This article was written by Michael Snyder and originally published on his Economic Collapse blog.
Editor’s Comment: As Michael Snyder so often points out, the writing is on the wall, and has been for some time. The whole system is an elephant doing a tight wire act; if it weren’t such an illusion for the masses, it never would have worked to begin with.
Toxic junk bonds, unstable oil prices, plunging commodity values, downgrades for many institutions and crushing debt are all signs of the last days for this bubble economy. The dollar is going full kamikaze, and the suicide bankers are in command.
4 Harbingers Of Stock Market Doom That Foreshadowed The 2008 Crash Are Flashing Red Again
by Michael Snyder
So many of the exact same patterns that we witnessed just before the stock market crash of 2008 are playing out once again right before our eyes. Most of the time, a stock market crash doesn’t just come out of nowhere. Normally there are specific leading indicators that we can look for that will tell us if major trouble is on the horizon. One of these leading indicators is the junk bond market. Right now, a closely watched high yield bond ETF known as JNK is sitting at 35.77. If it falls below 35, that will be a major red flag, and it will be the first time that it has done so since 2009. As you can see from this chart, JNK started crashing in June and July of 2008 – well before equities started crashing later that year. A crash in junk bonds almost always precedes a major crash in stocks, and so this is something that I am watching carefully.
And there is a reason why junk bonds are crashing. In 2015 we have seen the most corporate bond downgrades since the last financial crisis, and corporate debt defaults are absolutely skyrocketing. The following comes from a recent piece by Porter Stansberry…
So far this year, nearly 300 U.S. corporations have seen their bonds downgraded. That’s the most downgrades per year since the financial crisis of 2008-2009. The year isn’t over yet. Neither are the downgrades. More worrisome, the 12-month default rate on high-yield corporate debt has doubled this year. This suggests we are well into the next major debt-default cycle.
Another thing that I am watching closely is the price of oil.
A massive crash in the price of oil preceded the stock market crash of 2008, and over the past year we have seen another dramatic crash in the price of oil.
Many had been expecting the price of oil to bounce back, but instead we are seeing new downward momentum. In fact, according to Business Insider the price of U.S. oil briefly dipped below $43 a barrel on Wednesday…
Crude oil was down nearly 3% in morning trade on Wednesday.
West Texas Intermediate crude oil futures in New York dropped to as low as $42.97 per barrel. Futures touched a $42-handle in the last week of October, but last traded near those levels for a considerable period in August.
Another thing that I am watching is the ongoing crash of other industrial commodities. This is something that also preceded the stock market crash of 2008, and it is a clear sign that global economic activity is really slowing down.
Prices for industrial commodities such as aluminum, tin, iron ore and coal are all crashing. But the commodity that has me most alarmed personally is copper.
Economists commonly refer to it as “Dr. Copper”, and there is a very good reason for that. Looking back over history, the price of copper often makes a significant move in one direction or the other before the overall economy does. And the price of copper almost always starts declining before stocks do.
As I write this, the price of copper has fallen to $2.21, and it is already lower than at any point since the last financial crisis. To get a better perspective regarding what I am talking about, just check out this chart. This is one signal that is absolutely screaming that a major financial crisis is imminent.
One more harbinger of financial doom on the horizon is the surging U.S. dollar. The U.S. dollar surged just before the financial crisis of 2008, and now it is happening again.
Most Americans don’t understand this, but the truth is that a rising U.S. dollar puts an incredible amount of stress on emerging markets all around the globe. Since the last financial crisis, many of these emerging markets have been on a massive debt binge, and much of that debt was denominated in U.S. dollars. Now that the dollar has increased in value, emerging market borrowers are finding that it takes much more of their own local currencies to service and pay back those debts. Defaults are rapidly rising, and emerging market economies all over the world (such as Brazil) have already plunged into recession.
If the Fed does follow through with an interest rate hike in December, that is going to make things even worse. The U.S. dollar will surge even more, and emerging markets will be in even more trouble.
At the same time that the dollar is getting stronger, the euro is getting weaker. An article that was posted by CNBC on Wednesday went so far as to state that “it is now looking like the euro reaching parity with the greenback is all but guaranteed”…
The prospect of the Fed hiking interest rates in December has pushed the dollar higher, and it is now looking like the euro reaching parity with the greenback is all but guaranteed.
