Home » Economic Predictions » Epocalypse Now: The Economic Apocalypse is Here

Epocalypse Now: The Economic Apocalypse is Here

From an epocalypse of another time By Dorothea Lange, Farm Security Administration / Office of War Information / Office of Emergency Management / Resettlement Administration [Public domain], via Wikimedia Commons

When I predicted the economic apocalypse would begin for the US this month, I said the stock market would rise euphorically after the Fed raised its interest target. Rise it did. Steeply, too. I also said it would fall shortly after. Fall it did. Quickly, too. Now I’m saying the Epocalypse is here.

Just as I stated that “the rate at which the market goes up now is a measurement of pure euphoria,” by the same token, how quickly that euphoria falls off indicates just how far down the downside is. If you have ever floated in the ocean and felt yourself unexpectedly drop way down with the water, you know that means a huge wave is coming up right behind you.

“Particularly watch out,” I warned, “if the euphoria cools quickly because, after more than a year of concern over what would happen when stimulus ended, there is a lot of relief the bulls would like to celebrate. If the euphoria cools quickly, it’s likely to mean things are ready to go down hard and fast.”

While I said in my last article, “Their party could last for days or end tomorrow,” I actually anticipated the euphoric rise in the stock market would last several days, given how long investors feared what might happen when the Fed raised rates and how relieved they’d be that the sky didn’t fall that day … and how persistent they have been in taking bad news as good news.

That the market turned so quickly on itself is a strong indication of how different the Epocalypse will be compared to previous Fed tightenings following previous recessions where the revelry over recovery lasted longer. For such a long “recovery” out of such a deep hole, the celebration sure was short!

During many Fed tightenings, the stock market and overall economy improved for years afterward … because the Fed stimulus had actually brought a temporary form of economic recovery. Rarely if ever has the mood turned dark so fast after the Fed officially announced that the recovery is sound and the life support can be removed.

So, even while I knew the global economic news was bleak, I didn’t expect the market bulls to snuff out their own ecstasy the day after the ball began. I can only imagine how much the permabulls wanted to go on air that next morning to revel in their “We told you so’s” about how the economy would do just fine after a Fed rate hike. Only they could not. They woke up to face reality.

As the new week begins, everyone is nervously guessing which way the market will continue. That also tells you the market is starting to realize that bad news is only bad news from this point forward.


The party in the bull pen is over


Federal Reserve Chair, Janet Yellen, looked visibly happy when she was able to make the announcement of her lifetime — the claim that things looked optimistic enough for the Fed’s recovery that the Fed could finally end its economic aid. Never before has a Fed chairman looked less dour and more ready to crack open the champagne for the big Fed Christmas party.

Her market minions gleefully rewarded their queen with am immediate rise of 200 points in the Dow Jones Industrial Average during the remains of the day after she delivered her glad yule tidings.

The market, however, decided to crash the street party along Wall Street the next morning by dropping 253 points — farther than it had risen during the celebration. The real gravity of those numbers was proven when the fall picked up speed for a 367-point plunge the next day, bringing the stock market down over 600 points before it closed at the end of last week.

And, so, the Fed’s rate hike made this the most volatile December for the Dow since the economic crisis of 2008. Moreover, since 1990 Decembers have been the least volatile month of the year. So, something is different this time. Something is very deeply and disturbingly different if you compare this seventy-degree day of Winter Solstice in Washington to any other.

This isn’t your typical placid and merry December. Friday’s sell-off was the sharpest one-day plunge since September, and trading volume has been higher than usual in December as investors jockeyed to position themselves for the Fed’s anticipate rate rise. This is the feel of something big beginning to creep.

The sharp sell-off of in stocks across all sectors of the Dow in the heaviest trading of the year came because of news that oil prices were still falling and fear over what this means for banks that are heavily involved in financing highly leveraged oil companies. For the past several years, such news would have caused the stock market to rise because it would mean another year of struggle in which the Fed would be hard at work trying to re-inflate the economy by giving free money to its banksters.

All ten sectors of the S&P 500 also closed in negative territory Friday. For the Dow, it was the third weekly decline in four weeks. Reality, in other words, hit the face like a glass of ice water the morning after the party. For the market bulls, it was off to work with a hangover.

