Stock Market Crash

If History Is Any Indication, Junk Bonds And Copper Are Telling Us Exactly Where Stocks Are Heading Next

August 18, 2015August 18, 2015 by Michael

Yields on the riskiest junk bonds are absolutely soaring and the price of copper just hit a fresh six year low. To most people, those pieces of financial news are meaningless. But if you understand history, and you are aware of the patterns that immediately preceded previous stock market crashes, then you know how how huge both of those signs are. During the summer of 2008, junk bond prices absolutely cratered as junk bond yields skyrocketed. This was a very clear signal that financial markets were about to crash, and sure enough a couple of months later it happened. Now the exact same thing is happening again. The following comes from a Wall Street On Parade article that was posted on Tuesday entitled “Keep Your Eye on Junk Bonds: They’re Starting to Behave Like ‘08“…

According to data from Bloomberg, corporations have issued a stunning $9.3 trillion in bonds since the beginning of 2009. The major beneficiary of this debt binge has been the stock market rather than investment in modernizing the plant, equipment or new hires to make the company more competitive for the future. Bond proceeds frequently ended up buying back shares or boosting dividends, thus elevating the stock market on the back of heavier debt levels on corporate balance sheets.

Now, with commodity prices resuming their plunge and currency wars spreading, concerns of financial contagion are back in the markets and spreads on corporate bonds versus safer, more liquid instruments like U.S. Treasury notes, are widening in a fashion similar to the warning signs heading into the 2008 crash. The $2.2 trillion junk bond market (high-yield) as well as the investment grade market have seen spreads widen as outflows from Exchange Traded Funds (ETFs) and bond funds pick up steam.

And right now we are seeing the most volatility in the junkiest of the junk bonds.

The following comes from Wolf Richter, and my jaw just about dropped to the floor when I first saw this…

This chart of yields at the riskiest end of the junk bond market – bonds rated CCC and below – shows what happened. These bonds have been selling off over the past 12 months, with exception of the sucker rally earlier this year, and their yields more than doubled from less than 7.9% in June a year ago to 16.2% by Thursday evening. And Thursday was a massacre:

On Thursday, yields jumped 2.6 percentage points, from 13.58% to 16.18%, as these junk bonds plunged. Those kinds of single-day vertigo-inducing sell-offs are rare in normal times, and there haven’t been any since the Financial Crisis.

Amazingly, the Federal Reserve is actually thinking about raising interest rates in this environment.

If that sounds like a really bad idea to you, that is because it is a really bad idea.

Raising interest rates would just add fuel to the fire of this junk bond rout. DoubleLine Capital’s co-founder Jeffrey Gundlach agrees with me…

“To raise interest rates when junk bonds are nearly at a four-year low is a bad idea,” Gundlach said in a telephone interview.

Gundlach, widely followed for his prescient investment calls, said if the Fed begins raising interest rates in September, “it opens the lid on Pandora’s Box of a tightening cycle.”

Gundlach said the selling pressure in copper and commodity prices driven by worries over China’s growth outlook “should be a huge concern. It is the second-biggest economy in the world.”

Meanwhile, as Gundlach mentioned, the price of copper continues to plunge.

On Tuesday, it set a brand new six year low. It is now the lowest that it has been since the days of the last financial crisis.

And as you can see from this excerpt from a recent Investment Research Dynamics article, the price of copper started crashing before the stock market crash of 2008…

I wanted to keep this simple and just look at what is considered perhaps the best barometer of global economic activity:

You’ll note that the price of copper is headed lower and is back to the price level where it was in the middle of 2008, right before the great financial collapse. You’ll note that $3.6 trillion in Federal Reserve money printing – on top of trillions in Bank of Japan, ECB and People’s Bank of China money printing – has not been able to keep the price of copper from crashing again.

In case you haven’t figured it out by now, the global financial system is in real trouble.

Another sign that rough waters are ahead is the fact that global shipping has fallen into a dramatic slump. The following comes from the Telegraph…

World shipping has fallen into a deep slump over the late summer, dashing hopes of a quick recovery from the global trade recession earlier this year and heightening fears that the six-year economic expansion may be on its last legs.

Freight rates for container shipping from Asia to Europe fell by over 20pc in the second week of August, even though trade volumes should be picking up at this time of the year. The Shanghai Containerized Freight Index (SCFI) for routes to north European ports crashed by 23pc in five trading days.

Global economic activity is clearly slowing down, and there are 23 nations around the planet that are already experiencing stock market crashes.

The financial markets of the western world have not totally crashed just yet, but they are more leveraged and more vulnerable than ever. The following comes from Zero Hedge…

The REAL problem for the financial system is the bond bubble. In 2008 when the crisis hit it was $80 trillion. It has since grown to over $100 trillion.
The derivatives market that uses this bond bubble as collateral is over $555 trillion in size.
Many of the large multinational corporations, sovereign governments, and even municipalities have used derivatives to fake earnings and hide debt. NO ONE knows to what degree this has been the case, but given that 20% of corporate CFOs have admitted to faking earnings in the past, it’s likely a significant amount.
Corporations today are more leveraged than they were in 2007. As Stanley Druckenmiller noted recently, in 2007 corporate bonds were $3.5 trillion… today they are $7 trillion: an amount equal to nearly 50% of US GDP.
The Central Banks are now all leveraged at levels greater than or equal to where Lehman Brothers was when it imploded. The Fed is leveraged at 78 to 1. The ECB is leveraged at over 26 to 1. Lehman Brothers was leveraged at 30 to 1.
The Central Banks have no idea how to exit their strategies. Fed minutes released from 2009 show Janet Yellen was worried about how to exit when the Fed’s balance sheet was $1.3 trillion (back in 2009). Today it’s over $4.5 trillion.

