Financial Collapse -Why 2.1% GDP Growth Is A Joke AND Stocks Are Going To Fall Big Time!

Financial Collapse -Why 2.1% GDP Growth Is A Joke AND Stocks Are Going To Fall Big Time!



welcome to the next video and basically what we're doing is that we're going to recap what the GDP figures mean for the US economy in general probably the global economy considering last Friday we had a GDP figure just over two percent 2.1 percent the question one has to ask oneself is it seems a bit country to what we've seen historically before that as we start the economy though the global economy starts tipping off into a recession territory we start seeing interest rates at tapering off and it usually the sentiments has already turned bearish and it's start coming down a bit lid so if in the United States were seeing growth at two point one percent and the the current administration and the mainstream media are basically saying our economy is doing so well and we've got two point one percent and then comparative EU zone and other parts of the world they're actually starting to get close to a session so what's going on here why why is the current administration and the investment markets so worried when things look to be so good and so what I'm going to do is examine the real reason why I and the the problem is that as far as the mainstream media and the administration is concerned I think investors are really being sold to pop while the smart money is is getting out getting out so not being negative or anything like that I would love the the markets to be keeping on going up ad infinitum because it's very easy to trigger a market that's trending up all the time it's it's much harder when the market flattens aren't as volatile or is going down so going forward I think there are too many negatives I could do six six to ten videos and all the negatives and I could probably do a few videos and the positives but to me the negatives that are what are going on behind the scenes are much more and need to be covered so whereas as I said before that the the quarter to GDP looks like they're they're fantastic figures and certainly they look fantastic compared to the eurozone it's not really the case so what I want to do is I want to basically show you this particular slide that there's a little it's just a small analysis of where the gains and losses wearing the GDP compared to last quarter now what we can do is we can see fixed investment is down – 0.14 percent down from not 0.53% now that's a change of negative point six seven percent change in inventories now that's a very important figure there down point idiot percent from last quarter where it was 0.55 percent positive so that's a that's a quarterly change down 1.4 1% and then net exports they're also down as negative not 0.64% is down from not 0.9 percent and that's quarter and quarter so we're talking about a quarterly drop of one and a half percent so the main corporate health indicators and USA Inc are down and that's not looking too healthy on a quarter by quarter basis no the reason why we get a point two two point one percent positive because I believe these figures have been juiced effectively by personal and government consumption we can see the personal consumption has gone from 0.62% positive point six two percent to two point eight five percent that's a one very large figure in terms of consumption and the government consumption has gone from point forty eight percent to point at five percent and equally that's a hundred percent almost increase in government spending now this is important because the administration in the MSA I'm aren't looking at what's underneath this figure and basically what we're getting is a is a quantitative sort of analysis on the figure not a qualitative one so if we look at these these particular figures that we can see that you know we're very much on this quarter consumption driven and that's got implications going forward I'll address later on in the video all right what I want to do the next one and this is often raised by economists and people who are quite interested in which way the economy is going to see the PMI figures Nats purchasing manager index and this particular slide is from courtesy of Morgan Stanley research and Bloomberg and every one of these figures are worse so what does this mean well if we look at we look at you mean on the right-hand column you can see the red worse but if we look at the the global one first of all we can say market global PMI forty nine point four and it was fifty three point six in 2007 previous to the last recession and what we got to do realize is that 50 when when the the PMI is at fifty fifty or above that's managers have got a healthy attitude towards where the economy is going anymore they're more likely to hire people and also more likely to increase inventories based on a potential probability of increased demand but that's not the key is people are actually all looking at a negative side of things and as we can see these are even worse than 2007 but let's have a look let's have a look at the United States because that's where we are at the moment and the United States it doesn't look so bad in the is M manufacturing is 51.7 and yet in 2007 it was fifty two point two but still worse but it's still above fifty and we can see that we can see that there the the other indexes for example city the city US economic surprise index is hovering minus thirty seven point two was was minus six point eight in 2007 so that is a an incredible decrease and look at the trouble we had in 2007 so Europe let's look at Europe market the euro area forty six point four well into under confidence as far as purchasing managers are concerned and that was fifty four point three we have Bloomberg euro area minus point three it and that was minus 0.3 so every figures worse and then Asia minus five point three and fifty five point six forty nine point three for the China forty nine point three sorts below fifty fifty three point four that's very important considering the China was the main engine of pulling the whole world economy out with its consumption basically and demand for materials and raw materials back in 2007 when it when it basically went AWOL as far as creating credit stimulus for their economy and effectively lifted helped lift the world economy out of the doldrums so we can see therefore that this position is worsening in that side of things now let's look at these next two charts and these basically show what the probability of recession is like occurring now a particular interest is the the second chart where we use is the ten-year and the 2-year Treasury bonds and we can see that according to this index we can see that's a 33 