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As investors continue to believe the stock market correction is over, the next big stop LOWER for the Dow Jones Index is 19,000. When the Dow falls below 19,000, all doubt will be removed as the best investment strategy would be to sell the rallies, rather than buy the dip. However, most investors buy at the top and sell at the bottom. So, it looks like investor carnage will continue for the foreseeable future.

I am quite surprised that investors don’t see the writing on the wall as it pertains to the most overvalued stock market in human history. While the PE Ratio of the S&P 500 isn’t as severe as it was in 1999, the debt, leverage, and margin are orders of magnitude higher. For example, in 1999 the U.S. Govt. debt was only $5.6 trillion compared to the $21 trillion today. Also, with higher debt levels comes higher interest payments.

Unfortunately, the U.S. Government and the economy is in a nasty feedback loop heading towards complete destruction. You can’t continue to print money, increase debt and leverage without causing severe disruptions in the future.

Today, investors have become way too complacent as the broader markets trade near their highs. However, as the markets really start to fall, complacency will eventually turn into panic. According to my analysis, the next critical level for the Dow Jones Index is 19,000:

I picked the 50-month moving average (MMA), shown in the blue line as the first critical level. Once the Dow Jones Index falls below 19,000, the next critical level will be 13,000, or the 200 MMA (in red). These levels aren’t “possibilities,” but rather, “guarantees” to occur over the next few years. Why do I say a guarantee? Well, if we look at some of the insane stock price charts below, you would have to be a complete imbècil to arrive at a different conclusion.

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

An Unexpected Warning From Goldman Sachs: “Markets Themselves” Will Cause The Next Crash

March 19, 2018

An Unexpected Warning From Goldman Sachs: “Markets Themselves” Will Cause The Next Crash

It all started nearly 9 years ago to the day, when in April 2009 we wrote, “The Incredibly Shrinking Market Liquidity, Or The Upcoming Black Swan Of Black Swans“, in which we explained how as a result of the growing influence of HFT, quants and central banks, the market itself was breaking.

We also highlighted what the culmination of the market’s “breakage” could look like:

liquidity disruptions could and will lead to unexpected market aberrations, such as exorbitant bid/ask margins, inability to unwind large block positions, and last but not least, explosive volatility: in essence a recreation of the market conditions approximating the days of August 2007, and the days post the Lehman collapse…

We even laid out some likely catalysts for a possible market crash: “continued deleveraging in quant funds, significant pre-market volatility swings as quants rebalance their end of day positions, increasing program trading on decreasing relative overall trading volumes.”

One month ago, we saw all of the above elements briefly come together when on February 5 the market finally did break as its topology was torn apart by various, disparate elements, resulting in virtually all of the above materializing, if only for a short time.

To be sure, as time passed, others joined our warning that the market is becoming increasingly broken, with some of the most notable warnings coming from the likes of Bank of America’s Benjamin Bowler…

… who explicitly noted the market’s increasing fragility on numerous occasions…

… and how the Fed rushed to bail it out on every single occasion…

… as well as Fasanara Capital…

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

The Global Economy’s Wile E. Coyote Moment

March 11, 2018

The Global Economy’s Wile E. Coyote Moment

Economies and markets may already be plunging off a cliff.

Always behind.
Photographer: Justin Sullivan/Getty Images

Our prediction last year of a global growth downturn was based on our 20-Country Long Leading Index, which, in 2016, foresaw the synchronized global growth upturn that the consensus only started to recognize around the spring of 2017.

With the synchronized global growth upturn in the rearview mirror, the downturn is no longer a forecast, but is now a fact.

The chart below shows that quarter-over-quarter annualized gross domestic product growth rates in the three largest advanced economies — the U.S., the euro zone, and Japan — have turned down. In all three, GDP growth peaked in the second or third quarter of 2017, and fell in the fourth quarter. This is what the start of a synchronized global growth downswing looks like.

