Stock Market

Stock Market Crash: The Dow Has Fallen Nearly 2,500 Points And FAANG Stocks Have Lost A TRILLION Dollars In Value

November 20, 2018 by Michael

Thanksgiving week was not supposed to be like this. Normally things are slow in the days leading up to Thanksgiving as investors prepare to gorge themselves with turkey and stuffing as they gather with family and friends. But this year the stock market is crashing, and Wall Street is in panic mode. On Tuesday, the Dow Jones Industrial Average closed at 24,465.64, which is nearly 2,500 points lower than the all-time high of 26,951.81 that was set in early October. But as I noted yesterday, what has been happening to tech stocks is even more dramatic. Each one of the FAANG stocks is now down by more than 20 percent, and they have combined to lose more than a trillion dollars in value. We haven’t seen anything like this since the financial crisis of 2008, and at this point all of Wall Street’s gains for 2018 have been completely wiped out.

Fear is a very powerful motivator, and right now a lot of investors are feverishly getting out of the market because they are afraid of losing their paper profits.

One analyst is describing what is going on as a rush for the exits…

“The highways will be crowded this evening as the Thanksgiving rush will begin in earnest, but this morning investors are rushing for the exits,” Paul Hickey, co-founder of Bespoke Investment Group, wrote to clients on Tuesday.

But for many tech investors, the truth is that the cattle have already left the barn.

Just check out how much market capitalization the “big five” have already lost. The following numbers come from CNBC…

Facebook: $253 billion
Amazon: $280 billion
Apple: $253 billion
Netflix: $67 billion
Alphabet: $164 billion

When you add those figures together, you get a grand total of 1.02 trillion dollars.

If you were alive when Jesus was born, and you spent a million dollars every day since then, you still would not have spent a trillion dollars by now.

A trillion dollars is an amount of money so vast that it is difficult to comprehend, and those that hesitated to sell at the peak of the market mania are never going to get that money back.

And many believe that the tech losses are just beginning because several of these companies have now entered “death cross” territory…

This could be the final nail in the coffin for the FANG trade.

Three of the companies within the big-tech quartet have entered into death crosses, with Facebook, Netflix and Google parent Alphabet seeing their 50-day moving averages cross below their 200-day moving averages.

We shall see what happens in the days ahead, but right now things do not look good.

Apple was supposed to be the strongest and most profitable of the FANG companies, but slowing sales have suddenly changed everything. In fact, Goldman Sachs just cut their price target for the stock…

Goldman Sachs slashed its Apple price target on Tuesday. The firm said in a note there is a “weakness in demand for Apple’s products in China and other emerging markets,” as well as a disappointing reception for the iPhone XR model.

As the trade war intensifies, many in China have been encouraging a boycott of American goods.

Could this be one of the reasons why Apple phone sales are slowing over there?

The trade war is also being singled out as one of the reasons why the stock market as a whole is falling. The following comes from CNN…

The losses have been sparked by a flurry of concerns about everything from higher interest rates and crashing oil prices to the US-China trade war. But the overarching theme is that investors are bracing for the end of the fantastic economic and profit growth that marked the past year. Analysts expect a deceleration in 2019 driven by tariffs, the fading impact of the tax cuts and higher borrowing costs caused by the Federal Reserve.

“Put simply, stocks have already started to price in the risk of an economic slowdown,” Goldman Sachs chief US equity strategist David Kostin wrote to clients on Tuesday.

Ultimately, people buy stocks because they believe in the future. If investors believe that they will get more money back than they are originally investing, they will buy stocks. But if they don’t believe that will be the case, they won’t buy stocks.

For a long time, there was a tremendous amount of optimism about the future on Wall Street, but now that has disappeared. Without that relentless optimism, it is inevitable that stock ratios will return to their long-term averages, and the S&P 500 sales to price ratio is telling us that stock prices still have a very long way to fall.

But our system will not be able to handle a decline of that magnitude. There is more leverage on Wall Street today than ever before, and a huge decline in stock prices would lead to a meltdown unlike anything we have ever witnessed.

If we break 20,000 on the Dow, the panic on Wall Street will be off the charts, and the flow of credit will be absolutely strangled. As a result, economic activity would crash at a pace that would make 2008 look like a Sunday picnic.

Our economy is more dependent on Wall Street than ever, and it is absolutely imperative that we have a healthy financial system. Now that the financial system is starting to crumble, a lot of people are becoming highly alarmed.

But according to Larry Kudlow, we have absolutely nothing to worry about…

‘Corrections come and go,’ he told reporters at the White House, saying that the economy is strong overall.

‘I’m reading some of the weirdest stuff how a recession is in the future,’ Kudlow said. ‘Nonsense.’

‘Recession is so far in the distance I can’t see it,’ he said after appearing in a Fox Business Network interview.

