Where Will The “Pending” Financial Crisis Originate?

By Mark O’Byrne – Re-Blogged From Gold Eagle

Case for a pending financial collapse is well grounded warns Rickards
– “Ticking time bomb” the Federal Reserve has created is set to go off…

– Economist warns U.S. high-yield debt, default of “junk bonds” could cause next crisis
– Systemic risk is “more dangerous than ever” as “entire system is larger than before”

– Protect wealth by allocating at least 10% of assets in physical gold and silver

Source: BofA Merrill Lynch via Marketwatch.com

from The Daily Reckoning:

The case for a pending financial collapse is well grounded. Financial crises occur on a regular basis including 1987, 1994, 1998, 2000, 2007-08.

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As Oil Plunges, Energy Junk Bonds Turn Dangerous — Again

By John Rubino – Re-Blogged From Dollar Collapse

Back in 2014 oil was falling and hundreds of billions of dollars of energy junk bonds and leveraged loans looked to be at risk. Wolf Street had this to say at the time:

Oil and Gas Bloodbath Spreads to Junk Bonds, Leveraged Loans. Defaults Next

The price of oil has plunged nearly 40% since June to $65.63, and junk bonds in the US energy sector are getting hammered, after a phenomenal boom that peaked this year. Energy companies sold $50 billion in junk bonds through October, 14% of all junk bonds issued! But junk-rated energy companies trying to raise new money to service old debt or to fund costly fracking or off-shore drilling operations are suddenly hitting resistance.

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A 50% Market Decline & No Way To Stop It

By Michael Snyder – Re-Blogged From Freedom Outpost

Is Ron Paul about to be proven right once again?  For a very long time, Ron Paul has been one of my political heroes.  His willingness to stand up for true constitutional values and to keep saying “no” to the Washington establishment over and over again won the hearts of millions of American voters, and I wish that there had been enough of us to send him to the White House either in 2008 or in 2012.  To this day, I still wish that we could make his classic work entitled “End The Fed” required reading in every high school classroom in America.  He was one of the few members of Congress that actually understood economics, and it is very sad that he has now retired from politics.  With the enormous mess that Washington D.C. has become, we sure could use a lot more statesmen like him right now.

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Here’s Where The Next Crisis Starts

By James Richards – Re-Blogged From Gold Eagle

So many credit crises are brewing, it’s hard to keep track without a scorecard.

The mother of all credit crises is coming to China with over a quarter-trillion dollars owed by insolvent banks and state-owned enterprises, not to mention off-the-books liabilities of provincial governments, wealth management products and developers of white elephant infrastructure projects.

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How Did That Get Into My Bond Fund?

By John Rubino – Re-Blogged From Dollar Collapse

Towards the end of financial bubbles, people who previously paid little attention to things like “quality” start trying to figure out what they actually own. The result is either funny or terrifying, depending on the point of view.

This time around bonds are (finally) getting a closer look. From today’s Wall Street Journal:

Decade of Easy Cash Turns Bond Market Upside Down

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Netflix Expects to Report Loss to IRS, Will Burn $3-$4 Bn in 2018, after Burning $2 Bn in 2017

By Wolf Richter – Re-Blogged From Wolf Street

Shares Soar. Bond market on cloud 9.

Wall Street gushed over Netflix’s “earnings” Monday after-hours, sending its shares up 8.5% to $246, from around $10 five years ago, giving it a market capitalization of over $100 billion for the first time. Actually, what everyone gushed over were the metrics that Netflix wants everyone to gush over, namely the number of subscribers that pay monthly fees and subscriber additions, and they’re growing. Revenues jumped 32% to $11.7 billion for the year 2017. And there were some gems in its earnings report today:

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The $6 TRILLION Corporate Debt Implosion Begins In T-Minus 3…2…

By Graham Summers – Re-Blogged From http://gainspainscapital.com

The corporate bond market is a $6 trillion time bomb waiting to go off.

It took the US half a century to grow its corporate bond market to $3 trillion.

Thanks to the Fed implementing ZIRP and holding rates there for seven years, we’ve doubled the corporate bond market, adding another $3 trillion in corporate debt… since 2009.

These bonds are junk… literally. The average credit rating is junk. All told, since 2012, 75% of companies accessing the bond market have had a credit rating of single-B.

So… if the corporate bond market is now TWICE as large as it was in 2008. And the quality of the bonds is lower than it was at the PEAK of the previous bubble… what does that tell us about the state of affairs for the markets in 2016?

