Thread: Get Ready For The Next Great Stock Market Exodus

Saturday, July 13, 2013


Get Ready For The Next Great Stock Market Exodus


Brandon Smith
Activist Post

In the years 2006 and 2007, the underlying stability of the global economy and the U.S. credit base in particular was experiencing intense scrutiny by alternative economic analysts. The mortgage-driven Xanadu that was the late 1990s and early 2000s seemed just too good to be true.

Many of us pointed out that such a system, based on dubious debt instruments animated by the central banking voodoo of arbitrary fractional reserve lending and fiat cash creation, could not possibly survive for very long. A crash was coming, it was coming soon, and most of our society was either too stupid to recognize the problem or too frightened to accept the reality they knew was just over the horizon.

The Federal Reserve had cheated America out of an economic reset that was desperately needed. The 1980s had brought us utter destruction disguised as “globalization.” Our industrial center, the very heart of the American middle class that generated enormous wealth and decades of opportunity, had been dismantled and shipped overseas to the lowest bidder. It was then that the U.S. economy actually died; we just couldn’t see it. From that point forward, Americans were fully dependent on the charity of central bank money creation and international bank lending standards. The collapse that should have occurred in the '80s was delayed and thus made more volatile as the Fed artificially lowered interest rates and allowed trillions upon trillions of dollars in dubious loans to be generated. Free money abounded, and average citizens were suckered royally. Their greed was used against them, as they collateralized homes they could not afford to buy more crap they didn’t need. Of course, you know the rest of the story....

Today, credit markets remain frozen. Lending is nowhere near the levels reached in 2006. The housing market is showing signs of life; but that’s only because most home purchases are being made by banks, not regular people, for pennies on the dollar, as bankrupt properties are then reissued on the market for rent rather than for sale. If you are lucky, maybe one day you’ll get to borrow the keys to the house you used to own. And, millions of higher-paying full-time jobs have been lost and then replaced with lower-paying part-time-wage slavery positions. The image of American prosperity carries on, but it is nothing but a cruel farce; and anyone with any sense should question how long this false image can be given life before the truth dawns.


The novice will question why it is necessary to re-examine all of this information. Is it not widely known? Am I not simply preaching to the choir a message heard over and over again since the crash of 2008? Maybe - or maybe it is time for us to finally apply some foresight given our knowledge of the recent past.

Why did 2008 creep up on so many people? Weren’t there plenty of economists out there “preaching to the choir” at that time? Weren’t there plenty of signals? Weren’t there plenty of practical conclusions being made about the future? And yet, the world was left stunned.

The truth is, human beings have a nasty habit of ignoring the cold hard facts of the present in the hopes of using apathy as a magical elixir for future prosperity. They want to believe that disaster is a mindset, that it is a bogeyman under their bed that can be defeated through blind optimism. They refuse to accept that disaster is a tangible inevitability of life that pays no heed to our naïve, happy-go-lucky attitudes. The American people allowed themselves to be caught off guard in 2008, just as they are setting themselves up to be caught off guard again today.

Again, the reality is clear; the Federal Reserve has propped up equities and bonds using money created out of thin air — so much so that both markets have become totally reliant and disturbingly addicted to fiat injections. The distribution of this fiat threatens the continued dominance of the dollar as the world reserve currency and will invariably lead to currency collapse and hyperstagflation.

This process is much more likely to climax in the near term given the accelerated rate of quantitiative easing within our system to date and the accelerated rate at which our primary lenders (namely China) are dumping the dollar in bilateral trade with each other. The endgame is obvious, but I still fear millions of people within this country and around the world will be shell-shocked once again by a renewed crash.

The argument is always the same: “Yeah, things might get dicey, but it won’t be as bad as all the doom-mongers claim, and probably not for many years.”

Similar statements were made by naysayers before the Great Depression and before the 2008 crash. So why are the skeptics wrong again this time around?

The Stimulus Fantasy

Let’s put this in the simplest terms possible: Stimulus is now the lifeblood of our economy. There is nothing else sustaining our nation. Period. Stimulus in the form of bailouts and QE are keeping the stock market and bonds afloat. This means that the continued existence of equities, and the continued existence of healthy treasuries, and thus the foundation of our currency, our general economy, and a functioning (or barely functioning) government, is completely dependent on the Fed continuing to print.

