Will the Global Market Crash of 2018 Turn Out to Be the Beginning of the Greatest Financial Crisis the World Has Ever Seen?

The global selloff has erased $5 trillion from stock and bond markets in October alone! October is a historically bad month for stocks. Many of the most dramatic crashes have begun during this month. The global market crash of 2018 seems to be in line with this trend and the crash is indeed global.

This same trend has occurred prior to other major historical market crashes, whereby other countries were already crashing and in depression prior to the crash hitting the United States. Nothing happens in isolation. This holds true between markets and throughout time.

In February of this year, there was a huge stock market sell-off. What caused it?

In short, the “smart money” was taking profits. Huge profits. Trading whales sensed that the top was near and decided to withdraw major portions of their funds. And looking back, it appears they were right.

Over the next 8 months or so, “the little guy” began piling into stocks. This is a classic indicator of a true top being reached in equity markets. Falling victim to FOMO (fear of missing out), average retail investors pile into stocks when there has been such an epic bull run that everyone thinks the party will never end.

In other words, most of the stock market rally since February has been the result of retail investors entering the market. Everyone knows this is the final nail in the coffin for any long-term bull market.
So, the question becomes, why now?

Global Market Crash 2018 Explained

The causes of a crash like this are many and varied. While most media sources tend to report on things in terms of a simplistic dichotomy (this or that), reality tends to be more complex.

The recent trade war between America and China is only one recent event that seems to be precipitating this crash. And while mainstream media loves to point this out over and over again, they remain silent on the actions of central banks and governments that have put the world economy in such a vulnerable position in the first place.

In this case, flooding the market with trillions of new fiat currency units and pushing interest rates to zero for the greater part of a decade made a new crisis inevitable.

In February of this year, I wrote an article on Blasting News about the coming crash that would be blamed on Trump’s trade war. I asked the rhetorical question, “Will the next credit crisis and financial failure begin in 2018?” as it became more and more clear that the answer would be yes.

In the article, I describe the historical basis for central banks setting the stage for financial crises. By unilaterally manipulating interest rates and the money supply, central banks create the monetary conditions leading to economic booms that become economic busts. And they do a great job of concealing the fact that they usually initiate the bust through their own actions as well.

Of course, it’s not a coincidence that the timing of this crash happens to fall in line with The Federal Reserve raising interest rates. This action has caused the USD index to rise, which has weakened other fiat currencies.

Emerging market (EM) economies have tons of dollar-denominated debt that they must service with their own fiat money. A stronger dollar means they need more of their own currency to pay their debts. This is an oversimplification of the issue but is basically why we see economic turmoil fueled by currency collapse in countries like Argentina, Turkey, Iran, India, and so on, as we have previously covered at GSB.

As I mention in the Blasting News article, these financial conflicts almost always lead to military conflicts at some point, but that’s not our concern here. The question investors face at the moment is “how do I prepare for the deepening crisis ahead?”

Preparing for the Next Phase of the Global Market Crash 2018

The crash that is coming will be unlike anything the world has ever seen. Put simply, there has never been this much debt in the system (hundreds of trillions worldwide), so there will be no historical precedence for the crash.

And that debt doesn’t even include the hundreds of trillions worth of derivatives held by big banks. If those go bad, it’s game over for the global economy.

So, while holding some cash is always good in uncertain times, you can’t depend on fractional reserve banks to provide access to your funds during a crisis.

As occurred during the last crisis, we are likely to see some traditional financial institutions and even national governments become insolvent. They can print money in an attempt to stop the bleeding, but this inevitably leads to high inflation or hyperinflation.

Stocks

While most stocks should be avoided during a crash, gold mining stocks tend to do well after the initial take down. They bounce back first and rise the fastest as investors start fleeing to safe-haven assets, which the mining companies own.

Cannabis stocks are not immune from a market crash, but could hold up better than other sectors, as those using it for medical purposes and unlikely to cut back. And like alcohol, we could see sales hold steady or even rise, as people seek relief from the economic strife that unfolds.

At Gold Stock Bull, we help our subscribers pick top-performing stocks no matter which direction the market is moving. You can also purchase shares of an ETF like GDAX (gold mining) or MJ (cannabis) to get exposure to these sectors.

Large market cap, high-dividend-yielding stocks and utility stocks in developed countries like China, Russia, and many European nations also tend to hold up relatively well during market crashes.

Fixed-Income

There are also fixed-income investments, which are among the most conservative options. Certificate of Deposit (CD) accounts will become more attractive as interest rates rise, although they don’t even beat inflation at present rates. The same goes for money market funds.

