The Economy

You Can Kick The Can Down The Road, But Reality Will Catch Up With You Eventually

Nobody can defy the laws of economics forever.  Whether it is an individual, a company or the nation as a whole, reality always catches up with everyone eventually.  For years, I have been warning that Sears was eventually going to zero, but of course it didn’t happen immediately.  Sears CEO Eddie Lampert kept convincing investors to pour more money into his beleaguered money pit, and so the can kept getting kicked down the road.  It takes a great con man to be able to pull off what Eddie Lampert was able to pull off, and we should all be in awe at the level of skill that he has displayed.  But all good cons eventually come to an end, and now the retailer that was once the largest in world history is coming to an end.  According to multiple media reports, a Sears bankruptcy filing is imminent.  For a while there it looked like it would be a Chapter 7 filing which would mean immediate liquidation for Sears.  But it appears that Lampert will be able secure enough funding to give Sears a little bit of breathing space.  A Chapter 11 bankruptcy filing will allow most of the stores to stay open through the holidays and will give Sears more time to sell off more assets.

I can’t even imagine who would be dumb enough to hand Lampert more money at this point, and this is yet another example that shows that the old saying “a sucker is born every minute” is definitely true.

And we are not talking about a small amount of money.  According to USA Today, Sears is going to need between 300 and 500 million dollars just to keep operating through the holidays…

It is trying to secure $300 million to $500 million to continue functioning through the holidays, keeping a winnowed number of locations open, says the person familiar with what is being considered. As of an Aug. 4 public filing, Sears Holdings, the parent company of Sears and Kmart, still had 506 Sears stores and 360 Kmart locations.

If the bankruptcy filing occurs, it is likely the beginning of what has been the long, drawn-out ending to one of the most renowned sagas in retail.

Lampert is going to be burning up the phones all weekend, because Sears needs cash immediately for a 134 million dollar debt payment that is due on Monday…

Now, Sears is facing a critical Monday deadline to make a $134 million debt payment. Reports this week by the Wall Street Journal and CNBC said Sears had begun consulting with advisers to prepare a possible bankruptcy filing.

Just like our current stock market bubble, it is absolutely amazing that Sears has survived for as long as it has.

The truth is that Sears should have been put out of its misery long ago, but the can just kept getting kicked down the road.  But now the cash is gone and the debts have become overwhelming.

At this point, Sears has been missing payments to important vendors and has been making preparations for the upcoming bankruptcy filing for weeks…

Three companies that sell items at Sears told Reuters this week that Sears had missed payments to them over the past few weeks. One of Sears’ major shareholders recently dumped a chunk of his stock for pennies on his original investment. The company added a new director this week who is familiar with bankruptcies and restructuring.

And reports are swirling that the company is talking to advisers and banks in preparation for a bankruptcy filing. According to the Wall Street Journal, Sears has hired M-III Partners, a boutique advisory firm specializing in seeing companies through bankruptcies and restructuring, The company is also talking to lenders about providing it with debtor-in-possession financing, CNBC reported. That kind of loan is used by companies that file for bankruptcy to fund operations during the process. Usually, funding is secured well before the final days.

Many of the company’s lenders had been pushing for an immediate Chapter 7 liquidation.  They wanted the bleeding to stop so that they could recover what they could while there was still something to grab.

But Eddie Lampert seems determined to stretch this thing out for as long as possible, and so it appears that a Chapter 11 bankruptcy filing will happen instead.

It is easy to mock Sears, but the truth that America as a whole is on the exact same trajectory.

In my article that lists 101 reasons why the Federal Reserve should be shut down, I explain the absolute insanity of our current debt-based financial system.  Our system is literally designed to create as much debt as possible, and that is precisely what has been happening since the Federal Reserve was created in 1913.

If you add up all forms of debt in the United States (government, business, consumer, etc.), it comes to a grand total of more than 68 trillion dollars.  Other than hyper-inflating our currency into oblivion, there is no possible way that all of that debt will ever be repaid.  Under our current system, the only viable choice is to “extend and pretend”, and that is what we have been doing for decades.

But just like with Sears, economic reality is catching up with us, and time is rapidly running out for America.

From time to time, I get accused of being “too negative”, but the truth is that myself and others like me have been pleading with the American people to consider alternative solutions for many years.  In my latest book, I strongly advocate for the elimination of the Federal Reserve system and the establishment of a new financial system and a new currency that are not based on exponential debt growth.  In addition to writing thousands of articles, I have traveled and spoken to groups about these issues extensively, and I have done countless radio and television interviews.

But voices like mine have not been embraced on a widespread basis, and instead the American people seem to want the status quo.

So the can will keep getting kicked down the road until everything collapses.

Ultimately, what we are facing is the greatest economic depression that the United States has ever seen.  I really like how Charles Hugh Smith made this point as he wrapped up his most recent article…

Everywhere we look in the U.S. economy, we see sky-high fixed costs. Investors who overpaid for commercial real estate will default once their business tenants close down, homeowners who overpaid will default once one of the household’s primary jobholders loses his/her job, state and local governments that have feasted on a decade of rising tax revenues will suddenly face staggering deficits as tax revenues crater–the list of those with high fixed costs and no wiggle room other than bankruptcy is essentially endless in America.

Here’s the difference between a recession and a depression: you can’t get blood from a stone, or make an insolvent entity solvent with more debt. Losses will have to taken, and nose-bleed fixed-costs will have to be slashed; reality will eventually have to be dealt with.

