Stock Trading

New Tariffs, Stocks Plunge, Manufacturing Falls Again And More Layoffs – But Everything Is “Fine”?

Things are starting to go downhill rather quickly now.  A day after the Federal Reserve cut interest rates for the first time in more than a decade, we received a whole bunch more bad economic news.  Most Americans don’t realize it yet, but our economy is in serious trouble.  We haven’t seen anything like this since the last recession, but most people seem to think that since stock prices are still very high that everything must be fine.  No, everything is definitely not “fine”, and as I noted yesterday, a lot of prominent names are loudly sounding the alarm.  Many analysts are expecting things to really start breaking loose as we get deeper into the second half of this year, and what we witnessed on Thursday certainly didn’t make the outlook any brighter.

President Trump completely shocked Wall Street when he announced that yet another round of tariffs will be imposed upon Chinese goods.  According to CNBC, these new tariffs will go into effect on September 1st…

Trump said in a series of tweets the tariff will be imposed on $300 billion worth of Chinese goods. The levy will take effect Sept. 1.

He said later in the day those levies could go up to 25%. Trump’s comments came after a U.S. delegation met with Chinese trade officials earlier this week. Those were the first in-person trade talks between China and the U.S. since both countries reached a truce on the situation.

This is essentially the equivalent of a “gut punch”, and it definitely takes our trade war with China to an entirely new level.

And Trump told the press that the tariffs will remain in place until the U.S. and China agree to a deal.  The following comes from Fox Business…

President Trump said on Thursday the U.S. will continue to tax China until the world’s two largest economies reach a trade agreement .

“When my people came home they said we were talking. We have another meeting in September. Until such time as there is a deal we will be taxing them,” he said from the White House’s south lawn.

But as I have repeatedly explained to my readers, there isn’t going to be an agreement any time soon.  In fact, it is extremely doubtful that we will see one before the 2020 presidential election.  Trump is not going to back down from his core demands, the Chinese will never accept them, and China would much prefer to negotiate with whoever follows Trump in the Oval Office.

So these tariffs are here to stay, China will inevitably retaliate once again, and global economic activity will suffer.

But Trump doesn’t seem alarmed.  On Thursday, he also told reporters that if China doesn’t want to trade with the United States anymore “that would be fine with me”…

“For many years China has been taking money out by the hundreds billions of dollars a year. We have rebuilt China so now it is time that we changed things around. If they didn’t want to trade with us anymore that would be fine with me. It would save us a lot of money,” Trump told reporters Thursday.

Those are very strong words, and Trump actually has a point.

In the short-term, decoupling from the Chinese economy is going to be extremely painful for us.  But the truth is that we should have never integrated our economy so deeply with China’s economy in the first place.  The Chinese government is one of the most tyrannical regimes on the entire planet, and they have no respect for basic human rights.  Trade agreements that were extremely unfavorable for the United States allowed China to become exceedingly wealthy at our expense, and the Chinese would like to continue taking advantage of us indefinitely if they could.

So something definitely needed to be done about China, but it is going to be a really, really painful period of adjustment for the U.S. economy.

After Wall Street learned of the new tariffs on Thursday, stock prices immediately began to plummet…

When President Donald Trump announced a new round of tariffs on Chinese imports on Thursday, the Dow was up 311 points. Then it was down nearly 300 points.

That was the biggest swing since early January.

And it certainly would not be a surprise if stock prices continued to go down.  As I noted the other day, the stock market is more primed for a crash than it has ever been before.

At this point, stock prices are completely and totally disconnected from economic reality.  As stocks hit record high after record high in July, bad economic news just kept pouring in.

Of course August certainly just started off with a bang.  On Thursday, we learned that a key measure of U.S. manufacturing activity has fallen to the lowest level since September 2009…

The IHS Markit Manufacturing Purchasing Managers’ Index fell to 50.4 in July, down from 50.6 in June, driven by a weaker demand. The firm also noted managers’ signaled slower hiring.

In addition, Lowe’s just announced that they will be “laying off thousands of workers”…

Lowe’s is laying off thousands of workers.

Layoffs will include assemblers, who put together items like grills and patio furniture. The company will also cut maintenance and facility-service jobs, such as janitors. The company said it is outsourcing those positions to third-party companies.

Lowe’s (LOW) declined to say exactly how many workers will be laid off. It said that workers whose jobs are being eliminated will be given transition pay and have the opportunity to apply for open roles at Lowe’s. The Wall Street Journal first reported Lowe’s plan.

This is the continuation of a trend that I have been tracking for months.  Big companies have been laying off workers at a level that we haven’t seen since the last recession, and many believe that what we have witnessed so far is just the beginning.

Also, the “trucking apocalypse” just continues to accelerate.  The following comes from Zero Hedge…

Yet another trucking company has fallen victim to the recession in freight this year, according to FreightWaves. Terrill Transportation of Livermore, California shut its doors unexpectedly on July 30. The company had been in business 25 years.

