One Of The Signs Another Financial Collapse Is Coming

As everyone knows, the primary stock indices are being aggressively supported and pushed higher by the Fed using the liquidity with which it as flooded the banking system. However, most of the non-marquee indices have been selling off. As an example, the SOX semiconductor index is down 10.5% since June 1st. I’ll bet a lot of you are surprised by that fact, given that the tech-heavy NASDAQ hit an all-time high last week.

When I was a junk bond trader, one of the sectors I traded was semiconductors/electronics. Because semiconductors, similar to what MOSFET produce and are often used in tech designs that might have been built through websites similar to Upverter.com, are used in many everyday-use consumer goods, including automobiles, semiconductor sales is considered to be bellwether economic barometer. Thus, if the SOX is tanking despite a torrid rally in the Dow, SPX and Nasdaq, it likely indicates that the economy is slowing down – significantly.

Another bellwether indicator is financials. I noticed something quite interesting on Thursday, the day that the S&P 500 ramped up 19 points on meaningless to negative economic reports. One of the sub-categories of financials I follow is what I term “specialty” financial stocks. Most of the big bank and financial stocks last Thursday were up big with the SPX. But look at this – click to enlarge:

Financials

All six of those specialty financials were down – some down quite a bit. MBI, AMBC and AGO are debt guarantee companies. All three have heavy exposure to Puerto Rico but they also have big exposure to debt-based derivatives in general. RDN is also a financial guarantee company that should have collapsed in 2008 but was saved by TARP and QE. CACC and ALLY are auto-finance companies. CACC is the Countrywide Financial of the current credit bubble. ALLY is the old GMAC, which went bust in 2008 and was taken over by the Government. It will go bust again this time around – Chapter 22, if you will.

Because those stocks were weak all week last week, not just on Thursday, while the S&P 500 was going near-vertical toward a new record high and the NAZ hit an all-time high, those sub-sector financials are telling us the something is melting down behind the extremely thick layer of make-up being applied heavily to the Miss Piggy U.S. economy.

19 thoughts on “One Of The Signs Another Financial Collapse Is Coming

  1. They smashed the metal on the Asian bourse today. I’ll throw in my 2cents and just say that I think there maybe an asian CB or 2 involved in the whole illusion of cheap commodities. I have held the belief that until the supply side starts collapsing they will keep up with this BS. I.E. empty supermarkets. The supply side is probably more leveraged than the financial Eg farmers. Their margins very,very thin. BTW Dave I am a shadow of truth junky. You and Rory are really great .

    Just curious could you guys perhaps do a show on debt to equity across a broad range of goods primary industries F.I. Because this is starting to look like a classic great depression scenario.

    1. Agree w/you on Asian CB comment. Thanks for the feedback on Shadow of Truth. It’s a great idea for a show but it would require putting in a lot more time to prepare that kind of data than either Rory or I have for that. As I’m sure you know, the outright level of corporate debt outstanding is soaring.

      What’s coming at us in the system is worse than what happened in 2008 or the 1930’s depression.

  2. Dave,

    Your point has gotten me thinking about the state of the multi-billion dollar video game industry. The new consoles were released over a year ago, and from what I gather, the sales figures aren’t rosy in the slightest. Funny enough, it’s very difficult to find any year-over-year sales data that is current. If we were to take at an article from IGN from last January, however, the trend over the past 10 years for Japanese consoles is clearly going downhill. I can venture to guess that the same is the case for Microsoft’s Xbox sales, and perhaps even the rest of the PC market as a whole: http://www.ign.com/articles/2015/01/08/japans-console-and-video-game-sales-hit-24-year-low

    There was a report from NPD stipulating that last May was a disaster (http://www.cnet.com/news/npd-video-game-report-may-2015/) so I wouldn’t be surprised is last month was no better…if not worse.

  3. I understand Dave, but I have been curious. Maybe a guest who’s already got the wood? No one absolutely no one is talking about it and it was THE major cause of pain through the depression. Also 1/10th oz silver bits I have had an idea about them ever since I bought a couple of rolls from California State Mint
    They look great but how to get people using them for real trade? I’ve got an idea (not much I am no expert) If your wondering shoot me an email.

    1. Can you explain what you mean by this: “Just curious could you guys perhaps do a show on debt to equity across a broad range of goods primary industries F.I. Because this is starting to look like a classic great depression scenario.”

      Maybe I’m misunderstanding what you are requesting. What does “F.I.” stand for?

    2. Dave,
      F. I. For Instance. Roosevelts interference in the supply side during the new deal episode. Farmers pouring milk in storm water drains to counter deflation etc
      other genius financial politics the Roosevelt worshippers don’t like talking about. It’s all coming again you wait. I’m in Australia so if my post’s are out of step apologies’

      As for this blatant smash on metal. My guess is this is Chinese covering. If they keep going, this one will definitely blow up in their faces. When the paper price is $1 and no dealer will accept less than $100 an ounce. We’ll know it is game on.
      Silver i mean. It’s coming.

  4. Precious metals are crashing. I know it’s a conspiracy but the fact remains gold is toast.

    Wow. Is serial killer North Korea selling Gold? Is China really a democracy?

    Your comments on the economy are valid. The conspiracy stuff is hilarious.

    1. Frank – the idea of a conspiracy is one in which something is going on behind the scene which we cannot see directly. There do not have to be many ‘players’ who conspire, and sometimes I believe the ‘cooperation’ happens because it occurs to several of them how they can scam the system. LIBOR, FX and $30b of fines for JPM (as one example) tell me that there is much going on behind the scenes.

      Unless you are telling me to believe …. politicians tell the truth (weapons in Iraq), bankers take their fiduciary duty seriously, there is no such thing as propaganda (make the lie big enough and tell it often enough and people will believe you)…….

