Brexit Vote

Has the next Lehman Brothers moment arrived? Late Thursday night we learned that the British people had voted to leave the European Union, and this could be the “trigger event” that unleashes great financial panic all over the planet. Of course stocks have already been crashing all over the globe over the past year, but up until now we had not seen the kind of stark fear that the crash of 2008 created following the collapse of Lehman Brothers. The British people are certainly to be congratulated for choosing to leave the tyrannical EU, and if I could have voted I would have voted to “leave” as well. But just as I warned 10 days ago, choosing to leave will “throw the entire continent into a state of economic and financial chaos”. And “Black Friday” was just the beginning – the pain from this event is going to continue to be felt for months to come.

The shocking outcome of the Brexit vote caught financial markets completely off guard, and the carnage that we witnessed on Friday was absolutely staggering…

-The Dow Jones Industrial Average plunged 610 points, and this represented the 9th largest one day stock market crash in the history of the Dow.

-The Nasdaq was hit even harder than the Dow. It declined 4.12 percent which was the biggest one day decline since 2011.

-Overall, Black Friday erased approximately 800 billion dollars of stock market wealth in the United States.

-Thursday was the worst day ever for the British pound, and investors were stunned to see it collapse to a 31 year low.

-Friday was the worst day ever for European banking stocks.

-Friday was the worst day for Italian stocks since 1997.

-Friday was the worst day for Spanish stocks since 1987.

-Japan experienced tremendous chaos as well. The Nikkei fell an astounding 1286 points, and this was the biggest drop that we have seen in more than 16 years.

-Banking stocks all over the planet got absolutely pummeled on Black Friday. The following comes from USA Today…

Stocks of some British-based banks suffered double-digit losses in heavy U.S. trading. Barclays (BCS) shares plunged 20.48% to close at $8.89. HSBC (HSBC) shares closed down 9.04% at $30.68. And shares of Royal Bank of Scotland (RBS) plummeted 27.5% to a $5.43 close.

Top U.S. banks also suffered from the Brexit fallout, although not as badly as their British counterparts.

Shares of JPMorgan Chase (JPM) closed down 6.95% at $59.60. Bank of America (BAC) shares fell 7.41% to a $13 close. Citigroup (C) shares dropped 9.36% to close at $40.30. And Wells Fargo (WFC) closed 4.59% lower at $45.71.

-Friday was the best day for gold since the collapse of Lehman Brothers.

-George Soros made a killing on Black Friday because he had already positioned his company to greatly benefit from the Brexit vote ahead of time.

But please don’t think that “Black Friday” was just a one day thing. As I warned before, the Brexit vote “could be the trigger that changes everything“. And if you don’t believe me on this, perhaps you will listen to former Federal Reserve Chairman Alan Greenspan. This is what he told CNBC on Friday…

“This is the worst period, I recall since I’ve been in public service,” Greenspan said on “Squawk on the Street.”

“There’s nothing like it, including the crisis — remember October 19th, 1987, when the Dow went down by a record amount 23 percent? That I thought was the bottom of all potential problems. This has a corrosive effect that will not go away.”

I completely agree with Greenspan on this point. This “corrosive effect” on global markets is not going to go away any time soon. Sure there will be days when the markets are green just like there were after the collapse of Lehman Brothers, but overall the trend will be down.

Now that the United Kingdom has decided to leave the EU, financial markets have been gripped by fear and uncertainty, and there is a great deal of concern that this Brexit “could harm the economies of everyone involved”…

Important British trading partners — including India and China — indicated they were worried that an exit would create regulatory and political volatility that could harm the economies of everyone involved.

The U.K.’s Treasury itself reported that its analysis showed the nation “would be permanently poorer” if it left the EU and adopted any of a number of likely alternatives. “Productivity and GDP per person would be lower in all these alternative scenarios, as the costs would substantially outweigh any potential benefit of leaving the EU,” a summary of the report said.

This threat even extends to the United States. CNN just published an article that lists four ways the U.S. could be significantly affected by all of this…

1. Fears that the EU may be falling apart
2. Volatile markets slow down the engine of U.S. growth
3. Brexit triggers a strong dollar, which hurts U.S. trade
4. Brexit forces the Fed to rewrite its rate hike playbook

Fortunately we are now heading into the weekend, and that might have a calming effect on the markets.

Or it might just cause financial tension to build up to an extremely high level which will subsequently be released on Monday morning.

We shall see.

RCB’s Charlie McElligott is warning that Black Friday was just the beginning and that “today is the appetizer for Monday”.

And UBS derivatives strategist Rebecca Cheong says that we could see more than a hundred billion dollars of selling over the next two to three trading days…

Strategies designed to mitigate risk will actually add to downward pressure in the S&P 500 over the next week as computerized selling ramps up to keep pace with falling prices. It reminds Cheong of the rapid stock selling that roiled markets in August, when the S&P 500 fell 11 percent to a 10-month low while facing similar behavior from algorithmic traders.

“The bigger the down move today, the more they have to sell, which would basically create a vicious cycle,” Cheong, head of Americas equity derivatives strategy at UBS, said in a phone interview. “We’ll see front-loaded selling in the range of $100 billion to $150 billion over the next two to three days. It could be very similar to August in terms of model-based selling.”

Personally, I am hoping for calm when the markets open on Monday. But without a doubt, something has now shifted as a result of this Brexit vote, and things have suddenly become a whole lot more serious.

So what do you believe we will see happen next week?

