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Why The Next Drop Will Likely Be 30-40%

A re-awakened bear can do a lot of damage to a bubble market
Friday, October 23, 2015, 3:12 PM

Executive Summary

  • New bear market + re-enter recession = 30-40% drop in stock prices
  • What are the chart of the best technical indicators telling us?
  • Confusion reigns during the transition from bull market to bear
  • Why volatility will reign & capital protection should be prioritized

If you have not yet read Part 1: Has The Market Trend Shifted From Bull To Bear? available free to all readers, please click here to read it first.

It’s The Global Economy, Stupid!

I believe another key question for equity investors right now is whether the recent noticeable slowing in global economic trajectory ultimately results in recession.  Why is this important?  According to the playbook of historical experience, stock market corrections that occur in non-recessionary environments tend to be shorter and less violent than corrections that take place within the context of actual economic recession.  Corrections in non-recessionary environments have been on average contained to the 10-20% range.  Corrective stock price periods associated with recession have been worse, many associated with 30-40% price declines known as “bear market” environments.

We can see exactly this in the following graph.  We are looking at the Dow Jones Global Index.  This is a composite of the top 350 companies on planet Earth.  If the fortunes of these companies do not represent and reflect the rhythm of the global economy, I do not know what does.  The blue bars marked in the chart are the periods covering last two US recessions.  US recessions that were accompanied by downturns in major developed economies globally.  As I’ve stated many a time, economies globally are.... » Read more



Devastating Shale Oil Losses

Coming soon to a bank near you
Monday, October 19, 2015, 3:12 PM

Sometimes it helps to examine one narrow slice of the pie as a means to understanding the entire pie. In the case of the shale oil Ponzi scheme, we can both wrap our minds around the scale of the predicament and also answer the question of who the losses will be foisted on.

Once we’ve done that, you should be able to simply apply the same logic and learning to other sectors of the financial universe.  Learn one sub-bubble, learn them all; like a fractal foam of misadventure. » Read more


Jaroslav Machacek/Shutterstock

How To Protect Yourself & Profit From This Manipulation

Also: is the bottom in for precious metals?
Friday, October 16, 2015, 6:45 PM

Executive Summary

  • What the Great Gold Smash of 2013 tells us
  • Was $1,075/oz gold the bottom? Is the bottom indeed in?
  • Is a new bull trend ahead for precious metals?
  • How to hedge against -- and speculate on, for those who dare --  future manipulation attempts

If you have not yet read Part 1: EXCLUSIVE: The Smoking Gun Proving Silver & Gold Manipulation available free to all readers, please click here to read it first.

Now let's look at the great gold smash of 2013.

There were three separate operations I saw on or around the gold smash of 2013:

Operation #1: On April 12, gold had already broken below the 1525 support level to close at 1501 after dropping $100 over the two preceding months.  After a long decline followed by a support break, the market was in a very fragile state.  Sunday rolled around, and “someone” chose this moment to unload $95 in 13 volatility events over the course of just 13 hours.  This avalanche decisively drove gold down $150 in just one day.  This engineered follow-through using volatility events coming immediately after the support break resulted in the total annihilation of the longs.  Price still has not recovered from that move.

Operation #2: two days after the $150 drop, another 3-event $23 assault completely failed.  Price did not move at all.  In fact, it rallied on the day.  Why?  Why didn't we get another $150 drop?  Well, 1325 turned out to be strong support.  Buyers came out in droves to pick up the lower-priced gold.  And so when gold dropped $23 due to the volatility events, COMEX buyers snapped up the lower priced gold, and as a result the assault completely failed.

Operation #3: two months later, another 1-event $24 assault had only a very minor effect.  Price fell that day a few bucks, which was regained the day following.  Support was not quite as strong, but the market was clearly not in a fragile state at that point either.  This assault failed as well, since there was no support break and no price reset lower.

