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Did you see what just happened in China? For the second time in four days, a massive stock market crash has caused an emergency shutdown of the markets in China. On both Monday and Thursday, trading was suspended for 15 minutes when the CSI 300 fell 5 percent, and on both days the total decline very rapidly escalated to 7 percent once trading was reopened. Once a 7 percent drop happens, trading is automatically suspended for the rest of the day. I guess that is one way to keep the stock market from crashing – you just don’t let anyone trade. And of course the panic in China is causing other markets to go haywire as well. As I write this, the Nikkei is down 324 points and Hong Kong is down 572 points.

The amazing thing is that trading was only open in China for about 15 total minutes tonight. Here is how CNBC described what just happened…

China’s stocks were suspended from all trade on Thursday after the CSI300 tumbled more than 7 percent in early trade, triggering the market’s circuit breaker for a second time this week.

That drop-kicked stock markets across Asia, which were already wallowing after a weaker open amid concerns over China’s economic slowdown and its depreciating currency as well as falling oil prices.

On the mainland, the Shanghai Composite tumbled 7.32 percent by at the time of the halt, while the Shenzhen Composite plummeted 8.34 percent. The CSI300, the benchmark index against which China’s new circuit breakers are set, plunged 7.21 percent. If that index rises or falls 5 percent, the market halts all trade for 15 minutes. If it moves 7 percent, trading will be suspended for the rest of the day. In total Thursday, China shares only traded around 15 minutes.

How will European and U.S. markets respond to the chaos in Asia when they open?

…click on the above link to read the rest of the article…

The Damage Has Been Done And The Consequences Will Be Suffered: “Have a Healthy Storage of Food, Precious Metals and Necessary Supplies”

January 1, 2016

The Damage Has Been Done And The Consequences Will Be Suffered: “Have a Healthy Storage of Food, Precious Metals and Necessary Supplies”

While the band plays on and Americans celebrate New Year’s many have no idea what may be in store in 2016. Mainstream financial pundits like to paint a rosy picture of the current economic conditions, suggesting that the government’s green shoots of yesteryear have now turned to full blown money trees, wherein consumers are spending, businesses are selling and everyone has an unlimited flow of cash.

But as noted by analysts at CrushTheStreet.com in their latest video report, “what we have become accustomed to in terms of normal is rapidly coming to an end.”

Indeed, with the Federal Reserve recently having raised interest rates, corporate bond markets starting to crack, and abysmal sales numbers over the holiday season, 2016 could very well spell disaster for financial markets, including government bonds.

So serious is the potential destruction to come that, according to the report, you’d better be ready with an alternate monetary mechanism of exchange such as gold or silver, as well as food and other stockpiles to mitigate supply disruptions and shortages.

Watch Perfect Storm Market Collapse courtesy of Crush The Street:

What we have become accustomed to in terms of normal is rapidly coming to an end… the global monetary experiment is literally bursting at the seams.

…

The economy is more dependent now than ever on the circulation of increasing systemic leverage.

…

The damage has been done and the consequences will be suffered… A loss of faith in the dollar will be a loss of faith in credit… and when perceived value in credit is lost, prices in the bond markets will collapse… Already we are seeing bonds outside of government debt implode.

…click on the above link to read the rest of the article…

Here Come the Money Helicopters!

October 3, 2015

Here Come the Money Helicopters!

$10 Trillion Goes to Money Heaven

We interrupt our series on what to do if you have no money to bring you an update on those who are losing it. (You can catch up on Parts I and II of that series here and here.)

What was the best place for your money so far in 2015? Cash! Compared to cash, almost everything is down. We are headed for the worst quarter for stocks since 2011, says the lead story in today’s Financial Times.

Global stock markets have lost $10 trillion of their value over the last three months. What? Where did all that paper wealth go? The old-timers say it went to “money heaven.”

One fine morning in money heaven….will it ever rain down again? Of course, no money has actually disappeared. Only make-believe values have. Image credit: Salvatore Vuono

We’re not so sure. But we stop. We stare. We look at it as we would at a corpse. What happened to its life force? Where did it go? Why is it no longer there? We have no answer. But looking at a stock market sell-off is like standing over an open coffin: We are in awe at the power of the gods to take as well as to give.

They ask no one’s permission. They follow their own playbook (which they never reveal to mortals). And they are as much a law unto themselves as the NSA. But what’s $10 trillion that never actually existed anyway? Easy come, easy go, right?

Well… yes… and no. It’s usually a pleasure to welcome a baby, but a funeral can be painful. And every one of those dollars – now headed for heaven or hell – will be missed by someone.

