Financial

Lindsey Williams, Martin Armstrong And Alex Jones All Warn About What Is Coming In The Fall Of 2015

July 20, 2015June 21, 2015 by Michael

Not since the financial crash of 2008 have so many prominent people issued such urgent warnings about a specific time period. Almost daily now, really big names are coming out with chilling predictions about what they believe is going to happen during the second half of 2015. But it isn’t just that these people have a “bad feeling” about things. The truth is that we are witnessing a confluence of circumstances and events in the second half of this year that is unprecedented. This is something that I covered in a previous article that went mega-viral all over the Internet entitled “7 Key Events That Are Going To Happen By The End Of September“. Personally, I have never been more concerned about any period of time than I am about the second half of 2015. And as you will see below, I am definitely not alone.

Just a few days ago, I received an email that contained a chilling message from Lindsey Williams. You can view the same message that came to my email right here. According to Lindsey Williams, the elite insider that he is in contact with told him that there will be a global financial collapse between September and December of this year…

WARNING!

From Lindsey Williams: I just received an email from my Elite friend.

My Elite friend indicated that they have a World Wide Financial Collapse scheduled between September and the end of December 2015

You may have just THREE (3) months to prepare!

I have a ton of respect for Lindsey Williams, and I would listen to what he has to say very carefully. Back in 2008, an elite insider told him that the price of oil would drop from $140 a barrel to $40 a barrel, and it happened. This time around, Williams has been telling us throughout 2013 and 2014 that a global financial collapse was not going to happen during those years, and he was right about that.

But now he is sounding the alarm that one is going to come by the end of this calendar year.

Martin Armstrong is someone else that has been sounding the alarm about the second half of this year.

In fact, Armstrong says that he has “warned that the Big Bang was coming 2015.75” since 1985.

In the past, I have written entire articles about economic cycle theories and what they indicate is coming in our future.

Armstrong has developed one of his own, and he calls it the Economic Confidence Model. According to the ECM, the “sovereign debt Big Bang” is scheduled to happen by the end of 2015. And it turns out that the time period that Armstrong has been pointing to lines up with a whole bunch of other significant events as well…

There are many aspects that are lining up with the turn in the ECM (Economic Confidence Model) from the Blood Moon and the Jewish Year for forgiving the debts, to France imposing restrictions on cash in September, and even in Germany the laws that protected about half a million people so-called dachas there in East Germany expire. To date, a law protecting the tenant against dismissal by the municipality will also expire October 3, 2015. Everywhere we look, there are changes coming to a head, right down to the U.S. Federal budget with 2015.75.

In case you are tempted to dismiss this as nonsense, Armstrong has pointed out that his ECM has been accurate “to the day” in the past…

Of course the 1987 crash bottomed to the day with the ECM confirming that was the low. The same took place in 1994 where the U.S. share market bottomed right to the day, once again confirming this was an important low.

So will the ECM be right again this time?

Only time will tell, but it should be noted that the global bond market is already starting to crash. If Armstrong ultimately turns out to be correct, we could be on the verge of a major turning point…

This next turning point should be the peak in the concentration of capital and confidence in government. From there on out, 2015.75 should mark the change in trend where people will start to disbelieve government on a grand scale. The debt markets that peak precisely with the target are going to get the worst of it.

Other financial experts are issuing similar warnings, even if they aren’t being quite as specific.

For example, just consider what Jim Rogers had to say recently…

I suspect in the next year or two we will see some kind of major, major problems in the world financial markets.

I would suspect when we have this correction, it’s going to cause central banks to panic. There’s going to come a time when there is not much the central banks can do when they have lost all credibility. When governments have lost all credibility. They will print and spend and borrow, but there comes a time when people are just going to say We don’t want to play this game anymore. And at that point, the world has serious, serious problems because there’s nothing to rescue us.

Perhaps the most sobering warning of all that I have come across in recent days is from Alex Jones.

In the video posted below, he explains that he recently received “two different calls” from “extremely prominent wealthy people” warning him about what is coming by the end of this year and asking him why he isn’t leaving the United States “before October”.

In other words, these individuals believe that something really big is going to happen by the end of September. This dovetails perfectly with what I have already been warning about.

In this video, Alex also explains that large numbers of insiders are now quietly leaving the country. I have never seen him quite like this. I think that so many of us are just in shock that the things that we have been warning about for so long are now actually happening. Watch this video for yourself and see what you think…

In the financial markets, we are also seeing signals that many people believe that big trouble is right around the corner. For instance, according to Dana Lyons we haven’t seen bets that the VIX will rise at this level since just before the financial crash of 2008…

As most observers are aware, the VIX tends to rise as the stock market declines. Thus a rising VIX is associated with bad markets. The interesting thing about present conditions in VIX options is that the Put/Call Ratio (using a 21-day average) is at the lowest level since the summer of 2008. That means that there are more bets on a rising VIX versus bets on a falling VIX than we have seen in 7 years. And again, a rising VIX is associated with bad markets.

In other words, investors are betting a tremendous amount of money that we are going to see a rise in volatility in the financial markets in the months ahead. And as I have explained so many times before, during times of high volatility markets tend to go down very rapidly. So these bets will pay off very handsomely if there is a financial crash this fall.

Meanwhile, the manager of one of the largest bond funds in the UK is warning that a “systemic event” could soon hit global financial markets and that it is wise to have some “physical cash” at home just in case there is some sort of major emergency. The following comes from Zero Hedge…

The manager of one of Britain’s biggest bond funds has urged investors to keep cash under the mattress.

Ian Spreadbury, who invests more than £4bn of investors’ money across a handful of bond funds for Fidelity, including the flagship Moneybuilder Income fund, is concerned that a “systemic event” could rock markets, possibly similar in magnitude to the financial crisis of 2008, which began in Britain with a run on Northern Rock.

“Systemic risk is in the system and as an investor you have to be aware of that,” he told Telegraph Money.

The best strategy to deal with this, he said, was for investors to spread their money widely into different assets, including gold and silver, as well as cash in savings accounts. But he went further, suggesting it was wise to hold some “physical cash”, an unusual suggestion from a mainstream fund manager.