percent predictability of a recession going forward now why is that significant because back in 2007 it was 27% so 12 months before the great financial recession as I say it was 27% so do we have a lead time of 12 months maybe but it's another it's another statistic that's based on the predictive effects of an inverted yield curve which I've alluded to in the previous video so we can see that things as far as some major indicators that aren't lagging indicators these are these are forward indicators are not looking too good especially as I said in the first slide so basically here's where we have a disconnect here that I alluded to in the beginning of the video see if the price if the price of a stock a price for stocks should reflect the future cash flows including profits of those stocks all things being equal so if the PMI is are decreasing as per the previous slide the yield curve is inverted and there's a main so for the last few months why are stocks going up well the answer isn't as simple as a Fed put because that's part of it but there are more ominous signs and some of them are allude to in the next few minutes that aren't so subtly hidden but they're there to be seen it's rather like analyzing these markets is rather like being a detective it's looking for the clues there's always clues that are left at the the scene of a crime and and often well more often than not when a market implodes the criminals have already left the scene uh not saying everybody in the market is a criminal but it's just a metaphorical way of speaking well by the time that the boat has left and another metaphorical sense it's too late for the investors because once the r-word as I've said in previous videos is mentioned then markets tend to panic and sometimes overreact but maybe not necessarily in this case so let's start building the case with the clues that we have and by looking at the following slide it shows that there's been a decline in corporate profits and this is courtesy of Zero Hedge we can see that revisions are down are always dying but that's not really the main story here but the main story is that two things are too many endpoints here first of all that we're looking at 2.25 trillion that was an estimate revised down to one point nine one point nine trillion so that's a two hundred and 225 billion shortfall and predicted profits and as we can see over the last five years profits have been declining not increasing so and yet in that same period of time the S&P 500 has gone up 53% so what gives here we basically can look at the fact that stock prices increase on the basis of profitability and interest rates but what I've what I've mentioned before is there's been no increase in earnings per share the stock price growth has come from so has the stock price come from the Fed right yes I know it's a combination of both what major in my view what a major drive of the increase in stock prices has been besides anticipation of lower interest rates it's the fact of the the participation of major corporates buying back shares and this is why there will be a double whammy when things start to get a little bit pear-shaped and the recession word is really tight it now according to Goldman Sachs they're one of their there analyst David David Costin he has has estimated that last year we had 880 billion of share buybacks we're gonna have a record year this year of 940 billion so that's that's pretty close to 1 trillion and what he said in his report to their investors was that gross debt grew by 8% year and year so basically what he was saying unless the income can sufficiently recovered to cover that debt what's not going to happen is that net cash outflows which are currently 104 percent so companies are paying out more than they're making in terms of revenue and profits is going to really dig deep into the the cash reserves and will will involve more leverage being taken on so what what does this mean this basically means we have a recession coming not if but when some of the indicators that I've said before could be 12 months could be sooner could be later I don't have a crystal ball but I will say that one is coming and what happens is the during recession companies intuitively what they do is that they want they will mint n dividend payments because if they fail to maintain dividend payments then investors will sell the shares and the share prices will take a much greater hit confidence within the shares will decline especially those that are have got vapor of balance sheets in terms of over leveraged because those shares that are passing at the moment because of the Fed interest rate drops can still refinance their balance sheets to the extent that it's not necessarily as big a worry are going to be highly pressurized when the corporate bond market implodes as well so what basically happens is at corporates and and households in the United States and worldwide batten down the hatches so this one trillion buyback activity in the market is going to stop and start with that just literally overnight because basically companies are going to go into survival mode because basically what's going to happen is as inventories as we've seen beforehand in the first slide are going to be drawn down that means they're not going to be manufacturing for those manufacturers are just a left in the United it's so they're not going to be replacing in the trees and that means they're over staffed and that means people are going to be laid off and what this means is that that P that GDP figure the two point eight five percent personal consumption is going to nosedive and it's it's it's a vicious circle you know consumption will nosedive investment will nosedive the the the buybacks will cease and then all of a sudden it's it's going to start getting worse but the the layers of the onion are going to be starting to be peeled off and showing how volatile and how vulnerable many of these companies are especially in the last one of the the previous videos I did in the Russell 2000 where most of the companies were heavily indebted 65% that way so what we're seeing is we're seeing that they're things are not looking so good for the US market going forward these this GDP figure was not good no matter what anybody says you can't say to me that you know fixed investments and that side of things going down and inventories going down is good going forward so we need to keep an eye on this and I certainly believe that we're going to be in this situation where possibly in a year's time possibly less we're going to be looking at a market that's catching up with Europe either very slow or potentially going into recession thank you so much and I'll see you in the next video bye you