Customer Manny Bhandal, president of Bhandal Bros. Inc., said that three of his trucks arrived at Terrill on July 30 to drop off a shipment and were turned away. Kevin Terrill, president of Terrill Transportation, did not respond to FreightWaves.

If the U.S. economy really was in “fine” shape, trucking company after trucking company would not be shutting their doors.

Sadly, instead of heeding the warning signs and using this time to get prepared for rough times ahead, most Americans are choosing to use this time to party.

And there is certainly not anything wrong with enjoying life, but we have gotten to the point where it is crystal clear that a new crisis is upon us, and most Americans are completely and utterly unprepared for what is about to happen.

I will continue to track these developments as they unfold.  We are truly in unprecedented territory, and I have a feeling that the second half of 2019 is going to be far more “interesting” than the first half was.

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Kirkland declined to comment.

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Goldman Sachs Says That There Is A 99 Percent Chance That Stock Prices Will Not Keep Going Up Like This

Analysts at Goldman Sachs are saying that it is next to impossible for stock prices to keep going up like they have been recently.  Ever since Donald Trump’s surprise election victory in November, stocks have been on a tremendous run, but this surge has not been matched by a turnaround in the real economy.  We have essentially had a “no growth” economy for most of the past decade, and ominous signs pointing to big trouble ahead are all around us.  The only reason why stocks have been able to perform so well is due to unprecedented intervention by global central banks, but they are not going to be able to keep inflating this bubble forever.  At some point this absolutely enormous bubble will burst and investors will lose trillions of dollars.

The only other times we have seen stock valuations at these levels were just before the stock market crash of 1929 and just before the dotcom bubble burst in 2000.  For those that think that they can jump into the markets now and make a lot of money from rapidly rising stock prices, I think that it would be wise to consider what analysts at Goldman Sachs are telling us.  The following is from a CNBC article that was published on Monday…

Investors may be in for disappointing market returns in the decade to come with valuations at levels this high, if history is any indication.

Analysts at Goldman Sachs pointed out that annualized returns on the S&P 500 10 years out were in the single digits or negative 99 percent of the time when starting with valuations at current levels.

Do you really want to try to fight those odds?

Unfortunately, it appears that is precisely what a lot of investors are planning to do.  In fact, Schwab says that they are opening new accounts “at levels we have not seen since the Internet boom of the late 1990s”…

New accounts are at levels we have not seen since the Internet boom of the late 1990s, up 34% over the first half of last year. But maybe more important for the long-term growth of the organization is not so much new accounts, but new-to-firm households, and our new-to-firm retail households were up 50% over that same period from 2016.

And a different survey found that Millennial investors in particular are eager to pour money into the stock market…

Furthermore, according to a June survey from Legg Mason, nearly 80% of millennial investors plan to take on more risk this year, with 66% of them expressing an interest in equities. About 45% plan to take on “much more risk” in their portfolios.

One of the fundamental tenets of investing is to buy low and sell high.  Those that are getting in at the peak of the market are going to get absolutely slaughtered.  Trillions of dollars of paper wealth will be completely wiped out by the coming crash, and I wish that I could get more people to understand what is about to happen.

I recently wrote about how some really big investors are betting millions upon millions of dollars that a major stock market crash is going to happen in the very near future.  The financial markets are far more primed for a crash than they were in 2008, and there are certainly a lot of potential “black swan events” that could push us over the edge.  In his most recent article, Simon Black listed some of the things that he is currently watching…

– North Korea is threatening to nuke the US
– Donald Trump is firing his entire cabinet
– The Federal Reserve has dropped interest rates to record lows and drowned the world in trillions of dollars of cash
– Debt levels are at record highs
– Entire banking systems, especially in Europe, are in need of massive bailouts
– The US government will run out of money in less than 90-days and hit the debt ceiling once again

You only make money in the stock market if you get out in time.  And since just before the crisis of 2008 I have never seen so many prominent names in the financial community warn about a coming stock market crash as I have over the last 90 days.  For example, legendary investor Jim Rogers is warning that there will almost certainly be a crash “this year or the next”, and that it will be “the worst in your lifetime and my lifetime”…

The best-selling author expects the next financial crisis to be the “worst” he has ever seen.

“We’ve had economic problems in the U.S. or in North America every four to eight years since the beginning of the Republic so to say that we’re going to have a problem is not unusual,” he told Kitco News from the Freedom Fest conference in Las Vegas.

“I would expect it to start this year or the next…and it’s going to be the worst in your lifetime and my lifetime.”

What goes up must come down, and markets tend to go down a whole lot faster than they go up.

And in the environment that we are in today, caution is a very good thing.  I really like how billionaire Howard Marks put this the other day…

I think it’s better to turn cautious too soon (and thus perhaps underperform for a while) rather than too late, after the downslide has begun, making it hard to trim risk, achieve exits and cut losses.

Perhaps this will be the first giant financial bubble in our history to end smoothly, but I wouldn’t count on it.