But while these assets are typically viewed as having no risk, we think that the next market crash could call into question the safety of assets that have long been viewed as having zero risk. This is especially true when they are backed by governments that are deep in debt themselves and rely on other nations buying their debt in order to pay the bills each year.

Gold and Bitcoin

Many experts believe the most significant hedge against this kind of uncertainty to be physical gold securely held in your possession or in vaults outside the USA.

A potential newcomer to the safe-haven assets is bitcoin, ideally held in a hardware wallet or cold storage. For those who choose to hold a crypto portfolio, it’s wise to keep a significant portion of those holdings in bitcoin, which is the gold standard of crypto, has a strictly limited supply, the highest encryption strength and a perfect track record of never being hacked.

The great thing about bitcoin (and other cryptocurrencies) is that you own it. With a hardware wallet, you own your private keys. A third-party doesn’t have to provide custody and can’t abscond with your funds due to fraud or a national emergency.

Goldmoney

Goldmoney provides custody and liquidity for those who want to own gold, silver, platinum, and palladium in tradeable form.

At a minimal premium and for small monthly storage fees, users can hold precious metals in Brinks vaults in countries like Canada, Switzerland, Singapore, and more. The metals can be sent to anyone else with a Goldmoney account or loaded onto a pre-paid debit Mastercard for daily transactions.

If you hold some gold and bitcoin as a safe haven bid in addition to mining stocks and cannabis stocks for considerable long-term gains, you will be shielding yourself against the harshest effects of the storm. More speculative assets like altcoins, junk bonds, penny stocks, etc. should be limited to single-digit percentages of a total portfolio at times like this.

Real Estate

The real estate market is currently overvalued in our view and due for a correction. As interest rates rise and economic growth slows, we could see a repeat of the last housing market crisis. Households are back to spending the same percentage of their income on housing as they were just prior to the last crash.

Governments are also back to pushing for more lenient loan requirements. These are both troubling signs, as we tend to see this happen at or near tops.

But real estate is a great long-term investment and inflation hedge. High net worth individuals should consider scooping up real estate bargains during crashes. People who bought property in 2009, for example, have profited quite handsomely since then.

Short Selling

Sophisticated, risk-tolerant investors might consider buying put options or selling call options to hedge their portfolios during major corrections.

Like many other market observers, I recently mentioned that tech stocks were overvalued. While they have since corrected, there might still be an opportunity to short stocks like Tesla, Netflix, Amazon, and many others in the tech sector if the current correction continues.

But again, acquiring gold and bitcoin should be your first priority. In fact, for the average person with limited resources and little appetite for risk, it may be the only thing that really matters.

The only thing that really has value in a big #stockmarketcrash is successfully programmed #blockchains with huge application possibilities. An example among a few? #DYOR $IOC pic.twitter.com/81AFNKworf

— Swiss IOC-Forever (@SwissIOCForever) October 25, 2018

Global Market Crash 2018: How Bad is it, And Will it Continue?

It’s tough to measure the severity of this global market crash in 2018 as it may only have just begun.

With that in mind, Wednesday was definitely a terrible day for markets and the major indices are dropping again on Friday. It’s shocking to see an exchange like the Nasdaq (the second-largest stock exchange in the world) down over 4% in a single trading session. This marked the worst day for the NASDAQ since 2011. While stocks in the US rallied on Thursday, they still didn’t quite erase the previous days’ losses.

Several variables are pointing toward further volatility and declines, though. Here are just a few…

VIX Has Been Climbing

A good indicator to look at is the volatility index (VIX). VIX has been skyrocketing the last few weeks. This measure of overall volatility in the market has peaked at 25. Four weeks ago it was barely above 10. In other words, volatility has increased by almost 150%.

Extreme Fear Plaguing the Markets

Another indicator is the global fear/greed index. It has turned toward “extreme fear,” whereas just two months ago it was at “extreme greed.”

USD Index Rising

Brian Kelly of CNBC wrote an op-ed piece for Forbes this week in which he talked about the US Dollar as the new VIX. His main point was that a rising dollar creates greater global risks than the VIX can account for.

Kelly also mentions that although many countries are making moves away from the dollar, it still makes up 62% of all foreign currency reserves. So, while no fiat currency is safe in the long-term, it does make sense to hold some cash for now.

After all, the USD index has been strengthening. And while this may be the final top ever for the dollar, it will stay strong in the near-term. As long as you have gold and bitcoin to hedge against it, you’re okay holding some fiat.