Strategists, however, disagree on how quickly that will happen and how much more the dollar can appreciate in the near term. That depends, they say, on the Fed, and how fast it will raise interest rates in a world where other central banks are moving in the opposite direction toward easier policy.
Goldman Sachs analysts this week reiterated that they expect euro parity with the dollar by year-end though other strategists expect the decline in the common currency against the dollar to take longer.
Let’s see, who has been warning that this would happen for more than a year? Here are just a few examples…
July 19th: “For a long time, I have been repeating my prediction that the euro would fall to parity with the U.S. dollar.”
June 28th: “As I have warned repeatedly, the euro is heading for parity with the U.S. dollar, and at some point it will drop below parity.”
May 25th: “As I have warned so many times before, the euro is headed for parity with the U.S. dollar, and then it is going to go below parity.”
In August 2014, just a little bit over a year ago, the EUR/USD was sitting above 1.30. At that time very few people out there would have ever imagined we would be talking about parity just a little more than a year later.
This is just the beginning of a time of great financial volatility. The things that we are going to witness in the months and years to come are going to be absolutely unprecedented. A massive global debt super-cycle is coming to an end, and the pain that this is going to mean for the global economy is almost too great to put into words.
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Waiting patiently…
Yes sir, been calling for it for 7 years now, so despair is due any day now for sure. The earthquakes didn’t get us yet, so the next blog has got to be about Niburu or some ” mysterious” bright object in the sky that secret NASA scientists say is on a collision course with Earth ” soon”, but won’t say anything publicly lest they disappear. But, don’t let that stop you from sending a big check to mikey doom porn before it gets here.
All of the indicators that Michael Snyder point to, happen at the end of EVERY business cycle.
The sky is not falling unless you live in Russia, China, Brazil, Argentina, or Venezuela. 🙂
DK
So what happened in 2008 was just part of a business cycle?
Lack of liquidity. Bad loans. Bad debt for starters. Lehman could have been saved. Lehman wasn’t cooperating with the FED. The CEO was a SOB.
They hung him out to dry, just like they did Corzine. Same thing for AIG, only AIG held the pension funds for Congress. AIG had its losses reimbursed, and QE effectively began, with even the Investment Banks like Goldman lining up at the FED window for a handout.
Need I say more??? 🙁
So 2008 was just a business cycle and what is currently happening is of no major concern?
I’ll sleep well now.
Oh, Corzine Illegally took money from segregated accounts and I have asked several times to show me any documentation that what he did was legal. Every broker I have talked to with MBA’s that are CPA’s have told me the same thing.
The system is hopelessly corrupt.
K2: Yes the system is hopelessly corrupt. It always has been, even when I was a banker. When top officers measure their bonus’ on the number and amount of loans they make, either good or bad, its systemic corruption.
Nothing new here. Just more of it and larger loans for the Taxpayers to cover.
All accounts are “segregated”. Don’t get caught up in that idea. No bank, credit union or other financial institution segregates their investment money. That idea is ludicrous. Funds are pooled for investments or loans using depositor funds.
The Hedge Fund Managers and money managers who invested with Corzine (these were other bankers, not small depositors) knew and understood the risks of 40 times leverage, and they signed the investment AGREEMENT (contract) allowing Corzine to rehypothecate their funds.
Move along nothing to see here. Same, same, only deeper and longer to shake out anyone with leverage. 🙁
To the people who caused it, sad to say yes it was just a business cycle – I see on BBC news this morning that we are going there again faster than you may think too with sale of over £13,000,000,000 of debt (that is thirteen billion pounds, not dollars, with a billion in the modern American parlance of one thousand million) and this is somehow being applauded as a sensible thing and that it is cool to make money off of reselling debt.
Isn’t that what started it all last time? And the time before that etc ad nauseam
Yep, the 5% drop in the Dow, just this week, is just part of a “normal” business cycle.
Wrong. But it is part of a seesaw trend we have been in since mid September. Nothing changes until we see a true bear market where the drop is at least 20% in a week, or so. If that 20% drop is backed up by another 10% drop within a few days…then we can officially say there is a stock market crash.
I thought I was nearing the point where i was gonna admit that i made a wrong prediction from back earlier in the summer/late spring when i said I thought the market, specifically the Dow, would drop by the end of Sept., and never return to it’s high, meaning high for the year of 18000 *.
So far, I have that admission and apology on hold.
