Posted: 13 Jan 2016 Michael Snyder THE ECONOMIC COLLAPSE BLOG
It was another day of utter carnage on Wall Street. The Dow was down another 364 points, the S&P 500 broke below 1900, and the Nasdaq had a much larger percentage loss than either of them. The Russell 2000 has now fallen 22 percent from the peak, and it has officially entered bear market territory. After 13 days, this remains the worst start to a year for stocks ever, and trillions of dollars of stock market wealth has already been wiped out globally.
Meanwhile, junk bonds continue their collapse. JNK got hammered all the way down to 33.06 as bond investors race for the exits. In case you were wondering, this is exactly what a financial crisis look like. Many of the “experts” had been proclaiming that “things are different this time” and that stocks could defy gravity forever. Now we seeing that was not true at all. So how far could stocks ultimately fall? I have been telling my readers that stocks still need to fall about another 30 percent just to get to a level that is considered to be “normal” be historical standards, but the truth is that they could eventually fall much farther than that. Just this week, Societe Generale economist Albert Edwards made headlines all over the world with his prediction that we could see the S&P 500 drop by a total of 75 percent… If I am right and we have just seen a cyclical bull market within a secular bear market, then the next recession will spell real trouble for investors ill-prepared for equity valuations to fall to new lows. To bottom on a Shiller PE of 7x would see the S&P falling to around 550.Other than stocks, there are three key areas that I want my readers to keep an eye on during the weeks ahead… 1. The Price Of Oil – The price of oil doesn’t have to go one penny lower to continue causing catastrophic damage in the financial world. If we hover around 30 dollars a barrel, we will see more bankruptcies, more defaults, more layoffs and more carnage for energy stocks. But of course it is quite conceivable that the price of oil could easily slide a lot farther. Just check out some of the predictions that some of the biggest banks in the entire world are now making… Just this week Morgan Stanley warned that the super-strong U.S. dollar could drive crude oil to $20 a barrel. Not to be outdone, Royal Bank of Scotland said $16 is on the horizon, comparing the current market mood to the days before the implosion of Lehman Brothers in 2008.2. Junk Bonds – This is something that I have written about repeatedly. Right now, we are witnessing an epic collapse of the junk bond market, just like we did just prior to the great stock market crash of 2008. As I mentioned above, Wednesday was a particularly brutal day for junk bonds, and Jeffrey Gundlach seems convinced that the worst is still yet to come… He seemed to leave his most dire predictions for junk bonds, a part of the market he’s been bearish on for years. Gundlach believes hedge funds investing in risky debts face major liquidity risks if they are forced to exit positions amid investor redemptions. “We could be looking at a real ugly situation in the first quarter of 2016,” Gundlach said on a Tuesday call with investors, when referring to redemptions.3. Emerging Markets – We have not seen money being pulled out of emerging markets at this kind of rate in decades. We are seeing a repeat of the conditions that caused the Latin American debt crisis of the 1980s and the Asian financial crisis of the 1990s. Only this time what we are witnessing is truly global in scope, and central bankers are beginning to panic. The following comes from Wolf Richter… “Last year was a terrible year, probably worse than 2009,” the head of Mexico’s central bank told a conference of central bankers in Paris on Tuesday. It was the first year since 1988 that emerging markets saw net capital outflows, according to the Institute of International Finance, a Washington-based association of global banks and finance houses.In addition to everything that I just shared with you, we got several other very troubling pieces of news on Wednesday… -Canadian stocks continued their dramatic plunge and have now officially entered a bear market. -PC sales just hit an eight year low. -GoPro just announced that it is getting rid of 7 percent of its total workforce. The bad news is coming fast and furious now. The snowball that started rolling downhill about halfway last year has set off an avalanche, and panic has gripped the financial marketplace. But my readers knew all of this was coming in advance. What we are witnessing right now is simply the logical extension of trends that have been building for months. The global financial crisis that started during the second half of 2015 is now bludgeoning Wall Street mercilessly, and investors are in panic mode. So what comes next? We have never seen a year start like this, so it is hard to say. And if there is some sort of a major “trigger event” in our near future, we could see some single day crashes that make history. Either way, the hounds have now been released, and it is going to be exceedingly difficult to get them back into the barn. |
Are We About to See Another Great Recession or a Great Awakening?