But everyone will resist this process because high fixed costs are the gravy train everyone depends on. Slashing fixed costs destroys the income needed to support asset valuations which are the collateral for the stupendous mountains of debt that define the U.S. economy. Once that debt is written down, the entire financial system collapses.

It didn’t have to be this way.

America could have chosen another path, but it didn’t.

So now we are steamrolling toward a date with destiny, and the people of this country will soon receive a very harsh lesson about economic reality.

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

The Last Days Warrior Summit is the premier online event of 2018 for Christians, Conservatives and Patriots.  It is a premium-members only international event that will empower and equip you with the knowledge and tools that you need as global events begin to escalate dramatically.  The speaker list includes Michael Snyder, Mike Adams, Dave Daubenmire, Ray Gano, Dr. Daniel Daves, Gary Kah, Justus Knight, Doug Krieger, Lyn Leahz, Laura Maxwell and many more. Full summit access will begin on October 25th, and if you would like to register for this unprecedented event you can do so right here.

Why Is The Media Warning A Recession Is Expected “By The End Of 2020” That Will Be “Worse Than The Great Depression”?

The mood of the mainstream media is really starting to shift dramatically.  At one time they seemed determined to convince all of us that happy days were here again for the U.S. economy, but now some mainstream news outlets are openly warning that the next recession will be “worse than the Great Depression”.  Do they really believe that this is true, or is there some other purpose behind their bold headlines?  Of course it isn’t exactly difficult to predict that another recession is coming, because the U.S. economy has experienced recession after recession ever since the Federal Reserve was first established in 1913.  But the phrase “worse than the Great Depression” implies that what we will soon be facing will be the worst economic downturn in all of U.S. history.  That is a very bold statement to make, and it should not be done lightly.

That is why I have been absolutely astounded by some of the mainstream headlines that I have been seeing lately.  For example, the following comes from a New York Post article entitled “Next crash will be ‘worse than the Great Depression’: experts”…

“We think the major economies are on the cusp of this turning into the worst recession we have seen in 10 years,” said Murray Gunn, head of global research at Elliott Wave International.

And in a note, he added: “Should the [US] economy start to shrink, and our analysis suggests that it will, the high nominal levels of debt will instantly become a very big issue.”

And here is an excerpt from an article posted on MSN entitled “Experts warn the next recession will be ‘worse than the Great Depression’ and predict it will hit US within two years as $247 trillion global debt outdoes 2008”…

The next recession could put the 2008 financial crash to shame if two experts’ predictions about the worldwide debt of $247 trillion are correct.

Expected to hit the United States within the next two years, the impact has been compared to the severe worldwide economic crisis which started 1929 and last until 1939.

It is particularly interesting that the author of the last article chose to use the phrase “within the next two years”.

That strongly implies that the U.S. economy will have plunged into the next recession before the next presidential election takes place.

Other mainstream outlets are using similar language.  For example, the following comes from a Bloomberg article entitled “Two-thirds of U.S. business economists see recession by end of 2020”…

Two-thirds of business economists in the U.S. expect a recession to begin by the end of 2020, while a plurality of respondents say trade policy is the greatest risk to the expansion, according to a new survey.

About 10 percent see the next contraction starting in 2019, 56 percent say 2020 and 33 percent said 2021 or later, according to the Aug. 28-Sept. 17 poll of 51 forecasters issued by the National Association for Business Economics on Monday.

Those are stunning numbers.

If they are correct, and I have no reason to doubt them, that means that 66 percent of mainstream economists believe that the next recession will strike in either 2019 or 2020.

Of course those that follow my work on a regular basis already know that there are a multitude of signs that indicate that the U.S. economy is already slowing down.

I wanted to share another one of those signs with you today.  For years, the real estate market in Manhattan was red hot, but now we just witnessed “the fourth straight quarter of double-digit declines”…

Total real estate sales in Manhattan fell 11 percent in the third quarter compared with a year ago, marking the fourth straight quarter of double-digit declines, according to new data from Douglas Elliman Real Estate and Miller Samuel Real Estate Appraisers & Consultants. It was also the first time since the financial crisis that resales of existing apartments fell for four straight quarters.

Prices fell, inventory jumped and discounts were higher and more common. Real estate brokers say the Manhattan real estate market is suffering from an oversupply of luxury units, a decline in foreign buyers and changes in the tax law that make it more expensive to own property in high-tax states.

At this point, the housing market in New York City has become “a buyer’s market”, and there are no signs that things are going to turn around any time soon…

“Offers 20 percent and 25 percent below asking prices began to flow in, a phenomenon last seen in 2009,” wrote Warburg Realty founder and CEO Frederick W. Peters in the report, which surveys real estate conditions around the city.

Warburg’s report dovetails with separate data showing a definitive cooling in New York’s housing market. The number of homes for sale in the city recently hit a record, according to StreetEasy data, amid fewer sales transactions. Meanwhile, September’s report from real estate firm MNS showed Manhattan apartment rental prices — the most expensive in the city — on the decline.

Of course this is not just happening in New York City.  Home sellers all over the nation are slashing their prices at the fastest rate that we have seen in at least eight years.

In order for people to be able to afford to buy expensive homes, they need good jobs, and more good jobs just keep getting shipped out of the country.

For example, Verizon just announced that they will be shipping thousands of information technology jobs to India…

Earlier this week, Verizon confirmed that it offered a voluntary severance package (VSP) to about 44,000 employees and that it will transfer over 2,500 IT staff – some rumors suggest the figure to be closer to 5,000 employees – to India-based Infosys as part of a $700 million outsourcing deal.