As I explained during a recent interview with Kate Dalley of Fox News radio, what is coming should be obvious to anyone that is willing to look at the numbers honestly.

The global financial system is going to crash.

Yes, this crisis is going to take years to fully play out, but by the time it is all said and done it is going to be much worse than what we experienced back in 2008 and 2009.

So buckle up tight and hold on for your life, because we are in for one wild ride.

23 Nations Around The World Where Stock Market Crashes Are Already Happening

August 17, 2015August 17, 2015 by Michael

You can stop waiting for a global financial crisis to happen. The truth is that one is happening right now. All over the world, stock markets are already crashing. Most of these stock market crashes are occurring in nations that are known as “emerging markets”. In recent years, developing countries in Asia, South America and Africa loaded up on lots of cheap loans that were denominated in U.S. dollars. But now that the U.S. dollar has been surging, those borrowers are finding that it takes much more of their own local currencies to service those loans. At the same time, prices are crashing for many of the commodities that those countries export. The exact same kind of double whammy caused the Latin American debt crisis of the 1980s and the Asian financial crisis of the 1990s.

As you read this article, almost every single stock market in the world is down significantly from a record high that was set either earlier this year or late in 2014. But even though stocks have been sliding in the western world, they haven’t completely collapsed just yet.

In much of the developing world, it is a very different story. Emerging market currencies are crashing hard, recessions are starting, and equity prices are getting absolutely hammered.

Posted below is a list that I put together of 23 nations around the world where stock market crashes are already happening. To see the stock market chart for each country, just click the link…

1. Malaysia

2. Brazil

3. Egypt

4. China

5. Indonesia

6. South Korea

7. Turkey

8. Chile

9. Colombia

10. Peru

11. Bulgaria

12. Greece

13. Poland

14. Serbia

15. Slovenia

16. Ukraine

17. Ghana

18. Kenya

19. Morocco

20. Nigeria

21. Singapore

22. Taiwan

23. Thailand

Of course this is just the beginning. The western world is going to feel this kind of pain as well very soon. I want to share with you an excerpt from an article that just appeared in the Telegraph entitled “Doomsday clock for global market crash strikes one minute to midnight as central banks lose control“. You see, the Telegraph is not just one of the most important newspapers in the UK – it is truly one of the most important newspapers in the entire world. When it speaks on financial matters, millions of people listen very carefully. So for the Telegraph to declare that the countdown to a “global market crash” is “one minute to midnight” is a very, very big deal…

When the banking crisis crippled global markets seven years ago, central bankers stepped in as lenders of last resort. Profligate private-sector loans were moved on to the public-sector balance sheet and vast money-printing gave the global economy room to heal.

Time is now rapidly running out. From China to Brazil, the central banks have lost control and at the same time the global economy is grinding to a halt. It is only a matter of time before stock markets collapse under the weight of their lofty expectations and record valuations.

I encourage you to read the rest of that excellent article right here. It contains lots of charts and graphs, and it discusses many of the exact same things that I have been hammering on for months.

When one of the newspapers of record for the entire planet starts sounding exactly like The Economic Collapse Blog, then you know that it is late in the game.

Others are sounding the alarm about an imminent global financial crash as well. For example, just consider what Egon von Greyerz recently told King World News…

Eric, I fear that this coming September – October all hell will break loose in the world economy and markets. A lot of factors point to that, both fundamental and technical indicators and this indicates that we could have a number of shocks this autumn.

Sadly, most investors will hold stocks, bonds and property and will see any decline in value as an opportunity. It will be a long time and a very big fall before they realize that the system will not help them this time because the central bankers have run out of ammunition to save the global financial system one more time. Yes, we will see more massive money printing, but it will just make things worse. And at some stage, which could be quite soon, real fear will set in, a fear of a magnitude the world has not experienced before.

Hmm – there is another example of someone talking about September. It is funny how often that month keeps coming up.

And of course most of the major stock market crashes in U.S. history have been in the fall. Just go back and take a look at what happened in 1929, 1987, 2001 and 2008.

The “smart money” has been pulling their money out of stocks for quite a while now, and at this point a lot of others have hopped on the bandwagon. The following comes from CNBC…

The flight of investor money from U.S. stocks has turned into a stampede.

In fact, the $78.7 billion leaving domestic equity-focused funds has been worse in 2015 than it was even during the financial crisis years, when the S&P 500 tumbled some 60 percent, according to data released Friday by Morningstar. The total is the highest since 1993.

Domestic equity funds surrendered $20.4 billion in July alone and have seen $158.6 billion in redemptions over the past 12 months. Even a strong flow of money into passively managed exchange-traded funds has been unable to offset the stream to the exit among retail investors, who generally focus more on mutual funds than ETFs.

A global financial crisis has already begun.

So those that were claiming that one would not happen in 2015 are already wrong.

Over the coming months we will find out how bad it will ultimately be.

Sometimes I get criticized for talking about these things. There are a few people out there that don’t like all of the “doom and gloom” that I discuss on my website. Apparently it is a bad thing to talk about the things that really matter and we should all just be “keeping up with the Kardashians” instead.

I consider myself just to be another watchman on the wall. From our spots on the wall, watchmen such as myself all over the nation are sounding the alarm about what we clearly see coming.

If we saw what was coming and we did not warn the people, their blood would be on our hands. But if we do warn the people, then we have done our duty.

Every day I just do the best that I can with what I have been given. And there are many others just like me that are doing exactly the same thing.

Those that do not like the warning message are going to feel really stupid when things start falling apart all around them and they finally realize how wrong they truly were.

