Financial

Dot-Com Bubble 2.0 Is Bursting: Tech Stocks Are Already Down Half A Trillion Dollars Since Mid-2015

Tech Bubble 2.0Do you remember how much stocks went down when the first dot-com bubble burst?  Well, it is happening again, and tech stocks are already down more than half a trillion dollars since the middle of 2015.  On Friday, the tech-heavy Nasdaq dropped to its lowest level in more than 15 months, and it has now fallen more than 16 percent from the peak of the market.  But of course some of the biggest names have fallen much more than that.  Netflix is down 37 percent, Yahoo is down 39 percent, LinkedIn is down 60 percent, and Twitter is down more than 70 percent.  If you go back through my previous articles, you will find that I specifically warned about Twitter again and again.  Irrational financial bubbles like this always burst eventually, and many investors that got in at the very top are now losing extraordinary amounts of money.

On Friday, tech stocks got absolutely slammed as the bursting of dot-com bubble 2.0 accelerated once again.  The following is how CNBC summarized the carnage…

The Nasdaq composite fell 3.25 percent, as Apple and the iShares Nasdaq Biotechnology ETF (IBB) dropped 2.67 percent and 3.19 percent, respectively.

Also weighing on the index were Amazon and Facebook, which closed down 6.36 percent and 5.81 percent, respectively.

LinkedIn shares also tanked 43.63 percent after posting weak guidance on their quarterly results.

Overall, LinkedIn is now down a total of 60 percent from the peak of the market.  But they are far from the only ones that have already seen their bubble burst.

Many of the biggest names in the tech world have gotten mercilessly hammered over the past six months of so.  Just look at some of the famous brands that have already lost between 20 and 40 percent of their market caps…

Yahoo (YHOO) shares are off 39%, and Netflix (NFLX), the best-performing stock in the S&P 500 last year, is now off by 37% from its 52-week high.

Likewise, Priceline.com (PCLN) is off 31% and eBay (EBAY), 22%.

But there are other very big tech companies that have seen stock collapses that completely dwarf those numbers.  Here are some more absolutely stunning statistics from USA Today…

Twitter and Groupon are the biggest dogs of this boom, both off 70% from 52-week highs and well below their IPO prices.

FitBit shares have collapsed 70%, while Yelp’s valuation has shrunk by two-thirds.

Box, which has the distinction of posting quarterly net losses in excess of revenue, is down by half.

Match.com, the holding company for dating sites owned by parent Interactive Corp. that went public late last year, is down 39% from its high.

When your stock loses 70 percent of its value, that is a complete and utter collapse.

In the past, I have specifically singled out Twitter, Yelp and LinkedIn as tech stocks that were irrationally priced.

Hopefully people listened to those warnings and got out while the getting was good.

At the top of this article, I mentioned that tech stocks have already fallen in value by more than 500 billion dollars.  The financial crisis that began in the middle of last year is now greatly accelerating, and Wall Street is starting to panic.

As stocks crash, many hedge funds are being absolutely pummeled.  The following are just a few of the high profile names that are experiencing massive losses right now…

Some of the biggest names to get trounced include:

►Pershing Square Capital Management, the publicly traded investment vehicle of billionaire hedgie Bill Ackman, fell 11% last month following a 20% decline last year, data from the web site shows.

►Larry Robbins’ Glenview Capital, famous for picking stocks that could benefit from Obamacare, dropped 13.65% in January following a decline of 18% last year, according to data from HSBC’s Hedge Weekly report, a copy of which was obtained by USA TODAY.

►Marcato International, a well-known activist fund run by Ackman protege Mick McGuire, fell 12.1% last month following a 9% loss last year, according to HSBC.

When you lose more than 10 percent of your money in a single month, that is not good.

And if I am right, this is just the beginning of our troubles.

And of course I am far from the only one warning that big problems are on the horizon.  In fact, analysts at Citigroup just made international headlines by warning that the global economy was now trapped in a “death spiral”…

Some analysts — including those at Citi — have turned bearish on the world economy this year, following an equity rout in January and weaker economic data out of China and the U.S.

“The world appears to be trapped in a circular reference death spiral,” Citi strategists led by Jonathan Stubbs said in a report on Thursday.

“Stronger U.S. dollar, weaker oil/commodity prices, weaker world trade/petrodollar liquidity, weaker EM (and global growth)… and repeat. Ad infinitum, this would lead to Oilmageddon, a ‘significant and synchronized’ global recession and a proper modern-day equity bear market.”

Signs of a significant economic downturn are all around us, and so many of the exact same patterns that played out during the last two stock market crashes are happening again, and yet most people continue to refuse to acknowledge what is taking place.

If you are waiting for this new dot-com bubble to crash, you can stop waiting, because it has already happened.

When your stock falls by 50, 60 or 70 percent, the game is already over.

But just like 2001 and 2008, many people out there will end up being paralyzed by indecision.  Once again the mainstream media is insisting that there is no reason for panic and that everything will be just fine, and once again millions upon millions of ordinary Americans will be wiped out as the financial markets implode.

This is now the third time this has happened since the turn of the century.

How clueless have we become?  The exact same thing keeps happening to us over and over and yet we still don’t get it.

Only this time around there isn’t going to be any sort of a “recovery” afterwards.

This is essentially our “third strike”, and the years ahead are going to be extremely bitter and painful for most people.

But if you want to believe that one of these politicians is going to come along and save America, you go ahead and keep on believing that.

Most people believe what they want to believe, and the capacity that many Americans have demonstrated for self-delusion is absolutely remarkable.

