by
DAVID HAGGITH
Economic Collapse — The Train Wreck that is Happening Now!
Even the Tweedledumbs of Wall Street are finally catching on to the fact that
global economic collapse is
happening all around them. Two weeks ago, they could have stood inside
the building shown on the left with their nicely polished, rose-colored
glasses and seen only signs of an improving housing market. Now enough
shingles are falling on their heads that they’re starting to realize
things are falling apart.
To back up my case that even the
US economy is now collapsing,
I’ll quote the permaBULLs who are finally joining me — though they’ve
never heard of me — in agreement that the US stock market is crashing
and/or that we are experiencing a global economic collapse. Anyone can
quote the permabears to support a bear market; so, I’ll build my case
stronger by quoting The Resistance.
Even bullheaded Jim Cramer can smell a bear and glimpse a global economic collapse
CNBC’s Jim Cramer is a man who usually can’t get out the word “bear”
even when one is eating his butt. So, one sure sign the bull market is
dead is when you hear Cramer, who less than two weeks ago was prating
about now being the time to buy “the dip” in the stock market, stating
that we have clearly entered a bear market:
I think we’re very much IN a bear market. (“Cramer: We’re in a bear market“)
Jim Cramer waved goodbye to September and a horrendous third quarter
on Wednesday. The market declined almost 10 percent during that time,
and “every rally turned out to be a trap or a sucker’s game!” (“Cramer: I can’t be bullish“)
While the bear market is now obvious enough that even Cramer cannot
avoid admitting it has a bite he doesn’t like, his foresight is limited
to thinking it will turn out to be something like the mini crash that I
also predicted back in August 2011 … a month before it happened (which
he also missed).
In other words, Cramer now gets it without getting it. Little does
he perceive how big are the gaping jaws of this particular bear who has
his hind side, though even Cramer does casually mention “the threat of
collapse,” moving along quickly as if collapse is barely worth a
mention.
As a result, the loud-mouthed but dimly synapsed Cramer still reassures his viewers, “We want to be
buyers.”
Maybe your “we” does, Cramer; but mine sure doesn’t — if I have a “we.”
These crashing stock prices are, in Cramer’s opinion, now
approaching bargain-bottom prices. In my opinion, you ain’t seen nothin’
yet.
Last week I was going to list Cramer among the village idiots who
still believed the stock market was going to find its upward trend
again. The only reason I didn’t is that the village is fertile with
idiots, so my idiot list was getting long for today’s short attention
span. (A problem I always have with my writing: Do you want substance
with enough facts/quotes to solidly back up the opinion, or do you want a
few quotable sound bytes? In a world that feeds on bytes, I guess I’m
contrarian there, too.)
What is the current evidence of a global economic collapse?
What one calls something is always less easy to say when one is just entering it than after one has come out of it.
My big prediction
for this fall was not merely that the US stock market would crash (by
which, I mean it will have to do worse than become a bear market,
defined as a 20% drop). I also said we will enter a period of global
economic collapse, and I’ve said that collapse will be worse than what
we saw at the bottom of the Great Recession. So, I’ve somewhat defined
what it will look like, and clearly it doesn’t look anything like that
yet.
How, then, is my prediction turning out, now that fall has officially begun?
Let’s start with the change in trend for US employment since that is the Fed’s key way of measuring recessionary trends:
U.S. employers slammed the brakes on hiring over the last
two months and wages fell in September, raising new doubts the economy
is strong enough for the Federal Reserve to raise interest rates by the
end of this year.
Payrolls outside of farming rose by 142,000 last month and August
figures were revised sharply lower to show only 136,000 jobs added in
August, the Labor Department said on Friday. (“Job Growth Cools in Last Two Months, Raising Doubts on Economy“)
Well that didn’t sound too good, except as an indicator that my
prediction might prove right; so, let’s look at US gross domestic
product, which is how economists assess recessionary trends:
The U.S. economy is on track to grow 0.9 percent in the third quarter. (“Atlanta Fed Sees 50 Percent Drop in GDP Growth Estimate for Q3“)
That estimate by one Federal Reserve bank is a sharp shrinkage of US
GDP from the 3+% reported for previous quarter, and that decline is
consistent with what the Federal Reserve now knows about September’s
equally severe decline in manufacturing:
Surveys conducted by regional Federal Reserve banks signal that U.S. manufacturers came undersevere stress in September.
