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WE ARE HEADED FOR A NOSE DIVE!
BEFORE I ADDRESS John Del Vecchio, AND THE POTENTIAL FOR COMING BEAR MARKETS, AND BEFORE I ADDRESS Adam O’Dell REGARDING ANOTHER SIX MONTHS OF VOLATILITY IN THE MARKET, I THINK BY SHARING THE FOLLOWING IT WILL SUM UP WHERE I STAND!
If nothing else, use this as your chance to mock me, if you can…
The following are the predictions that I put down on this blog in writing back in February of 2013. A LINK TO THAT POST CAN BE FOUND HERE. Before I go any further, I'd like to point out my track record on predictions. While working as one of the top 3 loan officers in the country for Merrill Lynch, as far back as 2004 I predicted the housing crash of 2008, almost to the day. Had I been older and wiser, and knew it took 2-3 months for the actual foreclosure process to begin, I would have pegged the crash almost to the day.
During that time, the stock market was at an all time high, and both myself and my colleagues were doing very well as mortgage loan officers while real estate increased at at least 10% a year for years on end. Needless to say, my words went ignored by anyone who heard them. What was always particularly annoying, was that I was called Mr. Doom and Gloom. The reality was, I did not predict that “things would go bad.” I laid out a specific sequence of events that would take place, followed by other specific events, and followed by more specificity. It was SO obvious people were buying more home than they could afford, and the average loan was a 7-year interest only… so it’s not like I was performing rocket science. Everyone else was a just an IDIOT.
When the housing crisis struck, I had not previously heard of Peter Schiff, but a few years later he published his book CrashProof which also predicted the crash. In my opinion, Peter is the only economist out there who has a clue. He is almost ALWAYS right when fools like Paul Krugman have NEVER been right in their lives. My point is, I have never had any formal economics training. At the time I made my predictions in 2004, they were the result of self teaching on a pretty low scale, yet despite such minimal training, I even managed to predict the Dow's bottom within 200 points of where it hit bottom. Ever since I was introduced to Peter Schiff – I have followed him religiously. Personally, I seem to have a knack for just "seeing the big picture" without knowing all the technical terms etc., but now I rely on Peter for my economic lessons because he is an AMAZING teacher if you read his books or listen to his podcasts on his radio show.
All that being said – Peter and I differ a bit in our predictions for the coming future. Peter obviously knows the concepts of Austrian and Keynesian Economics better than anyone, so he has the ability to use better terminology or better economic theory to explain his stances. Me, I just know what I "see,” and don't know if there is an official theoretical name for what I am "seeing" or not. Peter is an optimist. As much as I look to him as a god of economics, Peter has a fraction of my knowledge in what some might call "conspiracies," prophecy, politics, and the inherent overall shittiness of people in general. While I've never heard him expressly say it, Peter gives the impression in his daily podcasts that the United States can still be turned around. Obviously that presumes no more O'bummer in the White House and a return of politicians to Washington passing legislation in keeping with Austrian economic principles.
ON THE OTHER HAND, I am NOT optimistic. I give this a ZERO percent chance of working out for the United States in any way other than a crash of BIBLICAL proportions. 2008 will look like Camelot. I am COMPLETELY convinced we are off the cliff, on our way down in free fall, but we haven't gone splat yet. Its coming. I promise. The following is a brief break down of why I see a financial apocalypse on the horizon. In 2004, it was easy to predict the crash would begin in 2007 or 2008. This time, I have no prediction for a set date, but I fear it is MUCH sooner than most could imagine. Worst case I'd say 9 years before all hell beaks lose, and I base that on the Congressional budget Office Numbers below.
THESE WERE MY PREDICTIONS ALMOST 3 YEARS AGO…
LET’S SEE HOW CLOSE I AM… SO FAR…
Here are just a few pieces of what I see, and you tell me how there is ANY chance we can pull out of this:
1. Even without the atrocity otherwise known as Obamacare, the costs of healthcare have already been increasing exponentially, so healthcare is potentially the first domino in a long line of dominos that ultimately bring down this mighty nation.
We have the largest generation in American history just entering retirement. Consequently, as a nation we will face the largest expenditures for healthcare probably in human history, but at the very least opportune moment in American history with REAL unemployment hovering around 27% according to CNN's study. Where are these baby boomers going to get the money to pay those medical bills? The "stock market" (which is a term I will use generally for retirement investments) is where this enormous group of Americans have the bulk of their wealth tied up. Not all I realize, but a huge majority of them. By far most of them.