…click on the above link to read the rest of the article…

Equity Markets and Credit Contraction

September 26, 2015

Equity Markets and Credit Contraction

There is one class of money that is constantly being created and destroyed, and that is bank credit.

Bank credit is created when a bank lends money to a customer; it becomes money because the customer draws down this credit to deposit in other bank accounts and to pay creditors. It is not money that is created by a central bank; it is money that is created out of thin air by commercial banks to lend. Its contraction comes about when it is repaid, or if a customer defaults.

The recent sharp fall in equity markets is leading to two levels of contraction of bank credit. Brokers’ loans to speculating investors are being unwound from record levels, notably in China and also in the US where in July they hit an all-time record of $487bn. Then there is the secondary effect, likely to kick in if there are further falls in equity prices, when equities held as loan collateral are liquidated. This is when falling stock prices can be so destructive of bank credit, and as the US economist Irving Fisher warned in 1933, a wider cycle of collateral liquidation can ensue leading to economic depression.

Fear of an escalating debt liquidation cycle is always a major concern for central bankers, so ensuring the secondary effect described above does not occur is their ultimate priority. Macroeconomic policy is centred on ensuring that bank credit grows continually, so since the Lehman crisis any tendency for bank credit to contract has been offset by central banks creating money. The bald fact that equity markets have now lost upside momentum and appear to be at risk of a self-feeding collapse will be viewed by central bankers with increasing alarm.

– See more at: http://www.cobdencentre.org/2015/09/equity-markets-and-credit-contraction/#sthash.7O1UI6TY.dpuf

This Bubble’s Days Are Numbered—–Market Tops Are Sprouting Up Everywhere

September 26, 2015

This Bubble’s Days Are Numbered—–Market Tops Are Sprouting Up Everywhere

I have an important update regarding how far we could see the market drop in the short days and weeks ahead…

I’ve been warning for months that it looks like this bubble may finally be peaking.

I’ve warned that it’s best to get out of stocks a little early rather than a bit late. That’s because, when bubbles finally break, they burst rapidly – as much as 40% in the first few months. It can make markets very volatile, up and down, hence harder to predict and adjust to. If this is indeed the end, we’ve only taken the first step down a long ladder.

In retrospect, the odds keep going up that we saw a major long-term top on May 19.

The first warning sign was that, as stocks made little progress from late December into May, we saw a series of major tops around the world. And that to me is no small matter.

Dow Transports peaked in late November and are down 20% since.

Dow Utilities peaked in late January and are down 18%.

The German DAX and British FTSE both peaked in April and are down 24% and 19%, respectively.

The Dow and S&P 500 appear to have peaked in late May. The Dow’s down 16% since then.

Then in June came China’s Shanghai Composite index – one of the leading dominoes to fall – and it’s crashed 42%. The Russell 2000 index also peaked in June and is down a little more than 12%.

And finally, our Nasdaq, which peaked in late July, is recently down 21%.

Four of those are undeniably in bear territory. The Shanghai, DAX, Nasdaq and Dow Transports have crossed that 20% threshold that literally defines a bear market. A drop like that only raises the chances that a bubble is finally over. But thus far technical indicators only show that the Shanghai and DAX have peaked for good.

And all of this is just the first warning sign…

…click on the above link to read the rest of the article…

Financial Strategist: “To Tie The Collapse To Some Date In September Is A Fool’s Errand”

September 14, 2015

Financial Strategist: “To Tie The Collapse To Some Date In September Is A Fool’s Errand”

There are scores of reports and analyses that peg a coming collapse of the economic, financial and monetary systems to the latter half of 2015. And while it is obvious that global stability is on borrowed time, analyst Craig Hemke of TF Metals Report isn’t completely convinced that we can effectively forecast such paradigm shifts the way we used to before the introduction of central bank intervention and rows upon rows of high frequency trading machines operated by Wall Street’s biggest banks.

In a recent interview posted by Future Money Trends Hemke argues that humans operating in free markets no longer carry the same influence as they did during previous events attributed to The Shemitah, Elliot Wave theory or Kondratieff waves:

(Watch at Youtube)

If you plot the U.S. Dollar versus Japanese Yen with a chart of S&P futures you can see them moving in exact one-to-one correlation… this gets back to those High Frequency Trading Machines and the ability of the central banks to influence the stock market by influencing a key factor that these HFT machines follow.

So if our markets now are not a human market… of human emotions and human economic cycles… if they’re not that anymore… then all of this stuff… the Shemitah, Kondratieff Waves, or all of the cycles and all of the Elliot Waves… you can throw it all out the window.