The layoffs and transfers will impact more than 30% of Verizon’s 153,100-employee workforce – as of the end of June – and are part of a 4-year plan to save the largest U.S. wireless carrier $10 billion by 2021.

If you get angry when you read such stories, that is good, because they should make you angry.

The middle class in America is being systematically eviscerated, and the U.S. economy is steadily being hollowed out.

And now the mainstream media is boldly pronouncing that the next recession will arrive within the next two years, and many are suggesting that it will be even more painful than the last one…

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

The Last Days Warrior Summit is the premier online event of 2018 for Christians, Conservatives and Patriots.  It is a premium-members only international event that will empower and equip you with the knowledge and tools that you need as global events begin to escalate dramatically.  The speaker list includes Michael Snyder, Mike Adams, Dave Daubenmire, Ray Gano, Dr. Daniel Daves, Gary Kah, Justus Knight, Doug Krieger, Lyn Leahz, Laura Maxwell and many more. Full summit access will begin on October 25th, and if you would like to register for this unprecedented event you can do so right here.

Worst Job Growth In A Year – Way Below Expectations

We just got more evidence that the U.S. economy is starting to slow down.  The U.S. economy must produce somewhere around 200,000 jobs a month just to keep up with population growth, and last month we were way below that number.  In fact, the employment numbers that the government released on Friday were the worst that we have seen in an entire year.  In late 2018, the IMF is openly warning of “a second Great Depression”, and indications that another economic crisis is coming are emerging all around us.  Many had been hoping that very strong employment numbers on Friday would change that trend, but instead it was “the worst performance since last September”…

Nonfarm payrolls rose just 134,000, well below Refinitiv estimates of 185,000 and the worst performance since last September, when a labor strike weighed on the numbers.

But even though the number of jobs created did not even come close to keeping up with population growth, we are told that the unemployment rate actually declined, and some media outlets are proudly touting this as some sort of “success”.

Of course other numbers actually show that the unemployment rate is rising.  The following comes from CNBC…

A separate measure of unemployment that includes discouraged workers and those holding jobs part-time for economic reasons — sometimes called the “real unemployment rate” — edged higher to 7.5 percent.

And according to shadowstats.com, the actual unemployment rate in the United States right now is 21.3 percent.  That is down slightly from the peak, but it is nowhere even close to where we were before the last recession.

There are many out there that desperately want to believe that the U.S. economy is “booming”, but that simply is not accurate.

If the U.S. economy really is “booming”, then why has “the largest ever homeless encampment” that Minneapolis has ever seen just gone up?…

The Associated Press (AP) has revealed a troubling story of the largest ever homeless encampment site mostly made up of Native Americans has quickly erected just south of downtown Minneapolis, Minnesota.

City officials are scrambling to contain the situation as two deaths in recent weeks, concerns about disease and infection, illicit drug use and the coming winter season, have sounded the alarm of a developing public health crisis.

We also got another really bad piece of economic news on Friday.

According to official government numbers, the U.S. trade deficit increased once again in August…

The US Census Bureau reported Friday that the trade deficit increased to $53.2 billion in August for both goods and services, up from $50.0 billion in July. The goods trade deficit, which draws most of Trump’s attention, also increased to $86.3 billion, a $3.8 billion increase from the month before.

The primary reason for the increase in the deficit was a collapse in exports, especially soybeans, which fell off by $1 billion, a 28% drop from the month prior. China, the largest buyer of US soybeans, imposed tariffs on the American crop and it appears the restrictions are taking a toll.

One of the primary goals of the trade war is to decrease the size of our trade deficit, and so far it is not working.

Financial markets responded very negatively to all of the bad economic news.  Stocks plunged for a third straight day on Friday, and the Nasdaq was hit particularly hard…

US equity markets were pressured for a third straight day Friday, with all of the major averages sporting losses of at least 1% at their lows. Heavy selling pushed the tech-heavy Nasdaq down by as much as 2.1%, before rebounding and finishing with a loss of just more than 1%.

Overall, it was a very tough week on Wall Street.  The following is how Zero Hedge summarized the carnage…

 

  • US Stocks – worst 2-day drop since May
  • Small Caps, Nasdaq – biggest weekly drop in 7 months
  • Small Caps – biggest 5-week drop since Nov 2016
  • China (closed) ETF – biggest weekly drop in 7 months
  • Semis – biggest weekly drop in 6 months
  • FANGs – biggest weekly drop in 7 months
  • Homebuilders – worst.losing.streak.ever…
  • USD Index – best week in 2 months
  • HY Bonds – biggest weekly price drop in 8 months
  • IG Bonds – biggest weekly drop since Nov 2016
  • Treasury Yields – biggest weekly yield spike in 8 months
  • Yield Curve – biggest weekly steepening in 8 months
  • Gold – best weekly gain in 6 weeks

 

In particular, it is absolutely stunning what is happening to homebuilder stocks.  They have now fallen for 13 days in a row, and that could be another very clear indication that a housing crash is coming.

None of the problems that caused the crash of 2008 have been fixed.  It absolutely amazes me that some people think that you can “fix” our economy by tinkering with the tax code a little bit and getting rid of a few regulations.  A handful of marginal changes is not going to alter our long-term outlook one bit.

The truth is that our economic system requires extensive emergency surgery.  We need to abolish the Federal Reserve, abolish the IRS, abolish the income tax and start using currency that is not created by debt.  And that would just be for starters.  Our current economic system is fundamentally flawed, and in the long-term it is inevitably going to fail.  The best that anyone can do in the short-term is to keep inflating the bubbles so that things will hold together long enough until they can become somebody else’s problem.

