VIX Spikes Showing Massive Volatility Increase

Today, we are going to revisit some of our earlier analysis regarding the VIX and our beloved VIX Spikes.  Over the past 3+ months, we’ve been predicting a number of VIX Spikes based on our research and cycle analysis.  Our original analysis of the VIX Spike patterns has been accurate 3 out of 4 instances (75%).  Our analysis has predicted these spikes within 2 to 4 days of the exact spike date.  The most recent VIX Spike shot up 57% from the VIX lows.  What should we expect in the future?

Well, this is where we should warn you that our analysis is subjective and may not be 100% accurate as we can’t accurately predict what will happen in the future. Our research team at Active Trading Partners.com attempt to find highly correlative trading signals that allow our members to develop trading strategies and allow us to deliver detailed and important analysis of the US and global markets.

The research team at ATP is concerned that massive volatility is creeping back into the global markets. The most recent VIX spike was nearly DOUBLE the size of the previous spike. Even though the US markets are clearly range bound and rotating, we expect them to stay within ranges that would allow for the VIX to gradually increase through a succession of VIX spike patterns in the future.

Let’s review some of our earlier analysis before we attempt to make a case for the future. Our original VIX Spike article indicated we believed a massive VIX spike would happen near June 29th. We warned of this pattern nearly 3 weeks ahead of the spike date. Below, you will see the chart of the VIX and spikes we shared with our members. This forecast was originally created on June 7th and predicted potential spikes on June 9th or 12th and June 29th.

What would you do if you knew these spikes were happening?

Currently, we need to keep in mind the next VIX Spike Dates

Sept 11th or 12th and finally Sept 28th or 29th.

Our continued research has shown that the US markets are setting up for a potential massive Head-n-Shoulders pattern (clearly indicated in this NQ Chart). The basis of this analysis is that the US markets are reacting to Political and Geo-Economic headwinds by stalling/retracing. The rally after the US Presidential election was “elation” regarding possibilities for increased global economic activities. And, as such, we have seen an increase in manufacturing and GDP output over the past 6+ months. Yet, the US and global markets may have jumped the gun a bit and rallied into “hype” setting up a potential corrective move.

Currently, the NQ would have to fall an additional 4.5% to reach the Neck Line of the Head-n-Shoulders formation. One interesting facet of the current NQ chart is that is setting up in a FLAG FORMATION that would indicate a massive breakout/breakdown is imminent. The cycle dates that correspond to this move are the September 11th or 12th move.

Please understand that we are attempting to keep you informed as to the potential for a massive volatility spike in the US and Global markets related to what we believe are eminent Political and Geo-Economic factors. Central Banks have just met in Jackson Hole, WY and have been discussing their next moves as well as the US Fed reducing their balance sheets. Overall, the US economy appears to show some strength, yet as we have shown, delinquencies have started to rise and this is not a positive sign for a mature economic cycle. Expectations are that the US Fed will attempt another one or two rate raises before the end of 2017. Our analysis shows that Janet Yellen should be moving at a snail’s pace at this critical juncture.

So, now we get to the VIX Spike Data!

The last, most recent, VIX Spike was nearly DOUBLE the size of the previous Spike. This is an anomaly in the sense that the VIX has, with only a few exceptions, continued to contract as the global central banks continued to support the world’s economies. In other words, smooth sailing ahead as long as the global banks were supplying capital for the recovery.

Now that we are at a point where the central banks are attempting to remove capital from their balance sheets while raising rates and dealing with debt issues, the markets are looking at this with a fresh perspective and the VIX is showing us early warning signs that massive volatility may be reentering the global markets. Any future VIX Spike cycles that continue to increase in range would be a clear indication that FEAR is entering the markets again and that debt, contraction and decreased consumer participation are at play.

I don’t expect you to fully understand the chart and analysis below, but the take away is this. Pay attention to these dates: September 11, September 28 and October 16. These are the dates that will likely see increased price volatility associated with them and could prompt some very big moves.

