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Friday, January 9, 2015

GLOBAL FINANCIAL CRISIS: 1.9.15 - Oil Falls Below 50 As Global Financial Markets Begin To Unravel

Oil Falls Below 50 As Global Financial Markets Begin To Unravel - By Michael Snyder -
http://theeconomiccollapseblog.com/archives/oil-falls-50-global-financial-markets-begin-unravel
 
On Monday, the price of oil fell below $50 for the first time since April 2009, and the Dow dropped 331 points.  Meanwhile, the stock market declines over in Europe were even larger on a percentage basis, and the euro sank to a fresh nine year low on concerns that the anti-austerity Syriza party will be victorious in the upcoming election in Greece.  These are precisely the kinds of things that we would expect to see happen if a global financial crash was coming in 2015.  Just prior to the financial crisis of 2008, the price of oil collapsed, prices for industrial commodities got crushed and the U.S. dollar soared relative to other currencies.  All of those things are happening again.  And yet somehow many analysts are still convinced that things will be different this time.  And I agree that things will indeed be "different" this time.  When this crisis fully erupts, it will make 2008 look like a Sunday picnic.
 
Another thing that usually happens when financial markets begin to unravel is that they get really choppy.  There are big ups and big downs, and that is exactly what we have witnessed since October.
 
So don't expect the markets just to go in one direction.  In fact, it would not be a surprise if the Dow went up by 300 or 400 points tomorrow.  During the initial stages of a financial crash, there are always certain days when the markets absolutely soar.
 
For example, did you know that the three largest single day stock market advances in history were right in the middle of the financial crash of 2008?  Here are the dates and the amount the Dow rose each of those days...
 
October 13th, 2008: +936 points
 
October 28th, 2008: +889 points
 
November 13th, 2008: +552 points
 
Just looking at those three days, you would assume that the fall of 2008 was the greatest time ever for stocks.  But instead, it was the worst financial crash that we have seen since the days of the Great Depression.
 
So don't get fooled by the volatility.  Choppy markets are almost always a sign of big trouble ahead.  Calm waters usually mean that the markets are going up.
 
In order to avoid a major financial crisis in the near future, we desperately need the price of oil to rebound in a substantial way.
 
Unfortunately, it does not look like that is going to happen any time soon.  There is just way too much oil being produced right now.  The following is an excerpt from a recent CNBC article...
 
The Morgan Stanley strategists say there are new reports of unsold West and North African cargoes, with much of the oil moving into storage. They also note that new supply has entered the global market with additional exports coming from Russia and Iraq, which is reportedly seeing production rising to new highs.
 
Since June, the price of oil has plummeted close to 55 percent.  If the price of oil stays where it is right now, we are going to see large numbers of small producers go out of business, the U.S. economy will lose millions of jobs, billions of dollars of junk bonds will go bad and trillions of dollars of derivatives will be in jeopardy.
 
And the lower the price of oil goes, the worse our problems are going to get.  That is why it is so alarming that some analysts are now predicting that the price of oil could hit $40 later this month...
 
Some traders appeared certain that U.S. crude will hit the $40 region later in the week if weekly oil inventory numbers for the United States on Wednesday show another supply build.
 
'We're headed for a four-handle,' said Tariq Zahir, managing member at Tyche Capital Advisors in Laurel Hollow in New York. 'Maybe not today, but I'm sure when you get the inventory numbers that come out this week, we definitely will.'
 
Open interest for $40-$50 strike puts in U.S. crude have risen several fold since the start of December, while $20-$30 puts for June 2015 have traded, said Stephen Schork, editor of Pennsylvania-based The Schork Report.
 
The only way that the price of oil has a chance to move back up significantly is if global production slows down.  But instead, production just continues to increase in the short-term thanks to projects that were already in the works.  As a result, analysts from Morgan Stanley say that the oil glut is only going to intensify...
 
Morgan Stanley analysts said new production will continue to ramp up at a number of fields in Brazil, West Africa, Canada and in the U.S. Gulf of Mexico as well as U.S. shale production. Also, the potential framework agreement with Iran could mean more Iranian oil on the market.
 
Yes, lower oil prices mean that we get to pay less for gasoline when we fill up our vehicles.
 
But as I have written about previously, anyone that believes that lower oil prices are good for the U.S. economy or for the global economy as a whole is crazy.  And these sentiments were echoed recently by Jeff Gundlach...
 