A Death Cross, Wild Market Swings And A Currency War – And We Haven’t Even Gotten To September Yet

August 12, 2015August 12, 2015 by Michael

Things continue to line up in textbook fashion for a major financial crisis by the end of 2015. This week, Wall Street has been buzzing about the first “death cross” that we have seen for the Dow since 2011. When the 50-day moving average moves below the 200-day moving average, that is a very important psychological moment for the market. And just like during the run up to the stock market crash of 2008, we are starting to witness lots of wild swings up and down. The Dow was up more than 200 points on Monday, the Dow was down more than 200 points on Tuesday, and it took a nearly 700 point roundtrip on Wednesday. This is exactly the type of behavior that we would expect to see during the weeks or months leading up to a crash. As any good sailor will tell you, when the waters start getting very choppy that is not a good sign. Of course what China is doing is certainly not helping matters. On Wednesday, the Chinese devalued the yuan for a second day in a row, and many believe that a new “currency war” has now begun.

So what does all of this mean?

Does this mean that the time of financial “shaking” has now arrived?

Let’s start with what is happening to the Dow. When the 50-day moving average crosses over the 200-day moving average, it is a very powerful signal. For example, as Business Insider has pointed out, if you would have got into stocks when the 50-day moving average moved above the 200-day moving average in December 2011, you would have experienced a gain of 43 percent by now…

The Dow Jones Industrial Average has been on an unrelenting upward trajectory since its October 2011 low.

The signal that convinced many traders that the market was now moving with a bullish bias was when the 50-day moving average of the index price rose above the 200-day moving average a couple of months later at the end of December.

Since then the market rallied 6,200 points to a high of 18,333 before pulling back to last night’s close of 17,404. That’s a gain of around 43% even though the market is 5% off its high.

But now a cross is happening in the other direction. That is why it is called a “death cross”. It is quite understandable why a lot of investors are freaking out about the fact that the 50-day moving average has moved below the 200-day moving average for the first time in four years. Every major stock market in history has been preceded by a death cross.

Of course no indicator is perfect. Sometimes these death crosses come just before market crashes, and other times nothing much seems to happen. The following comes from MarketWatch…

The 50-day moving average (or “MA”) crossed below a rising 200-day MA on July 7, 2010, when the Dow closed at 10,018.28. The Dow’s closing low for 2010 was actually hit two sessions earlier, at 9,686.48.

But the Dow fell another 5.9% over six weeks after the Aug. 24, 2011 death cross, and tumbled as much as 50% over 14 months after the one appearing on Jan. 3, 2008.

And keep in mind that when the January 2008 death cross appeared, the Dow had lost just 7.8% from its Oct. 9, 2007 peak. That means the bull market was still firmly in place, as the rule of thumb is a bear market is defined by a decline of at least 20% from a significant peak. In addition, the 200-day moving average didn’t turn lower until two weeks after the death cross appeared.

But this is not the only indicator pointing to trouble ahead. Even while we have many stocks hitting 52-week highs, we also have an extraordinary number hitting 52-week lows. This is called a “split market”, and this is a very ominous sign. In fact, according to Peter Boockvar 62 percent of all stocks on the New York Stock Exchange are already trading below their 200-day moving average…

Peter Boockvar, market strategist at Lindsey Group, said he believes the market is in a correction that began a few weeks ago, starting with commodities names getting hit. The small-cap Russell 2000 was also a leader of the declines. “The key is it’s infecting other areas of the market. You have every headwind and every reason to continue this correction,” he said.

“Going into today, 62 percent of the NYSE stocks were trading below the 200-day moving average,” said Boockvar. “More and more companies are dropping out of the bull market.”

At this point, we have already had more than 50 “split days” this year. King World News has just released an article which has pointed out this has only happened four times before, and a major stock market crash has followed each occurrence…

The only other times in history we’ve seen more than 50 split days during the past year were March 1968, August 1972, October 2000 and July 2006.

After all four of those, stocks lost more than a third of their value at some point during the next two years.

Are you starting to see?

A stock market crash is coming.

Another thing that has investors concerned is the fact that we have seen a large divergence between high yield credit and stocks. As Bloomberg has pointed out, when this happens a significant stock market decline follows more than 70 percent of the time…

While not without precedent, instances when anxiety in bonds didn’t seep into equities are rare. More than 70 percent of the time since 1996, as spreads widened as much as they have since April, the S&P 500 has fallen, with the average decline exceeding 10 percent, data compiled by Bloomberg show.

“This is something that sooner or later is going to impact the stock market,” said Russ Koesterich, global chief investment strategist at New York-based BlackRock Inc., which oversees $4.7 trillion. “Credit market conditions have not been benign and easy as where they were last summer.”

On top of everything else, it looks like a global currency war could be erupting.

According to USA Today, this desperate move by China to devalue the yuan may indicate that the Chinese economy is in far worse shape than most had thought…

One, China’s move suggests that its economy is in worst shape than believed. “It highlights the fragility of the global economy,” says Donald Luskin, chief investment officer at TrendMacro. Second, a weaker yuan means a stronger dollar, and a stronger dollar means U.S. products sold in China are more expensive, which means fewer sales of Apple iPhones, hotel rooms offered by Wynn Resorts and computer chips made by Micron Technology.

Lastly, there is a fear that other nations will respond to China by devaluing their own currencies to stay competitive.

“When people start talking about ‘currency wars,’ it’s never a good thing,” says Michael Farr, president of money-management firm Farr, Miller & Washington. “China’s move to devalue its currency could be the first shot across the bow towards a wider currency war.”

As I discussed yesterday, it seems like the phrase “currency war” has been thrown around a lot lately.

But what would that look like, and what would that mean for the global economy?