Still, the groupthink on the synchronized global growth upturn is so pervasive that nobody seemed to notice that South Korea’s GDP contracted in the fourth quarter of 2017, partly due to the biggest drop in its exports in 33 years. And that news came as the country was in the spotlight as host of the winter Olympics.

Because it’s so export-dependent, South Korea is often a canary in the coal mine of global growth. So, when the Asian nation experiences slower growth — let alone negative growth — it’s a yellow flag for the global economy.

The international slowdown is becoming increasingly obvious from the widely followed economic indicators. The most popular U.S. measures seem to present more of a mixed bag. Yet, as we pointed out late last year, the bond market, following the U.S. Short Leading Index, started sniffing out the U.S. slowdown months ago. Specifically, the quality spread — the difference between the yields on junk bonds and investment-grade corporate bonds — has been widening for several months.

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

Trump Trade Wars A Perfect Smokescreen For A Market Crash

March 7, 2018

Trump Trade Wars A Perfect Smokescreen For A Market Crash

First, I would like to say that the timing of Donald Trump’s announcement on expansive trade tariffs is unusual if not impeccable. I say this only IF Trump’s plan was to benefit establishment globalists by giving them perfect cover for their continued demolition of the market bubbles that they have engineered since the crash of 2008.

If this was not his plan, then I am a bit bewildered by what he hopes to accomplish. It is certainly not the end of trade deficits and the return of American industry. But let’s explore the situation for a moment…

Trump is in my view a modern day Herbert Hoover. One of Hoover’s first actions as president in response to the crash of 1929 was to support increased tax cuts, primarily for corporations (this was then followed in 1932 by extensive tax increases in the midst of the depression, so let’s see what Trump does in the next couple of years). Then, he instituted tariffs through the Smoot-Hawley Act. His hyperfocus on massive infrastructure spending resulted in U.S. debt expansion and did nothing to dig the U.S. out of its unemployment abyss. In fact, infrastructure projects like the Hoover Dam, which were launched in 1931, were not paid off for over 50 years. Hoover oversaw the beginning of the Great Depression and ended up as a single-term Republican president who paved the way socially for Franklin D. Roosevelt, an essential communist and perhaps the worst president in American history.

This is not to say Hoover was responsible for the Great Depression. That distinction goes to the Federal Reserve, which had artificially lowered interest rates and then suddenly raised them going into the economic downturn causing an aggressive bubble implosion (just like the central bank is doing right now).

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

US Stock Market: Conspicuous Similarities with 1929, 1987 and Japan in 1990

March 4, 2018

US Stock Market: Conspicuous Similarities with 1929, 1987 and Japan in 1990

Stretched to the Limit

There are good reasons to suspect that the bull market in US equities has been stretched to the limit. These include inter alia: high fundamental valuation levels, as e.g. illustrated by the Shiller P/E ratio (a.k.a. “CAPE”/ cyclically adjusted P/E); rising interest rates; and the maturity of the advance.The end of an era – a little review of the mother of modern crash patterns, the 1929 debacle. In hindsight it is both a bit scary and sad, in light of the important caesura it represented. In many ways the roaring 20s were the last hurrah of a world in its death throes, a world that never managed to make a comeback. The massive expansion of the State that had begun in the years just before WW1 resumed in full force as soon as the post-war party on Wall Street ended. The worried crowd that formed in the streets around the NYSE in the week of the crash may well have suspected that the starting gun to profound change had just been fired. [PT]

Near the end of a bull market cycle there is always the question of when a decline will begin, and above all, how large will it be. I believe it possible that the retreat in prices will begin soon and that it could possibly even start out with a crash. I will explain in the following what led me to draw this conclusion.