Because, that all relies to a great extent on human beings making decisions. What we’re seeing now is that all of these global markets are… they’re not flat out controlled because that means you’ve got central banks actually managing it tick-by-tick… But they are so utterly influenced by the central banks that are trying to purport this vision of normalcy to keep things going and they’re driven by these HFT machines, there’s no humans left.

…click on the above link to read the rest of the article…

Why Don’t You Explain this to Me Like I’m 5….

September 10, 2015

Why Don’t You Explain this to Me Like I’m 5….

Soc Gen’s global head of research, Patrick Legland, has gone on record, according to a MarketWatch article yesterday as saying that the selloff in developed equity markets has gone too far, and he provides reasons to support his claim. First, he suggests the Chinese market rout has further to go but believes the fallout will be limited to EM and commodities. Second, Legland believes that the US and other developed nations are protected by “well-armed central banks” evident by the 3.7% economic growth and the 5.1% unemployment rate and the Eurozone’s 3 year low unemployment. Lastly, he suggests that due to central banks having created a bond market bubble bonds are no longer a safe haven and thus no longer a viable alternative to equities. I will point out that Leon Cooperman also discussed on CNBC yesterday morning the fact that there are no viable alternatives to equities anymore and so equities remain in the secular bull.

Let me explain this to Legland like he is an 8 year old.

Ok like he’s 5.

While I admire Legland’s optimism I simply do not accept his claims. They are full of tragic flaws. Allow me to colour code this for all those market ‘pros’ and PhD ‘economists’ who haven’t been able to follow the premise over the past several months.

The chart depicts that this rout has just begun. As EPS rolled over in the first half of this year, it signaled that ‘The Tide has Finally Turned‘ as I explained in a recent piece published Aug 2nd (just weeks before the selloff began). In that research piece I told readers to “prepare for an imminent equity valuation reset” and explained why it would occur. The above chart provides an explanation as if we are a 5 year old.

…click on the above link to read the rest of the article…

How Fracking Changed the Economics of Oil Production Around the World

September 7, 2015

How Fracking Changed the Economics of Oil Production Around the World

James Meadway, chief economist at the New Economics Foundation, explains the interrelated economics behind China’s ‘Black Monday’ stock market crash, Middle Eastern oil and US fracking.

The ‘fracking revolution’ has transformed the economics of oil production globally, with the US becoming a bigger producer than Saudi Arabia and – after decades of dependency on oil imports – even being able to export some of its surplus production.

US shale oil is unusual, too, in being privately owned: most of the world’s oil reserves (over 70 percent) are in state hands. Like the North Sea 30 years ago, in a world dominated by state-owned companies and publicly owned reserves, US shale could look like a new frontier for private operators on the search for fat profits.

New technology, high oil prices, and plentiful cheap credit have encouraged the boom. Some $200bn has been borrowed to invest in fracking in the last few years, accounting for 15 percent of the entire $1.3tr US junk bond market. Investors were, in effect, betting on continuing high oil prices making their investments profitable for years to come.

Price Slump

Last year’s slump in prices trashed that calculation. From a mid-year high of $115 per barrel, by the end of 2014 the price per barrel had fallen by more than 40 percent. More than half of US shale rigs have been laid up since October.

The driver, last year, was the behaviour of OPEC – the Organization of Petroleum Exporting Countries. OPEC is a cartel agreement among major oil producers that seeks to manage the international market for oil. With oil prices already plunging over the summer, OPEC could be expected to ease off on production. Restricting supplies should, thanks to the magic of the market, produce a decent increase in the sale price of oil. Instead, with Saudi Arabia taking the lead, OPECdecided to continue production levels. No agreement on restricting output could be reached. Prices slumped.

…click on the above link to read the rest of the article…

Watch Carefully as Dangerous Economic Times Approach: “Nothing but Black Swans Ahead”

September 6, 2015

Watch Carefully as Dangerous Economic Times Approach: “Nothing but Black Swans Ahead”

USA Watchdog’s Greg Hunter interviewed investment expert Jeff Berwick on the ominous signs headed our way in the near future, and in particular, in the month of September.

Berwick has, like so many other voices, been on the forefront of warning about the instability of markets ahead, and during the seven year cycle of Shemitah, that it would unwise to ignore their warnings and prepare for a potential market crash.

Whatever does or doesn’t happen in the days and weeks ahead, it has become all too clear that the system is teetering on the edge, and the powers that be are doing all they can to keep the illusion going, and keep the public under the spell that everything is fine.

But as we have all known since nursery school, once the thing cracks and falls apart, even all the king’s men can’t put the thing back together again.

