Tesla

The Dow Just Hit 30,000, But Meanwhile The Real Economy Is Having A Meltdown

Did you hear the good news?  The Dow Jones Industrial Average hit 30,000 for the first time ever this week.  In the midst of the worst economic downturn since the Great Depression of the 1930s, the stock market has been soaring to heights that we have never seen before.  What we have been witnessing is completely insane, but I suppose that if the entire system is utterly doomed, we might as well go out with a bang.

I have often said that the stock market has become entirely detached from reality, and that statement has never been truer than it is right now.

For the companies listed on the S&P 500, profits are down about 48 percent compared to last year.  But fundamentals do not seem to matter in the giant casino that Wall Street has become.

Instead, the key is to create as much buzz and speculation around your company as possible.  In this type of environment, a mirage known as “Tesla” can be worth more than all of the other major automakers in the entire world combined…

The electric car maker’s shares continued to climb more than 4% on Tuesday, increasing its total market value above $500 billion for the first time. Tesla’s market cap rose to more than $520 billion Tuesday afternoon.

Tesla (TSLA) is now worth more than the combined market value of most of the world’s major automakers: Toyota (TM), Volkswagen (VLKAF), GM (GM), Ford (F), Fiat Chrysler (FCAU) and its merger partner PSA Group (PUGOY).

Anyone that believes that Tesla is actually worth 500 billion dollars is probably clinically insane.

But of course there are hundreds of other big corporations that are wildly overvalued at the moment as well.

Meanwhile, the real economy continues to implode.  According to Fox Business, we are facing “a tidal wave of evictions at the end of the year”…

The U.S. is facing a tidal wave of evictions at the end of the year unless the federal government, in the eleventh hour, extends key pandemic-related protections for millions of renters and homeowners.

More than 5.8 million adults say they are somewhat to very likely to face eviction or foreclosure over the course of the next two months, according to a U.S. Census Bureau survey completed Nov. 9. That represents about one-third of the 17.9 million Americans who were behind on their rent or mortgage payments last month.

The reason why millions upon millions of Americans are in danger of losing their homes is because we have seen an unprecedented tsunami of unemployment in 2020.

More than 70 million Americans have filed new claims for unemployment this year, and there has never been another year in all of U.S. history when we have even seen half that number.

This absolutely massive wave of job losses has pushed millions of Americans into poverty, and hunger is on the rise all over the country.  The following comes from Simon Black…

New York City is up 33% this year. St. Louis is up 66%. In Oregon it’s up 100%.

I’m not talking about real estate prices, local budget gaps, or even property tax rates.

These are the startling increases in the number of people across the country, and the world, who are in need of food.

But at least the stock market is doing well, right?

In Texas, the CEO of one food bank says that the number of people that they are helping has doubled this year…

Eric Cooper, CEO of the San Antonio Food Bank, told CNBC that his Texas food bank now feeds double the amount of people it used to compared to before the coronavirus pandemic gripped the United States.

“Pre-pandemic we fed about 60,00 people a week and now we’re seeing about 120,000 per week, and most of those are new to the food bank, and have never had to ask for help before,” Cooper said during a Tuesday evening interview on “The News with Shepard Smith.”

And what makes all of this even more heartbreaking is the fact that most of the households that need assistance have children living at home.  Just check out these numbers from Washington state…

Nearly one-third of Washington households have struggled to get enough to food at some point since the start of the coronavirus pandemic, a new study found.

Of the 30% of households that experienced food insecurity, 59% had children living at home, according to the Washington State Food Security Survey, put together by a team of professors and researchers at Washington State University, the University of Washington and Tacoma Community College.

Now another wave of lockdowns is being instituted all over the nation, and that is going to take the level of economic suffering in this country to an even higher level.

For many workers, being laid off just before the holidays is especially painful…

Waiters and bartenders are being thrown out of work – again – as governors and local officials shut down indoor dining and drinking establishments to combat the nationwide surge in coronavirus infections that is overwhelming hospitals and dashing hopes for a quick economic recovery.

And the timing, just before the holidays, couldn’t be worse.