“Yep, the 5% drop in the Dow, just this week, is just part of a “normal” business cycle. Wrong.”
No you are wrong. We have had several corrections over the past year alone. Corrections are an obvious phenomena of the business cycle. Look at business cycle history on a chart. See a pattern dumb fuck???
You do not know fucking squat about the markets or the business cycle; or you would not have said that. 🙂
But, but, but, he’s an expert on EVERYTHING! Well, at least he knows how to tell a real bullshit yarn, even if a kid can see through them.
As am I….I wish the shoe would drop already so we can get on with it. The sooner we start the sooner it’ll be over. Like when I used to have to go to the gas chamber in the military, I went in the first group every time so I be done and chill while everyone else cried and had panic attacks about going in.
I lost patience. This site sucks! It makes up just as much shit as the government!
Nearly every supposed prepper site does and many times worse. At least this guy does speak some truth about economics, most are clueless and just marketing their prepper junk like Berkey filters and such for ridiculous prices that will plug up rather easily in any real emergency. Look at all the redundant junk all of them are constantly pawning ? Some have even resorted to hiring fake writers to write BS stories for them as if they wrote it themselves and idiots suck it up like a good cold beer on a hot day ! Who coulda known ,Hey ?
The only reason it hasn’t collapsed is because of the incredibly vast amount of cyber dollars created to keep it all afloat ! So when people say it is all fear and gloom and doom that is the important fact they do not understand . It will all be just fine until the day it isn’t Anybody who actually looks at all the underlying dynamics clearly knows the massive debt on all levels has never happened before in history ! That should be a big clue right there for those still not realizing what is coming one day ? We all live in massive illusions and the above is just one of those many illusions but a very important one to be sure. All of the illusions are in fact breaking down, just as all the fake markets have peaked and teetering. Can you nay sayers show me one real fundamental that indicates any reason for any type of positive in these fake pumped markets ? If not then what is going to hold it all together and why would it continue to ramp as it has ? Or is tech and social media going to save us all economically ? We have not seen anything yet and USD is already on its way out world wide. BHO just put it all on steroids and threw in some of his special racism sauce to boot !
http://www.bugout.news/2015-11-12-bugging-out-what-will-you-wear-milspec-is-the-best.html
HOW MANY FUCKING TIMES DO YOU HAVE TO BE TOLD?
SHTF IS NOT COMBAT
DO NOT RUN AROUND LOOKING LIKE A JACKASS IN YOUR STUPID FUCKING CAMO GEAR OR IN A NINJA OUTFIT
LOOK AND ACT LIKE EVERYONE ELSE
Sound advice Acid –
The only rule I see in wearing military fatigues.
Is in the form of a Ghillie Suit, and staying incognito.
Any other reason, is asking for trouble or possible a death sentence to one’s self.
FTW
An old timer at work had an analogy that applies. In a school of fish you don’t want to be at the front nor at the end. Your safest place to be is right in the middle.
Yep, blend in as best as possible.
Be the grey man……
Right on acid
Yeh and make sure you do everything guys like Jack Spirko says for sure, as well as send him your money for his BS club of greater fools !
http://collapse.news/2015-11-11-why-the-federal-reserve-favors-debt-over-thrift.html
IF YOU HAVEN’T READ THE CREATURE FROM JEKYLL ISLAND
DO SO NOW
also watch the video “Money Masters” at my sit for free and a few more over there 1
LOVE IT!!
Today, Thursday, has been very interesting so far. Yellen blew out a little air to make the market drop 200 points. What a calamity when she actually does raise rates a mere quarter point.
At some point the world will realize the FED is clueless.
Plus, the FED is out of tools in the tool box, at this point look for totalitarian measures, they have nothing left.
The FED backed out of yet another badly needed rate hike. They absolutely must raise rates soon, if they don’t want to lose all credibility.
There are whole industries that can’t function without higher interest rates, like the insurance industry. Very soon the insurance industry will need Togo,d or fight. They are getting slaughtered. Time is short.
Black Friday 1987
Dot com Bubble 2000
Financial Crisis 2008
Thanks Obama 2015
Can we stop having a financial crisis whenever a president is about to step down?
The next president has to blame someone.
Oil @ 41.59 currently. Bring on the crash.
I like how Mr Snyder is using “trigger words” such as “harbinger” which he seems to have learned from Rabi Jonathan Cahn.