Well, former IMF economist Stephen Jen is suggesting that we could soon see major currencies all over the planet being devalued by up to 50 percent…

[The] devaluation of the yuan risks a new round of competitive easing that may send currencies from Brazil’s real to Indonesia’s rupiah tumbling by an average 30 percent to 50 percent in the next nine months, according to investor and former International Monetary Fund economist Stephen Jen.

Volatility measures were already signaling rising distress in emerging markets even before China’s shock move. An index of anticipated price swings climbed above a rich-world gauge at the end of July, reversing the trend seen for most of the past six months.

The surging U.S. dollar combined with crashing prices for commodity exports has already created a state of crisis in South America. If emerging markets such as Brazil are forced to devalue their currencies to stay competitive with nations such as China, that is going to just exacerbate the problems.

For a long time, things in the financial world were pretty quiet.

But now events are beginning to accelerate.

A lot of people are extremely concerned about what is going to happen in September, and I think that there are very good reasons to be concerned.

Throughout our history, the majority of our stock market crashes have happened in the fall. Just remember what happened in 1929, 1987 and 2008.

Now we are approaching that time of the year once again, and things are lining up perfectly for a major financial crisis.

So what do you personally think will happen? Please feel free to join the discussion by posting a comment below…

Gerald Celente Is Predicting That A Stock Market Crash Will Happen By The End Of 2015

August 9, 2015August 9, 2015 by Michael

Gerald Celente of the Trends Research Institute has just gone on the record with a prediction that there will be a stock market crash by the end of this calendar year. If you are not familiar with Gerald Celente, he is one of the most highly respected trends forecasters in the entire world. He has been featured on CNN, The Oprah Winfrey Show, The Today Show, Good Morning America, CBS Morning News, NBC Nightly News and Coast to Coast AM. Personally, I have a lot of respect for him. While it is true that not every single one of his forecasts about the future came to pass over the years, he does have a very solid track record that goes back for decades. He correctly predicted the 1987 stock market crash, the bursting of the dotcom bubble and the financial panic of 2008. Just a couple of days ago, he told Eric King the following: “I’m now predicting that we are going to see a global stock market crash before the end of the year.” Celente says that it won’t just be U.S. stocks either. He believes that crashes are also coming to “the DAX, the FTSE, the CAC, Shanghai, and the Nikkei”. It other words, it is going to be a truly global financial crisis and he says that there is “going to be panic on the streets from Wall Street to Shanghai and from the UK down to Brazil”.

When you go out on a limb like this, you are putting your credibility on the line. This is something that Celente has only done a few times in the past, and normally he has been spot on…

Rarely do I ever put a date on market crashes. I did it in 1987 when I forecast the 1987 stock market crash — that was in the Wall Street Journal. I also forecast the ‘Panic of 2008,’ and the ‘dot-com bust’ in October of 1999, when I said it (the dot-com mania) would fail in the second quarter of 2000…

Of course Celente is far from alone. Many others have also been warning that a new financial crisis is imminent.

For instance, just check out what David Stockman recently told CNBC…

David Stockman has long warned that the stock market is on the verge of a massive collapse, and the recent price action has him even more convinced than ever that the bottom is about to fall out.

“I think it’s pretty obvious that the top is in,” the Reagan administration’s OMB director said Thursday on CNBC’s “Futures Now.” The S&P 500 has traded in a historically narrow range for the better part of 2015, having moved just 1 percent higher year to date. “It’s just waiting for the knee-jerk bulls, robo traders and dip buyers to finally capitulate.”

Stockman, whose past claims have yet to come to fruition, still believes that the excessive monetary policy from central banks around the world has created a “debt supernova,” and all the signs point to “the end of the central bank enabled bubble,” which could cause a worldwide recession.

Just a few days ago, I authored an article entitled “8 Financial Experts That Are Warning That A Great Financial Crisis Is Imminent” which showed that a whole bunch of other financial experts are sounding the alarm about an implosion of the financial markets.

And before any of these warnings came out, I issued my “red alert” for the last six months of 2015 back on June 25th.

There is a growing consensus that something really, really bad is about to happen in the very near future.

You know that we are really late in the game when the mainstream media starts sounding exactly like The Economic Collapse Blog.

On July 22nd, I authored a piece entitled “Commodities Collapsed Just Before The Last Stock Market Crash – So Guess What Is Happening Right Now?”

Now compare that headline to this recent one from Bloomberg: “Commodities Are Crashing Like It’s 2008 All Over Again“.

The mainstream media is starting to get it. The exact same patterns that we witnessed just prior to the last financial crisis are playing out once again right before our very eyes. Here is an excerpt from that Bloomberg article…

Attention commodities investors: Welcome back to 2008!

The meltdown has pushed as many commodities into bear markets as there were in the month after the collapse of Lehman Brothers Holdings Inc., which spurred the worst financial crisis seven years ago since the Great Depression.

Eighteen of the 22 components in the Bloomberg Commodity Index have dropped at least 20 percent from recent closing highs, meeting the common definition of a bear market. That’s the same number as at the end of October 2008, when deepening financial turmoil sent global markets into a swoon.

This is the kind of stuff that I have been hammering on for weeks.

Another sign that we saw back in 2008 that is repeating once again is a substantial slowdown in global trade. Over the weekend, we got some more bad news on this front from China. The following comes from Zero Hedge…

Overnight we got another acute reminder of just who is lying hunched over, comatose in the driver’s seat of global commerce: the country whose July exports just crashed by 8.3% Y/Y (and down 3.6% from the month before) far greater than the consensus estimate of only a 1.5% drop, and the biggest drop in four months following the modest June rebound by 2.8%: China.

It wasn’t just exports, imports tumbled as well by 8.1%, fractionally worse than the -8.0% consensus, and down from the -6.1% in June as China’s commodity tolling operations are suddenly mothballed.

The crisis that so many have been waiting for is here.

