2016 Market Meltdown: We Have Never Seen A Year Start Quite Like This… - Michael Snyder THE ECONOMIC COLLAPSE BLOG

2016 Market Meltdown: We Have Never Seen A Year Start Quite Like This… Posted: 21 Jan 2016  Michael Snyder   THE ECONOMIC COLLAPSE BLOG We are about three weeks into 2016, and we are witnessing things that we have never seen before.  There were two emergency market shutdowns in China within the first four trading days of this year, the Dow Jones Industrial Average has never lost this many points within the first three weeks, and just yesterday we learned that global stocks had officially entered bear market territory.   Overall, more than 15 trillion dollars of global stock market wealth has been wiped out since last June.  And of course the markets are simply playing catch up with global economic reality.  The Baltic Dry Index just hit another new all-time record low today, Wal-Mart has announced that they are shutting down 269 stores, and initial jobless claims in the U.S. just surged to their highest level in six months.  So if things are this bad already, what will the rest of 2016 bring? The Dow was up just a little bit on Thursday thankfully, but even with that gain we are still in unprecedented territory.  According to CNBC, we have never seen a tougher start to the year for the Dow than we have in 2016… The Dow Jones industrial average, which was created in 1896, has never begun a year with 12 worse trading days. Through Wednesday’s close, the Dow has fallen 9.5 percent. Even including the 1.3 percent gains as of noon Thursday, the Dow is still down nearly 8 percent in 2016. But even with the carnage that we have seen so far, stocks are still wildly overpriced compared to historical averages.  In order for stocks to no longer be in a “bubble”, they will still need to decline by about another one-third.  The following comes from MarketWatch… Data from the U.S. Federal Reserve, meanwhile, say U.S. nonfinancial corporate stocks are now valued at about 90% of the replacement cost of company assets, a metric known as “Tobin’s Q.” But the historic average, going back a century, is in the region of 60% of replacement costs. By this measure, stocks could fall by another third, taking the Dow all the way down toward 10,000. (On Wednesday it closed at 15,767.) Similar calculations could be reached by comparing share prices to average per-share earnings, a measure known as the cyclically adjusted price-to-earnings ratio, commonly known as CAPE, after Yale finance professor Robert Shiller, who made it famous. Of course the mainstream media doesn’t seem to understand any of this.  They seem to be under the impression that the bubble should have lasted forever, and this latest meltdown has taken them totally by surprise. Ultimately, what is happening should not be a surprise to any of us.  The financial markets always catch up with economic reality eventually, and right now evidence continues to mount that economic activity is significantly slowing down.  Here is some analysis from Brandon Smith… Trucking freight in the U.S. is in steep decline, with freight companies pointing to a “glut in inventories” and a fall in demand as the culprit. Morgan Stanley’s freight transportation update indicates a collapse in freight demand worse than that seen during 2009. The Baltic Dry Index, a measure of global freight rates and thus a measure of global demand for shipping of raw materials, has collapsed to even more dismal historic lows. Hucksters in the mainstream continue to push the lie that the fall in the BDI is due to an “overabundance of new ships.” However, the CEO of A.P. Moeller-Maersk, the world’s largest shipping line, put that nonsense to rest when he admitted in November that “global growth is slowing down” and “[t]rade is currently significantly weaker than it normally would be under the growth forecasts we see.” In addition, another very troubling sign is the fact that initial jobless claims are starting to surge once again… The number of Americans applying for unemployment benefits in mid-January reached seven-month highs, perhaps a sign that the rate of layoffs in the U.S. has risen slightly from record lows. Initial jobless claims climbed a seasonally adjusted 10,000 to 293,000 in the seven days stretching from Jan. 10 to Jan 16, the government said Thursday. That’s the highest level since last July. Since the last recession, the primary engine for the creation of good jobs in this country has been the energy industry. Unfortunately, the “oil boomtowns” are now going bust, and workers are being laid off in droves.  As I mentioned the other day, 42 North American oil companies have filed for bankruptcy and 130,000 good paying energy jobs have been lost in this country since the start of 2015.  And as long as the price of oil stays in this neighborhood, the worse things are going to get. A lot of people out there still seem to think that this is just going to be a temporary downturn.  Many are convinced that we will just go through another tough recession and then we will come out okay on the other side.  What they don’t realize is that a number of long-term trends are now reaching a crescendo. For decades, we have been living wildly beyond our means.  The federal government, state and local governments, corporations and consumers have all been going into debt far faster than our economy has been growing.  Of course this was never going to be sustainable in the long run, but we had been doing it for so long that many of us had come to believe that our exceedingly reckless debt-fueled prosperity was somehow “normal”. Unfortunately, the truth is that you can’t consume far more than you produce forever.  Eventually reality catches up with you.  This is a point that Simon Black made extremely well in one of his recent articles… Economics isn’t complicated. The Universal Law of Prosperity is very simple: produce more than you consume. Governments, corporations, and individuals all have to abide by it. Those who do will thrive. Those who don’t will fail, sooner or later. When the entire financial system ignores this fundamental rule, it puts us all at risk. And if you can understand that, you can take simple, sensible steps to prevent the consequences. Sadly, the time for avoiding the consequences of our actions is now past. We are now starting to pay the price for decades of incredibly bone-headed decisions, and anyone that is looking to Barack Obama, the Federal Reserve or anyone else in Washington D.C. to be our savior is going to be bitterly disappointed. And as bad as things have been so far, just wait until you see what happens next. 2016 is the year when everything changes.