The sobering fact that bank stocks were the first to decline was a surprise to many (including myself). Common wisdom throughout the market expected bank stocks to rise the fastest when the Fed raised rates because the rise in interest would actually improve bank profits since so many of their adjustable-rate loans and credit cards are pegged to interest rates that are strongly affected by the Fed’s target.

Banks will be collecting more in interest but they will be slow to start paying more interest on deposits, so were expected to benefit. Yet, financials went down because banks ensnared in a commodities massacre look edgy.

Even high-tech stocks, which have been supporting the narrowly traded market fell last week with the King of Stocks, Apple, down 10% for the month! That means Apple, leader of the Dow, is already in correction territory.

It looks like there’ll be no Christmas rally for stocks this year because the Federal Reserve turned off the free money … just in time for Christmas.

The global market went into a similar slide two weeks ago when the European Central Bank did a little quantitative wheezing that didn’t satisfy the demands of its junkies. Likewise with the Quantitative Queen, Japan, where five rounds of QE have now failed to jack up the economy any longer than the QE lasted. QE is so unsuccessful that Japanese income and household spending are in decline again, even with the money pumps still running.

The Epocalypse is everywhere.


Read the exposé Republicans and Democrats both hate, and learn how the Federal Reserve corrupted capitalism in America to bring down the nation with the support of both parties.


Santa Claws Offers Little Hope for a Christmas Rally


Some might say that stocks have only fallen because of a badly timed bout of bad news, which just happened to hit as the Fed raised rates; but that has been my point throughout this year of predicting the global economy and US stock market would both crash in the fall of 2015. This is the same bad news that has been happening all year — the same bad news that I said would only become more intense by the time the Fed finally did raise rates, so that it would be making its transition with the worst possible timing and be totally blind to that because the Fed doesn’t look at the right indicators.

The news trend all year has been tilting from moderately bad toward terrible. My predictions of the Epocalypse have been based on the loss of the loft effect from the Yellen put at a time when economic down pressures would become intense. We went back to reality on December 16. The market will now drop when bad economic news happens, and there is a lot of bad economic news happening all around the globe right now, so the kinds of drops in the market we saw last week will keep happening because there is little upside to bad news anymore and little chance of that trend changing anytime soon.

What market investors need to realize is that the critical importance of the Fed’s rate hike is not the meager quarter-of-a-percent rise in its interest target; it is the fact that the move off of the zero bound puts us back into the real world where bad news is now only bad news because bad news can no longer stave off the Fed’s first rate increase. That’s done.

So, gone are the drunken years of dissipation when bad news came to mean that speculators could anticipate a vault full of new free money from the Fed. No longer will the market get a rise out of the hope of more stimulus. This is an environment many market investors and advisors have never experienced in their neophyte careers. The market right now is hunting for news, looking for some clue of which way to go in this new environment, and it will go the direction the news takes it. And there is a lot more negative economic news in the pipeline now than positive.

What everyone is — or at least should be — starting to understand is that when this stock market crashes the market has no airbags. There will be wounded.


There are plenty of skeletons in the closet for Christmas:

  • The commodities market has already crashed, and from all appearances it will go down further, as economic conditions are worsening in China.
  • The impact of the commodities crash has already started a junk-bond bloodbath, which has already leaked over into investment-grade funds, which saw record outflows last week.
  • More hedge funds have already failed in 2015 than in any year since the 2008 financial crisis.
  • Now that bad news is only bad news, stocks have finally begun to slide, including the high-tech stocks that were helping support the market when other stocks were falling. Now, every sector of the stock market is falling.
  • Banks are heavily involved in the failure of junk bonds and in the decline of their own stocks. As sub-prime housing loans, subprime auto loans, student loans fail, banks will experience more downward pressure. So, banks will fail; but this time banks will follow the cascade of events, rather than lead it.


Look at those events and ask yourself, “Aren’t those the conditions under which central banks normally begin stimulus, not bring it to a close?” That ought to tell you a lot about where the Fed’s tightening is going to go, and the Fed cannot simply reverse course if things go from bad to worse because to do so would clearly be to admit its recovery was an immediate failure.

