Warnings That A Massive Stock Market Crash Is Imminent
http://theeconomiccollapseblog.com
http://albertpeia.com/massivestockmarketcrashimminent.htm
‘In the financial world, the month of October is synonymous with
stock market crashes. So will a massive stock market crash happen this
year? You never know. The truth is that our financial system is even more
vulnerable than it was back in 2008, and financial experts such as Doug Short,
Peter Schiff, Robert Wiedemer and Harry Dent are all warning that the next
crash is rapidly approaching. We are living in the greatest debt bubble
in the history of the world and Wall Street has been transformed into a giant
casino that is based on a massive web of debt, risk and leverage. When
that web breaks we are going to see a stock market crash that is going to make
2008 look like a Sunday picnic. Yes, the Federal Reserve has tried to
prevent any problems from erupting in the financial markets by initiating another round of quantitative
easing, but 40 billion dollars a month will not be nearly enough to stop
the massive collapse that is coming. This will be explained in detail
toward the end of the article. Hopefully we will get through October (and
the rest of this year) without seeing a stock market collapse, but without a
doubt one is coming at some point. Those on the wrong end of the coming
crash are going to be absolutely wiped out.
A lot of people focus on the
month of October because of the history of stock market crashes in this
month. This history was detailed in a recent USA Today article....
When it comes to wealth
suddenly disappearing, October can be diabolically frightful. The stock market
crash of 1929 that led to the Great Depression occurred in October. So did the
22.6% plunge suffered by the Dow Jones industrial average in 1987 on
"Black Monday."
The scariest 19-day span
during the 2008 financial crisis also went down in October, when the Dow plunged
2,675 points after investors fearing a financial collapse went on a
panic-driven stock-selling spree that resulted in five of the 10 biggest daily
point drops in the iconic Dow's 123-year history.
So what will we see this year?
Only time will tell.
If a stock market crash does not
happen this month or by the end of this year, that does not mean that the
experts that are predicting a stock market crash are wrong.
It just means that they were
early.
As I have said so many times,
there are thousands upon thousands of moving parts in the global financial
system. So that makes it nearly impossible to predict the timing of
events with perfect precision. Financial conditions are constantly
shifting and changing.
But without a doubt another
major financial collapse similar to what happened back in 2008 (or even worse)
is on the way. Let's take a look at some of the financial experts that
are predicting really bad things for our financial markets in the months
ahead....
Doug Short
According to Doug Short, the
vice president of research at Advisor Perspectives, the stock market is
somewhere between 33% and 51% overvalued at this point. In a recent article he offered the
following evidence to support his position....
● The Crestmont
Research P/E Ratio (more)
● The cyclical P/E
ratio using the trailing 10-year earnings as the divisor (more)
● The Q Ratio, which
is the total price of the market divided by its replacement cost (more)
● The relationship
of the S&P Composite price to a regression trendline (more)
Peter Schiff
Peter Schiff, the CEO of Euro
Pacific Capital, has been one of the leading voices in the financial community
warning people about the crisis that is coming.
During a recent interview with Fox Business, Schiff stated
that the massive financial collapse that we witnessed back in 2008 "wasn't
the real crash" and he boldly declared that the "real crash is
coming".
So is Schiff right?
We shall see.
Robert Wiedemer
Economist Robert Wiedemer warned people what
was coming before the crash of 2008, and now he is warning that what is coming
next is going to be even worse....
"The data is clear,
50% unemployment, a 90% stock market drop, and 100% annual inflation . . .
starting in 2012."
Harry Dent
Financial author Harry Dent believes that the stock
market could fall by as much as 60 percent in the coming months. He is
convinced that stocks are hugely overvalued right now....
"We have the greatest
debt bubble in history. We will see a worldwide downturn. And when you are in
this type of recessionary environment stocks should be trading at five to seven
times earnings."
So are these guys right?
We shall see.
But I do find it interesting
that some of the biggest names in the financial world are currently making
moves as if they also believe that a massive financial crisis is coming.
For example, as I have written
about previously, George Soros has dumped all of his holdings in
banking giants JP Morgan, Citigroup and Goldman Sachs.
Infamous billionaire hedge fund
manager John Paulson, the man who made somewhere around 20 billion dollars betting
against the U.S. housing market during the last financial crisis, is making
massive bets against the euro right now.
So where are these financial
titans putting their money?