In recent weeks, the Fed hinted at possible intentions reduce or remove stimulus measures, which would effectively shut down the life-support machine and let the patient drown in his own fluids.

http://money.cnn.com/2013/06/19/news...lus/index.html

http://www.reuters.com/article/2013/...etsNews&rpc=43

Day traders and common investors are not very bright, but they do understand well that no stimulus means no stock market and no bond market. In response, indexes have become erratic, shifting on the slightest rumor that the central bank might continue QE for a little longer. Pathetically, the Dow Jones now rallies upward whenever bad financial news hits the wire, as insane investment groups pour in money in the hopes that dismal economic developments might cause the Fed to extend the bailout bonanza.

In our modern nightmare era of hyper-centralized economy, one word or rumor from Ben Bernanke now determines whether stocks dramatically rise or fall. This is NOT the behavior of a healthy and vibrant fiscal system.

The anatomy of American finance and trade has been horribly mutilated; and clearly, such a monstrous creation cannot last. Stocks are supposed to perform based on the true profitability of individual businesses as well as the political and social health of the overall culture. The wild printing of paper money by private banking magnates is not a catalyst for a successful economy. Whether the Fed actually ends QE is ultimately irrelevant. No fiscal structure can survive when it abandons fundamentals for fantasy. Either QE continues, becoming less and less effective in staving off negative results in equities, inspiring a flight from the dollar leading to a crash, or QE ends, exposing the inevitability of negative results in equities, leading to a crash. If the Fed ends stimulus, the process of collapse will merely take place slightly faster than if stimulus remains.

But every historic economic crisis has a defining moment, a moment in which the tide turned overwhelmingly sour for a majority of the public. The question now becomes what, exactly, will trigger the avalanche?

Precious Metals Signal Secret Shift To Asia

As I have discussed in numerous articles over the years, China's shift away from the U.S. consumer and the U.S. dollar is well under way. Over half of the world's major economies now have bilateral trade agreements in place which remove the dollar as the world reserve currency in trade with China and the ASEAN economic bloc. China is issuing trillions in Yuan and Yuan-denominated bonds around the globe, setting the stage for a higher Yuan valuation and allowing Chinese consumer markets to replace American consumer markets as the number one driver of manufacturing in export countries. At the same time, China has increased its purchases of precious metals exponentially to the point that the nation is now set to become the largest holder of gold and silver in the world in the next two years. This is clearly in preparation for a currency crisis event....

The buying spree in Asia seems to directly contradict the "paper market" value of metals in recent weeks. Demand for gold and silver has only increased throughout most of the world, even in light of Federal Reserve suggestions that QE might end. Manipulations within metals markets by the CME and JP Morgan explain half the story, but there may be another issue at work.

It is very possible that the COMEX is now essentially broken, and that gold and silver ETF's (paper gold and silver) are decoupling from the street value of physical metals during the last gasp of a failing system. In the near term, I believe that premiums on physical coins and bars will skyrocket, even as the official market prices of those metals is held down. At the same time, China, Russia, and other countries heavily invested in gold may break from Western COMEX valuations completely using their own metals markets to establish their own prices.

As the dollar loses its world reserve status, the countries holding the most physical gold in their coffers stand to weather the storm most effectively, and because U.S. gold stores have never been officially audited, we have no idea if America has any reserve whatsoever.

Crushing Energy Prices Coming Soon?

While China continues a careful strategy of decoupling from the dollar and the U.S. consumer through bilateral agreements and trading blocks, another issue is arising: the issue of energy. I would like to note that despite globally diminishing oil demand caused by the 2008 credit collapse, gas prices have experienced little to no deflation. I would also like to note that after the Federal Reserve hinted at shutting down QE, oil was one of the few commodities that continued to rise.

http://www.bloomberg.com/news/2013-0...i-reports.html

This has not been caused by a lack of supply, as many American-based companies ramp up production. (I am aware of all the arguments behind peak oil. As soon as a peak oil proponent can show me an example of oil demand not being met because of a legitimate lack of supply, then I’ll be happy to consider that peak oil is the main cause of price increases.)

http://www.bizjournals.com/sanantoni...as-global.html

The fact is that current regressive global demand and ample supply should have led to lower gas prices, not higher. If speculation was the cause, then price shifts within the oil market should have been far more volatile, with increases lasting weeks or perhaps months, but certainly not years. The only plausible explanation for this kind of commodity activity is a weakening of the currency it is directly tied to. The petrodollar is slowly but surely coming to an end.