This sounds like what I have been saying for years. I am a big believer in not having all of your financial eggs in one basket, and I do believe that it is wise to have at least some emergency cash at home.

But to hear it from a member of Britain’s financial elite is definitely unusual to say the least.

Sadly, just like last time, most people are not listening to the warnings. Back in the summer of 2008, my wife and I went up to visit her parents. I sat on their sofa and told them that a great financial collapse was about to unfold and that it would shake the entire world. Of course just a few months later that is exactly what happened.

Now we are on the verge of an even greater financial collapse, and still I find that there are a lot of people out there that are doubters. Most of these doubters have an immense amount of faith in the system, and they are confident that this debt-fueled bubble of false prosperity that we are currently enjoying can somehow last indefinitely.

I truly wish that the hopeless optimists were right.

I truly wish that I could live out my days in peace and quiet in a world that was safe and stable.

Unfortunately for all of us, things are about to change in a major way. When it starts happening, don’t forget that there have been people that have been warning you that this would happen all along.

Signs Of Financial Turmoil In Europe, China And The United States

June 19, 2015 by Michael

As we move toward the second half of 2015, signs of financial turmoil are appearing all over the globe. In Greece, a full blown bank run is happening right now. Approximately 2 billion euros were pulled out of Greek banks in just the past three days, Barclays says that capital controls are “imminent” unless a debt deal is struck, and there are reports that preparations are being made for a “bank holiday” in Greece. Meanwhile, Chinese stocks are absolutely crashing. The Shanghai Composite Index was down more than 13 percent this week alone. That was the largest one week decline since the collapse of Lehman Brothers. In the U.S., stocks aren’t crashing yet, but we just witnessed one of the largest one week outflows of capital from the bond markets that we have ever witnessed. Slowly but surely, we are starting to see the smart money head for the exits. As one Swedish fund manager put it recently, everyone wants “to avoid being caught on the wrong side of markets once the herd realizes stocks are over-valued“.

I don’t think that most people understand how serious things have gotten already. In Greece, so much money has been pulled out of the banks that the European Central Bank admits that Greek banks may not be able to open on Monday…

The European Central Bank told a meeting of euro zone finance ministers on Thursday that it was not sure if Greek banks, which have been suffering large daily deposit outflows, would be able to open on Monday, officials with knowledge of the talks said.

Greek savers have withdrawn about 2 billion euros from banks over the past three days, with outflows accelerating rapidly since talks between the government and its creditors collapsed at the weekend, banking sources told Reuters.

All over social media, people are sharing photos of long lines at Greek ATMs as ordinary citizens rush to get their cash out of the troubled banks. Here is one example…

Long queues at ATM’s all around Athens center. #Greece pic.twitter.com/k4wgerQ7gP

— Elly Vintiadis (@EllyVintiadis) June 19, 2015

And if there is no debt deal by the end of this month, the Greek debt crisis is going to totally spin out of control and financial chaos will begin to erupt all over Europe. But instead of trying to be reasonable, EU president Donald Tusk “has delivered an ultimatum to Greece”, and it almost appears as if EU officials are more concerned about winning a power struggle than they are about averting financial catastrophe…

EU president Donald Tusk has delivered an ultimatum to Greece, claiming the country must ‘accept an offer or default’ at an emergency summit set for Monday – in a last-ditch effort to stop the debt-stricken nation crashing out of the euro.

‘We are close to the point where the Greek government will have to choose between accepting what I believe is a good offer of continued support or to head towards default,’ Mr Tusk said today.

His comments come as Greek Prime Minister Alexis Tsipras warned that his country’s exit from the eurozone would trigger the collapse of the single currency.

‘The famous Grexit cannot be an option either for the Greeks or the European Union,’ he said in an Austrian newspaper interview.

‘This would be an irreversible step, it would be the beginning of the end of the eurozone.’

While all of this has been going on, the obscene stock market bubble in China has started to implode. Just check out the following numbers from Zero Hedge…

As the carnage began last night in China we noted the extreme levels of volatility the major indices had experienced in recent weeks. By the close, things were ugly with the broad Shanghai Composite down a stunning 13.3% on the week – the most since Lehman in 2008 (with Shenzhen slightly better at down 12.8% and CHINEXT down a record-breaking 14.99%).

Under normal circumstances, numbers like these would be reason for a full-blown financial panic over in Asia. But these are not normal times. Even with these losses, stock prices in China are still massively overinflated. For example, USA Today is reporting that the median stock over in China is “trading at 95 times earnings”…

Margin debt in China has soared to a record $363 billion, according to Bloomberg, and the median stock in mainland China is now trading at 95 times earnings, which even tops the price-to-earnings multiple of 68 back at the 2007 peak.

That is absolutely ridiculous. When a stock is trading at 25 or 30 times earnings it is overpriced. So these numbers that are coming out of China are beyond crazy, and what this means is that Chinese stocks have much, much farther to fall before they get back to any semblance of reality.

Meanwhile, in the U.S. money is flowing out of bonds at a staggering pace. The following quote originally comes from Bank of America…

“High grade credit funds suffered their biggest outflow this year, and double the previous week (and also the biggest since June 2013). High yield outflows also jumped to $1.1bn, the biggest since the start of the year. However, government bond funds suffered the most amid the recent spike in volatility, with outflows surging to the highest weekly number on record ($2.7bn). This brings the total outflow from fixed income funds to almost $6bn over the last week, the highest since the Taper Tantrum and the third highest outflow ever.”

What this means is that big trouble is brewing in the bond markets. This is something that I warned about in my previous article entitled “Experts Are Warning That The 76 Trillion Dollar Global Bond Bubble Is About To Explode“.

