Is The Stock Market Overvalued?

Stock Market Overvalued - Public DomainAre stocks overvalued?  By just about any measure that you could possibly name, stocks are at historically high prices right now.  From a technical standpoint, the stock market is more overvalued today than it was just prior to the last financial crisis.  The only two moments in U.S. history that even compare to our current state of affairs are the run up to the stock market crash of 1929 and the peak of the hysteria just before the dotcom bubble burst.  It is so obvious that stocks are in a bubble that even Janet Yellen has talked about it, but of course she will never admit that the Federal Reserve has played a key role in creating this bubble.  They say that hindsight is 20/20, but what is happening right in front of our eyes in 2015 is so obvious that everyone should be able to see it.  Just like with all other financial bubbles throughout our history, someday people will look back and talk about how stupid we all were. (Read More...)

A Recession Within A Recession

Recession - Public DomainOn Friday, the federal government announced that the U.S. economy contracted at a 0.7 percent annual rate during the first quarter of 2015.  This unexpected shrinking of the economy is being primarily blamed on “harsh” weather during the first three months of this year and on the strengthening of the U.S. dollar.  Most economists are confident that U.S. GDP will rebound back into positive territory when the numbers for the second quarter come out, but if that does not happen we will officially meet the government’s criteria for being in another “recession”.  To make sure that the numbers for Q2 will look “acceptable”, the Bureau of Economic Analysis is about to change the way that it calculates GDP again.  They are just going to keep “seasonally adjusting” the numbers until they get what they want.  At this point, the government numbers are so full of “assumptions” and “estimates” that they don’t really bear much resemblance to reality anyway.  In fact, John Williams of shadowstats.com has calculated that if the government was actually using honest numbers that they would show that we have continually been in a recession since 2005.  That is why I am referring to this as a “recession within a recession”.  Most people can look around and see that economic conditions for most Americans are not good, and now they are about to get even worse. (Read More...)

Baltimore Has Descended Into A State Of Lawlessness – And More Cities Will Soon Follow

Baltimore Riot Police - Public DomainDid you really think that Baltimore would return to normal after everything that has happened?  On Thursday, a mother and her 7-year-old son were both shot in the head in a double murder that has shocked the entire nation.  Police believe that the son may have been shot in order to prevent him from identifying the individual that shot his mother.  So is this what America is turning into?  A place where 7-year-old kids are executed in cold blood?  That mother and son were the 37th and 38th murder victims in the city of Baltimore so far this month.  That makes this the deadliest month in Baltimore in 15 years, but because of all the controversy surrounding the death of Freddie Gray, police in Baltimore are afraid to do their jobs at this point.  In some areas of the city, young men boldly smoke weed in public and wave guns around at innocent bystanders without any worry that police will intervene.  Baltimore has descended into a state of lawlessness, and this is just the beginning.  As I discussed just the other day, the same kind of lawlessness will soon sweep all across this country. (Read More...)

Emergency Powers Give Barack Obama Authority Over Just About Everything During A Major National Crisis

Barack Obama With His Hand On The Resolute DeskPresidents have always exercised emergency powers, but now thanks to dozens of new laws, regulations, court decisions and executive orders, Barack Obama is the most powerful president in all of U.S. history.  Of course the U.S. Constitution does not actually give the president any special powers during a time of national emergency, but over time presidents have decided that they should be able to exercise such powers and the courts have generally agreed with them.  During World War II and prior to that, these emergency powers were largely uncodified and were primarily used during times of war.  But since World War II things have completely changed, and this has particularly been true since 9/11.  Over the past decade or so, a whole host of extraordinary powers have specifically been given to the office of the president, and all that it takes to exercise them is a major “national emergency”.  So if we do have a full-blown economic collapse, a historic natural disaster, a significant war or a massive pandemic, Barack Obama could use the emergency powers that he has been given to essentially take authority over everything. (Read More...)