This analysis brings us to an attempt at creating a conclusion for our readers. First, our current analysis of the Head-n-Shoulders pattern in the NQ is still valid. We do not have any indication of a change in trend or analysis at this moment. Thus, we are still operating under the presumption that this pattern will continue to form. Secondly, the current VIX spike aligns perfectly with our analysis that the markets are becoming more volatile as the VIX WEDGE tightens and as the potential for the Head-n-Shoulders pattern extends. Lastly, FEAR and CONCERN has begun to enter the market as we are seeing moves in the Metals and Equities that portend a general weakness by investors.

We will add the following that you won’t likely see from other researchers – the time to act is NOT NOW. Want to know why this is the case and why we believe our analysis will tell us exactly when to act to develop maximum profits from these moves?

Join the Active Trading Partners to learn why and to stay on top of these patterns as they unfold. We’ve been accurate with our VIX Spike predictions and we will soon see how our Head and Shoulders predictions play out. We’ve already alerted you to the new VIX Spike dates (these alone are extremely valuable). We are actively advising our ATP members regarding opportunities and trading signals that we believe will deliver superior profits. Isn’t it time you invested in your future and prepared for these moves?

Join the Active Trading Partners HERE today and Join a team dedicated to your success.

Mrs. Magoo, Deflation, and Commodity Woes

By Tony Sagami 

Did you read my September 22 issue? Or my July 14 column? If you did, you could have avoided the downdraft that has pulled down stocks all across the transportation sector or even made a bundle, like the 100% gain my Rational Bear subscribers made by buying put options on Seaspan Corporation, the largest container shipping company in the world.

Don’t worry, though. Transportation stocks still have a long ways to fall, so it’s not too late to sell any trucking, shipping, or railroad stock you may own—or profit from their continued fall through shorting, put options, or inverse ETFs. This chart of the Dow Jones Transportation Average validates my negative outlook on all things transportation and shows why we’ve been so successful betting against the “movers” of the US economy.

However, the bear market for transportation stocks is far from finished.

Federal Express Crashes and Burns

Federal Express, which is the single largest weighting of the Dow Jones Transportation Average at 11.6%, delivered a trifecta of misery:

1. Missed on revenues
    
2. Missed on earnings
    
3. Lowered 2016 guidance

I’m not talking about a small miss either. FedEx reported profits of $2.26 per share, well below the $2.46 Wall Street was expecting. Moreover, the company should benefit from having one extra day in the quarter, which makes the results even more disappointing.

What’s the problem?

“Weak industry demand,” according to FedEx. By the way, both Federal Express and United Parcel Service are good barometers of overall consumer spending/confidence, so that should tell you something about the (deteriorating) state of the US economy. Oh, and Federal Express announced that it will increase its rates by an average of 4.9% beginning in January 2015. Yeah, I bet that rate increase will really help with that already weak demand. The decline is even more troublesome when you consider that gasoline/diesel prices have fallen like a rock this year.

Speaking of Falling Commodity Prices

Oil, which dropped by 23% in the third quarter, isn’t the only commodity that’s falling like a rock.

• Copper prices plunged to a six-year low.
   
• Aluminum prices have also dropped to a six year low.

• Coal prices have fallen 40% since the start of 2014.
   
• Minerals aren’t the only commodities that are dropping. Sugar hit a 7-year low in August.

Commodities across the board are lower; the Thomson Reuters CoreCommodity CRB Index of 19 commodities was down 15% for the quarter and 31% over the last 12 months. Since peaking in 2008, the CRB Index is down 60%.

That’s why anybody and anything associated with the commodity food chain has been a terrible place to invest your money. Just last week:

Connecting the Dots #1: Caterpillar announced that it was going to lay off 4,000 to 5,000 people this year. That number could reach 10,000 by the end of 2016, and the company may close more than 20 plants. Layoffs are nothing new at Caterpillar—the company has reduced its total workforce by 31,000 workers since 2012.

The problem is lousy sales. Caterpillar just told Wall Street to lower its revenues forecast for 2016 by $1 billion. $1 billion!

How bad does the future have to look for a company to suddenly decide that it is going to lose $1 billion in sales? “We are facing a convergence of challenging marketplace conditions in key regions and industry sectors, namely in mining and energy,” said Doug Oberhelman, Caterpillar chairman and CEO.

Like the layoffs, vanishing sales are nothing new. 2015 is the third year in a row of shrinking sales, and 2016 will be the fourth. Caterpillar, by the way, isn’t the only heavy-equipment company in deep trouble.