Seven of these surveys have been released over the course of the month….
All these regional surveys pointed to shrinking manufacturing sectors, with some prints coming in at their worst levels since the Great Recession….
The Empire State manufacturing index earlier this month indicatedback-to-back months of contraction, with the employment sub-index and six-month forward outlook hitting multiyear lows…. The Kansas City Fed’s index has beenstuck in negative territory since March, with new orders, shipments, employment, and exports all declining in September.
…Two regional indices confirmed that the pain is widespread. The ISM Milwaukee Purchasers Manufacturing Index sank to its lowest level since 2009. (“US Manufacturing Got Crushed In September“)
Yikes! That sounds really bad, and those are surveys by the Federal
Reserve, which has been looking to build a case for raising interest
rates. Now, let’s take a look at what this shrinkage in manufacturing
means for jobs in an easy-to-read chart:
Nice. We haven’t seen that kind of job drainage since 2009, the belly
of the Great Recession, and the only reason it looks small right now is
that it has just begun to heat up near the end of the year. Didn’t
someone on this blog (that would be me) say that the reason this
economic collapse would be so bad is that it is really all about falling
back into the belly of the Great Recession? I’ve said, since stimulus
efforts began, that the belly of Great Recession was merely propped up
into positive territory by vast amounts of artificial
life support and that the Great Recession would reveal its true depth once the artificial life support finally ran out.
But, lest you think it is only manufacturing that is getting hit,
take a look at the broad sweep of job losses in America during
September:
The cuts come as the world’s largest retailer struggles
to shore up its profit margins, which have been weighed down by a $1
billion investment announced earlier this year to increase wages for
half a million store-level workers and other cost pressures. The
company’s stock is down 26 percent so far this year. (“Wal-Mart Said to Cut Hundreds of Jobs at Headquarters“)
O.K. but that’s just Wal-Mart, and it is a small employment cut,
so maybe its profits are really only down because it finally decided to
share a small percentage of its billions in profit with its employees.
Right?
Wrong. (For starters, Wal-Mart is an icon of American retail — for
better or worse — and right now things are looking too weak at Wal-mart
to even accommodate what still amounts to pretty low wages.)
This is not just Wal-Mart. It is a September sweep of major businesses showing employment reductions:
The number of announced layoffs by U.S.-based companies surged in September from
the previous month, and Hewlett-Packard’s outsized cuts raise a red
flag, John Challenger, CEO of Challenger, Gray & Christmas, told
CNBC’s “Squawk Box” on Thursday.
“It’s interesting that we are beginning to see some big layoff announcements this year,” he said. “One
of the things you start to see as you get near the end of a period of
expansion, but before it really turns, is you start to see major layoffs
occurring, big mega-layoffs like we’re seeing now.”
U.S.-headquartered companies put 58,877 jobs on the
chopping block last month, up 43 percent from just more than 41,000 in
August.
…Challenger said the computer sector led all other industries in layoffs in September. (“Big layoffs may signal end of expansion“)
Well, that doesn’t sound too sweet either. The computer industry,
which has led the bull market for years in the US, is the industry now
leading the fall-off of jobs. So, this is a sea change.
Other big lay-offs came in September from ConAgra, which cut 30% of
its office-based workers during a move of headquarters. (Maybe just a
streamlining business decision in that particular case.) More indicative
of trend, Chesapeake Energy is laying off 15 percent of its workforce
after major losses in the last quarter. Chesapeake is the nation’s
second-largest producer of natural gas. Think about it: the energy
industry is where almost all job growth happened during the so-called
“recovery.” So, this is the unwinding of what little recovery we saw —
the vanishing of the illusion. All told, the energy industry has made
almost 75,000 job cuts this year!
Other big cuts this year,
outside of the energy industry and computer industry,have
come from Target (17,000 jobs cut), Procter and Gamble (6,000),
American Express (4,000), JP Morgan Chase (5,000), Caterpillar (5,000).
That’s why the ‘
Incredibly fearful’ Fed braces for jobs report today:
Data-dependent Federal Reserve officials suddenly are finding the data turning against them.
