Stock Market

Oil Prices Have Been Rising And $4 A Gallon Gasoline Would Put Enormous Stress On The U.S. Economy

Thanks to increasing demand and upcoming U.S. sanctions against Iran, oil prices have been rising and some analysts are forecasting that they will surge even higher in the months ahead.  Unfortunately, that would be very bad news for the U.S. economy at a time when concerns about a major economic downturn have already been percolating.  In recent years, extremely low gasoline prices have been one of the factors that have contributed to a period of relative economic stability in the United States.  Because our country is so spread out, we import such a high percentage of our goods, and we are so dependent on foreign oil, our economy is particularly vulnerable to gasoline price shocks.  Anyone that lived in the U.S. during the early 1970s can attest to that.  If the average price of gasoline rises to $4 a gallon by the end of 2018 that will be really bad news, and if the average price of gasoline were to hit $5 a gallon that would be catastrophic for the economy.

Very early on Tuesday, the price of U.S. oil surged past $70 a barrel in anticipation of the approaching hurricane along the Gulf Coast.  The following comes from Fox Business…

U.S. oil prices rose on Tuesday, breaking past $70 per barrel, after two Gulf of Mexico oil platforms were evacuated in preparation for a hurricane.

U.S. West Texas Intermediate (WTI) crude futures were at $70.05 per barrel at 0353 GMT, up 25 cents, or 0.4 percent from their last settlement.

If we stay at about $70 a gallon, that isn’t going to be much of a problem.

But some analysts are now speaking of “an impending supply crunch”, and that is a very troubling sign.  For example, just check out what Stephen Brennock is saying…

“Exports from OPEC’s third-biggest producer are falling faster than expected and worse is to come ahead of a looming second wave of U.S. sanctions,” said Stephen Brennock, analyst at London brokerage PVM Oil Associates. “Fears of an impending supply crunch are gaining traction.”

So how high could prices ultimately go?

Well, energy expert John Kilduff is now projecting that we could see the price of gasoline at $4 a gallon by winter…

Energy expert John Kilduff counts Iran sanctions as the top reason West Texas Intermediate (WTI) could climb as much as 30 percent by winter, and that could spell $4 a gallon unleaded gasoline at the pumps.

“The global market is tight and it’s getting tighter, and the big strangle around the market right now is what’s in the process of happening with Iran and the Iran sanctions,” the Again Capital founding partner said on CNBC’s “Futures Now.”

About two months from now, U.S. sanctions will formally be imposed on Iran, and that is going to significantly restrict the supply of oil available in the marketplace.

So refiners that had relied on Iranian oil are “scrambling” to find new suppliers, and this could ultimately drive oil prices much higher…

Iran’s oil exports are plummeting, as refiners scramble to find alternatives ahead of a re imposition of U.S. sanctions in early November. That in turn has helped drain a glut of unsold oil.

“To the extent we’re seeing the Iran barrels lost to the market, you’re looking at a WTI price and Brent in the $85 to $95 range, potentially,” Kilduff said.

Other sources are also predicting that oil prices will rise.

Barclays is warning that “prices could reach $80 and higher in the short term”, and BNP Paribas is now anticipating that Brent crude will average $79 a barrel in 2019.

In addition to the upcoming Iranian sanctions, rising global demand for oil is also a major factor that is pushing up prices.

For example, many Americans don’t even realize that China has surpassed us and has now become the biggest crude oil importer on the entire planet…

China became the world’s largest crude oil importer in 2017, surpassing the US and importing 8.4 million barrels per day.

The US only imported 7.9 million barrels per day in 2017, according to the US Energy Information Administration.

So what is the bottom line for U.S. consumers?

The bottom line is that gasoline prices are likely to jump substantially, and that is going to affect prices for almost everything else that you buy.

Excluding tech products, virtually everything else that Americans purchase has to be transported, and so the price of gasoline must be factored into the cost.

So if gasoline prices shoot up quite a bit, that means that almost everything is going to cost more.

And this would be happening at a time when inflation is already on the rise…

According to data from the Bureau of Labor Statistics, the Consumer Price Index for All Urban Consumers, less food and energy, hit 2.4% in July 2018. That’s its highest reading since September 2008.

Of course 2.4 percent doesn’t really sound that scary, and that is how the government likes it.

But if the rate of inflation was still calculated the way it was back in 1990, the current inflation rate would be above 6 percent.

And if the rate of inflation was still calculated the way it was back in 1980, the current inflation rate would be above 10 percent.

Inflation is a hidden tax on all of us, and it is one of the big reasons why the middle class is being eroded so rapidly.

Please do not underestimate the impact of the price of oil.  It shot above $100 a barrel in 2008, and it was one of the factors that precipitated the financial crisis later that year.

Now we are rapidly approaching another crisis point, and there are so many wildcards that could potentially cause major problems.

One of those wildcards that I haven’t even talked about in this article would be a major war in the Middle East.  One of these days it will happen, and the price of oil will instantly soar to well above $100 a barrel.