Connecting the Dots #2: Last week, UK construction machinery firm and Caterpillar competitor JCB announced that it will cut 400 jobs, or 6% of its workforce, because of a massive slowdown in business in Russia, China, and Brazil.

“In the first six months of the year, the market in Russia has dropped by 70%, Brazil by 36%, and China by 47%,”said JCB CEO Graeme Macdonald. Caterpillar, the world’s biggest maker of earthmoving equipment, cut its full-year 2015 forecast in part because of the slowdown in China and Brazil.

Connecting the Dots #3: BHP Billiton announced that it is chopping its capital expenditure budget again to $8.5 billion, a stunning $10 billion below its 2013 peak. Moreover, BHP Billiton currently only has four projects in the works, two of which are almost complete, compared to 18 developments it had going just two years ago.

Overall, the mining industry—according to SNL Metals and Mining—is going to spend $70 billion less in 2015 less than it did in 2012. And in case you think metals prices are going to rebound, consider that the previous bear market for mining lasted from 1997 to 2002, which suggests at least another two years of shrinking budgets and pain.

Repeat After Me!

I have said this many, many times before, but repeat after me.....ZIRP (zero interest rate policy) and QE are DEFLATIONARY!

The reason is that cheap (almost free) money encourages over-investment as well as keeping zombie companies alive that should have gone out of business. Both of those forces are highly deflationary, and unless you think that Mrs. Magoo (Janet Yellen) is going to aggressively start jacking up interest rates, you better adjust your portfolio for years and years and years of deflation.

While the rest of the investment world has been struggling, here at Rational Bear, we’ve been doing just fine.

Here are the results of six recent trades: 38% return from puts on an oil services fund, 16.6% return from an ETF that shorts industry sectors, 200% return from puts on an auction house, 50% return from puts on a jeweler, 50% return from puts on a social media giant and 100% return from puts on a container shipping company.

And we still have more irons in the fire. It’s time to be bearish, so I suggest you give Rational Bear a try—like it or your money back.

Tony Sagami

30 year market expert Tony Sagami leads the Yield Shark and Rational Bear advisories at Mauldin Economics. To learn more about Yield Shark and how it helps you maximize dividend income, click here.

To learn more about Rational Bear and how you can use it to benefit from falling stocks and sectors, click here.

The article Connecting the Dots: Mrs. Magoo, Deflation, and Commodity Woes was originally published at mauldineconomics.com.

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The Fed’s Alice In Wonderland Economy - What Happens Next?

By Nick Giambruno

After the president of the United States, the most powerful person on the planet is the chairman of the Federal Reserve. Ask almost anyone on the street for the name of the U.S. president, and you’ll get a quick answer. But if you ask the same person what the Federal Reserve is, you’ll likely get a blank stare. They don’t know - partly due to the institution’s deliberately obscure name - that the Fed is really the third iteration of the country’s central bank. Or that the Fed manipulates the nation’s economic destiny by controlling the money supply.

And that’s just how the Fed likes it. They’d prefer Boobus americanus not understand the king like power they wield. By simply choosing to utter the right words, the chairman of the Fed can create or extinguish trillions of dollars of wealth both in and outside of the U.S. He holds the economic fate of billions of people in his hands. So it’s no shocker that investors carefully parse everything he says. They have to, if they want to be successful. Some even go as far as to analyze the almighty chairman’s body language. Of course, the mainstream financial media revere the Fed.

You may recall the unhealthy spectacle that occurred in 1996. That’s when Alan Greenspan, the Fed chairman at the time, spoke the now famous phrase “irrational exuberance” in what should have otherwise been a dull and forgettable speech. Investors heard Greenspan’s phrase to mean that the Fed would soon raise interest rates to slow the global economy. It’s worth mentioning that Greenspan didn’t actually say the Fed would raise rates. Nor did he intend to signal that.

Nonetheless, the reaction was swift and panicky. U.S. markets were closed at the time, but stocks in Japan and Hong Kong dropped 3%. The German stock market fell 4%. When trading started in the U.S. market the next day, the market opened down 2%. Billions of dollars of wealth vanished in a period of 16 hours. That’s the absurd power over the global economy that the Federal Reserve gives to one human being. The words of the chairman can make or break the fortunes of anyone with a brokerage account.

