Tag Archives: market crash

Make America Great Again: Buy Extremely Overvalued Stocks

Key Economic Data Continues To Show A Recession

The stock market assumed a decidedly bearish tone last week, in the face of apparent domestic political instability, increasing geopolitical tensions and, most important, a continued flow of hard economic data reflecting an economy that is in recession (click image to enlarge).

The SPX declined 3 out of the 4 trading days this last week to close down 1.1% from the previous Friday’s close. It’s down nearly 3% from the all-time high it hit on March 1st. Thursday’s big red bar took the SPX below the 50 dma. On all four days the SPX closed well below its intra-day high. This indicates to me that, at least for now, stock market traders are better sellers. Also of interest, for the first time in seventeen years, the stock market declined the day before the Good Friday market holiday.

The growth in loan origination to the key areas of the economy – real estate, general commercial business and the consumer – is plunging. This is due to lack of demand for new loans, not banks tightening credit. If anything, credit is getting “looser,” especially for mortgages. Since the Fed’s quantitative easing and near-zero interest rate policy took hold of yields, bank interest income – the spread on loans earned by banks (net interest margin) – has been historically low. Loan origination fees have been one of the primary drivers of bank cash flow and income generation. Those four graphs above show that the loan origination “punch bowl” is becoming empty.

HOWEVER, the Fed’s tiny interest rate hikes are not the culprit. Loan origination growth is dropping like rock off a cliff because consumers largely are “tapped out” of their capacity to assume more debt and, with corporate debt at all-time highs, business demand for loans is falling off quickly. The latter issue is being driven by a lack of new business expansion opportunities caused by a fall-off in consumer spending. If loan origination continues to fall off like this, and it likely will, bank earnings will plunge.

But it gets worse. As the economy falls further into a recession, banks will get hit with a double-whammy. Their interest and lending fee income will decline and, as businesses and consumers increasingly default on their loans, they will be forced to write-down the loans they hold on their balance sheet. 2008 all over again.  (The commentary above is an excerpt from the latest Short Seller’s Journal).

Despite the propaganda coming from the media, the housing market is in trouble.  37% of all transactions in 2016 were flips.  A flip double-counts a sale because the house trades twice before it ends up with the end-user.  I would bet that in the $300-$600k price-bucket that close to 50% of all transactions YTD in 2017 have been flips.  This is how the mid-2000’s housing bubble ended.

Today the housing starts report for March registered the biggest drop in four months.  Single family starts plunged 32% in the midwest and 16% in the west.   Both multi-family and single-family starts dropped.  Multi-family is going to be a big problem.  Prices in NYC and Miami are dropping like a rock and vacancies are soaring because of oversupply – just like in 2007.  Apartment rental rates are falling quickly and vacancy rates soaring across all the major MSA’s.   Manufacturing  output plunged in March, likely reflecting bulging car inventories at auto dealers, which are at  a post-2009 high.   OEM auto manufacturers are closing plants and laying off workers.  The latter, no doubt, will miraculously fail to register in the Governments next employment report.

Meanwhile, the stock market continues disconnect from underlying economic reality. Auto, retail and restaurant sales are plunging. The explanation for falling retail sales is simple: real average weekly earnings have dropped two months in a row. The consumer, as I’ve been suggesting, is tapped out on two fronts: disposable income and the capacity to take on more debt.

Despite the obvious intervention in the stock market by the Fed and the Government, via the Treasury’s Exchange Stabilization Fund, plenty of stocks are tanking. As an example, I recommended shorting Kate Spade (KATE) to my Short Seller Journal subscribers about a month ago at $23.50. The stock is trading at $18 this morning – 23% gain if you shorted the stock and even more if you used puts. You can get in-depth economic and market analysis plus ideas for taking advantage of the most overvalued stock market in U.S. history via IRD’s Short Seller’s Journal. For more information, click here:  Short Seller’s Journal Subscription Information.

Fake Economic News + Overvalued Stocks = Recipe For Market Disaster

Think you know what will happen this year?  What would you have said to me on January 1st last year if I told you:  ” the S&P 500 would hit several new all-time years this year and Donald Trump will be elected President?”

