Those of you tempted to believe that this week’s ‘Black Monday’ was an aberration should note that a huge, global stock market crash is likely to be with us pretty soon.
China is exporting a tidal wave of deflation to the US (an economy already in trouble) and as it hits things are going to get very bad indeed.
Forget the market soothsayers employed to talk up the prospects of the stock markets. Their analysis is wanting, their predictive powers non-existent.
You’d be better off following the analysis of the three men below. Compared to the vast majority of commentators they are market oracles. The message they have to impart is sobering.
Professor Steve Keen
No less a figure than economist Professor Steve Keen, who predicted the 2008-09 Great Recession, explained in an interview last year that the US was headed for a long period of stagnation. It is due to the build up of private debt (among both corporates and the general public).
Economies across the globe have been fuelled by the growth of private debt and, given the already high levels of debt, further growth cannot be sustained for very long. That is why the ‘recoveries’ in the US and UK are below trend and stop start.
Because of this reducing private debt not public debt is the issue that should be concentrating the minds of our politicians and economists. Hence QE for the people, which reduces this burden makes a lot more sense than QE for the banks.
Until now, all QE for the banks has done is:
- encourage banks to continue speculating with cheap money from tax payers
- created asset bubbles in areas such as property, stock markets and bonds where this money has been invested
- encouraged ordinary investors to take on excessive risks in order to get decent returns
- blinded the public to the way they are being fleeced by the political-financial elite that rule over us and finance this Ponzi scheme.
It is a pity that until the arrival of Jeremy Corbyn the Labour Party leadership failed to explain that the bank-bail out was the real reason the UK public debt ballooned.
In any case, austerity in the present economic climate is madness, the wrong medicine at the wrong time.
Mitch Fierstein is the author of Planet Ponzi and a hedge fund manager. He knows the system from the inside out and is one of the sharpest commentators on the manipulation at the heart of our financial system. At the very least you should follow his twitter feed. The insights fly out of him like sparks from a Catherine Wheel.
Often only when going over his comments in detail do you become aware of the really deep knowledge he is imparting. For example, the most recent revision to US second quarter GDP, indicates that the US economy is doing fine growing fine with an annualised rate of growth of 3.7% revised up from 2.3%.
However, as Feierstein pointed out in a tweet yesterday (August 27th) US Gross Domestic Income (GDI) increased at an annual rate of just 0.6%.
This is what Shadowstats had to say on the matter in a note published yesterday: “Not only was that revision unbelievable, it also ran counter to the indication of stagnant economic activity seen in the initial estimate of second-quarter 2015 Gross Domestic Income (GDI), the theoretical and a practical equivalent to the GDP. The pattern of GDI stagnation for first-half 2015—not the faux surge in second-quarter GDP—is consistent with better quality monthly reporting seen in series such as industrial production and real retail sales.”
He’s been labelled a ‘bear’ by many bulls. Yet he accurately predicted that Chinese devaluation was coming months ago and that it would lead to a tidal wave of deflation heading West.
When it hits the US, it won’t be pretty. Forget cheaper gasoline prices and commodities. They aren’t much use when you’re out of a job because your economy has gone back into recession.
Okay, the US won’t raise interest rates. When it becomes clear that it is falling back into recession, QE4 may be unleashed. However, more bank bailouts (which is what QE is all about) won’t save the US economy from turning Japanese and stagnating.
This week, in a note published on August 27th, Edwards explained: “Despite deflation fears washing westward and US implied inflation expectations diving to levels not seen since the 2008 Great Recession, there remains a touching faith that the US is resilient enough to withstand further renminbi devaluation. And if it isn’t, why worry anyway, because QE4 will be around the corner. But let me be as clear as I can: the US authorities CANNOT eliminate the business cycle, however many QE helicopters they send up. The idea that developed economies will decouple from emerging market turmoil is as ridiculous as was the reverse in the first half of 2008. Remember Emerging Market and commodities had then de-coupled from the wests woes until they too also crashed. “
He also stated that we are already in a bear market. “While equities rebound investors are hoping things are quickly returning to normal. One of the many lessons from equity investing during Japan’s Lost Decade is that in a secular bear market hope is a killer. In a secular bear market hope should only be flirted with briefly during cyclical upturns, but it must be ruthlessly rejected as the cycle turns. In a secular bear market being wedded to hope destroys portfolios as the bear slashes to ribbons the hard-fought gains of the previous bull market. Gains that have taken years to accumulate are gone in months. One key measure we monitor informs us conclusively: we are now in a bear market.”
Time to be fearful
When men as smart as the 3 oracles above tell you that things are turning nasty it is time to listen. Far from being greedy it is now time to be fearful.
Certainly, it is time to take profits/hedge your winnings. Avoid leverage and take all money you need for the short term out of the market.
Even in a bearish environment physical gold and silver should do well and probably selective, innovative, small caps.
P.S. Please BBC put on a show like RT’s The Keiser Report and interview these 3 people. Their deep knowledge is desperately needed by a mainstream audience fed incoherent nonsense until now.