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The Economic Collapse Blog Has Issued A RED ALERT For The Last Six Months Of 2015
By
Michael Snyder,
25
June 25th, 2015
I
have never done anything like this before. Ever since I started
The Economic Collapse Blog in late 2009, I have never issued any kind
of “red alert” for any specific period of time. As an
attorney, I was trained to be level-headed and to only come to
conclusions that were warranted by the evidence. So this is not
something that I am doing lightly. Based on information that I
have received, things that I have been told, and thousands of hours
of research that have gone into the publication of more than 1,300
articles about our ongoing economic collapse, I have come to the
conclusion that a major financial collapse is imminent.
Therefore, I am issuing a RED
ALERT for
the last six months of 2015.
To
clarify, when I say “imminent” I do not mean that it will happen
within the next 48 hours. And I am not saying that our problems
will be “over” once we get to the end of 2015. In fact, I
believe that the truth is that our problems will only be just
beginning as we enter 2016.
What
I am attempting to communicate is that we are right at the door of a
major turning point. About this time of the year back in 2008,
my wife and I went to visit her parents. As we sat in their
living room, I explained to them that we were on the verge of a major
financial crisis, and of course the events that happened a few months
later showed that I was right on the money.
This
time around, I wish that I could visit the living rooms of all of my
readers and explain to them why we are on the verge of another major
financial crisis. Unfortunately, that is not possible, but
hopefully this article will suffice. Please share it with your
friends, your family and anyone else that you want to warn about what
is coming.
Let’s
start with a little discussion about the U.S. economy. Most of
the time, when I use the term “economic collapse” what most
people are actually thinking of is a “financial collapse”.
And we will talk about the imminent “financial collapse” later on
in this article. But just because stocks have recently been
hitting all-time record highs does not mean that the overall economy
has been doing well. This is a theme that I have hammered on
over and over again. It is my contention that we are in the
midst of a long-term economic collapse that has been happening for
many years, that is happening as you read this article, and that will
greatly accelerate over the coming months.
Let
me give you just one quick example. When an economy is healthy,
money tends to circulate fairly rapidly. I buy something from
you, then you take that money and buy something from someone else,
etc. In a stable and growing economy, people generally feel
good about things and they are not afraid to spend. But during
hard times, the exact opposite happens. That is why the
velocity of money almost always slows down during a recession.
As you can see from the chart below, the velocity of money has indeed
gone down during every recession since 1960. Once a recession
is over, the velocity of money is supposed to go back up. But a
funny thing happened after the last recession ended. The
velocity of money continued to go down, and it has now hit an
all-time record low…
This
is the kind of chart that you would expect from a very sick economy.
And without a doubt, our economy is sick. Even the official
government numbers paint a picture of an economy that is deeply
troubled. Corporate profits have declined for
two quarters in a row,
U.S. exports plunged by 7.6
percent during
the first quarter of 2015, U.S. GDP contracted by
0.7 percent during
the first quarter, and factory orders have declined year over
year for
six months in a row.
If
the stock market was connected to reality, it would be going down.
But instead, it has just kept going up. As I
discussed yesterday,
this is a classic case of an irrational financial bubble. If I
was writing an economic textbook and I wanted to include an example
of what a run up to a major financial crash looks like, it would be
hard to come up with anything more ideal than what we have watched
unfold over the last six months. Just about every pattern that
has popped up prior to previous stock markets crashes is happening
again, and this is something that I have written about so much that
many of my readers are sick of it.
And
without a doubt, our financial markets are primed for a crash.
The
first was in 1929, and the stock market subsequently crashed.
The
second was in 2000, right before the dotcom bubble burst.
And
by just about any measure that you can possibly imagine, stocks are
massively overvalued right now.
For
instance, just check out the chart posted below. It comes
from Doug
Short,
and it shows that the ratio of corporate equity prices to GDP has
only been higher one time since 1950. That was in 2000 just
before the dotcom bubble burst…
Let’s
take a look at another chart. This one comes from Phoenix
Capital Research,
and it shows that the CAPE ratio (cyclically adjusted
price-to-earnings ratio) has rarely been higher. In fact, the
only times that it has been higher we have seen stock market crashes
immediately afterwards…
I think that compared with history, US stocks are overvalued. One way to assess this is by looking at the CAPE (cyclically adjusted P/E) ratio that I created with John Campbell, now at Harvard, 25 years ago. The ratio is defined as the real stock price (using the S&P Composite Stock Price Index deflated by the CPI) divided by the ten-year average of real earnings per share. We have found this ratio to be a good predictor of subsequent stock market returns, especially over the long run. The CAPE ratio has recently been around 27, which is quite high by US historical standards. The only other times it has been that high or higher were in 1929, 2000, and 2007—all moments before market crashes.
