For a long time now, we have been enjoying a period of relative economic stability even though our underlying economic fundamentals continue to get worse. Unfortunately there are now a bunch of signs that this period of relative stability is about to end.
Just prior to the last stock crash in 2008, a massive amount of money was pulled out of junk bonds. It’s happening again. But if you’re relying on the drive-by media for your news, you probably didn’t hear about it.
The U.S. junk bond market just experienced a “6-sigma event” earlier this month, an event that is only supposed to have a chance of 1 in 500 million of happening. Billions are being pulled out of junk bonds, which has some analysts wondering if a financial crash is just around the corner.
Rumblings of a stock market correction have become so loud that even the drive-by media has pulled their head out of the sand.
Retail sales have missed expectations for three months in a row and we just had the worst reading since January. Things have gotten so bad that even Walmart is struggling. Same-store sales at Walmart have declined for 5 quarters in a row and the outlook for the future is not particularly promising.
The four week moving average for mortgage applications just hit a 14 year low, even lower than it was during the worst moments of the 2008 financial crisis. Home ownership rates have fallen to the lowest level since 1995.
The tech industry, is supposed to be booming, but mass layoffs in the industry are actually 68% ahead of last year’s pace.
According to the Federal Reserve, 40% of all households are currently showing signs of financial stress. According to one survey, 76% of Americans do not have enough money saved to cover 6 months of expenses.
Terrorism in Iraq is spiraling out of control. As the 7th largest oil producing nation on the planet, if the flow of oil is disrupted, we could be in serious trouble. And let’s not forget the Ukraine crisis or the turmoil in the Middle East as Hamas prepares for a long battle against Israel.
Ebola deaths continue to grow at an exponential rate and if it starts to spread inside the U.S. it has the potential to shut down our entire economy.
Things look just as bad in much of the rest of the globe. Portugal has crashed into deep deflation and Italy’s inflation rate has fallen to zero as the Eurozone flirts with recession, pushing these countries further toward a debt compound spiral. Germany’s index of investor confidence plunged from 27.1 to 8.6 in July, the sharpest fall since June 2012.
Japan’s GDP just contracted at a 6.8% annual rate during the second quarter, the worst contraction since 2011.
There was no way that this bubble of false prosperity was going to last forever because it was based on a pyramid of debt and false promises. In fact, the condition of the global financial system is now far worse than it was just prior to the financial crisis of 2008.