A year that was supposed to provide the Fed with plenty of ammunition to justify a rate increase has fallen considerably short. Economic growth remains mired, inflation increasingly has become a bygone remnant of years past and industrial activity is nearing contraction levels.
Moreover, the stock market is tumbling, investors’ nerves
are frayed and a government shutdown, narrowly averted for October,
looks increasingly probable in December, right around the time the U.S. central bank gets its final opportunity to start normalizing interest rates.
On top of it, corporate America has seen a few high-profile episodes of mass layoffs.
That jobs report, mentioned earlier, did not come out as the Fed
hoped to see in order to ease it’s concerns about raising interest
rates:
Payrolls rose less than projected in
September, wages stagnated and the jobless rate was unchanged as people
left the workforce, signaling the global slowdown and financial-market
turmoil are rippling through the world’s largest economy.
…Revisions to prior reports cut a total of 59,000 jobs from payrolls in the previous two months.
(“Hiring Slows as Employers Add Just 142K Jobs“)
Comments Michelle Girard, an economist at RBS Securities,
“Every aspect of the September jobs report was disappointing.”
Says Brian Jacobsen, a portfolio strategist at Wells Fargo Funds Management,
“You can’t throw lipstick on this pig of a report.” (Newsmax)
The percentage of the US population that is employed is now at its
lowest since the bad recession we had in 1977. That’s your “recovery.”
True, you just can’t put enough lipstick on this pig. The fact above
paint a picture of a nation in retreat. Last fall I scoffed at the
ridiculous people at Goldman Sachs and Bank of America (and several
other entities) that believed in the “recovery” and were projecting 2015
to be another good year of growth in the stock market, albeit volatile
and bit slower in growth than previous years. That was the standard line
that prevailed on Wall St.
I seriously wondered if all the people at Goldman and BO America had
put their heads through a noodle maker after what had just happened that
October. The volatile part, of course, I agreed with because it agreed
with me when I saw the October 2014 plunge as the beginning of
greater volatility that would typify the new year.
As for the other part of their predictions, however, they are now all
retreating from their 2015 projections to come more and more in line
with what
I predicted late last fall.
Each month, they nip their projections of good times back a little more
severely, and have finally gone negative. But how good are predictions
that are revised after the fact? Why do people even listen to them?
These are the same strutting buffoons who missed
predicting the Great Recession.
Goldman Sachs now expects the S&P 500 to finish in the red in 2015.
Chief U.S. equity strategist David Kostin lowered his year-end price
target for the S&P 500 to 2,000 from 2,100, citing slower than
anticipated growth from the world’s two biggest economies. (“Goldman Sachs Slashes S&P 500 Price Target, Sees Negative Return for US Stocks“)
Look at what is really happening to see how far behind the curve BofA and Goldman Sachs remain,
even with their retreat:
Stocks will fall about 5 percent from current levels and
may even slide into bear market territory in the next few months as
emerging markets like China rattle investors, said Bob Janjuah, senior
adviser at Nomura Holdings Inc.
He forecast that the S&P 500 stock index will end the year at
1,820 from its current level of about 1,920 amid signs of economic
weakness.
“I fear that we could even see prints in the low 1700s
which would entail a 20 percent move (an official bear market) in the
S&P 500 from its 2015 high of 2134,” he said in a Sept. 30 report obtained by Newsmax Finance.“Globally I expect things to be even weaker.”(“Nomura’s Janjuah: Brace Yourself for Deeper Stock Declines“)
Here BofA and Goldman are getting on board with what is happening late in the game by
re-predicting
the future after it has happened … and they are still running high
above what will actually happen. Maybe that’s why one of these companies
is now seeing its own much-deserved decline:
Bank of America Corp. is cutting dozens of jobs across
the firm’s trading and banking divisions after Chief Executive Officer
Brian Moynihan pledged to trim expenses amid a decline in trading
revenue. (“BofA Said to Cut Dozens of Traders, Bankers as Revenue Drops“)
Ah, justice. Their Revenue should drop. It should fall through the
floor. As should their traders and pathetic bankers. As usual, though,
the CEO is starting with cuts at the wrong end. Moynihan should have
started with himself. It’s always everyone’s fault but his. I mean,
after all, how can he blame the decline of revenue on falling market
conditions when his own company advised all their clients last fall that
things were favorable for stock market growth this year, and advisement
is their business? Given that they said it would be such a favorable
year, doesn’t that mean Moynihan must be doing an abysmal job if he now
has to lay off traders in a thriving market?