Global Stocks Enter Bear Market: One-Fifth Of All Worldwide Stock Market Wealth Is Already Gone Posted: 20 Jan 2016 04:14 PM PST It’s official – global stocks have entered a bear market.  On Wednesday, we learned that the MSCI All-Country World Index has fallen a total of more than 20 percent from the peak of the market.  So that means that roughly one-fifth of all the stock market wealth in the entire world has already been wiped out.   How much more is it going to take before everyone will finally admit that we have a major financial crisis on our hands?  30 percent?  40 percent?  This new round of chaos began last night in Asia.  Japanese stocks were down more than 600 points and Hong Kong was down more than 700 points.  The nightmare continued to roll on when Europe opened, and European stocks ended up down about 3.2 percent when the markets over there finally closed.  In the U.S., it looked like it was going to be a truly historic day for a while there.  At one point the Dow had fallen 566 points, but a curious rebound resulted in a loss of only 249 points for the day. As bad as things are in the U.S. right now, the truth is that we still have a long way to go to catch up with the rest of the planet.  Around the world, many major stock indexes are already down more than 30 or 40 percent.  Overall, the MSCI All-Country World Index is now down 20 percent, which officially puts us in bear market territory… The MSCI All-Country World Index, which measures major developed and emerging markets, fell into a bear market Wednesday, with its decline from early last year now totaling more than 20 percent. A plunge in U.S. stocks, which caused the Dow Jones industrial average to decline by more than 400 points at one point, pushed the global index into bear territory at midmorning during New York trading. Japan fell into a bear market as well as the Nikkei 225 index dropped 3.7 percent Wednesday, bringing its total pullback to 22 percent from its high in June. Much of this chaos is being driven by the price of oil.  On Wednesday the price of U.S. oil dropped below 28 dollars a barrel for a while, and as I write this article Brent crude is still below 28 dollars a barrel. As energy prices continue to plummet, this is putting a tremendous amount of pressure on junk bonds.  On Wednesday JNK actually dipped beneath 32.00 for a time before rebounding at the end of the day.  I expect to see junk bonds continue to crash during the days ahead as investors feverishly race for the exits. And of course global economic fundamentals continue to deteriorate as well.  Global trade is absolutely imploding and shipping rates have fallen to unprecedented levels.  If you can believe it, Bloomberg is reporting that it is now actually cheaper to rent a 1,100 foot merchant vessel than it is to rent a Ferrari… Rates for Capesize-class ships plummeted 92 percent since August to $1,563 a day amid slowing growth in China. That’s less than a third of the daily rate of 3,950 pounds ($5,597) to rent a Ferrari F40, the price of which has also fallen slightly in the past few years, according to Nick Hardwick, founder of supercarexperiences.com. The Baltic Exchange’s rates reflect the cost of hiring the vessel but not fuel costs. Ships burn about 35 metric tons a day, implying a cost of about $4,000 at present prices, data compiled by Bloomberg show. I could hardly believe that when I first read it. But this is the kind of thing that we would expect to see happen when the greatest financial bubble in world history bursts. The 200 trillion dollar global debt pyramid is now collapsing all around us, and the former chief economist of the Bank for International Settlements is warning that we could soon be facing “an avalanche of bankruptcies”… The global financial system has become dangerously unstable and faces an avalanche of bankruptcies that will test social and political stability, a leading monetary theorist has warned. “The situation is worse than it was in 2007. Our macroeconomic ammunition to fight downturns is essentially all used up,” said William White, the Swiss-based chairman of the OECD’s review committee and former chief economist of the Bank for International Settlements (BIS). Of course it is a little late in the game to be warning us about this now. At this point there is very little that can be done to stop the collapse that is already happening. White went on to tell the Telegraph that things are going to become “uncomfortable for a lot of people who think they own assets that are worth something”… “It will become obvious in the next recession that many of these debts will never be serviced or repaid, and this will be uncomfortable for a lot of people who think they own assets that are worth something,” he told The Telegraph on the eve of the World Economic Forum in Davos. For years, I have been warning that the global financial system is an incredibly shaky house of cards, and now we have finally reached the endgame. But the mainstream media in the United States is telling everyone not to panic.  Instead of a time to sell, the mainstream media is urging people to jump in and take advantage of all of the “great deals” in the stock market right now.  I really like what Mike Adams of Natural News had to say about what we are seeing… The pathetically stupid and dishonest financial media is desperately running stories right now to maintain false faith in the markets, even while their own people are behind the scenes selling like mad. As long as they can keep the public believing in the “faith” of never-ending cheap money, they can bail out their own positions to suckers and fools who think a tiny dip in a massively overvalued, fraudulent market is a “buying opportunity.” Watch for desperate headlines from propaganda financial outlets (such as MarketWatch.com) like, “10 reasons you shouldn’t sell” or “The upside potential of the market is HUGE!” These are psychological operations to try to persuade people that the collapse they’re seeing in global markets isn’t actually happening. The financial chaos that has erupted in recent weeks has really caught a lot of people by surprise, but my readers knew that it was coming well in advance. For months, I have been warning about this exact kind of scenario. The deflationary financial meltdown that started during the last six months of 2015 is now making headlines all over the planet, and what we have experienced so far is just the tip of the iceberg. The bears have gotten out of their cages, and global investors are running for cover.  Nobody is exactly sure what is going to happen tomorrow, but without a doubt the entire world will be watching.