Right now, the only way that we can achieve economic growth is by growing debt at a far faster pace than the overall economy is expanding.  That is a recipe for a long-term disaster, and everyone knows that we are in the process of committing national suicide, but nobody is really doing anything to stop it.

Sadly, it is probably going to take another major crisis before people start calling for real change, and that is extremely unfortunate.

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

The Last Days Warrior Summit is the premier online event of 2018 for Christians, Conservatives and Patriots.  It is a premium-members only international event that will empower and equip you with the knowledge and tools that you need as global events begin to escalate dramatically.  The speaker list includes Michael Snyder, Mike Adams, Dave Daubenmire, Ray Gano, Dr. Daniel Daves, Gary Kah, Justus Knight, Doug Krieger, Lyn Leahz, Laura Maxwell and many more. Full summit access will begin on October 25th, and if you would like to register for this unprecedented event you can do so right here.

 

The Retail Apocalypse Picks Up Speed As Sears, JCPenney, Brookstone And Mattress Firm Spiral Toward Bankruptcy

Over 20 major retailers have filed for bankruptcy since the beginning of last year, and in 2018 we may break the all-time record for annual store closings that was established just last year.  We are in the midst of the worst retail apocalypse in American history, and it appears to be picking up speed as retail giants such as Sears, JCPenney, Brookstone and Mattress Firm spiral toward bankruptcy.  We live at a time when the middle class is being systematically destroyed, and so the truth is that U.S. consumers simply do not have as much discretionary income as they once did.  Many large retailers believed that things would eventually turn around, and they have been fighting very hard to survive, but now time has run out for quite a few of them.

Mattress Firm

Everyone knew that Mattress Firm was in deep trouble, but it still surprised many of us when it was announced that they are officially planning to file for bankruptcy.  The following comes from Reuters…

Mattress Firm Inc, the largest U.S. mattress retailer, is preparing to file for bankruptcy protection as soon as this week, as it seeks to exit costly store leases and shore up its business, people familiar with the matter said on Tuesday.

At this moment Mattress Firm has approximately 3,000 brick-and-mortar locations, and as those stores close down those abandoned buildings are going to be giant eyesores on street corners all over America.

Brookstone

When I was a kid back in the 1980s, it seemed like Brookstone had an outlet in every mall I visited.  But now Brookstone has filed for bankruptcy, and all remaining mall stores will be shut down…

Brookstone filed for bankruptcy and will close its remaining 101 mall stores.

The mall and airport seller, best known for massage chairs, quirky gadgets, and travel luggage, filed for Chapter 11 bankruptcy in federal court on Thursday. It was Brookstone’s second bankruptcy round in four years.

Sears

Sears has been shutting down stores for years, but up until now they have never admitted that bankruptcy was on the horizon.

But now time has run out and emergency measures are required if Sears is to survive.  The following comes from CNN…

Sears is running out of time to fix its problems, the CEO says.

Eddie Lampert, who controls most of the company’s shares through his hedge fund, told the board on Monday that it must address “significant near-term constraints” in its cash position.

Of course Sears is still not actually using the term “bankruptcy”, but even CNN is admitting that Eddie Lampert used “language that suggested the company could be forced out of business”…

Lampert did not use the word “bankruptcy,” but he raised the possibility that creditors could be wiped out, a process that often takes place in bankruptcy court, without immediate action.

He also said it was in the best interest of stakeholders to “accomplish this as a going concern” — language that suggested the company could be forced out of business.

Those that have been following my work for a long time know that I have repeatedly stated that Sears is going to zero.

Now we appear to be on the precipice of that actually happening, and it is a very sad day for America indeed.

JCPenney

Speaking of retailers that are going to zero, JCPenney is absolutely drowning in debt and has a very dismal prognosis for the future…

Leaderless, $4 billion in debt and with a stock price below $2, the besieged retailer faces an uncertain fate after posting its latest round of dismal earnings.

“They’re in a leaky boat that eventually will sink,” said Mark Cohen, the director of retail studies at the Columbia Business School and a former CEO of Sears Canada and other department stores. “The prognosis for the future is not happiness.”

In the end, JCPenney is not going to survive, and so America will have to shop elsewhere for substandard clothing at inflated prices.

Bed Bath & Beyond

Nobody is suggesting that bankruptcy is imminent for Bed Bath & Beyond, but if they continue to have disastrous sales results it won’t be too long before they are on the chopping block too…

The struggling retailer said Wednesday that it was bringing on two top management consulting firms to help it cut costs and improve its merchandise. CEO Steven Temares did not name the firms.

The housewares retailer needs help. Shares of Bed Bath & Beyond plunged nearly 25% Thursday to their lowest level since March 2000 because of awful sales during the previous quarter.

We are moving into the most critical time of the year for retailers.  Most troubled chains will hang on through the next three months, but once we get to January and February we will see many of them give up the fight for good.

Meanwhile, some of the retailers that are still doing okay are warning that our trade war with China will likely mean much higher prices for consumers…

Walmart Inc. and Target Corp. are among the large retailers and food companies that have sent a letter to U.S. Trade Ambassador Robert Lighthizer warning that proposed tariffs on $200 billion on Chinese goods would hurt consumers and American businesses.

Walmart’s letter, dated Sept. 6, focuses on what it says will be the repercussions of the tariffs, which would apply to goods like food and beverages, personal care products like shampoo, detergents, motor vehicles and paper goods like napkins.

Of course U.S. consumers cannot exactly afford higher prices at this point.  U.S. consumers have been spending more than they are earning month after month, and they are making up the difference by going into ever-increasing amounts of debt.