Craig “Turd Ferguson” Hemke invited me on to his “A2A” webinar with his subscribers last week.  We had a spirited and (I think) entertaining discussion about abundance of fake economic news that permeates the financial media, the true state of the U.S. economy and the growing risks to the stock market.  And of course we chatted about precious metals an mining stocks.

And of course his subscribers had some interesting and thought-provoking questions. You can listen to our conversation here:  A2A with Dave Kranzler and you can access Turd’s webite here:  TFMetals Report.

The Fed’s Final Solution

Today is Bastille Day in France which celebrates the overthrow of the French feudal monarchy and the establishment of a Constitutional Monarchy.   The storming of the Bastille was a key event in the French Revolution.

It’s ironic that the course of the U.S. Government, and it’s original “Bill of Rights” foundation upon which the French “Declaration of the Rights of Man and of the Citizen” was based, is going in the opposite direction of the gift given to us by the Founding Fathers.

The 3rd massive stock market bubble in 16 years is emblematic of the fraudulent Ponzi scheme that has engulfed the United States political, economic and financial system.   The Fed now as much as openly admits that it is driving the stock market higher, ostensibly with the goal of stimulating economic growth.

However, I the elitists who control the Fed are not stupid.  They have ignited the third stock market bubble specifically for purpose of a final effort to confiscate public wealth and destroy the middle class.  For purposes of this discussion, “middle class” is defined as anyone not in upper .5% (point five percent) of wealth in the U.S.

In today’s episode of The Shadow Truth, we discuss the stock bubble as a wealth confiscation mechanism and explain why we believe an explosive move in gold and silver is going to occur this  year.

Give me control of a nation’s money and I care not who makes it’s laws — Mayer Amschel Bauer Rothschild

BREXIT: An Expression Of Political Freedom

In the latest episode of Market Update, we explore the “aftermath” of the BREXIT vote and the fact that the global markets have become manipulated by the Central Banks to the extent that it’s impossible to tell the difference between reality and fraud.

“There had to be hedge funds that blew up on Friday that we’re not hearing about”

mining-stock-journal-header-border

The Writing Is On The Wall: Latest Issue Of Short Seller’s Journal Is Up

It’s been estimated that at least a third of the 175 oil producing companies in the U.S. are at risk of slipping into bankruptcy this year. At some point banks are going to have to start foreclosing on defaulted loans and many companies will be forced to liquidate. Shell Oil announced this past week that it is exiting its North American shale operations. The writing is on the wall. This is going to inflict a significant amount of damage to the U.S. economy – an amount of damage that is not yet being anticipated by investors or by the policymakers.  – the February 28th issue the Short Seller’s Journal

This week I feature a two stocks that can treated either as a “quick hit” or positioned as a long term short. I’m also going to include a highly undervalued silver mining stock as a “contra” stock market idea. For new subscribers, because the precious metals sector tends to move inversely to the stock market, going long mining shares is similar to shorting stocks.

I also review some strategies for using puts to either speculate on a big move lower or replicating a longer term short position in AMZN – see AMAZON dOT CON.

You can subscribe by clicking on this link – SHORT SELLER’S JOURNAL – or on the image below.  Subsribers to SSJ will be able to subscribe to the Mining Stock Journal for half-price.  The debut issue should be out this upcoming week or the following week at the latest.

Untitled

The System Is Starting Its Final Collapse

The director of the CME Metals Group announced her resignation to effective December 11. No further explanation was provided – Reuters link.  I’m not one to infer some type of conspiracy theory in connection with this, but it seems rather abrupt.   It’s akin to Bernanke leaving the Fed much sooner than anyone expected.  The rats are leaving the ship before it sinks.

The collapse began in earnest in 2008.  This is why gold soared to all-time highs in dollar terms until late 2011.  The effort to push down the price of gold is overt evidence that the systemic collapse, even with the heavy application of money printing, has been ongoing since 2008.  The recurring violent hits to the price of gold using fraudulent paper gold is overt evidence that the authorities are becoming more desperate in their attempt to hide any possible market signals that the systemic collapse is accelerating.  This is how gold behaved from March 2008 – October 2008.  Look what happened then.