We live at a time of rising global instability, and we should all learn to start expecting the unexpected.

This article originally appeared on The Economic Collapse Blog.  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.

 

If You Read Between The Lines, Global Economic Leaders Are Telling Us Exactly What Is Coming

Sometimes, a strongly-worded denial is the most damning evidence of all that something is seriously wrong.  And when things start to really get crazy, “the spin” is often the exact opposite of the truth.  In recent days we have seen a lot of troubling headlines and a lot of chaos in the global financial marketplace, but authorities continue to assure us that everything is going to be just fine.  Of course we witnessed precisely the same thing just prior to the great financial crisis of 2008.  Federal Reserve Chair Ben Bernanke insisted that a recession was not coming, and we proceeded to plunge into the worst economic downturn since the Great Depression.  Is our society experiencing a similar state of denial about what is ahead of us here in 2018?

Let me give you a few examples of some recent things that global economic leaders have said, and what they really meant…

–Tesla Motors CEO Elon Musk: “We are definitely not going bankrupt.”

Translation: “We are definitely going bankrupt.”

Tesla is a company that is supposedly worth 51 billion dollars, but the reality is that they are going to zero.  They have been bleeding massive amounts of cash for years, and now a day of reckoning has finally arrived.  A severe liquidity crunch has forced the company to delay payments or to ask for enormous discounts from suppliers, and many of those suppliers are now concerned that Tesla is on the verge of collapse…

Specifically, a recent survey sent privately by a well-regarded automotive supplier association to top executives, and seen by the WS , found that 18 of 22 respondents believe that Tesla is now a financial risk to their companies.

Meanwhile, confirming last month’s report that Tesla is increasingly relying on net working capital, and specifically accounts payable to window dress its liquidity, several suppliers said Tesla has tried to stretch out payments or asked for significant cash back. And in some cases, public records show, small suppliers over the past several months have claimed they failed to get paid for services supplied to Tesla.

–Shark Tank billionaire Mark Cuban: “I’ve got a whole lot of cash on the sidelines.”

Translation: “I believe that the stock market is about to crash.”

Mark Cuban is not stupid.  Like Warren Buffett, he is sitting on giant piles of cash as he waits for stock valuations to return to their long-term averages.  And when “something happens”, Cuban insists that he is “ready, willing and able” to make some bold moves…

Billionaire entrepreneur Mark Cuban told CNBC on Monday that he’s holding much more cash than he normally does because he’s concerned about the stock market and U.S debt levels.

“I’m down to maybe four dividend-owning stocks, two shorts, and Amazon and Netflix. I’ve got a whole lot of cash on the sidelines,” Cuban said on “Fast Money Halftime Report.” “[I’m] ready, willing and able if something happens” to invest.

–Deutsche Bank: We need our employees to “take every opportunity to restrict non-essential travel” in order to cut costs.

Translation: We are on the verge of collapse, and we have got to save every single penny that we can right now.

If you follow my work on a regular basis, you already know that I have been extremely hard on Deutsche Bank.  The biggest bank in Europe is teetering on the brink, and this latest move is more evidence that their days are numbered…

Forget the days of traveling first class to meet clients: Deutsche Bank, which following major management upheaval in the past year, is telling its employees to take the bus whenever possible.

In the latest indignity to befall the bank’s employees, in a memo sent by Deutsche Bank CFO James von Moltke, the biggest European bank – if certainly not by market cap – urged employees to “take every opportunity to restrict non-essential travel” until the end of the year adding that “with your help, we will meet our cost-reduction targets.”

–Italian Cabinet Undersecretary Giancarlo Giorgetti: “I hope that the quantitative easing program will go forward.”

Translation: If the ECB does not buy our bonds, the Italian financial system is toast.

Italy will almost certainly be the fulcrum of the next European financial crisis, and the truth is that the EU will not have enough money to bail Italy out once it collapses.

So the Italians desperately need the ECB to continue buying their bonds, and the new Italian government seems to understand this very well…

Italian Cabinet Undersecretary Giancarlo Giorgetti said he hopes the European Central Bank’s quantitative easing program will be extended to help protect the country from financial speculators.

Italy also needs to be credible to help shield itself, Giorgetti said in an interview with newspaper Il Messaggero. After the Genoa bridge disaster, the country may boost its extra spending request to the European Union, he said.

Signs of trouble continue to erupt in the United States as well.  The trade war is taking a huge toll on businesses of all sizes, and sometimes it is rural America that is being hurt the most.

For instance, the looming closure of the Element Electronics factory in Winnsboro, South Carolina would be absolutely crippling for that community…

TVs at the plant are made out of components that are imported from China, and the tariffs make assembling the TVs here a losing proposition, the company has said. The company is fighting for a waiver but is bracing for shutdown.

Winnsboro is the seat of Fairfield County, where a third of the population lives in poverty. Unemployment among its nearly 23,000 residents is second highest in the state, and, despite periodic rebounds, the population has fallen steadily over the past century.