22 Signs That The Global Economic Turmoil We Have Seen So Far In 2016 Is Just The Beginning

Skyline Globe Clock Gears - Public DomainAs bad as the month of January was for the global economy, the truth is that the rest of 2016 promises to be much worse.  Layoffs are increasing at a pace that we haven’t seen since the last recession, major retailers are shutting down hundreds of locations, corporate profit margins are plunging, global trade is slowing down dramatically, and several major European banks are in the process of completely imploding.  I am about to share some numbers with you that are truly eye-popping.  Each one by itself would be reason for concern, but when you put all of the pieces together it creates a picture that is hard to deny.  The global economy is in crisis, and this is going to have very serious implications for the financial markets moving forward.  U.S. stocks just had their worst January in seven years, and if I am right much worse is still yet to come this year.  The following are 22 signs that the global economic turmoil that we have seen so far in 2016 is just the beginning…

1. The number of job cuts in the United States skyrocketed 218 percent during the month of January according to Challenger, Gray & Christmas.

2. The Baltic Dry Index just hit yet another brand new all-time record low.  As I write this article, it is sitting at 303.

3. U.S. factory orders have now dropped for 14 months in a row.

4. In the U.S., the Restaurant Performance Index just fell to the lowest level that we have seen since 2008.

5. In January, orders for class 8 trucks (the big trucks that you see shipping stuff around the country on our highways) declined a whopping 48 percent from a year ago.

6. Rail traffic is also slowing down substantially.  In Colorado, there are hundreds of train engines that are just sitting on the tracks with nothing to do.

7. Corporate profit margins peaked during the third quarter of 2014 and have been declining steadily since then.  This usually happens when we are heading into a recession.

8. A series of extremely disappointing corporate quarterly reports is sending stock after stock plummeting.  Here is a summary from Zero Hedge of a few examples that we have just witnessed…

  • SHARES OF LIONS GATE ENTERTAINMENT FALL 5 PCT IN EXTENDED TRADE AFTER QUARTERLY RESULTS – RTRS
  • TABLEAU SOFTWARE SHARES TUMBLE 40 PCT IN AFTER HOURS TRADING – RTRS
  • YRC WORLDWIDE SHARES DOWN 16.4 PCT AFTER THE BALL FOLLOWING RESULTS – RTRS
  • SPLUNK INC SHARES DOWN 7.6 PCT IN AFTER HOURS TRADING – RTRS
  • LINKEDIN SHARES EXTEND DECLINE, DOWN 24 PCT AFTER RESULTS, GUIDANCE – RTRS
  • HANESBRANDS SHARES FURTHER ADD TO LOSSES IN EXTENDED TRADE, LAST DOWN 14.9 PCT – RTRS
  • OUTERWALL SHARES FALL 11 PCT IN EXTENDED TRADING AFTER QUARTERLY RESULTS – RTRS
  • GENWORTH SHARES DOWN 16.5 PCT AFTER THE BELL FOLLOWING RESULTS, RESTRUCTURING PLAN

9. Junk bonds continue to crash on Wall Street.  On Monday, JNK was down to 32.60 and HYG was down to 77.99.

10. On Thursday, a major British news source publicly named five large European banks that are considered to be in very serious danger…

Deutsche Bank, Credit Suisse, Santander, Barclays and RBS are among the stocks that are falling sharply sending shockwaves through the financial world, according to former hedge fund manager and ex Goldman Sachs employee Raoul Pal.

11. Deutsche Bank is the biggest bank in Germany and it has more exposure to derivatives than any other bank in the world.  Unfortunately, Deutsche Bank credit default swaps are now telling us that there is deep turmoil at the bank and that a complete implosion may be imminent.

12. Last week, we learned that Deutsche Bank had lost a staggering 6.8 billion euros in 2015.  If you will recall, I warned about massive problems at Deutsche Bank all the way back in September.  The most important bank in Germany is exceedingly troubled, and it could end up being for the EU what Lehman Brothers was for the United States.

13. Credit Suisse just announced that it will be eliminating 4,000 jobs.

14. Royal Dutch Shell has announced that it is going to be eliminating 10,000 jobs.

15. Caterpillar has announced that it will be closing 5 plants and getting rid of 670 workers.

16. Yahoo has announced that it is going to be getting rid of 15 percent of its total workforce.

17. Johnson & Johnson has announced that it is slashing its workforce by 3,000 jobs.

18. Sprint just laid off 8 percent of its workforce and GoPro is letting go 7 percent of its workers.

19. All over America, retail stores are shutting down at a staggering pace.  The following list comes from one of my previous articles…

-Wal-Mart is closing 269 stores, including 154 inside the United States.

-K-Mart is closing down more than two dozen stores over the next several months.

-J.C. Penney will be permanently shutting down 47 more stores after closing a total of 40 stores in 2015.

-Macy’s has decided that it needs to shutter 36 stores and lay off approximately 2,500 employees.

-The Gap is in the process of closing 175 stores in North America.

-Aeropostale is in the process of closing 84 stores all across America.

-Finish Line has announced that 150 stores will be shutting down over the next few years.

-Sears has shut down about 600 stores over the past year or so, but sales at the stores that remain open continue to fall precipitously.

20. According to the New York Times, the Chinese economy is facing a mountain of bad loans that “could exceed $5 trillion“.

21. Japan has implemented a negative interest rate program in a desperate attempt to try to get banks to make more loans.

22. The global economy desperately needs the price of oil to go back up, but Morgan Stanley says that we will not see $80 oil again until 2018.

It is not difficult to see where the numbers are trending.

