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By Steve St. Angelo
It’s about time that I share with you all a little secret. The
situation in the markets is much worse than you realize. While that may
sound like someone who has been crying “wolf” for the past several years, in
all honesty, the public has no idea just how dire our present situation has
become.
The amount of debt, leverage, deceit, corruption, and fraud in the
economic markets, financial system, and in the energy industry are off the
charts. Unfortunately, the present condition is even much worse when we
consider “INSIDER INFORMATION.”
What do I mean by insider information… I will explain that in a
minute. However, I receive a lot of comments on my site and emails
stating that the U.S. Dollar is A-okay and our domestic oil industry will
continue pumping out cheap oil for quite some time. They say… “No need
to worry. Business, as usual, will continue for the next 2-3 decades.”
I really wish that were true. Believe me, when I say this, I am not
rooting for a collapse or breakdown of our economic and financial
markets. However, the information, data, and facts that I have come
across suggest that the U.S. and global economy will hit a brick wall within
the next few years.
How I Acquire My Information, Data & Facts
To put out the original information in my articles and reports, I spend a
great deal of time researching the internet on official websites, alternative
media outlets, and various blogs. Some of the blogs that I read, I find
more interesting information in the comment section than in the
article. For example, the Peakoilbarrel.com site is visited by a lot of
engineers and geologists in the oil and gas industry. Their comments
provide important “on-hands insight” in the energy sector not found on the
Mainstream Media.
I also have a lot of contacts in the various industries that either
forward information via email or share during phone conversations. Some
of the information that I receive from these contacts, I include in my
articles and reports. However, there is a good bit of information that
I can’t share, because it was done with the understanding that I would not
reveal the source or intelligence.
Of course, some readers may find that a bit cryptic, but it’s the
truth. Individuals have contacted me from all over the world and in
different levels of industry and business. Some people are the working
staff who understand th reality taking place in the plant or field, while
others are higher ranking officers. Even though I have been receiving
this sort of contact for the past 4-5 years, the number has increased
significantly over the past year and a half.
That being said, these individuals contacted me after coming across my
site because they wanted to share valuable information and their insight of
what was going on in their respective industires. The common
theme from most of these contacts was…. GOSH STEVE, IT’S MUCH WORSE THAN YOU
REALIZE. Yes, that is what I heard over and over again.
If my readers and followers believe I am overly pessimistic or cynical,
your hair will stand up on your neck if you knew just how bad the situation
was BEHIND THE SCENES.
Unfortunately, we in the Alternative Media have been lobotomized to a
certain degree due to the constant propaganda from the Mainstream Media and
market intervention by the Fed and Central Banks. A perfect example of
the massive market rigging is found in Zerohedge’s recent article; Central Banks Have Purchased $2 Trillion In Assets
In 2017 :
….. so far in 2017 there has been $1.96 trillion of central bank
purchases of financial assets in 2017 alone, as central bank balance sheets
have grown by $11.26 trillion since Lehman to $15.6 trillion.
What is interesting about the nearly $2 trillion in Central Bank purchases
so far in 2017, is that the average for each year was only $1.5
trillion. We can plainly see that the Central Banks had to ramp up
asset purchases as the Ponzi Scheme seems to be getting out of hand.
So, how bad is the current economic and financial situation in the world
today? If we take a look at the chart in the next section, it may give
you a clue.
THE DEATH OF BEAR STEARNS: A Warning For Things To Come
It seems like a lot of people already forgot about the gut-wrenching
2008-2009 economic and financial crash. During the U.S. Banking
collapse, two of the country’s largest investment banks, Lehman Brothers, and
Bear Stearns went belly up. Lehman Brothers was founded in 1850 and
Bear Stearns in 1923. In just one year, both of those top Wall Street
Investment Banks ceased to exist.
Now, during the 2001-2007 U.S. housing boom heyday, it seemed like
virtually no one had a clue just how rotten of a company Bear Stearns had
become. Looking at the chart below, we can see the incredible RISE
& FALL of Bear Stearns:
As Bear Stearns added more and more crappy MBS – Mortgage Backed Securities
to its portfolio, the company share price rose towards the heavens. At
the beginning of 2007 and the peak of the U.S. housing boom, Bear Stearns
stock price hit a record $171. Unfortunately, at some point,
all highly leveraged garbage assets or Ponzi Schemes come to an end.
While the PARTY LIFE at Bear Stearns lasted for quite a while, DEATH came
suddenly.