For the moment, U.S. stocks are doing fine. But just about everyone can see that we in a massive financial bubble that could burst at any time. Presidential candidate Donald Trump says that what we are witnessing is a “big fat economic and financial bubble like you’ve never seen before”…

Yesterday during an interview on MSNBC, presidential candidate Donald Trump said he has some big names in mind for the Treasury secretary if he wins the White House. “I’d like guys like Jack Welch. I like guys like Henry Kravis. I’d love to bring my friend Carl Icahn.” He also opined on the economy and the stock market, admitting that the Fed has benefited people like him but that the economy and is in a “big fat economic and financial bubble like you’ve never seen before.“

Ron Paul also believes that this financial bubble is going to end very badly. Just check out what he told CNBC earlier this week…

Despite record highs in the market, former Rep. Ron Paul says the Fed’s easy money policies have left stocks and bonds are on the verge of a massive collapse.

“I am utterly amazed at how the Federal Reserve can play havoc with the market,” Paul said on CNBC’s “Futures Now” referring to Thursday’s surge in stocks. The S&P 500 closed less than 1 percent off its all-time high. “I look at it as being very unstable.”

In Paul’s eyes, “the fallacy of economic planning” has created such a “horrendous bubble” in the bond market that it’s only a matter of time before the bottom falls out. And when it does, it will lead to “stock market chaos.”

Yes, this financial bubble has persisted far longer than many believed possible, but all irrational bubbles eventually burst.

And you know what they say – the bigger they come the harder they fall.

When this gigantic financial bubble finally implodes, it is going to be absolutely horrifying, and the entire planet is going to be shocked by the carnage.

The Next Great European Financial Crisis Has Begun

June 16, 2015June 16, 2015 by Michael

The Greek financial system is in the process of totally imploding, and the rest of Europe will soon follow. Neither the Greeks nor the Germans are willing to give in, and that means that there is very little chance that a debt deal is going to happen by the end of June. So that means that we will likely see a major Greek debt default and potentially even a Greek exit from the eurozone. At this point, credit default swaps on Greek debt have risen 456 percent in price since the beginning of this year, and the market has priced in a 75 percent chance that a Greek debt default will happen. Over the past month, the yield on two year Greek bonds has skyrocketed from 20 percent to more than 30 percent, and the Greek stock market has fallen by a total of 13 percent during the last three trading days alone. This is what a financial collapse looks like, and if Greece does leave the euro, we are going to see this kind of carnage happen all over Europe.

Officials over in Europe are now openly speaking of the need to prepare for a “state of emergency” now that negotiations have totally collapsed. At one time, it would have been unthinkable for Greece to leave the euro, but now it appears that this is precisely what will happen unless a miracle happens…

Greece is heading for a state of emergency and an exit from the euro following the collapse of talks to agree a bailout deal, senior EU officials warned last night.

Europe must be prepared to step in otherwise Greek society would face an unprecedented crisis with power blackouts, medicine shortages and no money to pay for police, they said.

In the past, the Greeks have always buckled under pressure. But this new Greek government was elected with a mandate to end austerity, and so far they have shown a remarkable amount of resolve. In order for a debt deal to happen, one side is going to have to blink, and at this point it does not look like it will be the Greeks…

The world’s financial markets are facing up to the possibility that Greece could soon become the first country to crash out of Europe’s single currency. Talks between Athens and its eurozone creditors have collapsed in acrimony just days before a final deadline for Greece to unlock the €7.2bn (£5.2bn) in bailout funds it needs to avoid a catastrophic debt default.

The Greek Prime Minister, Alexis Tsipras, accused the creditor powers of hidden “political motives” in their demands that Greece make further cuts to public pension payments in return for the financial aid. “We are shouldering the dignity of our people, as well as the hopes of the people of Europe,” Mr Tsipras said in a defiant statement. “We cannot ignore this responsibility. This is not a matter of ideological stubbornness. This is about democracy.”

As we approach the point of no return, both sides are preparing for the endgame.

In Greece, members of parliament have been studying what happened in Iceland a few years ago. Many of them believe that a Greek debt default combined with a nationalization of Greek banks and a Greek exit from the euro could set the nation back on the path to prosperity fairly rapidly. The following comes from the Telegraph…

The radical wing of Greece’s Syriza party is to table plans over coming days for an Icelandic-style default and a nationalisation of the Greek banking system, deeming it pointless to continue talks with Europe’s creditor powers.

Syriza sources say measures being drafted include capital controls and the establishment of a sovereign central bank able to stand behind a new financial system. While some form of dual currency might be possible in theory, such a structure would be incompatible with euro membership and would imply a rapid return to the drachma.

The confidential plans were circulating over the weekend and have the backing of 30 MPs from the Aristeri Platforma or ‘Left Platform’, as well as other hard-line groupings in Syriza’s spectrum. It is understood that the nationalist ANEL party in the ruling coalition is also willing to force a rupture with creditors, if need be.

Meanwhile, in a desperate attempt to get the Greeks to give in at the last moment, Greek’s creditors are preparing to pull out all the stops in order to put as much financial pressure on Greece as possible…

Germany’s Suddeutsche Zeitung reported that the creditors are drawing an ultimatum to the Greeks, threatening to cut off Greek access to the European payments system and forcing capital controls on the country as soon as this weekend. The plan would lead to the temporary closure of the banks, followed by a rationing of cash withdrawals.

For a long time, most in the financial world assumed that a debt deal would eventually happen. But now reality is setting in. As I mentioned at the top of this article, the cost to insure Greek debt has risen by an astounding 456 percent since the beginning of this year…

Given these dramatic stakes, the risk of a Greek default has gone way up. One way to measure that risk is by looking at the skyrocketing price of insurance policies that would pay out if Greek bonds go bust. The cost to insure Greek debt for one year against the risk of default has skyrocketed 456% since the start of the 2015, according to FactSet data.

These insurance-like contracts, known as credit default swaps, imply there is a 75% to 80% probability of Greece defaulting on its debt, according to Jigar Patel, a credit strategist at Barclays.

The probability of a Greek default soars to a whopping 95% for five-year CDS, Patel said.

“Default is looking more and more likely,” Peter Boockvar, chief market analyst at The Lindsey Group, wrote in a note to clients on Tuesday.

And in recent days, we have also seen Greek stocks and Greek bonds totally crash. The following comes from CNN…

The Greek stock market has plummeted 13% over the past three trading days, including a 3% drop on Tuesday alone.