As the coming weeks and months play out, there will be good days and there will be bad days. Remember, some of the biggest one day gains in U.S. stock market history happened right in the middle of the financial crisis of 2008. So don’t get fooled by what happens on any one particular day.

Also, please do not think that this crisis will be “over” by the end of 2015. What we are moving into is just the start of the crisis. Things will continue to unravel as we move into 2016 and beyond. The recession that we experienced back in 2008 and 2009 will seem like a Sunday picnic compared to what is coming by the time that everything is all said and done.

So that is why I work so hard to encourage people to get prepared.

What we are facing is not going to last for weeks or for months.

The coming crisis is going to last for years, and it is going to be painful beyond what most people would dare to imagine.

The Dow Has Already Fallen Nearly 900 Points From The Peak Of The Market

August 6, 2015August 6, 2015 by Michael

In an eerie repeat of what we witnessed in 2008, U.S. stocks are steadily sliding throughout the summer as we head toward the month of September. From August 1st, 2008 to September 1st, 2008 the Dow fell by nearly 700 points. And of course we all remember what happened the following month. Right now, we are watching a similar thing happen. The Dow has plummeted nearly 700 points since July 16th, and it is down nearly 900 points from the peak of the market back in May. At this point the Dow has now fallen for six days in a row and eleven of the last thirteen. Of course most of the talking heads on television are still insisting that everything is going to be just fine and that a repeat of 2008 is not possible. So what do you think? Should we trust them?

Personally, I find that I put a lot more faith in cold, hard numbers than in what the talking heads on television have to say. And at this moment, the cold, hard numbers are telling us that another financial crisis in imminent.

This is one of the reasons why I am such a fan of Zero Hedge. Nobody stays on top of the hard financial numbers like Zero Hedge does. And according to Zero Hedge, market internals are absolutely screaming that a U.S. stock market crash is right around the corner…

In early 2007, market internals began to weaken dramatically. Talking heads and asset gatherers said fears were overblown, risk was contained, Fed has it under control, stay the course. Six months later, the equity markets began to collapse and then accelerated lower. Today, in an eery case of deja vu all over again, it has been six months now since US equity market internals began to decouple from the manipulated index levels that manufacture wealth and happiness across America… what would you do?

Here is the chart that immediately followed that paragraph. As you can see, we are repeating the exact same pattern that we witnessed back during the last financial crisis…

Meanwhile, the second largest stock market in the world is already crashing. The Chinese have spent approximately 1.3 trillion dollars propping up stocks in China, but they just continue to fall. They were down again on Wednesday night, and nobody is quite sure when the carnage is going to end.

And remember, Chinese stocks started to crash before U.S. stocks did in 2008 as well.

Another eerie similarity to 2008 is the behavior of oil. In the summer of 2008, the price of oil crashed hard, and then a stock crash followed a couple of months later.

Well, guess what?

The price of oil is crashing hard once again. The following comes from CNBC…

Oil set multi-month lows on Thursday as investors and traders sought clues about the market’s next bottom after a large drop in U.S. crude inventories failed to boost prices.

A bigger-than-expected build in U.S. gasoline stockpiles last week proved more important to investors than crude storage numbers that came in three times below forecast on Wednesday.

U.S. crude was down 50 cents at $44.65 a barrel at 1:30 p.m. EDT (1730 GMT), after touching a 4½ month bottom at $44.20.

Why can’t more people see the signs?

They are so obvious.

We are also getting indications that the real economy is starting to be affected by all of this chaos. The mainstream media has been very quiet about this, but the number of job cuts just hit a four year high…

Challenger, Gray & Christmas has released its monthly job cuts for July, and it is ugly. The 105,696 job cuts was the highest number since 2011. To put this in perspective, the July job cuts total is a whopping 136% higher than the 44,842 job cuts reported in June, as well as 125% higher than the in same report a year ago.

The July report showed that the last time more than 100,000 job cuts were announced was back in September 2011, when there were some 115,730 layoffs.

Another bad trend is that July’s surge now brings the year-to-date job cuts up to a total of 393,368. That is 34% higher than the run rate for the same period in 2014.

If alarm bells are going off in your head right now, that is good, because they should be.

A 34 percent increase in job cuts is not a good thing.

Of course it would probably help if the Obama administration was not bringing in far more immigrant workers than the limits that have been officially set by Congress. Just check out these numbers…

In written responses to the Senate Judiciary Immigration and the National Interest Subcommittee Republicans obtained by Breitbart News, U.S. Citizenship and Immigration Services reveal that the Obama administration has been approving work authorizations for immigrants beyond admission limits and for some categories of immigrants that Congress never intended to work in the U.S.

Beyond those limits each year, these new and renewed work permit approvals amounted to about 1.23 million in fiscal year 2009, 1.08 million in FY 2010, 970,277 in FY 2011, 1.24 million in FY 2012, 1.68 million in FY 2013 and 1.24 million in FY 2014.

Also, this is the first time that imports and exports have both been declining on a year over year basis since the last recession. Just check out this chart and this chart.

When imports and exports are both falling, that means that economic activity is slowing down. And we are seeing a similar thing happen all over the planet. At this point, global trade has fallen by a total of about 2 percent over the past six months.

Are you starting to get the picture?

Just like in the summer of 2008, global economic activity is diminishing and things in the financial world are lining up in textbook fashion for a major crisis.

But for those that are not convinced by now, there is not that much more that I can do. I could keep throwing out numbers and charts and graphs, but if people refuse to see the truth they simply will not see it.

Less than a month from now, we will officially be in the danger zone.

September is coming, and I truly hope that you are already prepared for it.