“This is going to be a ghost town,” Winnsboro resident Herbert Workman said.

In this day and age, we are trained to be optimistic, and that can be a good thing.

But there comes a point when blind optimism causes us to lose touch with reality, and many believe that we have already crossed that threshold.

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.

Experts Warn That The “Scariest” Stock Market Signals Are Flashing Red

So many top professionals in the financial industry are sounding the alarm about a coming stock market crash right now.  And there certainly have been rumblings in 2018 – not too long ago we had a three day stretch that was called “the tech bloodbath”, and during that time Facebook had the worst day for a single company in stock market history.  But we haven’t seen the really big “crash” yet.  Many have been waiting for it to happen for several years, and some people out there are convinced that it is never going to come at all.  Of course the truth is that we are in perhaps the largest stock market bubble that our nation has ever seen, and all other large stock market bubbles have always ended with a major price collapse.  So whether it happens immediately or it takes a little while longer, it is inevitable that stock prices will eventually return to their long-term averages.

Doug Ramsey, the chief investment officer at Leuthold Group, is one of those that is sounding the alarm.  Unlike price to earnings ratios, price to sales ratios are very hard to manipulate, and he has pointed out that price to sales ratios are higher than we have ever witnessed before.

In particular, when you look at the median stock price to sales ratio, it is the highest that it has ever been and it is twice as high as it was in February 2000…

He also shared a chart which he claims is “unfit for a family-friendly publication” that shows how in terms of median price to sales ratio, the S&P 500 is twice as expensive as it was in 2000.

“Overvaluation in 2000 was highly concentrated; today it is pervasive, with the median S&P 500 Price/Sales ratio of 2.63 times more than double the 1.23 times prevailing in February 2000.

To me, that number is absolutely stunning, and it shows that we have a long, long way to fall.

As I have said before, stock prices need to fall by 40 or 50 percent just to get into a neighborhood where they will begin to make sense again.

And something else that Ramsey has pointed out is that in 2018 stocks are behaving very much like they did just before the dotcom bubble crashed…

Ramsey admits that history isn’t the best guide for the future but the S&P 500’s performance since it touched its peak on Jan. 26 is closely mirroring what happened 18 years ago.

“In the earlier case, a volatile five-month upswing that began in mid-April ultimately fell just a half-percent short of the March 24th high by early September. This year, a similarly choppy, six-month rebound has taken the S&P 500 to within 1% of its January 26th high,” Ramsey said.

Another major indicator that is “flashing red” is correlation.

Just prior to the last two stock market crashes, stock prices began to wildly diverge.  While some stocks were still going up, others were cratering big time.  This lack of uniformity is often a sign that big trouble is on the horizon.  The following comes from CNBC…

In January 2001, before tech went bust, stocks diverged as growth flourished. Everything named dotcom boomed, but old line industries puttered.

There hasn’t been such a divergence between stocks in the overall market since then, not even during the Great Recession.

Well, guess what is happening right now?

James Paulsen, also with the Leuthold Group, is warning that correlation “is at one of the lowest levels in the post-War era”…

“Correlation is at one of the lowest levels in the post-War era,” said James Paulsen, chief investment strategist at Leuthold Group. “The combination is damaging. We now have record low correlation at the same time we have high valuations, and the combination is bad for the market.”

“When you have this situation of the lowest quintile correlation against the highest quintile valuation since 1952, you have 10 percent declines on average,” said Paulsen.

When the stock market finally crashes, a lot of people are going to complain that nobody warned them in advance that it was coming, but in reality anybody that cannot see it coming from a mile away must be blind.

There is no question that it is coming.  The only question is how soon it will get here.

And it certainly doesn’t help that a trade war has erupted which is greatly disrupting global commerce.

For example, a giant cargo ship carrying 20 million dollars worth of soybeans has been circling in the ocean off the coast of China for over a month because it missed the tariff deadline by just a few hours…

The Peak Pegasus, which is owned by JPMorgan Asset Management, left Seattle on June 8 on a monthlong voyage to the northeastern Chinese city of Dalian. The trade war between the US and China was erupting just as it left, with President Donald Trump imposing tariffs on billions of dollars’ worth of Chinese imports.

The US ship was due to deliver its 70,000-tonne cargo on July 6, The Guardian reported, but missed the tariff deadline. The Peak Pegasus arrived about five hours after China imposed retaliatory tariffs on US goods including soybeans.

Somebody is going to lose a tremendous amount of money in that deal.

If you take an honest look at the numbers, there is no debate that we are in far worse shape than we were just before the financial crisis of 2008.  Our debt levels are much higher, stock prices are way more inflated, and financial institutions have become even more reckless.  None of the long-term problems that plagued us back in 2008 have been fixed.  Instead, the current system was patched up and all of the bubbles were re-inflated.  Unfortunately, our attention spans are so short these days, and for most people 2008 seems like ancient history at this point.