The Fed’s Alice in Wonderland Economy

I almost fell out of my chair when I heard it….. A journalist recently asked Janet Yellen, the current chair of the Federal Reserve, if the central bank would keep interest rates at 0% forever. Her response: “I can’t completely rule it out.” I was stunned. The deferential financial media hurried to ignore the significance of that statement. Instead, it acted the way big city police might act after making a messy arrest on a busy sidewalk. “Move along folks, nothing to see here!”

Clearly, there was something to see. Something very important. Yellen’s words came amidst one of the most anticipated economic pronouncements in a generation… whether the Fed would finally raise interest rates for the first time in nine years. Short term rates have been at zero since the 2008 financial crisis. Interest rates are simply the price of borrowing money. Setting them at an artificial level is nothing other than price fixing. Not surprisingly, it has led to enormous amounts of malinvestment and other distortions in the economy.

Malinvestment is the result of faulty decision-making. Any investor or business can make a mistake, but central bank manipulation of interest rates subsidizes bad, wasteful decisions. Cheap borrowing costs trick companies. It causes them to plow money into plants, equipment, and other assets that appear profitable because borrowing costs are low. Only later, when the profits don’t show up, do they discover that the capital was wasted.

Seven years of quantitative easing (QE) and Fed engineered zero interest rates have drawn the U.S. and much of the world into an unsustainable "Alice in Wonderland" bubble economy riddled with malinvestment. The pundits had expected that, at this recent meeting, the Fed would move to raise rates just a little and give the global economy a tiny taste of sobriety. Not even that nudge materialized.

Instead, the Fed sat on its hands. It kept interest rates at zero. And Janet Yellen couldn’t even rule out that rates would stay at zero forever. If she can’t even do that, how is she going to start a sustained series of rate hikes, as many of those same pundits now expect her to do a few months down the road?

The truth is, seven years of 0% yields and successive rounds of money printing has so distorted the U.S. economy that it can’t handle even the tiniest increase in interest rates. It would be the pin that pricks the biggest stock and bond market bubble in all of human history. The Fed cannot let that happen.

What Happens Next

It’s clear that the Fed can’t raise interest rates in any meaningful way. It would trigger a financial meltdown that would quickly force them to reverse course. The Fed might be able to get away with a token increase, but that’s all. In other words, the Fed has trapped itself. Former Fed chairman Ben Bernanke admitted as much recently when he said he didn’t expect rates to normalize in his lifetime.

And then, we have the current chair Janet Yellen saying that rates might stay at zero forever!

Yellen’s belief that she has the power to suppress interest rates until the end of time is a frightening sign. As powerful as the Fed is, it isn’t stronger than the markets. A crisis in the markets could force rates higher even if the Fed doesn’t want them to go there. And the longer the Fed tries to sustain abnormalities like QE and 0% interest rates, the more likely it is that the whole business will end with the markets crushing the Fed.

And that’s not even considering a collapse of the petrodollar system or China pushing the establishment of a New Silk Road in Eurasia…two catalysts that would likely force interest rates higher. So I’ll go ahead and disagree with Yellen and rule out the possibility that rates might stay at zero forever. They won’t, because they can’t.

At the next sign of a market swoon or of a weakening economy, or with the next episode of deflationary jitters, the Fed will again ramp up the easy money. It could be another round of QE. Or the Fed could push interest rates into negative territory. If that fails, the Fed could go for the nuclear option and drop freshly printed money out of helicopters as Bernanke once infamously suggested – or, more likely, into everyone’s bank account. They’ll do whatever it takes, no matter what the eventual damage to the dollar’s value.
Whatever the details, one thing should be clear. This politburo of unaccountable central planners is the greatest risk to your financial wellbeing today.

What You Can Do About It

It’s a terrifying thought that the actions of a few people at the Fed so endanger your financial security.
But the facts are worse than that. There’s more to worry about than just the financial effects. The social and political implications of the Fed’s actions are even more dangerous. An economic depression and currency inflation (perhaps hyperinflation) are very much in the cards. These things rarely lead to anything but bigger government, less freedom, and shrinking prosperity. Sometimes they lead to much worse.