In the bond market, the yield on Greek two-year debt has skyrocketed to 30.2%. A month ago, the yield was only 20%. Yields rise as bond prices fall.

Of course if there is a Greek debt default and Greece does leave the euro, it won’t just be Greece that pays the price.

As I have written about previously, there are tens of trillions of dollars in derivatives that are directly tied to currency exchange rates and 505 trillion dollars in derivatives that are directly tied to interest rates. A “Grexit” would cause the euro to drop like a rock and interest rates all over the continent would start to go crazy. The financial chaos that a “Grexit” would cause should not be underestimated.

And there are signs that some of Europe’s biggest banks are already on the verge of collapse. For example, just consider what has been going on at the biggest bank in Germany. Both of the co-CEOs at Deutsche Bank recently resigned, and it is increasingly looking as if it could soon become Europe’s version of Lehman Brothers. The following summary of the recent troubles at Deutsche Bank comes from an article that was posted on NotQuant…

Here’s a re-cap of what’s happened at Deutsche Bank over the past 15 months:

In April of 2014, Deutsche Bank was forced to raise an additional 1.5 Billion of Tier 1 capital to support it’s capital structure. Why?
1 month later in May of 2014, the scramble for liquidity continued as DB announced the selling of 8 billion euros worth of stock – at up to a 30% discount. Why again? It was a move which raised eyebrows across the financial media. The calm outward image of Deutsche Bank did not seem to reflect their rushed efforts to raise liquidity. Something was decidedly rotten behind the curtain.
Fast forwarding to March of this year: Deutsche Bank fails the banking industry’s “stress tests” and is given a stern warning to shore up it’s capital structure.
In April, Deutsche Bank confirms it’s agreement to a joint settlement with the US and UK regarding the manipulation of LIBOR. The bank is saddled with a massive $2.1 billion payment to the DOJ. (Still, a small fraction of their winnings from the crime).
In May, one of Deutsche Bank’s CEOs, Anshu Jain is given an enormous amount of new authority by the board of directors. We guess that this is a “crisis move”. In times of crisis the power of the executive is often increased.
June 5: Greece misses it’s payment to the IMF. The risk of default across all of it’s debt is now considered acute. This has massive implications for Deutsche Bank.
June 6/7: (A Saturday/Sunday, and immediately following Greece’s missed payment to the IMF) Deutsche Bank’s two CEO’s announce their surprise departure from the company. (Just one month after Jain is given his new expanded powers). Anshu Jain will step down first at the end of June. Jürgen Fitschen will step down next May.
June 9: S&P lowers the rating of Deutsche Bank to BBB+ Just three notches above “junk”. (Incidentally, BBB+ is even lower than Lehman’s downgrade – which preceded it’s collapse by just 3 months)

And that’s where we are now. How bad is it? We don’t know because we won’t be permitted to know. But these are not the moves of a healthy company.

For a very long time, I have been warning that a major financial crisis was coming to Europe, and for a very long time the authorities in Europe have been able to successfully kick the can down the road.

But now it looks like we have reached the end of the road, and a day of reckoning is finally here.

Nobody is quite sure what is going to happen next, but almost everyone agrees that it isn’t going to be pretty.

So you better buckle up, because it looks like we are all in for a wild ride as we enter the second half of this year.

We Might As Well Face It – America Is Addicted To Debt

June 12, 2015June 15, 2015 by Michael

Corporations, individuals and the federal government continue to rack up debt at a rate that is far faster than the overall rate of economic growth. We are literally drowning in red ink from sea to shining sea, and yet we just can’t help ourselves. Consumer credit has doubled since the year 2000. Student loan debt has doubled over the course of the past decade. Business debt has doubled since 2006. And of course the debt of the federal government has doubled since 2007. Anyone that believes that this is “sustainable” in any way, shape or form is crazy. We have accumulated the greatest mountain of debt that the world has ever seen, and yet despite all of the warnings we just continue to race forward into financial oblivion. There is no possible way that this is going to end well.

Just the other day, a financial story that USA Today posted really got my attention. It contained charts and graphs that showed that business debt in the U.S. had doubled since 2006. I knew that things were bad, but I didn’t know that they were this bad. Back in 2006, just prior to the last major economic downturn, U.S. nonfinancial companies had a total of about 2.6 trillion dollars of debt. Now, that total has skyrocketed to 5.8 trillion…

Companies are sitting on a record $1.82 trillion in cash. That might sound impressive until you hear companies owe three times more – $5.8 trillion, according to a new report from Standard & Poor’s Ratings Services.

Debt levels are soaring at U.S. non-financial companies so quickly – total debt outstanding rose $650 billion in 2014, which is six times faster than the $100 billion in added cash.

So are we in better condition to handle an economic crisis than we were the last time, or are we in worse shape?

Let’s look at another category of debt. According to new data that just came out, the total amount of student loan debt in the U.S. is up to a staggering 1.2 trillion dollars. That total has more than doubled over the past decade…

New data released by The Associated Press shows student loan debt is over $1.2 trillion, which is more than double the amount of a decade ago.

Students are facing an average of $35,000 in debt, that’s the highest of any graduating class in U.S. history. A senior at University of Colorado, Colorado Springs, Jon Cheek, knows the struggle first hand.

“It’s been a pretty big concern, I work while I go to school. I applied for a bunch of scholarships and done everything I can to try and keep it low,” said Cheek.

And of course it isn’t just student loan debt. American consumers have had a love affair with debt that stretches back for decades. As the chart below demonstrates, overall consumer credit has more than doubled since the year 2000…

If our paychecks were increasing at this same pace, that would be one thing. But they aren’t. In fact, real median household income is actually lower today than it was just prior to the last economic crisis.

So American households should actually be cutting back on debt. But instead, they are just piling on more debt, and the financial predators are becoming even more creative. In a previous article, I discussed how many auto loans are now being stretched out for seven years. At this point, the number of auto loans that exceed 72 months is at an all-time high…

The average new car loan has reached a record 67 months, reports Experian, the Ireland-based information-services company. The percentage of loans with terms of 73 to 84 months also reached a new high of 29.5% in the first quarter of 2015, up from 24.9% a year earlier.