But without a doubt a much worse crisis than 2008 is on the way, and most people are going to be absolutely blind-sided by it.

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.

According To The “Buffett Indicator”, The Stock Market Is More Primed For A Crash Than It Has Ever Been Before

Warren Buffett’s favorite indicator is telling us that stocks are more overvalued right now than they have ever been before in American history.  That doesn’t mean that a stock market crash is imminent.  In fact, this indicator has been in the “danger zone” for quite some time.  But what it does tell us is that stock valuations are more bloated than we have ever seen and that a stock market crash would make perfect sense.  So precisely what is the “Buffett Indicator”?  Well, it is actually very simple to calculate.  You just take the total market value of all stocks and divide it by the gross domestic product.  When that ratio is more than 100 percent, stocks are generally considered to be overvalued, and when that ratio is under 100 percent stocks are generally considered to be undervalued.  The following comes from MSN…

That being said, the Buffett Indicator, while it’s not a flawless indicator, does tend to peak during hot stock markets and bottom during weak markets. And as a general rule, if the indicator falls below 80%-90% or so, it has historically signaled that stocks are cheap. On the other hand, levels significantly higher than 100% can indicate stocks are expensive.

For context, the Buffett indicator peaked at about 145% right before the dot-com bubble burst and reached nearly 110% before the financial crisis.

So where are we today?

Right now we are at almost 149 percent, which is the highest level ever recorded…

Where does the Buffett Indicator stand now? It may surprise you to learn that, at nearly 149%, the total market cap to GDP ratio has never been higher. It’s even higher than the 145% peak we saw during the dot-com bubble.

In recent days we have seen a “tech bloodbath”, but that was nothing compared to what is eventually coming.  Ultimately, the stock market would need to fall by at least one-third in order for prices to be properly balanced again.

And it appears that Warren Buffett is taking his own advice.  His company is currently sitting on more than 100 billion dollars in cash…

Having said that, it does seem like Buffett himself is paying attention and agrees that the market is generally expensive. After all, the lack of attractive investment opportunities has resulted in Berkshire Hathaway accumulating nearly $110 billion of cash and equivalents on its balance sheet. Plus, Buffett has specifically cited valuation when discussing the absence of major acquisitions lately.

Warren Buffett didn’t become one of the wealthiest men in America by being stupid.  He knows that valuations are absurd right now, and he is waiting to strike until valuations are not so absurd.

And he knows that another recession is inevitably coming.  I wrote about some of the trouble signs yesterday, and more trouble signs seem to pop up on a daily basis now.

Earlier today, CNN published an article entitled “Two recession warning signs are here”…

Home sales have declined in four of the past five months as housing prices have grown — but paychecks have remained stagnant. Many people can’t afford to buy homes, and those who can are taking on a lot of debt to get into them.

I feel really bad for those that purchased a home in recent months, because those poor people are getting in right at the top of the bubble.  The housing bubble is about to burst in a major way, and there will be a tremendous amount of pain afterwards.

And we received more bad news about the housing market on Wednesday.  According to Redfin, housing demand plunged 9.6 percent in June…

The long list of housing headwinds is finally taking its toll on potential buyers. Housing demand fell 9.6 percent in June, compared with June 2017, according to a monthly index from Redfin. That is the largest decline since April 2016.

CNN’s second “warning sign” is the fact that the yield curve is about to invert…

The Federal Reserve, which is finishing up its two-day meeting Wednesday, is expected to raise its target rate two more times this year. Higher rates have boosted short-term US Treasury bond rates. But the longer-term bond rates haven’t risen along with the shorter-term rates, because investors are growing wary about the economy over the long haul.

With two more interest rate hikes planned, the Fed could boost short-term rates higher than long-term ones, inverting the so-called yield curve. An inverted yield curve has preceded every recession in modern history.

If you don’t understand the yield curve or you just want a deeper examination of this issue, please see my previous article entitled “Beware – The Last 7 Times The Yield Curve Inverted The U.S. Economy Was Hit By A Recession”.

In recent weeks, there has been renewed interest in my economics website as people begin to wake up and understand that a major economic crisis is looming.  Of course the truth is that we are way, way overdue for a stock market crash and another recession.  The only thing that is surprising is that it took us so long to get here.

Sadly, most people are still very much asleep.  Average Americans spend most of their waking hours staring at either a television or a computer screen, and the big media companies control almost all of the media that we are so voraciously consuming.  Instead of thinking for themselves, most people simply regurgitate what they have been fed by the media giants, and we are never going to turn things around if we continue to allow “the matrix” to tell us what to think.

The Buffett Indicator is very simple, but it is also very accurate.  If you want to do well in the stock market, you want to buy low and sell high, and right now we are in absurdly high territory.  Stock valuations always return to their long-term averages eventually, and many believe that the coming stock market crash is going to arrive sooner rather than later.

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.

