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Posted: 13 Dec 2015 Michael Synder - THE ECONOMIC COLLAPSE BLOG
Are we about to witness widespread panic in the global financial marketplace?
This week is shaping up to be an absolutely critical week for global stocks. Coming into December, more than half of the 93 largest stock market indexes in the world were down more than 10 percent year to date, and last week stocks really started to slide all over the world. Here in the United States, the Dow Jones Industrial Average is down about 600 points over the past week or so, and at this point it is down more than 1000 points from the peak of the market. That brings us to this week, during which the Federal Reserve is expected to raise interest rates for the very first time since the last financial crisis. If that happens, that could potentially be enough to accelerate this “slide” into a full-blown crash. And just look at what is already happening. Trading for stocks in the Middle East has opened for the week, and we are already witnessing tremendous carnage… Following Friday’s further freefall in crude oil prices, The Middle East is opening down notably. Abu Dhabi, Saudi, and Kuwait are lower; Israel is weak and UAE and Qatar are tumbling, but Dubai is worst for now. Dubai is down for the 6th day in a row (dropping over 3% – the most in a month) extending the opening losses to 2-year lows. The 11% drop in the last 6 days is the largest since the post-China-devaluation global stock collapse. Leading the losses are financial and property firms.Things in Asia look very troubling as well. As I write this, the Japanese market has just opened, and the Nikkei is already down 508 points. In recent days I have been explaining to my readers how everything is lining up in textbook fashion for another major market crash. In particular, the implosion of junk bonds is a major red flag. Late last week, Third Avenue Management shocked Wall Street by freezing withdrawals from a 788 million dollar credit mutual fund. The following comes from Bloomberg… A day after a prominent Wall Street firm shocked investors by freezing withdrawals from a credit mutual fund, things only got nastier in the junk-bond market. Prices on the high-risk securities sank to levels not seen in six years and, to add to the growing sense of alarm, billionaire investor Carl Icahn said the selloff is only starting.What Third Avenue Management just did was absolutely huge. Now investors that have money in any similar funds are going to be racing to get it out. We could be on the verge of a run on bond funds that is absolutely unprecedented. This is so obvious that even CNBC’s Jim Cramer is sounding the alarm… Friday was a day where Cramer’s ears were burning with concern because of the troubles discovered with a high yield bond fund run by Third Avenue Management. It decided to bar investors from getting their money out of its Focused Credit Fund, because it could not meet demands to get cash back to them in an orderly way.I know that for the ordinary person on the street, all of this sounds very complicated. But it basically comes down to this – anyone that has a lot of money invested in these bond funds is in danger of getting totally wiped out. In a situation like this, it is those that are “first out the door” that come out as the winners. I like how Wolf Richter explained what we are currently facing… It works like this: When an “open-end” bond fund starts losing money, investors begin to sell it. Fund managers first use all available cash to pay investors. When the cash is gone, they sell the most liquid securities that haven’t lost much money yet, such as Treasuries. When they’re gone, they sell the most liquid corporate paper. As they go down the line, they sell bonds that have already lost a lot of value. By now the smart money is betting against the fund, having figured out what’s happening. They’re shorting the very bonds these folks are trying to sell.I would anticipate that we will see more junk bond carnage this week – especially if the Fed raises rates. And as I have discussed previously, a stock crash almost always follows a junk bond crash. If the Fed does raise rates this week and stocks do start falling significantly, one key day to watch will be Friday. JPM’s head quant Marko Kolanovic has warned that “the largest option expiry in many years” will happen on that day… This important event falls at a peculiar time—less than 48 hours before the largest option expiry in many years. There are $1.1 trillion of S&P 500 options expiring on Friday morning. $670Bn of these are puts, of which $215Bn are struck relatively close below the market level, between 1900 and 2050. Clients are net long these puts and will likely hold onto them through the event and until expiry. At the time of the Fed announcement, these put options will essentially look like a massive stop loss order under the market.A perfect storm for stocks is brewing, and this week could potentially be one of the most chaotic that we have seen in a very long time. But of course the Federal Reserve could decide to surprise us all by not raising rates, and that would change things substantially. So what do you think will happen this week? Please feel free to share your thoughts by posting a comment below… |
If you have not been preparing for what is coming, you need to get off your sofa and you need to start prepping right now. Just remember what happened back in 2008. That crisis took most people totally by surprise. Millions of Americans lost their jobs.
Most of them were living paycheck to paycheck. So all of a sudden, most of them couldn't pay the rent or the mortgage. Large numbers of families who once lived a comfortable middle-class lifestyle suddenly found themselves destitute. Well, this coming crisis is going to be even worse by the time it is all said and done, and it is not just going to be economic in nature.
Over the past two trading days, the Dow has gone down more than 1,000 points. The shaking that so many have warned about has begun. As this shaking plays out, you and your family will need cash, food, supplies and a whole bunch of other things. If you do not already have everything prepared, then you need to kick your prepping into overdrive, because we are on a very compressed time frame now.