Fortunately, your destiny doesn’t need to be hostage to what’s coming. We’ve published a groundbreaking step by step manual that sets out the three essential measures all Americans should take right now to protect themselves and their families. These measures are easy and straightforward to implement. You just need to understand what they are and how they keep you safe. New York Times best selling author Doug Casey and his team describe how you can do it all from home. And there’s still time to get it done without any extraordinary cost or effort.

Normally, this "get it done" manual retails for $99. But I believe it’s so important for you to act now to protect yourself and your family that I’ve arranged for anyone who is a resident of the U.S. to get a free copy.

Click here to secure your free copy.

The article was originally published at internationalman.com.

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Buy the Dip? Hell No.....Sell the Rip Instead

By Tony Sagami

Are you worried about the stock market? You should be; at least according to your local Starbucks barista.
Starbucks CEO Howard Schultz told his 190,000 employees in his daily “Message from Howard” email communication: “Today’s financial market volatility, combined with great political uncertainty both at home and abroad, will undoubtedly have an effect on consumer confidence and … our customers are likely to experience an increased level of anxiety and concern. Let’s be very sensitive to the pressures our customers may be feeling.”

You can’t make this stuff up!

Hey, maybe I shouldn’t be too harsh on Mr. Schultz, because the stock market is in a lot of trouble… and not for the reasons the mass media and Wall Street experts are telling you. The know it alls on CNBC are pointing their fingers at the Chinese stock market meltdown as the reason for our stock market turmoil, but that is just the catalyst… not the root problem.

The source of the meltdown is deeper, more problematic, and more painful. What I’m talking about is that the Federal Reserve—from Greenspan to Bernanke, to Yellen—thought they possessed Wizard of Oz powers to fix whatever ails the economy with their menu of monetary tools.

In 2000, the Fed thought it could solve the bursting of the dot-com bubble with massive interest rate cuts and repeated that playbook again for the 2008-09 Financial Crisis. And when they ran out of room by cutting interest rates to zero, they trotted out Operation Twist and QE 1, 2, and 3.

Those three rounds of QE added about $3.7 trillion to the Federal Reserve’s balance sheet since 2008, which now totals a mind boggling $4.5 trillion. The problem is not China; the problem is Janet Yellen and her Federal Reserve buddies.

The Fed—beginning with the original monetary Mr. Magoo of Alan Greenspan—created a bubble, then rolled out more of the same to deal with the bursting of the bubble, and like the shampoo bottle says: Rinse, Lather, Repeat. Zero interest rates plus QE1, QE2, and QE3 created a massive misallocation of capital that has affected everything from home supply, ocean-going freighters, the US dollar, and wages, and pushed stock prices to a bigger than ever bubble.

The recent weakness is the painful process of deflating that bubble, but the Federal Reserve refuses to learn from its mistakes. It won’t be long until we hear about QE4 and/or a delay to the overpromised interest rate liftoff. Former US Treasury Secretary Larry Summers had this to say yesterday: “A reasonable assessment of current conditions suggests that raising rates in the near future would be a serious error that would threaten all three of the Fed’s major objectives; price stability, full employment and financial stability.”

Honestly, I don’t know what the Federal Reserve will do next. Heck, I bet they don’t know what to do either… but they will do something. Central bankers are arrogant know-it-alls who think they can fix the world’s financial problems with a couple of pulls of a monetary lever.

So pull they will.

And so the stock market damage will continue, albeit with some powerful up moves along the way.
Bulls, whether in a Spanish bull-fighting arena or roaming the floor of the NYSE, are a tough animal to kill. They won’t surrender until they make a few more desperate attempts to push the market higher.
Look at what happened last Tuesday after the 588-point Monday meltdown. The Dow Jones Industrial Average shot up by as much as 441 points before ending the day with a 204-point loss.

My point is that you’re going to see a lot of powerful up moves in the coming months… but I’m telling you, these are nothing more than bear market traps to lure you into buying at the wrong time. The stock market is falling into a bear market, and that means big swings both up and down, similar to 2000–2003.