In addition, on Thursday, financial advisor Mitch Goldberg said in a guest post for CNBC:

“With bonds also in negative territory year-to-date, as measured by the benchmark 10-year Treasury, it’s important to remember that cash offers both a stabilizing force within your portfolio and a source of funds for new opportunities that come along… As a financial advisor who likes to assort my clients’ accounts based on time horizons and the timing of cash needs — as opposed to the old way of just based on client age or account value — I can tell you that cash and cash equivalents play a critical role in portfolio composition.”

As Goldberg mentions, a big benefit of holding cash is that it provides the liquidity needed to jump into a new investment the moment it becomes most appealing. Because we are likely in the early stages of this decline, cash is king in a limited sense.

When you look at the above factors, it seems this crash is more likely to continue than not. There are also many other factors at play that are beyond the scope of this article and paint an even more convincing picture that leads to the same conclusion.

Stock Valuations Remain High

While P/E ratios have come down a bit in the past few months, the Shiller PE remains historically high. It is currently at 30, higher than the peak just before the financial crisis and the same level just prior to Black Tuesday. In fact, it has only been higher at one point in history, just prior to the dotcom bubble bursting in the year 2000.

Price earnings ratio is based on average inflation-adjusted earnings from the previous 10 years, known as the Cyclically Adjusted PE Ratio (CAPE Ratio), Shiller PE Ratio, or PE 10.

Don’t Panic During This Global Market Crash in 2018

All things considered, October 2018 could very well be the start of something big. The global crisis that everyone has been warning about for the greater part of a decade appears to be materializing.

One thing is for sure, though. In recent weeks, mainstream sources like CNBC, Forbes, and Business Insider have begun to mimic what sources like Gold Stock Bull have been saying for years with regard to a global market crash. We have reduced risk in our model portfolio, entered a short position against an overvalued biotech company and hold a large position in gold mining stocks and cryptocurrencies.

Sign up to be a GSB subscriber today and put yourself in a position to protect your assets and profit from the challenges and opportunities ahead.

[Originally posted on GoldStockBull.com on October 26h, 2018.]

BIS and IMF Warn of Risk In Financial Markets That Surpasses That of 2008 Crisis

In his most recent book, The Road to Ruin: The Global Elites’ Secret Plan for the Next Financial Crisis, former CIA analyst Jim Rickards notes that some of the biggest financial bodies in the world have been warning of excessive risk in financial markets since 2014.

Through a series of published papers, press releases, and public statements, institutions like the IMF and BIS have been subtly telling the world that another crisis has long since been baked into the economic cake.

Risk in Financial Markets as Described by the IMF

The International Monetary Fund (IMF) and the Bank of International Settlements (BIS) are the two most significant economic groups in the world. Their statements regarding risk in financial markets should be examined carefully.

Headquartered in Switzerland, the BIS is the central bank of central banks – the head of the snake that is the central banking system, so to speak. And the IMF is just what it sounds like – a monetary fund for the world, providing loans for countries that are in dire straits.

As far back as October of 2017, the IMF has been making statements regarding the insane levels of debt being accumulated by corporations and individuals. Without even taking into account the hundreds of trillions of dollars’ worth of public debt that national governments have piled on since the 2008 crisis, the nonfinancial sector itself has become a potential risk.

Taken together, the amount of leverage existing within the nonfinancial sector of G-20 economies is now larger than it was before the ’08 collapse, according to a report by the IMF.

“Increasing leverage signals potential risks down the road,” according to the same report.

General Manager of BIS Gives Speech About Risk in Financial Markets

On August 25^th, Agustin Carstens, General Manager for the Bank of International Settlements, gave a speech during the Federal Reserve Bank of Kansas City’s 42^nd Economic Policy Symposiumentitled “Global Market Structures and the High Price of Protectionism.”

In the speech, Carstens detailed just a few of the risks posed by current trends.

“Tariffs could therefore push up US prices, possibly requiring monetary policy to react through more rapid increases in interest rates. Such a response would widen the interest rate premium to the rest of the world and could drive the dollar higher. This would hit US exporters with a double whammy, and emerging market economies with a triple whammy. For emerging markets, a stronger dollar tightens financial conditions, triggers capital outflows and slows growth.”

The speech concluded by noting that nonfinancial risks (such as those identified by the IMF) can interact with, and possibly exacerbate, the type of risk that has been building up in the broader financial system for the past decade.

“When assessing these risks, we should not underestimate the potential for real and financial risks to amplify each other in unexpected ways.”

In other words, increasing leverage means increasing unpredictability and systemic risk. The longer these trends continue, the more likely it becomes than an unexpected lynchpin could spark the next crisis.

Risk in Financial Markets Are Already Materializing

Let’s be real. Despite the cautious, uncertain, and vague language they use, these institutions and their managers know full well what’s happening and what it means for the future.

