Who said Janet Yellen was “dovish”?
crash
Junk Bond Market Forecasts a Looming Stock Market Crash
There is a particular debt market that is very interesting to watch and that is the junk bond market. We call these bonds “junk bonds” because the debt is issued by corporations that do not have high credit ratings and they need to pay higher interest rates.
The reason why we need to monitor this market is the following. The high yield debt market is a leading indicator for the direction of the stock market. Whenever investors leave the junk bond market, yields will spike upwards and the price of these bonds will decline in value. This will lead to less borrowing and consequently lead to less spending. What we then see is a stock market crash with typically a delay of a few months (see chart below from FRED). You can clearly see that the stock market (red chart) is overdue for a correction as the high yield bond market (blue chart) is declining in value.
Read the full analysis here.
Is The Dow Jones Bottoming Out Or Crashing?
The last few weeks have been very eventful for equity investors. In just one week, all the gains since 2014 have been wiped out. The question is: “Is this a buying opportunity or is this the start of a bear market?”. I’ll make the case that we are going much lower, if the Federal Reserve doesn’t act in its September 16-17 meeting.
Go here to read the analysis.
Greece Government Bond Yields Inverting
The inversion has begun again in Greece government bonds. Normally, higher maturity bonds have higher interest rates, because they are riskier to hold due to inflation. But sometimes the yield curve inverts (see chart below created by Correlation Economics).
As you know, 2012 was the year where Greece defaulted on debt as low maturity bonds crashed (yellow chart peaks out).
We might be seeing take two of that crash in 2015 as low maturity bonds are now re-inverting against high yield bonds. For more info, go here.
Crash
And my laptop crashed, which means all data from February 2013 onwards is gone…
But now I can start from a clean laptop…
Luckily, this blog is like a backup for me…
(so always backup your things, do it, right now, I’m serious.)
1987 aka 2012 Crash by Marc Faber
Today I have very important news. According to Marc Faber, we will have a crash like in 1987 in the second half of this year, if there is no QE3. Marc Faber is known to have accurately predicted the 1987 crash. So we better prepare for this event.
As we already can see on the federal balance sheet, there has not been any QE3 since July 2011 (Chart 1).
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| Chart 1: Federal Reserve Balance Sheet |
What happened in 1987 (also known as Black Monday)? And what to do about it? Let’s go over all asset classes one by one in this article.
Correlation Economics (Backup) 