The Federal Reserve, along with the rest of the world’s central bankers, has puffed stock valuations into an epic bubble, and the stock market has a long, long ways yet to fall…..just not in a straight line. That’s heart attack material for both buy-hold-and-pray and buy the dip investors, but it is a goldmine if you adapt your strategy.

Instead of buying the dip, the right strategy going forward is SELL THE RIP.

When the stock market gives you a big rally, the right move will be to sell into strength.

And if you have some risk capital, that will be the time to load up on inverse ETFs and put options, like my Rational Bear subscribers did in July.

The biggest short-selling opportunity of our lifetimes is knocking on your door.

Tony Sagami

30 year market expert Tony Sagami leads the Yield Shark and Rational Bear advisories at Mauldin Economics. To learn more about Yield Shark and how it helps you maximize dividend income, click here.

To learn more about Rational Bear and how you can use it to benefit from falling stocks and sectors, click here.

The article Connecting the Dots: Buy the Dip? Hell No! Sell the Rip Instead was originally published at mauldineconomics.com.

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The Wall Street Titanic and You

By Tony Sagami

“I would highlight that equity market valuations at this point generally are quite high.”

—Janet Yellen

Are you worried about the stock market? If you are, you’re in the minority of investors.
Greece… China… don’t worry about it!

At least that seems to be Wall Street’s reaction to what could have been a catastrophic fall of dominoes if the European and Chinese governments hadn’t come to the rescue with another massive monetary intervention.

If you think you’ve heard the last about Greece or a Chinese stock market meltdown, you’re in the majority. Investors are pretty darn confident about the stock market.

The John Hancock Investor Sentiment Index hit +29 in the second quarter, the highest reading since the inception of the index in January of 2011.

However, overconfidence is dangerous and often accompanies market tops.

If you listen to the hear no evil cheerleaders on Wall Street and CNBC, you might be inclined to think the bull market will last a couple more decades, but we haven’t had a major correction since 2011, and the Nasdaq hit an all time high last week.

Investors are so enthusiastic that the exuberance is spilling beyond stock certificates to the high brow world of collectible art.

Investment gamblers are shopping up art in record droves. In the last major art auction, prices for collectible art reached all time highs, and somebody with more money than brains paid $32.8 million for an Andy Warhol painting of a $1 bill.

Who says a dollar doesn’t buy what it used to?

I’m not saying that a new bear market will start tomorrow morning, but I’m suggesting that bear markets hurt more and last longer than most investors realize.

The reality is that bear markets historically occur about every four and a half to five years, which means we are overdue. And the average loss during a bear market is a whopping 38%. Ouch!

On average, a bear market lasts about two and a half years… but averages can be misleading.
In the 1973-74 bear market, investors had to wait seven and a half years to get back to even. In the 2000-02 bear market, investors didn’t break even until 2007.

Unless you, too, have drunk the Wall Street Kool Aid, you should have some type of emergency back up plan for the next bear market. There are three basic options:

Option #1: Do nothing, get clobbered, and wait between two and a half and 10 years to get your money back. Most people think they can ride out bear markets, but the reality is that most investors—professional and individual alike—panic and sell when the pain gets too severe.

Option #2: Have some sort of defensive selling strategy in place to avoid the big downturns. That could be some type of simple moving average selling discipline or a more complex technical analysis. At minimum, I highly recommend the use of stop losses.

Option #3: Buy some portfolio insurance with put options or inverse ETFs. That’s exactly what my Rational Bear subscribers are doing, and I expect those bear market bets to pay off in a big, big way.

Whether it is next week, next month, or next year—a bear market for US stocks is coming, and I hope you’ll have a strategy in place to protect yourself.

If you'd like to hear what worries me most about the stock market, here is a link to an interview I did last week with old friend and market watchdog Gary Halbert.

Tony Sagami

30 year market expert Tony Sagami leads the Yield Shark and Rational Bear advisories at Mauldin Economics. To learn more about Yield Shark and how it helps you maximize dividend income, click here.

To learn more about Rational Bear and how you can use it to benefit from falling stocks and sectors, click here.

The article Connecting the Dots: The Wall Street Titanic and You was originally published at mauldineconomics.com.

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Bears Run For Cover!

From our trading partner Phil Flynn....