The heads of these companies are dumber than the head on a dollar
bill and more corrupt than a three-dollar counterfeit. In fact,
conspiracy theories are created because people believe that those in
charge could not actually be this dumb.
Here is where the stock market has gone over the course of one year since the stock market crash I predicted for October 2014:
Exactly right back to where it was when things fell apart on October
2014. When the market rebounded back then, I said it would round off and
crash again and eventually (in the spring of 2015) pegged that crash
for the fall of 2015. Here we are.
David Stockman, President Reagan’s budget advisor, sees the event of
October 2014 as a watershed — a marker of where the market is really
going now, and he says that the present drop back to that level is not
merely a retest of that level:
Here we are again, knocking on the door of the
Bullard Rip low of last October 15th. While we will know soon enough
whether this battered and bloodied bull will give up the ghost on this
trip down and slice through 1867 on the S&P 500 or stage another
half-hearted rebound, one thing cannot be gainsaid.
To wit, all the reasons for a deep correction ahead—–not merely the
perennial Wall Street hyped “retest”—— remain in tact; and a passel of
new ones have appeared, too.
…In the interim, the global commodity
collapse has gathered force, and is now spilling over into financial
market mechanics in the form of the Glencore meltdown and CDS blowout. (“This Is Not A Retest——Take # 2“)
If Wall St. is going to call this present market drop a “retest” of
what happened on October, 2014, then that must mean they see what
happened in October, 2014 was a part of what is happening now. So, even
by the “retest” line of thinking, if the market crashes now, the plunge
in October 2014 was connected to this crash.
Did you notice that last bit about Glencore? This could be the
Bear-Stearns that starts our return to the belly of the Great Recession.
Glencore, the world’s largest commodities trader, is now teetering on
the edge bankruptcy. Other major commodities traders are not doing much
better.
The 15-month commodities free-fall is starting to resemble a full-blown crisis.
Investors are reacting to diminished demand from China and an end to the
cheap-money era provided by the Federal Reserve. A Bloomberg index of
commodity futures has fallen 50 percent since a 2011 high, and eight of
the 10 worst performers in the Standard & Poor’s 500 Index this year
are commodities-related businesses.
Now it all seems to be coming apart at once.
Alcoa Inc., the biggest U.S. aluminum producer, said it would break
itself into two companies amid a glut stemming from booming production.
Royal Dutch Shell Plc announced it would abandon its drilling campaign
in U.S. Arctic waters after spending $7 billion. And the carnage culminated Monday with GlencorePlc,
the commodities powerhouse that came to symbolize the era with its
initial public offering in 2011 and bold acquisition of a rival in 2013,
falling by as much as 31 percent in London trading.
…It’s about to get worse…. “In commodities you’re going to get a lot of failures, companies closing up.” (“With Glencore, Commodity Rout Beginning to Look Like a Crisis“)
Glencore’s equity is down another -30% today, only weeks after having raised capital to shore up its balance sheet for “Armageddon.”
The cause of the rout is a note from Investec which suggests Glencore
equity could be wiped out (and probably already is worth nothing) if
commodity prices remain at current levels. Investec’s biggest concern is
the amount of debt on Glencore’s balance sheet. This is a theme that BK
et al have harped on for quite some time – the commodity
house of cards was built on the false belief that China’s appetite would
never end and commodity prices would always go up. Sound familiar? It
should because it is the same dynamic that caused the housing
crisis/financial crisis of 2008. (“Is Glencore the Bear Stearns of 2015 and Deutsche Bank the Next AIG?“)
Deutsche Bank’s problems are that it has about a $76 TRILLION
exposure to derivatives. You know, those things that played a major role
in causing that thing we called “the Great Recession.” Those
derivatives,
says Bank of America, are now
a junk-bond “train wreck that is accelerating.”