This is not what a healthy economy looks like.

If we had a healthy economy, the middle class would be growing and retailers would be thriving.

But instead, the vacancy rate at U.S. shopping malls just hit the highest level in six years…

The vacancy rate at metro and regional malls around the United States hit 8.6% last quarter, the highest since the end of 2012, according to data released Monday by real estate research firm Reis (REIS).

Back then, the economy was still working its way out of a recession and an excess of malls had been built in the preceding decades. Retail vacancies peaked at 9.4% during the middle of 2011.

Things are not getting better for the U.S. economy.  We continue to see numbers that we have not seen since the last recession, and it appears that things will continue to deteriorate as we head into 2019.

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

The Last Days Warrior Summit is the premier online event of 2018 for Christians, Conservatives and Patriots.  It is a premium-members only international event that will empower and equip you with the knowledge and tools that you need as global events begin to escalate dramatically.  The speaker list includes Michael Snyder, Mike Adams, Dave Daubenmire, Ray Gano, Dr. Daniel Daves, Gary Kah, Justus Knight, Doug Krieger, Lyn Leahz, Laura Maxwell and many more. Full summit access will begin on October 25th, and if you would like to register for this unprecedented event you can do so right here.

New Vehicle Sales “Collapse” And Pending Home Sales “Plunge” As America’s Economic Slowdown Accelerates

In late 2018, the bad economic news just keeps rolling in.  At a time when consumer confidence is absolutely soaring, the underlying economic numbers are clearly telling us that enormous problems are right around the corner.  Of course this is usually what happens just before a major economic downturn.  Most people in the general population feel like the party can go on for quite a while longer, but meanwhile the warning signs just keep becoming more and more obvious.  I have been hearing from people that truly believe that the economy is “strong”, but if the U.S. economy really was in good shape would new vehicle sales be “collapsing”?…

According to the latest estimates released by Edmunds, new vehicle sales for September are expected to collapse both on a monthly basis and year-over-year basis. The company predicted that 1,392,434 new cars and trucks will be sold in the U.S. in September, which makes for a estimated seasonally adjusted annual rate (SAAR) of 17 million. This will be a 5.4% decrease from last month and an 8.3% drop from September of last year.

Those are absolutely terrible numbers.

And this news comes after all of the major automakers had already revised earnings guidance lower.  The following comes from Zero Hedge…

The drop in sales capped another rough month for the auto industry during which Detroit’s carmakers all revised their earnings guidance lower and Ford embarked on a five-year restructuring plan. Earlier this week, we reported that Ford’s CEO claimed that President Trump’s auto tariffs had cost the company $1 billion in profits.

Sadly, this may just be the very beginning of the auto industry’s troubles.

It is now being projected that if this trade war with China continues, U.S. automakers could see total sales fall “by 2 million vehicles per year”…

Retaliation by China to tariffs already in place have made some American auto exports uncompetitive, and could collapse US auto sales by 2 million vehicles per year, resulting in the loss of up to 715,000 American jobs and a devastating hit of as much as $62 billion to the US GDP.

As per NBC News, the Center for Automotive Research (CAR) warns that the auto industry could receive a devastating blow if Section 232 declares foreign-made cars and car parts a threat to national security.

Kristin Dziczek, a vice president and senior economist at CAR, said if Section 232 is enacted, it could trigger a “downward cycle” in the auto industry – not seen since the last great recession.

And needless to say, the thousands of companies that do business with those large automakers would also lose sales and jobs.

Once these downturns get rolling, the domino effect can be absolutely devastating.

On Thursday, we also learned that pending home sales “plunged in August”…

Pending home sales plunged in August, dropping 1.8% MoM (almost four times worse than expected) to its lowest since Oct 2014 (and fell 2.5% YoY) – the fourth month of annual declines in a row…

If the U.S. economy truly is “strong”, then why have we seen four monthly declines in a row?

And it isn’t just one part of the nation that is experiencing a downturn.  According to Bloomberg, all four major regions of the country showed a decline…

As Bloomberg notes, the decline, which was broad-based across all four regions, shows that higher mortgage rates, rising prices and a shortage of affordable homes continue to squeeze buyers. Existing-home sales in August matched the lowest in more than two years, while revisions to new-home sales showed a slower market than thought, according to previously released figures.

Homes are not selling like they once were.  There is a reason why one out of every four home sellers in America slashed their prices in August.  Demand is way down, and that strongly indicates that an economic slowdown is here.

When it looks like the economy is headed for a major downturn, a lot of people go out and stock up on gold, and it turns out that is precisely what global central banks have been doing…

Central banks have emerged as some of the biggest buyers of gold this year, buying a total of 264 metric tons this year to reach the highest level in six years, according to analysts at Macquarie.

Of course the Federal Reserve and other central banks are trying to assure us that everything is going to be okay, but meanwhile their actions are telling us a different story.

Much of the world is already in the midst of a crippling economic crisis, and every indicator seems to be pointing to the fact that the U.S. is headed down the same path.

Even without any extenuating circumstances, the truth is that we are way overdue for a recession.  But when you throw in political chaos, exploding debt levels, an emerging market currency crisis and a trade war between the two largest economies on the entire planet, you definitely have a recipe for a perfect storm.

If you do not believe that this trade war is a big deal, you should consider the words of former Reagan administration official David Stockman…

Folks, it’s not a “skirmish”. On the scale of trade warfare we are now at DEFCON 2.

At this very moment, the US is taxing $250 billion of Chinese imports or nearly half the total flow; and China is taxing $110 billion of its imports from the US or 85% of the flow.

