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Soon after I posted my new video, The Next Black Swans, over ten thousand readers rushed to watch it.
Thousands more viewed it on our Money and Markets Facebook page.
And answers poured in, responding to my big-picture question:
"What will be the next major Black Swan to strike the United States?"
Brian, for example, writing in the comments section of my last column predicts that "the next Black Swan event will be the political crisis in Italy along with the collapse of their banks, which will result in Italy leaving the EU. The EU will then collapse."
David A. agrees: "The next Black Swan," he says, "will be bank failures in Europe. Italian and Spanish banks are in deep trouble, and a bankruptcy will set off a chain of events that will shake the entire financial system."
This is very timely commentary, gentlemen. Indeed, just recently, we released our Weiss Safety Ratings on the weakest banks in the world, covering institutions in 51 countries. We found that among the 22 weakest large banks in the eurozone …
Germany, Belgium and Cyprus each have one. Portugal has two; Spain and Greece, four each.
But of all the countries in the world, Italy has the biggest concentration of weak large banks — nine institutions in all.
Moreover, five of Italy’s nine weakest banks are megabanks with over $100 billion in assets:
- Unione di Banche Italiane, rated D, with $132.8 billion in assets;
- Banco Popolare SC, D-, with $139 billion;
- Banca Monte del Paschi di Siena, D-, with $197.6 billion;
- Intesa Sanpaolo, D+, with a whopping $796.9 billion; and
- the largest of all, UniCredit SpA, rated D, with over $1 trillion.
One of their main problems: Since 2009, bad debts have quadrupled from less than 3% of total loans to more than 12% today. As a result, many Italian banks have far more bad debts than they have capital to back them up.
To make matters worse, Italy has more public debt per GDP than any other EU member except Greece, despite an economy nine times larger than Greece’s.
Result: In a banking crisis, not only would Rome be hard pressed to come to the rescue, but Brussels would have a tough time saving Rome.
(For our complete list of the 22 most vulnerable large banks in the eurozone, click here.)
R.M. writes that the next Black Swan will be "market demand for higher interest rates despite the best efforts of central banks, causing one or two advanced nations to absolutely default on sovereign debt obligations. That would precipitate a worldwide and long-lasting deflation."
R.M., it sounds like you’re referring to a global bond market collapse. You’re saying that, regardless of what central bankers may want, global bond investors could dump their holdings, drive interest rates higher, and put great financial stress on highly indebted sovereign governments.
If so, based on numbers alone, Japan seems to be most vulnerable, with government debts that represent more than 245% of GDP.
But the numbers are also alarming in five other major nations with more government debts than GDP. That includes Greece, Italy, Portugal, Belgium, plus one more country that has joined the same pitiful club: the USA.
In each of these countries, government debts exceed 100% of GPD. In each case, the debt burden is far worse than it was a decade ago. And everywhere, economists of years past warned loudly that exceeding 100% would be disastrous.
Among those same economists, many are silent today. But some — even at the International Monetary Fund (IMF) and in the Congressional Budget Office (CBO) — are not.
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| Click here for the full IMF report. |
In the IMF’s most recent Global Financial Stability Report, for example, it warns that risks have risen and the outlook has deteriorated in advanced countries …
Italy: IMF analysts warn that unless Italy can repair its bank balance sheets and lower its very high public debt, the result could be global contagion. They refer to "Italy’s monumental challenge," the likelihood of "regional and global spillovers," and "Italy’s systemic weight." In other words, Black Swan events that could sink more than just Italy’s economy.
Japan: The IMF warns that "public debt is unsustainable under current policies."
United States: The Congressional Budget Office states emphatically that "the long-term outlook for the federal budget has worsened dramatically over the past several years." It foresees a death spiral that will sap revenue from government programs even as demands grow.
Clearly, R.M., the data support your thesis. But I feel what is missing in your comments is this critical fact: Bond investors don’t wait for actual defaults. They start dumping their bond holdings far sooner, and a major trigger can be ratings downgrades of sovereign debts.
Flash update: Fitch Ratings has just reported that the creditworthiness of sovereign nations has deteriorated at a record pace in the first six months of this year. So expect a raft of new downgrades.
John H. says "I believe another false flag event will occur which will support the continuation of the police state we are now living in. George Orwell’s 1984 is here and now."
I understand, John. You’re talking about events, which, despite the appearance of enemy attacks, are actually covert government operations designed to shock the public into accepting more aggressive foreign military actions or more intrusive domestic controls.
Some people believe that even Pearl Harbor and 9/11 were false flag events, or at least that the government had advance knowledge of the attacks and deliberately chose to ignore it.
In my humble opinion, there are three sad aspects to these theories: They often villainize government officials dedicated to our protection. They can be a huge distraction from the urgent task of self-defense. And, sometimes (but rarely), they are true.
But the historical examples of Black Swan events in my video are not false flags. Nor do I think the next major Black Swans will be either.
William B writes: "There is a major uptrend in street crime and violence. Several groups are organizing to disrupt both conventions this summer. I believe these … will get out of control, leading to marshal law and further loss of liberty."
William, if you have children or grandchildren … if you fear for their lives in ordinary daily circumstances (going to school, dancing in a disco, waiting in line at an airport check-in counter) … and if you’re given a choice between more liberty or less security, which do you choose?