You Can Add Iraq And Ukraine To The List Of Economies That Are Collapsing

August 5, 2015August 5, 2015 by Michael

The list of nations around the globe that have collapsing economies just continues to grow. In recent weeks I have written about the ongoing saga in Greece, the stock market crash in China, the debt crisis in Puerto Rico and the economic meltdown in South America. But there are more economic flashpoints that I have not even addressed yet. For example, did you know that a full-blown economic collapse is happening in Iraq right now? And did you know that the economy of Ukraine is contracting rapidly and that it cannot pay its debts? Back in 2008, the financial crisis was primarily centered on the United States, but this time around it is turning out to be a truly global phenomenon.

When the U.S. “liberated” Iraq, the future for that nation was supposed to be incredibly bright. But instead, things have just gone from bad to worse. This has especially been true since we pulled our troops out and allowed ISIS to run buck wild. At this point unemployment in Iraq is at Great Depression levels, the economy is steadily contracting and government debt is spiraling wildly out of control…

But Iraq’s oil industry, and the government’s budget, is being squeezed by low oil prices. As a result, the nation’s finances are being hit hard: the market price is now half that needed to break even, expanding the budget deficit, forecast to return to balance until the rise of IS, to a projected 9% of GDP.

In the past, Iraq’s leaders approved budgets without seriously taking into account a drop in the price of oil. Now the severe revenue shortfall is forcing leaders to cut back on new investments. Russia’s Lukoil, Royal Dutch Shell, and Italy’s ENI are also cutting back, eyeing neighbouring Iran’s pending economic opening as a safer investment.

Despite improving its finances after the US troop withdrawal, the drop in oil prices and the rising costs of battling IS have pushed Iraq’s economy into a state of near-crisis. According to the IMF, the nation’s GDP shrank by 2.7% in 2014 and unemployment is estimated to be over 25%.

Things are even worse in another nation that was recently “liberated”. The new U.S.-friendly government in Ukraine was supposed to make things much better for average Ukrainians, but instead the economy is absolutely imploding…

The country’s GDP contracted by 6.8 percent last year, and is forecast to shrink by another 9 percent this year — a total loss of roughly 16 percent over two years.

Just like in much of southern Europe, the banks are absolutely overloaded with bad loans and the entire banking system is on the verge of total collapse. The following comes from a CNN article that was posted earlier this year…

Ukraine’s banking sector is one of the weakest parts of the economy. The key interest rates are the highest in 15 years, and experts estimate bad loans make up between one third and one half of all banking assets.

Over 40 banks have been declared bankrupt since the war began, with the country’s fourth largest lender, Delta Bank, going under earlier this week.

Just recently, the government of Ukraine declared that it could not pay its debts. We didn’t hear much about this in the United States, because the Obama administration wants us to believe that their policies over there are a success. But the truth is that Ukraine now needs a “debt restructuring deal” similar to what Greece has received in the past…

Progress between Ukraine and its creditors on a $19 billion restructuring may be losing momentum as a proposed high-level meeting was canceled amid further disagreements over terms.

Ukraine’s $2.6 billion of 2017 notes fell the most in a month after a person familiar with negotiations said a new offer put forward by Ukraine this week would be unacceptable to bondholders. Later on Wednesday, Ukraine’s Finance Ministry said that a Franklin Templeton-led creditor group should prepare an improved offer for meetings next week.

Speaking of Greece, things just continue to unravel over there. Earlier this week we witnessed the greatest one day stock market crash in Greek history, and there was more financial carnage on Wednesday. The following comes from the Economic Policy Journal…

For a second straight day, following the reopening of the Greek stock market, there were heavy losses in Greek banking stocks, with shares across the sector once again falling by about 30 percent, the bottom of their daily limit.

Bank of Piraeus and National Bank of Greece fell the most, falling by the daily limit of 30 percent t. Alpha Bank was 29.7 percent lower and Eurobank Ergasias lost 29.6 percent.

At this point you would have to be blind to not see what is happening.

A financial crisis is not just imminent – one is already starting to erupt all over the planet.

And none of us can say that we weren’t warned. In a recent piece, Bill Holter included a long list of ominous financial warnings that were issued over the past two years by either the IMF or the Bank for International Settlements…

July 2014 – BIS –BIS Issues Strong Warning on “Asset Bubbles”

July 2014 – IMF –Bloomberg: IMF Warns of Potential Risks to Global Growth

October 2014 – BIS –”No One Could Foresee this Coming”

October 2014 IMF Direct Blog — What Could Make $3.8 Trillion in global bonds go up in smoke?

October 2014 IMF Report –”Heat Wave”-Rising financial risk in the U.S.

***December 2014 – BIS –BIS Issues a new warning on markets

December 2014 – BIS —BIS Warnings on the U.S. Dollar

February 2015 – IMF – Shadow Banking — Another Warning from the IMF – This Time on “Shadow Banking”

March 2015 – Former IMF Peter Doyle – Don’t expect any warning on new crisis -Former IMF Peter Doyle: Don’t Expect any Early Warning from the IMF –

*** April 2015 IMF – Liquidity Shock –IMF Tells Regulators to Brace for Liquidity Shock

May 2015 BIS – Need New “Rules of the Game” –BIS: Time to Think about New Global Rules of the Game?

June 2015 BIS Credit Risk Report –BIS: New Credit Risk Management Report

June 2015 IMF (Jose Vinals) –IMF’s Vinals Says Central Banks May Have to be Market Makers

***BIS June 2015 (UK Telegraph) –The world is defenceless against the next financial crisis, warns BIS

July 2015 – IMF – Warns US the System is Still Vulnerable (no blog article) –IMF warns U.S.: Your financial system is (still) vulnerable

July 2015 – IMF – Warns Pension Funds Could Pose Systemic Risk (no blog article) –IMF warns pension funds could pose systemic risks to the US

Overall, there are currently 24 nations that are dealing with a major financial crisis right now, and there are another 14 nations that are right on the verge of one.