7 thoughts on “Financial Collapse -Why 2.1% GDP Growth Is A Joke AND Stocks Are Going To Fall Big Time!

  1. Great info thanks. Although I’ve been hearing this collapse stuff for what seems like forever, this collapse will happen……

  2. I would be surprised if this time the bubble doesn't burst. It's time and new brooms need to sweep the floor. A huge shock in people who serve the golden calf and identify with what's in their bank account might be just what the doctor orders. Change of paradigm. Taking nothing for granted is a welcome sobering wind blowing through our global society. Unveiling mirages. I'm happy to live in a country that holds on to its own currency. Pound Sterling. There's enormous wealth, money-wise, in Britain. Only thing is, will the new brooms bring fair share? All this points at why I'm in favor of local economy, sovereignty and a self-sustainable lifestyle.

  3. Thanks for these videos. The GDP numbers consisted of consumers spending Jamie Dimon's money, and government military expenditures. Jamie Dimon was boasting about how JP Morgan exceeded quarterly expectations, and Trump is dead set on reaching an 800 billion dollar military deficit, so his buddies at Raytheon can enrich themselves even further off the back of the tax payers.

    Not to be gloomy or cry about being a millennial, but I can remember in 08' when jobs were impossible to come by. in 2013 I found a job, but the wage was not keeping up with the rate inflation. It basically felt like I was working for nothing. Rent was taking up over 50% of my net monthly income. I believe my generation has no idea what life was like back in the 50's, when you were actually paid a wage that could afford you a legitimate middle class life. People just assume that people have always lived on the razors edge, just keeping afloat by bank credit. Reading and experiencing all this has definitely been deflating to say the least.

    Whenever this crash comes I welcome it, regardless how bad it will be. Some are predicting that this upcoming crash will be worse than the Great Depression, due to all the bubbles the Fed has blown since 08'. If it actually is that bad, and lives will end up being lost I won't be scared if one is mine. The honest truth is that the economy never recovered after 08'. The only people who benefited from all the stimulus and QE were the mega banks, private equity, and asset holders. The middle class was on the opposite end; the only thing they got was more inflation.

    Watching this empire die off in real time can be difficult to witness when you're actually conscious of it. Opioid epidemics, highest suicide rates since WW2, people confused about their gender, escalating homeless and poverty everywhere, class and political warfare, nobody is having kids anymore……

    Just one giant nightmare.

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