Prior to the 2008 crash it was estimated about 40% of Americans had enough money saved for retirement. Let's be REALLY optimistic and say that after the crash 35% still had enough. First of all, that would be LUDICROUS, but lets assume so anyway. It's obviously a MUCH lower number.
As the baby boomers begin to cash in those investments for their ungodly high medical bills and their retirement living in general, the stock market is inevitably going to drop as money is pulled out. It MIGHT not be so bad if Generation X or their employers were contributing even a fraction of what their baby boomer parents did to replace the withdrawals. The reality is that so many Generation X 's are out of work or underemployed, so there is NOWHERE NEAR enough going in to replace what will be coming out. Furthermore, about 50% of the money in the stock market right now is "Institutional Investors." When the Fed is lending at 0%, why not borrow and invest speculatively?
Guess what? We have another stock bubble brewing, but that is the smallest of the bubbles presently brewing. At some point, the institutional investors will begin the selloff and start to get out of the overpriced market while the getting is good. In an attempt to minimize losses to their retirement funds, the mom and pops of the country are going to be scrambling to get out as fast as they can causing stocks to drop like a ROCK. On a side note, when the market bottoms out and the mom and pops are all cleaned out and devastated, THAT is when the institutional investors will jump back in at low prices and ride the wave back up that screws the average investor again. It's a cycle. That's assuming we're not under Martial Law by then- but I'll get to that in a bit.
As stock prices drop, eventually we'll see a mad selloff driven by fear. In turn, since corporations could care less about the welfare of their employees, and they only care about the almighty shareholder – it will be LAYOFF time. MASSIVE layoffs will set the cycle in motion AGAIN of people not making their home payments and record foreclosures will resume. Why? Once share prices start to drop like rocks corporations will act out of self preservation and ditch employees for a better bottom line. Keep in mind that "bottom line" is in U.S. Dollars and it's safe to say its just a matter of time before the U.S. Dollar is completely debased from all the quantitative easing, implodes, and massive inflation, much higher interest rates, and the loss of the World's Reserve Currency is upon us. At that point, American corporations firing people at record pace won't matter. The bottom line will be based in a currency that is WORTHLESS.
I could easily see the Dow and an ounce of gold both being around $5,000. Yes – I said 5,000. I am very well aware we're at 15,000 now. But how you ask? Calm down, I'm getting there.
2. I think #1 began to paint a picture of a downward spiral that "could" get out of control. Then again, maybe not… so lets look at some other factors:
Right now the Fed is monetizing our debt to the tune of about 80 BILLION per month. What does that mean? It means they are printing that money out of thin air. That does two things. First, it debases our currency as can be seen by one look at the dollar index. The dollar has been in free fall. The ONLY thing saving us is the dollar is the fact it is still the world reserve currency… but don't get too excited because I'll get to that later. Don't count on that continuing for long. In addition to debasing the currency, it creates inflation. MASSIVE inflation.
The government tells us inflation is like 2%. Um. Ok. Gas went from under $2.00 to close to $4.00. What is that? Food prices are going up – but NOTHING like they will be soon. The same bag of dog food I used to get for $9.50 is now about $13.00. What is that if not inflation? That doesn't sound like 2% to me. Anyone in your family who does the food shopping KNOWS food prices are going up much more than 2%.
We have not even begun to feel the inflation that is coming as a result of the printing presses Obama and his economic advisors have been running around the clock. Let's not even think about if Iran gets frisky and messes with oil… then food prices could triple… or WORSE!
We use a system of banking called Fractional Reserve Banking. Everyone knows banks have been tight on lending money. Familiarize yourself with how Fractional Reserve Banking works, and imagine when the full extent of all this printed money IS actually all in circulation. OMG. Prices will SKYROCKET… and I'm still not even touching the reserve currency status yet. I'm assuming we still have that thus far. Stay tuned for more on that. Remember those baby boomers on fixed incomes? How are those skyrocketing prices going to work out for them? Expect ramped foreclosures and parents moving back in with their kids. As more people experience financial hardship they'll buy less stuff, causing companies to cut back MORE – and exacerbating the foreclosure nightmare even MORE. This is when I see the Dow ultimately dipping to around 5,000.