I believe the next market exodus may be triggered by the weakening effects of stimulus (or the removal of stimulus altogether) along with extreme energy prices cause by steady inflation and a global political crisis in the near future.

China, being strangely and consistently prophetic when it comes to economic calamity, has recently established an astonishing oil trade deal with Russia, which plans to supply China with an alternative petroleum source for the next 25 years. (This news went almost completely unnoticed by the mainstream media.)

http://www.forbes.com/sites/kenrapoz...rtner=yahootix

Now, keep in mind that in 2010, China and Russia signed an agreement completely removing the U.S. dollar in bilateral trade. The dollar has been the world reserve and the only currency used to purchase petroleum for decades. The Russia/China oil deal changes everything. It sets a trend toward the removal of the petrodollar function of the Greenback which ultimately destroys any credibility the currency has left. This news flies in the face of dollar proponents who consistently claim that the dollar's ties to oil make it invincible. Apparently, there are some weaknesses in the armor.

Ongoing social unrest in Egypt has also made oil markets jumpy, being that the Suez Canal oversees the transfer of a significant portion of the world’s oil shipping. Clearly, there are two opposing factions within the country vying for power, and regardless of who is best suited to U.S. interests, the Egyptian people overall have no love for the West. There is a distinct chance of a shooting war, similar to Syria, in the coming months in Egypt.

Meanwhile, the engineered conflict in Syria continues to go exactly as I predicted in my article The Terrible Future Of The Syrian War.

Syria remains an explosive trigger point for regional war which will, in the end, draw in Iran and result in the closure of the Strait of Hormuz, which annually handles the shipping of about 20 percent of the world’s oil. All trends point toward higher gas prices over the horizon, and the U.S. economy is barely able to survive on the cost of energy we have today.

So Close They Can’t See It

Reduced stimulus combined with adversely high oils prices may very well be the tumbling boulders that bring down the mountain. We are close now. Beyond the undeniable economic factors, the very fabric of American government is crumbling. Corruption is openly rampant. Scandals are exposed daily. The establishment leadership is unapologetic and grows even more despotic with each truth that escapes into the open air. They are becoming MORE bold, not less bold, and those of us who seek transparency in all things, from politics, to economics, to surveillance, are being attacked as the source of the problem rather than the solution.

Collapse, from a historical perspective, seems to occur when the searchlights of the individual mind are dimmest, when the threat is the greatest, and when we are most comfortable in our ignorance. In 2008, the U.S. public was mostly oblivious to the danger, and they were painfully stung. Today, I hope that the liberty movement, the alternative media, and alternative economic analysts have created a window of opportunity by which millions of people can this time see the writing on the wall and prepare accordingly. At this point, there is no question that Americans have been warned. Whether or not they pay heed, is out of our hands.

You can contact Brandon Smith at: brandon@alt-market.com
Alt-Market is an organization designed to help you find like-minded activists and preppers in your local area so that you can network and construct communities for mutual aid and defense. Join Alt-Market.com today and learn what it means to step away from the system and build something better.

http://www.activistpost.com/2013/07/...ck-market.html

Saturday, July 13, 2013

10 Reasons Why The Global Economy Is About To Experience Its Own Version Of “Sharknado”

image source

Michael Snyder
Activist Post

Have you ever seen a disaster movie that is so bad that it is actually good? Well, that is exactly what Syfy's new television movie entitled Sharknado is. In the movie, wild weather patterns actually cause man-eating sharks to come flying out of the sky. It sounds absolutely ridiculous, and it is. You can view the trailer for the movie right here. Unfortunately, we are witnessing something just as ridiculous in the real world right now.