Last week, I told my wife that I thought that Marco Rubio was going to do better than expected in Iowa.

How did I come to that conclusion?

It was simply based on how his poll numbers were trending.

And when you look at where global economic numbers are trending, they tell us that 2016 is going to be a year that is going to get progressively worse as it goes along.

So many of the exact same things that we saw happen in 2008 are happening again right now, and you would have to be blind not to see it.

Hopefully I am wrong about what is coming in our immediate future, because millions upon millions of Americans are not prepared for what is ahead, and most of them are going to get absolutely blindsided by the coming crisis.

The Federal Reserve Just Made Another Huge Mistake

The Great Seal Of The United States - A Symbol Of Your Enslavement - Photo by IpankoninAs stocks continue to crash, you can blame the Federal Reserve, because the Fed is more responsible for creating the current financial bubble that we are living in than anyone else.  When the Federal Reserve pushed interest rates all the way to the floor and injected lots of hot money into the financial markets during their quantitative easing programs, this pushed stock prices to wildly artificial levels.  The only way that it would have been possible to keep stock prices at those wildly artificial levels would have been to keep interest rates ultra-low and to keep recklessly creating lots of new money.  But now the Federal Reserve has ended quantitative easing and has embarked on a program of very slowly raising interest rates.  This is going to have very severe consequences for the markets, but Janet Yellen doesn’t seem to care.

There is a reason why the financial world hangs on every single word that is issued by the Fed.  That is because the massively inflated stock prices that we see today were a creation of the Fed and are completely dependent on the Fed for their continued existence.

Right now, stock prices are still 30 to 40 percent above what the economic fundamentals say that they should be based on historical averages.  And if we are now plunging into a very deep recession as I contend, stock prices should probably fall by a total of more than 50 percent from where they are now.

The only way that stock prices could have ever gotten this disconnected from economic reality is with the help of the Federal Reserve.  And since the U.S. dollar is the primary reserve currency of the entire planet, the actions of the Fed over the past few years have created stock market bubbles all over the globe.

But the only way to keep the party going is to keep the hot money flowing.  Unfortunately for investors, Janet Yellen and her friends at the Fed have chosen to go the other direction.  Not only has quantitative easing ended, but the Fed has also decided to slowly raise interest rates.  The Fed left rates unchanged on Wednesday, but we were told that we are probably still on schedule for another rate hike in March.

So how did the markets respond to the Fed?

Well, after attempting to go green for much of the day, the Dow started plunging very rapidly and ended up down 222 points.

The markets understand the reality of what they are now facing.  They know that stock prices are artificially high and that if the Fed keeps tightening that it is inevitable that they will fall back to earth.

In a true free market system, stock prices would be far, far lower than they are right now.  Everyone knows this – including Jim Cramer.  Just check out what he told CNBC viewers earlier today…

Jim Cramer was tempted to resurface his “they know nothing” rant after hearing the Fed speak on Wednesday. He was hoping that a few boxes on his market bottom checklist might be checked off, but it seems that the bear market has not yet run its course.

“The Fed’s wishy-washy statement on interest rates today left stocks sinking back into oblivion after a nice rally yesterday,” the “Mad Money” host said.

Without artificial help from the Fed, stocks will most definitely continue to sink into oblivion.

That is because these current stock prices are not based on anything real.

And so as this new financial crisis continues to unfold, the magnitude of the crash is going to be much worse than it otherwise would have been.

It has often been said that the higher you go the farther you have to fall.  Because the Federal Reserve has pumped up stock prices to ridiculously high levels, that just means that the pain on the way down is going to be that much worse.

It is also important to remember that stocks tend to fall much more rapidly than they rise.  And when we see a giant crash in the financial markets, that creates a tremendous amount of fear and panic.  The last time there was great fear and panic for an extended period of time was during the crisis of 2008 and 2009, and this created a tremendous credit crunch.

During a credit crunch, financial institutions because very hesitant to lend to one another or to anyone else.  And since our economy is extremely dependent on the flow of credit, economic activity slows down dramatically.

As this current financial crisis escalates, you are going to notice certain things begin to happen.  If you own a business or you work at a business, you may start to notice that fewer people are coming in, and those people that do come in are going have less money to spend.

As economic activity slows, employers will be forced to lay off workers, and many businesses will shut down completely.  And since 63 percent of all Americans are living paycheck to paycheck, many will suddenly find themselves unable to meet their monthly expenses.  Foreclosures will skyrocket, and large numbers of people will go from living a comfortable middle class lifestyle to being essentially out on the street very, very rapidly.

At this point, many experts believe that the economic outlook for the coming months is quite grim.  For example, just consider what Marc Faber is saying…

It won’t come as a surprise to market watchers that “Dr. Doom” Marc Faber isn’t getting any more cheerful.

But the noted bear at least found a sense of humor on Wednesday into which he could channel his bleakness.

The publisher of the “Gloom, Boom & Doom Report” told attendees at the annual “Inside ETFs” conference that the medium-term economic outlook has become “so depressing” that he may as well fill a newly installed pool with beer instead of water.

If the Federal Reserve had left interest rates at more reasonable levels and had never done any quantitative easing, we would have been forced to address our fundamental economic problems more honestly and stock prices would be far, far lower today.

But now that the Fed has created this giant artificial financial bubble, the coming crash is going to be much worse than it otherwise would have been.  And the tremendous amount of panic that this crash will cause will paralyze much of the economy and will ultimately lead to a far deeper economic downturn than we witnessed last time around.