It would be wonderful if Kudlow turns out to be correct. But in “Get Prepared Now”, I warned about what can happen when we allow others to do our thinking for us. What is happening on Wall Street should be obvious to everyone, and no amount of optimistic chatter is going to change that.

And the truth is that even the mainstream media is starting to acknowledge the reality of what we are now facing. CNBC just took a poll of global finance executives, and they discovered that more than half of them believe that the Dow will fall below 23,000…

More than half of the members of the CNBC Global CFO Council think the Dow Jones Industrial Average will fall below 23,000 — roughly 2,000 points from its current level — before the stock market barometer is ever able to top the 27,000 level. The 23,000 level would equate to another 8 percent in decline among the Dow group of stocks before the selling stops.

Ultimately the Dow is going to go much lower than 23,000, and it will shake Wall Street to the core.

But for now, hopefully everyone can have a happy Thanksgiving, because it is likely that there won’t be many happy days for investors after that as this financial meltdown accelerates.

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

All The FANG Stocks Are Now In A Bear Market And Facebook Investors Have Already Lost 39 Percent Of Their Paper Wealth

November 19, 2018 by Michael

These large stock market declines are starting to become a regular thing, and tech stocks are getting hit particularly hard. But we have been in a bull market for such a long time that many investors are having a difficult time comprehending what is happening. Many just keep believing that their beloved tech stocks will eventually bounce back because they just can’t accept the fact that the party is over. At this point, all of the “FANG stocks” have officially entered bear market territory. Facebook is down 39.5 percent from their 52 week high, Amazon is down 25.4 percent, Netflix is down 35.6 percent and Google is down 20.3 percent. And since many throw in Apple to make the acronym “FAANG”, we should also note that Apple’s stock price is now down more than 20 percent from the peak. The tech stock crash that so many have been waiting for has arrived, and many analysts believe that it is going to get a whole lot worse.

The combined market value of Facebook, Amazon, Netflix and Google has fallen by 610 billion dollars so far.

Just think about that for a moment.

Most Americans don’t even realize that tech stocks have been crashing, and many of them simply assume that their investments are safe.

And at one time Facebook was considered to be a very safe investment, but now 39.5 percent of the value of Facebook has already been completely wiped out.

It looks like November will be Facebook’s third month in a row in the red, and that will be the longest monthly losing streak that it has ever had.

A lot of people are shocked that this is happening so rapidly. But really the only surprise is that it has taken this long for these massively overvalued stocks to crash and burn.

The truth is that these companies have been priced beyond perfection. So when even the smallest piece of bad news comes along, investors can start to panic.

For example, one of the big reasons why Apple has declined so much is because production orders for all three of the new iPhones that were unveiled in September have been slashed. It looks like iPhone sales are not going to be at quite the level everyone had anticipated, and Wall Street responded by throwing a huge temper tantrum.

And things look even more ominous for Facebook. As Joel Kulina of Wedbush recently noted, the number of people that are using Facebook on a daily basis in North America is falling…

Joel Kulina of Wedbush says problems in the company have been evident longer than this month. “If you go back to that earnings report back in July, they missed across the board and what really jumps out at me is that we’re seeing declining daily and monthly active users in North America or stalling active user metrics in North America, declining in Europe and the only regions that are seeing growth is in Asia where the average revenue per user is much lower than the Western world,” Kulina said.

When Facebook decided to start censoring people for their political views on a massive basis, that was the beginning of the end for the company. At this point they have alienated millions upon millions of users that were once addicted to the service, and that is damage that will never be repaired.

And it is inevitable that something newer, better and more engaging will eventually come along. Not too long ago, MySpace was the unbeatable giant in social media, but then Facebook came along and crushed them. Now it is clear that Facebook has peaked, and the void that is being created as Facebook declines will certainly be filled by someone else.

But what we are witnessing in the financial marketplace is not just about tech stocks. This is a broad-based global decline, and it has been going on for quite some time.

In fact, just check out the following tidbit from Simon Black…

Deutsche Bank says 89% of all asset classes it tracks are negative this year – the worst year since 1901.

This is often how a big downturn begins: gradually, then suddenly. Asset prices stew and fester, slowly grinding downward for months while people maintain hope that prices will recover.

Yes, you read that correctly.

89 percent of all the asset classes that they track are down in 2018.

That is an absolutely astounding number.

We haven’t seen anything like this since the last financial crisis. Most people seem to assume that the problems that caused the last financial crisis have been fixed, but that is not the case at all. Instead, things were patched together and the global financial bubble was made even bigger. Here is more from Simon Black…

Instead of giving million-dollar mortgages to unemployed borrowers with a history of default, investors are loaning billions of dollars to money-losing zombie businesses, or to governments that are already in debt up to their eyeballs, all while pretending these are safe, credible investments.

Total global debt back in 2008 was about $173 trillion, worth about 280% of GDP.

Today total global debt is $250 trillion, worth about 320% of GDP. It’s only gotten worse.