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

*About the author: Michael Snyder is the founder and publisher of The Economic Collapse Blog. Michael’s controversial new book about Bible prophecy entitled “The Rapture Verdict” is available in paperback and for the Kindle on Amazon.com.*

When less stuff is being bought, sold and shipped around the country with each passing month, how in the world can the U.S. economy be in “good shape”? Unlike official government statistics which are often based largely on projections, assumptions and numbers seemingly made up out of thin air, the Cass Freight index is based on real transactions conducted by real shipping companies. And what the Cass Freight Index is telling us about the state of the U.S. economy in 2016 lines up perfectly with all of the other statistics that are clearly indicating that we have now shifted into recession mode.

If you are not familiar with the Cass Freight Index, here is a definition of the index from the official Cass website…

Since 1995, the Cass Freight Index™ has been a trusted measure of North American freight volumes and expenditures. Our monthly Cass Freight Index Report provides valuable insight into freight trends as they relate to other economic and supply chain indicators and the overall economy.

Data within the Index includes all domestic freight modes and is derived from $25 billion in freight transactions processed by Cass annually on behalf of its client base of hundreds of large shippers. These companies represent a broad sampling of industries including consumer packaged goods, food, automotive, chemical, OEM, retail and heavy equipment. Annual freight volume per organization ranges from $1 million to over $1 billion. The diversity of shippers and aggregate volume provide a statistically valid representation of North American shipping activity.

When they say “all domestic freight modes”, that includes air, rail, truck, etc. As you are about to see, the total amount of stuff that is being bought, sold and shipped around the country by all these various methods has now been declining for 15 months in a row.

If it was just one or two months you could say that it was just an anomaly, but how in the world can anyone explain away 15 consecutive months?

Not only that, but the brand new number that just came out for May 2016 is the lowest number that we have seen for the month of May in 6 years.

Of course the number for April was the lowest number that we have seen for that month in 6 years too, and the number for March was also the lowest number that we have seen for that month in 6 years.

Are you starting to get the picture?

Below is some analysis of these numbers and a chart from Wolf Richter…

The Index is not seasonally or otherwise adjusted, so it shows strong seasonal patterns. In the chart below, the red line with black markers is for 2016. The colorful spaghetti above that line represents the years 2011 through 2015. The only month this year that was not the worst month since 2010 was February; only February 2011 was worse. That’s how bad it has gotten in the Freight sector:

“Truck tonnage continues to slide for both linehaul and spot markets,” according to the report. And railroads are also singing the blues.

To me, these numbers are absolutely staggering. How anyone can look at them and then attempt to claim that the U.S. economy is heading for good times is a mystery to me.

And this is especially true considering all of the other news that is pouring in. Just today, we learned that new home sales have fallen by the most in 8 months. If you are trying to sell your home, hopefully you will get that done very quickly, because this latest property bubble is starting to burst in a major way.

Of course there are many, many more numbers that tell us that a new U.S. economic crisis has already begun and has been going on for quite a while. If you doubt this at all, please carefully read my previous article entitled “15 Facts About The Imploding U.S. Economy That The Mainstream Media Doesn’t Want You To See“.

Today, I also came across a stunning IMF report that was just released that criticized the U.S. for our shrinking middle class and our rising levels of poverty…

A rising share of the U.S. labor force is shifting into retirement, basic infrastructure is crumbling, productivity gains are scanty, and labor markets and businesses appear less adept at reallocating human and physical capital. These growing headwinds are overlaid by pernicious secular trends in income: labor’s share of income is around 5 percent lower today than it was 15 years ago, the middle class has shrunk to its smallest size in the last 30 years, the income and wealth distribution are increasingly polarized, and poverty has risen.

If you follow my work on a regular basis, you already know that everything that the IMF said in that paragraph is true.

A little bit later in the report, the IMF shared some absolutely startling facts about the growth of poverty in this country…

There is an urgent need to tackle poverty. In the latest data, 1 in 7 Americans is living in poverty, including 1 in 5 children and 1 in 3 female-headed households. Around 40 percent of those in poverty are working.

This distressing growth in our poverty numbers has taken place during Barack Obama’s so-called “economic recovery”.

So how bad are things ultimately going to get for America’s poor now that a new economic crisis has begun?

Before I wrap up this article, I have to mention the early returns from the Brexit vote. All day on Thursday, global news sources were reporting that the latest polls had “Remain” comfortably in the lead, and global financial markets soared on that news.

But now that the actual votes are being reported, it looks like it is going to be much, much closer than anticipated. In fact, as I write this article “Leave” is ahead by a 54.16 percent to 45.84 percent margin. Only a relatively small fraction of the votes have been counted so far, but global financial markets are already being spooked by these results.

If “Leave” does actually win, that is going to have enormous implications for the markets and for the future of Europe. So let’s keep a close eye on what is happening. If “Leave” does prove to be victorious, that will be one of the biggest things to hit Europe in decades, and I am sure that I will be posting an article about it tomorrow.

We live at a time when global events are beginning to accelerate, and there is much uncertainty in the air. If you do not have a solid foundation on which to stand, the events of the coming months will likely shake you greatly. I encourage everyone to start focusing on the things that really matter, because a lot of the other things that we obsess over will soon become quite insignificant.

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UPDATE: It is official – the United Kingdom has voted to leave the European Union. They are to be greatly congratulated for declaring their independence, but without a doubt this vote is going to cause some very serious short-term economic and financial pain. Already we have witnessed the greatest one day crash in the history of the British pound, and stock markets all over the world are crashing. For much more, please see our latest video update…

Black Friday: Shocking Brexit Vote Result Causes The 9th Largest Stock Market Crash In U.S. History

The Amount Of Stuff Being Bought, Sold And Shipped Around The U.S. Hits The Lowest Level In 6 Years