2015 – 2018: the S&P 500 Index Moves Up Along a Well-Defined Trend Line

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

GMO: “A Global Trade War Would Lead To a 40% Market Crash”

March 2, 2018

GMO: “A Global Trade War Would Lead To a 40% Market Crash”

If one was following the price action of stocks today in response to Trump’s Thursday announcement of steel and aluminum import tariffs, one would be left with the impression that either the market thinks Trumps is bluffing, or that tariffs are bullish for risk assets. As shown in the chart below, both the S&P and the Nasdaq closed at session highs, with the Dow just barely red, while the tech index was effectively unchanged from yesterday’s announcement level.

Well, considering that Trump not only doubled-down, but tripled-down on his tariff threats, it does not seem realistic that the president will flip-flop on this issue, even if it means that Trump’s precious stock market (big, fat bubble) lets out some air.

Which then leaves open the question of whether tariffs are – somehow – bullish. And just to dispel any confusion on the topic, this afternoon GMO’s Ben Inker wrote something so simple, even a momentum-chasing algo will understand it:

As a general rule, when you add “war” to your description of an event, it’s a pretty strong suggestion that it is unlikely to be either good or easy. Wars are sometimes well intentioned (the war on drugs), occasionally necessary (World War II), but seldom good and more or less never easy to win.

The last of course is a reference to Trump’s tweeted prediction that “trade wars are good, and easy to win” to which Inker responds that “even if you do “win” easily, the longer term implications are often more problematic than you thought (the second Iraq War). There is still some time for this particular war to be averted. But while it is our general contention that equity markets tend to overreact to political and economic events, this is not one of those times.”

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

Chart Predicts Every Market Crash in History

March 1, 2018

Chart Predicts Every Market Crash in History

The Fed blows bubbles. Then it eventually pops them. Where are we in the cycle?

Bill Bonner writes This Has Predicted Every Market Crash in History.

I recreated the chart in Fred and added trendlines. But let’s tune in to Bill Bonner.

“Buy the dip” has worked for the last 38 years. And now, investors are more than 100% convinced that it will work again. But they are wrong. Every major stock market decline and every recession in the last 100 years was preceded by the Federal Reserve raising short-term interest rates by enough to provide the pin to prick the balloon.

Note the emphasis on every. Yes, there have been periods where the Fed raised rates and a recession didn’t ensue. Everyone knows the famous saying about the stock market having predicted nine of the past five recessions! That may be true, that rising rates don’t necessarily cause a recession. But as an investor, you must be aware that every major stock market decline occurred on the heels of a tightening phase by the Fed. More importantly, there have been no substantive Fed tightening phases that did not end with a stock market decline.*

This is an economy built on debt. The whole capital structure – stocks, bonds, and real estate – now depends on excess debt… and more of it.

In a correction, the only way to stop stock prices from falling and the economy from shrinking is to bring in some more debt. But when you do that a few times, you are soon beyond Peak Debt… which is to say, you’re way over the legal limit.

Debt has been growing three to six times faster than income for more than an entire generation. This makes the old 1.5-to-1 ratio of debt to income seem quaint. It is now 3.5-to-1 nationwide.

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

The imminent crash.

February 28, 2018

The imminent crash.

The world is in a credit bubble, the likes of which we have never seen before.

About 3 weeks ago, on my Facebook and Twitter, I indicated that that US stock market would crash soon, and that it would be a symptom of a larger problem. In the following days I also clarified my reasons for saying so. As it happens, the market has begun to crash before I even thought it would. It might recover for the time being, but in the longer term a crash is inevitable. The situation suggests that about $65 trillion of wealth will soon be disappearing from the global economy. The problem here is that we are in a credit bubble, quite possibly the worst ever in history. One that is even worse than the one we experienced during the Great Depression (1929).

Summary: Stock markets are propped up with borrowed money, making them a symptom, and not ‘the’ problem. The question that comes to mind here is whether the bubble is bursting right now. To answer this, we’ll need to put everything into context. If we consider the latest market conditions, the logical flow of a crash would go start with the crashing of the US Stock Markets, followed by the Asian Markets, and further followed by real estate, and other assets and in the short term by gold markets as well. After these have occurred, the final symptom would manifest with about half of the world’s banks going bankrupt, at least the smaller ones and some of the medium-sized ones if we’re being optimistic — the great depression saw 9000 banks fail in just the US.