Now the “Bubble To End All Bubbles” is starting to burst, and great chaos is ahead. What we experienced in 2008 and 2009 is nothing compared to what is in front of us, and most Americans have absolutely no idea what is coming.

At the moment, one key thing to keep a close eye on is the high yield bond market.

High yield bonds (also known as “junk bonds”) crashed really hard just before the financial crisis of 2008 erupted, and now it is happening again.

Even if high yield bonds didn’t go down any further, they have already dropped to a level that indicates that stocks still have a lot more room to fall.

But if high yield bonds do continue to plummet like this, it is a clear indication that it is time to put your crash helmet on.

These are interesting times, and I have a feeling that they are about to get a whole lot more interesting.

Jim Cramer On The U.S. Economy: “Many CEOS Have Told Me About How Quickly Things Have Cooled”

November 16, 2018November 16, 2018 by Michael

A lot of people are shocked by how rapidly things are beginning to move. The U.S. economy is slowing down at a pace that we haven’t seen since the last recession, and this is something that I have been tracking extensively. But now the slowdown is so obvious that even some of the biggest names in the mainstream media are talking about it. For example, just take a look at what Jim Cramer of CNBC is saying. For a long time, he was touting how well the U.S. economy was doing, but now his tune has completely changed. According to Cramer, a lot of corporate executives have “told me about how quickly things have cooled”, and he says that many of them are shocked because this “wasn’t supposed to occur so soon”…

Company leaders across industries are telling Jim Cramer — off the record — that they’re worried about a slowdown in the U.S. economy, Cramer said Thursday on CNBC.

“So many CEOs have told me about how quickly things have cooled,” the “Mad Money” host said. “So many of them are baffled that we could find ourselves in this late-cycle dilemma that wasn’t supposed to occur so soon.”

Just like in 2008, the suddenness of the downturn is taking many of the experts by surprise.

Because our system is so highly vulnerable, when things start to go bad we can see a crisis escalate very rapidly, and the outlook for the months ahead is very troubling.

Normally Jim Cramer doesn’t talk like this, but now he is warning that we are “on the verge” of a slowdown that could potentially “cause an awful lot of havoc and cost a lot of jobs”…

“There are degrees of slowdowns that, nonetheless, can cause an awful lot of havoc and cost a lot of jobs, and that’s what we’re on the verge of here,” he said. “That’s what the markets are saying. That’s what the CEOs are worried about offline.”

The situation reminded Cramer of when, on the cusp of the 2008 financial crisis, his corporate sources confided in him that the Fed “seemed to be out of touch … with what was happening” on Wall Street, he said. That led to his now-famous “They know nothing!” rant blasting the Fed for its lack of diligence.

Back in 2008 and 2009, millions of Americans lost their jobs within a matter of months. Many of you that are reading this article know all about it, because it happened to you personally.

The same thing will happen again, and now it looks like it may happen a lot faster than most of the “experts” were projecting.

There is also another troubling piece of news that I would like to share with all of you.

On Friday, the latest NY Fed report came out, and we learned that U.S. household debt is now 837 billion dollars higher than it was during the previous peak in 2008…

Total household debt, driven by a $9.1 trillion in mortgages, is now $837 billion higher than its previous peak in 2008, just as the last recession took hold and brought on massive deleveraging across the United States. Indebtedness has risen steadily for more than four years and sits more than 21 percent above a trough in 2013.

The $219 billion rise in total debt in the quarter ended September 30 was the biggest jump since 2016.

Our entire “economic recovery” has been fueled by debt, and so those numbers are not that surprising.

But the troubling part of the report is the fact that debt delinquency rates have now risen to the highest levels in 7 years…

Aggregate delinquency rates worsened in the third quarter of 2018. As of September 30, 4.7% of outstanding debt was in some stage of delinquency, an uptick from 4.5% in the second quarter and the largest in 7 years. Of the $638 billion of debt that is delinquent, $415 billion is seriously delinquent (at least 90 days late or “severely derogatory”). This increase was primarily due to a large increase in the flow into delinquency for student loan balances during the third quarter of 2018. The flow into 90+ day delinquency for credit card balances has been rising for the last year and remained elevated since then compared to its recent history, while the flow into 90+ day delinquency for auto loan balances has been slowly trending upward since 2012.

In other words, Americans are getting behind on their debts to a degree that we have not seen since the U.S. economy was coming out of the last recession.

This is a very clear indicator that the U.S. economy is really slowing down, and if delinquency rates keep rising that is going to mean big trouble for U.S. financial institutions.

Of course U.S. consumers are not the only ones with a massive debt problem. Corporate debt has more than doubled since the last financial crisis, state and local government debt levels are at record highs, and the U.S. government is now almost 22 trillion dollars in debt.

Perhaps if we had not spent six trillion dollars on wars in the Middle East since 2001, we would be in much better financial shape as a nation.