Furthermore, if there are skyrocketing prices, and super high unemployment, how will people feed their families? Hmmm. I sense this could create some MAJOR problems. I fully predict neighbor will be robbing neighbor trying to feed starving family members, so you better be armed and ready to protect your food…. oh wait… Obama wants your guns. Wow.
3. Forget both of those for a minute. I don't think its a stretch to say most Americans have heard ad nauseam if Greece goes, so does the European Union – hence all the bailouts to try to save Greece. Just LOOK at all the chaos it has caused Europe. Now for some facts:
I don't know how many countries make up the whole European Union but I know as a whole they have a $16 TRILLION dollar economy. Greece makes up 2% of their GDP. Hmmmm. If a measly 2% has the potential to bring down an entire continent's financial system, lets compare that to the United States.
The United States has a $15 TRILLION dollar economy. Anyone care to venture a guess what percentage our "liberal bastions of insanity" here in the U.S. make up as a percentage of our GDP? Of course I am referring to New York, New Jersey, Illinois, California, & Massachusetts. I don't know what the percentage is, but can we agree its higher than the 2% Greece is? Why is no one talking about this? I think we could say ULTRA conservatively those states make up 15% of our GDP. Sadly, the insane union pensions make up hundreds of billions of dollars in unfunded liabilities coming due. How do you suppose we'll get out of that one? Don't even say China. If 2% Greece can bring down Europe, imagine what happens WHEN, not IF those states go belly up. WOW.
4. Should I bring up the school loan bubble that is going to go BOOM soon? For now, lets just leave it at that. It's another bubble, and like all bubbles, it will go pop. Now we have the stock market bubble and the school loan bubble. Any doubts the stock market is a bubble? Triple the money supply. The Dow is at 14,000, HOWEVER you tripled the money supply. What does that mean its REALLY at? Food for thought. Remember – the institutional investors are going to ride the wave to the top of the crest, and then let Main Street get pummeled. Count on it.
5. Interest rates are at all time lows. What happens when they rise? In the late 1970's early 1980's interest was 11% for a home. I don't know what rate its going to go to, but I can assure you it will be higher than zero at some point. At current rates, when will the money we owe for JUST the INTEREST payment on our debt EXCEED our NATIONAL GDP?
Ask the folks at the Congressional Budget Office, who released their annual “Long Term Budget Outlook” last month. According to the CBO, our national debt will be 101% of GDP in 2021. That’s right, the size of the national debt will be larger than the economy in 9 years AT CURRENT SPENDING. Anyone see Obama slowing down?
What happens if your family has 75k in bills every year, but only brings in 60k in revenue? I'd say you're in DEEP shit. Oh yeah, any ridiculous thoughts you had about the government bailing out the broke liberal states should have just gone out the window. There is NO money. Worse! We're NEGATIVE!
What could possibly make all that happen MUCH sooner than 9 years from now? INFLATION!!!!!! YIPEE! Bond yields are already rising, and the more money we print, the higher they will go, which means the price of bonds is dropping. What does bond yields rising mean? Translation: Interest Rates go up. We are printing 80 BILLION a month. At some point the Fed won't be able to artificially keep rates low… then that 9 year figure before our interest payments are more than GDP could be more like 3-4 years, especially with Obama's spending. In other words, we have another bubble.
6. The ONLY thing that allows us to remotely keep this ship afloat is the fact we are the world's reserve currency.
I'm no economist, and you don't have to be to answer this: How long before the world dumps us as the reserve currency? It's a process that has already begun in many places, but as of now MOST oil is still priced in dollars… so we have that going for us.
Once we cannot make the interest payments on our debts much less defend ourselves or anything else, would YOU keep the dollar? It's backed with only one thing: The full faith and credit of the U.S. Government. Pardon my French, but find me some jackass who still has faith in the U.S. Government. Social Security: Bankrupt! Medicare: Bankrupt! Medicaid: Bankrupt! Postal Service: Bankrupt. Everything they touch is toxic.
7. Now, imagine as all these begin to happen at once. One is likely to trigger another which is likely to trigger another and like a house of cards the United States will fall. Will we be invaded now that our military is pretty decimated?
Here is a very good article talking about such a subject.