Join us on our podcast each weekday for an interesting story, well told, from Charisma News. Listen at charismapodcastnetwork.com.
As the same economic patterns that preceded the 2008 financial crash repeat, Michael Snyder, founder of The Economic Collapse Blog, is urging people to get ready for another recession or worse.
"I believe that some very troubling times in terms of the U.S. are coming and eventually that we're headed into the hardest economic times as a country we've ever seen," Snyder told Dr. Steve Greene, the publisher and executive vice president of Charisma Media and host of the Charisma Podcast Network's "Charisma Connection" program on Thursday.
"But on the other hand, I believe we're going to see a great move of God—the greatest harvest of souls we've ever seen. I believe the finest hour of the church is ahead of us and there are going to be great opportunities to do amazing things for the kingdom moving forward."
Snyder, who founded the popular blog in 2009 that now has more than 1 million readers, says the world is witnessing the same economic warning signs that preceded the last financial crisis in 2008.
"One thing I've been stressing with my readers lately is that we've been seeing so many of the patterns we witnessed just before the financial crash of 2008," Snyder says. "They are happening again right in front of our eyes."
Snyder, who goes into greater depth about these indicators at theeconomiccollapseblog.com and endoftheamericandream.com, says some of these signs include the recent crash in junk bonds, the drop in the price of oil and the decline in the price of commodities.
Junk bonds, or high yield bonds, consist of companies that are "a little more risky," Snyder says. Many of these are energy companies that have experienced financial difficulties as the price of oil has dropped.
"Some of these energy companies have gotten into trouble because the price of oil has dropped, which is another indicator of trouble coming," Snyder says. "These junk bonds are starting to crash. That's a huge red flag for me and an indication that we have trouble on the horizon."
In the last global recession, the price of oil dropped from about $140 a barrel to below $40 a barrel. The same thing is occurring now. The price of oil recently dropped below $38 a barrel. Also, the price of commodities has fallen dramatically to a 16-year low.
If these indicators are signs that the economy is headed for another recession and ultimately an economic collapse, Snyder says he expects the unemployment rate to increase significantly. Currently, the nation's official unemployment rate is 5.5 percent, but Snyder says the real unemployment rate—taking into account large numbers of people who have quit looking for work—is 22 percent.
"So just like in 2008 in the initial stages of the recession, I believe we are going to see the unemployment rate go up dramatically," says Snyder, author of Get Prepared Now. "Because most Americans are living paycheck to paycheck, about 62 percent of all Americans, one survey found, then people all of a sudden won't be able to pay the mortgage. Just like last time, we are going to see so many people go from a middle-class lifestyle to out on the streets very rapidly."
To prepare for what he believes is coming, Snyder says people should create a six-month emergency fund to help pay the bills in the event of a financial crisis.
"I believe the crisis we are moving into is already starting to roll out in so many ways, but people need to do the best they can with what they have and leave the rest to God," Snyder says. "Now is not a good time to buy a whole lot of toys for Christmas and to go into debt, but to be smart. The Word of God tells us that the wise man sees trouble coming and prepares."
Snyder also encourages people to store up food, water and supplies and buy precious metals, especially silver coins.
"Silver has been trading around $14 an ounce now, which is ridiculously undervalued," Snyder says. "In the mid to long term, it's a way to protect your wealth when currencies are going to be in flux and ultimately the U.S. dollar is going to be in trouble."
As far as investments, Snyder encourages people to be broadly diversified.
"On the one hand, I do have warnings, I do have tough things to talk about, but on the other hand, I have a real message of inspiration and hope," Snyder says. "I'm encouraging people that you were born for such a time as this, and it's when times are the darkest that the greatest heroes are needed.
"In fact, when you look back through history, when have the people that we really admire—the great heroes and great leaders—arisen? It was during times that were the darkest—during times of great crisis, during war and during tough times. I would encourage people to think about what their God-given destiny is as we move forward into what will be challenging times, but also great times."
For a limited time, we are extending our celebration of the 40th anniversary of Charisma. As a special offer, you can get 40 issues of Charisma magazine for only $40!
NEW from CHARISMA: Do you want to encounter the Holy Spirit and hear God speak to you? Increase your faith, discover freedom, and draw near to God! Click Here