They Are Calling It “The Tech Bloodbath” – 10 Facts About This Tech Stock Crash That Will Take Your Breath Away

Thanks to crashing tech stocks, Americans have lost hundreds of billions of dollars in paper wealth over the past three trading days.  As you will see below, we have just witnessed “the biggest market cap loss in history”, and many analysts believe that this is only just the beginning.  At this point, even the mainstream media is fearing the worst.  CNN is boldly proclaiming that “the tech bloodbath is here”, and there is a flood of mainstream articles giving advice to investors about how to ride out this crisis.  But the amount of money that has already been lost is absolutely huge, and it isn’t going to take much to turn this panic into a full-blown stampede.  In a lot of ways, what we are watching is very reminiscent of 2001.  When the original tech bubble burst, the crash was so rapid and so dramatic that many ordinary investors were not able to react in time.  As I have explained so many times before, markets tend to go down a whole lot faster than they go up, and the events of the last three trading days have been completely breathtaking.

A lot of people are responding as if this tech stock crash is a complete surprise, but the truth is that it shouldn’t be a surprise at all.

The only surprise is that the bubble lasted for as long as it did.

Even after the declines of the past three days, some of these tech companies still have some of the most absurd valuations that we have ever seen.  There has been warning after warning that something like this could happen, but the optimists on Wall Street wanted to believe that the party would never come to an end.

Well, now the party is ending, and people are starting to understand the gravity of what we are facing.  The following are 10 facts about this “tech bloodbath” that are almost too crazy to believe…

#1 The 10 leading U.S. tech companies lost an astounding 82.7 billion dollars in stock value on Monday.

#2 Overall, FANG stocks have lost 220 billion dollars in stock value over the last 3 trading days.  According to Zero Hedge, that represents “the biggest market cap loss in history”.

#3 Last Thursday, Facebook had the worst day for a single company in the history of the stock market.

#4 The amount of money that Facebook investors have lost is greater than the entire market value of some of the biggest corporations in America…

The gargantuan one-day loss in the social media company’s market value eclipses the total value of warehouse club Costco, drug maker Bristol-Myers Squibb, investment powerhouse Goldman Sachs, defense contractor Lockheed Martin and credit-card company American Express, according to Bloomberg data.

The wealth destroyed also is more than the total value of farm equipment maker Caterpillar, home-improvement retailer Lowe’s, coffee seller Starbucks and drugstore chain CVS.

#5 One prominent ETF manager is saying that he doesn’t “see us being heavily invested in Facebook ever again”.

#6 FANG stocks are collectively down more than 10 percent from the record high last month.

#7 The 5 most valuable companies in the United States are all in the tech sector and they are all located on a stretch between Silicon Valley and Seattle.

#8 Thanks to all of the panic, investors are being forced to pay more for Nasdaq downside protection than they ever have before.

#9 Morgan Stanley’s chief U.S. equity strategist is warning that “the selling has just begun and this correction will be biggest since the one we experienced in February.”

#10 One major investor has told CNBC that he believes that the major tech stocks could ultimately lose 30 or 40 percent of their value…

Ahead of Apple earnings scheduled for Tuesday evening, Larry McDonald, editor of the Bear Traps Report, warns to stay away from what has been one of the hottest areas of the market this year.

“These are stocks you want to run away from,” McDonald told CNBC’s “Trading Nation” on Friday. “I see potentially 30 percent to 40 percent downside on the FAANGs.”

Tech stocks led the way up during the first Internet bubble, and they also led the way down.

Will the same thing happen again this time around?

If some people think that the broader market will be immune as tech stocks continue to crash, they are just deceiving themselves.  To a very large extent, it has been the tech industry that has been responsible for holding the market up in these troubled times.  Right now the housing industry is slowing down substantially, we are in the midst of the worst “retail apocalypse” in American history, and big agriculture is being absolutely devastated by foreign tariffs.

There aren’t too many other bright spots for the U.S. economy at the moment, and so if the tech sector implodes we are going to see a lot of others go down with it.

Look, there is a reason why Mark Zuckerberg and other Facebook insiders dumped billions of dollars worth of Facebook stock in the months leading up to this crash.  They all knew that trouble was brewing, and they wanted to get out while the getting out was good.

As I have told my readers so many times before, you only make money in the stock market if you get out at the right time, and those Facebook insiders picked the right time.

Earlier this month, Ron Paul warned that the stock market could be cut “in half” when the “biggest bubble in the history of mankind” finally bursts, and a lot of people laughed at him.

Are they still laughing now?

Hopefully the market will settle down tomorrow, and without a doubt we will see a bounce at some point.  But it is certainly starting to feel like 2001 and 2008 all over again, but this time the bubble is far bigger than ever before.

How will this story ultimately end?

I think that we all know the answer, and it isn’t going to be pretty…

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.