In just a little more than a year, Bear Stearns stock fell to a
mere $2… a staggering 98% decline. Of course, the financial
networks and analysts were providing guidance and forecasts that Bear Stearns
was a fine and healthy company. For example, when Bear was dealing with
some negative issues in March 2008, CBNC’s Mad Money, Jim Cramer made
the following statement in response to a caller on his show (Source):
Tuesday, March 11, 2008, On Mad Money
Dear Jim: “Should I be worried about Bear Stearns in
terms of liquidity and get my money out of there?” – Peter
Jim Cramer: “No! No! No! Bear Stearns is fine. Do not
take your money out. Bear sterns is not in trouble. If anything, they’re more
likely to be taken over. Don’t move your money from Bear. That’s just being
silly. Don’t be silly.”
Thanks to Jim, many investors took his advice. So, what happened to
Bear Stearns after Jim Cramer gave the company a clean bill of health?
On Tuesday, March 11, the price of Bear Stearns was trading at
$60, but five days later it was down 85%. The source (linked
above) where I found the quote in which Jim Cramer provided his financial
advice, said that there was a chance Jim was replying to the person in
regards to the money he had deposited in the bank and not as an
investment. However, Jim was not clear in stating whether he was
talking about bank deposits or the company health and stock price.
Regardless, Bear Stearns stock price was worth ZERO many years before it
collapsed in 2008. If financial analysts had seriously looked into the
fundamentals in the Mortgage Backed Security market and the bank’s financial
balance sheet several years before 2008, they would have realized Bear
Stearns was rotten to the core. But, this is the way of Wall Street and
Central Banks. Everything is fine, until the day it isn’t.
And that day is close at hand.
THE RECORD LOW VOLATILITY INDEX: Signals Big Market Trouble
Ahead
Even though I have presented a few charts on the VIX – Volatility Index in
past articles, I thought this one would provide a better picture of the
coming disaster in the U.S. stock markets:
The VIX – Volatility Index (RED) is shown to be at its
lowest level ever when compared to the S&P 500 Index (GREY)
which is at its all-time high. If we take a look at the VIX
Index in 2007, it fell to another extreme low right at the same time Bear
Stearns stock price reached a new record high of $171. Isn’t
that a neat coincidence?
As a reminder, the VIX Index measures the amount of fear in the
markets. When the VIX Index is at a low, the market believes everything
is A-OKAY. However, when the VIX surges higher, then it means that fear
and panic have over-taken investment sentiment, as blood runs in the streets.
As the Fed and Central Banks continue playing the game of Monopoly with
Trillions of Dollars of money printing and asset purchases, the party won’t
last for long as DEATH comes to all highly leveraged garbage assets and Ponzi
Schemes.
To get an idea just how much worse the situation has become than we
realize, let’s take a look at the energy fundamental that is gutting
everything in its path.
WHY THE BIG MARKET COLLAPSE IS COMING: It’s The Energy,
Stupid
Even though I belong to the Alternative Media Community, I am amazed at
the lack of understanding by most of the precious metals analysts when it
comes to energy. While I respect what many of these gold and silver
analysts have to say, they exclude the most important factor in their
forecasts. This critical factor is the Falling EROI – Energy Returned
On Investment.
As I mentioned earlier in the article, I speak to many people on the phone
from various industries. Yesterday, I was fortunate enough to chat with
Bedford Hill of the Hill’s
Group for over 90 minutes. What an interesting
conversation. Ole Bedford knows we are toast. Unfortunately, only
0.01% of the population may understand the details of the Hill’s Group work.
Here is an explanation of the Hill’s Group:
The Hill’s Group is an association of consulting engineers
and professional project managers. Our goal is to support
our clients by providing them with the most relevant, and up to-date skill
sets needed to manage their organizations. Depletion: A determination for the
world’s petroleum reserve provides organizational long range planners, and
policy makers with the essential information they will need in today’s
rapidly changing environment.
I asked Bedford if he agreed with me that the hyperinflationary collapse
of Venezuela was due to the falling oil price rather than its corrupt
Communist Government. He concurred. Bedford stated that
the total BTU energy cost to extract Venezuela’s heavy oil was higher than
the BTU’s the market could afford. Bedford went on to say that
when the oil price was at $80, Venezuela could still make enough profit to
continue running its inefficient, corrupt government. However, now that
the price of oil is trading below $50, it’s gutting the entire Venezuelan
economy.