This time, it is not all “mortgage-backed securities,” but includes
junk bonds issued to commodities producers, particularly in the
energy industry and mining industry, where Glencore was king.
Apparently, even that dim candle in the wind that calls itself the
“Bank of America” is finding the world is full of darkened denial
towards its recent glimpse of illumination:
Around this time last year, when our view on
HY [high-yield bonds\ began turning decidedly less rosy, the biggest
pushback we got from clients was that we were too bearish. A couple of
months back, as our anticipated low single digit return year looked
likely to come to fruition, many clients began to sympathize with our
view, but challenged us on our contention that there were
issues beyond the commodity sector. Tellingly, we now have an Ex-
Energy/Metals/Mining version of almost every high yield metric we track
(it started off as just Ex-Energy last year). Point out the troubles in
Retail and Semiconductors and pat comes the reply that one’s always been
structurally weak and the other’s going through a secular decline.
Mention the stirring in Telecom and we’re told that it’s isolated to the
Wirelines. When we began writing this piece, Chemicals and Media were
fine, and Healthcare was a safer option; not so much anymore. At this
pace, we wonder just how long until our Ex-Index gets bigger than our
In-Index.
…That however is just the beginning. We suspect that this
is the start of a long, slow and painful unwind of the excesses of the
last five years.(“BofA Issues Dramatic Junk Bond Meltdown Warning: This “Train Wreck Is Accelerating”)
BofA pats itself on the back that now single-digit prediction of
stock-market growth for 2015 came to fruition (because its clients
thought it should have been more bullish). Yet, in the same breath, BofA
admits things are now looking even worse than that “bearish”
prediction. So, what they are really saying is that they didn’t get it
as wrong as they could have. Even though they have already had to revise
their predictions downward, it sounds like BofA feels they were almost
prescient for having overestimated the market less than their clients
did.
Ahem. Is that not what I said about Bank of America’s predictions last fall — that their single-digit predictions were
far too rosy compared
what would really appear? So, they pat themselves on the back now for
being a wee bit less wrong than they could have been as they finally
(almost a year later) begin to sense what I warned of back in their
rosier days. They are perhaps a little too beholden to what their
clients want to hear (and what they want their clients to believe).
I, on the other hand, don’t care what
anyone wants to hear
or wants to believe. Denial is 99% of our problem from the very start of
this crisis. So, get over it! The sooner we stop saying, “Oh, that’s
too gloomy of a picture” and start seeing reality for what it is, the
sooner we will take the serious corrective action that is needed and
stop relying on unsustainable stimulus measures and stop leaving the
responsibility for our economy to central banks.
Bond defaults starting to create global economic collapse … again
It’s same song, second verse.
I hate to quote the Dark One so much, but it is illuminating when
even The Dark begins to see clearly. It is particularly atypical of
BofA to paint things in such stark terms as what I’m about to quote.
Bank of America expects bond defaults to start to rise over the next
couple of years. Sound familiar? Sound like where we stood with mortgage
defaults in 2007, which then rose for the next few years, which
resulted in the defaults of mortgage-backed securities?
As more investors continue to see the forest for the
trees, we believe they will see what we have seen: a series of
indicators that are consistent with late cycle behavior that we think
clearly demonstrates a turn of the credit cycle…. We often see that a
cycle is approaching its end when the bad apples start visibly
separating out from the pack as idiosyncratic risk surfaces. We saw
this first with Energy and Retail, then Telcos and Semis, and now
creeping into some of the perceived ‘safe havens’ such as Healthcare and
Autos…. We believe the market is now reflecting the thesis we
have outlined in recent months: lower commodity prices will trigger
rising contagion, and weakness will spread to the broader credit markets
(in particular lower-quality high yield)….This, in our view, is a
virtual certainty.
Oh, yes, they have had such foresight! They are now certain of the
kinds of things I was certain of a year ago. Thanks for coming on board
with me, BofA? And I’m sure you’ll get all the credit.