Long-term used-vehicle loans also broke records with loan terms of 73 to 84 months reaching 16% in the first quarter 2015, up from 12.94% — also the highest on record.

When will we learn?

The crash of 2008 should have been a wake up call.

We should have acknowledged our mistakes and we should have started doing things very differently.

But instead, we just kept on making the exact same mistakes. In fact, our long-term financial problems have continued to accelerate since the last recession. Just look at what has happened to our national debt. Just prior to the last recession, the U.S. national debt was sitting at approximately 9 trillion dollars. Today, it is over 18 trillion dollars…

Our debt has grown so large that we will never be able to get out from under it. This is something that I covered in my recent article entitled “It Is Mathematically Impossible To Pay Off All Of Our Debt“. Because of our recklessness, our children, our grandchildren and all future generations of Americans are consigned to a lifetime of debt slavery. What we have done to them is beyond criminal. If we lived in a just society, a whole bunch of people would be going to prison for the rest of their lives over this.

During fiscal year 2014, the debt of the federal government increased by more than a trillion dollars. But in addition to that, the federal government has more than seven trillion dollars of debt that must be “rolled over” every year. In other words, the government must issue more than seven trillion dollars of new debt just to pay off old debts that are coming due.

As long as the rest of the world continues to lend us enormous mountains of money at ridiculously low interest rates, we can continue to keep our heads above the water. But this can change at any time. And once it does, interest rates will rise. If the average rate of interest on U.S. government debt was to return to the long-term average, we would very quickly find ourselves spending more than a trillion dollars a year just on interest on the national debt.

The debt-fueled prosperity that we are enjoying now is not real. It is a false prosperity that has been purchased by selling future generations into debt slavery. We have mortgaged the future to make our own lives better.

We are addicts. We are addicted to debt, and no matter how many warnings we receive, we just can’t help ourselves.

Shame on you America.

The Central Banks Are Losing Control Of The Financial Markets

June 4, 2015 by Michael

Every great con game eventually comes to an end. For years, global central banks have been manipulating the financial marketplace with their monetary voodoo. Somehow, they have convinced investors around the world to invest tens of trillions of dollars into bonds that provide a return that is way under the real rate of inflation. For quite a long time I have been insisting that this is highly irrational. Why would any rational investor want to put money into investments that will make them poorer on a purchasing power basis in the long run? And when any central bank initiates a policy of “quantitative easing”, any rational investor should immediately start demanding a higher rate of return on the bonds of that nation. Creating money out of thin air and pumping into the financial system devalues all existing money and creates inflation. Therefore, rational investors should respond by driving interest rates up. Instead, central banks told everyone that interest rates would be forced down, and that is precisely what happened. But now things have shifted. Investors are starting to behave more rationally and the central banks are starting to lose control of the financial markets, and that is a very bad sign for the rest of 2015.

And of course it isn’t just bond yields that are out of control. No matter how hard they try, financial authorities in Europe can’t seem to fix the problems in Greece, and the problems in Italy, Spain, Portugal and France just continue to escalate as well. This week, Greece became the very first nation to miss a payment to the IMF since the 1980s. We’ll discuss that some more in a moment.

Over in Asia, stocks are fluctuating very wildly. The Shanghai Composite Index plunged by 5.4 percent on Thursday before regaining all of those losses and actually closing with a gain of 0.8 percent. When we see this kind of extreme volatility, it is a very bad sign. It is during times of extreme volatility that markets crash.

Remember, stocks generally tend to go up during calm markets, and they generally tend to go down during choppy markets. So most investors do not want to see lots of volatility. Unfortunately, that is precisely what we are witnessing all over the world right now. The following comes from the Wall Street Journal…

“Volatility over the last days has been breathtaking, especially in bond markets,” said Wouter Sturkenboom, senior investment strategist at Russell Investments. He said that it rippled through equity and currency markets, which overreacted.

The yield on the benchmark German 10-year bond touched 0.99%, its highest level since September, before erasing the day’s rise and falling back to 0.84%. The 10-year U.S. Treasury yield, which hit a fresh 2015 high of 2.42% earlier Thursday, recently fell back to 2.33%. Yields rise as prices fall.

Sometimes when bond yields go up, it is because investors are taking money out of bonds and putting it into stocks because they are feeling really good about where the stock market is heading. This is not one of those times. As Peter Tchir has noted, the huge moves in the bond market that we are now seeing are the result of “sheer panic in the market”…

In a morning note before the open, Brean Capital’s Peter Tchir wrote: “It is time to reduce US equity holdings for the near term and look for a 3% to 5% move lower. The Treasury weakness is NOT a ‘risk on’ trade it is a ‘risk off’ trade, where low yields are viewed as a risk asset and not a safe haven.” And Tom di Galoma, head of fixed-income rates and credit at ED&F Man Capital Markets, told Bloomberg, “This is sheer panic in the market from the standpoint of what’s been happening in Europe … Most of Wall Street is guarded here as far as taking on new positions.”

But this wasn’t supposed to happen.

After watching the Federal Reserve be able to successfully use quantitative easing to drive down interest rates, the European Central Bank decided to try the same thing. Unfortunately for them, investors are starting to behave more rationally. The central banks are starting to lose control of the financial markets, and bond yields are soaring. I think that Peter Boockvar summarized where we are currently at very well when he stated the following…

I’ve said this before but I’m sorry, I need to say it again. What we are witnessing in global markets is the inherent contradiction writ large that is modern day monetary policy where dangerously ZIRP, NIRP and QE are considered conventional policies. The contradiction is simply this: the desire for higher inflation if fulfilled will result in higher interest rates that central banks are trying so hard and desperately to suppress.

Outside of the short end of the curve, markets will always win for better or worse and that is clearly evident now. The ECB is getting their first taste of the market talking back and in quite the violent way. In the US, the bond market is watching the Fed drag its feet (its never-ending) with wanting to raise interest rates and finally said enough is enough. The US Treasury market is tightening for them. Since mid April, the 5 yr note yield is higher by 40 bps, the 10 yr is up by 55 bps and the 30 yr yield is up by 65 bps.

