|
As I noted yesterday, the Fuse on the Global Debt Bomb has been lit. We
are now officially in the Crisis to which the 2008 Meltdown was just the warm
up.
The process will take time to unfold. The Tech Bubble, arguably the single
biggest stock market bubble of all time, was both obvious to investors AND
isolated to a single asset class: stocks. In spite of this, it took
two years for stocks to finally bottom.
In contrast, the current Crisis that we are facing involves bonds… the
bedrock of the financial system.
Every asset class in the world trades based on the
pricing of bonds. So the fact that bonds are in a bubble (arguably the
biggest bubble in financial history), means that EVERY asset class
is in a bubble.
And what a bubble it is.
All told, globally there are $100 trillion in bonds in existence
today.
A little over a third of this is in the US. About half comes from
developed nations outside of the US. And finally, emerging markets make up
the remaining 14%.
Over $100 trillion...the size of the bond
bubble alone should be enough to give pause.
However, when you consider that these bonds are pledged as
collateral for other securities (usually over-the-counter derivatives) the
full impact of the bond bubble explodes higher to $555 TRILLION.
To put this into perspective, the Credit Default Swap (CDS) market
that nearly took down the financial system in 2008 was only a tenth of this
($50-$60 trillion).
What does all of this mean?
The $100 trillion bond bubble will implode. As it does, the
financial system will begin to deleverage as debt is defaulted on or restructured
(reducing the amount of US Dollars in the system, pushing the US Dollar
higher).
By the time it’s all over, I expect:
1) Numerous emerging market countries to default and most
emerging market stocks to lose 50% of their value.
2) The Euro to break below parity before the Eurozone is
broken up (eventually some new version of the Euro to be introduced and
remain below parity with the US Dollar).
3) Japan to have defaulted and very likely enter
hyperinflation.
4) US stocks to lose at least 50% of their value and possibly
fall as far as 400 on the S&P 500.
5) Numerous “bail-ins” in which deposits are frozen and used
to prop up insolvent banks.
This process has already begun in Europe. It will be spreading elsewhere
in the months to come. Smart investors are preparing now BEFORE
it hits so they are in a position to profit from it, instead of getting
slaughtered
If you've yet to take action to prepare for this, we offer a FREE
investment report called the Financial Crisis "Round Two"
Survival Guide that outlines simple, easy to follow strategies you
can use to not only protect your portfolio from it, but actually produce
profits.
We made 1,000 copies available for FREE the general public.
As we write this, there are less than 50 left.
To pick up yours, swing by….
http://www.phoenixcapitalmarketing.com/roundtwo.html
|