The Bubble to End All Bubbles, which some have dubbed “The Everything Bubble”, appears to be starting to burst and that is likely to mean tremendous chaos for global financial markets.

And without a doubt, this was another very tough week for Wall Street. All of the major indexes were down significantly, and tech stocks got hit particularly hard…

The S&P 500 fell 1.6 percent this week, while the Dow Jones Industrial Average and Nasdaq Composite both declined more than 2 percent.

Technology, the biggest sector in the S&P 500 by market cap, was the second-worst performer this week, falling 2.5 percent. The sector dropped following a 5.4 percent decline in Apple. Wall Street analysts worry iPhone sales will slow down. Tech-related shares like Amazon and Netflix were also down 7 percent and 5.7 percent, respectively. Sharp losses in Nvidia dragged down the chips sector and the overall tech sector on Friday.

For the past couple of years we have been enjoying a time of relative economic and financial stability, but most Americans used that time to party instead of to prepare.

Now that period of stability is ending, and a very uncertain future is ahead.

11 Signs That The U.S. Economy Is Starting To Slow Down Dramatically

November 13, 2018November 13, 2018 by Michael

The pace at which things are changing is shocking the experts. Just a few months ago, many of the experts were still talking about how the U.S. economy was “booming”, but since then a major shift has taken place. Most of the headlines have been about the huge stock market declines that we have been witnessing, but things have not been going well for the real economy either. Home sales are way down, auto sales are plummeting, the retail apocalypse is escalating, the middle class continues to shrink and economic optimism is rapidly evaporating. We haven’t seen anything like this since 2008, and many believe that the economic downturn that is now upon us will ultimately be even worse than what we experienced a decade ago. The following are 11 signs that the U.S. economy is starting to slow down dramatically…

#1 When economic activity is rising, demand for oil increases, and oil prices tend to go up. But when economic activity is slowing down, demand for oil diminishes, and oil prices tend to go down. That is why what is happening to the price of oil right now is so alarming…

US oil prices plummeted 7% to a one-year low of $55.69 a barrel on Tuesday. It was crude’s worst day since September 2015.

The losses in the oil world have been staggering as worries deepen about excess supply. Crude is down 12 straight days, the longest losing streak since futures trading began in March 1983.

#2 One new poll has found that only 13 percent of Americans plan to buy a home in the next year. That number has fallen for three quarters in a row, and it is now down by almost half over the last twelve months.

#3 As the market dries up, the inventory of unsold homes is absolutely soaring nationwide…

With that in mind, it comes as no surprise that inventory countywide soared 86% among single-family homes and 188% among condos in October compared to a year prior, according to newly published data by the Northwest Multiple Listing Service. It was the most massive year-over-year increase on record, dating back to the Dotcom bust, a rhythm that has some asking: Is the housing industry about to go bust?

#4 California once had the hottest housing market in the entire nation, but now home prices in the state are plummeting like it is 2008 all over again.

#5 According to the latest Bank of America survey, global fund managers are the most bearish that they have been since the financial crisis of 2008…

According to the survey, 44% of the fund managers expect global growth to decelerate in the next year, the worst outlook since November 2008. What’s more, 54% are anticipating a slowdown in Chinese growth in the next year, the most bearish they’ve been in over 2 years.

#6 America’s ongoing retail apocalypse just continues to accelerate. According to a recent Bloomberg article, things are going so poorly for some mall operators that they “handing over their keys to lenders even before leases end”…

Things are getting worse for malls across America. So much worse that their owners are walking away early from struggling properties, a trend that has mortgage bond investors bracing for losses.

Mall operators, eyeing defaults caused or made more likely by shuttered stores such as Sears Holdings Corp., are handing over their keys to lenders even before leases end. That’s forcing loan-servicing companies to either take a shot at running the properties or sell them cheap. And if they’re unable to salvage the debt payments, investors in commercial mortgage-backed securities will take a hit.

#7 Despite the eruption of a major trade war, the U.S. trade deficit with the rest of the world is on pace to set a brand new all-time record in 2018.

#8 One new study discovered that 62 percent of all U.S. jobs do not currently pay enough to support a middle class lifestyle.

#9 At this point, most Americans barely have any financial cushion at all. According to one recent survey, 58 percent of all Americans have less than $1,000 in savings.

#10 Right now, more than half of all U.S. children are living in households that receive financial assistance from the federal government.

#11 As the economy slows down, an increasing number of Americans are being forced into the streets. More than half a million Americans are currently homeless, and that number is growing with each passing day.