But the CAPE ratio is not the only metric I watch. In my bookIrrational Exuberance (3rd Ed., Princeton 2015) I discuss several metrics that help judge what’s going on in the market. These include my stock market confidence indices. One of the indicators in that series is based on a single question that I have asked individual and institutional investors over the years along the lines of, “Do you think the stock market is overvalued, undervalued, or about right?” Lately, what I call “valuation confidence” captured by this question has been on a downward trend, and for individual investors recently reached its lowest point since the stock market peak in 2000.
Other
valuation indicators produce similar results. This next chart
is another one from Doug
Short,
and it shows the average of four of his favorite valuation
indicators. As you can see, there is only one other time when
stocks have been more overvalued than they are today according to the
average of his four favorite indicators, and that was just before the
stock market crashed when the dotcom bubble burst…
Another
one of the things that indicates that a financial bubble is happening
is the level of margin debt. Whenever margin debt has gone over
2.25% of GDP a
stock market crash has always followed, and today it is far above
that level. As you can see from the chart below, there have
been three major peaks in margin debt in modern U.S. history.
One was just before the dotcom bubble burst, one was just before the
financial crisis of 2008, and the third is happening right now…
Something
else that we would expect to see prior to a major financial crisis is
a decoupling of high yield debt and stocks. This is something
that happened just prior to the stock market crash of 2008, and it is
happening again right now. The following chart comes
from Zero Hedge,
and it demonstrates this brilliantly…
Are
you starting to get the picture?
And
as I discussed yesterday,
the smart money is beginning to pull their money out of stocks while
they still can. According to USA
Today,
mutual fund investors have pulled more money out of stocks than they
have put into stocks for
16 weeks in a row…
In a sign of stock market nervousness on Main Street, mutual fund investors have yanked more money out of U.S. stock funds than they put in for 16 straight weeks.
The last time domestic stock funds had positive net cash inflows was in the week ending Feb. 25, according to data from the Investment Company Institute, a mutual fund trade group.
In the week ended June 17, the most recent data available, mutual funds that invest in U.S. stocks suffered net outflows of $3.45 billion, according to the ICI.
Since late February, U.S. stock funds have suffered estimated outflows of nearly $55 billion. Those net withdrawals come despite the fact the benchmark Standard & Poor’s 500 hit a fresh record high of 2130.82 on May 21 and the Dow Jones industrial average notched a fresh record on May 19.
But
it isn’t just stocks that are going to crash during the next
financial crisis. Bonds
Derivatives
are going to play a
starring role in
the next major financial crisis. I cannot emphasize this
enough. In fact, if you want to listen for just one word on the
news that will let you know that things have started to really
unravel, just listen for the word “derivatives”. This form
of legalized gambling is going to crush “too big to fail” banks
all over the planet during the next major financial downturn.
The “too big to fail” banks in the U.S. alone have 278
trillion dollars of
total exposure to derivatives, but they only have 9.8 trillion
dollars in total assets. To say that they are being “reckless”
is a massive understatement.
For
much more on the coming derivatives crisis, please see my previous
article entitled “Warren
Buffett: Derivatives Are Still Weapons Of Mass Destruction And ‘Are
Likely To Cause Big Trouble’“.
Of
course I am not the only one that is sounding the alarm about what is
coming. Just consider what some very prominent individuals have
been saying recently…
Ron
Paul has
just released a new video in which he warned all of us to “prepare
for a bear market in bonds“.
Martin
Armstrong says
that his Economic Confidence Model predicts that the “Big Bang”
is coming in “2015.75“.
Jeff
Berwick of the Dollar Vigilante says
that “we’re
getting very, very close to the next crisis collapse”
and he has specifically pointed to the month of September.
James
Howard Kunstler has
predicted that stocks are going to “crater
in Q3 as faith in paper and pixels erodes“.
Lindsey
Williams recently
sent out an email alert in which he warned that his elite friend has
told him that “they
have a World Wide Financial Collapse scheduled between September and
the end of December 2015“.
Ray
Gano has
stated that we will see a financial collapse “probably
starting in the third quarter of 2015″.
Legendary
investor Jim Rogers recently
said that he believes that
“we will see some kind of major, major problems in the world
financial markets” within the next year or two.
Alex
Jones recently
released a
video in
which he explained that he recently received “two different calls”
from “extremely prominent wealthy people” warning him about what
is coming by the end of this year and asking him why he isn’t
leaving the United States “before October”.
Bible
prophecy expert Joel C. Rosenberg has
posted an ominous message on
his personal blog in
which he warned that “something is coming” and that “we must be
ready”…
I feel a tremendous sense of urgency about this column.
The United States is hurtling towards severe trouble, and the events of the past few months — and what may be coming over the next few months — grieves me a great deal.
Something is coming. I don’t know what. But we all must be ready in every possible way.
When
I read what Rosenberg wrote, it struck me that it was precisely how I
have been feeling too.
In
my entire life, I have never had such an ominous feeling about any
period of time as I have about the last six months of 2015.
