In today’s show, you will learn why a debt default by China’s Evergrande could threaten to crash global markets, why a former Fed official is warning of an imminent financial crisis the Fed is unprepared to stop, why large-cap stocks continue higher, why Morgan Stanley is cutting their GDP forecasts, and a look at the credit markets.
Former Fed official warns of 'urgent' threat of another financial crisis t.co/iuoxk6H4l7
— Stephene Klein 🌋⚡️🧡 (@StepheneKlein) September 6, 2021
Are you ready for the greatest financial disaster of our generation? Several key indicators that have accurately predicted previous stock market crashes are now signaling that financial markets and the economy are about to face a massive crisis — and one of the most important gauges is flashing red for the first time in decades. Recent data released by the U.S. Department of Housing and Urban Development (HUD) reveals that the median sales price for houses sold across the country in the second quarter of 2021 was $374,900, the highest figure ever recorded, and 4.51 percent higher than the figures seen during the final quarter of 2020. About one year ago, the median price for a home was $322,600, which is to say that housing prices skyrocketed by a whopping $52,300 in only 12 months, marking a 16 percent increase. The HUD report highlighted that the last time housing prices surged by 16 percent in a single year was in 1987, 34 years ago. What does this have to do with the stock market? Well, when housing prices are rising this aggressively in such a short time span, it’s typically a sign of severe distortions in the financial system, meaning that a stock market crash and an economic recession are about to unfold.
Given that the current financial bubble includes everything – from stocks to bonds to housing – what happens in one market can have a direct impact on the other, and the imbalances seen in the housing market are threatening to push the stock market to the brink of a major collapse. Never before in history the Fed and the national government have created such a staggering amount of money in such a short period. Needless to say, these reckless policies have sparked dramatic economic distortions across a series of important industries. Nothing else can explain why housing prices increased to the highest level in over three decades — or why stock markets recorded the largest gains ever and multinational corporations reported extraordinary profits amidst one of the bleakest economic scenarios of modern times. All of this started to occur just as the economy faced mass business shutdowns that led to millions of job losses.
September is historically known as the cruelest month for Wall Street and many investment experts have been warning that a stock market crash is likely to occur this month. Autumn is a traditionally rough season for investors: the 1929 stock market crash, Black Monday 1987, and the Lehman Brothers meltdown in 2008 all happened in September or October. As the managing director of fund platform Bestinvest, Jason Hollands recently outlined in an interview with CNBC history suggests we should all be very worried about what’s coming next. “September spells danger for investors, as it is a month with a reputation for volatile markets. This is more than a myth,” he said. The financial expert warned that the current rally cannot last for much longer.
At this point, all evidence is signaling that a stock market crash of epic proportions could occur at any moment. And one extremely concerning market indicator just jumped to its highest level ever recorded, suggesting stocks are about to face a steep downfall given that the market already reached its peak. The “Buffett” indicator, named after the legendary investor Warren Buffett, has climbed to unprecedented levels, which means stocks are vastly overpriced and a crash is now looming on the horizon. About a week ago, the Wilshire 5000 Total Market Index closed at nearly $46.69 trillion and the S&P 500 and Nasdaq indexes ended hit new record highs. From then on, stocks started to plummet. And, on the other hand, the latest estimate for second-quarter GDP is $22.72 trillion, which puts the Buffett indicator at 205%. According to the famed investor and Berkshire Hathaway CEO, when the indicator hit a record high during the dot-com bubble, it should have been a “very strong warning signal” of an imminent crash.
Right now, investors should be looking out for the catalyst that could trigger the crash. Otherwise, they may be left empty-handed before they have an opportunity to run for the exits. In the meantime, conditions in both financial markets and the economy continue to deteriorate because rather than returning to fiscal sanity, the current administration and the Fed continue to do everything in their power to spend trillions of dollars more on new unnecessary government programs, projects, and stimulus packages. Right now, not only the U.S. economy is treading on extremely dangerous ground, but housing, stock, and bond markets are also on the verge of a financial catastrophe. It’s time for Americans to prepare for the worst because things are changing extremely fast.