Can you imagine just barely making it through the first round of lockdowns and then being told that you have to do it again?

This is the reality that so many Americans are facing at this moment.  For example, this is what 34-year-old Tracey Grey told CBS News about her situation…

My savings are depleted. If 10 of my clients cancel their membership, right now, I’m done. When I say I’m literally just making it, I am literally just making it. I’m one paycheck away and that’s not even an exaggeration.

Now more than ever, the stock market is not a barometer for the health of the overall economy.  The truth is that an economic collapse has begun, and over time it will get much, much worse.

But for the moment, nothing you can say will keep the ultra-wealthy from feeling euphoric as they monitor their rapidly rising stock portfolios.

For them, this will definitely be a very happy Thanksgiving.

But for most of the rest of the country, the current state of affairs is nothing to smile about.

***Michael’s new book entitled “Lost Prophecies Of The Future Of America” is now available in paperback and for the Kindle on Amazon.***

About the Author: My name is Michael Snyder and my brand new book entitled “Lost Prophecies Of The Future Of America” is now available on Amazon.com.  In addition to my new book, I have written four others that are available on Amazon.com including The Beginning Of The End, Get Prepared Now, and Living A Life That Really Matters. (#CommissionsEarned)  By purchasing the books you help to support the work that my wife and I are doing, and by giving it to others you help to multiply the impact that we are having on people all over the globe.  I have published thousands of articles on The Economic Collapse Blog, End Of The American Dream and The Most Important News, and the articles that I publish on those sites are republished on dozens of other prominent websites all over the globe.  I always freely and happily allow others to republish my articles on their own websites, but I also ask that they include this “About the Author” section with each article.  The material contained in this article is for general information purposes only, and readers should consult licensed professionals before making any legal, business, financial or health decisions.  I encourage you to follow me on social media on Facebook, Twitter and Parler, and any way that you can share these articles with others is a great help.  During these very challenging times, people will need hope more than ever before, and it is our goal to share the gospel of Jesus Christ with as many people as we possibly can.

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.

Former Reagan Administration Official Is Warning Of A Financial Collapse Some Time ‘Between August And November’

If a former Reagan administration official is correct, we are likely to see the next major financial collapse by the end of 2017.  According to Wikipedia, David Stockman “is an author, former businessman and U.S. politician who served as a Republican U.S. Representative from the state of Michigan (1977–1981) and as the Director of the Office of Management and Budget (1981–1985) under President Ronald Reagan.”  He has been frequently interviewed by mainstream news outlets such as CNBC, Bloomberg and PBS, and he is a highly respected voice in the financial community.  Like other analysts, Stockman believes that the U.S. economy is in dire shape, and he told Greg Hunter during a recent interview that he is convinced that the S&P 500 could soon crash “by 40% or even more”…

The market is pricing itself for perfection for all of eternity.  This is crazy. . . . I think the market could easily drop to 1,600 or 1,300.  It could drop by 40% or even more once the fantasy ends.  When the government shows its true colors, that it’s headed for a fiscal blood bath when this crazy notion that there is going to be some Trump fiscal stimulus is put to rest once and for all.  I mean it’s not going to happen.  They can’t pass a tax cut that big without a budget resolution that incorporated $10 trillion or $15 trillion in debt over the next decade.  It’s just not going to pass Congress. . . . I think this is the greatest sucker’s rally we have ever seen.”

But even more alarming is what Stockman had to say about the potential timing of such a financial crash.  According to Stockman, if he were to pick a time for the next major stock market plunge he would “target sometime between August and November”…

The S&P 500 is going to drop by hundreds and hundreds of points sometime over the next few months as we drift into this unexpected crisis. . . . I would target sometime between August and November because that’s when the rubber is going to meet the road on a debt ceiling increase when they are out of cash.  Washington is going to end up in vicious political conflict over what to do about the debt ceiling. . . . It is going to be one giant fiscal bloodbath the likes of which we have never seen.

That really got my attention, because those are the exact months during which the events that I portrayed in The Beginning Of The End play out.

