Why should you be concerned with the global economy and financial markets? How does this impact my wealth? Let’s take a look at the economic situation around the world first.
The world’s government sovereign debt is as high as $200 Trillion as reported in Bloomberg News http://www.bloomberg.com/news/articles/2016-02-22/the-world-s-debt-is-alarmingly-high-but-is-it-contagious, approximately 250% greater than the total global gross domestic product (GDP) of $75 trillion – as reported by Money and Markets back in 2015.
The trouble exists today more than ever as reported June 2016 in The Street https://www.thestreet.com/story/13617882/3/here-s-just-how-bad-the-global-economy-s-debt-problem-is.html.
According to Business Insider, there is bad loan debt in the Deutsche Bank in Germany that is 10-times the amount of debt that collapsed Lehman Brothers in the U.S. in 2008. Is Europe in for a financial collapse? Will this have a domino effect in the U.S. Markets? The”Brexit” event in June impacted the U.S. markets confidence. http://www.businessinsider.com/deutsche-bank-stock-market-collapse-fiscal-stimulus-2016-8?r=UK&IR=T.
The markets are now at a crossroads. Stock markets are at an all-time high and the global debt markets are at record highs. What have we learned over the past decades? As Palisade Research has reported we are in for a major stock market crash.
Why U.S. Markets Will Fall from Their Current Levels
U.S. Treasuries at Record Lows
Birch Gold group reported this week that “something unprecedented has taken place in the U.S. Treasury market: Nations around the world have been selling treasuries at an alarming rate. The troubling number of treasuries being liquidated by foreign countries now places the total of “custodial paper,” or treasuries held in reserve, in the Federal Reserve’s custodial account at $2.805 trillion. This is the lowest level since 2012”.
So, could we face another recession to avoid having to squander value of the U.S. Dollar by not printing more money as a extension of massive quantitative easing program that was responsible for $4 Trillion in exposure and little growth? They continue to cite “we’re witnessing what could be the largest sell-off U.S. debt in recent history, and it’s happening with “unprecedented” speed. China, Saudi Arabia, and several other nations are rapidly dumping treasuries, and the impact could put the American public at risk. To add more danger to the situation is that China has its Yuan currency accepted for trade in the international basket of currencies for the first time. Read more on this Chinese Yuan news below.
What are Wall-Street Hedge Fund Managers doing with their money?
It is obvious that several hedge fund money managers on Wall Street see a bad situation if they have pulled out record amounts of investments since 2009 when the housing market crashed. With $28.2 Billion in funds coming out of Wall-Street this represents the largest exit of hedge fund money since the 2008-09 financial crisis. Read the Yahoo Finance article here – https://finance.yahoo.com/news/hedge-fund-investors-withdrew-28-133728941.html.
High Stock Market Valuations
High valuations, along with poor results, are a recipe for a correction to occur. The following chart on indicates that the Price to Earnings Ratio otherwise known as the “Shiller P/E Ratio” is dangerously high for U.S. Stocks. The stock market is oversold with corporate stock prices too high relative to earnings. How did this happen? Because the Federal Reserve was able to print $17 trillion in U.S. dollars and the interest rates have been low – corporations have artificially propped up stock values by borrowing cheap money to buy their own stock making it appear more valuable.
What are the large institutional banks in the U.S. thinking about the U.S. Stock Market?
“HSBC’s technical-analysis team has thrown up the ultimate warning signal” according to the Business Insider journal online.
Global Banking, Currency Devaluation and other Issues
The crash of the British pound indicates the damage that can be caused by ‘Brexit’. The Deutsch Bank is holding an estimated $45 Trillion in outstanding bad loan debts that is about 10-times the size of the entire European economy and 4-times the amount of defaulted debts that bankrupted Lehman Brothers on Wall Street that essentially started the 2008 financial markets crash. Deutsche Bank almost certainly will default. Consequently, when it does, it will have ugly consequences for the European banking system. After Deutsche Bank, investors will target the Italian banks, which are also facing a financial crisis of their own.
Geopolitical tensions with proxy wars between the larger and more powerful nations, as well as fear of increased frequency of future terrorist attacks are all added risks facing any rise in the stock markets. The Chinese Yuan currency, for the first time in history, was added to the IMF reserve basket of currencies used for international trade. Analysts anticipate this will have detrimental impact on the velocity of the U.S. Dollar as most countries buy U.S. Dollar in conversion for trade. The $17 Trillion in U.S. Dollar sovereign debt is too large and places the U.S. government at great risk now and in the future.
How has the global turmoil impacted Silver and Gold demand?
Silver and Gold demand has increased significantly and the value at this writing has grown 18% for Gold and 26% for Silver this year. According to the October 19th Silver Phoenix 500 newsletter, sales as of October 18th are 75% higher than total sales for September of 1,675,000. Furthermore, they have already surpassed June’s sales of 2,837,000. If Silver Eagle sales continue to remain strong for the remainder of the month, they estimate that at least 4,000,000 will be sold.
In addition, Gold Eagle sales are much stronger in October. Even though Gold Eagle sales of 84,000 ounces have not yet surpassed the total of 94,000 ounces in September, we still have nearly two more weeks remaining in October.
To complete reading this newsletter https://fidelitygs.com/why-physical-gold-and-silver/.
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