Time’s proclaimed “Master of the Universe” predicts a stock market crash
Don’t just take all of this from me — someone no one of importance knows — or especially from the Dark One. Take it from
Time’s “Master of the Universe.” Billionaire financier
Carl Icahn, whom Donald Trump would tap to be his Secretary of the Treasury, just released a strong warning video today in which he says,
I’ve been worried for the last five, six months about the
market and the economy and the dangerous spot that we’re in…. This
country needs — somebody to wake it up. The same type of short-term
thinking that is happening in government is happening in corporate
America…. It’s financial engineering at its height. The earnings that
are being put out today — I think they are very suspect. These earnings
are fallacious. And, yet, analysts look at it quarter for quarter. If
your earnings went up for the quarter, your stock goes jumping up…. If
you really do GAAP [Generally Accepted Accounting Principles], you
haven’t really increased earnings for three years…. We are making
earnings with financial engineering…. I’ve seen this before a number of
times. I’ve been around a long time. I saw ’69, ’74, ’79 … ’87, and
then 2000 wasn’t pretty, and I think a time is coming that might make some of those times look pretty good…. The public, they got screwed in ’08. They’re going to get screwed again.
Icahn, is an icon of the financial world. When
Time magazine
called him “Master of the universe” on their cover, they said he was
“the most important investor in America.” The Icahn of finance is
speaking in nearly apocalyptic terms about the US economy and where it
is headed.
Major hedge fund managers, where we saw so much trouble in the economic collapse 2008, are in trouble again
There’s no big bank failure on the horizon. The housing
market is booming, not melting. Yet for a handful of well-known hedge
fund managers, 2015 is looking a lot like 2008, when their industry
suffered record losses and investor withdrawals…. Every struggling hedge
fund has struggled in its own way, yet September did a lot damage for many managers, including Ackman, who slumped as much as in all of 2008…. “Hedge funds are reeling from a relentless rout that has all but killed a year’s worth of alpha in a matter of two weeks.” (“Hedge Funds on Track to Rival ’08 Slump“)
The Fed heads are already dead and don’t know it
One of my bold claims for this fall was that the Federal Reserve
would wind up in a position where it would no longer matter if it raised
interest rates or not. They would be damned if they do and damned if
they don’t. 1) If they raised rates, the end of life support would
shock-pop the stock bubble created by free money that can be borrowed at
zero-percent interest. 2) If they chose, after so much talk about
raising rates, to not raise them, people would cue in quickly that there
really has been no recovery. After seven years, the still believes the
economy is too shakey to even weather a quarter-of-a-percent interest
boost. It would give the lie to their narrative of recovery.
I am now seeing that exact argument materialize in many places. Here is one example:
The Federal Reserve continues to change the
criteria for raising interest rates, which in turn creates increasing
uncertainty and signals that all is not well with our economy….
The result of these moving goal posts and unclear goals is increasing
uncertainty. Its most visible impact is in the increased volatility in
the stock market.
It also sends a clear signal that our economy continues to be in a state of emergency. The
accommodative monetary policies of bond buying and zero interest rates
were sold to Americans as emergency measures to help stabilize the U.S.
economy.There continuation means that our economy has been
in a state of emergency for almost 7 years. Chair Yellen even confirmed
this by stating that the U.S. economy is too fragile to withstand the
normalization of interest rates, even with a slow ramp up over many
years.
It seems that the Federal Reserve finds itself in between the rock and a hard place it wanted to avoid. (Newsmax)
The truth that now dawns is that, rather than having been through
seven years of recovery, we have been through seven years of being in a
state of emergency. The Fed’s recovery charade is in need of its own
recovery.
America is collapsing.
What about my prediction that this would not just be a US stock-market crash, but a global economic collapse?
Suffice it to say for the moment, that everything is only so much worse in the other economies of the world.
The U.S. economy, which has been outshining most others
around the world, is weakening. Lackluster growth overseas has reduced
exports of U.S. factory goods. China, the world’s second-largest economy
after the United States, is slowing. Europe is struggling. Emerging
economies from Brazil to Turkey are straining to grow at all. (Newsmax)
I won’t spend much time on this because I think everyone knows that
things look even worse in the rest of the world right now than they do
in the U.S. So, let’s just look at what one of Europe’s largest and most
influential banks, Credit Suisse, has to say:
The financial markets have been flashing doomsday signals in the past few months.
China’s stock market rout, commodities getting crushed,
and a loss of investor confidence at Glencore and Volkswagen have
combined for the worst quarter since 2011.