To do so would also require overcoming huge inertia the Fed must feel toward starting back down a course that it had such a hard time getting out of and which it so rejoiced to bring to an end. To do so, will also require overcoming the Fed’s denial, which causes it to really believe it’s program was a big success. To do so would also require Yellen to lose face for having just pronounced the economy sound like Ben Bernanke stated in 2008 when he saw no recession in sight.

One thing after another will now unravel as the most massive asset bubble in history unwinds globally, and the heaviest mountain of debt ever known to humankind crushes down upon it. The market is only starting to realize that there will be no Fed support in the short term if things do go bad. They still have no idea that an economic apocalypse is dawning.

How bad will it be? One of the most reliable leading indicators of a market crash has historically been a sharp rise in the difference between the yields of reasonably safe investment-grade bonds and junk bonds. An article today in Bloomberg asks the same question about how bad a stock market crash right now might be:


How bad? In the three months before August 1929, the high-yield spread spiked by 47 basis points, and in the three months before May 1937, it shot up 85 basis points. In the past six weeks of 2015, it has spiked by about 120 basis points.


Investors are just starting to see in the meager light through their fuzzy hangovers, but still have little idea how bad this crash is going to be. So, there is a lot of fear to set in when denial breaks.

Denial and a nearly religious belief in political-economic ideas of both parties, however, are hard to break. So, many will think I’m foolish to name something like this the “Epocalypse” and to claim that it has now begun. And the stock market, of course, will attempt rallies, maybe even a brief one for Christmas, as it loves to rally then anyway. If it does,  it is nothing but a spurt of optimism cheered on by holiday feelings, the hope of getting some of that party spirit back that was shorted after two hours, and the lack of much economic news to go on today, leaving the market scouting around for a sense of direction in this fuzzy new world they are unaccustomed to. It probably won’t even have enough holding power to last the week. If it doesn’t rally at this generally upbeat time of year, which is usually a great time for the stock market, it really is going down fast.

I am willing to take the chance of people saying such things because I am fully certain proof that the US stock market crash began the day after December 16 and was triggered by the Fed’s change of course on December 16 will quickly become a fact of history. I think the Epocalypse will even be big enough to break through nearly everyone’s denial, and critics of this claim will have to stuff their words back in their mouths in a hurry.

Even afterward, some will still argue foolishly for their own ideas about how and why it happened; but they will believe no more in the Fed’s phony recovery, and they will soon enough be forced to realize the Fed delivered a bear at Christmas.


Books to read during the Epocalypse:



  • Marcus Cake

    Your work prompted deep thought! A draft comment became a blog article “The Epocalypse (economic, epoch, apocalypse, collapse): Fear not … Evolution is just forcing an overdue Shift to Network Society”. It is available at http://www.wisdomnetworks.im/epocalypse.html .

    We also prepared a ‘One page plan to restore transition, evolution, wisdom, prosperity and peace’ ( http://www.wisdomnetworks.im/1-page-plan.html ). This is our view on what comes next. The world has been singularly focused on saving the ‘Industrial Economy’ development model that it has devoted little to what comes next. Society has crowd created the individual pieces of ‘What comes next’. We think the one pager simply puts all the individual pieces on one page.

    The USA Wisdom Network page provides a initial introduction of the possibilities. It is available at http://www.wisdomnetworks.im/usa .

    There are some great comments on productivity and the consumer-producer exchange also on this page. ‘More with less’ also means that one person’s production is another person’s income is ultimately broken. 1.4% of people in the world feed the rest (or could if 1/3 of food was not wasted and centralist structures didn’t prevent distribution). The same happens with services. The problem then becomes if 10% of the population produce everything … on what basis do the producers provide goods and services to the consumers. Is this not what we see in the world today. Consumers that can’t provide value (ie sound money) to producers. Where are the new sectors to which people get redeployed from where income can be earned to pay for goods/services in the older sectors. What if there are no new sectors. If there are no new sectors, then do unemployed starve, or is there a new social contract. Is such a social contract (between people and countries) even possible?