"Oil is incredibly important right now. If oil falls to around $40 a barrel then I think the yield on ten year treasury note is going to 1%. I hope it does not go to $40 because then something is very, very wrong with the world, not just the economy. The geopolitical consequences could be - to put it bluntly - terrifying."
 
If the price of oil does not recover, we are going to see massive financial problems all over the planet and the geopolitical stress that this will create will be unbelievable.
 
To expand on this point, I want to share an excerpt from a recent Zero Hedge article.  As you can see, a rapid rise or fall in the price of oil almost always correlates with a major global crisis of some sort...

 

 
 
Large and rapid rises and falls in the price of crude oil have correlated oddly strongly with major geopolitical and economic crisis across the globe. Whether driven by problems for oil exporters or oil importers, the 'difference this time' is that, thanks to central bank largesse, money flows faster than ever and everything is more tightly coupled with that flow.
 
Oil Crisis Chart - Zero Hedge
 
So is the 45% YoY drop in oil prices about to 'cause' contagion risk concerns for the world?
 
And without a doubt, we are overdue for another stock market crisis.
 
Between December 31st, 1996 and March 24th, 2000 the S&P 500 rose 106 percent.
 
Then the dotcom bubble burst and it fell by 49 percent.
 
Between October 9th, 2002 and October 9th, 2007 the S&P 500 rose 101 percent.
 
But then that bubble burst and it fell by 57 percent.
 
Between March 9th, 2009 and December 31st, 2014 the S&P 500 rose an astounding 204 percent.
 
When this bubble bursts, how far will it fall this time?
On The Verge of the Next Economic Crisis, 62 Percent of Americans Are Living Paycheck To Paycheck - By Michael Snyder -
http://theeconomiccollapseblog.com/archives/verge-next-economic-crisis-62-percent-americans-living-paycheck-paycheck

 
Nearly two-thirds of all Americans are completely and totally unprepared for the next economic crisis.  As you will read about below, a new survey has found that only 38 percent of Americans have enough money on hand to cover "a $500 repair bill or a $1,000 emergency room visit".  That essentially means that 62 percent of the people in this country do not have an emergency fund.  Even after the extremely bitter financial lessons that millions of Americans learned during the last recession, most of us are still choosing to live on the edge.  That is utter insanity, and when the next major economic downturn strikes most people are going to find themselves totally unprepared.
 
The number one thing that you need to do to get ready for the coming economic collapse is to build up an emergency fund.
 
I know that is not the most "sexy" piece of advice in the world, but it is the truth.  Just think about it.  During the last recession, millions of Americans suddenly lost their jobs.  Because they did not have any cushion to fall back on, millions of them also suddenly could not pay their bills and their mortgages.  Foreclosures skyrocketed and countless families went from living a very comfortable middle class lifestyle to being out on the street in very short order.
 
And now because the people of this country have been so foolish it is going to happen again.
 
Because of my website, people are constantly asking me what they should do to prepare for the coming economic collapse.
 
I think that they expect me to say something like this...
 
"Sell everything that you possibly can and buy gold and silver, go purchase a llama farm, and dig a bunker where you can bury 10,000 cases of MREs."
 
Not that there is anything wrong with those kinds of preparations.
 
But before you do anything else, you have got to have an emergency fund.  My recommendation is to have an emergency fund that can cover at least six months of expenses in case something happens.
 
Sadly, a solid majority of Americans do not have any emergency cash at all.  The following comes from the Wall Street Journal...
 
Only 38% of those polled said they could cover a $500 repair bill or a $1,000 emergency room visit with funds from their bank accounts, a new Bankrate report said. Most others would need to take on debt or cut back elsewhere.
 
"A solid majority of Americans say they have a household budget," said Bankrate banking analyst Claes Bell. "But too few have the ability to cover expenses outside their budget without going into debt or turning to family and friends for help."
 
The survey found that an unexpected bill would cause 26% to reduce spending elsewhere, while 16% would borrow from family or friends and 12% would put the expense on a credit card. The remainder didn't know what they would do or would make other arrangements.
 
And of course this is not the only poll that has come up with these kinds of results.  In fact, a Federal Reserve survey from last year produced similar numbers...
 
The findings are strikingly similar to a U.S. Federal Reserve survey of more than 4,000 adults released last year. "Savings are depleted for many households after the recession," it found. Among those who had savings prior to 2008, 57% said they'd used up some or all of their savings in the Great Recession and its aftermath. What's more, only 39% of respondents reported having a "rainy day" fund adequate to cover three months of expenses and only 48% of respondents said that they would completely cover a hypothetical emergency expense costing $400 without selling something or borrowing money.
 