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

Peter Schiff: We’re Ripe for a 1987-Style Crash (Video)

February 21, 2018

Peter Schiff: We’re Ripe for a 1987-Style Crash (Video)

Stock markets have settled down after an awful couple of weeks earlier this month. On Feb. 5, the Dow Jones suffered its largest-ever drop in terms of points. It was down 1,600 at one point and ultimately lost 1,175.21 points, a 4.6% drop that day. At one point during that week, the Dow was off 10% in correction territory. But everything is calm now and most of the mainstream is once again feeling bullish and optimistic.

Peter Schiff spoke at the Vancouver Resource Investment Conference 2018 last month before the market tanked. But his message remains relevant in the aftermath of the plunge and the subsequent recovery because the dynamics in the market remain pretty much the same. Conditions are still ripe for a 1987-style market crash.

Investors have not been this optimistic…since 1987. They are even more optimistic than they were at the height of the technology bubble, the dot-com bubble, the new era. Of course, 1987 didn’t end well, right? We had a stock market crash, and there’s a lot about what’s happening today that reminds me about what was happening in ’87.”

Highlights from the Speech

“The economy has not improved under Trump. We don’t have a booming economy. I mean, Trump keeps telling us we have a booming economy, but nothing is booming.”

“When Donald Trump was a candidate for president, he said that the unemployment numbers were phony. They were fake. They were a fraud. They were a con. He said the real unemployment rate is 30%, 40%. Now, every time there is an unemployment number that comes out, he’s tweeting about how great it is we have this record low unemployment and we should all give him credit for it.”

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

New Fed Chairman Will Trigger A Historic Stock Market Crash In 2018

February 21, 2018

New Fed Chairman Will Trigger A Historic Stock Market Crash In 2018

Ever since the credit and equities crash of 2008, Americans have been bombarded relentlessly with the narrative that our economy is “in recovery”. For some people, simply hearing this ad nauseam is enough to stave off any concerns they may have for the economy. For some of us, however, it’s just not satisfactory. We need concrete data that actually supports the notion, and for years, we have seen none.

In fact, we have heard from officials at the Federal Reserve that the exact opposite is true. They have admitted that the so-called recovery has been fiat driven, and that there is a danger that when the Fed finally stops artificially propping up the economy with constant stimulus and near zero interest rates, the whole farce might come tumbling down.

For example, Richard Fisher, former head of the Dallas Federal Reserve, admitted a few years ago that the U.S. central bank has made its business the manipulation of the stock market to the upside:

What the Fed did — and I was part of that group — is we front-loaded a tremendous market rally, starting in 2009.It’s sort of what I call the “reverse Whimpy factor” — give me two hamburgers today for one tomorrow.

I’m not surprised that almost every index you can look at … was down significantly.

Fisher went on to hint at the impending danger (though his predicted drop is overly conservative in my view), saying: “I was warning my colleagues, don’t go wobbly if we have a 10-20% correction at some point…. Everybody you talk to … has been warning that these markets are heavily priced.”

One might claim that this is simply one Fed member’s point of view. But it was recently revealed that in 2012, Jerome Powell made the same point in a Fed meeting, the minutes of which have only just now been released:

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

Central Banks Will Let The Next Crash Happen

February 15, 2018

Central Banks Will Let The Next Crash Happen

If you have been following the public commentary from central banks around the world the past few months, you know that there has been a considerable change in tone compared to the last several years.