Meanwhile, more troubling news continues to emerge from Wall Street on a daily basis. One of the big stories this week has been the fact that General Electric appears to be on the verge of “collapse”. They have been completely locked out of the commercial paper market, they are being completely overwhelmed by the giant mountain of debt that they are carrying, and their formerly “investment grade” bonds are now being traded like junk. The following comes from Zero Hedge…

Two weeks after we reported that GE had found itself locked out of the commercial paper market following downgrades that made it ineligible for most money market investors, the pain has continued, and yesterday General Electric lost just over $5bn in market capitalization. While far less than the $49bn wiped out from AAPL the same day, it was arguably the bigger headline grabber.

The shares slumped -6.88% after dropping as much as -10% at the lows after the company’s CEO, in an interview with CNBC yesterday, failed to reassure market fears about a weakening financial position. The CEO suggested that the company will now urgently sell assets to address leverage and its precarious liquidity situation whereby it will have to rely on revolvers – and the generosity of its banks – now that it is locked out of the commercial paper market.

GE is not a financial company, but could this be a candidate to become “the next Lehman Brothers”?

The upward economic downturn of the last couple of years is totally gone, and many believe that there will soon be a feverish race for the exits on Wall Street. If you have not already positioned yourself for the coming crisis, now is the time to do so. As we saw in 2008, markets tend to go down a whole lot faster than they go up.

And once things get really crazy on Wall Street, the real economy can fall apart at a pace that is breathtaking. In 2008, millions of people lost their jobs within a matter of months. This will happen again, and there are an increasing number of signs that this is going to happen much sooner than most people had anticipated.

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This Wasn’t Supposed To Happen…

November 12, 2018November 12, 2018 by Michael

We have definitely deviated from the script. According to virtually all of the “experts”, the stock market was not supposed to keep plummeting in November. This was supposed to be the month when the market calmed down and things returned to normal. But instead, November is starting to look a whole lot like October, and many investors are really starting to freak out. U.S. stocks declined for a third day in a row on Monday, and all post-election gains have now been completely wiped out. The Dow Jones Industrial Average lost another 602 points, and all of these large daily losses are really starting to add up. It may still be a bit too early to call this a “major financial crisis”, but if stock prices keep plunging like this it won’t be too long before all hell starts breaking loose on Wall Street.

Goldman Sachs, GE and California utility stocks were some of the biggest losers on Monday, but it was Apple that made the biggest news…

Investors grew concerned after Wells Fargo analysts identified Apple as the unnamed customer that optical communications company Lumentum Holdings said was significantly reducing orders. The news sent Apple’s stock down 5 percent for the day. Lumentum shares plunged almost 33 percent.

Shares in other major tech stocks fell. Advanced Micro Devices gave up 9.51 percent, while Nvidia fell 7.84 percent. Micron Technology lost 4.27 percent. Banks and consumer-focused companies, and media and communications stocks also took heavy losses.

All along, tech stocks had been leading the bull market on the way up, but now things have completely shifted.

In recent weeks tech stocks have been absolutely cratering, and several of the biggest names are now officially in bear market territory. The following summary comes from Wolf Richter…

Facebook [FB] dropped 2.4% today, to $141.55 and is down 35% from its peak in July.
Amazon [AMZN] dropped 4.4% to $1,636.85 a share and is down nearly 20%, from the peak on September 5, when shares nearly kissed for the briefest moment $1 trillion.
Alphabet [GOOG] dropped 2.6%. At $1,038.63, shares are down 18% from the peak in July.
NVIDIA [NVDA] plunged 7.8% today to $189.54 and is down 34.5% over the past six weeks and down 11% from a year ago.
Netflix [NFLX] dropped 3.1% today to $294.07 and has plunged 30% from its high in early July.
Microsoft [MSFT] fell 2.4% today to $106.87 and is down 7.5% from its peak at the beginning of October.

The environment on Wall Street is radically different than it was even six months ago. Today, there are concerns about what a divided Congress will mean for the next two years. Certainly there will be no more tax cuts, and many investors are bummed about that. There are also concerns that the trade war between the United States and China will continue to escalate. In addition, interest rates continue to rise, housing numbers continue to get worse, and we continue to get more evidence that the global economy is really starting to slow down.

And one thing that is really spooking investors right now is the surging U.S. dollar…

Stocks investors are spooked about a lot of things, and the strong dollar biting into earnings growth is now one of them.

The dollar index, which measures the greenback versus a basket of other currencies, jumped 0.7 percent on Monday to 97.58, a 17-month high. As the dollar rose, the Dow Jones Industrial Average lost 602 points to 25,387, and the S&P 500 was down nearly 2 percent to 2,726.

You may be tempted to think that a strong dollar would be a good thing, but in this financial climate it is definitely not. As I have discussed previously, many emerging market countries binged on debt during the boom years, and much of that debt was denominated in U.S. dollars. Now that the dollar is surging, that is making it much, much more difficult to service and pay back those loans.

Meanwhile, the price of oil continues to fall precipitously. At this point, oil has now fallen for 11 days in a row…

Crude has now lost ground for 11 consecutive days, the longest slide since oil futures trading was introduced on the NYMEX in March 1983. The historic slump knocked oil into a bear market — barely a month after it hit four-year highs. Selling accelerated in extended trading, with crude breaking below $59 a barrel.