But even though a global financial crisis is already unfolding right in front of our eyes, there are people that come to my website every day and leave comments telling me that everything is going to be just fine.

So what do you think?

What do you believe the rest of this year will bring?

Please feel free to share your thoughts by posting a comment below…

An Expert That Correctly Called The Last Two Stock Market Crashes Is Now Predicting Another One

July 28, 2015July 28, 2015 by Michael

What I am about to share with you is quite stunning. A well-respected financial expert that correctly predicted the last two stock market crashes is now warning that we are right on the verge of the next one. John Hussman is a former professor of economics and international finance at the University of Michigan, and the information in his latest weekly market comment is staggering. Since 1970, there have only been a handful of times when a combination of market signals that Hussman uses have indicated that a major market peak has been reached. In 1972, 2000 and 2007 each of those peaks was followed by a dramatic stock market crash. Now, for the first time since the last financial crisis, all four of those signals appeared once again during the week of July 17th. If Hussman’s analysis is correct, this could very well mean that the next great stock market crash in the United States is imminent.

It was an excellent article by Jim Quinn of the Burning Platform that first alerted me to Hussman’s latest warning. If you don’t follow Quinn’s work already, you should, because it is excellent.

When someone is repeatedly correct about the financial markets, we should all start paying attention. Back in late 2007, Hussman warned us about what was coming in 2008, but most people did not listen.

Now he is sounding the alarm again. According to Hussman, when there is a confluence of four key market indicators, that tells us that the market has peaked and is in danger of crashing. The following comes from Newsmax…

He cited the metric among the indicators that foreshadowed declines after peaks in 1972, 2000 and 2007:

*Less than 27 percent of investment advisers polled by Investors Intelligence who say they are bearish.

*Valuations measured by the Shiller price-to-earnings ratio are greater than 18 times.

*Less than 60 percent of S&P 500 stocks above their 200-day moving averages.

*Record high on a weekly closing basis.

“The most recent warning was the week ended July 17, 2015,” Hussman said. “It’s often said that they don’t ring a bell at the top, and that’s true in many cycles. But it’s interesting that the same ‘ding’ has been heard at the most extreme peaks among them.”

It is quite rare for the market to set a new record high on a weekly closing basis and have more than 40 percent of stocks below their 200-day moving averages at the same time. That is why a confluence of all these factors is fairly uncommon. Hussman elaborated on this in his recent report…

The remaining signals (record high on a weekly closing basis, fewer than 27% bears, Shiller P/E greater than 18, fewer than 60% of S&P 500 stocks above their 200-day average), are shown below. What’s interesting about these warnings is how closely they identified the precise market peak of each cycle. Internal divergences have to be fairly extensive for the S&P 500 to register a fresh overvalued, overbullish new high with more than 40% of its component stocks already falling – it’s evidently a rare indication of a last hurrah. The 1972 warning occurred on November 17, 1972, only 7 weeks and less than 4% from the final high before the market lost half its value. The 2000 warning occurred the week of March 24, 2000, marking the exact weekly high of that bull run. The 2007 instance spanned two consecutive weekly closing highs: October 5 and October 12. The final daily high of the S&P 500 was October 9 – right in between. The most recent warning was the week ended July 17, 2015.

The following is the chart that immediately followed the paragraph in his report that you just read…

When I first took a look at that chart I could hardly believe it.

It appears that Hussman’s signals are able to indicate major stock market crashes with stunning precision.

And considering the fact that we just hit a new “ding” for the first time since the last financial crisis, what Hussman is saying is more than just a little bit ominous.

According to Hussman this is not just a recent phenomenon either. Even though advisory sentiment figures were not available back in 1929, he believes that his indicators would have given a signal that a market crash was imminent in August of that year as well…

Though advisory sentiment figures aren’t available prior to the mid-1960’s, imputed data suggest that additional instances likely include the two consecutive weeks of August 19, 1929 and August 26, 1929. We can infer unfavorable market internals in that instance because we know that cumulative NYSE breadth was declining for months before the 1929 high. The week of the exact market peak would also be included except that stocks closed down that week after registering a final high on September 3, 1929. Another likely instance, based on imputed sentiment data, is the week of November 10, 1961, which was immediately followed by a market swoon into June 1962.

Of course the past is the past, and what has happened in the past will not necessarily happen in the future.

So is Hussman wrong this time? With all of the other things that are happening in the financial world right now, I certainly would not bet against him.

Other financial professionals are concerned that a market crash could be imminent as well. The following comes from a piece authored by Andrew Adams…

More than 13% of stocks on the New York Stock Exchange are at 52-week lows, which is about 6 standard deviations above the average over the last three years (1.62%) and an extreme only seen one other time during said period (last October when the S&P 500 was percentage points away from a 10% correction).

This dichotomy has created what I believe to be the biggest question about the stock market right now – have we already experienced a stealth correction in the majority of stocks that will soon come to an end or will the market leaders finally succumb to the weight of the laggards and join in on the sell-off? The answer to this could end up being worth at least $2.2 trillion, which is how much money would essentially be wiped out of the stock market if we finally get the much-discussed 10% correction in the overall market (the total U.S. stock market capitalization was $22.5 trillion as of June 30, according to the Center for Research in Security Prices).

Sometimes, a picture is worth more than a thousand words. I could share many more quotes from the “experts” about why they are concerned about a potential stock market collapse, but instead I want to share with you a “bonus chart” that Zero Hedge posted on Tuesday…

Do you understand what that is saying?

In 2007 and 2008, junk bonds started crashing well before stocks did.

Now, we are witnessing a similar divergence. If a similar pattern holds up this time, stocks have a long, long way to fall.