Ron Paul Warns That When The “Biggest Bubble In The History Of Mankind” Bursts It Could “Cut The Stock Market In Half”

When this bubble finally bursts, will we witness the biggest stock market crash in U.S. history?  “The bigger they come, the harder they fall” is a well used phrase, but I think that it is very appropriate in this case.  From a low of 6,443.27 on March 6th, 2009, we have seen the Dow nearly quadruple in value since the last financial crisis.  It has been a remarkable run, and it has lasted far longer than virtually any of the experts anticipated.  But what goes up must come down eventually.  This stock market bubble was almost entirely fueled by easy money from the Federal Reserve, and now that easy money has been cut off.  The insiders can see the handwriting on the wall and they are getting out of the market at a pace that we haven’t seen since 2008.  Could it be possible that the day of reckoning is finally at our door?

Of course we have been hearing warnings like this for a very long time.  In fact, I have been warning about a market crash for a very long time.  Just the other day, one of my readers insisted that if something was going to take place that “it would have happened by now”.  In the Internet age, we have been trained to have very short attention spans, but financial bubbles don’t care about the length of our attention spans.  They all inevitably come to a bitter end, but they don’t reach that end until they are good and ready.

And without a doubt we are on borrowed time, but meanwhile so many of us that are continually warning about what we are facing are getting a lot of heat for it.

For instance, when Ron Paul told CNBC that the stock market is “the biggest bubble in the history of mankind”, he was strongly criticized for it, but he was 100 percent correct…

This market is in the “biggest bubble in the history of mankind,” and when it bursts, it could cut the stock market in half, he told CNBC’s “Futures Now” Thursday.

If the Dow only plummets to about 12,000 or so during the coming downturn we will be exceedingly fortunate, because the truth is that stock prices need to fall by at least that much just to get us into the neighborhood where stock prices will start to make sense once again.

Today, sales to stock price ratios are hovering near all-time highs.

The same thing is true for earnings to stock price ratios and GDP to stock price ratios.

The only other times these ratios have been so elevated were just before major stock market crashes.

In the end, these ratios always, always, always return to their long-term averages eventually.

It may take many years, but it always happens.

So what factors led Ron Paul to make such an ominous prognostication?  The following comes from CNBC…

“The Congress spending and the Federal Reserve manipulation of monetary policy and interest rates — debt is too big, the current account is in bad shape, foreign debt is bad and it’s not going to change,” he said.

Paul isn’t alone in his critique. A number of politicians have voiced concern over ballooning deficits, including current House Speaker Paul Ryan, who raised a warning on the nation’s debt in 2012.

Of course it isn’t just the U.S. that is drowning in debt.

According to the Institute of International Finance, total global debt just hit a brand new record high of 247 trillion dollars…

Every quarter the Institute of International Finance publishes a new number of the total amount of global debt outstanding, and every quarter the result is the same: a new record high

Today was no exception: according to the IIF’s latest Global Debt Monitor, the amount of debt held in the world rose by the biggest amount in two years during the first quarter of 2018, when it grew by $8 trillion to hit a new all time high of $247 trillion, up from $238 trillion as of Dec. 31, 2017 and up by $30 trillion from the end of 2016.

Global debt has been rising much, much faster than global GDP, and at this point there is three times as much debt in the world as there is money.

There is no possible way that all of that debt can ever be paid off.  The only way that the party can continue is for debt to continue growing faster than global GDP, and everyone knows that is simply not sustainable in the long-term.

So an absolutely monumental “adjustment” is coming.  You can call it a “crash”, a “collapse” or anything else that you would like, but just as certainly as you are reading this article it is coming.

It is just a matter of time.

But for now, the talking heads on television continue to insist that everything is just fine and that the stock market still has more room to go up…

There’s still room for stock markets to rise and worries of an impending recession are premature, according to Berenberg Capital Markets’ chief economist.

“Even if profits peaked in (the first quarter of) 2018, which remains uncertain, history suggests the stock market has room to appreciate,” Mickey Levy, Berenberg’s chief Americas and Asia economist, said in a client note this week. He pointed to data demonstrating how in every economic expansion since the mid-1970s, the S&P 500 index went on to appreciate for a “significant period” after corporate profits peaked.

I wish that CNBC would have me on just one time so that I could refute some of these guys.

Since 1913, the Federal Reserve has gone through 18 rate hiking cycles.  In 18 out of 18 cases, those rate hiking cycles have ended in either a recession or a market crash.

Do you really think that the 19th time will be different?

10 years ago, virtually everyone thought that the “boom times” would last forever too.  But they didn’t.  Instead, we plunged into the greatest economic and financial crisis since the Great Depression, but at this point 2008 seems like ancient history to most people.

Yet again we have fooled ourselves into thinking that the good times will just continue to keep on rolling, and once again our society will be in for a very rude awakening when the inevitable crash finally arrives.

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.