Once we lose reserve currency status imports (including oil) are going to cost so much your head will spin. You'll wake up and a Diet Coke will cost $5.00. By the time you go to bed it will cost $6.00. Gas? Forget it. We'll be higher than European prices. $10-$15 per gallon. Once oil is not priced in dollars any more, we'll have to exchange dollars into the currency it IS sold in. Remember what happened to our currency? We DESTROYED it by Obama running the printing press around the clock. In fairness, several of his predecessors get some blame there too.
Those who do not know history are doomed to repeat it. All this has happened before, but our politicians have a knack for ignoring history and/or facts if they can get a vote instead. They'll be protected. Will you? When there are flash mobs and neighbors killing neighbors for food how will you fare?
Are we really going to have Martial Law here in the United States?
What are Fema camps and why have they been set up?
Folks – I could go on – but you get it. Enjoy the days now… while you can. A storm is brewing… and it is going to be BIBLICAL. Count on it. This was off the top of my head, so as I remember some of the other factors I've thought of, 'll be sure to update my prediction so its in writing well in advance.
BIBLICAL FOLKS! BUCKLE UP!
AS FAR AS VOLATILITY GOES…
I can agree with Adam O’Dell to the extend that if he defines volatility as enormous losses, with the occasional hiccup of gain every once in a while. There may be be some intermittent spikes where the market goes up once in a blue moon, but for the most part, I agree with everything Harry Dent says in the video below. No matter how good the fundamentals are, or any other statistic you want to throw at me, NOTHING is escaping DEMOGRAPHICS. If you don’t know what that means, and how it affects things, listen to the video. All Ill say is I would not be the slightest bit shocked to see the Dow Jones and an once of Gold both at $5,000 when it’s all done.
A CRASH OF BIBLICAL PROPORTIONS COMING VERY SOON
Folks, this is NOT going to be an “Economic Downturn” or “Correction” of some kind. This is a once in a lifetime total deflationary collapse from a major debt bubble just like in the 1930’s, only we have SO much more debt than in the 1930’s, not to mention the current derivatives market is TWENTY PERCENT bigger than it was in 2008, all while almost ONE THIRD of the U.S. population is unemployed. That spells certain doom.
In the immediate future, you may see major volatility and swings like we have the last week, but long term, you better be thinking survival.The last two times in history we had a perfect storm develop like this,if you invested all your money in 1929, after the crash, you would have have to wait UNTIL 1953 to BREAK EVEN!!!! If you invested in 1968, you would have had to wait UNTIL 1993 TO BREAK EVEN. Those were generational crashes.
In keeping with everything Harry Dent goes through in the video above, I will side with John Del Vecchio to the extent that I agree, we are going to have a bear economy. The problem is it will last almost long enough to get a child through high school, and that’s assuming any number of the other ticking time bombs of our economy don’t go boom first!
WHAT IS COMING IS ONCE IN A LIFETIME!
THINK ANYONE IS READY?
Stocks Are Likely in for Another 6 Months of Volatility!
Adam O’Dell: What a week it’s been! Since last Thursday when the selling began, volatility – as measured by the CBOE Volatility Index (aka the “VIX”) – has rocketed higher, and doesn’t look to calm down anytime soon.
This “fear gauge” began the month at 12.85. But on Monday, it was as high as 53.29. That’s an astronomical increase of 314%!
Of course, most investors were likely caught off guard by both the timing and the magnitude of this surge in volatility. Prior to this move, the VIX hadn’t climbed higher than 24 all year. Investors had been lulled into a false sense of security, brought on by the market’s ability to climb higher despite a torrent of negative news flow.
Have you ever wondered how billionaires continue to get RICHER, while the rest of the world is struggling?
"I study billionaires for a living. To be more specific, I study how these investors generate such huge and consistent profits in the stock markets — year-in and year-out."
CLICK HERE to get your Free E-Book, “The Little Black Book Of Billionaires Secrets”
But the VIX spike shouldn’t have caught you off guard…
I warned of the likelihood of this event back on June 24, when I asked “Have You Insured Your Summer?”
And my Cycle 9 Alert subscribers are now holding a position that’s up 80%, thanks to that “nasty” volatility that most buy-and-hold investors fear.
Now, as I’ve said many times before, I do not have a crystal ball. I’m no mystic. And I had no way of knowing for sure that the “insurance policy” I recommended buying at the end of May would indeed pay out. But I didn’t need a crystal ball to know that this time of year is ripe for panic selling and volatility spikes.