Meanwhile, the financial condition of most American families is far worse than it was just prior to the last major economic crisis.  As a recent MarketWatch article detailed, the average family currently has far less wealth than it did back then...
 
But while the jobs market is improving and the Affordable Care Act has given an estimated 15 million people access to medical care, the Great Recession does appear to have taken its toll on Americans' finances; in fact, they're 40% poorer today than they were in 2007. The net worth of American families - that is, the difference between the values of their assets, including homes and investments, and liabilities - fell to $81,400 in 2013, down slightly from $82,300 in 2010, but a long way off the $135,700 in 2007, according to a report released last month by the nonprofit think tank Pew Research Center in Washington, D.C.
 
So we have a lot less wealth, and almost two-thirds of us have no emergency cushion to fall back on whatsoever.
 
What could go wrong?
 
In addition, there is lots of evidence that much of the country has not bothered to make any preparations at all for even a basic emergency that would last for just a few days.  For example, the following are results from a survey conducted by the Adelphi Center for Health Innovation that I featured in a previous article...
 
*44 percent don't have first-aid kits
*48 percent lack emergency supplies
*53 percent do not have a minimum three-day supply of nonperishable food and water at home
*55 percent believe local authorities will come to their rescue if disaster strikes
*52 percent have not designated a family meeting place if they are separated during an emergency
*42 percent do not know the phone numbers of all of their immediate family members
*21 percent don't know if their workplace has an emergency preparedness plan
*37 percent do not have a list of the drugs they are taking
*52 percent do not have copies of health insurance documents
 
What are all of those people going to do if there is an extended crisis or disaster in this nation?
 
That is a very good question.
 
Meanwhile, the signs that we are on the verge of the next major economic crisis just continue to grow.  Yesterday, I shared 10 things that happened just prior to the financial crisis of 2008 that are happening again right now.
 
Today, we learned that a major oil driller down in Texas has just declared bankruptcy, and many more energy companies are expected to follow suit in the coming months.  The following is from the Wall Street Journal...
 
[S]igns of strain are building in the oil patch, where revenue growth hasn't kept pace with borrowing. On Sunday, a private company that drills in Texas, WBH Energy LP, and its partners, filed for bankruptcy protection, saying a lender refused to advance more money and citing debt of between $10 million and $50 million. Neither the Austin-based company nor its lawyers responded to requests for comment.
 
Energy analysts warn defaults could be coming. "The group is not positioned for this downturn," said Daniel Katzenberg, an analyst at Robert W. Baird & Co. "There are too many ugly balance sheets."
 
And we also learned today that teen retailer Wet Seal is going to be closing two-thirds of its stores.
 
Dozens more retailers are expected to make similar announcements over the coming months.
 
We are moving into the most chaotic time for the U.S. economy that any of us have ever seen, and most Americans are totally oblivious to what is happening and are totally unprepared.
 
So what is our country going to look like when tens of millions of unprepared people are blindsided by a crisis that they never saw coming?

11 Predictions of Economic Disaster in 2015 from Top Experts All Over the Globe - By Michael Snyder - http://theeconomiccollapseblog.com/archives/11-predictions-economic-disaster-2015-top-experts-globe
 
Will 2015 be a year of financial crashes, economic chaos and the start of the next great worldwide depression?  Over the past couple of years, we have all watched as global financial bubbles have gotten larger and larger.  Despite predictions that they could burst at any time, they have just continued to expand.  But just like we witnessed in 2001 and 2008, all financial bubbles come to an end at some point, and when they do implode the pain can be extreme.  Personally, I am entirely convinced that the financial markets are more primed for a financial collapse now than they have been at any other time since the last crisis happened nearly seven years ago.  And I am certainly not alone.  At this point, the warning cries have become a deafening roar as a whole host of prominent voices have stepped forward to sound the alarm.  The following are 11 predictions of economic disaster in 2015 from top experts all over the globe...
 
#1 Bill Fleckenstein: "They are trying to make the stock market go up and drag the economy along with it. It's not going to work. There's going to be a big accident. When people realize that it's all a charade, the dollar will tank, the stock market will tank, and hopefully bond markets will tank. Gold will rally in that period of time because it's done what it's done because people have assumed complete infallibility on the part of the central bankers."
 
#2 John Ficenec: "In the US, Professor Robert Shiller's cyclically adjusted price earnings ratio - or Shiller CAPE - for the S&P 500 is currently at 27.2, some 64pc above the historic average of 16.6. On only three occasions since 1882 has it been higher - in 1929, 2000 and 2007."
 