    • Always nice to be an inspiration. Thanks for sharing that. It’s particularly an interesting comment in light of beliefs expressed in a comment or two about “bears” not being able or perhaps likely to be innovators; but what you are saying is that extinction periods that take out corrupted system create room for new life forms to merge. Sometimes these cleansing or purging periods are exactly what gives room for innovation, painful and deadly and destructive as they can be. What comes to mind in ordinary timeframes is a forest fire, where we see all kinds of new life emerge that wasn’t there before after the fire has cleared the way. It’s not that we would ever want such things to happen, but those who can see what is happening are probably best able to adapt and to make it through the transition. One of the reasons I called this an “apocalypse” is because I do believe it will certainly transition us into a more global economy. (The good or bad of that is another matter, but that it will bring change is certain.)

      • BRELG

        A number of ways to reset the system exist if you disregard 5000 years of recorded human nature. However, given ( spiritually unregenerate, at least ) human nature, I think this description of a reset given by Kunstler is most likely to occur. Please pardon his bad language.


        • I operate right now on the basis that clearly much of the worst of human nature is already prevailing. The bank bailouts were an extravaganza of crony politics, and America barely peeped over having taxpayers money snarfed up to help out the pompous and wealthy so they don’t fall flat on the rest of humanity. Now colleges are throwing away their freedom of speech just to make sure no one is offended by ideas they hate. The social deterioration is happening surprisingly fast. I read today that NYC is thinking of implementing a quarter-million-dollar fine against hate speech for anyone who intentionally offends cross-gendered people. So, we have entire protected classes.

          So, my advice here and my economic predictions are based on trends toward moving cashless, becoming more centralized, more globalized, the economic pressures that are building all over the earth, and the explosion of greed that is ongoing … because those ARE the current trends. I am certain of a coming epocalypse because I see no movement toward justice or toward supporting a vibrant middle class or toward sound economic fundamentals. Since evil contains the seeds of its own destruction, this system will self-incinerate in an economic apocalypse. I am certain of it, so generally share your position on which way things are headed.

          That said, I am always for putting forward ideas that could bring positive change because I think we have a duty to our nation to not just throw in the towel but to present what could be done right. I think presentations of what can be done that is right also bring all that is being done that is wrong into greater contrast (as anyone can sit back and criticize, but a valid question is always, “Do you have anything better to suggest?”

          If nothing else, presenting the positive actions that could be taken to restore the economy along with presenting the wrong ones that ARE being taken and that are damaging the economy in the long term, strips away the excuses of the corrupt. They cannot say their way was the only way because a better way was presented and rejected by them the entire time. The more presentation better ways get, the less excuse the corrupt have for not taking those roads.


  • Alleged Comment

    2016 to a bear market? They will try to make the negro Moslem look good for Hillary but at the same time the economy is being held up by air only. Will be an interesting year.

    • Race has nothing to do with it, so to provide some balance to that intruding element, I’ll just say that I have found children of mixed race to be the most beautiful people on earth and typically highly intelligent and athletic. So, when we mix races (as can be seen in Obama, whose policies I often do not like), we seem to increase our strengths by bringing together the strongest qualities of each. Bringing two divergent races together empowers us. However, it does not bring any benefit to our politics because one can be smart, handsome, and athletic, and still have some very bad philosophies.

  • jakartaman

    I believe silver and gold still have a ways to go down but where to protect your assets is a mystery – at least for this guy.

    • It is! When you have a global economic collapse that is much, much wider in scope than just a stock market crash, it’s hard to know if there is any safe haven in such a storm. For myself, I think cash is safest, property has some intrinsic security being always necessary for shelter (a prime human need), but it will drop in value. Gold can be and sometimes is manipulated by central banks, but it generally recovers to its value. US bonds are secure if you own the actual bond for it term and not just participate in a bond fund that can get wiped out from a run. I say they are secure because the US government would have to collapse before the bonds defaulted, and if things get that bad, all bets are off for every safe haven.

      • jakartaman


  • jakartaman

    The only question is how bad will bad be?