We Are Witnessing Unusual Stock Market Behavior That Is Unlike Anything That We Have Seen Since 2008

We have not seen Wall Street this jumpy since just before the great financial crisis of 2008.  As I have explained so many times before, when the waters are calm and there is low volatility, markets tend to go up.  And when the waters are choppy and volatility starts to spike, markets tend to go down.  That is why the behavior that we have been witnessing from investors during the first two quarters of 2018 is so alarming.  A high level of market turnover is often a sign of big trouble ahead, and according to Bloomberg our financial markets “are churning at the fastest rate since 2008″…

From junk bonds to emerging-market stocks, market turnover is through the roof, reaching multi-year highs. Within the S&P 500 Index, investors traded more than $2.9 trillion worth of shares in each of the past two quarters, a feat last achieved in early 2008.

Bloomberg is not prone to hyperbole, and so when they say that “market turnover is through the roof”, I hope that you will take that statement seriously.

We truly are facing a scenario that Wall Street has never seen before.  The Wilshire 5000 stock index to nominal GDP ratio has been hovering near all-time highs, and what that tells us is that stock prices are more overvalued today than they have been at any other point in modern American history.  Meanwhile, all sorts of red flags continue to indicate that big trouble is on the horizon, but most investors are ignoring those red flags.

But if you look closely, it is becoming clear that the most savvy investors are getting out while the getting is good.  In a previous article, I explained that the “smart money” is getting out of stocks at a pace that we have not seen since just before the last financial crisis.  Fortunately for them, the “dumb money” has been willing to buy what they are selling at these massively inflated prices.

We see a similar spike in the “churn rate” when we look at emerging markets.  In fact, Bloomberg says that we have not seen this much volatility in emerging market stocks since the international financial crisis of 1998…

It’s a similar story for developing-nation assets at the mercy of a strengthening U.S. dollar and trade tensions. Volume on the MSCI Emerging Market index reached $1.9 trillion in the three months through June, the most since 1998 when a wave of currency devaluations and defaults ripped through emerging economies from Thailand to Russia.

As I mentioned a couple of days ago, global stocks lost approximately 10 trillion dollars in value during the first six months of 2018.

Just think about that.

10 trillion dollars is almost half of the U.S. national debt.

If global stocks continue to fall at a similar pace during the second half, it is only a matter of time before U.S. stocks get absolutely slammed.

One of the emerging markets that is showing significant signs of trouble is India.  According to Bloomberg, India’s banks are now dealing with 210 billion dollars of bad debts…

India’s nearly $1.7 trillion formal banking sector is coping with $210 billion of soured or problem loans, and some regional banks have been ensnared in fraud scandals.

If U.S. banks had 210 billion dollars of bad debts that would be a big problem.

In India, a number like that is a complete and utter financial catastrophe that is not going to be easy to clean up.

According to CNBC, most of the bad loans are owned by India’s state-controlled banks…

India’s public-sector financial institutions control about 70 percent of all banking assets in the country, but they have the highest exposure to soured loans amounting to as much as $150 billion. In fact, the 21 state-owned banks had stressed loans of about 8.26 trillion rupees ($120 billion) as of Dec. 31, Reuters reported. Private sector lenders, meanwhile, reportedly had a bad loan pile of just about 1.1 trillion rupees.

Things have already gotten so bad in India that some people are starting to panic.

In fact, it is being reported that ATMs in some areas of the nation have been “running dry”…

On top of that, ATMs in some parts of the country have been reported to be running dry in recent days. There’s an unusually high demand for cash, according to the Finance Ministry. The rupee shortage is being blamed on everything from farm spending to looming elections and hoarding by some families.

This is yet another example that shows that it always pays to not put all of your eggs in one basket.  In the event of a major emergency, you will want access to cash, and you cannot necessarily count on your bank to always be there for you.

As we move forward into the second half of 2018, red flags continue to appear on an almost daily basis.  The Federal Reserve is steadily raising interest rates, civil unrest is erupting in the streets of America, and the Trump administration is starting trade wars with virtually everyone else on the planet.

In the end, these trade wars are going to prove to be very painful for U.S. businesses.  Earlier today, CNBC posted a piece about the impact that tariffs are likely to have on our pork producers…

U.S. pork producers are about to be bitten by a second batch of hefty retaliatory tariffs from China and Mexico — and that has some large producers predicting they could lose big money and be forced to invest overseas.

Executives say the pork industry has been expanding in recent years, in part on the expectation of export opportunities that would continue to support growth. However, the threat of a trade war is adding uncertainty and driving fear. One in 4 hogs raised in the U.S. is sold overseas, and the Chinese are the world’s top consumers of pork.

As I write this article, I can hear fireworks going off in the background.  The 4th of July is always a time for celebration, and without a doubt many Americans are extremely optimistic right now.

But as I have just explained, major storm clouds are gathering, and it isn’t going to take much to push the U.S. economy into another major crisis.

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

Why Are Investors Pulling Money Out Of Global Stock Funds At The Fastest Pace Since The Last Financial Crisis?