And it’s soon going full monte. The Donald has repeatedly threatened to tariff the remaining $267 billion of Chinese imports if Beijing retaliates against his $200 billion, but, self-evidently, they already have.

The U.S. economy has found a way to muddle through for the past couple of years, and we should all hope that the economy can find a way to navigate through these current problems.

But the storm clouds are growing more ominous with each passing day, and at some point time will run out.

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

The Last Days Warrior Summit is the premier online event of 2018 for Christians, Conservatives and Patriots.  It is a premium-members only international event that will empower and equip you with the knowledge and tools that you need as global events begin to escalate dramatically.  The speaker list includes Michael Snyder, Mike Adams, Dave Daubenmire, Ray Gano, Dr. Daniel Daves, Gary Kah, Justus Knight, Doug Krieger, Lyn Leahz, Laura Maxwell and many more. Full summit access will begin on October 25th, and if you would like to register for this unprecedented event you can do so right here.

Why Are So Many People Talking About The Potential For A Stock Market Crash In October?

It is that time of the year again.  Every year, people start talking about a possible stock market crash in October, because everyone remembers the historic crashes that took place in October 1987 and October 2008.  Could we witness a similar stock market crash in October 2018?  Without a doubt, the market is primed for another crash.  Stock valuations have been in crazytown territory for a very long time, and financial chaos has already begun to erupt in emerging markets all over the globe.  When the stock market does collapse, it won’t exactly be a surprise.  And a lot of people out there are pointing to October for historical reasons.  I did not know this, but it turns out that the month with the most market volatility since the Dow was first established has been the month of October…

The difference is quite significant, as judged by a measure of volatility known as the standard deviation: For all Octobers since 1896, when the Dow Jones Industrial Average was created, the standard deviation of the Dow’s daily changes has been 1.44%. That compares to 1.05% for all months other than October.

Like me, you are probably tempted to think that the reason why October’s number is so high is because of what happened in 1987 and 2008.

But even if you pull out those two months, October is still the most volatile…

You might think that this difference is caused by a few outliers, such as the 1987 crash (which, of course, occurred in October) or 2008 (the Dow suffered several thousand-point plunges that month as it reacted to the snowballing financial crisis). But you would be wrong: The standard deviation of daily Dow changes is much higher in October than other months even if we eliminate 1987 and 2008 from the sample.

Once we get to Thanksgiving, the market tends to get sleepy, and it usually doesn’t wake up again until the new year begins.

So if something big is going to happen in the market in 2018, it is probably going to happen in the coming weeks.

And it is inevitable that something big will happen at some point.  As Jesse Colombo has pointed out, stocks are more overvalued right now than they were just before the great stock market crash of 1929…

In a bubble, the stock market becomes overpriced relative to its underlying fundamentals such as earnings, revenues, assets, book value, etc. The current bubble cycle is no different: the U.S. stock market is as overvalued as it was at major generational peaks. According to the cyclically-adjusted price-to-earnings ratio (a smoothed price-to-earnings ratio), the U.S. stock market is more overvalued than it was in 1929, right before the stock market crash and Great Depression

It is becoming increasingly obvious what we are heading for, and a growing chorus of market experts are issuing ominous declarations about this market.

For example, David Tice is warning that “we’re getting closer to a meltdown scenario”…

According to investor David Tice, who made a name for himself in running the Prudent Bear Fund before selling it to Federated Investors in 2008, the current market is dangerous. Tice was quoted as saying he’s “nervous” because “we’re getting closer to a meltdown scenario.”

And John Hussman ultimately expects “two-thirds of market capitalization” to vanish…

I am aware of no plausible conditions under which current extremes are likely to work out well for investors. There are a few possibilities that could involve a smaller loss than the two-thirds of market capitalization that I expect to vanish, as the run-of-the-mill, baseline expectation for the S&P 500 over the completion of this cycle. Yet it’s worth recognizing that the completion of every market cycle in history has taken the most reliable valuation measures we identify (those best correlated with actual subsequent S&P 500 market returns) to less than half of current levels.

Could you imagine the chaos that would be unleashed if the stock market went down by two-thirds?

That would make what happened in 2008 look like a Sunday picnic.

And there are a lot of parallels between what happened in 2008 and what is happening today.  For example, the housing market is slowing down dramatically just like it did a decade ago.  The following comes from a Bloomberg article that I came across earlier today entitled “Builders Slump as U.S. Housing Market Shifts to the Slow Lane”…

The housing market is stalling, and homebuilder stocks are feeling the pain.

The S&P Supercomposite Homebuilding Index is down 21 percent year-to-date, on track for the biggest annual drop since 2008, when it fell 32 percent. That’s even with tax cuts, unemployment near the lowest since 1969 and a real-estate developer in the White House. What gives?

Just a few days ago, I wrote an entire article about the fact that home sellers are cutting prices at the fastest rate that we have seen in eight years.  The housing market is clearly telling us that a big time economic slowdown is coming, but most people are not listening.

Switching gears, we have also recently learned that it looks like Ford Motor Company will soon be laying off lots of workers…

Ford Motor employees are warily awaiting details of CEO Jim Hackett’s promised “fitness” plan and the serious possibility of significant job losses as the company faces pressure to improve its operations.

The company has warned of $11 billion in restructuring costs over three to five years, which could mean thousands of worker buyouts, according to analysts.

Why would they be doing that if the economy really was in “good shape”?