Ultra bears are starting to change their tune on oil as weak Chinese manufacturing data and strong manufacturing data in Germany both point to better demand. China's demand may rise as the Chinese government will be forced to act swiftly to reach their growth target and should soon add stimulus increasing oil demand. Factory activity in China fell to 49.2, according to HSBC, a number that should force the Chinese government's hand.

In Germany, we are already seeing the QE impact on oil demand. The Purchasing Managers Index for the manufacturing and services industries across the region rose to a much stronger than expected 54.1 ked by a 0.4 percent expansion in Germany. Germany is the beneficiary of being the strongest economy in the Eurozone at a time when the ECB central bank has launched unprecedented stimulus. On top of that you see the U.K. inflation rate come in at the lowest rate in history. The inflation rate fell below zero for the first time in history and all of a sudden this QE madness is likely to continue.

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Now one might think that might be bearish as the dollar might continue its historic upward move as the rate differential outlook could cause continued safe haven buying. But now it seems that the Fed may be influenced into not rating rates quickly as the dollar strength is causing more problems. We saw in the FOMC that Fed Chair Janet Yellen warned that the Fed will not be impatient in raising rates. The Fed's Stanley Fischer suggested that the Fed will be data, and perhaps dollar dependent on raising rates and warned that there would not be a "smooth upward path" for interest rates hikes.

Oil bears are also counting on another big inventory increase. Yet data from Genscape, the private forecaster, is suggesting that the build might be much less than the 4 million barrel builds that is being bandied about. Genscape reports that the increase of less than 2 million barrels are around 1.6 million. That should reduce fears of storage over flowing. In fact the Energy Information Administration reported that although inventory levels at Cushing are at their record high, storage utilization (inventories as a percent of working storage capacity) are not at record levels. Capacity utilization at Cushing is now 77%, a large increase from a recent low of 27% in October 2014. However, utilization reached 91% in March 2011, soon after EIA began surveying storage capacity twice a year, starting in September 2010."

See Phil on the Fox Business Network and follow him on Twitter @energyphilflynn!

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Good Reason for Doom and Gloom

By Doug French, Contributing Editor

Predicting the future, like getting old, ain’t for sissies. Questioning the bull market is even more treacherous.
Howard Gold, writing for MarketWatch, makes fun of seers who made what he calls “the four worst predictions to gain traction over the past few years.”

Gold says the last six years have been a disaster for those who stayed out of the stock market. He claims there’s a bull market in doom and gloom, referring to a column by his colleague Chuck Jaffe, who points out, “The fortune-tellers … know that the more outrageous the prediction, the more attention they get. They can highlight any forecasts they get right, knowing that their misfires are forgotten quickly. Thus, calamity and catastrophe sells. Right now, it’s a bull market for bearish forecasts.”

If such a bull market in doom were really happening, the market wouldn’t be hitting all-time highs. Besides, no one ever went broke being out of the market.

But more importantly, there is a very good reason people respond to gloomy forecasts. Behavioral economics pioneer and 2002 Nobel Prize winner Daniel Kahneman explains in his bestseller Thinking, Fast and Slow that when people compare losses and gains, they weigh losses more heavily. There’s an evolutionary reason for this: “Organisms that treat threats as more urgent than opportunities have a better chance to survive and reproduce,” Kahneman explains.

Most people, when given the opportunity to win $150 or lose $100 on a coin flip, decline the bet because the fear of losing $100 is more intense than the hope of gaining $150. Kahneman writes that the typical loss aversion ratio seen in most experiments is 1.5 to 2.5. Professional stock traders have much higher tolerance for risk, but most people investing their retirement accounts are not pros and have little fortitude for losses.

The average Joe can’t just sit tight while his retirement account drops 40%. He’s not wired that way. His retirement savings represent safety, and a market crash is the modern equivalent of a flood, a bear, or a warring tribe. When stocks start falling, survival mode kicks in. He or she sells and runs for cover.
So when someone makes a compelling case that stocks might crash, the average person rightly listens. Otherwise they don’t get any sleep.

Gloomy Forecasts

Economist and financial newsletter writer Harry Dent predicted the DJIA would crash to 3,000 and told investors to bail out between early 2012 and late 2013. Some people likely took him up on it. In July 2010, Robert Prechter of Elliott Wave fame predicted the DJIA would fall to well below 1,000 over the ensuing five or six years.

