So many of the exact same patterns that preceded the great financial collapse of 2008 are happening again right before our very eyes, history accurately appears to be repeating. The media and global politicians are promising people that everything is going to be okay somehow, and that seems to be good enough for most people. But the SIGNS that another MASSIVE FINANCIAL CRISIS is on the horizon ARE EVERYWHERE. All you have to do is open up your eyes and look at them.
Bill Gross - an American financial manager and author who is considered by many to be the number one authority on government bonds on the entire planet says in his latest January Investment Outlook:
“When the year is done (i.e., 2014), there will be minus signs in front of returns for many asset classes. The good times are over.”
The question arises to me that, why Gross and other financial experts being “so negative” right now? The answer is, they are able to see the same patterns that they saw in early 2008 unfolding again.
Are we heading directly toward another major financial crisis?
Here are these patterns that preceded the last financial crisis that are happening again right now…
1. A really bad start to the year for the stock market.
During the first three trading days of 2015, the S&P 500 was down a total of 2.73 percent. There are only two times in history when it has declined by more than three percent during the first three trading days of a year. Those years were 2000 and 2008, and in both years we witnessed enormous stock market declines.
2. Very uneven financial market behavior.
In general, calm markets tend to go up. When markets get uneven, they tend to go down. For example, the chart below shows how the Dow Jones Industrial Average behaved from the beginning of 2006 to the end of 2008. As you can see, the Dow was very calm as it rose throughout 2006 and most of 2007, but it got very uneven as 2008 played out.
Experts say that, when we start to see big ups and big downs in the market, that is a sign of big trouble ahead. That is why it is so alarming that global financial markets have begun to become quite choppy in recent weeks.
3. A substantial decline for 10 year bond yields:
When investors get scared, there tends to be a “flight to safety” as investors moves their money to safer investments. We saw this happen in 2008, and that is happening again right now.
In fact, according to Bloomberg, global 10 year bond yields have already dropped to low levels that are absolutely unprecedented and Bloomberg states as “That’s not GOOD NEWS”.
4. The price of oil crashes:
The price of U.S. oil has dipped below $48 a barrel. But back in June, it was sitting at $106 at one point. As the chart below demonstrates, there is only one other time in history when the price of oil has declined by more than $50 in less than a year.
The only other time there has been an oil price collapse of this magnitude we experienced the greatest financial crisis since the Great Depression shortly thereafter.
5. A dramatic drop in the number of oil and gas rigs in operation:
Right now, oil and gas rigs are going out of operation at a frightening pace. During the fourth quarter of 2014, 93 oil and gas rigs were idled, and it is being projected that another 200 will shut down this quarter. As this Business Insider article demonstrates, this is also something that happened during the financial crisis of 2008 and it continued well into 2009.
6. The price of gasoline takes a huge tumble:
Millions of Americans and global people are celebrating that the price of gasoline has plummeted in recent weeks. But they were also celebrating when it happened back in 2008 as well. But of course it turned out that there was really nothing to celebrate in 2008. In short order, millions of Americans lost their jobs and their homes. So the chart below is definitely not “good news”…
7. A broad range of industrial commodities begin to decline in price:
When industrial commodities go down in price, which is a sign that economic activity is slowing down. And just like in 2008, that is what we are watching unfold on the global stage right now. The following is an excerpt from a recent CNBC article…
“From nickel to soybean oil, plywood to sugar, global commodity prices have been on a steady decline as the world’s economy has lost momentum.”
8. A junk bond crash:
Just like in 2008, we are witnessing the beginnings of a junk bond collapse. High yield debt related to the energy industry is on the bleeding edge of this crash, but in recent weeks we have seen investors start to bail out of a broad range of junk bonds. Check out this chart and this chart in addition to the chart below…
9. Global inflation slows down significantly:
When economic activity slows down, so does inflation. This is something that we witnessed in 2008, this is also something that is happening once again. In fact, it is being projected that global inflation is about to fall to the lowest level that we have seen since World War II…
“Increases in the prices of goods and services in the world’s largest economies are slowing dramatically. Analysts are predicting that inflation will fall below 2pc in all of the countries that make up the G7 group of advanced nations this year – the first time that has happened since before the Second World War.
Indeed, Japan was the only G7 country whose inflation rate was above 2pc last year. And economists believe that was because its government increased sales tax which had the effect of artificially boosting prices.”
10. A crisis in investor confidence:
Just prior to the last financial crisis, the confidence that investors had that we would be able to avoid a stock market collapse in the next six months began to decline significantly. And guess what? That is something else that is happening once again NOW…
“Investor confidence that the US will avoid a stock-market crash in the next six months has dropped dramatically since last spring. The Yale School of Management publishes a monthly Crash Confidence Index. The index shows the proportion of investors who believe we will avoid a stock-market crash in the next six months.”
“Yale points out that “crash confidence reached its all-time low, both for individual and institutional investors, in early 2009, just months after the Lehman crisis, reflecting the turmoil in the credit markets and the strong depression fears generated by that event, and is plausibly related to the very low stock market valuations then.”