And if global investors continue to move in a rational direction, this is just the beginning. Bond yields all over the planet should be much, much higher than they are right now. What that means is that bond prices potentially have a tremendous amount of room to go down.

One thing that could accelerate the global bond crash is the crisis in Greece. Negotiations between the Greeks and their creditors have been dragging on for four months, and no agreement has been reached. Now, Greece has missed the loan payment that was due to the IMF on June 5th, and it is asking the IMF to bundle all of the payments that are due this month into one giant payment at the end of June…

Greece has asked to bundle its four debt payments to the International Monetary Fund that fall due in June so that it can pay them in one batch at the end of the month, Greek newspaper Kathimerini reported on Thursday.

The request is expected to be approved by the IMF, the newspaper said. That would mean Greece does not have to pay the first tranche of 300 million euros that falls due on Friday.

Greece faces a total bill of 1.5 billion euros owed to the IMF over four installments this month.

Of course that payment will not be made either if a deal does not happen by then. And with each passing day, a deal seems less and less likely. At this point, the package of “economic reforms” that the creditors are demanding from Greece is completely unacceptable to Syriza. The following comes from an article in the Guardian…

Fresh from talks in Brussels, Tsipras faced outrage on Thursday from highly skeptical members of his own Syriza party. A five-page ultimatum from creditors, presented by the European commission president, Jean-Claude Juncker, was variously described as shocking, provocative, disgraceful and dishonourable.

“It will never pass,” said Greece’s deputy social security minister, Dimitris Stratoulis. “If they don’t back down, the country won’t be lost … there are alternatives that would cost less than our signing a disgraceful and dishonourable agreement.”

Ultimately, I don’t believe that we are going to see an agreement.

Why?

Well, I tend to agree with this bit of analysis from Andrew Lilico…

The Eurozone does not want to make any compromise with the current Greek government because (a) they don’t believe they need to because Greek threats to leave the euro are empty both because internal polling suggests Greeks don’t want to leave and because if they did leave that doesn’t really constitute any threat to the euro; (b) because they (particularly perhaps Angela Merkel) believe that under enough pressure the Greek government might collapse and be replaced by a more cooperative government, as has happened repeatedly before in the Eurozone crisis including in Italy and Greece itself; and (c) because any deal with Greece that is seen to involve or be presentable as any victory for the Greek government would threaten the political positions of governments in several Eurozone states including Spain, Portugal, Italy, Finland and perhaps even the Netherlands and Germany.

Furthermore, it’s not clear to me that the Eurozone creditors at this stage would have much interest in any deal based upon promises, regardless of how much the Greek had verbally surrendered. Things have gone too far now for mere words to work. They would need to see the Greeks deliver actions — tangible economic reforms and tangible, credible primary surplus targets and a sustainable change in the long-term political mood within Greece that meant other Eurozone states might eventually get their money back. That is almost certainly not doable at all with the current Greek government. The only deal possible would be with some replacement Greek government that had come in precisely on the basis that it did want to do a deal and did want to pay the creditors back.

On the Syriza side, I see no more appetite for a deal. They believe that austerity has been ruinous for the lives of Greeks and that decades more austerity would mean decades more Greek economic misery. From their point of view, default or even exit from the euro, even if economically painful in the short term, would be better than continuing with austerity now.

You can read the rest of his excellent article right here.

Without a deal, the value of the euro is going to absolutely plummet and bond yields over in Europe will go through the roof. I am fully convinced that this is the beginning of the end for the eurozone as it is currently constituted, and that we stand on the verge of a great European financial crisis.

And of course the financial crisis that is coming won’t just be in Europe. The global financial system is more interconnected than ever, and there are tens of trillions of dollars in derivatives that are tied to foreign exchange rates and 505 trillion dollars in derivatives that are tied to interest rates. When this giant house of cards collapses, the central banks won’t be able to stop it.

In the end, could we eventually see the entire central banking system itself totally collapse?

That is what Phoenix Capital Research believes is about to happen…

Last year (2014) will likely go down in history as the “beginning of the end” for the current global Central Banking system.

What will follow will be a gradual unfolding of the next crisis and very likely the collapse of the Central Banking system as we know it.

However, this process will not be fast by any means.

Central Banks and the political elite will fight tooth and nail to maintain the status quo, even if this means breaking the law (freezing bank accounts or funds to stop withdrawals) or closing down the markets (the Dow was closed for four and a half months during World War 1).

There will be Crashes and sharp drops in asset prices (20%-30%) here and there. However, history has shown us that when a financial system goes down, the overall process takes take several years, if not longer.

We stand at the precipice of the greatest economic transition that any of us have ever seen.

Even though things may seem very “normal” to most people right now, the truth is that the global financial system is fundamentally flawed, and cracks in the system are starting to appear all over the place.

When this system does collapse, it will take most people entirely by surprise.

But it shouldn’t.

All con games eventually fall apart in the end, and we are about to learn that lesson the hard way.

Investors Start To Panic As A Global Bond Market Crash Begins

June 3, 2015 by Michael

Is the financial collapse that so many are expecting in the second half of 2015 already starting? Many have believed that we would see bonds crash before the stock market crashes, and that is precisely what is happening right now. Since mid-April, the yield on 10 year German bonds has shot up from 0.05 percent to 0.89 percent. But much of that jump has come this week. Just a couple of days ago, the yield on 10 year German bonds was sitting at just 0.54 percent. And it isn’t just Germany – bond yields are going crazy all over Europe. So far, it is being estimated that global investors have lost more than half a trillion dollars, and there is much more room for these bonds to fall. In the end, the overall losses could be well into the trillions even before the stock market collapses.

I know that for most average Americans, talk about “bond yields” is rather boring. But it is important to understand these things, because we could very well be looking at the beginning of the next great financial crisis. The following is an excerpt from an article by Wolf Richter in which he details the unprecedented carnage that we have witnessed over the past few days…

On Tuesday, ahead of the ECB’s policy announcement today, German Bunds sagged, and the 10-year yield soared from 0.54% to 0.72%, drawing a squiggly diagonal line across the chart. In just one day, yield increased by one-third!