Stocks Began Falling Right At This Time Of The Year Just Prior To The Last Financial Crisis

Stock Market Crash Bear - Public DomainHave you heard of the saying “sell in May and go away”?  Traditionally, the period from May through October has been a time of weakness for stocks.  In fact, on average stocks hit their lowest point of the year on October 27th.  And most people don’t remember this, but the Dow Jones Industrial Average actually began plunging right at this time of the year just prior to the financial crisis of 2008.  Most people do remember the huge stock crash that happened in the fall of that year, but the market actually started to slide in May.  Throughout the first four and a half months of 2008, stocks moved up and down in a fairly narrow range, and the Dow closed at a short-term peak of 13,028.16 on May 19th.  From there it was all downhill for the rest of the year.  So will a similar thing happen in 2015 as we approach the next great financial crisis?  Since March 20th, the Dow Jones Transportation Average has already fallen by almost 800 points.  So will the Dow Jones Industrial Average soon follow?  Well, only time will tell, but the Dow was down 190 points on Tuesday.  Signs of trouble are popping up all over the place, and the “smart money” is getting out while the getting is good. (Read More...)

Is The 505 Trillion Dollar Interest Rate Derivatives Bubble In Imminent Jeopardy?

Bubble In Hands - Public DomainAll over the planet, large banks are massively overexposed to derivatives contracts.  Interest rate derivatives account for the biggest chunk of these derivatives contracts.  According to the Bank for International Settlements, the notional value of all interest rate derivatives contracts outstanding around the globe is a staggering 505 trillion dollars.  Considering the fact that the U.S. national debt is only 18 trillion dollars, that is an amount of money that is almost incomprehensible.  When this derivatives bubble finally bursts, there won’t be enough money in the entire world to bail everyone out.  The key to making sure that all of these interest rate bets do not start going bad is for interest rates to remain stable.  That is why what is going on in Greece right now is so important.  The Greek government has announced that it will default on a loan payment that it owes to the IMF on June 5th.  If that default does indeed happen, Greek bond yields will soar into the stratosphere as panicked investors flee for the exits.  But it won’t just be Greece.  If Greece defaults despite years of intervention by the EU and the IMF, that will be a clear signal to the financial world that no nation in Europe is truly safe.  Bond yields will start spiking in Italy, Spain, Portugal, Ireland and all over the rest of the continent.  By the end of it, we could be faced with the greatest interest rate derivatives crisis that any of us have ever seen. (Read More...)

It Is Mathematically Impossible To Pay Off All Of Our Debt

Money - Public DomainDid you know that if you took every single penny away from everyone in the United States that it still would not be enough to pay off the national debt?  Today, the debt of the federal government exceeds $145,000 per household, and it is getting worse with each passing year.  Many believe that if we paid it off a little bit at a time that we could eventually pay it all off, but as you will see below that isn’t going to work either.  It has been projected that “mandatory” federal spending on programs such as Social Security, Medicaid and Medicare plus interest on the national debt will exceed total federal revenue by the year 2025.  That is before a single dollar is spent on the U.S. military, homeland security, paying federal workers or building any roads and bridges.  So no, we aren’t going to be “paying down” our debt any time in the foreseeable future.  And of course it isn’t just our 18 trillion dollar national debt that we need to be concerned about.  Overall, Americans are a total of 58 trillion dollars in debt.  35 years ago, that number was sitting at just 4.3 trillion dollars.  There is no way in the world that all of that debt can ever be repaid.  The only thing that we can hope for now is for this debt bubble to last for as long as possible before it finally explodes. (Read More...)

Greece Says That It Will Default On June 5th, And Moody’s Warns Of A ‘Deposit Freeze’

Greece Euro - Public DomainThe Greek government says that a “moment of truth” is coming on June 5th.  Either their lenders agree to give them more money by that date, or Greece will default on a 300 million euro loan payment to the IMF.  Of course it won’t technically be a “default” according to IMF rules for another 30 days after that, but without a doubt news that Greece cannot pay will send shockwaves throughout the financial world.  At that point, those holding Greek bonds will start to panic as they realize that they might not get paid as well.  All over Europe, there are major banks that are holding large amounts of Greek debt and derivatives that are related to the performance of Greek debt.  If something is not done to avert disaster at the last moment, a default by Greece could be the spark that sets off a major European financial crisis this summer. (Read More...)

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