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In the financial world, the month of October is synonymous with stock market
crashes. So will a massive stock market crash happen this year? You never know. Hopefully we’ll get through October (and the rest of this year) but, without a doubt, one is coming at some point. The truth of the matter is that our financial system is even more vulnerable than it was back in 2008 and, as such, many financial experts are warning that the next crash is rapidly approaching and that those on the wrong end of the coming crash are going to be absolutely wiped out. Let’s take a look at some of the financial experts that are predicting really bad things for our financial markets in the months ahead. Words: 1634
So says an article posted at http://investmentwatchblog.com entitled Warnings That a Massive Stock Market Crash Is Imminent.
Lorimer Wilson, editor of www.munKNEE.com (Your Key to Making Money!), has edited the article below for length and clarity – see Editor’s Note at the bottom of the page. This paragraph must be included in any article re-posting to avoid copyright infringement.
The article goes on to say, in part:
We are living in the greatest debt bubble in the history of the world and Wall Street has been transformed into a giant casino that is based on a massive web of debt, risk and leverage. When that web breaks we are going to see a stock market crash that is going to make 2008 look like a Sunday picnic. Yes, the Federal Reserve has tried to prevent any problems from erupting in the financial markets by initiating another round of quantitative easing, but 40 billion dollars a month will not be nearly enough to stop the massive collapse that is coming.
A lot of people focus on the month of October because of the history of stock market crashes in this month. This history was detailed in a recent USA Today article, posted on munKNEE.com, entitled Yardeni & Dent: Will It Be Trick or Treat for Investors This October? Is a Stock Market Crash Coming? which says:
When it comes to wealth suddenly disappearing, October can be diabolically frightful. The stock market crash of 1929 that led to the Great Depression occurred in October. So did the 22.6% plunge suffered by the Dow Jones industrial average in 1987 on “Black Monday.”
The scariest 19-day span during the 2008 financial crisis also went down in October, when the Dow plunged 2,675 points after investors fearing a financial collapse went on a panic-driven stock-selling spree that resulted in five of the 10 biggest daily point drops in the iconic Dow’s 123-year history.
So what will we see this year? Only time will tell. If a stock market crash does not happen this month or by the end of this year, that does not mean that the experts that are predicting a stock market crash are wrong. It just means that they were early.
As I have said so many times, there are thousands upon thousands of moving parts in the global financial system so that makes it nearly impossible to predict the timing of events with perfect precision. Financial conditions are constantly shifting and changing but, without a doubt, another major financial collapse similar to what happened back in 2008 (or even worse) is on the way. Let’s take a look at some of the financial experts that are predicting really bad things for our financial markets in the months ahead….
Doug Short
According to Doug Short, the vice president of research at Advisor Perspectives, the stock market is somewhere between 33% and 51% overvalued at this point. Read his recent article at munKNEE.com entitled Current Market Overvaluation (from 33% – 51%!) Suggests Cautious Long-term Outlook in which he offered considerable evidence to support his position.
Peter Schiff
Peter Schiff, the CEO of Euro Pacific Capital, has been one of the leading voices in the financial community warning people about the crisis that is coming.
During a recent interview with Fox Business, Schiff stated that the massive financial collapse that we witnessed back in 2008 “wasn’t the real crash” and he boldly declared that the “real crash is coming”. Is Schiff right? We shall see.
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Robert Wiedemer
Economist Robert Wiedemer warned people what was coming before the crash of 2008, and now he is warning that what is coming next is going to be even worse….
“The data is clear, 50% unemployment, a 90% stock market drop, and 100% annual inflation . . . starting in 2012.”
Harry Dent
Financial author Harry Dent believes that the stock market could fall by as much as 60 percent in the coming months. He is convinced that stocks are hugely overvalued right now stating [Read Harry Dent Sees Dow 3,000; Seth Masters Sees Dow 20,000! Who’s Most Likely Right?)] that:
[Also read:“We have the greatest debt bubble in history. We will see a worldwide downturn. And when you are in this type of recessionary environment stocks should be trading at five to seven times earnings.”
- Marc Faber: We Could Have a Crash Like in 1987 This Fall! Here’s Why
- Goldman Sachs’ Leading Indicators Signal Steep Market Crash Ahead
- Charles Nenner: Dow to Peak in 2012 and Then Decline to 5,000!
- I’m Worried About the Likelihood of a Sharp Market Decline This Fall – For These Reasons]
So are these guys right? We shall see but I do find it interesting that some of the biggest names in the financial world are currently making moves as if they also believe that a massive financial crisis is coming.