Monday’s drop signals skepticism from investors that Saudi Arabia will be able to quickly mop up a glut of supply that has suddenly emerged.

If you will remember, the price of oil also spiked dramatically and then fell like a rock just prior to the financial crisis of 2008.

Could it be possible that a similar scenario is playing out again?

In “Get Prepared Now”, I talked about what the coming financial crisis would mean for all of us, and I noted that many prepare for such a crisis by investing in precious metals. So it is quite interesting to note that global central banks were voraciously buying gold during the third quarter of this year…

Gold is particularly attractive to central banks looking for safe, liquid assets. Central bank purchases of gold increased by 22% during the third quarter. That’s the fastest pace since the fourth quarter of 2015, according to Natalie Dempster, managing director for central banks and public policy at the World Gold Council.

Could this be a sign that the central bankers believe that a new crisis is looming?

Of course there are many of us that are stunned that things have already deteriorated so rapidly. I expected that October would be bad, but I didn’t think that it would be that bad.

And many of us had anticipated that things would calm down a bit in November, and so a 602 point decline on Monday definitely came as a surprise.

Ultimately, it is just a matter of time before we witness a stock market crash far greater than we saw in 2008, but we can certainly hope that it will be put off for as long as possible.

However, the truth is that nobody can outrun the relentless march of time indefinitely, and time is most certainly running out for Wall Street.

Global Stocks Plunge Again And A Former Reagan Administration Official Is Warning Of A “40% Crash”

November 4, 2018 by Michael

Stocks are falling again, and many believe that this new crisis is only just beginning. After a disappointing end to last week, a lot of investors were hoping for a bounce to start this week, but so far that has not materialized. As I write this article, all the big markets in Asia are down, and it looks like it is going be be a rough morning for Wall Street. Of course we probably won’t see too much movement as global markets wait to see what happens on Tuesday, and those results could potentially move things up or down substantially. Ultimately, I have a feeling that Wall Street will not be too happy if control of Congress is divided, because that would almost certainly mean that very little will get accomplished in Washington for the next two years. Instead, we will likely see even more bickering and fighting than we are seeing now.

But no matter what happens in the short-term, a lot of experts are convinced that the big market crash that everyone has been waiting for is finally here.

One of those experts is David Stockman.

Stockman is a former member of Congress, and he was the Director of the Office of Management and Budget under President Ronald Reagan. These days he is a frequent contributor on CNBC, and he recently told the network that there will be “a 40 percent stock market plunge”…

David Stockman warns a 40 percent stock market plunge is closing in on Wall Street.

Stockman, who served as President Reagan’s Office of Management and Budget director, has long warned of a deep downturn that would shake Wall Street’s most bullish investors. He believes the early rumblings of that epic downturn is finally here.

Because our financial system is even more leveraged today than it was in 2008, a plunge of that magnitude would be absolutely disastrous. Virtually everyone would need a “bailout” at that point, and economic activity would decline dramatically as the flow of credit dried up almost completely.

Needless to say, we would find ourselves in a very harsh recession very rapidly, and that is another thing that Stockman is anticipating…

“We’re going to be in a recession, and we’re going to have another market correction which will be pretty brutal,” Stockman said.

Of course Stockman is far from alone. Another economic expert that is warning of an imminent crisis is Mish Shedlock…

In the last 10 years not a single fundamental economic flaw has been fixed in the US, Europe, Japan, or China. The Fed was behind the curve for years contributing to the bubble. Massive rounds of QE in the US, EU, and Japan created extreme equity and junk bond bubbles. Trump’s tariffs are ill-founded as is Congressional spending wasted on war.

Potential Catalysts

Junk Bond Bubble Bursting

Equity Bubble Bursting

Italy

Tariffs

Brexit

Pensions

Housing

China

Many will blame the Fed. The Fed is surely to blame, but it is prior bubble-blowing policy, not rate hikes now that are the problem.

Shedlock has correctly identified a number of factors that could act as “catalysts” for this crisis. The truth is that signs of trouble are all around us, and it is only going to take a very small nudge to push us off of a very steep cliff.

Instead of fixing our long-term problems in 2008, our leaders patched up the current system and started reinflating the bubble.

Now we have created the largest financial bubble in all of human history, and the only way to keep it from imploding is to inflate it even more.

On some level, just about everyone knows that this story is going to end badly, and that a horrifying economic downturn is ahead of us.

Just look at what General Motors is doing. Even though the U.S. economy has supposedly been “doing well”, they just offered a buyout to 18,000 of their employees because they want “to act ahead of the next economic downturn”…

And yet, despite its strong position, Automotive News reports that GM plans to offer about 18,000 employees a voluntary buyout. The offer will only be extended to salaried employees who have worked at the company for at least 12 years, and eligible employees have until November 19 to decide whether to accept or not.