Makes you wonder to which well-connected hedge funds the ECB had once again leaked its policy statement and the all-important speech by ECB President Mario Draghi that the rest of us got see today.

And today, the German 10-year yield jump to 0.89%, the highest since October last year. From the low in mid-April of 0.05% to today’s 0.89% in just seven weeks! Bond prices, in turn, have plunged! This is the definition of a “rout.”

Other euro sovereign bonds have gone through a similar rout, with the Spanish 10-year yield soaring from 1.05% in March to 2.07% today, and the Italian 10-year yields jumping from a low in March of 1.03% to 2.17% now.

What this means is that the central banks are losing control.

In particular, the European Central Bank has been trying very hard to force yields down, and now the exact opposite is happening.

This is very bad news for a global financial system that is absolutely teeming with red ink. Since the last financial crisis, our planet has been on the greatest debt binge of all time. If we are moving into a time of higher interest rates, that is going to cause enormous problems. Unfortunately, CNBC says that is precisely where things are headed…

The wild breakout in German yields is rocking global debt markets, and giving investors an early glimpse of the uneasy future for bonds in a world of higher interest rates.

The shakeout also carries a message for corporate bond investors, who have snapped up a record level of new issuance this year, and are now seeing negative total returns in the secondary market for the first time this year.

So why is this happening?

Why are bond yields going crazy?

According to the Wall Street Journal, financial regulators in Europe are blaming the ECB’s quantitative easing program…

A recent surge in government bond market volatility can be blamed on the quantitative easing program of the European Central Bank, according to one of Europe’s top financial regulators.

EIOPA, the body responsible for regulating insurers and pension funds in the European Union, has warned that the ECB’s decision to buy billions of euros’ worth of sovereign bonds, to kick-start the region’s economy, has caused markets to become choppier.

And actually this is what should be happening. When central banks start creating money out of thin air and pumping it into the markets, investors should rationally demand a higher return on their money. This didn’t really happen when the Federal Reserve tried quantitative easing, so the Europeans thought that they might as well try to get away with it too. Unfortunately for them, investors are starting to catch up with the scam.

So what happens next?

Well, European bond yields are probably going to keep heading higher over the coming weeks and months. This will especially be true if the Greek crisis continues to escalate. And unfortunately for Europe, that appears to be exactly what is happening…

Greece will not make a June 5 repayment to the International Monetary Fund if there is no prospect of an aid-for-reforms deal with its international creditors soon, the spokesman for the ruling Syriza party’s lawmakers said on Wednesday.

The payment of 300 million euros ($335 million) is the first of four this month totaling 1.6 billion euros from a country that depends on foreign aid to stay afloat.

Greece owes a total of about 320 billion euros, of which about 65 percent to euro zone governments and the IMF, and about 8.7 percent to the European Central Bank.

On Tuesday, Greece’s creditors drafted the broad outlines of an agreement to put to the leftist government in Athens in a bid to conclude four months of negotiations and release aid before the country runs out of money.

“If there is no prospect of a deal by Friday or Monday, I don’t know by when exactly, we will not pay,” Nikos Filis told Mega TV.

In fact, there are reports that both the ECB and the Greek government are talking about Greece going to a “parallel domestic currency”…

Biagio Bossone and Marco Cattaneo write that according to several recent media reports, both the Greek government and the ECB are taking into consideration the possibility (for Greece) to issue a parallel domestic currency to pay for government expenditures, including civil servant salaries, pensions, etc. This could happen in the coming weeks as Greece faces a severe shortage of euros. A new domestic currency would help make payments to public employees and pensioners while freeing up the euros needed to pay out creditors.

If Greece defaults and starts using another currency, the value of the euro is going to absolutely plummet and bond yields all over the continent are going to start heading into the stratosphere.

That is why it is so important to keep an eye on what is going on in Greece.

But no matter what happens in Greece, it appears that we are moving into a time when there will be higher interest rates around the world. And since 505 trillion dollars in derivatives are directly tied to interest rate levels, that could lead to a financial unraveling unlike anything that we have ever seen before in the history of our planet.

As I have warned about so many times before, 2008 was just the warm up act.

The main event is still coming, and it is going to be extraordinarily painful.

Is The Stock Market Overvalued?

May 31, 2015May 31, 2015 by Michael

Are 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.

Why can’t we ever learn from history? We just keep on making the same mistakes over and over again. And without a doubt, some of the smartest members of our society are trying to warn us about what is coming. For example, Yale economics professor Robert Shiller has repeatedly tried to warn us that stocks are overvalued…

I think that compared with history, US stocks are overvalued. One way to assess this is by looking at the CAPE (cyclically adjusted P/E) ratio that I created with John Campbell, now at Harvard, 25 years ago. The ratio is defined as the real stock price (using the S&P Composite Stock Price Index deflated by the CPI) divided by the ten-year average of real earnings per share. We have found this ratio to be a good predictor of subsequent stock market returns, especially over the long run. The CAPE ratio has recently been around 27, which is quite high by US historical standards. The only other times it has been that high or higher were in 1929, 2000, and 2007—all moments before market crashes.

But the CAPE ratio is not the only metric I watch. In my book Irrational Exuberance (3rd Ed., Princeton 2015) I discuss several metrics that help judge what’s going on in the market. These include my stock market confidence indices. One of the indicators in that series is based on a single question that I have asked individual and institutional investors over the years along the lines of, “Do you think the stock market is overvalued, undervalued, or about right?” Lately, what I call “valuation confidence” captured by this question has been on a downward trend, and for individual investors recently reached its lowest point since the stock market peak in 2000.