Like Rosenberg, I feel a “tremendous sense of urgency”, and I
feel a great need to warn as many people as I can.
And
it isn’t just a financial collapse that I am concerned about.
In a previous
article,
I detailed seven key events that we are going to witness before the
end of this September…
Late
June/Early July –
It is expected that this is when the U.S. Supreme Court will reveal
their gay marriage decision. Most believe that the court will
rule that gay marriage is a constitutional right in all 50 states.
There are some that believe that this will be a major turning point
for our nation.
July
15th to September 15th –
A “realistic military training exercise” known as “Jade
Helm”
will be conducted by the U.S. Army. More than 1,000 members of
the U.S. military will take part in this exercise. The list of
states slated to be involved in these drills includes Texas,
Colorado, New Mexico, Arizona, Nevada, Utah, California, Mississippi
and Florida.
July
28th –
On May 28th, Reuters reported
that countries in the European Union were being given a two month
deadline to enact “bail-in” legislation. Any nation that
does not have “bail-in” legislation in place by that time will
face legal action from
the European Commission. So why is the European Union in such a
rush to get this done? Are the top dogs in the EU anticipating
that another great financial crisis is about to erupt?
September
13th –
This is Elul 29 on the Biblical calendar – the last day of the
Shemitah year.
Many are concerned about this date because we have seen giant stock
market crashes on the last day of the previous two Shemitah cycles.
On
September 17th, 2001 (which was Elul 29 on the Biblical calendar), we
witnessed the greatest one day stock market crash in U.S. history up
until that time. The Dow plummeted 684
points,
and it was a record that held for exactly seven years until the end
of the next Shemitah cycle.
On
September 29th, 2008 (which was also Elul 29 on the Biblical
calendar), the Dow fell by an astounding 777
points,
which still today remains the greatest one day stock market crash of
all time.
Now
we are approaching the end of another Shemitah year. So will
the stock market crash on September 13th, 2015? Well, no,
because that day is a Sunday.
So I guarantee that the stock
market will not crash on that particular day. But as Jonathan
Cahn has pointed out in
his book on the Shemitah,
sometimes stock market crashes happen just before the end of the
Shemitah year and sometimes they happen within just a few weeks after
the end of the Shemitah. So we are not just looking at one
particular date.
September
15th –
The 70th session of the UN General Assembly begins on this date.
It is being reported that France plans to introduce a resolution
which would give formal UN Security Council recognition to
a Palestinian state.
Up until now, the United States has always been the one blocking such
a resolution, but Barack Obama is indicating that things may be much
different this time around.
September
25th to September 27th –
The United Nations is going to launch a brand new sustainable
development agenda for
the entire planet.
Some have called this “Agenda 21 on steroids”. But this new
agenda is not just about the environment. It also includes
provisions regarding economics, agriculture, education and gender
equality. On September 25th, the Pope will travel to New York
to give a major speech kicking off the UN conference where this new
agenda will be unveiled.
September
28th –
This is the date for the last of the
four blood moons that
fall on Biblical festival dates during 2014 and 2015. This
blood moon falls on the very first day of the Feast of Tabernacles,
it will be a “supermoon”, and it will actually be visible in the
city of Jerusalem. There are many that dismiss the blood moon
phenomenon, but we have seen similar patterns before. For
example, a similar pattern of eclipses happened just before and just
after the destruction of the Jewish temple by the Romans in
70 AD.
In
addition to everything above, quite a number of economic cycle
theories that were developed by secular economists all point to big
trouble for America between the years of 2015 and 2020. For
more on this, please see my previous article entitled “If
Economic Cycle Theorists Are Correct, 2015 To 2020 Will Be Pure Hell
For The United States“.
Earlier
today, I publicly announced that I was issuing a RED
ALERT for
the last six months of 2015 on the Alex Jones radio show. You
can watch video of that interviewright
here.
In this article (which is about three times as long as one of my
normal articles) I have only shared a small fraction of the
information that has led me to issue this red alert. But if you
want to know more, and you are not afraid to really go
down the rabbit hole, I would encourage you to check out a
full two hour presentation that I did down in Dallas, Texas on
the nightmarish years that are coming.
The
period of relative stability that we have been enjoying is ending.
What comes next is going to lead us into the worst period of time in
modern American history. I wish that I was wrong about this.
But
the goal is not to scare you. My wife and I live our lives with
absolutely no fear, and that is my desire for all of my readers.
There is hope in understanding what is happening and there is hope in
getting prepared. Personally, my wife and I believe that the
greatest chapters of our lives are ahead of us, and I hope that you
have a similar outlook.
We
need a generation of people that are willing to rise up and do great
things even in the midst of all the chaos and darkness that is
coming. It is when times are the darkest that the greatest
heroes are needed.
So
what will you choose to do when the next crisis comes?
Will
you cower in fear, or will you rise up to meet the challenge?
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