And this dear readers is where the world stands today. On the verge of an implosion of the whole financial system. Just a small crack could push the whole system into a black hole.
All that is needed is a severe second wave of CV-19 or a bank collapse, triggering an implosion of debt markets and the whole system.
Yes, we know the world was in a similar situation in 2008 but with over $100 trillion more in debt and who knows how many additional $100s of trillions of derivatives plus a world economy disintegrating – it is now exponentially worse from a risk point of view.
We must also remember that bad debts in the financial system are going up by the minute with most borrowers under severe financial pressure. Just look at the chart below how bad debts follow unemployment. The banks haven’t reported this yet but we will see it in the next couple of quarters.
MARKETS
Stocks
There is an ominous disconnect between equity values and profits. As the chart below shows, values have doubled since 2012 with profits stagnant 2012-19. Now in 2020, profits are crashing and stocks will follow.
The Dow correction up finished on May 8 and is now resuming the downtrend. All the V recovery optimists are going to get a real shock. The monthly Dow peaked in January 2020, see chart, and the downtrend was confirmed well before CV started to trouble markets.
I have been saying in the last couple of weeks that a resumption of the stock market downtrend is imminent and it seems clear that imminent is now. Most market participants will be shocked as stocks around the world crash down below the March lows and long term much, much lower.
Gold & Silver
Many have feared that the precious metals will initially fall with stocks but this seems unlikely to be the case.
On the contrary, it looks like Gold is now breaking above the important $1,770 level. Since the Gold Maginot Line was broken a year ago at $1,350, gold is up over $400 or 30%. The 6 year consolidation since 2013 has built up a lot of energy that will take gold to over $2,000 in the next move.
There has been a massive fight to hold Silver below the $18 level. It seems the LBMA boys are now losing the fight as silver has gone through the $18 level which it has held below since 2014 with 3 months exception in 2016. This Silver Maginot Line is even more significant than the Gold one as it comes from a much lower level of 64% below the $50 peak. Once through, we are likely to see a silver explosion and a sharp fall in the gold/silver ratio.