Once the Fed started wildly injecting money into the system, they had no other choice but to keep on doing it.

By removing the artificial support that they had been giving to the financial markets, they are making a huge mistake, and they are setting the stage for an economic tragedy that will affect the lives of every man, woman and child in America.

Global Stocks Enter Bear Market: One-Fifth Of All Worldwide Stock Market Wealth Is Already Gone

Stock Market Bear Bull - Public DomainIt’s official – global stocks have entered a bear market.  On Wednesday, we learned that the MSCI All-Country World Index has fallen a total of more than 20 percent from the peak of the market.  So that means that roughly one-fifth of all the stock market wealth in the entire world has already been wiped out.  How much more is it going to take before everyone will finally admit that we have a major financial crisis on our hands?  30 percent?  40 percent?  This new round of chaos began last night in Asia.  Japanese stocks were down more than 600 points and Hong Kong was down more than 700 points.  The nightmare continued to roll on when Europe opened, and European stocks ended up down about 3.2 percent when the markets over there finally closed.  In the U.S., it looked like it was going to be a truly historic day for a while there.  At one point the Dow had fallen 566 points, but a curious rebound resulted in a loss of only 249 points for the day.

As bad as things are in the U.S. right now, the truth is that we still have a long way to go to catch up with the rest of the planet.  Around the world, many major stock indexes are already down more than 30 or 40 percent.  Overall, the MSCI All-Country World Index is now down 20 percent, which officially puts us in bear market territory…

The MSCI All-Country World Index, which measures major developed and emerging markets, fell into a bear market Wednesday, with its decline from early last year now totaling more than 20 percent.

A plunge in U.S. stocks, which caused the Dow Jones industrial average to decline by more than 400 points at one point, pushed the global index into bear territory at midmorning during New York trading.

Japan fell into a bear market as well as the Nikkei 225 index dropped 3.7 percent Wednesday, bringing its total pullback to 22 percent from its high in June.

Much of this chaos is being driven by the price of oil.  On Wednesday the price of U.S. oil dropped below 28 dollars a barrel for a while, and as I write this article Brent crude is still below 28 dollars a barrel.

As energy prices continue to plummet, this is putting a tremendous amount of pressure on junk bonds.  On Wednesday JNK actually dipped beneath 32.00 for a time before rebounding at the end of the day.  I expect to see junk bonds continue to crash during the days ahead as investors feverishly race for the exits.

And of course global economic fundamentals continue to deteriorate as well.  Global trade is absolutely imploding and shipping rates have fallen to unprecedented levels.  If you can believe it, Bloomberg is reporting that it is now actually cheaper to rent a 1,100 foot merchant vessel than it is to rent a Ferrari…

Rates for Capesize-class ships plummeted 92 percent since August to $1,563 a day amid slowing growth in China. That’s less than a third of the daily rate of 3,950 pounds ($5,597) to rent a Ferrari F40, the price of which has also fallen slightly in the past few years, according to Nick Hardwick, founder of supercarexperiences.com. The Baltic Exchange’s rates reflect the cost of hiring the vessel but not fuel costs. Ships burn about 35 metric tons a day, implying a cost of about $4,000 at present prices, data compiled by Bloomberg show.

I could hardly believe that when I first read it.

But this is the kind of thing that we would expect to see happen when the greatest financial bubble in world history bursts.

The 200 trillion dollar global debt pyramid is now collapsing all around us, and the former chief economist of the Bank for International Settlements is warning that we could soon be facing “an avalanche of bankruptcies”…

The global financial system has become dangerously unstable and faces an avalanche of bankruptcies that will test social and political stability, a leading monetary theorist has warned.

“The situation is worse than it was in 2007. Our macroeconomic ammunition to fight downturns is essentially all used up,” said William White, the Swiss-based chairman of the OECD’s review committee and former chief economist of the Bank for International Settlements (BIS).

Of course it is a little late in the game to be warning us about this now.

At this point there is very little that can be done to stop the collapse that is already happening.

White went on to tell the Telegraph that things are going to become “uncomfortable for a lot of people who think they own assets that are worth something”…

“It will become obvious in the next recession that many of these debts will never be serviced or repaid, and this will be uncomfortable for a lot of people who think they own assets that are worth something,” he told The Telegraph on the eve of the World Economic Forum in Davos.

For years, I have been warning that the global financial system is an incredibly shaky house of cards, and now we have finally reached the endgame.

But the mainstream media in the United States is telling everyone not to panic.  Instead of a time to sell, the mainstream media is urging people to jump in and take advantage of all of the “great deals” in the stock market right now.  I really like what Mike Adams of Natural News had to say about what we are seeing…

The pathetically stupid and dishonest financial media is desperately running stories right now to maintain false faith in the markets, even while their own people are behind the scenes selling like mad. As long as they can keep the public believing in the “faith” of never-ending cheap money, they can bail out their own positions to suckers and fools who think a tiny dip in a massively overvalued, fraudulent market is a “buying opportunity.”

Watch for desperate headlines from propaganda financial outlets (such as MarketWatch.com) like, “10 reasons you shouldn’t sell” or “The upside potential of the market is HUGE!” These are psychological operations to try to persuade people that the collapse they’re seeing in global markets isn’t actually happening.

The financial chaos that has erupted in recent weeks has really caught a lot of people by surprise, but my readers knew that it was coming well in advance.

For months, I have been warning about this exact kind of scenario.

The deflationary financial meltdown that started during the last six months of 2015 is now making headlines all over the planet, and what we have experienced so far is just the tip of the iceberg.