Other analysts prefer to use different valuation indicators than Shiller does. But no matter which indicators you use, they all show that stocks are tremendously overvalued in mid-2015. For instance, just consider the following chart. It comes from Doug Short, and it shows the average of four of his favorite valuation indicators. As you can see, there is only one other time in all of our history when stocks have been more overvalued than they are today according to the average of these four indicators…

Another danger sign that many analysts are pointing to is the dramatic rise in margin debt that we have seen in recent years. Investors are borrowing tremendous amounts of money to fund purchases of stock. This is something that we witnessed during the dotcom bubble, it was something that we witnessed just prior to the financial collapse of 2008, and now it is happening again. In fact, margin debt just surged to a brand new all-time record high. Once again, the following chart comes from Doug Short…

All of this margin debt has helped drive stocks to ridiculous highs, but it can also serve to drive stock prices down very rapidly when the market turns. This was noted by Henry Blodget of Business Insider in a recent editorial…

What is “margin debt”?

It’s the amount of money stock investors have collectively borrowed via traditional margin accounts to fund stock purchases.

In a bull market, the growth of margin debt serves as a turbocharger that helps drive stock prices higher.

As with a home mortgage, the more investors borrow, the more house or stock they can buy. So as margin debt grows, collective buying power grows. The borrowed money gets used to fund new stock purchases, which helps drives the prices of those stocks higher. The higher prices, in turn, allow traders to borrow more money to fund additional purchases. And so on.

It’s a self-reinforcing cycle.

The trouble is that it’s a self-reinforcing cycle on the way down, too.

If the overall U.S. economy was absolutely booming, these ultra-high stock prices would not be as much of a concern. But the truth is that the financial markets have become completely divorced from economic reality. Right now, corporate profits are actually falling and our exports are way down. U.S. GDP shrunk during the first quarter, and there are a whole host of economic trouble signs on the horizon. I am calling this a “recession within a recession“, and I believe that we are heading into another major economic downturn.

Unfortunately, our “leaders” are absolutely clueless about what is coming. They assure us that everything is going to be just fine – just like they did back in 2008 before everything fell apart. But the truth is that things are already so bad that even the big banks are sounding the alarm. For instance, just consider the following words from Deutsche Bank…

At issue is whether or not the Fed in particular but the market in general has properly understood the nature of the economic problem. The more we dig into this, the more we are afraid that they do not. So aside from a data revision tsunami, we would suggest that the Fed has the outlook not just horribly wrong, but completely misunderstood.

Ultimately, most people believe what they want to believe.

Our politicians want to believe that the economy is going to get better, and so do the bureaucrats over at the Federal Reserve. The mainstream media wants to put a happy face on things, and they want all of us to continue to have faith in the system.

Unfortunately for them, the system is failing. I truly do hope that this bubble can last for a few more months, but I don’t see it going on for much longer than that.

The greatest financial crisis in U.S. history is fast approaching, and it is going to be extraordinarily painful.

When it arrives, it is not just going to destroy faith in the system. In the end, it is going to destroy the system altogether.

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

May 26, 2015 by Michael

Have 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.

The chart that I have posted below shows how the Dow Jones Industrial Average performed during 2008. As you can see, stocks began plummeting long before the financial crisis in the fall. From May 19th through early July, the Dow fell by about 2,000 points. Should we expect to see a similar pattern this summer?…

Like I stated earlier in this article, red flags and warning signs are starting to pop up all over the place. The following are just a few of the trouble signs that we have seen this week…

-On Tuesday, the VIX (a closely watched measure of market volatility) jumped by the highest percentage that we have seen so far in 2015. As I have explained so often before, markets tend to go up in calm markets and they tend to go down in volatile markets. So the fact that volatility is on the rise is not a good sign.

-The U.S. dollar index is surging again. In fact, we just witnessed the largest seven day rise in the U.S. dollar index since the collapse of Lehman Brothers. This is another indication that big trouble is ahead. For much more on this, please see my previous article entitled “Guess What Happened The Last Time The U.S. Dollar Skyrocketed In Value Like This?…”

-Thanks to the ongoing Greek crisis, the euro is falling again. It just hit a fresh one-month low, and if I am right it is going to go quite a bit lower as the European financial crisis intensifies.

-In the U.S., orders for durable goods have fallen year over year for four months in a row. When orders for durable goods start going negative for a few months, it is usually a signal that we are entering a recession.

-After rebounding a little bit, the price of crude oil is falling again. It just hit a new one-month low, and the number of oil rigs in operation has declined for 24 weeks in a row. Once again, this is highly reminiscent of what happened back in 2008.

-Unfortunately, it isn’t just oil that is declining. A whole host of other commodity prices are going down right now as well. This happened just prior to the financial crisis of 2008, and it is a sign that we are heading into a deflationary economic slowdown.

The reason why I talk so much about what happened the last time around is that we should be able to learn from it.

Looking back, there were so many warning signs leading up to the financial crisis of 2008 but most people totally missed them. Now, so many of those exact same signs are appearing once again, but they are being ignored.

Only this time the global financial system is in far worse shape than it was back in 2008. Debt levels all over the planet have absolutely exploded over the past seven years, and the debt to GDP ratio for the entire world is now up to a mind blowing 286 percent. In the United States, our national debt has approximately doubled since just prior to the last recession, and at this point it is mathematically impossible to pay it off. We are in the midst of the greatest stock market bubble of all time, the greatest bond bubble of all time (76 trillion dollars) and the greatest derivatives bubble of all time. Anyone that cannot see the trouble that is approaching is willingly blind.

In the western world, we have extremely short attention spans and we suffer deeply from something called “normalcy bias”. The following is how “normalcy bias” is defined by Wikipedia…

The normalcy bias, or normality bias, is a mental state people enter when facing a disaster. It causes people to underestimate both the possibility of a disaster and its possible effects. This may result in situations where people fail to adequately prepare for a disaster, and on a larger scale, the failure of governments to include the populace in its disaster preparations.

The assumption that is made in the case of the normalcy bias is that since a disaster never has occurred then it never will occur. It can result in the inability of people to cope with a disaster once it occurs. People with a normalcy bias have difficulties reacting to something they have not experienced before. People also tend to interpret warnings in the most optimistic way possible, seizing on any ambiguities to infer a less serious situation.

That is such a perfect description of what is happening in the western world today. But just because things have always been a certain way in our past does not mean that they will continue to be that way in the future. A great economic storm is rapidly approaching, and the signs of the times are all around us.

Hopefully more people will start listening to the warnings, because we have almost run out of time to prepare.

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