The Phaserl


Two More Harbingers Of Financial Doom That Mirror The Crisis Of 2008

by Michael Snyder, The Economic Collapse Blog:

The stock market continues to flirt with new record highs, but the signs that we could be on the precipice of the next major financial crisis continue to mount.  A couple of days ago, I discussed the fact that the U.S. dollar is experiencing a tremendous surge in value just like it did in the months prior to the financial crisis of 2008.  And previously, I have detailed how the price of oil has collapsed, prices for industrial commodities are tanking and market behavior is becoming extremely choppy.  All of these are things that we witnessed just before the last market crash as well.  It is also important to note that orders for durable goods are declining and the Baltic Dry Index has dropped to the lowest level on record.  So does all of this mean that the stock market is guaranteed to crash in 2015?  No, of course not.  But what we are looking for are probabilities.  We are looking for patterns.  There are multiple warning signs that have popped up repeatedly just prior to previous financial crashes, and many of those same warning signs are now appearing once again.

One of these warning signs that I have not discussed previously is the wholesale inventories to sales ratio.  When economic activity starts to slow down, inventory tends to get backed up.  And that is precisely what is happening right now.  In fact, as Wolf Richter recently wrote about, the wholesale inventories to sales ratio has now hit a level that we have not seen since the last recession…

In December, the wholesale inventory/sales ratio reached 1.22, after rising consistently since July last year, when it was 1.17. It is now at the highest – and worst – level since September 2009, as the financial crisis was winding down:

Wolf Richter

Rising sales gives merchants the optimism to stock more. But because sales are rising in that rosy scenario, the inventory/sales ratio, depicting rising inventories and rising sales, would not suddenly jump. But in the current scenario, sales are not keeping up with inventory growth.

Another sign that I find extremely interesting is the behavior of the yield on 10 year U.S. Treasury notes.  As Jeff Clark recently explained, we usually see a spike in the 10 year Treasury yield about the time the market is peaking before a crash…

The 10-year Treasury note yield bottomed on January 30 at 1.65%. Today, it’s at 2%. That’s a 35-basis-point spike – a jump of 21% – in less than two weeks.

And it’s the first sign of an impending stock market crash.

10 Year Yield - Stansberry

As I explained last September, the 10-year Treasury note yield has ALWAYS spiked higher prior to an important top in the stock market.

For example, the 10-year yield was just 4.5% in January 1999. One year later, it was 6.75% – a spike of 50%. The dot-com bubble popped two months later.

In 2007, rates bottomed in March at 4.5%. By July, they had risen to 5.5% – a 22% increase. The stock market peaked in September.

Let’s be clear… not every spike in Treasury rates leads to an important top in the stock market. But there has always been a sharp spike in rates a few months before the top.

Once again, just because something has happened in the past does not mean that it will happen in the future.

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11 comments to Two More Harbingers Of Financial Doom That Mirror The Crisis Of 2008

  • randy0302

    Once again you report news that is widely available everywhere? You simply relay as though it is yours?

  • Petedivine

    I didn’t know that the ten year yield spikes at major stockmarket tops. It certainly seems like a lot of very important macro indicators are signaling a stockmarket correction and more importantly the beginnings of another deep recession or worse. I for one appreciate highlighting the current situation as it unfolds. I think this one is the big macro depression we will remember for generations.

  • Timco

    I thought you might find this interesting. Yesterday I took my kids to the Dollar Store, because it’s a fun place to get lots of stuff. Everything still costs 1 dollar, but you are getting less for the money. Less cereal, less laundry detergent, less paper plates, less soda pop. You get the picture. We might get a blast of deflation, but when’s that’s over, look out. Inflation will rack this Country.

    • petedivine

      I’m not sure if people debating inflation vs. deflation completely understand the phenomena and how it might be expressed. We lack the perspective that only someone having lived through such an event can express.I recall reading an article from Gonzalo Lira’s blog in 2010. It stuck with me through the years, because I think we are starting to see hyperinflation unfold.

      “One of the effects of Chile’s hyperinflation was the collapse in asset prices.
      This would seem counterintuitive. After all, if the prices of consumer goods and basic staples are rising in a hyperinflationary environment, then asset prices should rise as well—right? Equities should rise in price—since more money is chasing after the same number of stock. Real estate prices should rise also—and for the same reason. Right?

      Actually, wrong—and for a simple reason: Once basic necessities are unmet, and remain unmet for a sustained period of time, any asset will be willingly and instantly sacrificed, in order to meet that basic need.

      To put it in simple terms: If you were dying of thirst in the middle of the desert, would you give up your family heirloom diamonds, in exchange for a gallon of water? The answer is obvious—yes. You would sacrifice anything and everyting—instantly—in order to meet your basic needs, or those of your family.