#3 Ambrose Evans-Pritchard, one of the most respected economic journalists on the entire planet: "The eurozone will be in deflation by February, forlornly trying to ignite its damp wood by rubbing stones. Real interest rates will ratchet higher. The debt load will continue to rise at a faster pace than nominal GDP across Club Med. The region will sink deeper into a compound interest trap."
 
#4 The Jerome Levy Forecasting Center, which correctly predicted the bursting of the subprime mortgage bubble in 2007: "Clearly the direction of most of the recent global economic news suggests movement toward a 2015 downturn."
 
#5 Paul Craig Roberts: "At any time the Western house of cards could collapse. It (the financial system) is a house of cards. There are no economic fundamentals that support stock prices - the Dow Jones. There are no economic fundamentals that support the strong dollar..."
 
#6 David Tice: "I have the same kind of feel in '98 and '99; also '05 and '06.  This is going to end badly. I have every confidence in the world."
 
#7 Liz Capo McCormick and Susanne Walker: "Get ready for a disastrous year for U.S. government bonds. That's the message forecasters on Wall Street are sending."
 
#8 Phoenix Capital Research: "Just about everything will be hit as well. Most of the 'recovery' of the last five years has been fueled by cheap borrowed Dollars. Now that the US Dollar has broken out of a multi-year range, you're going to see more and more 'risk assets' (read: projects or investments fueled by borrowed Dollars) blow up. Oil is just the beginning, not a standalone story.
 
If things really pick up steam, there's over $9 TRILLION worth of potential explosions waiting in the wings. Imagine if the entire economies of both Germany and Japan exploded and you've got a decent idea of the size of the potential impact on the financial system."
 
#9 Rob Kirby: "What this breakdown in the crude oil price is going to spawn another financial crisis.  It will be tied to the junk debt that has been issued to finance the shale oil plays in North America.  It is reported to be in the area of half a trillion dollars worth of junk debt that is held largely on the books of large financial institutions in the western world.  When these bonds start to fail, they will jeopardize the future of these financial institutions.  I do believe that will be the signal for the Fed to come riding to the rescue with QE4.  I also think QE4 is likely going to be accompanied by bank bail-ins because we all know all western world countries have adopted bail-in legislation in their most recent budgets.  The financial elites are engineering the excuse for their next round of money printing . . .  and they will be confiscating money out of savings accounts and pension accounts.  That's what I think is coming in the very near future."
 
#10 John Ing: "The 2008 collapse was just a dress rehearsal compared to what the world is going to face this time around. This time we have governments which are even more highly leveraged than the private sector was.
 
So this time the collapse will be on a scale that is many magnitudes greater than what the world witnessed in 2008."
 
#11 Gerald Celente: "What does the word confidence mean? Break it down. In this case confidence = con men and con game. That's all it is. So people will lose confidence in the con men because they have already shown their cards. It's a Ponzi scheme. So the con game is running out and they don't have any more cards to play.
 
What are they going to do? They can't raise interest rates. We saw what happened in the beginning of December when the equity markets started to unravel. So it will be a loss of confidence in the con game and the con game is soon coming to an end. That is when you are going to see panic on Wall Street and around the world."
 
If you have been following my website, you know that I have been pointing to 2015 for quite some time now.
 
For example, in my article entitled "The Seven Year Cycle Of Economic Crashes That Everyone Is Talking About", I discussed the pattern of financial crashes that we have witnessed every seven years that goes all the way back to the Great Depression.  The last two major stock market crashes began in 2001 and 2008, and now here we are seven years later.
 
Will the same pattern hold up once again?
 
In addition, there are many other economic cycles that seem to indicate that we are due for a major economic downturn.  I discussed quite a few of these theories in my article entitled "If Economic Cycle Theorists Are Correct, 2015 To 2020 Will Be Pure Hell For The United States".
 
But just like in 2000 and 2007, there are a whole host of doubters that are fully convinced that the party can continue indefinitely.  Even though our economic fundamentals continue to get worse, our debt levels continue to grow and every objective measurement shows that Wall Street is more reckless and more vulnerable to collapse than ever before, they mock the idea that a financial collapse is imminent.
 
So let's see what happens in 2015.
 
I have a feeling that it is going to be an extremely "interesting" year.
 
BE SURE TO CHECK OUT MY ALL NEW PROPHECY AND CREATION DESIGN WEBSITES. THERE IS A LOT TO SEE AND DO..........
 

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