To review:

1) Central Banks distorted Risk across asset classes by manipulating Sovereign Credit. This has created the biggest global bubble in financial market history.

— Paranoid Bull (@paranoidbull) August 10, 2018

While no one can predict with absolute certainty exactly what’s going to happen and when, it doesn’t take a genius to be able to discern that something is seriously wrong, and at some point, it will lead to a chain-reaction of financial failures.

This crisis is already playing out in countries like Venezuela, Turkey, and Argentina, as their respective currencies circle the drain (fun fact: the Venezuelan Bolivar is now worth less than the digital currency used in the popular MMORPG game, World of Warcraft).

With Risk in Financial Markets, Position Your Portfolio Accordingly

While no one can stop what has been set in motion so far, not everyone has to be a victim of it. Position yourself to gain from developing trends while you still can.

The GSB portfolio is packed with mining stocks, cannabis stocks, and cryptocurrencies that are poised to power higher amidst a crisis. Many of these assets have already gained significant ground recently. Subscribe today to gain exclusive access to our picks.

[Originally published on GoldStockBull.com on August 31st, 2018]

Death of the Dollar Now Guaranteed as China Launches Petro-Yuan

China has officially announced that its new currency, the petro-yuan, has gone live. This will lead to the US dollar losing reserve currency status and ultimately failing as a currency. The resulting chaos will have only one solution – war. The death of the dollar will not be televised.

Death of the Dollar Many Decades in the Making

This has been a long time coming. While it will be portrayed as a recent event, fueled in large part by theatrical trade wars, it has developed over decades through endless American imperialism. The rest of the world has had enough of Western powers pillaging and plundering foreign lands to steal their resources and forcing them to trade using the US dollar.

Up until recently, there has been no alternative to the US dollar for trading oil, as it has been the world’s reserve currency for over 45 years. But now, with the creation of the Petro-Yuan, that is about to change.

The Eastern superpowers and their allies, namely Iran, China, Russia, Syria, and other surrounding territories, now have a means by which to exclude American economic imperialism from their societies.

If history is any guide, we know exactly what happens when a nation attempts to stop using the US dollar.

Libya did this. The country was invaded, their leader assassinated, and a puppet government installed. Today, Libya still uses the US dollar for international trade.

Iraq did this. The country was invaded, their leader assassinated, and a puppet government installed. Today, Iraq still uses the US dollar for international trade.

This Time the Death of the Dollar Will be Different

When China, Russia, and others take similar action, what will happen? Surely such economic and military powerhouses cannot be invaded and overthrown. No, the result will have to be much more dramatic. The result will be a world war that could, perhaps, become a full-scale nuclear assault.

Trump Is Underestimating The Petro-Yuan And China’s Weapons To Fight This Trade War https://t.co/ya8SbKMQLN $$ pic.twitter.com/8CgNRTbTPU

— ValueWalk (@valuewalk) April 12, 2018

I have been writing about this over and over because I both want people to take notice and want to have it on the record so that when it hits the fan, it can be understood what the real causes were. Make no mistake – the mechanisms underlying this imminent financial failure will be obscured. For evidence of this, just look to the lack of press coverage this Petro-Yuan event has received in the Western mainstream media.

The Death of the Dollar Receives Little Media Coverage

Were it not for RT.com, I myself would never have even known this happened. American and European media have us distracted with endless scandal and presidential affairs with adult actresses. Meanwhile, the entire empire has had its support pillars undermined and the final nail placed in its coffin. Most people living in first-world nations haven’t the slightest clue that any of this is happening.

This will allow those in power to pin the failure on any manufactured event they so choose.

Most likely, the excuse will involve a false flag attack involving chemical, biological, or nuclear weapons on American or European soil that will be blamed on a “hostile” nation such as China, Russia, Syria, Iran, or North Korea. It’s hard to imagine any nation other than these five being the alleged culprits. Remember, if you hear of an attack being caused by one of these nations, rest assured it was a false flag intended to bring the world to war for the third and final time in just over a century.

Will the next credit crisis and financial failing begin in 2018?

Ten years have passed since the crisis of 2008.  Overall, things have been getting worse, not better.

Modern financial markets have become accustomed to boom and bust cycles.  These cycles happen as a result of central banks exercising tyrannical control over the global monetary system.  Each cycle begins with a boom, leads to a bust, and culminates in war.  Central banks openly admit their roles in helping finance wars.  The cycle has repeated itself twice in the last century and lies on the precipice of its third completion.

The boom-bust cycle

For the past 105 years, America has had its economy and financial future ensnared by the central banking system.  Ever since the creation of the Federal Reserve Bank in 1913, a cycle of economic booms and busts has become the norm.  This artificial cycle has become so accepted that few even question its origin, let alone envision a world without it. 