Seasonality is just one of the tools I use to guide Cycle 9 Alert subscribers to the best three-month trends at any given time. But in this situation, it proved to be a very valuable tool.
As I shared with you in late June, my research shows that volatility spikes during the summer months of June, July and August occur more frequently, and are of greater magnitude, than year-long averages suggest. In fact, eight of the last 11 summers have brought about a volatility spike greater than 30%. Well… make that nine of the last 12 summers now!
But that doesn’t mean volatility will calm down as soon as the summer is over. September and October are still seasonal weak spots for equity markets. And volatility tends to stay at elevated levels for, on average, the six months following a massive spike.
That means markets are likely to remain rocky through year-end. Click here to learn how I’m positioning Cycle 9 Alert subscribers – I just issued a new recommendation today.
Bear Markets: Here’s What You Need to Know!
John Del Vecchio: Wall Street has had a wild ride over the last week. Two weeks ago I warned that several stocks had already entered their own bear market. If this is indeed the beginning of a full-on bear market, it’s only getting started. Even with all the selling, and the rally today, I still believe it’s too risky to allocate anymore capital to equities.
Bear markets have two interesting features that make them different from bull markets, besides the obvious downward trajectory:
Have you ever wondered how billionaires continue to get RICHER, while the rest of the world is struggling?
"I study billionaires for a living. To be more specific, I study how these investors generate such huge and consistent profits in the stock markets — year-in and year-out."
CLICK HERE to get your Free E-Book, “The Little Black Book Of Billionaires Secrets”
1. Volatility is much higher.
2. There are more days when stocks trade up sharply higher.
That second one might seem counterintuitive. Why would there be more large “up” days when the overall trend is pointing down?
Reason is, more people like to at least try to call a bottom than call a top. You can make money off calling a bottom (if you’re right).
When those people plug back into the market after a selloff (like today, with U.S. stocks up 4% higher), they can drive it sharply higher – again, sometimes much higher than you might find in a regular ol’ bull market. And it’s these sharp turns that make volatility so much higher as well.
It’s this combination of bottom fishing and these big “up” days that lull investors back into complacency… right before the next smash.
Where the Market Is Now
I write all this because the recent market price action is decidedly bearish. Many indices like the S&P 500 and many individual stocks are falling on much heavier volume – much more volume than when they were rising. Like Harry says, bubbles burst much faster than they inflate.
Several factors are at play here.
For one, market fundamentals have been weak for some time. The market had continued climbing, despite the fact that economic growth had been downgraded… household liquidity had been drying up… and that U.S. markets were among the most overvalued among the major markets globally. They still are. A 10% to 15% decline isn’t going to change that.
Yet there’s another dangerous warning sign in the fundamentals – the downward trend in earnings estimates.
Warning Signs: More Trouble Ahead!
Earnings have been poor this year. To meet their goals, I’ve seen many companies in the earnings report shift their revenue goals to the latter half of the year.
I’m skeptical.
One little-known tech company helps power Apple’s latest devices, and it’s moving into position to dominate its industry for years to come. Tell me the stock!
When a company has to depend on the second half of the year to meet its revenue goals, more often than not, management is kidding itself. How optimistic to think business will re-accelerate after it’s begun to slow!
Part of what’s driving these downward estimate revisions is plummeting oil prices. According to Ned Davis Research, the second quarter – whose figures are still being finalized – has a projected drop of 10.6% in consensus year-over-year estimates on the S&P 500. They also point out that’s the largest drop since Q4, 2009!
But it’s not just energy. Though it might be leading the pack with a 13.8% drop in estimates, estimates forevery sector are being slashed.
Have you ever wondered how billionaires continue to get RICHER, while the rest of the world is struggling?
"I study billionaires for a living. To be more specific, I study how these investors generate such huge and consistent profits in the stock markets — year-in and year-out."
CLICK HERE to get your Free E-Book, “The Little Black Book Of Billionaires Secrets”
Then there’s the fact that weak hands hold stocks now. After a number of investors have aggressively bought stocks on margin, this could be another catalyst for another big leg down.
Take those warning signs and the fact that valuations are still frothy, and you can expect much more volatility in the near future. This recent stock market slide is only the beginning. Prepare for more wild rides ahead!
So what do you think?
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