In the United States, the mainstream media is breathlessly proclaiming that the U.S. economy is in great shape because job growth is "accelerating" (even though we actually lost 240,000 full-time jobs last month) and because the U.S. stock market set new all-time highs this week. The mainstream media seems to be absolutely oblivious to all of the financial storm clouds that are gathering on the horizon. The conditions for a "perfect storm" are rapidly developing, and by the time this is all over we may be wishing that flying sharks were all that we had to deal with.

The following are 10 reasons why the global economy is about to experience its own version of Sharknado...

#1 The financial situation in Portugal continues to deteriorate thanks to an emerging political crisis. It all began last week when Portuguese finance minister Vitor Gaspar resigned...

"Mr. Gaspar's resignation on July 1 has opened a Pandora's box," says Nicholas Spiro, managing director of Spiro Sovereign Strategy. "Portuguese politicians from the President down are treating the exit of Mr. Gaspar, the architect of the fiscal and structural reforms demanded by the troika, as a green light for a public debate about the bail-out programme. Yet the manner in which this debate is taking place, with the President undermining the prime minister and the opposition leader seeking to renegotiate the terms of the programme, is spooking markets."

The general population is becoming increasingly restless as the nation plunges down the exact same path that Greece has gone. Nobody seems to have any solutions as the economic problems continue to escalate. According to Reuters, the president of Portugal has added fuel to the fire by calling for early elections next year...

Portugal's president threw the bailed-out euro zone country into disarray on Thursday after rejecting a plan to heal a government rift, igniting what critics called a "time bomb" by calling for early elections next year.

Due to all of this instability in Portugal, the yield on Portuguese bonds shot up to 7.51% this week. That is a very bad sign.

#2 The economic depression in Greece continues to deepen, and it is being reported that Greece will not even come close to hitting the austerity targets that it was supposed to hit this year...

A leaked report from the European Commission confirms that Greece will miss its austerity targets yet again by a wide margin. It alleges that Greece lacks the “willingness and capacity” to collect taxes. In fact, Athens is missing targets because the economy is still in freefall and that is because of austerity overkill. The Greek think-tank IOBE expects GDP to fall 5pc this year. It has told journalists privately that the final figure may be -7pc.

Another 7 percent contraction for the Greek economy?

It has already been contracting steadily for years.

At this point, it would be hard to overstate how bad economic conditions inside Greece are. The following is from a recent article by Simon Black...

My friend Illias took a drag of his cigarette as he contemplated my question.

"Our government tells us that this will be a better year. No one really believes them. But all we can do is be optimistic. Too many people are committing suicide."

His statement probably best sums up the situation in Greece right now. It's as if the hopelessness has gone stale, and the only thing they have to replace it with is desperate, misguided, faux-optimism. And anger.

There are roughly 11 million people in this country. 3.4 million of them are employed, of which roughly one third work for the government.

1.34 million people are 'officially' unemployed. To put this in context, it would be as if there were 36 million officially unemployed in the US.

More startling, if you add the number of 'inactive' workers (i.e. those who gave up looking), the total number of unemployed is roughly 57% of the entire Greek work force.

#3 The economic crisis in the third largest country in the eurozone, Italy, has taken another turn for the worse. The unemployment rate in Italy is up to 12.2 percent, which is the highest in 35 years. An average of 134 retail outlets are shutting down in Italy every single day, and the debt of the country has been downgraded again to just above junk status...

Italy’s slow crisis is again flaring up. Its debt trajectory has punched through the danger line over the past two years. The country’s €2.1 trillion (£1.8 trillion) debt – 129pc of GDP – may already be beyond the point of no return for a country without its own currency.

Standard & Poor’s did not say this outright when it downgraded the country to near-junk BBB on Tuesday. But if you read between the lines, it is close to saying the game is up for Italy.

#4 There are rumors that some of the biggest banks in the world are in very serious trouble. For example, Jim Willie (a financial writer who usually puts out really solid information) is insisting that Deutsche Bank is on the verge of collapse...