Throughout history, the cycles have three primary parts, each part being further divisible into smaller phases.  First, the credit cycle enjoys a brilliant expansion.  The economy is booming, there are jobs aplenty, people are making money, everyone is happy, and all is right with the world.  An example of this would be the so-called “roaring twenties”, referring to the decade preceding The Great Depression.  This is what’s referred to as the boom.

Second, a crisis, or “credit crunch” occurs.  At this point, banks stop lending, liquidity vanishes, businesses go bankrupt, stocks selloff, and chaos ensues.  Banks may even fail, as they did in 2008 prior to being bailed out by governments and the central banks who own them. 

For those who are betting on much greater U.S. stock market gains ahead, please realize just how overvalued the market is currently (it's worse than in 1929!). The odds are against much further gains. You need to be realistic. https://t.co/UUu9ltAzyw pic.twitter.com/yHDcYofXID

— Jesse Colombo (@TheBubbleBubble) February 14, 2018

The crisis of the 1930s has a reputation of being more severe due to its effects being more visible.  People waited in long bread lines to eat, unemployment was rampant and not hidden by people dropping out of the labor force, and banks were allowed to fail, resulting in millions of people losing their life savings overnight. 

By contrast, today we have the opposite: food stamps in the form of Electronic Benefits Cards masks the severity of people being unable to afford food, the official unemployment rate remains at a record low because those who give up looking for work are not counted in the official statistics, and banks were bailed out, leading to the illusion of business continuing as usual.

War and banks

The third phase of this central bank-induced cycle has no direct correlation to the cycle itself on the surface.  Yet it always follows.  The third and final action that happens after an economic bust is war.

World War I began in 1914, just a year after the creation of the Federal Reserve.  The Federal Reserve Act also enacted the income-tax in order to aid in financing the war effort.  President Woodrow Wilson gave a speech on October 13, 1917, proclaiming cooperation among the nation’s banks to be of paramount importance to the peaceful war effort.  In addition, European bankers had been working since at least 1887 to keep the nations of Europe under an insurmountable debt burden to pay for war armaments. 

Without financing from central banks, nations would not have the ability to war with one another like they have during the past century.  The Federal Reserve itself admits this to be part of its role in the economy.  In 1943, the Federal Reserve board of governors stated its intention to help with all efforts of funding World War II.  This war began following the bust of the 1930s.  The next world war will happen once the current credit cycle completes in a bust the likes of which the world has never seen.

The coming crisis

Many mainstream publications have been warning of an imminent economic catastrophe for years now.  But in the first few months of 2018, their collective voices have grown quite stronger.  Desmond Lachman, former macro-economist at the International Monetary Fund, recently wrote a piece for U.S. News entitled “A Crisis is Coming.”  In it, he describes the financial conditions today as being far worse than they were during 2008 by any metric. 

Debt levels have grown out of control, massive asset bubbles have appeared in sectors beyond the housing industry, and interest rates have been too low for too long.  Even a modest increase in interest rates will cause debt levels to be unsustainable.  

In addition, the Independent notes that wage growth in the UK is rising at its fastest pace since the 2008 financial crisis.  This corroborates what Lachman says in his U.S. News piece about economic conditions overheating.  Wage growth indicates inflation.  Inflation leads to rising interest rates.  Rising interest rates lead to higher debt payments.  Those payments will become so large that governments will have no way to pay them.  The only way out will be war.

A Third World War

As dire as the economic conditions look, they pale in comparison to the current geopolitical landscape.  Not since the Cold War have tensions between adversarial nations been quite so high.  How might such nations react in the midst of a historic financial collapse?  If history is any guide, the answer makes itself apparent.  As Marc Faber has said, “when everything collapses, then we go to war.”  It can’t be said any simpler. 

The coming crisis will be the biggest yet, and so will the war that follows.  Entire nations will go bankrupt.  It’s possible that entire nations could be destroyed in the conflict that ensues. 

World events have already begun to align with such an undesirable outcome.  The election of Donald Trump, for example, provides a convenient scapegoat for the whole ordeal.  Rather than focusing on central banks and their role in the crisis, all the world’s attention will have been turned to Trump as the ultimate harbinger of destruction.

Despite the fact that it matters not who holds political power, this will be the conclusion of most of the public.  Keep in mind, however, that politicians hold absolutely zero sway over monetary policy.  Central banks have total control when it comes to economic decisions.  And through this mechanism, they control economies, currencies, and ultimately, the course of world events.  Even in leading the human race to ruin, too many remain blind to the banks that have been guiding us there for generations.