Without a doubt, the U.S. financial system is living on borrowed time, and we cannot keep going into so much debt indefinitely.  In 2017, interest on the national debt will be more than half a trillion dollars for the first time ever, and it will be even higher next year because we are likely to add at least another trillion dollars to the debt during this fiscal year.

Meanwhile, the financial markets just keep becoming more absurd with each passing day.

Just look at Tesla.  This is a company that somehow managed to lose 620 million dollars during the first quarter of 2017, and it has been consistently losing hundreds of millions of dollars quarter after quarter.

And yet somehow the market values Tesla at a staggering 48 billion dollars.

It is almost as if we are living in an “opposite world” where the more money you lose the more valuable investors think that you are.  Companies like Tesla, Netflix and Twitter are burning through gigantic mountains of investor cash without ever making a profit, and nobody seems to care.

Commercial mortgage-backed securities are another red flag that is starting to get a lot of attention…

The percentage of commercial mortgage-backed security (MBS) loans in special servicing hit 6.6% to close April, Commercial Mortgage Alert reported, citing Trepp data. The five basis point move higher from March came as the past-due rate on Fitch-rated commercial mortgage-backed securities (CMBS) climbed by nine basis points to end April at to 3.5%.

Both MBS and CMBS rates hit their highest levels since 2015.

During the crisis of 2008, regular mortgage-backed securities played a major role, and this time around it looks like securities that are backed by commercial mortgages could cause quite a bit of havoc.

One of the reasons for this is because mall owners are having such tremendous difficulties.  The number of retail store closings in 2017 is on pace to shatter the all-time record by more than 20 percent, and Bloomberg is projecting that about a billion square feet of retail space will eventually close or be used for another purpose.

So needless to say this is putting an enormous amount of strain on those that are trying to rent space to retailers, and a lot of their debts are starting to go bad.

In 2007 and early 2008, a lot of the analysts that were loudly warning about mortgage-backed securities, a major stock market crash and an imminent recession were being mocked.  People kept asking them when “the crisis” was finally going to arrive, and leaders such as Federal Reserve Chairman Ben Bernanke confidently assured the public that the U.S. economy was not going to experience a recession.

But of course then we got to the fall of 2008 and all hell broke loose.  Investors suddenly lost trillions of dollars, millions of jobs were lost, and the U.S. economy plunged into the worst recession since the Great Depression of the 1930s.

Now we stand poised on the brink of an even worse disaster.  The U.S. national debt has almost doubled since the last crisis, corporate debt has more than doubled, and all of our long-term economic fundamentals have continued to deteriorate.

The only thing that has saved us is our ability to go into enormous amounts of debt, and once that debt bubble finally bursts it will be the biggest standard of living adjustment that Americans have ever seen.

So I don’t know if Stockman’s timing will be 100% accurate or not, but that is not what is important.

What is important is that decades of exceedingly foolish decisions have made the greatest economic crisis in American history inevitable, and when it fully erupts the pain is going to be absolutely off the charts.

What In The World Is Happening To The Nasdaq?

NASDAQ MarketSite TV studio - Photo by Luis Villa del CampoAll of a sudden, the Nasdaq is absolutely tanking.  On Monday, it fell more than 1 percent after dropping 3.6 percent on Thursday and Friday combined.  At this point, the Nasdaq is off to the worst start to a year that we have seen since 2008, and we all remember what happened back then.  So why is this happening?  In recent years, the Nasdaq has been ground zero for “dotcom bubble 2.0”.  The hottest stocks in the entire world are on the Nasdaq – we are talking about stocks like Yahoo, Netflix, Apple, Tesla, Google and Facebook.  Those stocks have gone to absolutely incredible heights, but now they are starting to fall.  Some are blaming insider selling, and without a doubt the “smart money” is starting to flee the stock market.  Just check out this chart.  Others are blaming low expectations for first-quarter earnings or the tapering of quantitative easing by the Federal Reserve.  But whatever is causing this decline, it is starting to get alarming.  The Nasdaq just experienced its largest three day fall since November 2011.

No stock can resist gravity forever.  What goes up must eventually come down.  This is especially true for stock prices that become grotesquely distorted.