The bears have gotten out of their cages, and global investors are running for cover.  Nobody is exactly sure what is going to happen tomorrow, but without a doubt the entire world will be watching.

The Last 16 Times This Happened There Was A Recession…

16 Sign - Public DomainSomething has just happened that has signaled a recession every single time that it has occurred since World War I.  16 times since 1919 there have been at least 8 month-over-month declines in industrial production during the preceding 12 month period, and in each of those 16 instances the U.S. economy has plunged into recession.  Now that it has happened again, will the U.S. economy beat the odds and avoid a major economic downturn?  I certainly wouldn’t count on it.  As I have written about repeatedly, there are a whole host of other numbers that are screaming that a new recession is here, and global financial markets are crumbling.  It would take a miracle of epic proportions to pull us out of this tailspin, and yet there are many people out there that are absolutely convinced that it will happen.

John Hussman is not one of them.  In his most recent weekly comment, he examined this stunning correlation between month-over-month declines in industrial production and recessions.  To me, what Hussman has presented is overwhelmingly conclusive…

Last week, following a long period of poor internals and weakening order surplus, we observed fresh declines in industrial production and retail sales. Industrial production has now also declined on a year-over-year basis. The weakness we presently observe is strongly associated with recession. The chart below (h/t Jeff Wilson) plots the cumulative number of month-over-month declines in Industrial Production during the preceding 12-month period, in data since 1919. Recessions are shaded. The current total of 10 (of a possible 12) month-over-month declines in Industrial Production has never been observed except in the context of a U.S. recession. Historically, as Dick Van Patten would say, eight is enough.

Declines In Industrial Production And Recessions

After looking at that chart, is there anyone out there that still doubts that the U.S. economy is in significant trouble?

Many estimates of U.S. GDP growth for the fourth quarter of 2015 are already just a small fraction of one percent.  It would not be a surprise at all to see a negative number posted once it is all said and done.

And of course more bad news for the economy just keeps pouring in.  So far this week we have learned that the growth rate of federal withholding taxes has turned negative, Johnson & Johnson plans has announced that it is eliminating 3,000 jobs, and BP has announced that it is eliminating 4,000 jobs.

Of course it is not exactly a surprise that BP is cutting jobs.  At this point the entire energy industry is absolutely hemorrhaging workers.  As I wrote about yesterday, 130,000 good paying energy jobs have been lost in the United States since the beginning of last year.

But now we are seeing major firms outside the energy industry cutting payrolls.  Even financial giants such as Morgan Stanley are looking for ways to cut costs…

Morgan Stanley just announced fourth-quarter earnings, and it is providing detail to investors on a cost-saving plan called Project Streamline.

During a conference call, CEO James Gorman uttered a sentence that will most likely make the bank’s staff shudder.

“Too many employees based in high-cost centers are doing work that can sensibly be done in lower-cost centers,” he said.

The whole environment is changing.

When things start to get tough, big corporations start to get rid of people.  We saw this back in 2008, and it is starting to happen again right now.

And just like last time around, we are going to see millions of Americans lose their jobs during the hard years that are ahead of us.

But thankfully for the moment there is a brief lull in the action.  The financial turmoil that has gripped the planet was calmed on Tuesday when China announced that their economy grew at a rate of 6.8 percent during the fourth quarter of 2015.  This was right in line with expectations, and markets around the world responded positively to the news.

There is just one huge problem.  Everyone knows that GDP figures coming out of China are essentially meaningless.  If you believe that the Chinese economy actually grew at a 6.8 percent rate during the fourth quarter of 2015, then I have a bridge to sell you.  Virtually every other number coming out of China over the past several months tells us that the Chinese economy is shrinking, and so that 6.8 percent figure is extremely questionable at best.

Do you want to know the last time the communist Chinese admitted to having a recession?

It was in 1976.

Over the past four decades, economic growth figures have become a source of great national pride for China.  To admit that the economy is now imploding would bring great shame on the Chinese government and the nation as a whole, and so that must be avoided at all costs.

Yes, the numbers are fraudulent in the U.S. too.  According to John Williams of shadowstats.com, if the U.S. was actually using honest numbers the last recession never would have technically ended.

But in China they take this to ridiculous extremes.  The Chinese economy is fueled by exports, and Chinese exports have been down on a year over year basis for six months in a row.  And the primary reason why commodity prices have been absolutely collapsing is because of the economic contraction in China.

Of course if China had released a GDP number that was honest, global markets would have crashed hard.  So their lies are making everyone else feel a bit better for the moment, and every day of relative stability that we can enjoy from here on out is something to be thankful for.

As you read this article, markets all over Asia, Europe, South America and the Middle East are already in bear market territory.  More than 30 percent of the market has been wiped out in Brazil and Hong Kong, more than 40 percent of the market has been wiped out in China and Italy, and about 50 percent of the market has been wiped out in Saudi Arabia.

We are already experiencing a major global financial crisis.

The only question remaining is how bad it will eventually become.

Let us hope for more days like this one that are relatively calm.  But I wouldn’t count on things turning around significantly any time soon, because the economic fundamentals are telling us that big trouble is ahead.