For example, officials at the European Central Bank are hinting at a taper of stimulus measures by September of this year and some EU economists are expecting a rate hike by December. The Bank of England has already started its own rate hike program and has warned of more hikes to come in the near term. The Bank of Canada is continuing with interest rate hikes and signaled more to come over the course of this year. The Bank of Japan has been cutting bond purchases, launching rumors that governor Haruhiko Kuroda will oversee the long overdue taper of Japan’s seemingly endless stimulus measures, which have now amounted to an official balance sheet of around $5 trillion.

This global trend of “fiscal tightening” is yet another piece of evidence indicating that central banks are NOT governed independently from one another, but that they act in concert with each other based on the same marching orders. That said, none of the trend reversals in other central banks compares to the vast shift in policy direction shown by the Federal Reserve.

First came the taper of QE, which almost no one thought would happen. Then came the interest rate hikes, which most analysts both mainstream and alternative said were impossible, and now the Fed is also unwinding its balance sheet of around $4 trillion, and it is unwinding faster than anyone expected.

Now, mainstream economists will say a number of things on this issue — they will point out that many investors simply do not believe the Fed will follow through with this tightening program.

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

City of London financiers contemplate “imminent” 2018 US stock market crash of up to “50%”

February 14, 2018

City of London financiers contemplate “imminent” 2018 US stock market crash of up to “50%”

Coming dramatic decline of US stock prices would trigger global recession, finds grim forecast to be explored at roundtable hosted by British financial services think-tank

A new analysis published on the website of a London-based think-tank, funded by the world’s biggest banking and financial services institutions, warns that the US stock market is on the brink of an imminent crash that could trigger another global recession.

The document by a senior US economist and former Houblon-Norman Fellow at the Bank of England is published on the website of the Centre for the Study of Financial Innovation (CSFI), which runs around 100 roundtable events a year involving financial services insiders from the UK and beyond.

The document forecasts that in 2018, US stock prices are likely to plummet by as much as “forty to fifty percent” — compared to the less than five percent plunge in early February. The document was published weeks before the recent stock market volatility.

The warning of a forty to fifty percent drop points to the prospect of a global financial crash worse than the 2008 banking collapse.

It comes at a time when the Federal Reserve, Bank of England and other authorities are looking to tighten up their cheap money policies, as economic growth is at its highest levels since the 2008 slump.

The new analysis is an ‘open letter’ by US economist Robert Aliber, Professor Emeritus at the University of Chicago Booth School of Business, a world renowned authority in identifying the source of shocks behind over forty banking crises that have occurred since the 1970s.

The ‘open letter’, dated January 21st 2018, is published on CSFI’s website at this link http://www.csfi.org/s/QUARTERLYJAN12018.docx, and mentioned in an announcement of a forthcoming breakfast conversation with Professor Aliber in late February.

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

DOW JONES INDEX CORRECTION & CRASH LEVELS: A Chart All Investors Must See

February 12, 2018

DOW JONES INDEX CORRECTION & CRASH LEVELS: A Chart All Investors Must See

As the Dow Jones Index continues to drop like a rock, the worst is yet to come. Today, investors once again plowed into the markets because they are following the Mainstream Financial advice of BUYING THE DIP. Unfortunately, those who bought the dip before yesterday’s 1,032 point drop and the 400+ point drop this afternoon, have thrown good money after bad.

Of course, we could see a late day rally to calm investor’s nerves…. but we could also see an increased sell-off. Either way, I could really give a rat’s arse. Why? Well, let’s just say the Dow Jones Index has a long way to fall before it gets back to FAIR VALUE. However, my fair value is likely much lower than the Mainstream analysts’ forecasts.

I wanted to publish this post today but will be putting together a Youtube video with more detail this weekend. However, let’s take a look at the Dow Jones Index chart from my Youtube video:

If you haven’t seen this video, I highly recommend that you do. When I published that video, the Dow Jones Index was trading at 26,100. Today it is already down to 23,400. However, as I stated, we have much further down to go. Here is my newest chart:

While the Dow Jones Index has already declined by 2,500 points since my first chart, I wanted to provide the different correction and crash levels as I see it taking place on the Dow Jones Index in the future. The first level the Dow Jones will reach its Support level at about 18,000 points. Once this level is broken, then it breaks down to the 200 Month Moving Average (RED line) at 13,000. Who knows how long it would take to get down to 13,000, but it will.