A team of Credit Suisse analysts led by James Sweeney looked at investor appetite for risk and found that it fit the profile of a full-blown panic. (“CREDIT SUISSE: The markets are gripped by ‘panic’“)
Hmm. “Full-blown panic.” No wonder the bullheaded Jim Cramer is even
getting the point that the bull markets in stocks are dead. The bear is
back everywhere, and she is angry.
In fact, twenty of the world’s emerging markets are officially in
recession. By “emerging markets” economists mean smaller nations with
economies that were rapidly rising during the vaunted “recovery” from
the Great Recession. Now, they are rapidly falling.
From the beginning days of quantitative easing and low interest rates, I have said that both were artificial life support
and
that our “recovery” from the Great Recession would end as soon as all
the artificial life support. It would end because those stimulus
measures were resolving nothing that needed to be fixed; so, their
effect is temporary, and they are not economically sustainable because
you cannot run the money press at full speed forever without creating
far worse problems.
More recently, I said that we will not even have to reach the point
where the last of artificial life support (zero interest by the Fed)
ends before the
effectsof stimulus end. That would happen this
fall, I claimed, because the Fed’s stimulus has reached the point in the
curve of deminishing returns where maintaining stimulus is now more
damaging to the illusion of recovery than it is helpful. Simply put,
the Fed has been making so much noise for so long about the possibility
of raising interest rates that not raising them would cause many people
to start to wonder if the Fed will ever be able to raise interest rates
without killing its “recovery” (which, of course, it never can; see
previous paragraph).
So, it’s now game over. The illusion is giving way. It no longer
matters if the Fed raises interest rates. Even many of the permabulls
are starting to see that the emperor at the Fed has no clothes. (And
we’re talking Grandma Yellen, so yikes!) Even Bank of America is able to
see it now and boasts of how prescient they were … just for being less
rosy a year ago than they might normally have been. That’s foresight,
Bank of America style!
I am betting my blog that we are now in a US stock market crash and a global economic collapse
Last year, I nearly bet my blog that the stock market would crash in
the fall. In fact, I wrote that into an article and later mentioned that
I had made that bet. When I went back to look for it months later (when
it still wasn’t clear what the plunge in Sept.-Oct., 2014, really was),
I found I must have thought the better of going out on that limb and
taken the bet out before publishing the article. Searching back through
several articles, I couldn’t find it.
Though I stopped short of betting my blog, I did predict a stock
market crash for the fall of 2014. For several months after that, it may
have looked to some readers here like I was wrong. I sometimes wondered
myself. Now, I think a strong case can be made that the October 2014
plunge, to which the present equal plunge is being compared, was the
first major foreshock of a bear market that has been unfolding ever
since and is now developing into a full-blow economic collapse.
Therefore, I am going on record now as betting my blog that we are,
in fact, in an unfolding stock market crash and a global economic
collapse. Many still don’t see it that way (a.k.a. folks like Cramer who
see it as a bear market that will end soon). So, I’m not making this
bet after the fact. Many Wall St. gurus, in fact, still do not agree
that we are in bear-market territory, much less a full-blown stock
market crash. We won’t know who is right until we have enough of it
behind us to know for certain what to call it.
My bet is this: If the present downturn does not develop into a stock
market crash that is also part of a global economic collapse, I’ll stop
writing this blog. To be more specific, before this bear is done
raging, I am betting the stock market will be down more than 20% and may
eventually drop as much as 60%. In fact, I believe the world
is entering an economic apocalypse because the bursting of the recovery
illusion that so many have put their stock in (literally) is going to be
horrifying for all of those who have believed in it and very difficult
for even the
prepared.
I suspect there will be some additional emergency shoring to maintain
the illusions a little while longer because I can’t imagine the
government wouldn’t dress the corpse up as well as it can during an
election year where ALL incumbents stand to fail if the
economy completely collapses on
their watch. Yet, I also cannot imagine any efforts will be successful
in reversing or slowing slide for even as much as a year.
Regardless, the illusion is now breaking up. All that
might be obscured for the election year is just how bad the failure of our present economic system really is.(
source)
We sat down with Wall Street’s Watchdog,