On Wall Street, a price to earnings ratio of 20 to 25 is usually considered fairly normal.  In recent years, the price to earnings ratios for many of these “hot tech stocks” have gone way, way beyond that.  For example, posted below is a screen capture from Bloomberg TV that was featured in a recent Zero Hedge article…

Zero Hedge

There is no way in the world that such valuations are justified.

We have been living in another dotcom bubble, and it was inevitable that it was going to burst at some point.

The following is how one financial industry insider described the carnage that we have seen on the Nasdaq over the past few days…

Gary Kaltbaum, president of money-management firm Kaltbaum Capital Management, describes the carnage of once high-flying “growth” names in the Nasdaq composite, that have come crashing down to earth: “The best we can describe what we have been recently seeing in ‘growth-land’ is a 50-car pileup,” Kaltbaum told clients in a morning research note. “Call them what you want … risk areas, growth stocks, froth areas … they are melting away.“

And of course it isn’t just the Nasdaq that has been seeing declines over the past few days.  On Monday, some of the biggest names on the Dow also fell precipitiously…

Visa, Goldman Sachs and Boeing are among the biggest drags on the Dow Monday, falling 2.1%, 2.9% and 1.4% respectively. Weakness in these stocks is especially problematic since the Dow gives greatest weight to the stocks with the highest per-share prices. And at $203.41, $158.56 and $125.59 respectively, Visa, Goldman and Boeing are the stocks that really matter to the measure.

And the trouble in these stocks isn’t just today. So far this year, Visa is down 8.7%, Goldman is off 10.5% and Boeing is down 8.0%.

This recent decline has many analysts groping for answers.

Some believe that it is simply a “rotation” as investors leave growth stocks that have become overvalued and move into safer, more traditional stocks.

Others are pointing their fingers at the Federal Reserve…

Peter Boockvar, chief market strategist at Lindsey Group, believes it’s all about the Fed. “I’m still amazed at the complacency with the Fed taper, and a lot of people still don’t think it’s a big deal,” he said. “I just don’t think it’s a coincidence that the high-fliers are getting popped when the Fed is half way done with QE. We’ve got tightening smack in front of your face with the taper.”

In fact, some believe that the really big stock market decline will happen later this year when the Fed starts to wrap up quantitative easing completely…

Once the Fed begins to truly reduce its massive bond buying program later this year, markets could see a quarter of their value wiped off the books, a private equity pro told CNBC on Friday.

Jay Jordan, founder of the Jordan Company, issued the dire warning during an interview on CNBC’s “Squawk Box,” saying a 25 percent drop could extend to all asset classes. He blames the monetary policies of former Fed chair Ben Bernanke for artificially inflating asset prices through super-low interest rates.

Yet others point to the fact that we are now moving into earnings season, and it is being projected that corporate earnings will come in at very poor levels.  In fact, it is being estimated that overall earnings for companies in the S&P 500 for the first quarter will be down 1.2 percent.

So what should we expect to see next?

Whether it happens this month or not, at some point a massive stock market correction is coming.  In recent years, the financial markets have become completely and totally divorced from economic reality, and that is a state of affairs that cannot last indefinitely.

Many have compared the current state of affairs to 2008, but to me what is happening right now is eerily reminiscent of 2007.  The Dow soared to record heights quite a few times that year, but there were constant rumblings of economic trouble in the background.  Stocks began to drop steadily late in the year, and 2008 ultimately turned out to be an utter bloodbath.

I believe that what is happening right now is setting the stage for another financial bloodbath.  I truly believe that we will look back on this two year time period and regard it as a major “turning point” for America.

And as I have written about previously, we are in far worse shape as a nation than we were back in 2008.  We have far more debt, the “too big to fail banks” have a much larger share of the banking industry, the derivatives bubble has gotten completely and totally out of control, and our overall economy is far weaker than it was back then.

In other words, we are now even more vulnerable.  When the next great financial crisis strikes us, it is going to be absolutely crippling.

Now is not the time to get complacent.

Now is the time to get prepared, because time is running out.