But why would GM reduce its workforce when it’s doing so well? With sales in the U.S. and China slowing down, hybrid and electric vehicles growing increasingly popular, and automated driving technology finding its way to more vehicles, GM sees a lot of change on the horizon. It’s also worried about the potential for another recession, and it wants to act ahead of the next economic downturn.

Earlier today, I received an email from one of my readers that really made me think.

He expressed his belief that a great economic crisis is rapidly approaching, and he wanted to know how he could help warn people about what is coming.

I wasn’t sure what to tell him.

At this point, the elite know what is coming and they are feverishly preparing for it. The “smart money” is pulling out of stocks at an unprecedented pace, and the ingredients for a “perfect storm” are definitely coming together.

But most ordinary Americans have bought into the false narrative that everything is going to be okay somehow.

Sadly, everything is not going to be okay, and a lot of people are going to be completely overwhelmed by the very painful times that are coming.

“Red October”: We Just Witnessed The Worst Month For The S&P 500 In 7 Years

October 31, 2018 by Michael

This was an October that many of us will never forget. The month of October is typically the most volatile month of the year for stocks, and that was definitely the case in 2018. It was the worst month for the S&P 500 in 7 years, and it was the worst month for the Nasdaq in almost 10 years. But the damage could have been much worse if we had not seen a bounce the last two trading days of the month. On Wednesday, the Dow Jones Industrial Average was up 241 points, and investors are hoping that this is a sign that things are starting to settle down a bit. And hopefully things will be calmer in November, because things were so chaotic in October that the month has already been branded “Red October” by the mainstream media…

Wall Street finally bid good riddance to what one professional stock investor dubbed “Red October.”

In a tumultuous month marked by big price swings, rising fear levels and emerging risks, the U.S. stock market suffered its biggest October decline since the 2008 financial crisis, prompting shaken investors to reassess the staying power of a bull run that began more than nine years ago.

When we go back and look at the month as a whole, the damage is breathtaking.

Here is a summary of the carnage that we witnessed…

-October was the worst month for the S&P 500 since September 2011.

-October was the worst month for the Nasdaq since November 2008.

–Nearly 2 trillion dollars in U.S. stock market wealth was wiped out.

-Overall, approximately 8 trillion dollars in global stock market wealth was wiped out.

-October was the worst month ever for the “FANG” stocks.

-Facebook was down 7.7 percent.

-Alphabet (the parent company of Google) was down 9.7 percent.

-Netflix was down 19.3 percent.

-Amazon was down 20.2 percent.

-Global systemically important bank stocks were down more than 10 percent.

To me, one of the most noteworthy things that happened in October was the huge movement that we saw in the junk bond market.

Usually junk bonds start to rapidly decline just before a major stock market crash happens, and October was the worst month for junk bonds since 2008.

That is a major league red flag, but not a lot of people are talking about it.

But without a doubt there is a lot of anxiety on Wall Street right now, and even many long-time bulls are turning into bears.

For example, just consider what Ralph Acampora is saying…

The so-called “Godfather” of market chart analysis said that the damage already done to the stock market is much worse than most people are talking about. Ralph Acampora, a prominent market technician, says the stock market is in bad shape and it’s worse than many Wall Street investors appreciate.

“From a technical perspective, the damage that has been done technically to the stock market is much, much worse than people are talking about,” he told MarketWatch in a phone interview on Tuesday. Acampora also said that the technical damage that has resulted in the Dow Jones Industrial Average and the S&P 500 index erasing all of their gains for 2018, and the Nasdaq Composite Index falling into correction territory (which is usually characterized as a decline of at least 10% from a recent peak) will take months to repair.

Acampora had been a bull for a very long time, and while many other analysts are calling this decline a “correction”, he believes that “this is something different”…

“I’ve been a bull for a long, long time and like everyone, I was waiting for a correction but this is something different,” said Acampora. “All the leadership is getting crushed,” he said. He added that he feels that the entire market will go into bear territory soon.

“Honestly, I don’t see the low being put in yet and I think we’re going to go into a bear market,” he said according to MarketWatch.

We’ll see what happens in November.

Stocks will definitely move next week after the election results come in. I would think that a divided result (Republicans keep the Senate but Democrats take the House) would be interpreted by investors as a negative sign because that will produce gridlock in Washington.

However, that will only move the needle for a day or two.

Ultimately, I still believe that some sort of “trigger event” will be necessary in order for a full-blown stock market crash to happen.

But the smart money is already behaving as if a stock market crash is a certainty. Just consider the following chart from Zero Hedge…

Meanwhile, the number of Americans that expect the stock market to decline over the next year is at the lowest level in over a decade.

That seems quite odd.

As you can see from the chart, the smart money has correctly anticipated the overall direction of the market all the way back to 1990.