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

“We Are Living In A Reality Distortion” Mark Spitznagel Warns “This Is Not Over Yet”

February 11, 2018

“We Are Living In A Reality Distortion” Mark Spitznagel Warns “This Is Not Over Yet”

Just a week before the biggest spike in US equity market volatility ever – something ‘no one’ in the mainstream even thought possible – Universa’s Mark Spitznagel warned “a reckoning always follows…something really big is coming”

This is an age of massive artificial economic imbalances and systemic risks.

Repress change, and you repress all that it means. Repressing it is sheer hubris and, in Dylan’s words, “beyond your command.” You can only defer it, not stop it. (Juxtapose this view with outgoing U.S. Federal Reserve Chair Janet Yellen’s ambitious claim that there will not be another financial crisis “in our lifetimes.”) When we try enforcing stability by decree, a reckoning always follows. An unsustainable boom leads headlong to an inevitable bust. A hard rain falls.

Rather than fear it, we should “tell it and think it and speak it and breathe it.” This is Dylan’s resolve. Something really big is coming. Let the central bankers try to keep standing in its way, but as investors we need to recognize and accept its logical consequence of a return to the meaning of volatility. Change and volatility are good. “There is nothing perpetual but change”—according to Mises, who surely must have loved Dylan just as much as I do.

While this is a common theme from the guru of tail risks, his timing could not have been better. As some might say “nailed it,” and Spitznagel was asked to explain how to spot market crashes coming on Bloomberg TV this week…

Spitznagel begins by pointing out the obvious, and crushing the business models of 99% of the mainstream media’s guests:

“My job is not picking the top. My job has always been risk mitigation. Picking crashes is impossible… timing crashes is impossible. If you require a forecast in order for your investment thesis to do well, then I think you’re doing it wrong.“

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

Jim Rogers: “Next Bear Market Will Be Worst In My Lifetime”

February 9, 2018

Jim Rogers: “Next Bear Market Will Be Worst In My Lifetime”

For months now, Jim Rogers has been talking to anybody (who cares to listen) about the coming equity crash, which he said would be the “worst in his lifetime” – and he’s a spry 75 years old.

Today, in his latest pessimistic prognostication, the co-founder of George Soros’ Quantum Fund told Bloomberg that the fact that the total US debt pile has only increased since the financial crisis threatens to upend stocks, and that he believes the current turmoil will continue until Jerome Powell and company hike rates next month. Or alternatively, it could just make the crash that much worse: as volatility surges and investors in certain highly risky volatility-linked products have seen all of their savings wiped out, the new Fed chair could rethink a hike, for fear of exacerbating the selloff.

“When we have a bear market again, and we are going to have a bear market again, it will be the worst in our lifetime,” Rogers said. “Debt is everywhere, and it’s much, much higher now.”

Rogers has seen severe bear markets, including the most recent crash when the Dow plunged more than 50% during the financial crisis, from a peak in October 2007 through a low in March 2009. It sank 38% from its high during the IT bubble in 2000 through a low in 2002.

“Jim has been talking about severe corrections since I started in business over 30 years ago,” said Alibaba Group President Mike Evans, a former Goldman Sachs Group Inc. banker. “So I’m sure he’ll be right at some point.”

* * *

Ok, so we know the magnitude, we just don’t know the timing: why not also give a time frame for this next “epic” market crash? Simple: Rogers admits he’s terrible at timing selloffs, which – of course – is just as important as getting the event right.

“I’m very bad in market timing,” Rogers said. “But maybe there will be continued sloppiness until March when they raise interest rates, and it looks like the market will rally.”

Listen to the interview below:

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