And let us not forget about the ongoing woes of the retail industry.  Recently, I was astounded to learn that a whopping 20 percent of all retail space in Manhattan is currently vacant…

“When you walk the streets, you see vacancies on every block in all five boroughs, rich or poor areas — even on Madison Avenue, where you used to have to fight to get space,” said Faith Hope Consolo, head of retail leasing for Douglas Elliman Real Estate, who said the increase in storefront vacancies in New York City had created “the most challenging retail landscape in my 25 years in real estate.”

A survey conducted by Douglas Elliman found that about 20 percent of all retail space in Manhattan is currently vacant, she said, compared with roughly 7 percent in 2016.

New York City is one of the few areas around the country that has actually been prospering.

If things are that bad there already, what does that say about the outlook for the rest of the nation?

The truth is that the economy is not nearly as good as you are being told, and things could literally start breaking loose at any moment.

Unfortunately, as a society we have not learned very much from history, and most Americans seem to think that this bubble of artificial prosperity is going to last indefinitely.

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

The 11th Hour: 8 Examples Of Mainstream Media Sources Warning Us Of Imminent Economic Disaster

Are we on the verge of another great financial crisis, a devastating recession and a horrific implosion of the global debt bubble?  On my website I have been relentlessly warning my readers about the inevitable consequences of our very foolish actions, but now the mainstream media is beginning to sound just like The Economic Collapse Blog.  The coming crisis is so close now that a lot of them are starting to see it, and of course economic disaster is already a reality for much of the rest of the planet.  For years, the mainstream media told us that things would get better, and in a lot of ways we did see some improvement.  But now the tone of the mainstream media has become quite ominous, and that is definitely not a positive sign.  The following are 8 examples of mainstream media sources warning us of imminent economic disaster…

#1 Forbes: “Disaster Is Inevitable When America’s Stock Market Bubble Bursts”…

As shown in this report, the U.S. stock market is currently trading at extremely precarious levels and it won’t take much to topple the whole house of cards. Once again, the Federal Reserve, which was responsible for creating the disastrous Dot-com bubble and housing bubble, has inflated yet another extremely dangerous bubble in its attempt to force the economy to grow after the Great Recession. History has proven time and time again that market meddling by central banks leads to massive market distortions and eventual crises. As a society, we have not learned the lessons that we were supposed to learn from 1999 and 2008, therefore we are doomed to repeat them.

The purpose of this report is to warn society of the path that we are on and the risks that we are facing.

#2 CNBC: “Tech stock sell-off could be just beginning if trade war with China worsens”…

Congressional scrutiny of social media companies and fears of new regulation pummeled their stocks, but other tech names could also soon be vulnerable to a new round of selling pressure if President Donald Trump goes through with new tariffs on Chinese goods.

#3 Bloomberg: “Emerging-market rout is longest since 2008 as confidence cracks”…

For stocks, it’s 222 days. For currencies, 155 days. For local government bonds, 240 days.

This year’s rout in emerging markets has lasted so long that it’s taken even the most ardent bears by surprise. Not one of the seven biggest selloffs since the financial crisis — including the so-called taper tantrum — inflicted such pain for so long on the developing world.

#4 CNN: “Emerging Markets Look Sick. Will They Infect Wall Street?”…

Chinese stocks are is in a bear market. Turkey’s currency has collapsed. South Africa has stumbled into a recession. Not even an IMF bailout has stemmed the bleeding in Argentina.

The storm rocking emerging markets has its origins in Washington. Vulnerable currencies plunged as the US Federal Reserve steadily raised interest rates. And President Donald Trump’s trade crackdown added gasoline to the fire.

The trouble could spread, infecting other emerging markets or even Wall Street.

#5 The Motley Fool: “6 signs the next recession might be closer than we realize”…

To be perfectly clear, trying to predict when recessions will occur is pure guesswork. Top market analysts have called for pullbacks in the market, unsuccessfully, in pretty much every year since the Great Recession ended. But the economic cycle doesn’t lie: recessions are inevitable. And in my estimation, we’re probably closer to the next recession than you realize.

How can I be so certain? Well, I can’t. Remember, I just noted there’s virtually no certainty when it comes to predicting when recessions will occur. There are, however, six warning signs that suggest a recession could be, in relative terms, around the corner.

#6 Forbes: “U.S. Household Wealth Is Experiencing An Unsustainable Bubble”…

Since the dark days of the Great Recession in 2009, America has experienced one of the most powerful household wealth booms in its history. Household wealth has ballooned by approximately $46 trillion or 83% to an all-time high of $100.8 trillion. While most people welcome and applaud a wealth boom like this, my research shows that it is actually another dangerous bubble that is similar to the U.S. housing bubble of the mid-2000s. In this piece, I will explain why America’s wealth boom is artificial and heading for a devastating bust.

#7 Savannah Now: “Global debt soars, along with fears of crisis ahead”…

“We were supposed to correct a debt bubble,” said David Rosenberg, chief economist at Gluskin Sheff, a wealth-management firm. “What we did instead was create more debt.”

#8 CNBC: “The emerging market crisis is back. And this time it’s serious”…

But markets are feeling a sense of deja vu. Blame it on a stronger dollar, escalating tensions since President Donald Trump came to power, worries over a full-fledged trade war with China or rising interest rates in the U.S., this time around the crisis seems to have entered a new phase.

The damage is far more widespread. The crisis has engulfed countries across the globe — from economies in South America, to Turkey, South Africa and some of the bigger economies in Asia, such as India and China. A number of these countries are seeing their currency fall to record levels, high inflation and unemployment, and in some cases, escalating tensions with the United States.

I don’t think that we have seen such ominous declarations from the mainstream media since the last global financial crisis in 2008.