But don't just take my word for it. A top adviser to former British Prime Minister Gordon Brown named Damian McBride is saying the same thing:
"A former adviser to Gordon Brown has urged people to stock up on canned goods and bottled water as stock markets around the world slide."
And he didn't just speak in generalities. According to an article in one of the most important newspapers in the U.K., McBride is urging his fellow citizens to do some very specific things:
"Advice on the looming crash, No. 1: Get hard cash in a safe place now; don't assume banks and cashpoints will be open, or bank cards will work," he tweeted."Crash advice No. 2: Do you have enough bottled water, tinned goods and other essentials at home to live a month indoors? If not, get shopping."Crash advice No. 3: Agree a rally point with your loved ones in case transport and communication gets cut off; somewhere you can all head to."
All of that is great advice. But I wonder why he is so concerned about people being able to live a month indoors. Does he know something that the rest of us do not?
Others are issuing similar ominous warnings. The following is an excerpt from a recent article by Chuck Baldwin that seemed to be written with an unusual sense of urgency:
I suggest you have a supply of food and water to last at least three months. Many survival experts insist that a six-month supply is the minimum. Personally, I can live a long time on tuna fish or peanut butter. You can purchase MREs from a variety of sources, as well as camp-style packaged food from many sporting goods stores. Of course, bottled water is available everywhere during normal times. Stock up! Distilled water will store longer than spring water. Plus, I suggest you have some water purification tablets or a Katadyn water filter on hand. And if you are able, prepare to grow your own food. In cold weather climates such as we have here in Montana, people quickly learn how to construct and utilize greenhouses in which to grow food. Canning food is another very helpful hedge against deprivation. If your parents and grandparents lived through the Great Depression as mine did, this was standard operating procedure.Get a generator. Keep a supply of fuel on hand. Stay stocked up on batteries, candles, portable lights, first aid supplies, and toiletries—especially toilet paper and toothpaste. I also suggest you never run out of lighters or matches. You never know when you'll need to build a fire. If you live in a cold weather climate, you probably already have some sort of wood stove or fireplace.
You can read the rest of that outstanding article right here.
Similar sentiments were expressed in a recent piece by prepper extraordinaire Daisy Luther:
- Take your money out of the bank ASAP. If you still keep your money in the bank, go there and remove as much as you can while leaving in enough to pay your bills. Although it wasn't a market collapse in Greece recently, the banks did close and limit ATM withdrawals. People went for quite some time without being able to access their money, but were able to have a sense of normalcy by transferring money online to pay bills or using their debit cards to make purchases. Get your cash out. You don't want to be at the mercy of the banks.
- Stock up on supplies. Make sure you are prepped. If you're behind on your preparedness efforts and need to do this quickly, you can order buckets of emergency food just to have some on hand. (Learn how to build an emergency food supply using freeze-dried food HERE.) Hit the grocery store or wholesale club and stock up there, too, on your way home.
- Load up on fuel. Fill up your gas tank and fill your extra cans also. Quite often, fuel prices skyrocket in the wake of a market crash.
- Be prepared for the potential of civil unrest. If the banks put a limit on withdrawals (or close like they did in Greece), you can look for some panic to occur. If the stores dramatically increase prices or close, (there will be) more panic. Be armed and be prepared to stay safely at home. (Although this article was written during the Ferguson race riots, civil unrest follows a similar pattern regardless of the cause.)
- Be prepared for the possibility of being unable to pay your bills. If things really go downhill, the middle class and those who are the working poor will be the most strongly affected, as they have been in Greece during that country's ongoing financial crisis. This article talks about surviving if you are unable to pay all of your bills.
Every family is facing a different set of circumstances, so "prepping" is not going to look the same for everyone. What may make sense for you may not make sense for me. But the truth is that we all need to get prepared for what is coming, because time is running out.
As I have discussed repeatedly, I have more of a sense of urgency about the last six months of 2015 than I have ever had about any other specific period of time. That is why the book that I recently co-authored with survivalist expert Barbara Fix is titledGet Prepared NOW. The word "NOW" is in larger print than everything else on the front cover because I really wanted to emphasize the urgency of what we are facing.
If you think that you can wait until next year to start getting prepared, you are going to be too late.
This stock market crash is just the beginning. Next month we are witnessing a convergence of events that is pretty much unprecedented. If you would like to learn more, here are some places to get started:
The relative stability of the past few years has lulled millions of Americans into a state of complacency.
And even our politicians are displaying a stunning level of complacency. For example, even though our nation is rapidly going down the toilet, Barack Obama has played more than 1,100 hours of golf while he has been in the White House.
It is time for all of us to awaken from our slumber, because life in America is about to dramatically change.
Do you have some specific tips to share with those that are trying to get prepared for what is coming? Please feel free to join the discussion by posting a comment below.
Michael T. Snyder is the publisher of The Economic Collapse Blog and author of The Beginning of the End.
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