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Rising Default Rates

By Chris Ciovacco – Re-Blogged From http://www.Gold-Eagle.com

Yield vs. Safety Of Principal

If an investor was given the opportunity to invest in two nearly identical bonds with one bond paying 2% per year and the other paying 6% per year, logic says most would choose to invest in the higher-yielding bond. In the real world, the bond paying 6% also comes with a higher risk of default. Therefore, when investors start to become more concerned about the economy and rising bond default rates, they tend to gravitate toward lower-yielding and safer bond ETFs, such as IEF, relative to higher yielding alternatives, such as JNK. The chart below shows the performance of JNK relative to IEF. The chart reflects a bias toward return of principal over yield.

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THE RAPIDLY APPROACHING LAYOFF TSUNAMI

By Andrew Hoffman – Re-Blogged From blog.MilesFranklin.com

Well, I may not have had “much” to say yesterday, but I SURE DO TODAY!  My god, have the “horrible headlines” multiplied in the past 24 hours (it’s early Tuesday morning), which the following two pictures summarize perfectly – in spades.

a1 a2

Yes, the Baltic Dry Index plunged 6% last week to a new all-time low, down a whopping 70% in the past five months.  Meanwhile, the Shanghai Stock Exchange, despite yet another “record liquidity injection” by the PBOC, plunged 6.4% today alone – down 46% from June’s hyper-bubble top, as it sliced through August’s spike-bottom low of 2,850 like a hot knife through butter.  The 10-year Treasury yield is back below 2.0% – “rate hike” and all; WTI crude plunged an astounding 8% yesterday alone, again, to below $30/bbl; whilst the PPT was routed in yesterday afternoon’s trading.  And how about that?  Yet again gold and silver prices rose.  Not to mention, U.S. Mint gold and silver Eagle sales; which, based on early-year results, are on pace to set new annual records.

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Torrent Of Bad News Greets Fed As It Raises Rates

[Note: The FED raised it’s benchmark Fed-Funds Interest Rate yesterday, from 0% to 0.25%, although the Bond Market (at this moment) is showing 90 Day US Treasury Bills at 0.19%. – Bob]

By John Rubino – Re-Blogged From http://www.Silver-Phoenix500.com

Ideally, a central bank would like the party to be rocking when it takes away the punch bowl. This party, however, is not cooperating. For every sign of exuberance (high-end real estate bubbles, equity and bond bull markets, job growth) there are five or six things going wrong, some of them in a big way. This morning’s news illustrates the point:

Oil slump resumes on U.S. supply build, expected Fed rate hike

Plunging energy prices are a tax cut for consumers but a calamity for the leveraged speculating community. And since finance now wags the economic dog, the latter effect is potentially a lot more serious. Look for a wave of bankruptcies and defaults across the energy world in 2016.

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Why Isn’t This Incredibly Bearish Development Making The News?

By E B Tucker – Re-Blogged From http://www.Gold-Eagle.com

There’s a very important warning signal flashing in the financial market right now.

Despite the importance of this signal, few people know about it…even fewer are talking about it.

Don’t be one of the people who don’t understand the vital importance of the bond market and what it’s telling you right now.

This knowledge could help you avoid a huge hit to your net worth over the next 12-24 months. Here’s why…

Most investors focus on just one area of the investment market: Stocks. After all, stocks have a long track record of generating solid, long-term returns. Plus, the idea of owning shares in a small business that grows large – and making 500% along the way – can capture almost anyone’s attention.

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One Step Back From The Ledge

By Michael Pento – Re-Blogged From http://www.PentoPort.com

I started Pento Portfolio Strategies three years ago with the knowledge that the unprecedented level of fiat credit creation had rendered the globe debt disabled and would result in mass global sovereign default. As a consequence, there would be wild swings between inflation and deflation dependent upon the government provisions of fiscal stimulus, Quantitative Easing and Zero Interest Rate Policies…

For much of the third quarter the US Federal Reserve has avowed to raise rates. This in turn caused a sharp stock market correction on a worldwide basis. The flattening of the Treasury yield curve and the strengthening of the US dollar were the primary culprits. But then the September Non-Farm Payroll Report came in with a net increase of just 142k jobs, which was well below Wall Street’s expectation. The unemployment rate held steady at 5.1% but the labor force participation rate dropped to the October 1977 low of 62.4%. Average hourly earnings fell 0.04% and the workweek slipped to 34.5 hours. There were also significant downward revisions of 22k and 37k jobs for the July and August reports respectively.

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