Something catastrophic is occurring behind “the curtain.”   I would love to have a peak at what is melting down.  We can generally speculate that, with the oil, copper and iron ore price collapse, and with emerging market currencies collapsing,  there’s been a series of derivatives  explosions that have been contained but that are straining the Central Banks’ abilities to keep the system from coming completely unglued.  This is also why the price of gold is being contained with brute force.

We have never seen markets behave the way they’re behaving right now,  with absolute unpredictability.  The overt intervention is a big part of the what we’re seeing on the surface with gold, currencies, credit markets and the primary stock indices.  But all indications suggest a high likelihood of several train wrecks occurring at once behind the scenes.  The intervention, of course, is keeping the surface indicators from crashing.  But the intervention has also destroyed the signal transmission and rational capital allocation mechanisms of the market.  Adam Smith’s “invisible hand” has been amputated, if you will.

This is why stocks like AMZN, FB, GOOG and NFLX trade at insane p/e ratios.  It’s debatable whether or not AMZN has bona fide economic net income in the first place.  I have not looked in depth at the accounting of FB, GOOG and NFLX to assess whether or not their “net income” is a function of GAAP manipulation or if they actually produce real cash flow in excess of all expenses, on and off the income statement.  But all of them unequivocally trade at sublimely irrational market caps and they are the primary devices being used to keep the S&P 500/Dow indices propped up.

Another indication of the chaos erupting behind the “curtain” is the melt-down going on the junk bond market.  Alhambra Partners wrote a piece in which it asserted that the stunning spike higher in triple-CCC rated junk bonds is indicative of something blowing up in the junk bond market – LINK.    But it’s not speculation, it’s a fact.  And it’s not “something,” it’s the entire distressed credit asset class.

The asset class itself, like every other financial asset, is horrendously mis-priced thanks to the massive Central Bank intervention.  But unavoidable leaks are springing and they are going to turn into torrential floods.

The reason triple-CCC yields are blowing out is that some entity or entities have been forced to sell.  Here’s how it works – I know this based on first-hand experience trading this stuff:   As you know by now, the bond market has become extremely illiquid.  This means that there’s a lack of capital available to accommodate sellers who look to sell at price levels remotely close to where bonds are being quoted.

Everyone (big pension funds, hedge funds, mutual funds, etc) keeps the price marks on the bonds in their portfolio unchanged and holds their breath that a seller never appears who has to sell for whatever reason and forces a re-pricing of the bond issue, which in turn forces a re-pricing of the market.  I’ve lived this nightmare as a sell-side junk bond trader running capital positions in triple-C paper.

The fact that triple-C bond yields have blown out so quickly means that sellers have appeared and the yields on these bonds are going to blow out until they become high enough for a bona fide distressed buyer to decide it’s worth the risk to buy some of the paper. We’re not talking 10-20 points below where everyone is marked.  Many of these bonds will plummet from the 80’s and 90’s to the 20’s and 30’s before enough capital begins to flow into the market to provide a bid big enough to take on the selling.  That’s usually the first step down before it gets even worse.

This dynamic is going to spread to other asset classes within the credit market, like subprime mortgage pass-thru trusts, collateralized debt obligations, etc.  This how it began to unfold in 2008.  This is why Wall Street banks are now net short corporate bonds. The problem is that this time around the amount of debt of all varieties is a few multiples greater than it was in 2008.  And connected to all of this is a preponderance of OTC derivatives.  Derivatives that I believe are already melting down behind “the curtain.”

At some point the “collapse dyamic” is going to hit the entire stock market.  It already has in several sub-sectors and individual stocks below the surface.  We see this in the “cliff-dives” that occur when companies report “unexpectedly” disappointing earnings results.   Stocks which were held up with the broad indices thanks to the Fed’s monetary lasiviousness get quickly repriced to downside.