“I’m saying: ‘Winter is coming. Buy a coat,’” Prechter told the New York Times. “Other people are advising people to stay naked. If I’m wrong, you’re not hurt. If they’re wrong, you’re dead. It’s pretty benign advice to opt for safety for a while.”

While Prechter sees massive deflation on the horizon, Marc Faber, editor of the Gloom, Boom & Doom Report, says Zimbabwe-style hyperinflation is on the way. Gold calls this “the single worst prediction of the past five years.” Gold calls Faber wacky for telling Bloomberg in 2009:

I am 100% sure that the U.S. will go into hyperinflation. Not tomorrow, but the problem with the government debt growing so much is that when the time will come and the Fed should increase interest rates, they’ll be very reluctant to do so and so inflation will start to accelerate.

Peter Schiff’s call for $5,000/oz gold also has Mr. Gold laughing. Schiff sees the Fed printing more to stimulate the economy, which will send the yellow metal soaring.

“Back in the real world,” sneers Gold, “new Fed Chairwoman Janet Yellen is actually winding down the Fed’s extra bond buying (quantitative easing, or QE), and she’s on pace to finish by fall.”

Europe’s economic problems had establishment news outlets like The Economist saying in November 2011, the euro “could break up within weeks.” President Obama’s former chief economist, Austan Goolsbee, said “there probably isn’t” any way to hold the eurozone together.

And the ultimate establishment voice, Alan Greenspan, told CNBC the divergent cultures using one currency “simply can’t continue to work.”

So it’s not just wackadoodles wearing tinfoil hats missing the mark, as Mr. Gold implies. He writes, “But too many people have lost precious time and a chance to make real money by listening to these fear mongers. They’re probably kicking themselves now, or should be.”

However, nearly all of the gloomy prognostications Gold makes fun of are in response to the actions of central bankers, who have been at least as wrong as anyone else in their predictions.

Big financial-services companies should be kicking themselves for paying Greenspan $100,000 a speech these days. The Maestro reportedly hauled in an $8.5 million advance for his book, The Age of Turbulence. That’s a lot to pay for someone who whiffed on the housing bubble. In 2002, Greenspan said, “Even if a bubble were to develop in a local market, it would not necessarily have implications for the nation as a whole.”

Ben Bernanke, who used to make $200,000 a year, now makes “that in just a few hours speaking to bankers, hedge fund billionaires and leaders of industry,” the New York Times reports. “This year alone, he is poised to make millions of dollars from speaking engagements.”

He hasn’t exactly been an accurate predictor either. In 2005, Ben Bernanke was asked if the housing market was overheated. “Well, I guess I don’t buy your premise,” he replied. “It’s a pretty unlikely possibility. We’ve never had a decline in house prices on a nationwide basis.”

Even former Treasury Secretary and ex-New York Fed President Tim Geithner is getting in on the action, receiving $100,000 to $200,000 per talk. Plus he likely received a large advance for his book Stress Test.
Geithner admits he didn’t see the financial crisis coming. In his review of Geithner’s book, Flash Boys author Michael Lewis writes, “The story Geithner goes on to tell blames everyone and no one. The crisis he describes might just as well have been an act of God.”

They Warn for a Reason

Mr. Gold believes that economic catastrophes have natural causes. “Bad things happen in life,” he writes. “Hurricanes and tornadoes destroy communities. Nuclear war and climate change are big long-term dangers. And there will be bear markets and deep recessions in the years ahead.”

Inflation to any degree is not an act of God. Neither are currency nor stock market crashes. Central bankers create these calamities and then ride off into the sunset, earning six-figure speaking fees and multimillion-dollar book deals. The positive reinforcement they receive ensures they’ll repeat the same mistakes over and over again.

Thus, warnings must be issued constantly. Bad things are going to happen to the finances of individuals who aren’t prepared.

It’s not a matter of if, but when. Better scared than sorry.

(Editor’s Note: How quickly a crisis can creep up on you is demonstrated in our Casey Research documentary, Meltdown America. If you haven’t watched it yet, you should. Click here to watch this free video.)

The article Good Reason for Doom and Gloom was originally published at Casey Research

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