    • Indeed. One way of evaluating that, in terms of the stock market is to say, “Where would the market be if NONE of the Fed’s stimulus had happened and if none of its crazy loose loan policies were in place (as well as other government sloppy loan terms). That line adjusted for inflation is where the market would be without all the fakery. I.e., project out the trend line that existed before all of that nonsense. That line projected out today would be somewhere between 6,000 and 10,000 for the Dow. Basically, it projects to to 6,000; but allowing for some reasonable steepening due to the vast improvements to home computers and development of the internet could mean the line would arch somewhat steeper even without the junk. So, I am saying, it COULD go as low as 6,000, and I suspect it will drop to somewhere around 10,000. But that’s just the stock market, which is not the economy, though it is often talked about as if it were. The economy will have all kinds of dreadful things happen, but impossible to say where all the pieces of something so complex will fall. It would be like predicting which brinks in a structure will remain in place during the next earthquake and which ones will be lying in pieces on the ground.

      • jakartaman

        Again – Thanks
        I am betting that once the negative inertia begins it will be hard to stop or control
        I am thinking very bad things.

        • Like a train wreck … it keeps on wrecking!

  • disqus_0YHjy6V7JN

    We’re projecting self-fulfilling prophesy here, an economic jinx. Capital is moving B2B, not C2B, and manufacturing jobs will never come back to the US. That shouldn’t be any surprise. This is a post industrial economy, plain and simple. Machines and programmers will do much of the work not humans. We are a service based economy. There is a lot of debt out there, and need the economy and debt has always driven the world’s economy. Corruption always existed. There are systemic issues, but we’re killing this end of the world doom and gloom crap. Why??? Simple; it is what sells. It’s not about truth as much as it is your attitudes. Doesn’t make any difference to me because I can still make money off you clowns because I can easily predict you next dumb move and how it affects the market. Keep on with your woe as me we’re doomed crap.

    • And all of that sucks.

      It is also far worse and more negative in its own way than my doom and gloom.

      If only I really had the power you describe to where I could jinx a good economy or use the same power to fix a bad one … with my mere words.

      According to your reasoning, if anyone ever predicts the economy is going down, they’re just wrong and negative and destroying a good thing with their talk. In that case, there never is a bad economy, no matter how many bad facts one can see, and never is a reason one should go down due to its own flaws.


      • disqus_0YHjy6V7JN

        Innovative! others may see the benefit of what you said. Incredibly insightful. Thanks for sharing!

        • BRELG

          There can never be a service-based economy for the long run. Say’s Law is inviolable. Members of society must produce actual goods in order to consume other actual goods. Any nice “services” that are either essential or optional must be paid for out of extra buying power paid for by productivity increases, remember, IN THE LONG RUN. Any services in the short run used in excess of the productivity increases must be paid for out of the issuance of credit.

          This is how we have turned the real, Say’s Law, world upside down to where it is now unrecognizable to the layman: we instead set up ( banking/government ) systems to issue naked credit to nonproducers; credit that essentially undermines the purchasing power of existing money via increasing its supply. This reduction in purchasing power then negates the organic increase in purchasing power that increasing productivity would have produced. In other words, if productivity increases a net 5% per year in a society, and we grow credit by more than 5%, we have just removed the REAL benefits to society from productivity, and replaced it with credit, which “enriches” ( with money, not wealth – don’t confuse them ) a separate group of people than the producers. Then we take it far beyond that by allowing that to develop into an entire society based primarily on credit, with production of goods relegated to a secondary role. That destroys and neglects capital, used for production, and causes it to flee to areas where it finds its relative value again. Meanwhile, the “service-based”, credit-funded society cooks along blithely unaware that it can only exist as long as others believe there is some chance they will be repaid for trading their goods for credit. That might go on for decades, if the originally-productive society has enough extant wealth and capital to draw down to trade for goods. We all live on food, clothing, fuel, shelter. At some point, though, others will no longer trade our “services” for these things, as the aggregate credit that funds them loses, well, credibility. I think we are very close.