Keeping the music playing while the chairs are rearranged for collapse is more a way of making an orderly exit for the members of the Ponzi scheme than it is any kind of way of repairing the damage or creating a viable economy.

With black swans on the horizon, it is indeed time to beware, and watch the path ahead.

The Default Next Move For Oil Is Down, And Here’s Why

September 6, 2015

The Default Next Move For Oil Is Down, And Here’s Why

Panic seems like a strong word, but….

As traders, investors and pundits, we all like to think that what we do is akin to a science. We believe that by working harder and being smarter we can give ourselves an edge, that enough research will reveal to us the next move, either a long term trend or an intraday blip on a chart, and that we can profit from that knowledge. Usually, especially over longer time spans, we are correct in that assumption. Sometimes, however, no amount of fundamental or technical analysis will help.

Over the last week or so we have seen some violent swings in the price of oil, swings that in many ways defy logic. At times like these we have to rely on the art, rather than science, of trading and reading markets. That is not to say that traders and investors at home should be simply making wild guesses. It is just that right now, the oil markets are trading on factors other than the fundamental influences that we are used to. It is hard to chart fear and panic.

Panic may seem like a strong word to many, but having been a denizen of a dealing room for most of my working life I can assure you that that is what many have been feeling. The level of overreaction that we have been seeing to every scrap of news over the last couple of weeks is hard to justify in any other way. It is at times like this that some degree of basic technical analysis, a simple identification of support and resistance, becomes all we have to fall back on. To that extent the science of reading these markets is still intact, but once the significant levels have been identified, assessing in what way they are significant is more of an art.

…click on the above link to read the rest of the article…

4 Charts Show Why This Rally Will Become a Rout!

September 3, 2015

4 Charts Show Why This Rally Will Become a Rout!

There’s a reason why I warn you to get out of a bubble a little early rather than a little late. It’s because the first wave down tends to happen in a matter of a few weeks or months, sometimes days. It’s fast and furious.

I know this because I’ve studied every major bubble in modern history – all the way back to the infamous tulip bubble in 1637, when a single tulip cost more than most people made in a single year! And what I’ve seen in each case, without exception, is that bubbles do not correct in nice stair steps when they’re coming off their highs. They burst, crash, collapse, clatter, clang – however you want to say it!

When the bubble deflates, it typically crashes 50% minimum to as high as 90%. But it’s that first wave down that can wipe out 20% to 50% right off the bat!

Below I have four charts that make the argument for me.

They show the 1929 bubble burst… the 1987 crash… the 2000 “Tech Wreck”… and the latest of 2015 from the Red Dragon itself – China’s Tsunami.

In each case, the fact that these bubbles were destined to burst were only obvious to the few that weren’t in denial. Most give into the bubble logic that new highs are the new norms. They think: “This time is different.” It’s not! It never is.

It’s always hard to predict exactly when bubbles will peak and crash. It’s like dropping grains of sand on the floor. A mound will build up – becoming like a Hershey’s kiss that grows more narrow at the top. At some point, one grain of sand will cause the avalanche. Who knows which grain of sand that one will be!

Here are those charts. Like I said, they speak for themselves!

What does that tell you!? EVERY bubble bursts. Bam, pow – no exceptions! So hopefully you understand why I keep harping on about this.

…click on the above link to read the rest of the article…

Is the Stock Market Now “Too Big to Fail”?

September 2, 2015

Is the Stock Market Now “Too Big to Fail”?

Who knows what will trigger Fed intervention; that information is asymmetric, i.e. only known to Fed insiders.

Correspondent Bart D. recently speculated that the U.S. stock market was now “too big to fail,” that is, that it was too integral to the global financial system and economy to be allowed to fail, i.e. decline 40+% as in previous bubble bursts.

The U.S. stock market is integral to the global financial system in two ways.Now that investment banks, pension funds, insurers and multitudes of 401K retirement plans are dependent on current equity valuations, a crash would impair virtually the entire spectrum of finance from hedge funds to banks to insurers to pension plans.

A decimation of these sectors would impact the U.S. economy and thus the global economy very negatively.

By turning the health of the economy into a reflection of the stock market, the Status Quo has made the stock market into the one bellwether that matters. In effect, the stock market is now integral to the economy as a measure of sentiment and evidence that all is well with the economy as a whole.

The stock market is now the signal everyone follows: if stocks are rising, we’re told that means the economy is healthy. Conversely, if stocks decline sharply, the implication is the economy is weak.

In other words, it’s not just valuations that make stocks integral to the economy and Status Quo–the market’s signaling is now the key to sentiment.In economist Michael Spence’s work, the information available to participants is asymmetric: roughly speaking, those on the “inside” have better information than those on the “outside.”