Like Hussman and so many others, I believe that a stock market crash and a new financial crisis are imminent.

The month of August is usually a slow month in the financial world, so hopefully we can get through it without too much chaos. But once we roll into the months of September and October we will officially be in “the danger zone”.

Keep an eye on China, keep an eye on Europe, and keep listening for serious trouble at “too big to fail” banks all over the planet.

The next several months are going to be extremely significant, and we all need to be getting ready while we still can.

The Stock Market Will Start To Fall In July? The Dow Plummeted More Than 500 Points Last Week

July 26, 2015July 26, 2015 by Michael

Was last week a preview of things to come? There are quite a few people out there that believe that the stock market would begin to decline in July, and that appears to be precisely what is happening. Last week, the Dow Jones Industrial Average fell by more than 530 points. It was the biggest one week decline that we have seen so far in 2015, and some are suggesting that this could only be just the beginning. By just about any measurement that you might want to use, the stock market is overvalued. But we have been in this bubble for so long that many people have come to believe that this is “the new normal”. In fact, earlier today someone that I know dropped me a line and suggested that our financial overlords may be able to use the tools at their disposal to get this current bubble to persist indefinitely. Unfortunately, the truth is that no financial bubble ever lasts forever, and right now some very alarming things are starting to happen behind the scenes. Over the past couple of weeks, the smart money has been dumping stocks like crazy, and the lack of liquidity in the bond markets is beginning to become acute. Could it be possible that another great financial crisis is just around the corner?

Last week took a lot of investors by surprise. The following is how Zero Hedge summarized the carnage…

-Russell 2000 -3.1% – worst week since Oct 2014 (Bullard)
-Dow -2.8% – worst week since Dec 2014
-S&P -2.1% – worst week since Jan 2015
-Trannies -2.8% – worst week since Mar 2015
-Nasdaq -2.2% – worst week since Mar 2015

The talking heads on television were not quite sure what to make of this sudden downturn. On CNBC, analysts mainly blamed the usual suspects…

“I think the market’s very much concerned about the commodity (decline),” said John Lonski, chief economist at Moody’s. “The contraction in China manufacturing activity is gaining momentum and the credit market has yet to signal that rates are not about to go higher.”

He also noted a surprising decline in new home sales and continued lack of revenue growth in earnings. Nearly all the commodities are in a bear market and gold and crude settled at lows Friday.

“You’ve got some major growth concerns and that is what’s weighing on investors minds,” said Peter Boockvar, chief market strategist at The Lindsey Group.

And without a doubt, there are some new numbers that are deeply troubling for Wall Street. For example, it is being projected that S&P 500 companies will collectively report a 2.2 percent decline in earnings for the second quarter of 2015. If this comes to pass, it will be the first drop that we have seen since the third quarter of 2012.

The biggest reason for this decline in earnings is the implosion of U.S. energy companies due to the crash in oil prices. The following comes from CNBC…

Thanks to a collapse in the price of oil, the energy sector is slated to report a monster 54 percent drop in earnings and 28 percent swoon in revenue, compared to the second quarter in the year prior.

Hmm – unlike what so many others were saying initially, it turns out that the oil crash is bad for the U.S. economy after all.

But just like at this time of the year in 2008, most people fully expect that everything is going to be just fine. So many of the exact same patterns that we witnessed the last time around are playing out once again, and yet most of the “experts” refuse to see what is happening right in front of their eyes.

When things crash this time, it won’t just be stocks that collapse. As I have been writing about so frequently, we are also headed for an implosion of the bond markets as well. The following comes from Dr. David Eifrig…

In the U.S. Treasury securities market, financial-services giant JPMorgan Chase estimates that five years ago, you could move about $280 million worth of Treasury securities before your trades moved the market’s price. Now, that’s down to $80 million… a decline of more than 70%.

When a panic sets in, reduced liquidity can cause big swings in market prices.

There is that word “liquidity” again. This is something that I have repeatedly been taking about. Just check out this article from a little over a month ago. A bond is only worth what someone else is willing to pay for it, and if the market runs out of buyers that can cause seismic shifts in price very rapidly. Here is more from Eifrig…

In a run-of-the-mill bear market, you just have a downward trend… When enough investors are selling bonds, it drives down prices. Falling prices lead more investors to start selling. We see that all the time.

A liquidity crisis goes even further. It’s like a classic run on a bank… Without sufficient liquidity, the sellers don’t just see lower prices… they see no prices. Since no one wants to buy bonds at this particular time, the price for them effectively becomes zero.

There has been a lot of speculation about what will happen in the second half of 2015.

We only have a little over five months to go in the year, so it won’t be too long before we see who was right and who was wrong.

Our perceptions of the future are very much shaped by our worldviews. All the time, I get “Obamabots” that come to my website and leave comments on my articles telling me how Barack Obama has “turned the economy around” and has set the stage for a new era of prosperity in America.

Despite all the evidence to the contrary, they choose to believe that things are in great shape because that is what they want to believe. Just check out the results from one recent survey…

While 55 percent of Democrats reported feeling positive about the economy, for example, just 25 percent of Republicans felt the same from March 25 to May 27.

When asked if they thought the economy would improve over the next 12 months, 53 percent of Democrats said yes. Only 23 percent of the Republicans in the survey agreed.

The same perception gap extends to the far future, with 41 percent of Democrats believing that the next generation will be better off than their parents, and just 24 percent of Republicans saying the same.

To me, those numbers are quite striking.

Many Democrats very much want to believe that things are getting better because Barack Obama is in the White House.

Many Republicans very much want to believe that things are totally falling apart because Barack Obama is in the White House.

So who is right and who is wrong?

Please feel free to share what you think by posting a comment below…

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