Here are three events, in relatively close proximity to one another, but under three different sets of “chart circumstances” which provided three different outcomes.  One worked, two others didn't.  The difference, I maintain, was where the market was at each point.  Fragile markets appear vulnerable to volatility events.  Strong markets are not.

Now let's look at the most recent event: July 20, 2015... » Read more


Peak Prosperity

Off The Cuff: Prosper!

Announcing the upcoming release of our new book
Friday, October 16, 2015, 2:15 AM

In this week's Off The Cuff podcast, Chris and Adam discuss:

  • Announcing our new book: Prosper!
    • Releasing publicly on Nov 17th
  • Destroying The Public's Trust
    • Another valuable fast-depleting resource
  • Eroding Sentiment
    • It's what causes bubble to pop. And we're seeing a lot of it.
  • US Intervention In The Middle East
    • The worst topic for wrapping up a podcast...

Click to listen to a sample of this Off the Cuff Podcast or Enroll today to access the full audio and other premium content today. » Read more



How A Major Housing Correction Can Happen Over The Next 1.5 Years

Own a home? This is a must-read.
Friday, October 9, 2015, 4:11 PM

Executive Summary

  • The Fed Won't Be Able To Soak Up Bad Mortgages Like It Once Did
  • Chinese Capital Will Dry Up After Capital Controls Are Imposed
  • The weakening petro-dollar will weaken demand for high-end housing
  • The inevitable symmetry of bubbles will force a price mean-reversion

If you have not yet read Part 1: How Much Longer Can Our Unaffordable Housing Prices Last? available free to all readers, please click here to read it first.

In Part 1, we looked at factors that limit further home price appreciation—mortgage rates that can’t go much lower and stagnant household incomes—and factors that could continue to push prices higher in islands of strong job growth and global demand.

Here in Part II, we’ll look at several dynamics that could deflate the current Housing Bubble #2, even in areas currently experiencing high demand for housing such as New York City and San Francisco.

The Fed Will Encounter Political Headwinds in Pushing Money to the Wealthy

Setting aside cash buyers from overseas, a major factor in the inflation of Housing Bubble #2 was the Federal Reserve’s quantitative easing programs that expanded the pool of money available to the already-wealthy while prompting very little “trickling down” of this new money to the bottom 90% of households.

The one Fed policy that aided the bottom 90% was buying $1.75 trillion of home mortgages. This unprecedented buying spree helped push mortgage rates down to equally unprecedented lows.

But as this chart shows, the Fed is... » Read more


Off The Cuff: Signs Of A Roll-Over

It increasingly looks like we're past the market peak
Thursday, October 8, 2015, 5:54 PM

In this week's Off The Cuff podcast, Chris and John Rubino discuss:

  • A Lack Of Logic
    • Markets today no longer trade on sense
  • Signs Of A Roll-Over
    • It increasingly looks like we're past the market peak
  • Black Swans Are Landing
    • Volkswagen, Glencore & Deutche Bank
  • What Separates The Rich From The Poor?
    • The Fed

Click to listen to a sample of this Off the Cuff Podcast or Enroll today to access the full audio and other premium content today. » Read more



Off The Cuff: The Betrayal Of Capital

Leads to mal-investment that eventually topples onto itself
Monday, October 5, 2015, 7:37 PM

In this week's Off The Cuff podcast, Chris and Charles Hugh Smith discuss:

  • Growing Weakness At The Periphery
    • A reminder that collapse happens from the outside in
  • The Betrayal Of Capital
    • We are watching the predictable result of too much mal-investment
  • Natural Limits Will Be The Ones That Matter
    • The ones that can't be addressed by printing up more money
  • TINA: There Is No Alternative
    • Those in charge of the system have run out of Plan Bs

Recorded last week, here's the latest Off The Cuff discussion recorded between Chris and Charles Hugh Smith.