Do you think that the smart money will be wrong this time?

We have never seen the smart money get out of stocks at such a rapid pace. Despite the bounce of the last couple of days, there is definitely an atmosphere of gloom on Wall Street.

The ingredients for a “perfect storm” are definitely coming together. It may not be today or tomorrow, but at some point a “trigger event” will happen, and then all hell will break loose in the financial markets.

The Stock Market Has Just Done Something That It Hasn’t Done Since 2009

October 29, 2018 by Michael

We continue to see extremely wild swings on Wall Street. On Monday, at one point the Dow Jones Industrial Average was up 352 points, and then later it was down 566 points. At the closing bell the Dow had officially lost 245 points, and all of this extreme volatility is making investors very nervous. Investors like markets that are predictable, because it is a whole lot easier to make money when things move in a predictable fashion. When things get crazy, a lot of investors pull their money out and wait until things settle down in the marketplace, and that definitely makes a lot of sense. Right now, there is a lot of uncertainty about where things are ultimately headed. Some experts believe that the bull market will resume after this “correction” is over, but others believe that a bear market has now begun. And as you will see below, the fact that the S&P 500 has now broken a major trendline that has not been broken since 2009 is strengthening the case of the latter group.

Many had anticipated that we may see a bounce on Monday, but instead we witnessed another very large decline. According to Zero Hedge, all of the major stock indexes are now officially in correction territory…

Dow -10.1%
S&P -10.8%
Nasdaq Composite -14.4%
Dow Transports -15.5%
Russell 2000 -15.5%

Tech stocks got hit harder than anything else on Monday, and at this point they are down 13.3 percent from the peak. Each one of the FANG stocks is now in bear market territory, and many on Wall Street are stunned that this has happened so quickly.

But as I have warned my readers many times, markets tend to go down a whole lot faster than they go up.

The main thing that rattled investors on Monday was news that the Trump administration might slap even more tariffs on Chinese imports…

President Donald Trump’s administration is prepared to announce tariffs on remaining Chinese imports if talks next month between Trump and Xi Jinping do not yield results, Bloomberg reported. Such a move is likely to prolong the standoff between the U.S. and China over trade and is expected to hurt the global economy.

Analysts are also blaming the stock market’s weakness in October on a variety of factors, including worries that U.S. corporate earnings growth has peaked and fears of a U.S. monetary policy misstep by the Federal Reserve.

The Chinese do not respond well to threats and intimidation, and our relations with China are the worst that they have been in decades. This is going to have huge implications for all of us, and this is a major storyline that we will want to revisit again and again in the months ahead.

Getting back to the market, we are starting to see things happen that we have not witnessed since the last financial crisis.

Specifically, the S&P 500 just broke the bull market trendline that had not been violated since the market bottomed out in early 2009. The following comes from Graham Summers…

That’s bad news. But unfortunately it gets worse from here. Stocks have violated the monthly trendline running back to the 2009 for the first time in this bull market.

So when we talk about the bull market ending… we’re not just talking about the 2016-2018 run… we’re talking about THE ENTIRE bull market running back to the 2009 bottom.

You can see the chart that he is referring to right here. The fact that this trendline has now been broken is a huge sell signal, and it is yet another indication that a new financial crisis has begun.

And it isn’t just the U.S. that is in trouble. In fact, the U.S. is still in much better shape than the rest of the world.

Right now, approximately 58 percent of the 2,767 stocks listed on MSCI’s global index are officially in bear market territory.

Things have deteriorated so rapidly that even Jim Cramer of CNBC is starting to talk like a bear…

There have only been four times in Jim Cramer’s career when the stock guru and former hedge fund manager sold out of his entire portfolio. And, scary as it sounds, the market action of the past few weeks reminds him of those chaotic moments.

“As much as it pains me to say this, the current situation combines … some of the worst characteristics of those four past breakdowns,” Cramer told investors on Monday as much of the stock market slid into correction territory.

Hopefully we will see a bounce on Tuesday and things will settle down on Wall Street for the rest of this week.

But whether that happens or not, this crisis is far from over.

Stock prices should have never gotten this high. The only reason they reached such absurd heights was due to unprecedented intervention by the Federal Reserve. And now the Federal Reserve seems determined to burst the bubble that they originally created, and that is going to cause immense pain for investors.

In order for valuations to return to their long-term averages, stock prices would still need to decline another 40 percent from current levels, but because our system is so leveraged a decline of that magnitude would be absolutely crippling for our financial system and would create the greatest credit crunch that any of us have ever seen.

And a credit crunch of that magnitude would instantly plunge the U.S. into an economic depression.

This financial bubble has lasted for much longer than it should have, but we desperately need it to continue, because the alternative is an economic horror show of unprecedented magnitude.

Unfortunately it appears that this bubble is now bursting, and that is extremely bad news for all of us.

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