The Financial Apocalypse Accelerates As Middle East Stocks Crash To Begin The Week

Apocalyptic - Public DomainIt looks like it is going to be another chaotic week for global financial markets.  On Sunday, news that Iran plans to dramatically ramp up oil production sent stocks plunging all across the Middle East.  Stocks in Kuwait were down 3.1 percent, stocks in Saudi Arabia plummeted 5.4 percent, and stocks in Qatar experienced a mammoth 7 percent decline.  And of course all of this comes in the context of a much larger long-term decline for Middle Eastern stocks.  At this point, Saudi Arabian stocks are down more than 50 percent from their 2014 highs.  Needless to say, a lot of very wealthy people in Saudi Arabia are getting very nervous.  Could you imagine waking up someday and realizing that more than half of your fortune had been wiped out?  Things aren’t that bad in the U.S. quite yet, but it looks like another rough week could be ahead.  The Dow, the S&P 500 and the Nasdaq are all down at least 12 percent from their 52-week highs, and the Russell 2000 is already in bear market territory.  Hopefully this week will not be as bad as last week, but events are starting to move very rapidly now.

Much of the chaos around the globe is being driven by the price of oil.  At the end of last week the price of oil dipped below 30 dollars a barrel, and now Iran has announced plans “to add 1 million barrels to its daily crude production”…

Iran could get more than five times as much cash from oil sales by year-end as the lifting of economic sanctions frees the OPEC member to boost crude exports and attract foreign investment needed to rebuild its energy industry.

The Persian Gulf nation will be able to access all of its revenue from crude sales after the U.S. and five other global powers removed sanctions on Saturday in return for Iran’s curbing its nuclear program. The fifth-biggest producer in the Organization of Petroleum Exporting Countries had been receiving only $700 million of each month’s oil earnings under an interim agreement, with the rest blocked in foreign bank accounts. Iran is striving to add 1 million barrels to its daily crude production and exports this year amid a global supply glut that has pushed prices 22 percent lower this month.

It doesn’t take a genius to figure out what this is going to do to the price of oil.

The price of oil has already fallen more than 20 percent so far in 2016, and overall it has declined by more than 70 percent since late 2014.

When the price of oil first started to fall, a lot of people out there were proclaiming that it would be really good for the U.S. economy.  But I said just the opposite.  And of course since that time we have seen an endless parade of debt downgrades, bankruptcies and job losses.  130,000 good paying energy jobs were lost in the United States in 2015 alone because of this collapse, and things just continue to get even worse.  At this point, some are even calling for the federal government to intervene.  For example, the following is an excerpt from a CNN article that was just posted entitled “Is it time to bail out the U.S. oil industry?“…

America’s once-booming oil industry is suddenly in deep financial trouble.

The epic crash in oil prices has wiped out tens of thousands of jobs, caused dozens of bankruptcies and spooked global financial markets.

The fallout is already being felt in oil-rich states like Texas, Oklahoma and North Dakota, where home foreclosure rates are spiking and economic growth is slowing.

Now there are calls in at least some corners for the federal government to come to the rescue.

Is it just me, or is all of this really starting to sound a lot like 2008?

And of course it isn’t just the U.S. that is facing troubles.  The global financial crisis that began during the second half of 2015 is rapidly accelerating, and chaos is erupting all over the planet.  The following summary of what we have been seeing in recent days comes from Doug Noland…

The world has changed significantly – perhaps profoundly – over recent weeks. The Shanghai Composite has dropped 17.4% over the past month (Shenzhen down 21%). Hong Kong’s Hang Seng Index was down 8.2% over the past month, with Hang Seng Financials sinking 11.9%. WTI crude is down 26% since December 15th. Over this period, the GSCI Commodities Index sank 12.2%. The Mexican peso has declined almost 7% in a month, the Russian ruble 10% and the South African rand 12%. A Friday headline from the Financial Times: “Emerging market stocks retreat to lowest since 09.”

Trouble at the “Periphery” has definitely taken a troubling turn for the worse. Hope that things were on an uptrend has confronted the reality that things are rapidly getting much worse. This week saw the Shanghai Composite sink 9.0%. Major equities indexes were hit 8.0% in Russia and 5.0% in Brazil (Petrobras down 9%). Financial stocks and levered corporations have been under pressure round the globe. The Russian ruble sank 4.0% this week, increasing y-t-d losses versus the dollar to 7.1%. The Mexican peso declined another 1.8% this week. The Polish zloty slid 2.8% on an S&P downgrade (“Tumbles Most Since 2011”). The South African rand declined 3.0% (down 7.9% y-t-d). The yen added 0.2% this week, increasing 2016 gains to 3.0%. With the yen up almost 4% versus the dollar over the past month, so-called yen “carry trades” are turning increasingly problematic.

Closer to home, the crisis in Puerto Rico continues to spiral out of control.  The following is an excerpt from a letter that Treasury Secretary Jack Lew sent to Congress on Friday…

Although there are many ways this crisis could escalate further, it is clear that Puerto Rico is already in the midst of an economic collapse…

Puerto Rico is already in default. It is shifting funds from one creditor to pay another and has stopped payment altogether on several of its debts. As predicted, creditors are filing lawsuits. The Government Development Bank, which provides critical banking and fiscal services to the central government, only avoided depleting its liquidity by halting lending activity and sweeping in additional deposits from other Puerto Rico governmental entities. A large debt payment of $400 million is due on May 1, and a broader set of payments are due at the end of June.

It isn’t Michael Snyder from The Economic Collapse Blog that is saying that Puerto Rico is “in the midst of an economic collapse”.

That is the Secretary of the U.S. Treasury that is saying it.

Those that have been eagerly anticipating a financial apocalypse are going to get what they have been waiting for.

Right now we are about halfway through January, and this is the worst start to a year for stocks ever.  The Dow is down a total of 1,437 points since the beginning of 2016, and more than 15 trillion dollars of stock market wealth has been wiped out globally since last June.

Unfortunately, there are still a lot of people out there that are in denial.