      …..dream on.

    2. “Frankly” please wake up and smell the coffee!

      A massive selling of 700,000 gold futures contracts, worth $2.7 billion took place this morning in less than 2 minutes! What maniac, or group of maniac’s would do that? Those who want to force down the price of gold. That’s who.

      Just makes the physical supply side tighter as bargain hunters flood the market. Your “gold is toast” is hilarious, since I agree! If you mean “paper gold” that is.

    3. Eric Scott Hunsader

      6h16 hours ago

      Harvard’s Safra was red-hot on getting Nanex to help. Turned ice-cold after Ken Griffins $150M donation http://ethics.harvard.edu/

      16 hours ago

      I should publish some of the emails I got from Harvard’s Safra – before and after Ken Griffin’s donation

      https://twitter.com/nanexllc

      makes you wonder how we’re ever going to correct all this corruption in markets when the criminals are funding the research on ethics?now that’s hilarious frank, eh? plus look at the name* of the center…it’s an oxymoron.

      *Safra and Martin Armstrong / Princeton
      Economics were confidants and business associates.

  5. Hi Dave,

    now you know why gold has been shorted to record levels last week. These guys KNOW what will happen. It is all orchestrated and they will not stop till gold is for free. 😉

  6. There are 3 contraindicators that I use in order to predict the crash.

    1. Jim Cramer
    2. Dennis Gartman.
    3.The Wampire Squid.

    The first 2 are stupid beyond belief and the third one is crooked to the core and deliberatly gives bad advice in order to take the other side of the trade.

    Can´t go wrong if you use these parametres the right way.

    1. Bill,
      You are aware Chinese businessmen have accounts’ on the Comex through proxy? Proxies’ like JPM. Mate seriously the Chinese are up to their balls in all of this. Like sylvester the cat with tweety pie in his mouth. It’s not all the fed. This is the smell of panic above.

  7. “The conspiracy stuff is hilarious.”

    @ Frank,

    It might seem hilarious until can can’t be kicked down the road any further and the conspiracy consumes 99% of all unprepared Americans monetary wealth.

    1. wonder how much of this going on?

      Keep the winners, moooove the losers to other accounts

      Eric Scott Hunsader ‏@nanexllc 8m8 minutes ago

      How Hillary became a cattle futures superstar. Keep the winners, moooove the losers to other accounts http://www.cmegroup.com/tools-information/lookups/advisories/disciplinary/COMEX-14-9777-BC-GOLDMAN-SACHS-EXECUTION-AND-CLEARING-LP.html?mkt_tok=3RkMMJWWfF9wsRonuq%2FBeu%2FhmjTEU5z16ewsXKeygokz2EFye%2BLIHETpodcMTsBjNb3YDBceEJhqyQJxPr3GLdkN0sV8RhjhCw%3D%3D#pageNumber=1

      https://twitter.com/nanexllc

      FINDINGS:

      Pursuant to an offer of settlement Goldman Sachs Execution & Clearing, L.P. (“GSEC”) presented at a hearing on July 16 2015, in which GSEC neither admitted nor denied the rule violations upon which the penalty is based, a Panel of the COMEX Business Conduct Committee (“BCC”) found that it had jurisdiction over GSEC as a COMEX member pursuant to Rules 400 and 402. The Panel also found that two GSEC customers with different beneficial ownership requested that GSEC process the purchase and sale of their gold futures and options book. On February 27, 2013, GSEC processed their transaction as a transfer of the relevant futures and options contracts between their accounts at GSEC without obtaining the approval of the Exchange.

      The Panel found that as a result, GSEC violated Legacy Exchange Rule 853.A.

      PENALTY:
      In accordance with the settlement offer, the Panel ordered GSEC to pay a fine to the Exchange in the amount of $110,000.

      http://www.cmegroup.com/tools-information/lookups/advisories/disciplinary/COMEX-14-9777-BC-GOLDMAN-SACHS-EXECUTION-AND-CLEARING-LP.html?mkt_tok=3RkMMJWWfF9wsRonuq%2FBeu%2FhmjTEU5z16ewsXKeygokz2EFye%2BLIHETpodcMTsBjNb3YDBceEJhqyQJxPr3GLdkN0sV8RhjhCw%3D%3D#pageNumber=1

  8. Yep, keep pumping the junk and dumping the real… Paper good. PM bad. It’s in keeping with the synthetic reality all around us.

    I just added to my pile of NUGT’s on a day when it’s been hit for 24+%. So now it’s only down 99% from its 9/5/11 all time high by $2,105 a share:

    http://finance.yahoo.com/echarts?s=NUGT+Interactive#{%22range%22:%225y%22,%22allowChartStacking%22:true}

    Woe be to any poor soul who bought before 2015. But now’s the time.

    Phyzz is being accumulated by those who have interest in getting more for less during this interval, knowing Au is a fraction of its actual value. From nations to individuals, they’re accumulating ounces on a declining cost basis. They also know this interval will be over soon, the window of opportunity gone. More specifically, the elite will end this interval in order to produce certain outcomes. Just like they began it to produce those we see now. It’s all been orchestrated, and the conductor is about to change things up.

    Watch what happens to NUGT & JNUG after various elites start gobbling up primo gold players for a song while the value of Crimex gold is allowed to rise. It can’t be too far off as few miners can produce (or remain solvent) at these prices much longer. In the increasingly authoritarian times we’re moving into, I have a hard time believing the ownership of the global supply of Au will be left to chance, or outside the control of certain hands. Those hands expect to make big money on their investments.

    Anyone not prone to the multi-year PsyOp on PM understands what the vaults of the global elite are loaded with. Hint: you can’t wipe your ass with it.

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