Both note the deflationary forces that are fast-eroding the stability of periphery countries around the globe. As long repeated here at Peak Prosperity, we're of the opinion that collapse happens from "the outside in". Once the smaller dominoes start falling, watch the pace at which the next-largest drop, as it can tell you how quickly the core ("safest") counties will start being affected.

A theme delved into in this discussion is the...

Click to listen to a sample of this Off the Cuff Podcast or Enroll today to access the full audio and other premium content today. » Read more


Michael Wick/Shutterstock

From Deflation To Hyperinflation

Expect a market crash followed by helicopter money
Wednesday, September 30, 2015, 11:36 PM

Executive Summary

  • China is rolling over
  • Contagion will eventually take down the core economies, including the US
  • We are witnessing a full-blown collapse of the commodity complex
  • Deflation will win the day over the next year, but then get ready for helicopter money hyperinflation

If you have not yet read Part 1: Deflation Warning: The Next Wave available free to all readers, please click here to read it first.

The Chinese GDP Lie

Right off the top, China is not growing anywhere near the 7% it claims.  That’s just a politically useful lie that the Chinese tell to the world as much as they tell to themselves.

Fortunately, hardly anyone is falling for that particular fib any longer.  Let’s start with the completely obvious manufacturing slump that has hit China:

Chinese Factory Gauge Slumps to Lowest Level Since March 2009

Sept 22, 2015

A private Chinese manufacturing gauge fell to the lowest in 6 1/2 years, underscoring challenges facing the economy as its old growth engines splutter.

A global sell off in riskier assets gained pace after the preliminary Purchasing Managers’ Index from Caixin Media and Markit Economics dropped to 47.0 in September. That missed the median estimate of 47.5 in a Bloomberg survey and fell from the final reading of 47.3 in the previous month. Readings have remained below 50 since March, indicating contraction.

Premier Li Keqiang’s growth target of about 7 percent for this year is being challenged by a slowdown in manufacturing and exports even as services and consumption show resilience.


The way a PMI reading works is anything over 50 indicates expansions and anything under 50 indicates contraction.  Anybody care to explain to me how China can be sporting sub-50 readings every month since March -- that’s five full months -- and still be claiming to be aiming for a 7% annual growth target?  You know, because China is... » Read more


Sgame |

Why Gold Is Headed Higher & May Become Unavailable At Any Price

Time is now short
Friday, September 25, 2015, 2:55 PM

Executive Summary

  • The amount of gold in London's vaults dropped by 1/3 in the past year(!)
  • Activity at the COMEX is flashing warning signs
  • When to worry about physical defaults
  • Simple math will win out: the West is fast running out of its bullion

If you have not yet read Part 1: Buy Gold While You Still Can! available free to all readers, please click here to read it first.

An interesting piece of detective work was done by Ronan Manly at where he noted that the LBMA reported pronounced drops in the amount of gold stored in London vaults, which includes both gold held at the Bank of England as well as non-official vaults within the LBMA system.

To summarize his report, here’s the amount of gold reportedly held in London:

  • April 2014 – 9,000 tonnes
  • Early 2015 – 7,500 tonnes
  • June 2015 – 6,250 tonnes

That means that 2,750 tonnes left London over the past 1+ year.

Does such a large number even make sense?

Well, sure, if we consider that just four countries cumulatively imported (or increased reserves) by ~4,500 tonnes since the beginning of 2014.

Confirming this is the handy chart below of gold flows as compared to... » Read more


Esteban De Armas/Shutterstock

Off The Cuff: Look Out Below!

We're on the cusp of major asset deflation
Thursday, September 24, 2015, 4:15 PM

In this week's Off The Cuff podcast, Chris and Mish Shedlock discuss:

  • The Periphery Is Collapsing Fast
    • Emerging market currencies are falling hard vs the US dollar
  • China Is Running Off The Rails
    • We're witnessing a bust in progress
  • Europe's Black Swan Has Landed
    • A migrant crisis no one saw coming this quickly
  • The US Is Sliding Back Into Recession
    • The data is bad and getting worse