So it’s been awhile since my last Economic Warning (7/29 to be exact), sorry about that. However, I’ve been watching the situation very closely and just felt as if there wasn’t a lot more to say that I didn’t say last time. Now is different, now is the time for me to say more.
So what exactly has changed? A fair amount really, but nothing earth shattering other than one item. Yes, a big item to be sure but only one to speak of.
What about all the other issues such as gold, unemployment, housing starts, etc.? They continue to get worse. Yeah, pretty simple, but it is the truth.
You have the talking heads commenting on unemployment is down to 5.1% but they neglect, once again, to tell you it is due to labor force participation. They also neglect to point out that the actual government unemployment statistic is over 10%. But that wouldn’t fit their political or economical agenda, so they keep it to themselves.
Yes, housing starts are down, middle class disposable income is down, housing prices are down, and a whole host of other economic indicators are down and continue to fall. Those issues are not the point. If you have been following my economic warnings for any length of time you already know about those things and are not surprised.
So what is the major economic indicator that has changed? And why does that worry me enough to make a special economic warning announcement?
Great questions! Here you go…
Since the bottom of the most recent stock market crash, 2/1/2009, the market is up 157%. I am using the DJIA, 7062 -> 18132. But, during that same time period the volume of shares traded each day has dropped drastically. What that means in practical terms, if you lost money in the market crash but left it in your investments you are fine. Actually, you earned all of your losses back and still made money. Not bad, eh?
The answer to “how” is simple, the Federal Reserve printed trillions of dollars and poured it into the stock market. Actually, it is worse than that, the Fed simply created money digitally on a computer then moved it into the stock markets. By doing so, they devalued the dollar, the stocks, and created a false economic recovery.
Now we are paying the price for it, and it is about to get much worse. Since I published my last economic warning the market at one point had dropped 11% of its value, that was 8/25. Today the market is down more than 1.5% (as of this writing). Overall, the market is down more than 8% since my last economic warning. Yes, not as bad as the 11% drop because there was a minor uptick on 8/27. However, an 8+% drop in less than 2 months is significant. But that isn’t the bad part.
Approximately 18 months before the bottom of the crash in February ’09 a market sell-off started. That was October ’07. During that time the volume of shares being traded was huge. Today we have a fraction of that volume being traded. And that means the big traders, the big firms, are not in the market. And worse yet, the sell pattern is back and the volatility is extreme.
What am I telling you? The market is in really bad shape and headed down. And I believe we are headed straight into another crash, possibly “the” crash. What I don’t know is the time frame. I simply don’t know how long till it goes really bad.
There are three things that reinforce what I am seeing:
- Jim Rogers, an well-known international market guy, made a comment last week that the Fed will raise rates by the end of the year. That the market will react by going down substantially. People and institutions will then panic and demand that civilization be saved. The Fed will then act. He thinks the Fed will once again lower rates to drive the market up. But it won’t work and he thinks the market is in very bad shape. FYI, Jim Rogers is a long-time partner and friend of George Soros.
- The Fed decided to no raise rates last week because the US and world economies are so weak. They see huge problems in the economy as a whole, i.e. false 5.1% unemployment, etc. But more troubling…there is some discussion among Fed members to actually create a negative interest rate. That means the Fed would pay its member banks to borrow money. Those banks in-turn are supposed to lend that money out at very low interest rates to drive consumerism. However, for years those banks have driven the money into the markets not consumerism. This negative interest rate move would be a huge contrary move for the Fed to make, something they simply haven’t done before. You have to ask yourself “why?”
- Jim Cramer, CNBC financial guy, is calling the stock market “unstable” and “unsafe.”
Normally, I wouldn’t put too much value in a single individual’s opinion of the market and/or economy. But here you have two individuals, both successful in their own right, but on the polar opposite ends of the adviser scale. And they are both saying the same thing and they are both getting it right.
All the previous things I spoke about in earlier warnings are still present. Instability, income loss, China problems, Russian problems, South American problems, etc. All of it is still bad, very bad, and it continues to get worse.
Here is what I am doing right now:
- I have moved my 401k and IRA money to cash or gov’t securities. Yes, my 401k doesn’t have a strict “cash” option. I am still using dollar cost averaging into stock-based mutual funds for my monthly contributions.
- I am reducing the checking and savings account balances, and I am putting that “cash” into the safe.
- I am holding precious metals.
- I am buying food and some other hard assets.
Here’s what I wouldn’t do:
- Borrow money for anything other than a home.
- Buy large amounts of precious metals.
Here are a couple other things that I would suggest people consider doing:
- Buy ways to filter and purify water.
- Buy food storage.
- Buy ammo for the guns you already own. Standard ammo such as 62gr M855 5.56, 55gr FMJ XM193 5.56, 12ga 00 Buck, etc.
And finally, be prepared for a wild ride economically. There will be all kinds of stock market reports, economic reports, etc. coming from the media. Don’t get caught up in all the frenzy!
You may find yourself wanting to do more as you hear all these reports coming at you from different directions. And if it is the “still small voice” then follow the direction. But don’t allow yourself to be pushed around mentally or emotionally by what you see and hear happening. Stay focused on what is important, don’t get caught up in all the static.
- Economic Warning (6/8/2015)
- Economic Warning – Part #2 (update, please read) 7/8/2015
- Economic Warning – Part #2 >>>> Urgent Update <<<<
- Economic Warning – Part #3 (update, please read) 7/29/2015
- Silver & Gold…Really?
- WARNING – Special Edition (5/29/2015) : Part #1
- Get Home Bag
- Get Out of Dodge – Bug Out Bag
- Food Storage – Pantry Food
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