This morning a poll is out from Quinnipiac University which reports that 83% of Americans polled live in fear of another “terrorist attack.”  I find this highly troubling because of the amount of power it gives the Government to control the population.   I expect to see a stunning degree of abuse of this power, as if the Patriot Act, Homeland Security Act, Detainee Bill and surveillance laws are not horrifying enough.

In late 2003, a colleague and friend of mine and I surmised that we would eventually see things occur in this country that would “blow  our minds.”  This is in the context of Enron, 9/11 and the highly illegal invasion of Iraq having already occurred.  Ponder that for a moment.

The  hallmark of an empire in collapse is the imposition of Governmental totalitarianism and reckless attempted military imperialism.  Currently the U.S. military is the most dangerous terrorist in the world.  Contrary to the view reflected in the Quinnipiac poll, my biggest fear is that the U.S. Government is soon going to turn its reign of terror on its own citizens.  History tells us this is what occurs when a powerful economic/political system is in the final stages of collapse.

Gold And Silver Are Paper-Slammed – Is The System Collapsing?

When a thoroughly corrupt Government wants to try and hide something from the public, they exert an all-out effort to mis-direct and cover-up.  The financial markets are no different.  It’s been obvious to anyone with one good eye and one brain cell that the puppet-masters behind the Wall Street/DC “curtain” have been propping up the Dow/S&P 500 and exerting forcefull downward pressure on the price of gold and silver.  Why gold and silver?  Because gold and silver, for 5,000 years, have been the world’s “alarm system” alerting everyone when something is terribly wrong.

I remember vividly 2008.  Many of you were not involved in the precious metals markets. Inexplicably, the manipulators smashed gold and silver down from their bull market highs in March 2008 very quickly.  Silver was smashed down to $8 after hitting $21 in March.  I remember staring at the futures screen wondering what would stop JPM from taking silver down to zero?

Shortly thereafter AIG and Goldman de facto collapsed and the rest is history, including the fact that former Goldman CEO, Hank Paulson, was “coincidentally” sitting in as Secretary of the Treasury and “coincidentally” came up with a plan for the Taxpayers to bail out Goldman Sachs.  Paulson, after all, was still sitting on about a quarter of a billion dollars worth of warrants on Goldman stock.  This, after he was allowed to sell his GS stock worth $100’s of millions on a tax-free basis.  Just a little “benefit” the elitists bestow upon themselves when their brethren appoint them to a Government post.

Here’s graph that shows the similarities between what happened to gold in a short period of time in 2008 and what has happened since peaking at $1900 in 2011 – click to enlarge:

Untitled

It’s pretty easy to see the similar trading pattern with gold in 2008 comparted to the period the summer of 2011 through the fall of 2012.  The only difference is that there was a massive rise in the use of OTC precious metals derivatives that began a couple years ago which has enabled the Fed/Treasury/banks to keep a tight lid on the price of gold and silver and has enabled the criminals running this country to promote a “narrative” of economic recovery.  It’s been nothing but one big lie.

Here’s what happened today with gold and silver – click to enlarge:

Goldsilver

How is it that day after day gold and silver get smashed when the NY Comex floor trading opens?   Does it seem odd that, nearly everyday for the last 4+ years, that at 8:20 a.m. EST all of a sudden the world decides to unload paper gold and silver positions?

How is it at all possible that the price of gold and silver are collapsing like this when China has imported a record amount of gold in the first half of 2015?  China and India combined are importing more gold than is being produced on a daily basis.  India is importing by far a record amount of physical silver.   These countries require the physical delivery of the metal they buy.  It’s not good enough for the bullion banks to offer free vault storage in London or NYC.   The misrepresentation of the true, intrinsic price of gold and silver by the NY and London paper markets is perhaps the greatest fraud in history.

The criminality operating in the U.S. financial markets has become all-pervasive.  The markets just ooze with unfettered theft and wealth confiscation.   The Government doesn’t just “look the other way.”  The Government is the criminal cartel.  Just look at where all the key appointees in a position to enforce the Rule of Law come from.  The Treasury, Justice Department, the SEC – they all come from Wall Street firms or the law firms that make $100’s of millions defending Wall Street firms.   It’s the American version of the Sicilian Mafia running our system!