According to the Telegraph, both of these men are
pouring enormous amounts of money into gold....
There was also news last
week in an SEC filing that both George Soros and John Paulson had increased
their investment in SPDR Gold Trust, the world’s largest publicly traded
physical gold exchange traded fund (ETF).
Mr Soros upped his stake
in the ETF to 884,400 shares from 319,550 and Mr Paulson bought 4.53m shares,
bringing his stake to 21.3m.
At the current price of
about $156 a share, these are new investments of about $88m of Mr Soros’ cash
and more than $700m from Mr Paulson’s funds. These are significant positions.
So why would they do this?
Why would they pour millions
upon millions of dollars into gold?
Well, it would make perfect
sense to put so much money into gold if a massive financial crisis was coming.
So is the next financial crisis
imminent?
We will see.
Most "financial
analysts" that appear in the mainstream media would laugh at the notion
that a stock market crash is imminent.
Most of them would insist that
everything is going to be perfectly fine for the foreseeable future.
In fact, most of them are
convinced that quantitative easing is going to cause stocks to go even higher.
After all, isn't quantitative
easing supposed to be good for stocks?
Didn't I write an article just last month
that detailed how quantitative easing drives up stock prices?
Yes I did.
So how can I be writing now
about the possibility of a stock market crash?
Aren't I contradicting myself?
Not at all.
Let me explain.
The first two rounds of
quantitative easing did indeed drive up stock prices.
The same thing will happen under QE3, unless the effects of QE3 are overwhelmed by
a major crisis.
For example, if we were to see a
total collapse of the derivatives market it would render QE3 totally
meaningless.
Estimates of the notional value
of the worldwide derivatives market range from 600 trillion
dollars all the way up to 1.5 quadrillion dollars. Nobody knows for
sure how large the market for derivatives is, but everyone agrees that it is absolutely
massive.
When we are talking about
amounts that large, the $40 billion being pumped into the financial system each
month by the Federal Reserve during QE3 would essentially be the equivalent of
spitting into Niagara Falls. It would make no difference at all.
Most Americans do not understand
what "derivatives" are, so they kind of tune out when people start
talking about them.
But they are very important to
understand.
Essentially, derivatives are
"side bets". When you buy a derivative, you are not investing
in anything. You are just gambling that something will or will not
happen.
I explained this more completely
in a previous article entitled "The
Coming Derivatives Crisis That Could Destroy The Entire Global Financial System"....
A derivative has no
underlying value of its own. A derivative is essentially a side
bet. Usually these side bets are highly leveraged.
At this point, making side
bets has totally gotten out of control in the financial world. Side bets
are being made on just about anything you can possibly imagine, and the major
Wall Street banks are making a ton of money from it. This system is
almost entirely unregulated and it is totally dominated by the big
international banks.
Over the past couple of
decades, the derivatives market has multiplied in size. Everything is
going to be fine as long as the system stays in balance. But once it gets
out of balance we could witness a string of financial crashes that no
government on earth will be able to fix.
Five very large U.S. banks
(including Goldman Sachs, JP Morgan and Bank of America) have combined exposure
to derivatives in excess of 250 trillion dollars.
Keep in mind that U.S. GDP for
2011 was only about 15 trillion dollars.
So we are talking about an
amount of money that is almost inconceivable.
That is why I cannot talk about
derivatives enough. In fact, I apologize to my readers for not writing
about them more.
If you want to understand the
coming financial collapse, one of the keys is to understand derivatives.
Our entire financial system has been transformed into a giant casino, and at
some point all of this gambling is going to cause a horrible crash.
Do you remember the billions of
dollars that JP Morgan announced that they lost a while back? Well, that
was caused by derivatives trades gone bad. In fact, they are still not
totally out of those trades and they are going to end up losing a whole lot more money than they
originally anticipated.
Sadly, that was just the tip of
the iceberg. Much, much worse is coming. When you hear of a major
"derivatives crisis" in the news, you better run for cover because it
is likely that the entire house of cards is about to start falling.
And don't get too caught up in the
exact timing of predictions.
If a stock market crash does not
happen this month, don't think that the storm has passed.
A major financial crisis is
coming. It might not happen this week, this month or even this year, but
without a doubt it is approaching.
And when it arrives it is going
to be immensely
painful and it is going to change all of our lives.
I hope you are ready for that.
