34 consecutive months. The following comes from Zero Hedge…

Most cats bounce at least once when they die, but not this one: after CAT posted its first annual drop in retail sales in December of 2012, it has failed to see a rise in retail sales even once.

In fact, since then Caterpillar has seen 34 consecutive months of declining global sales, and 11 consecutive months of double digit declines!

Those that assume that everything is going to be “just fine” now that we have gotten past September are going to be dead wrong.

Whether it happens in November or not, the kind of chaotic financial collapse that Bo Polny is warning about will happen.

And of course factors that he is unable to account for such as war, terror attacks and major natural disasters could greatly accelerate things.

Once again, I don’t know if everything that Bo Polny is saying is going to turn out to be 100% accurate or not. I am just reporting what he is saying. But it is true that what he is forecasting fits very well with what I have been warning my readers about for months and months.

A day of reckoning is most definitely coming for global financial markets.

Will it happen in November?

Stay tuned…

Stock Market Crash October 2015? 9 Of The 16 Largest Crashes In History Have Come This Month

October 4, 2015October 5, 2015 by Michael

The worst stock market crashes in U.S. history have come during the month of October. There is just something about this time of the year that seems to be conducive to financial panic. For example, on October 28th, 1929 the biggest stock market crash in U.S. history up until that time helped usher in the Great Depression of the 1930s. And the largest percentage crash in the history of the Dow Jones Industrial Average by a very wide margin happened on October 19th, 1987. Overall, 9 of the 16 largest single day percentage crashes that we have ever seen happened during the month of October. Of course that does not mean that something will happen this October, but after what we just witnessed in September we should all be on alert.

Clearly, there is a tremendous amount of momentum toward the downside right now. As you can see from the chart below, all of the gains for the Dow since the end of the 2013 calendar year have already been wiped out…

And as I wrote about just the other day, last quarter we witnessed the loss of 11 trillion dollars in “paper wealth” on stock markets all over the planet. The following comes from Justin Spittler…

The S&P 500 fell 8%… and so did the Dow and the NASDAQ. It was the worst quarter for U.S. stocks since 2011.

Stocks around the world dropped too. The MSCI All-Country World Index, which tracks 85% of global stocks, also had its worst quarter since 2011. The STOXX Europe 600 Index, which tracks 600 of Europe’s largest companies, fell 10%. It was the worst quarter for European stocks since 2011 as well.

China’s Shanghai Composite fell 28% last quarter, its largest quarterly decline in seven years. The MSCI Emerging Markets Index fell 19%. It was the worst quarterly decline for emerging market stocks in four years.

In total, last quarter’s selloff erased nearly $11 trillion in value from stocks around the world.

Sadly, the mainstream media is assuring everyone that things are going to be just fine, and a lot of people on the Internet seem to have the attitude that “nothing is happening“. Just like in 1929, a brief period of stabilization after the initial fall has lulled many into a false sense of security. The following comes from Zero Hedge…

Just as in 1929, the market was performing fantastic and the continuous wealth increase seemed to be unstoppable. A short 10% correction was seen as ‘healthy’ and soon a new uptrend was starting (the green line). This is exactly the same scenario we saw in the past few weeks. Market commenters said the 10% drop in the Dow Jones was a ‘healthy correction’ and we’re on our way to the next uptrend and Christmas rally.

Most people seem to assume that since I run a website called “The Economic Collapse Blog” that I must be rooting for a stock market collapse and an economic implosion, but that is not true at all. The longer that the financial markets can hold together, the longer all of our lives can stay quiet, peaceful and “normal”. Once the chaos begins, all of our lives will change dramatically. No matter how much any of us have prepared, what is coming is going to deeply affect all of us at least to a certain degree.

It would be far better for me, my extended family and my friends if I am wrong about an imminent financial collapse. Most of the people that I personally know are not even close to ready for what is coming. And during the coming credit crunch it is inevitable that people that I personally know will lose jobs and suffer business setbacks.

Sadly, the truth is that life in America is never going to be any better than it is right now. At some point, this stock market bubble will fully implode. At some point, our debt-fueled prosperity will disappear. At some point, the extraordinary recklessness of the big banks will catch up with them in a major way.

As we witnessed in 2008, our financial system is not designed to handle a severe bear market. We should have learned some very hard lessons from the last time around, but we didn’t. Instead, our financial system is even more vulnerable to a crisis today than it was back then. A huge turn down by the financial markets will rip many of our top financial companies to shreds. So a bear market would be extremely bad news, but unfortunately many prominent analysts seem to believe that this is precisely what we are now facing…

Jim Cramer, the ex-hedge fund manager and host of CNBC’s show “Mad Money,” has been vocal recently on air, saying repeatedly that he doesn’t like the market now, and last week said “we have a first-class bear market going.” Similarly, Gary Kaltbaum, president of Kaltbaum Capital Management, has been sending out notes to clients and this newspaper for weeks, saying the poor price action of the stock market and many hard-hit sectors, such as energy and the recently clobbered biotech sector, has all the earmarks of a bear market. Over the weekend, Kaltbaum said: “We remain in a worldwide bear market for stocks.”

On the way up, all of the extreme risk-taking didn’t seem to matter much because everyone was making a lot of money.

But on the way down, all of the extreme risk-taking is just going to accelerate the collapse.

Personally, I do not know exactly what will happen over the next few weeks, but without a doubt I have a very bad feeling about the rest of this year.

What about you?

What do you think will happen?

Please feel free to add to the discussion by posting a comment below…

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