There are a lot of people that still believe that this is just a temporary bump in the road and that things will return to “normal” very soon.

They don’t understand that this is just the beginning.  What we have seen so far is just the warm up act, and much, much worse is yet to come.

Welcome To The New Normal: The Dow Crashes Another 390 Points And Wal-Mart Closes 269 Stores

Welcome to the new normalDid you know that 15 trillion dollars of global stock market wealth has been wiped out since last June?  The worldwide financial crisis that began in the middle of last year is starting to spin wildly out of control.  On Friday, the Dow plunged another 390 points, and it is now down a total of 1,437 points since the beginning of this calendar year.  Never before in U.S. history have stocks ever started a year this badly.  The same thing can be said in Europe, where stocks have now officially entered bear market territory.  As I discussed yesterday, the economic slowdown and financial unraveling that we are witnessing are truly global in scope.  Banks are failing all over the continent, and I expect major European banks to start making some huge headlines not too long from now.  And of course let us not forget about China.  On Friday the Shanghai Composite declined another 3.6 percent, and overall it is now down more than 20 percent from its December high.  Much of this chaos has been driven by the continuing crash of the price of oil.  As I write this article, it has dipped below 30 dollars a barrel, and many of the big banks are projecting that it still has much farther to fall.

The other night, Barack Obama got up in front of the American people and proclaimed that anyone that was saying that the economy was not recovering was peddling fiction.  Well, if the U.S. economy is doing so great, then why in the world has Wal-Mart decided to shut down 269 stores?…

Walmart (WMT) will close 269 stores around the world in a strategic move to focus more on its supercenters and e-commerce business, the company said Friday.

The closures include 154 U.S. locations, encompassing Walmart’s entire fleet of 102 ‘Express’ format stores, its smallest stores that have been in pilot testing since 2011. Some supercenters, Sam’s Club locations and Neighborhood Markets will also close, plus 115 stores in Latin American markets. The closures were decided based on financial performance and how well the locations fit with Walmart’s broader strategy, says Greg Hitt, a company spokesman.

We have grown accustomed to other major retailers shutting down stores, but this is Wal-Mart.

Wal-Mart doesn’t retreat.  For decades, Wal-Mart has been on a relentless march forward.  They have been an unstoppable juggernaut that has expanded extremely aggressively and that has ruthlessly crushed the competition.

I was absolutely stunned when I saw that they were going to close down 269 stores.  If you want to know if your local store is in danger, you can view the full list right here.

Overall, 10,000 Wal-Mart employees will be affected.  I could understand closing down a few underperforming stores, but if the U.S. economy truly is in great shape then it wouldn’t make any sense at all to shut down hundreds of stores.

What in the name of Sam Walton is going on out there?

The truth, of course, is that the U.S. economy is in great danger.  We have now entered the next great crisis, but most communities around the country never even recovered from the last one.  In fact, the Wall Street Journal is reporting that a whopping 93 percent of all counties in the United States “have failed to fully recover” from the last recession…

More than six years after the economic expansion began, 93% of counties in the U.S. have failed to fully recover from the blow they suffered during the recession.

Nationwide, 214 counties, or 7% of 3,069, had recovered last year to prerecession levels on four indicators: total employment, the unemployment rate, size of the economy and home values, a study from the National Association of Counties released Tuesday found.

The next few weeks are going to be very interesting to watch.  The economic fundamentals continue to deteriorate, and the financial markets are finally starting to catch up with economic reality.

As the collapse on Wall Street accelerates, we are going to increasingly see panic selling and forced liquidations.  In the past, it was mostly humans that had their hands on the controls during market crashes, but today the machines are making more of the decisions than ever before.  The following comes from CNBC…

The new market age is decidedly different: Rather than that seething cacophony, aggressive corrections like the current ones are directed by a faceless metronome of computer-generated orders, triggering irresistible momentum and trillions in losses.

Amid it all, market veterans are left to ponder when the script will flip and market direction will turn not by newfound optimism among traders in the pits, but rather by algorithms that generate “buy” rather than “sell” signals.

“It feels like sell program after sell program,” said Michael Cohn, chief market strategist at Atlantis Asset Management, a boutique firm in New York. “It seems to happen first thing in the morning, and then however the market transpires during the day is how they close it. If it looks like it’s coming back, they’ll take it at the end. If if looks like it’s heading lower, they’ll slam it at the end of the day.”

Earlier today, an article authored by Michael Pento entitled “A recession worse than 2008 is coming” was posted on CNBC.  Here is a short excerpt…

But a recession has occurred in the U.S. about every five years, on average, since the end of WWII; and it has been seven years since the last one — we are overdue.

Most importantly, the average market drop during the peak to trough of the last 6 recessions has been 37 percent. That would take the S&P 500 down to 1,300; if this next recession were to be just of the average variety.

But this one will be worse.

If stocks do drop a total of 37 percent, that would just bring them back to levels that would be considered “normal” or “average” by historical standards.  There is certainly the possibility that they could fall much farther than that.

And of course the markets are so incredibly fragile at this point that any sort of a “trigger event” could cause a collapse of epic proportions.

All it is going to take is a major disaster or emergency of some sort.