In the end, I expect this one to end just like all of the others.  And I anticipate that the coming crisis will ultimately be worse than anything we have ever faced before because this current bubble has been artificially inflated for so long.

Hopefully stock prices will go up again tomorrow, but it would be exceedingly foolish to ignore all of the warnings.  Goldman Sachs says that there is a 99 percent chance that stocks cannot continue surging like this, and in this case I believe that Goldman Sachs is entirely correct.

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

A Mystery Investor Has Made A 262 Million Dollar Bet That The Stock Market Will Crash By October

One mystery trader has made an extremely large bet that the stock market is going to crash by October, and if he is right he could potentially make up to 262 million dollars on the deal.  Fortunes were made and lost during the great financial crisis of 2008, and the same thing will happen again the next time we see a major stock market crash.  But will that stock market crash take place before 2017 is over?  Without a doubt, we are in the midst of one of the largest stock market bubbles in U.S. history, and many prominent investors are loudly warning of an imminent stock market collapse.  It doesn’t take a genius to see that this stock market bubble is going to end very badly just like all of the other stock market bubbles throughout history have, but if you could know the precise timing that it will end you could set yourself up financially for the rest of your life.

I want to be very clear about the fact that I do not know what will or will not happen by the end of October.  But one mystery investor is extremely convinced that market volatility is going to increase over the next few months, and if he is correct he will make an astounding amount of money.  According to Business Insider, the following is how the trade was set up…

  • To fund it, the investor sold 262,000 VIX puts expiring in October, with a strike price of 12.
  • The trader then used those proceeds to buy a VIX 1×2 call spread, which involves buying 262,000 October contracts with a strike price of 15 and selling 524,000 October contracts with a strike price of 25.
  • For reference, bullish call spreads are used when a moderate rise in the underlying asset is expected. Traders buy call options at a specific strike price while selling the same number of calls of the same asset and expiration date at a higher strike.
  • In a perfect scenario, where the VIX hits but doesn’t exceed 25 before October expiration, the trader would see a whopping $262 million payout.

I will be watching to see what happens.  If this mystery investor is correct, it will essentially be like winning the lottery.

But just because he has made this wager does not mean that he has some special knowledge about what is going to happen.

For example, just look at what Ruffer LLP has been doing.  They are a $20 billion investment fund based in London, and they have been betting tens of millions of dollars on a stock market crash which has failed to materialize so far.  But even though they have lost so much money already, they continue to make extremely large bearish bets…

As of earlier this week, Ruffer had spent $119 million this year betting on a stock market shock, $89 million of which had expired worthless, according to data compiled by Macro Risk Advisors. The investor has gradually amassed holdings of about 1 million VIX calls through three occasions so far in 2017, and each time a significant portion expired at a loss.

Blame a subdued VIX for the futility. The fear gauge was locked in a range of 10 to 14 for the first three months of 2017, and while it has since climbed to as high as 15.96, it has been stuck well below 14 since a single-day plunge of 26% nine days ago. Earlier this week, the index closed at its lowest level since February 2007.

But that doesn’t mean Ruffer is giving up. Already loaded up on May contracts, the firm has continued to buy cheap VIX calls expiring later in the year — wagers costing about 50 cents.

I can understand why Ruffer has been making these bets.  In a rational world, stocks would have already crashed long ago.

The only way that stock prices have been able to continue to rise is because of unprecedented intervention by global central banks.  They have been pumping trillions of dollars into the financial markets, and this has essentially completely destroyed normal market forces.  The following comes from David Stockman…

The Fed and its crew of traveling central banks around the world have gutted honest price discovery entirely. They have turned global financial markets into outright gambling dens of unchecked speculation.

Central bank policies of massive quantitative easing (QE) and zero interest rates (ZIRP) have been sugar-coated in rhetoric about “stimulus”, “accommodation” and guiding economies toward optimal levels of inflation and full-employment.

The truth of the matter is far different. The combined $15 trillion of central bank balance sheet expansion since 2007 amounts to monetary fraud of epic proportions.

In the “bizarro world” that we are living in today, many companies are trading at prices that are more than 100 times earnings, and some companies are actually trading at prices that are more than 200 times earnings.

Stock prices have become completely and totally disconnected from economic reality.  As I discussed the other day, U.S. GDP has only risen at an average yearly rate of just 1.33 percent over the past 10 years, but meanwhile stock prices have been soaring into the stratosphere.

Nobody in their right mind can claim that makes any sense at all.  Just like in 2000, and just like in 2008, this absolutely ridiculous stock market bubble will have a horribly tragic ending as well.

Once again, I don’t know what the exact timing will be.  Stocks could start crashing tomorrow, but then the Swiss National Bank could swoop in and buy 4 million shares of Apple just like they did during the months of January, February and March earlier this year.

The biggest players in this ongoing charade are the global central banks.  If they decide to keep pumping trillions of dollars into global financial markets, they may be able to keep the bubble going for a little while longer.

But if at any point they decide to withdraw their artificial assistance, those that have placed huge bets against the market are going to make absolutely enormous piles of cash.

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

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