The impending economic collapse is hidden from most. People only see a rising stock market, not the negative underlying factors that will cause the whole system to crash. – Peter Schiff
The average middle class household is getting squeezed by an income that is not keeping up with the cost of living. Unfortunately, a major portion of the cost of living has become debt service. Most car buyers assume an almost insane amount of debt to buy a new car. Credit card debt is being used to make ends meet. Low-to-no down payment mortgages have funded most of the homes sold over the last few years. The problem, however, is that the financial system enables this behavior. One has to wonder if this was not intentional…
The quote above is from a recent Peter Schiff podcast. He goes on to say the it’s unclear how quickly the financial system will unravel but “it is close” to happening. I wanted to use that quote because one of the goals of the Short Seller’s Journal is to present hard evidence that brings to your attention the “negative underlying factors” which contradict the “official” narrative about the economy and financial system.
A subscriber of mine sent an article to me in which the Wall Street economist, Joe LaVorgna, was forecasting today’s GDP report to surprise everyone by coming in at 5%. I literally laughed out loud. LaVorgna is a hack who has spent his career on Wall Street preaching fairytales about the economy as a means of assisting the snakeoil salesmen at his bank in their efforts to stuff as much high-commission junk into investor accounts as possible. People like LaVorgna would sell their mother for a small commission. I know this because everyone who was above me in the food-chain in the securities division of Bankers Trust in the 1990’s was like that.
Ultimately the truth will prevail but by then it will be too late. In the meantime, here’s a tell-tale indicator that criminals on Wall Street and at the Fed can’t hide:
The chart above shows the rate of return comparison between the S&P 500 and junk bonds (HYG). Historically going back at least to the 1990’s, stocks tend to move in the same direction as junk bonds on a lagged basis. That lag when I was trading junk bonds was usually anywhere from a couple weeks to a couple months. The massive Central Bank intervention has largely removed the ability of the stock market to perceive fundamental problems developing in the financial and economic system. But the junk bond market is starting to smell problems.
Morgan Stanley’s wealth management division announced right after New Year’s that it was taking its recommended portfolio allocation in junk bonds down to zero. The rationale was that, while tax cut euphoria might inject fresh momentum into “high-flying stocks, the boost may be short-lived and will mask balance sheet weaknesses” – i.e. developing credit problems. The Morgan Stanley report further explained that “credit markets figure this out before equities” and that they are preparing “for a deterioration in lower-quality earnings in the U.S. led by lower operating margins.”
I nearly fell off my chair when I saw this commentary from Morgan Stanley. In my 32 years of active participation in the financial markets I can not recall any brokerage firm ever issuing a stark warning like this about any sector of the financial markets.
At some point the fundamental problems will become too obvious for stocks to ignore and there will be abrupt sell-offs. The 360 point drop from top to bottom last Tuesday was a hint of what’s to come. Eventually the Central Banks will be unable to intervene and manipulate the type of bounce that was engineered at Tuesday’s bottom and that followed-through on Wednesday and beyond.
All of this is going on in plain view. But the sheeple are too worried about whether or not they can take out enough debt to buy the cars and homes required to keep up with everyone else. But “everyone else” is doing the same thing. Default rates are starting to soar on credit card and auto loan debt. This will soon spill over into mortgages. My thesis on the housing market was confirmed by an industry-insider – a point which I will detail for my subscribers this weekend. We’re already seeing signs that the economy hit a wall in December. It will only get worse.
My subscribers who shorted my homebuilder stock idea two weeks ago are now up 17.7%. That’s if they shorted the shares. They are up even more if they used puts. If you are interested in learning how to take advantage of the coming stock market crash, you learn more about the Short Seller’s Journal here: Short Seller’s Journal information.
What do you think of Martin Armstrong thesis that money is panicking out of shaky debt markets (munis all over the world are obviously bankrupt) into blue chip equities, and that this driving force has another year to run before it runs out?
I think Martin Armstrong is an insane criminal who should still be locked up in jail.
Not very many people who read his bullshit know about his whole saga in jail and how Jim Sinclair and GATA went out of the way to help have him sprung early. Then he turned on Sinclair and GATA like crazed animal. He should be swimming with the fishes in the East River, where he belongs.
I don’t know very much about him and he presents as odd, but you can’t deny his calls have generally been right over the last decade. Called the 2009 bottom in equities, called the precious metals correction, called for the present blow-off top to keep running…
His calls have been offensively horrific. He’s perfected the art of revisionism. Armstrong in 2010 said that the markets would
collapse in 2015 and we would see $5,000 “by the end of 2015.”
It’s an insult to one’s intelligence to make the assertion that Armstrong is anything but a fucking nutjob criminal. I’ve been
doing this sector exhaustively since 2001 and I was cursed with a great memory. I remember the Sinclair/GATA saga but very few
do remember it. Armstrong should still be in jail, where he belongs.
Sinclair, GATA, and many others before. What was most hilarious was his rationale for his holiday in the crowbar hotel – besides the swindle he orchestrated in Japan – that being his Commodore 64 model, holding the real secret to the universe and all that, and which was covered by the CIA and Goldman Sachs. He refused to turn it over. Real deep state shit. I gather the answer wasn’t 42.
Talk about biting the hand that feeds you. Remember those crudely typed epistles Armstrong typed from the big house and how Sinclair would dutifully post them on his website. I thought the guy was already losing it but as you stated. Jim and GATA went the extra mile to get him out….stuck it right where the sun don’t shine ole Martin did. Nuff said.
Dow going parabolic , but dollar going down??!!
Crooks increased interest but to compensate that they had to push $ down otherwise economy would implode . At this moment gold is going up only because $ is going down.
One day it will change !!!
To be fair Dave Schiff has been wrong for ten years. I agree with him,lol, but timing is a cold heartless bitch.
Schiff has only been wrong for years if he has predicted DATES things he talks will happen
If he didn’t predict dates, what’s the point. Stopped clock is right twice a day.
OK, thanks for the perspective. I appreciate it and believe you. I didn’t follow the guy in the past. I am still curious on the specific point in my original question regarding flows from broke-ass German and American muni bonds into blue chip equities.
I was aware of Schiff many years ago and he has totally blown his credibility since 2009. You cite him above. I vividly recall him screaming about a dollar collapse and skyrocketing PM in a matter of months. The degree to which he’s been histrionically wrong dwarfs his correct analysis of the 2007 market, IMHO.
He’s probably going to be right again, but he was super wrong for a very long time.
If Jesse Livermore was alive today to see the last 12-15 years, I wonder what he would say. He never experienced this computer era and unlimited digital money creation like we have.
“Buy right, sit tight.” or “It was never my thinking that made the big money for me, it always was sitting.” or “Don’t give me timing, give me time.” or “Men who can both be right and sit tight are uncommon.”
We have sat and given our time for gold & silver and only have gray hair and older age thanks to the Cabal. Not good.