The best information coming to my desk indicates that three major Western banks are under constant threat of failure overnight, every night, forcing extraordinary measures to avoid failure. They are Deutsche Bank in Germany, Barclays in London, and Citibank in New York. Judging from the ongoing defense from prosecution and cooperation (flipped) with Interpol and distraction of resources, the most likely bank to die next is Deutsche Bank. They are caught with accounting fraud and outright financial fraud over collateral shell games, pertaining to USTreasury Bonds, other sovereign bonds in Southern Europe, and OTC derivatives linked to FOREX currency contracts. D-Bank is a dead man walking.

Time will tell if he is right. But without a doubt the global financial system is extremely vulnerable right now.

Most Americans assume that the problems that caused the financial crash of 2008 were fixed, but that is most definitely NOT the case. In fact, our financial system is far more shaky today than it was just before the last financial crisis. When one major bank goes down, we could start to see others fall like dominoes.

#5 Just before the financial crisis of 2008, the price of oil spiked dramatically. Well, it is starting to happen again. The price of oil hit $106 a barrel on Friday. If the price of oil continues to rise at this pace, it is going to mean big trouble for economies all over the planet.

And as I wrote about recently, every time the average price of a gallon of gasoline in the United States has risen above $3.80 during the past three years, a stock market decline has always followed.

The average price of a gallon of gasoline in the United States reached $3.55 on Friday. This is a number to keep a close eye on.

#6 Mortgage rates are absolutely skyrocketing right now...

The average U.S. rate on the 30-year fixed mortgage rose this week to 4.51%, a two-year high. Rates have been rising on expectations that the Federal Reserve will slow its bond purchases this year.

Mortgage buyer Freddie Mac said Thursday that the average on the 30-year loan jumped from 4.29% the previous week. Just two months ago, it was 3.35% — barely above the record low of 3.31%.

This threatens to throw the U.S. real estate market into a slowdown worse than anything we have seen since the last recession.

#7 This upcoming corporate earnings season is shaping up to be an extremely disappointing one. In fact, the percentage of companies issuing negative earnings guidance for this quarter is at a level that we have never seen before.

So is this a sign that economic activity is starting to slow down significantly?

#8 U.S. stocks are massively overextended right now. In fact, according to Graham Summers, this is the most overextended stocks have been in the past 20 years...

Today, the S&P 500 is sitting a full 30% above its 200-weekly moving average. We have NEVER been this overextended above this line at any point in the last 20 years.

#9 Rapidly rising interest rates are causing the bond market to begin to come apart at the seams. There is concern that the 30 year bull market for bonds is now over and investors are starting to pull their money out of the market at a staggering rate. In fact, 80 billion dollars was pulled out of bond funds during June alone.

#10 Rapidly rising interest rates could cause an implosion of the derivatives market at any moment. As I am so fond of reminding everyone, there are approximately 441 trillion dollars worth of interest rate derivatives out there.

If interest rates continue to soar, we could potentially see a financial disaster that is absolutely unprecedented, and the too big to fail banks would be the most vulnerable.

As USA Today recently reported, there are just five major banks that absolutely dominate derivatives trading in the United States...

Five of the biggest U.S. banks — JPMorgan, Goldman Sachs Group Inc., Bank of America Corp., Citigroup Inc. and Morgan Stanley — account for more than 90% of derivatives contracts. Regulators estimate that nearly half of derivatives are traded outside the United States.

Could you imagine the financial devastation that we would see if several of those banks started to collapse at the same time?

When you hear the mainstream media begin to talk about a "derivatives crisis" involving major banks, that will be a sign that disaster is upon us.

Most Americans don't realize that Wall Street has been transformed into the largest casino in the history of the world. Most Americans don't realize that the major banks are literally walking a financial tightrope each and every day.

All it is going to take is one false step and we will be looking at a financial crisis even worse than what happened back in 2008.

So enjoy this little bubble of false prosperity while you can.

It is not going to last for too much longer.

This article first appeared here at the Economic Collapse Blog. Michael Snyder is a writer, speaker and activist who writes and edits his own blogs The American Dream and Economic Collapse Blog. Follow him on Twitter here.

http://www.activistpost.com/2013/07/...-is-about.html