During our phone call, Bedford discussed his ETP Oil model, shown in his
chart below. If there is one chart that totally screws up the typical
Austrian School of Economics student or follower, it’s this baby:
Bedford along with a group of engineers spent thousands and thousands of
hours inputting the data that produced the “ETP Cost Curve” (BLACK
LINE). The ETP Cost Curve is the average cost to produce oil
by the industry. The RED dots represent the actual
average annual West Texas Oil price. As you can see, the oil price
corresponded with the ETP Cost Curve. This correlation suggests
that the market price of oil is determined by its cost of production, rather
than supply and demand market forces.
The ETP Cost Curve goes up until it reached an inflection point in 2012…
then IT PEAKED. The black line coming down on the right-hand side of
the chart represents “Maximum Consumer Price.” This line is the maximum
price that the end consumer can afford. Again, it has nothing to do
with supply and demand rather, it has everything to do with the cost of
production and the remaining net energy in the barrel of oil.
I decided to add the RED dots for years 2014-2016.
These additional annual oil price figures remain in or near the Maximum
Consumer Price line. According to Bedford, the oil price will continue
lower by 2020. However, the actual annual oil price in 2015 and 2016
was much lower than the estimated figures Bedford, and his group had
calculated. Thus, we could see some volatility in the price over the
next few years.
Regardless, the oil price trend will be lower. And as the oil price
continues to fall, it will gut the U.S. and global oil industry. There
is nothing the Fed and Central Banks can do to stop it. Yes, it’s true
that the U.S. government could step in and bail out the U.S. shale oil
industry, but this would not be a long-term solution.
Why? Let me explain with the following chart:
I have published this graph at least five times in my articles, but it is
essential to understand. This chart represents the amount of below
investment grade debt due by the U.S. energy industry each year. Not
only does this debt rise to $200 billion by 2020, but it also represents that
the quality of oil produced by the mighty U.S. shale oil industry WAS
UNECONOMICAL even at $100 a barrel.
Furthermore, this massive amount of debt came from the stored economic
energy via the various investors who provided the U.S. shale energy industry
with the funds to continue producing oil at a loss. We must
remember, INVESTMENT is stored economic energy. Thus, pension plans,
mutual funds, insurance funds, etc., had taken investments gained over the
years and gave it to the lousy U.S. shale oil industry for a short-term high
yield.
Okay, this is very important to understand. Don’t look at those bars
in the chart above as money or debt, rather look at them as energy. If
you can do that, you will understand the terrible predicament we are
facing. Years ago, these large investors saved up capital that came
from burning energy. They took this stored economic energy (capital)
and gave it to the U.S. shale oil industry. Without that capital, the
U.S. shale oil industry would have gone belly up years ago.
So, what does that mean? It means… IT TOOK MORE ENERGY TO
PRODUCE THE SHALE OIL than was DELIVERED TO THE MARKET.
Regrettably, the overwhelming majority of shale oil debt will never be
repaid. As the oil price continues to head lower, the supposed shale
oil break-even price will be crushed. Without profits, debts pile up
even higher.
Do you all see what is going on here? And let me say this.
What I have explained in this article, DOES NOT INCLUDE INSIDER INFORMATION,
which suggests “The situation is even much worse than you realize… LOL.”
For all my followers who believe business, as usual, will continue for
another 2-3 decades, YOU HAVE BEEN WARNED. The energy situation is in
far worse shape than you can imagine.
PRECIOUS METALS: Are Stores Of Economic Energy.. Stocks,
Bonds & Real Estate Are Energy IOU’s
If you want to lose all your money (most of it), I suggest that
you keep it invested in most STOCKS, BONDS and REAL ESTATE. I
still receive emails from individuals who try to convince me that real estate
is a safe-haven during economic distress. Yes, real estate was good to
own in the past, but we are living in much different times today.
Years after the markets finally crack, I see thousands and thousands of
suburban homes, commercial and industrial properties empty… never to be used
again. We just won’t have the energy to run them. Thus, there
will be Trillions of Dollars of sunk investment capital gone forever.
So, if you are still watching late night infomercials on how to
become RICH buying Real Estate, you have my sympathies.
Lastly, if you are one of the few Americans not suffering from BRAIN
DAMAGE, I suggest that you consider owning some physical precious metals to
protect your wealth. Once the markets finally implode, there will be
few bids for most STOCKS, BONDS and REAL ESTATE.
The time to get out of highly-inflated garbage assets is before everyone
else tries to.
GOD HATH A SENSE OF HUMOR….
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