          • disqus_0YHjy6V7JN

            What you have said is the dilemma. Manufacturing is too expensive which is why it has moved to other nations like China and other places where labor costs are low and where workers have fewer protective rights. But that will change there as well because they are going through the industrial stage we went through. This is why so much capital is invested in technology i.e. artificial intelligence to do the manufacturing; refer to current G.E. commercials. I agree producing goods is key – we did it before didn’t we? Well what if innovators of the past i.e. Ford had the attitude many have here on this blog? Many people thinking about manufacturing “old school” will be displaced and the manufacturing that some current politicians talk about – bringing back or simply “taking it back” will never happen. You can’t legislate where companies have to do business or punish them to bring jobs here. On the other hand, we need innovation to restore our competitiveness. That requires optimism and there are innovators in our country, but you would never find them reading the stuff on this blog. This largely kills innovation (not all of it) and is too doom and gloomy for an innovative mind. People’s minds are stymied today thus the economy is stymied by deep negative sentiment. There are real problems that we face and none of us have all the answers. Answers come from human innovation and the die trying spirit. This my friend we have lost. We’ve lost the capitalist spirit. We have turned into a sour bunch of complainers. Needed innovation and leadership to produce anything work buying will never come out complaining and bashing. Never mind the economy, that my frIend is another reason why we’re so doomed.

            • This is so typical of permabulls. When the market clearly fails to live up to their hopes, and the bears turn out to be right, they say, “You spoiled it with all your negativity.” It could never be that the bulls had become blindly optimistic or that they’r wrong in thinking the world should only go up all the time.

              It could never be that some of the bears (at least, the ones who are not permabears) simply saw what is coming CORRECTLY. It couldn’t be that the market is dying under an crushing mountain of debt. It couldn’t be that commodities were dangerously financed because so much money was looking for a place to land so it got sloppy on what it would buy because the Fed had erased all safer options by manipulating interest to zero, rather than letting the free market price interest. It couldn’t be that the US economy and global economy is DYING because the only thing keeping the globe afloat for the last several years was the rising consumption of the largest nation on earth (by population) and the biggest creation of money mankind has ever witnessed and that when BOTH of those go down at the same time, they are going to suck everything around them down like the undertow from the sinking Titanic. It couldn’t be that the stock market was only kept alive during the past year by the stock buybacks of hundreds of corporation financed because of zero interest. And it couldn’t be that we continued all the worst credit policies that contributed to the Great Recession so that our credit market is rickety at best.

              No, none of those MASSIVE forces has a thing to do with it at all. It’s all going down because of a few minor-league naysayers like myself. Its dying from a handful of killjoys — even though the number of rosey-eyed bulls in the world of financial forecasting has vastly outnumbered the bears for years now and even though they still slightly outnumber the bears so that most of what is heard is endless bullish optimism. The bears are just bringing it all down because they are a faintly heard squeaky, negative voice.

              Wow! How easily your robust economy dies from the weakest of voices. It must have been a shambles to begin with. You live in a world apparently controlled by feelings.

              Yes, production has moved to China because China is more competitive for the moment. That doesn’t mean we had to do everything in our power to encourage it to move in that direction as we most certainly did. Yes, robots are taking over the process of that production, BUT that is not a move away from a production-based economy. That is STILL production. It’s just being produced in a different way.


            • disqus_0YHjy6V7JN

              I respect what you say; however is it bears who really spark any innovation? Should we be commit suicide? Robotics is production. Debt will continue whether we’re producing or not. Money flows where it is innovatively convenient – here or there. Money knows no international borders. There are winners and losers and whiners and whiners don’t make money. Maybe we should also forget about innovation; it’s a thing of the past. If you are lost and stuck on top of a mountain and can’t get down, some will cry and die. If you expect to live, you better figure out where you next meal is going to come from or be eaten in the self devouring feeding frenzy.

            • BRELG

              Yes, Dave, thanks for simplifying. The problem is debt growth that has far exceeded growth of production, period.

              All human and financial incentives, or optimism, or whatever you want to call it, are reduced and eventually destroyed when debt does not reflect the ability of the society to pay it back in goods. We started down that path, the results are determinate when that is done, and we will soon be at the denouement regardless of hollering and hand-waving.

            • I agree. We will start to hear the bulls crying in their punch bowl and whining that it is all the bears’ fault. “If those mean ol’ bears hadn’t poo-pooed the party, the party would still be happening.” Hard reality tends to hit those who refuse to see it coming. Those who see it, step out of the way.