      So as the situation in Chile deteriorated in ’72 and into ’73, the stock market collapsed, the housing market collapsed—everything collapsed, as people either cashed out of their assets in order to buy basic goods and staples on the black market, or cashed out so as to leave the country altogether. No asset class was safe, from this sell-off—it was across-the-board, and total. “

      • Gnostic


        Yes I have heard of Lira’s story several years back, thanks for refresher.

        • Eric

          If you guys don’t already know 10 different ways to find, filter, and produce potable drinking water, best to learn those now.
          I still buy mine at the water store which is 1/3 of the price of the arrowhead flats, better water, and less plastic you are consuming. Best water in town actually. Not that I wouldn’t mind a mountain stream with a big berkey. Add a slice of lemon to the water to counteract the beer. 😉

          Watch some the early “Survivorman” shows with Les Stroud or whatever. I live practically in the high desert and water is a problem here but knowledge IS power.

          Hey Gnostic… got your link…

          Good stuff. I’ve spent a good amount of time in Black’s Law Dictionary. Great Resource to have around. Are you familiar with Tom Cryer? Look him up. Remember, they HATE tax cases and love to make examples of people… Dean Clifford, Santos, etc.

          Don’t go looking for a fight my friend. Just walk away. 😉

          • Gnostic


            My prediction of a big drop in PM’s was wrong, I suggest whenever I make a prediction in price expect the opposite 100&.

            PS- I agree walk away & don’t contract with these buggers.

      • rl

        Thanks peter,
        some thing are so basic that they boggle most.
        “things” will be worthless when no one can afford them or afford keep them. When your belly or your childrens belly growls with no relief in sight…
        It is no joke that one day a hand full of silver will buy that unmortgaged house unless the sheeple everywhere line up for food, shelter, and chains for all as they are expected to.
        Timco is seeing what all know and see now too, turning to their daily dose of msm hopium so they can sleep at night. Divide and conquer works best when their hungry has always been the end game that is coming.

  • Ed_B

    Agree on water and water purification being a high priority, especially during hard times. Many of us are so conditioned to the fact that we flip a switch and there is light. We turn a dial and there is warm or cool air. We open a valve and unlimited water comes to us at a very low price. As with many instances of normalcy bias, however, there is no logical reason to assume that this will always be the case. When hard times come, these things may either not be available at all or will become very expensive. Better to plan ahead as to how you will find water and then make it safe to drink.

    I am fortunate to live in an area with abundant rainfall and many lakes, rivers, streams, and springs so finding water is not at all difficult here. The water table is high and digging a well is not all that difficult. What can be difficult, though, is getting water of good quality, that is not contaminated with ag chemicals or human / animal wastes. There are some common bacteria and other water-born micro-organisms that are either deadly or that can cause sickness that is enough to threaten our ability to survive by making us too sick or weak to work, hunt, or fish. This must be avoided at any cost and a good water filter is one of the better steps we can take. I favor the sintered ceramic filters with a cloth bag that acts as a pre-filter. I made one of these from plans I found on You Tube for less than $40. It should do the job quite nicely and is cheap enough that a few spare filters can be added to the preps for not very much money. This could well be the best money spent prepping.

    • Timco


      Good advice on the water filter and bacteria risks. If the grid power goes out, water will likely siphon back into the water pipes. This is what a vacuum breaker prevents, but most people don’t have one installed on their water line. Anyway, this occurrence is a perfect way for bacteria to get established in the water supply. If, and when the power comes back on, the water will be contaminated. You will have no warning that the bacteria is in your body until you get sick. Get a water filter and some Clorox asap.

  • petedivine

    Interestingly, I have dozens of relatives in Venezuela, and am watching them live through hyperinflation. Venezuela has been living with high inflation for years even decades. People save in Dollars and use Bolivars for small purchases. However, the decline in the price of oil decreases the amount of Dollars available to the market.

    Real estate: Over the last five years real estate was a no miss investment. Buy an apartment wait 6 months and flip it for an easy $40K. Today that is not the case. Real estate prices are declining rapidly because people are selling assets in-search of better futures overseas. Also the decline in available dollars are driving prices lower.
    Since food costs are government controlled, necessities are hard to come by. Almost everything is imported. Importers require Dollars, but inflation is over 30% annually. Importers can’t exchange their Bolivares for Dollars to purchase overseas food and basic necessities such as medicine. That creates a black market where basic items can be obtained for substantially more then the government controlled stores. The black market is simply reflecting the real cost of goods in the reserve currency.

    If you were to ask my Venezuelan family what’s the hardest challenge they face today, it would not be the extreme poverty, declining asset prices, scarcity of basic living, government abuses etc…but rather the crime. Violent crime has escalated and has become epidemic. It terrifies the people and creates mind numbing fear. Its hard to do business, commute to work, or plan for a future when you could be robbed at gun point, or killed in a gun battle whenever you or your children leave the house. Sometimes the crime finds you even in your home. Their is no reprieve from the fear.

    I pray the Venezuelan financial flu does not come to America, but if we lose our reserve currency status then I suspect my Venezuelan relatives and I will be comparing the days recent atrocities.

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