Do you have a feeling that something really bad is about to happen?  This is something that I have been hearing from people that I respect, and I would like to know if it is a phenomenon that is more widespread.  If you have been feeling something like this, please feel free to share it with us by posting a comment below…

The Dow Falls Another 364 Points And We Are Now Down 2200 Points From The Peak Of The Market

Falling - Public DomainIt was another day of utter carnage on Wall Street.  The Dow was down another 364 points, the S&P 500 broke below 1900, and the Nasdaq had a much larger percentage loss than either of them.  The Russell 2000 has now fallen 22 percent from the peak, and it has officially entered bear market territory.  After 13 days, this remains the worst start to a year for stocks ever, and trillions of dollars of stock market wealth has already been wiped out globally.  Meanwhile, junk bonds continue their collapse.  JNK got hammered all the way down to 33.06 as bond investors race for the exits.  In case you were wondering, this is exactly what a financial crisis look like.

Many of the “experts” had been proclaiming that “things are different this time” and that stocks could defy gravity forever.

Now we seeing that was not true at all.

So how far could stocks ultimately fall?

I have been telling my readers that stocks still need to fall about another 30 percent just to get to a level that is considered to be “normal” be historical standards, but the truth is that they could eventually fall much farther than that.

Just this week, Societe Generale economist Albert Edwards made headlines all over the world with his prediction that we could see the S&P 500 drop by a total of 75 percent…

If I am right and we have just seen a cyclical bull market within a secular bear market, then the next recession will spell real trouble for investors ill-prepared for equity valuations to fall to new lows. To bottom on a Shiller PE of 7x would see the S&P falling to around 550.

I will repeat that: If I am right, the S&P would fall to 550, a 75% decline from the recent 2100 peak. That obviously will be a catastrophe for the economy via the wealth effect and all the Fed’s QE hard work will turn dust.

That is why I believe the Fed will fight the next bear market with every weapon available including deeply negative Fed Funds rates in addition to more QE. Indeed, negative policy rates will become ubiquitous.

Most believe a 75% equity bear market to be impossible. But those same people said something similar prior to the 2008 Global Financial Crisis. They, including the Fed, failed to predict the vulnerability of the US economy that would fall into deep recession, well before Lehman’s went bust in September 2008.

Other than stocks, there are three key areas that I want my readers to keep an eye on during the weeks ahead…

1. The Price Of Oil – The price of oil doesn’t have to go one penny lower to continue causing catastrophic damage in the financial world.  If we hover around 30 dollars a barrel, we will see more bankruptcies, more defaults, more layoffs and more carnage for energy stocks.  But of course it is quite conceivable that the price of oil could easily slide a lot farther.  Just check out some of the predictions that some of the biggest banks in the entire world are now making…

Just this week Morgan Stanley warned that the super-strong U.S. dollar could drive crude oil to $20 a barrel. Not to be outdone, Royal Bank of Scotland said $16 is on the horizon, comparing the current market mood to the days before the implosion of Lehman Brothers in 2008.

Standard Chartered doesn’t think those dire predictions are dark enough. The British bank said in a new research report that oil prices could collapse to as low as $10 a barrel — a level unseen since November 2001.

2. Junk Bonds – This is something that I have written about repeatedly.  Right now, we are witnessing an epic collapse of the junk bond market, just like we did just prior to the great stock market crash of 2008.  As I mentioned above, Wednesday was a particularly brutal day for junk bonds, and Jeffrey Gundlach seems convinced that the worst is still yet to come…

He seemed to leave his most dire predictions for junk bonds, a part of the market he’s been bearish on for years. Gundlach believes hedge funds investing in risky debts face major liquidity risks if they are forced to exit positions amid investor redemptions. “We could be looking at a real ugly situation in the first quarter of 2016,” Gundlach said on a Tuesday call with investors, when referring to redemptions.

Because many hedge funds operate with leverage, he raised an alarming prospect that those who don’t redeem could be left with losses far more severe than their marks indicate. As the Federal Reserve raises rates, redemptions combined with tightening credit conditions could create major pricing dislocations.

3. Emerging Markets – We have not seen money being pulled out of emerging markets at this kind of rate in decades.  We are seeing a repeat of the conditions that caused the Latin American debt crisis of the 1980s and the Asian financial crisis of the 1990s.  Only this time what we are witnessing is truly global in scope, and central bankers are beginning to panic.  The following comes from Wolf Richter…

“Last year was a terrible year, probably worse than 2009,” the head of Mexico’s central bank told a conference of central bankers in Paris on Tuesday. It was the first year since 1988 that emerging markets saw net capital outflows, according to the Institute of International Finance, a Washington-based association of global banks and finance houses.

In December more than $3.1 billion fled emerging market funds. If anything, the New Year has been worse.

“I don’t have any data yet for the first week of 2016 but it’s probably going to be very, very, very bad,” Carstens said. If conditions do not improve, he warned, central banks in emerging markets may have little choice but to adopt a more “radical” approach to monetary policy, including intervening in domestic bonds and securities markets.

In addition to everything that I just shared with you, we got several other very troubling pieces of news on Wednesday…

-Canadian stocks continued their dramatic plunge and have now officially entered a bear market.

-PC sales just hit an eight year low.

-GoPro just announced that it is getting rid of 7 percent of its total workforce.

The bad news is coming fast and furious now.  The snowball that started rolling downhill about halfway last year has set off an avalanche, and panic has gripped the financial marketplace.

But my readers knew all of this was coming in advance.  What we are witnessing right now is simply the logical extension of trends that have been building for months.  The global financial crisis that started during the second half of 2015 is now bludgeoning Wall Street mercilessly, and investors are in panic mode.

So what comes next?

We have never seen a year start like this, so it is hard to say.  And if there is some sort of a major “trigger event” in our near future, we could see some single day crashes that make history.

Either way, the hounds have now been released, and it is going to be exceedingly difficult to get them back into the barn.

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