We haven’t seen anything like this since the financial crisis of 2008.  Investors are taking money out of global stock funds at a pace that we haven’t seen in 10 years, and many believe that this is a harbinger of tough times ahead.  Global stocks lost about 10 trillion dollars in value during the first half of 2018, and an even worse performance during the second half of the year will almost certainly push the global financial system into panic mode.  U.S. stocks have been relatively stable, and so most Americans are not too alarmed about what is happening just yet.  But if you look back throughout history, emerging market chaos is often an early warning signal that a major global crisis is on the horizon, and that is precisely what is happening right now.  Financial markets in emerging markets all over the planet are in the process of melting down, and the losses are becoming quite dramatic.

As stock prices around the planet start to plummet, investors are pulling money out of global stock funds very, very rapidly.  The following comes from CNBC…

Investor money is hemorrhaging out of global stock funds at a pace not seen since just after the financial crisis exploded.

Global equity funds have seen outflows of $12.4 billion in June, a level not seen since October 2008, according to market research firm TrimTabs. Lehman Brothers collapsed in September of that year, triggering the worst economic downturn since the Great Depression and helping fuel a bear market that would see major indexes lose more than 60 percent of their value.

Does this automatically mean that another major financial crisis is on the way in the United States?

No, but it is definitely not a good sign.

As CNBC also noted, investors have been taking tremendous amounts of money out of one emerging market ETF in particular…

The iShares emerging market ETF has seen $5.4 billion in outflows in June, the most of any fund, according to ETF.com.

“U.S. dollar strength and persistent underperformance seem to be driving fund investors away from non-U.S. equities,” TrimTabs said in a note.

The list of emerging market economies that are in crisis mode is beginning to get really long.  Argentina, Venezuela, Turkey, Brazil and South Africa are some of the more prominent examples.

If the chaos in emerging markets continues to intensify, the rush for the exits is going to become a stampede.  Not too long ago, I discussed the fact that the “smart money” was getting out of stocks at a pace that we haven’t seen since just before the last financial crisis, and it isn’t going to take too much to set off a full-blown financial avalanche.

In the general population, most people still seem to think that the financial system is in good shape.  But in many ways, the first half of 2018 was the worst half of a year for the global financial system since the financial crisis of 2008.  The following summary of the carnage that we have witnessed over the last 6 months comes from Zero Hedge…

  • Bitcoin Worst Start To A Year Ever
  • German Banks At Lowest Since 1988
  • Onshore Yuan Worst Quarter Since 1994
  • Argentine Peso Worst Start To A Year Since 2002
  • US Financial Conditions Tightened The Most To Start A Year Since 2002
  • Global Systemically Important Banks Worst Start To A Year Since 2008
  • Global Stocks Worst Start To A Year Since 2010
  • China Stocks Worst Start To A Year Since 2010
  • German Stocks Worst Start (In USD Terms) Since 2010
  • Global Economic Data Disappointments Worst Since 2012
  • Emerging Markets, Gold, Silver Worst Start To A Year Since 2013
  • High Yield Bonds Worst Start To A Year Since 2013
  • Offshore Yuan Worst Month Since Aug 2015
  • Global Bonds Worst Start To A Year Since 2015
  • Treasury Yield Curve Down Record 16 Of Last 18 Quarters

And as I mentioned above, global stocks lost about 10 trillion dollars in value over the last 6 months.

When the Federal Reserve hikes interest rates, it puts a lot of financial stress on emerging markets.  It becomes much more expensive to take out dollar-denominated loans, and it also becomes much more expensive to pay back existing dollar-denominated debts.

But the Fed has not listened to appeals from the rest of the world, and has decided to accelerate the pace of rate hikes instead.

Meanwhile, the trade wars that the United States has started with other nations continue to escalate.  Here are the latest developments…

U.S. farmers and food producers are in the cross-hairs of a global trade conflict that shows no signs of abating anytime soon — and things are about to escalate in a big way on Sunday.

New tariffs will be imposed by Canada on beef, and more retaliation will come this week when China and Mexico take aim at pork. China’s also planning a 25 percent tariff on soybeans on July 6 in addition to hikes on pork duties, and Mexico’s 20 percent levy on “the other white meat” is set to begin July 5.

Meanwhile, the European Union’s initial duties worth $3.2 billion took effect June 22. Most of the duties amount to 25 percent, and include a variety of U.S. products, including motorcycles, boats, whiskey and peanut butter.

If nobody gives in, economic activity will start to slow down substantially.  This is what CNN says that we should expect…

Here’s how the dominoes could fall: First, businesses would be hit with higher costs triggered by tariffs. Then, companies won’t be able to figure out how to get the materials they need. Eventually, confidence among executives and households would drop. Businesses would respond by drastically scaling back spending.

A perfect storm is starting to emerge, and investors are getting spooked.

If financial problems continue to get worse in emerging markets, and if the Federal Reserve continues to raise interest rates, and if these trade wars continue to grow, it is only a matter of time before we have a major market catastrophe in the United States.

The storm clouds on the horizon have just kept getting darker and darker, and many analysts all over the nation agree that this is the gloomiest that things have looked since 2008.

Hopefully a way can be found to turn things around, but I wouldn’t count on it…

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

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