George Soros
George Soros has dumped all of his holdings in banking giants JP Morgan, Citigroup and Goldman Sachs [read Soros Selling Stocks and Stacking Gold! Should We Be Buying More Gold Too?].
John Paulson
Infamous billionaire hedge fund manager John Paulson, the man who made somewhere around 20 billion dollars betting against the U.S. housing market during the last financial crisis, is making massive bets against the euro right now. [Read John Paulson Now Has 44% of His Hedge Fund’s Assets in Gold Stocks/ETFs! How Much Do You Have?]
So where are these financial titans putting their money? Into gold! Why? Because it makes perfect sense to put money into gold if a massive financial crisis was coming.
So is the next financial crisis imminent? We will see. Most “financial analysts” that appear in the mainstream media laugh at the notion that a stock market crash is imminent. Most of them insist that everything is going to be perfectly fine for the foreseeable future. [Read: BMO: We’re On the Verge of the Next Bull Market! Here’s Why]
In fact, most of them are convinced that quantitative easing is going to cause stocks to go even higher. After all, isn’t quantitative easing supposed to be good for stocks? [Read: QE3 Will Be More Effective Than Previous Versions – Here’s Why]
Derivatives
The first two rounds of quantitative easing did indeed drive up stock prices. The same thing will happen under QE3, unless the effects of QE3 are overwhelmed by a major crisis. For example, if we were to see a total collapse of the derivatives market it would render QE3 totally meaningless.
Estimates of the notional value of the worldwide derivatives market range from 600 trillion dollars all the way up to 1.5 quadrillion dollars. Nobody knows for sure how large the market for derivatives is, but everyone agrees that it is absolutely massive.
When we are talking about amounts that large, the $40 billion being pumped into the financial system each month by the Federal Reserve during QE3 would essentially be the equivalent of spitting into Niagara Falls. It would make no difference at all.
Most Americans do not understand what “derivatives” are, so they kind of tune out when people start talking about them but they are very important to understand. Essentially, derivatives are “side bets”. When you buy a derivative, you are not investing in anything. You are just gambling that something will or will not happen. [Read: Derivatives: Their Origin, Evolvement and Eventual Corruption (Got Gold!)]
I explained this more completely in a previous article entitled “The Coming Derivatives Crisis That Could Destroy The Entire Global Financial System“
A derivative has no underlying value of its own. A derivative is essentially a side bet. Usually these side bets are highly leveraged.
At this point, making side bets has totally gotten out of control in the financial world. Side bets are being made on just about anything you can possibly imagine, and the major Wall Street banks are making a ton of money from it. This system is almost entirely unregulated and it is totally dominated by the big international banks.
Over the past couple of decades, the derivatives market has multiplied in size. Everything is going to be fine as long as the system stays in balance. But once it gets out of balance we could witness a string of financial crashes that no government on earth will be able to fix.
Five very large U.S. banks (including Goldman Sachs, JP Morgan and Bank of America) have combined exposure to derivatives in excess of 250 trillion dollars. [Read: America’s Derivative Market is Unbelievably Huge & Totally Unregulated – Take a Look at Which Banks Own How Much] Keep in mind that U.S. GDP for 2011 was only about 15 trillion dollars so we are talking about an amount of money that is almost inconceivable…
If you want to understand the coming financial collapse, one of the keys is to understand derivatives. Our entire financial system has been transformed into a giant casino, and at some point all of this gambling is going to cause a horrible crash.
Do you remember the billions of dollars that JP Morgan announced that they lost a while back? Well, that was caused by derivatives trades gone bad. In fact, they are still not totally out of those trades and they are going to end up losing a whole lot more money than they originally anticipated.
Sadly, that was just the tip of the iceberg. Much, much worse is coming. When you hear of a major “derivatives crisis” in the news, you better run for cover because it is likely that the entire house of cards is about to start falling. [Read: Alf Field: Will Derivative Losses Be Black Swan Event Propelling Gold to $4,500?]
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Timing
Don’t get too caught up in the exact timing of predictions. If a stock market crash does not happen this month, don’t think that the storm has passed. A major financial crisis is coming. It might not happen this week, this month or even this year, but without a doubt it is approaching – and when it arrives it is going to be immensely painful and it is going to change all of our lives. I hope you are ready for that.
*Source of original article: http://investmentwatchblog.com/warnings-that-a-massive-stock-market-crash-is-imminent/#9JvDXbh0fAJP2cIg.99
Editor’s Note: The above post may have been edited ([ ]), abridged (…), and reformatted (including the title, some sub-titles and bold/italics emphases) for the sake of clarity and brevity to ensure a fast and easy read. The article’s views and conclusions are unaltered and no personal comments have been included to maintain the integrity of the original article.