And where did you learn phrases like trigger words? I learned one: nit-pic.
Cost of things should be based on the cost to produce, improve, the item, and a profit for the producer. Due to Democrats this entire country has this all twisted and constrained. For example here in Hawaii Diesel costs more than gasoline. we have the most expensive electricity in the country. Food costs 50% higher than most of America.
You want to know why? A strangle hold of the local economy by Democrats and Unions. The rest of America will experience this very soon.
Stocks are way too high due to manipulation by Democrats. I want to see a depression. I will survive and eat well. Democrats will die and that is a good thing for America.
Not sticking up for Democrats, but don’t you think living in Hawaii, costs might just have something to do with shipping ? Is there a refinery for crude oil in Hawaii ? (I’m guessing not).
Diesel costs more than gasoline here as well (TN)and most places I’ve been up and down the east coast.
Electric ? Again….what powers the generators there ? Something that has to be shipped in ? (guessing again)….hey, with the amount of sunshine you guys get, you ought to be solar to the max.
Food ? Shipping again ? How about pineapples….betcha they are cheaper than in my local store !
Shipping really doesn’t add that much to costs, maybe 5% depending on what kind of deal you can work out. Sears automatically adds $50 to every appliance, but they get a FEU container every so often, full or not.
There are two refineries. We get most of our crude from Indonesia.
I have thousands of cows around me, they get shipped to the mainland as you guys pay more. I can’t buy a “Weaner” anywhere.
I raise cows as “pets” insurance reasons.
Most electricity is Diesel generated, we could run 100% off geothermal and solar but we have Democrats. As we go more solar, the Unions and Democrats demand higher pay because the same base generation ability has to be maintained, so they jack up the electrical prices.
The problem is Democrats. Kill them off and things will settle down. I don’t like GOPe, but it is better than Democrats.
I have a garden, Pineapples take a long time to grow. I grow only White pineapples, which you can’t get.
I take it from your comments you live on the Big Island. I live in Pahoa how about you?
Kalopa
I lived in pahoa for a while, my parents moved there when i was fifteen. Hawaiian beaches…
Used to go to kalapana when it was still there, then i enden up going to kahena
Yup, that was great for a young man to experience….
I’m in the Beaches, except for the frogs its a great place.
I put in almost 3 decades as an Oil Refinery operator up to operations supervisor. News flash, diesel is more valuable than gasoline as its more dense (by about 20%) and you therefore get less diesel out of a bbl of oil. The refining cost is pocket change next to the cost of crude. Crude will run from $1.20 to $2.50 a gallon. The cost / profit to refine (margins) is from almost nothing to usually 35 cents a gallon. Before demand dropped gasoline was the driving force. What happened is in summer too much diesel is produced to make sufficient gasoline as the operating units are not designed to make 0 to 100% of either. Its usually 3 of gasoline to 2 of diesel (or thereabouts). Post demand drop diesel took over so they meet market demand for it and without excess it therefore brings market price.
Its a fascinating industry, inherently dangerous but yet statistically safe. Thank God for dedicated operations personnel.
I believe Hawaii has at least one Oil Refinery.
If diesel is so valuable, why was it cheaper than gasoline up until diesel cars became popular?
Archivist
Read my above reply. They made too much diesel to supply the gasoline demand when the gasoline demand was higher. Its on the order of 3 gas to 2 diesel in the refining process. They had to discount diesel to sell it as especially in summer the market was flooded with it. In winter diesel is #2 oil and used for heating. Its demand went up and generally gasoline demand drops.
an excellent question and it was cheaper always until fairly recently maybe 8 to 10 years or so ?
TnAndy; Bingo bud!
http://guns.news/2015-11-12-democrat-congresswoman-introduces-bill-in-house-to-tax-every-gun-100.html
THE BANKS ARE FUNDING THIS GUN CONTROL SHIT
THEY ARE AFRAID THE PEOPLE WILL RISE AGAINST THEM
WHYEVER WOULD THEY THINK THAT?
Things like this will make the people rise. It is definitely time. The loony democrats have been flushing this nation down the toilet for too long.
If you look at at 25 year chart of copper prices….the early 2000’s were clearly HIGHLY INFLATIONARY- copper doubled in price. It is now dropping back into what is HISTORICALLY it’s range.