            • Sure bears do. I’m a creative guy (not in technology), and I’m a bear at the moment. I’m a realist, so if the moment calls for being a bear, then I’m a bear. It’s simply what is going to happen, and I’d rather not be blind to it. There is nothing suicidal about looking up and saying, “A train is about to run over me,” IF IT IS. In fact, it is refusing to deal with reality that is suicide.

              But I’m also a person who feels positive about his life and loves creating things. My creations come in the form of landscapes, photography and poetry. There is no correlation at all between seeing reality and giving up on innovation. The reasons so many bulls get slaughtered when bear markets happen is because they refused to look at reality as it was building up against them.

              I agree that robotics is production — very much. First, one produces the robots, then the robots speed up your production. In fact, so far, they work better in production than in services. They raise a question of what will happen in employment as a result, but we’re going to have to deal with that, and I am optimistic that — IF WE HAD A SOUND ECONOMY — we could and would deal with it to our advantage.

              Debt was a disaster from 2007-2009, and it is perfectly set to be an even bigger disaster now. There were many losers when debt self-destructed in those years. Many, many, MANY losers.

              Calming a bear market is coming is not whining. It is wisdom. It is always folly to deny reality. That’s when the mirror of the truck coming your way slaps you in the face because you didn’t see it coming. Seeing reality is a survival technique. You cannot adapt your skills to the next ice age if you don’t see it coming.


  • Eddie


    Great posts!
    As worldwide markets crash and defaults accelerate to what degree do you see foreign capital flight to the US Stock Market keeping the crash from being so bad and after that passes do you see the US Stock Market going back up again higher than today because it will be perceived as the only and last place to invest worldwide?


    • I’ve wondered about that. It’s the one thing I could think of that could easily be my undoing over my bet. I think there is some chance that US market will get bids because (as I’ve put it elsewhere) it’s the best looking horse at the glue factory. I thought about writing exactly what you’ve said in as a caveat to my bet, but then I hate it when people put in a lot of qualifiers. Seems like they are just preparing an escape route for their bet. In the end, I decided that if the market actually starts to crash, its not likely to be something people would want to run toward. If the European stock market crashed first, then the money flowing to America could prevent a crash from happening; but I felt pretty certain the European market would be less likely to suddenly get worse than the American one would. Europe has already got its problems and there has been some capital flight to the US, but it was not able to drive the market up while the Fed was at Zero interest, so I don’t think it’ll provide much float after.

      • Eddie

        Sounds reasonable.

        Have a Merry Christmas.


    Dave, you are spot on here. Good job ! A lot of the “rallying” that has occurred since 19Aug, 2014 ( yes, 2014 ), is due to the completely unfounded feeling that “if we ALL just stick our necks out and buy, then the markets will go up due to that alone, then we hold our breath and our stocks, and we will all benefit. Otherwise we all lose.”. This ludicrous unspoken deal has even been entered into the algos’ momentum processes, and also drives the corporate stock buybacks. However, it is all only mass repressed desperation psychology to counter the ugly truth that the real economy is failing undeniably, and fast. The mass psychology was breaking down even prior to 16Dec ( cf. August 2015 ) because the depletion of wealth, profit, and capital is becoming extremely obvious. Then Yellen’s gleeful rate announcement, which she had no choice but to make because of the same desperation psychology dynamics, really pulled the rug out. Only a remnant has been able to see what has been occurring, but it is OVER, DONE, now.

    • That’s how I have seen it all along, too. It’s just speculators speculating on what all the other speculators will do, and the Yellen Put made it easy for them to do that. That “put” is why Ben Bernanke said he though the Fed should become more transparent in its communications. The only way you can get all the speculators going in the same direction is if you tell them in advance what you are going to do and how much of it you’re going to do.

  • Hi, Dave. Thanks (:-/) for the latest heads up. You should watch Jim Cramer (MoneyChannel) squirm. He will forever try for a positive spin as he trips over his own tongue. He did the same during the last crash. Amazing stumbling act.

    On another note, do you know anything about home equity insurance? If so, ever heard of EquityLock Solutions?