Tuesday, February 23, 2016

THIS IS NOTHING LIKE THE LAST CRISIS......IT IS MUCH WORSE

THIS IS NOTHING LIKE THE LAST CRISIS......IT IS MUCH WORSE

We are now in a transition year from a bull market to a bear market and from a PROPPED UP 
economy to a recession—and this could be a very deep recession... now we see that we are finally there and more and more people are starting to realize it. But I raise the question here, 'Is it too late to panic?' Because...the advice given by so many analysts is 'Don't panic, don't sell, don't panic.' And I say, 'Yes, panic!' Panicking at the right time can save you a lot of money...

I predict in this bear market you will see the majority of stocks—majority meaning over 50% of the stocks—selling at huge discounts to current valuations.

We here other analysts say, 'Oh, this is nothing like 2008' and I agree with that, but I say that because I think it's going to be much worse. 2008 was really a crisis triggered by the subprime mortgage market and the confetti that the Wall Street firms distributed around the world. They took those subprime mortgages, put them into pools, they sold participations in these pools, in these CDOs...they got a triple-AAA rating on all this garbage and sold it around the world and then they started defaulting. That caused ripples throughout the financial system and a global financial crisis, okay; but it was basically a mortgage crisis—that's how it started.

Now, look at what we have currently. We have every major economic zone in the world in financial trouble. You have Japan with a debt-to-GDP ratio of 280%. You have China at 300% debt-to-GDP. China has over $34 trillion of debt and the banking system is flooded with bad loans. The best estimate is that they have at least 
$11 trillion of bad loans in the banking system. $11 trillion is the annual GDP of China—this is huge! And it is probably worse than what these numbers indicate.

You have Europe, you have Latin America in trouble, you have Russia in big trouble, you have Saudi Arabia even thinking about doing an IPO on their big oil company in order to make up for the shortfall of oil revenues. You have every major economic zone in the world in big, big trouble including the US and that is why I say this crisis has the potential of becoming much, much worse than the last one.

How long will this 
take to unfold?

Well, from 1929 to the bottom in 1933 it took four years—probably a little bit less—so that's probably the duration but, you know, you can't forecast those things because the central banks learned something the last time around. They learned how to bail things out, they learned how to change the laws and...they've changed a lot of laws in the meantime. For example, if a bank goes under it's no longer the government that goes to bail it out—they just confiscate the depositors money. If you have a savings account at a bank that goes out of business, they will take part of your savings account to bail the bank out because they now have an interpretation that bank deposits—money that you put in a bank—you actually become an unsecured creditor...

That is the current intrepretation in the West—in Europe and in the United States. It's called a 'bail-in'. So this time around there are a lot of gimmicks that they can use. They've exhausted quantitative easing—it just doesn't work...and now the whole world is going to negative interest rates. In Europe already they have over 30% of the government bonds at zero interest rates or below so if you buy a government bond you are paying for the privelege of owning that bond, of lending the government money. The Federal Reserve just put out a note saying that banks should prepare for negative interest rates...

The world has never seen this and there is no one that knows the eventual consequences of this... This is desperation on a scale never seen before
! The central banks have run out of ammunition and tools...all they have now is more lies through endless jawboning.

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