So, is copper down? Yes…from an inflationary HIGH.
http://www.infomine.com/investment/metal-prices/copper/all/
The inflationary high of copper wasn’t money supply driven but rather demand driven. That demand is the yard stick measure. Food is money supply driven as demand is somewhat more constant. Seen the price of beef in 2000 verses today?
Copper is a terrific indicator.
Yawn, more predictions. Yes, I do agree a market crash and hard times are coming; but I have been reading the same thing for at least 5 years now. It was suposed to crash in 2010, then ’11, then ’12’ and was stated definitely by many “experts” every year since. Sometimes the warnings were the collapse was just a few months or even weeks away. I guess I can predict too. The present administration will throw everything in necessary to delay anything bad so another Democrat will be elected in November 2016, and if a crash occurs then the present administration can say at least it did not happen on their watch. You can bet the next prez will pull every trick out of their magic bag, and when the bag is empty get another bag of tricks. If a collapse is allowed to happen in a short amount of time there will be social chaos, and the powers that be know it. You can bet they are controlling the unraveling in slow motion so they will be more prepared for what they will do to control the people. You must remember, they have all the inside knowledge, all the power necessary to do as they please, all can allocate any and all the resources they need to manipulate any situation to their advantage. My personal guess is probably early in 2018 because the next prez will try to make a go of it for at least a year before seeing the ultimate futility of prolonging the day of reckoning. Then they will do drastic things like confiscation of pension funds and bank accounts, and wage and price controls, curfews, etc. The masses will be successfully propagandized to believe what they are told and say hip, hip hooray! The gov’t will save us!
Anybody with half a damn brain knows this article is bullshit !!
Billy
The President is a mere hired hand. He has no real control. He can no sooner delay it than stop or create it.
The banksters run the show. The hired hand takes the credit or the blame.
The crash is coming but not until election
Rocky Mountain Ghost
I think its more likely if the timing is planned that it will happen under Obamas watch. The banksters and media allies would throw him under the bus. Its like, “Blame it on Hoover” but 2016 as opposed to 1932. The gullible public, needing someone to blame gets him. The talk at the water cooler goes like this, “Of course its his fault; what in the hell did you think you were getting, someone qualified”? The banksters, in the shadows, walk away unscathed and unknown.
If it hasn’t happened by the end of December then let’s just cancel the whole thing. enuf is enuf
Old Ross Perrot said today that the best hedge against inflation is owning land. true but Duh!
Mac, thanks for taking all of the shit and keep on pointing to what is coming. Only a fool would try to “time” the Market or a collapse.
There is going to be a day of reckoning, what with 200+ trillion of unfunded liabilities.
Acid I said this before they will put a high tax on gun sales to reduce the amount of guns on the streets. They are not denying your right to have a gun just gonna price you out of it. I agree the banks are in on it they are robbing the public and don’t want people to come after them. Hell they might even tax you for sell them too so everytime they change hands it hurts your wallet. I see $1500 dollar guns even though they are only worth a few hundred. keep your guns. They might just regulate the ammo cmpanies out of business too.
The Asian markets opened a little while ago and are down. Hang Seng is down over 500 points.
What we are seeing is what I call ‘Dollar Top’: this is where the dollar re-orients itself at the centre of the global economy as the reserve currency. What we saw since the 2008 crisis was a ‘false dawn’ for emerging markets. They mistakenly saw the crisis in the US and developed markets as a sign they were done and over; that it was the time for the emerging, corrupt markets. But, however, this misperception led to massive borrowing of US dollars and people going into debt on a grand scale. Essentially the sub-prime behavior that laid the US low prior to 2007 was just exported to other chumps (Canada, Australia, emerging markets).
In fishing, you loosen the line and let it go out, wait for a bite, and then pull it in sharp. This is what is going to happen with the next crisis when the Fed lets the dollar rise and interest rates return to normal. The big conflict has been between Obama, a friend of the third world, and those who see the US staying at the centre of the global economy. When Obama was strong, US dollar loans were free and easy to the third world. But, as Obama weakens towards the end of his term, the US economy is re-asserting itself, with tragic results for the emerging markets. In order to meet their debt obligations, they will need to devalue currencies and export as much as possible to the US.
Obama controls nothing regarding this. Presidents are hired hands.
Let’s see what the Dow does today. The Asian markets finished in the red early this morning, and the European markets are in the red also.