The stock market addresses this asymmetry by signaling what’s really going on via price: if the market sells off, that tells even those with little other information that all is not well in the economy.

…click on the above link to read the rest of the article…

In The Month Of September 2015 We Officially Enter The Danger Zone

September 1, 2015

In The Month Of September 2015 We Officially Enter The Danger Zone

Is September 2015 going to be one of the most important months in modern American history? When I issued my first ever “red alert” for the last six months of 2015 back in June, I was particularly concerned with the months of September through December, and not just for economic reasons. All of the intel that I have received is absolutely screaming that big trouble is ahead. So enjoy these last few days of relative peace and quiet. I mean that sincerely. In fact, that is exactly what I have been doing – over the past week I have not posted many articles because I was spending time with family, friends and preparing forthe national call to prayer on September 18th and 19th. But now as we enter the chaotic month of September 2015 I have a feeling that there is going to be plenty for me to write about.

At this time last month, I declared that we were entering “the pivotal month of August 2015“, and that is exactly what it turned out to be. August was the worst month overall for stocks in three years, and it was the worst month of August for U.S. financial markets in 17 years.

Throughout history, there have only been 11 times when the S&P 500 has declined by more than five percent during the month of August. When that has happened, the stock market has almost always fallen in September as well…

September is the only month in which the S&P 500 fell more frequently than it rose. What’s more, in the 11 times that the S&P 500 fell by more than 5 percent in August, it declined in 80 percent of the subsequent Septembers, and fell an average of nearly 4 percent.

Last week, there was a rally after the initial crash. I warned that this would happen in advance, and we have seen a similar pattern play out during almost every market collapse throughout history. The following comes from John Hussman…

…click on the above link to read the rest of the article…

China “Punishes” Hundreds For “Maliciously” Manipulating The Market

August 31, 2015

China “Punishes” Hundreds For “Maliciously” Manipulating The Market

The deadly chemical blast in the Chinese port of Tianjin was a preventable catastrophe in which more than 100 people lost their lives thanks in part to what looks like the political connections of the warehouse’s owners and although an upfront, transparent investigation and honest assessment of the environmental impact is likely the only way to safeguard the public and ensure it doesn’t happen again, no one believes the Chinese government has the will to conduct such an investigation.

But whatever you do, do not say any of the above if you live in China.

Similarly, China’s stock market collapse was an entirely preventable financial catastrophe caused by the unchecked accumulation of margin debt and the encouragement of speculation, and the bursting of the equity bubble which began in June has been nothing short of a debacle that’s led to international condemnation and accusations that, even in a centrally planned world, Beijing’s particular brand of intervention is so egregious as to stray outside the bounds of manipulated market decorum.

But if you live in China, don’t say that either.

Over the last two months there were signs that Beijing would soon resort to outright, sweeping censorship as it relates to both the stock market and the Tianjin blast. For instance, in July, phrases like “rescue the market” were reportedly banned and in the wake of the Tianjin disaster, hundreds of social media accounts were shut down for spreading “blast rumors.”

…click on the above link to read the rest of the article…

“The Most Astounding Credit Binge in History”

August 28, 2015

“The Most Astounding Credit Binge in History”

But is the bounce to be trusted?

“The Donald” breathed a sigh of relief. He and other rich people got a break from the beating they’ve been taking: Stocks bounced, with the Dow ending yesterday’s session up more than 600 points.

But is the bounce to be trusted? And are there better, more tangible, alternatives to investing in stocks? We’ll try to answer both questions in today’s update… We’ll also respond to a reader’s feedback on Mr. Trump in today’s Mailbag.

Stripped Gears

Yesterday’s bump confirms the mainstream view: There is nothing to worry about. The recent sell-off is just a case of nerves, not a sign of an epizootic. Here is U.S. Trust, a private bank for the ultra-wealthy, reassuring its customers:

The action in the past few days has been based on fears that we will revisit the market environment from 1997 to 1998, in which the Asian currency crisis led to a sizable correction in world equity markets. A second breakdown in energy, a continued fall to record‐low prices in many commodities, and a deep drop in emerging market currencies and equities are sparking fears that a global growth recession is coming our way. And add to that the fact that investors are worried that the Federal Reserve may tighten into a large-scale slowdown is increasing the flight to safety.

U.S. Trust, like Donald Trump and much of the media, blames the Chinese for the recent sell-off. Emerging market economies are slowing, they say, as the U.S. and developed economies are moving into “higher gear.”

Higher gear? As near as we can determine, the gears have been stripped.

…click on the above link to read the rest of the article…

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