The thundering sound of collapse is getting closer and louder. The terrorist threat has been pushed to the four corners of the world and there are warning signs all around us. The US government is getting ready to sign the UN arms treaty, we had a shooting at a school which will then lead to another false flag where the gun bills will be passed. This fall there is the threat of tapering, the Muslim march on 911, the Cyber Threat on Banks on 911 and the power grid drill in November. Countries and investors are starting to take delivery of physical gold. The Thunder has been called down and it’s here.
But clearly if the President is having this meeting, there is a crisis unfolding somewhere in the background, and it could very well relate to the dollar, interest rates, and the massive derivatives market associated with interest rates….
“Rising interest rates are a killer in an over-levered economy, and that’s exactly what we’ve been seeing in the United States.
This surge in interest rates may have already seriously destabilized the entire financial system, and that’s why there is this meeting taking place in the White House today. The fact is that the vast majority of derivatives in the global financial system are related to interest rates.
Now, the entire financial system may be on the precipice of some sort of catastrophic event unfolding because of what we have already seen in the bond market, and how the derivatives are so heavily intertwined. Meaning, we may be on the verge of another disastrous derivatives meltdown.
The following are 18 signs that global financial markets are entering a horrifying death spiral…
#1 The yield on 10 year U.S. Treasuries has risen for 5 of the past 6 days, and it briefly touched the 2.90% level on Monday.
#2 Rapidly rising interest rates are spooking investors and causing them to pull money out of bonds at a very rapid pace…
Investors have yanked nearly $20 billion from bond mutual funds and exchange traded funds so far in August. That’s the fourth highest pullback ever, according to TrimTabs data. In June, investors took out $69.1 billion — the highest on record.
#3 The sell-off of U.S. Treasuries is being led by foreigners. In particular, China and Japan have been particularly aggressive in selling off bonds…
China and Japan led an exodus from U.S. Treasuries in June after the first signals the U.S. central bank was preparing to wind back its stimulus, with data showing they accounted for almost all of a record $40.8 billion of net foreign selling of Treasuries.
The sales were part of $66.9 billion of net sales by foreigners of long-term U.S. securities in June, a fifth straight month of outflows and the largest since August 2007, U.S. Treasury Department data showed on Thursday.
China, the largest foreign creditor, reduced its Treasury holdings to $1.2758 trillion, and Japan trimmed its holdings for a third straight month to $1.0834 trillion. Combined, they accounted for about $40 billion in net Treasury outflows.
#4 Thanks to rapidly rising bond yields, some of the largest exchange-traded bond funds are getting absolutely hammered right now…
• The $18 billion iShares iBoxx $ Investment Grade Corporate Bond fund (ticker: LQD) has fallen 7.94% since May 2, according to S&P Capital IQ. That’s including reinvested interest from the fund’s bond holdings.
• The 3.7 billion iShares Barclays 20+ Year Treasury Bond (TLT) has plunged 15.9% the same period. Longer-term bonds typically get hit harder when rates rise than shorter-term bonds. For example, the iShares Barclays 3-7 Year Treasury Bond fund (IEI) has fallen 3.2% since May 2.
• PowerShares Emerging Markets Sovereign Debt (PCY), which invests in government bonds issued in developing countries, has fallen 12.7%. The fund has $1.8 billion in assets.
#5 In recent weeks we have witnessed the largest cluster of Hindenburg Omens that we have seen since prior to the last financial crisis.
#6 George Soros has bet a tremendous amount of money that the S&P 500 is going to be heading down.
#7 At this point, the S&P 500 has fallen for 9 out of the last 11trading days.
#8 Margin debt has spiked to extremely dangerous levels. This is a pattern that we also saw just before the last financial crash and just before the dotcom bubble burst…
The exuberant mood comes as margin debt on Wall Street hovers near $377bn, just below its all-time high and well above peaks before the dotcom crash and the Lehman crisis.
“Investors have rarely been more levered than today,” said Deutsche Bank, warning that the spike in margin debt is a “red flag” and should be watched closely.
#9 The growth rate of new commercial bank loans and leases is now the slowest that it has been since the end of the last financial crisis.
#10 According to a shocking new report, Fannie Mae and Freddie Mac are masking “billions of dollars” in losses. Will they need to be bailed out again just like they were during the last financial crisis?
#12 U.S. consumer bankruptcies just experienced their largest quarterly increase in three years.
#13 The velocity of money in the United States has hit another stunning new low.
#14 The massive civil unrest in Egypt threatens to disrupt the steady flow of oil out of the Middle East…
After last week’s bloody crackdown by the Egyptian army, fears of a disruption of oil supplies to the West have boosted the oil price. Brent crude prices werepropelled to a four-month high of $111.23 on Thursday. If the turmoil gets worse – or unrest spreads to other countries – the risk premium currently factored into the price of crude is likely to increase further.
#15 European stocks just experienced their biggest decline in six weeks.
#16 The Japanese national debt recently crossed the quadrillion yen mark, and many are expecting the Japanese financial system to start melting down at any time.
#17 In Indonesia, the stock market is “cratering“.
#18 In India, the yield on their 10 year government bonds has skyrocketed from 7.1 percent in May to 9.25 percent now.
As the coming months unfold, keep a close eye on the “too big to fail” banks both in Europe and in the United States. When the next great financial crisis strikes, they will play a starring role once again. They have been incredibly reckless, and as James Rickards told Greg Hunterduring an interview the other day, we are in much worse shape to deal with a major banking crisis than we were back in 2008…
What’s going to cause the next crisis? Rickards says,“The problem in 2008 was too-big-to-fail banks. Well, those banks are now bigger. Their derivative books are bigger. In other words, everything that was wrong in 2008 is worse today.” Rickards goes on to warn, “The last time, in 2008 when the crisis started, the Fed’s balance sheet was $800 billion. Today, the Fed’s balance sheet is $3.3 trillion and increasing at $1 trillion a year.” Rickards contends, “You’re going to have a banking crisis worse than the last one because the banking system is bigger without the resources because the Fed is tapped out.” As far as the Fed ending the money printing, Rickards predicts, “My view is they won’t. The economy is fundamentally weak. We have 50 million on food stamps, 24 million unemployed and 11 million on disability, and all these numbers are going up.”