And the mainstream media is not alone.  Yesterday, I discussed the fact that tech executives on the west coast are setting up luxury survival bunkers in New Zealand in order to prepare for what is ahead.

They all know what is coming, and they also know that it is approaching very rapidly.

This chapter in American history is not going to end well.  On some level, all of us understand this.  Storm clouds have been building on the horizon for quite some time and the warning signs are all around us.

Our day of reckoning may have been delayed, but it was not canceled.  America has a date with destiny, and it is going to be exceedingly painful.

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

Oil Prices Have Been Rising And $4 A Gallon Gasoline Would Put Enormous Stress On The U.S. Economy

Thanks to increasing demand and upcoming U.S. sanctions against Iran, oil prices have been rising and some analysts are forecasting that they will surge even higher in the months ahead.  Unfortunately, that would be very bad news for the U.S. economy at a time when concerns about a major economic downturn have already been percolating.  In recent years, extremely low gasoline prices have been one of the factors that have contributed to a period of relative economic stability in the United States.  Because our country is so spread out, we import such a high percentage of our goods, and we are so dependent on foreign oil, our economy is particularly vulnerable to gasoline price shocks.  Anyone that lived in the U.S. during the early 1970s can attest to that.  If the average price of gasoline rises to $4 a gallon by the end of 2018 that will be really bad news, and if the average price of gasoline were to hit $5 a gallon that would be catastrophic for the economy.

Very early on Tuesday, the price of U.S. oil surged past $70 a barrel in anticipation of the approaching hurricane along the Gulf Coast.  The following comes from Fox Business…

U.S. oil prices rose on Tuesday, breaking past $70 per barrel, after two Gulf of Mexico oil platforms were evacuated in preparation for a hurricane.

U.S. West Texas Intermediate (WTI) crude futures were at $70.05 per barrel at 0353 GMT, up 25 cents, or 0.4 percent from their last settlement.

If we stay at about $70 a gallon, that isn’t going to be much of a problem.

But some analysts are now speaking of “an impending supply crunch”, and that is a very troubling sign.  For example, just check out what Stephen Brennock is saying…

“Exports from OPEC’s third-biggest producer are falling faster than expected and worse is to come ahead of a looming second wave of U.S. sanctions,” said Stephen Brennock, analyst at London brokerage PVM Oil Associates. “Fears of an impending supply crunch are gaining traction.”

So how high could prices ultimately go?

Well, energy expert John Kilduff is now projecting that we could see the price of gasoline at $4 a gallon by winter…

Energy expert John Kilduff counts Iran sanctions as the top reason West Texas Intermediate (WTI) could climb as much as 30 percent by winter, and that could spell $4 a gallon unleaded gasoline at the pumps.

“The global market is tight and it’s getting tighter, and the big strangle around the market right now is what’s in the process of happening with Iran and the Iran sanctions,” the Again Capital founding partner said on CNBC’s “Futures Now.”

About two months from now, U.S. sanctions will formally be imposed on Iran, and that is going to significantly restrict the supply of oil available in the marketplace.

So refiners that had relied on Iranian oil are “scrambling” to find new suppliers, and this could ultimately drive oil prices much higher…

Iran’s oil exports are plummeting, as refiners scramble to find alternatives ahead of a re imposition of U.S. sanctions in early November. That in turn has helped drain a glut of unsold oil.

“To the extent we’re seeing the Iran barrels lost to the market, you’re looking at a WTI price and Brent in the $85 to $95 range, potentially,” Kilduff said.

Other sources are also predicting that oil prices will rise.

Barclays is warning that “prices could reach $80 and higher in the short term”, and BNP Paribas is now anticipating that Brent crude will average $79 a barrel in 2019.

In addition to the upcoming Iranian sanctions, rising global demand for oil is also a major factor that is pushing up prices.

For example, many Americans don’t even realize that China has surpassed us and has now become the biggest crude oil importer on the entire planet…

China became the world’s largest crude oil importer in 2017, surpassing the US and importing 8.4 million barrels per day.

The US only imported 7.9 million barrels per day in 2017, according to the US Energy Information Administration.

So what is the bottom line for U.S. consumers?

The bottom line is that gasoline prices are likely to jump substantially, and that is going to affect prices for almost everything else that you buy.

Excluding tech products, virtually everything else that Americans purchase has to be transported, and so the price of gasoline must be factored into the cost.

So if gasoline prices shoot up quite a bit, that means that almost everything is going to cost more.

And this would be happening at a time when inflation is already on the rise…

According to data from the Bureau of Labor Statistics, the Consumer Price Index for All Urban Consumers, less food and energy, hit 2.4% in July 2018. That’s its highest reading since September 2008.

Of course 2.4 percent doesn’t really sound that scary, and that is how the government likes it.

But if the rate of inflation was still calculated the way it was back in 1990, the current inflation rate would be above 6 percent.

And if the rate of inflation was still calculated the way it was back in 1980, the current inflation rate would be above 10 percent.

Inflation is a hidden tax on all of us, and it is one of the big reasons why the middle class is being eroded so rapidly.

Please do not underestimate the impact of the price of oil.  It shot above $100 a barrel in 2008, and it was one of the factors that precipitated the financial crisis later that year.

Now we are rapidly approaching another crisis point, and there are so many wildcards that could potentially cause major problems.

One of those wildcards that I haven’t even talked about in this article would be a major war in the Middle East.  One of these days it will happen, and the price of oil will instantly soar to well above $100 a barrel.

We live at a time of rising global instability, and we should all learn to start expecting the unexpected.

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

 

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