Do you can see it coming? The return on
10-year U.S. Treasuries skyrockets, the S&P 500 remains down for 9 out of
the last 11 trading days and disturbing economic reports pour in from all
throughout the globe. The much expected "financial correction" approaches
rapidly, and investors start heading for the exits. We have not experienced so
many foreboding financial signs all converge at one time like this since just
before the last major financial disaster. It appears as though a "perfect
storm" is brewing, and so much "smart money" has already
abandoned stocks and bonds.
Could
we possibly be headed toward another frightening financial crisis? Will we see
a replay of 2008 or prospectively an even worse crisis? Naturally, so many
people believe that we will never again experience another major financial catastrophe
like the one in 2008. So many people think that this kind of "doom and
gloom" talk is idiotic. Those types of people are those who did not see
the last financial crash coming and who choose not to prepare for the coming
one in spite of the extremely clear warning signs.
Let
us expect the best; but let us also get ready for the worst – and, right now,
things do not look bright at all. The following 18 signs give strong support
that global financial markets are headed toward
a horrendous death spiral...
#1 The yield on 10-year U.S. Treasuries has
grown for 5 of the past 6 days, and it briefly
perched on the 2.90% level on Monday.
#2 Rapidly increasing interest rates are
scaring investors and leading them to pull money out of bonds at a very fast
pace...
Investors have pulled out almost $20
billion from bond mutual funds and exchange traded funds so far in August. It
is the fourth highest pullback ever recorded, according to TrimTabs data. In
June, investors withdrew $69.1 billion -- the highest recorded.
#3 The U.S. Treasuries sell-off is led by
foreigners, in particular, China and Japan which have been remarkably
aggressive in selling off bonds...
China and Japan led a departure from U.S.
Treasuries in June after the initial signals the U.S. central bank was planning
to wind down its stimulus program, with statistics showing they accounted for
almost all of a record $40.8 billion of net foreign sales of Treasuries.
The sales were included among $66.9 billion
worth of net sales by foreigners of long-term U.S. securities in June, a fifth
straight month of outflows and the biggest since August 2007, U.S. Treasury
Department data revealed on Thursday.
China, the foremost foreign creditor,
decreased its Treasury holdings to $1.2758 trillion, and Japan reduced its
holdings for a third straight month to $1.0834 trillion. Put together, they
accounted for almost $40 billion in net Treasury investment outflows.
#4 Owing to fast rising bond yields, some of
the biggest exchange-traded bond funds are getting completely hammered right
now...
• The $18 billion iShares iBoxx $ Investment
Grade Corporate Bond fund (ticker: LQD) has dipped by 7.94% since May 2,
according to S&P Capital IQ. That includes reinvested interest from the
fund's bond holdings.
• The 3.7 billion iShares Barclays 20+ Year
Treasury Bond (TLT) has plummeted by 15.9% the same period. Longer-term bonds
ordinarily get hit harder when rates increase compared to shorter-term bonds.
For instance, the iShares Barclays 3-7 Year Treasury Bond fund (IEI) has
decreased by 3.2% since May 2.
• PowerShares Emerging Markets Sovereign
Debt (PCY), which purchases government bonds from developing countries, has
dipped 12.7%. The fund has $1.8 billion in assets.
#5 In recent weeks, we have seen the biggest
cluster of Hindenburg Omens that we have experienced since before the last
financial catastrophe.
#6 George Soros has wagered a fantastic amount
of money that the S&P 500 will be heading down.
#7 Up to this time, the S&P 500 has
dropped during 9 out of the last 11 trading days.
#8 Margin debt has peaked to incredibly
dangerous levels. This is a trend that we also observed right before the last
financial crash and as well as before the dotcom bubble burst...
The enthusiastic atmosphere arrives as
margin debt on Wall Street hovers close to $377bn, a tad below its all-time
high and well over peaks before the dotcom collapse and the Lehman crisis.
“Investors have hardly ever been more
levered than today,” said Deutsche Bank, forewarning that the spike in margin
debt is a “red flag” and should be monitored closely.
#9 The growth rate of new commercial bank
loans and leases is now the most sluggish that it has been since the end of the
last financial crash.
#10 According to a dreadful new report, Fannie
Mae and Freddie Mac are covering "billions of dollars" in losses.
Will they have to be bailed out again in the same way during the last financial
crisis?
#11 Wal-Mart reported very poor sales figures
for the second quarter. Sales at outlets operating at least for a year went
down 0.3%. This is a continuance of a
pattern that has been increasing for years.
#12 U.S. consumer bankruptcies recently saw their
highest quarterly increase in three years.
#13 The velocity of money in the United States
has hit another dramatic new low.
#14 The great civil unrest in Egypt threatens
to disrupt the stable flow of oil out of the Middle East...
After last week’s violent crackdown by the
Egyptian army, apprehensions of an unsteady supply of oil to the West have
jacked up the oil price. Brent crude prices were propelled to a four-month high
of $111.23 on Thursday. If the chaos worsens – or the strife spreads to other
countries – the risk premium presently integrated into the price of crude oil
is likely to rise even more.
#15 European stocks have recently seen their
highest decline in six weeks.
#16 The Japanese national debt has recently
passed the quadrillion yen level, and many expect the Japanese economic system
to begin melting down any time soon.
#17 Meanwhile, in Indonesia, the stock market
is "cratering".
#18 In India, the yield on their 10-year
government bonds has zoomed from 7.1 percent in May to 9.25 percent at present.
As
the coming months unfold, keep a close watch on the "too big to fail"
banks located both in Europe and in the United States. When the next gigantic
financial crisis hits, they will play a leading role once more. They have been
extremely out of control, and as James Rickards told Greg Hunter in an
interview the other day, we are in a much worse situation with regard to a
major banking disaster than we were back in 2008...
So, what will cause the next crisis in
particular? Rickards says,“The issue in 2008 was the too-big-to-fail
banks. Well, those banks are much bigger today. Their derivative accounts are
bigger. In simple terms, everything that was wrong in 2008 is worse at present.”
Rickards warns further, “The last time,
in 2008 when the crisis began, the Fed’s balance sheet was $800 billion. At
present, the Fed’s balance sheet is $3.3 trillion and rising at $1 trillion
annually.”
Rickards argues further, “You are going to have a banking crisis
worse than the last one because the banking system is bigger without the
capital backbone because the Fed is all out.” As far as the Fed stopping the printing of
money, Rickards predicts, “My belief is
they that they will not. The economy is
basically weak. We have 50 million on food stamps, 24 million without jobs and
11 million on disability, and all of these figures numbers are rising.”
We
never even approached that point of recovery from the last financial crisis and
the last recession.
Today,
the coming new major shock of the financial melt-down is fast approaching.
I
hope that you are taking the time to get ready for the approaching hurricane,
because it will be exceptionally painful.
By
Michael Snyder
No comments:
Post a Comment