It’s obvious what is happening to anyone who cares to look at the truth.  This is the end of the end-game. Perhaps Greece has triggered it but it’s irrelevant.  The entire world is over-bloated with catastrophically unpayable amounts of debt.  The IMF has told us that Greece can’t possibly repay its debts.  Huh?   Does the IMF really think the United States can repay its debt load?   Greece has $350 billion of sovereign-issued debt.  The United States has over $18 trillion in “on-balance-sheet” sovereign-issued debt.  It has at least $200 trillion of contingent sovereign-issued liabilities.

The only difference between Greece and the United States is that the United States can unilaterally print its own money.  Literally in unlimited amounts.   Ben Bernanke stated that fact in 2002:  “But the U.S. government has a technology, called a printing press (or, today, its electronic equivalent), that allows it to produce as many U.S. dollars as it wishes at essentially no cost.”  LINK

The system is collapsing.  It has been collapsing.  I believe it’s quite possible that we are seeing the final stages of the end game.  China’s stock market is down 30% since early June.  The prices of oil and copper are crashing.   As I wrote yesterday, oil and copper are the quintessential beacons of relative economic activity.  If their prices are crashing, so is economic activity.

After trading in positive territory overnight, the S&P 500 suddenly plunged shortly before the NYSE opened:

SPX

China suspended trading in its stock market last night. But how is this any different from key HFT ECN’s “breaking” when the market is about to go off a cliff? As Zerohedge always tauntingly reports, the market “breaks:” Broken Market Ignites Momentum

Coincidentally, the market never seems to “break” when its spiking inexorably higher on some fictitiously prepared “good” economic report. Let’s  see if the market “breaks” today in order to stop that waterfall plunge at the open.

Of course, if it doesn’t, are you prepared for the devastating consequences of a collapse?

Retail Investors Are All In, Margin Debt At Record High: Stock Crash Next?

According to TD Ameritrade’s CEO, based on looking at 6.5 million customer accounts the retail investor segment of the stock market is “all in” (link from CNBC).  In terms of statistical analysis, it is highly probable – 99% certain – that this same analysis would apply to retail brokerage accounts at Fidelity, Schwab, Scotrade, etc.  Historically, this has been the fatal signal of an impending stock market crash, especially when coupled with the fact that margin debt on the NYSE is at an all-time record high (source:   Advisor-perspectives.com, edits are mine):

NYSE-margin-debt-SPX-since-1995

I’ll let the readers/investors/traders decide for themselves how this is going to play out. But for me it’s only a question of “when?” not “if?” In fact, the above analysis is amplified when you include this fact:

SPX Cash

That graph shows net cash flows out of the stock market. It is highly likely that this net outflow is being driven by smart money which is passing the “crash bag” to retail investors.

Needless to say it would appear that risk/return profile of holding stocks right now highly skewed in favor of an all-out  “SELL” signal.

On another note, a couple months ago I wrote about the fact that the State of Kansas was selling muni bonds at 4% in order to take the cash raised and inject it into its badly underfunded State pension fund and pray for returns in excess of 4% on that money:  LINK.  I believe the current official assumed ROR for all pension funds is 7.5%.

I found out over the weekend that the State of Colorado is doing the same thing with its Public Employee Pension Fund (PERA).  I was chatting with someone who is covered by PERA, someone who understands that public pension funds are desperately underfunded, and she’s terrified that she will never see her retirement money.  She understood exactly what was going with muni bond scheme and that’s it’s nothing but a glorified Ponzi scheme.

This is going on all over the country.  As my link above outlines, several States with larger pension systems than Colorado and Kansas have already implemented these muni-bond Ponzi schemes.   With interest rates on all debt securities not rated for default or near-default now close to zero percent, the only way to achieve RORs greater than the interest cost of the muni bonds is to throw the money into stocks.

As we can see from the above analysis, this will not end well…