By Michael Snyder
Will global financial markets reach a breaking point during the month of October?
Right now there are all kinds of signs that the financial world is about to experience a nervous breakdown. Massive
amounts of investor money is being pulled out of the stock market and mammoth bets are being made against the S&P 500
in October. The European debt crisis continues to grow even worse and weird financial moves are being made all over
the globe. Does all of this unusual activity indicate that something big is about to happen? Let's hope not.
But historically, the biggest stock market crashes have tended to happen in the fall. So are we on the verge of a "Black
The following are 21 signs that something big is about to happen
in the financial world and that global financial markets are on the verge of a nervous breakdown....
#1 We are seeing an amazing number
of bets against the S&P 500 right now. According to CNN, the number of bets against the S&P 500 rose to the highest level in a year last month. But that was nothing compared to what we are
seeing for October. The number of bets against the S&P 500 for the month of October is absolutely astounding. Somebody is going to make a monstrous amount of money if
there is a stock market crash next month.
#2 Investors are pulling a huge
amount of money out of stocks right now. Do they know something that we don't? The following is from a report
in the Financial Post....
Investors have pulled more money from U.S. equity funds
since the end of April than in the five months after the collapse of Lehman Brothers Holdings Inc., adding to the $2.1 trillion
rout in American stocks.
About $75 billion was withdrawn from funds that focus on
shares during the past four months, according to data compiled by Bloomberg from the Investment Company Institute, a Washington-based
trade group, and EPFR Global, a research firm in Cambridge, Massachusetts. Outflows totaled $72.8 billion from October 2008
through February 2009, following Lehman’s bankruptcy, the data show.
#3 Siemens has pulled more than half a billion euros out of two major French banks and has moved that money to the
European Central Bank. Do they know something or are they just getting nervous?
#4 On Monday, Standard & Poor's
cut Italy's credit rating from A+ to A.
#5 The European Central Bank is
purchasing even more Italian and Spanish bonds in an attempt to cool down the burgeoning financial crisis in
#6 The Federal Reserve, the European
Central Bank, the Bank of England, the Bank of Japan and the Swiss National Bank have announced that they are going to make
available an "unlimited" amount of money to European commercial banks in October, November and December.
#7 So far this year, the largest
bank in Italy has lost over half of its value and the second largest bank in Italy is down 44 percent.
#8 Angela Merkel's coalition is getting embarrassed in local elections in Germany. A recent poll found that
an astounding 82 percent of all Germans believe that her government is doing a bad job
of handling the crisis in Greece. Right now, public opinion in Germany is very negative toward the bailouts, and that
is really bad news for Greece.
#9 Greece is experiencing a full-blown
economic collapse at this point. Just consider the following statistics from a recent editorial in the Guardian....
Consider first the scale of the crisis. After contracting
in 2009 and 2010, GDP fell by a further 7.3% in the second quarter of 2011. Unemployment is approaching 900,000 and is projected
to exceed 1.2 million, in a population of 11 million. These are figures reminiscent of the Great Depression of the 1930s.
#10 In 2009, Greece had a debt
to GDP ratio of about 115%. Today, Greece has a debt to GDP ratio of about 160%. All of the austerity that has been imposed upon them has
done nothing to solve their long-term problems.
#11 The yield on 1 year Greek bonds
is now over 129 percent. A year ago the yield on those bonds was under 10 percent.
#12 Greek Deputy Finance Minister
Filippos Sachinidis says that Greece only has enough cash to continue operating until next month.
#13 Italy now has a debt to GDP
ratio of about 120% and their economy is far, far larger than the economy of Greece.
#14 The yield on 2 year Portuguese
bonds is now over 17 percent. A year ago the yield on those bonds was about 4 percent.
#15 China seems to be concerned
about the stability of European banks. The following is from a recent Reuters report....
A big market-making state bank in China's onshore foreign
exchange market has stopped foreign exchange forwards and swaps trading with several European banks due to the unfolding debt
crisis in Europe, two sources told Reuters on Tuesday.
#16 European central banks are
now buying more gold than they are selling. This is the first time that has happened in more than 20 years.
#17 The chief economist at the
IMF says that the global economy has entered a "dangerous new phase".
#18 Israel has dumped 46 percent of its U.S. Treasuries and Russia has dumped 95 percent of its U.S. Treasuries. Do they know something that we don't?
#19 World financial markets are
expecting that the Federal Reserve will announce a new bond-buying plan this week that will be designed to push long-term interest rates
#20 If some wealthy investors believe
that the Obama tax plan has a chance of getting through Congress, they may start dumping
stocks before the end of this year in order to avoid getting taxed at a much higher rate in 2012.
#21 According to a study that was
recently released by Merrill Lynch, the U.S. economy has an 80% chance of going into another recession.
When financial markets get really jumpy like this, all it takes
is one really big spark to set the dominoes in motion.
Hopefully nothing really big will happen in October.
Hopefully global financial markets will not experience a nervous
But right now things look a little bit more like 2008 every
None of the problems that caused the financial crisis of 2008
have been fixed, and the world financial system is more vulnerable today than it ever has been since the end of World War
As I wrote about yesterday, the U.S. economy has never really recovered from the last financial crisis.
If we see another major financial crash in the coming months,
the consequences would be absolutely devastating.
We have been softened up and we are ready for the knockout blow.