I have asked many heads of households this same question in the U.S., Western Europe, Russia, Brazil, Japan, China and North Africa. I have asked people living in democracies, dictatorships and monarchies. But as you might imagine, regardless of social status or personal ideology, the answer is almost universally the same. For them, security is an immediate, tangible benefit; liberty is not.
The irony is that it’s the question — not the answer — that’s wrong. More security is not only possible without loss of liberty; it’s more likely to be achieved.
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| Martin Weiss in Brazil during its harsh dictatorship of 1964-84. |
I know from personal experience. I lived in one of the most repressive dictatorships in modern history — Brazil between 1964 and 1984. I also lived in one of the world’s most advanced and secure democracies — Japan.
In Brazil, the loss of freedom did nothing to improve lax security; often, it merely compounded the problem. And in Japan, the high level of security had little to do with politics; it was rooted mostly in a millennial tradition of collective self-defense by local community organizations.
That may be difficult in America. But as Money and Markets editor Jeff Cantor tells us, advanced self-defense for individuals and families is not difficult.
Hard to believe? Then watch his recent blockbuster video "Freedom from Fear."
Or if you want a complete list of Jeff’s recent columns, simply follow these steps:
- Go to www.moneyandmarkets.com
- In the red menu bar at the top of the page, go to "Issues."
- Select "2016 issues."
- Below the red bar menu, you will see a series of choices — for author, topic, year, etc. Click on the "All Authors," and select "Jeff Cantor."
- Press the "Submit" button (at the extreme right of the choices.) You will then have at your fingertips over 20 blockbuster columns Jeff has written for us since March 17 of this year.
- Plus, you can follow the same steps to display the columns of any Money and Markets editor of your choice.
Bill C. says "I am 70 and have lived through all of these Black Swans since the ’50s. The murder of Dr. Martin Luther King Jr. and Robert Kennedy, the party conventions of ’68 which saw violent protests. I’m afraid this summer could see a repeat of ’68, only much worse. I pray it doesn’t happen."
We share your prayers. But Cleveland is bracing for tens of thousands of protesters from "Bikers for Trump" to the "Coalition to Stop Trump." And in response, the city is putting half of its downtown area under new restrictions.
And Philadelphia, the site of the Democratic convention, could turn out to be more hectic, with as many as one million protesters potentially descending on the city, while roughly 1,000 of the city’s airport workers walk off the job.
In both cities, at least some chaos is inevitable. The question is: How much?
In the past, the primary variable was police riot training — their skill in managing crowds with just the right level of restraint. Today, unfortunately, as we’ve just seen in Dallas and Nice, what will most determine the outcome is the presence or absence of active shooters and terrorists.
Robert believes that it’s long-term megatrends — not some individual catastrophic event — that will drive history. He foresees more "printing of currency, which is nothing but theft," "a recession, for which the signs are already present," and a federal deficit which will hit $1.3 trillion.
I agree with this aspect: No matter how shocking each Black Swan event may be, what’s driving the world today toward greater danger and turmoil are the three enduring megatrends I laid out in my video: (1) The greatest Fed money printing of all time, (2) the most extreme concentration of wealth in at least 100 years and (3) the most radical political polarization since the Civil War.
A.T. writes "the greatest surprise to U.S. investors may be how well the U.S. markets do as money leaves Europe and comes to the U.S. in search of safety. There is no safe place in the world markets anymore. Just some that are less dangerous for a time."
If so, this will not come as a surprise to us. As you may know, Money and Markets Editor Larry Edelson was among the first anywhere to predict this phenomenon, coining the term "The Global Money Tsunami."
And as you saw in my Next Black Swans video, the flow of flight capital to the U.S. is a major factor behind rising stock and real estate prices.
This powerful megatrend is continuing even as we speak. And, for now at least, it seems to have enough critical mass to offset traditional bearish forces like recession and disappointing earnings.
Gordon’s view is this: "Japan has voted for a tired Abenomics plan that has not worked so far. Abe received a bigger majority than even he expected, and the Nikkei exploded 900 points. Likewise [in the U.S.], we have abandoned looking at data, and it’s party time. But I give this party a week to 10 days, and then the euphoria will die off. People will realize that they are still in one of the Titanic’s lifeboats looking to be saved by more free/cheap government money."
Well said, Gordon. But we feel that how soon the party will end could depend on the prior question. If the Global Money Tsunami continues to drive up U.S. stock prices, it may last longer. If not, it could abort sooner.
As an investor, your best plan is to follow, or better yet, invest in advance of the Global Money Tsunami: Buy what they’re going to buy, before they buy it.
We can’t know exactly which investments that will be. But we do know this with a high level of certainty: Global investors that are fleeing danger rarely seek new risks. Instead, they favor top-notch quality and security:
- The steadiest stocks with the best dividends track records.
- Extremely high-rated mutual funds and ETFs.
- Plenty of cash and the safest institutions to stash it.
We recommend you do the same. And to find the best of the best, I suggest you rely on our brand new website and tools at www.weissratings.com.
Thank you for your very stimulating comments and please accept my apologies for the many I have not yet addressed.
Good luck and God bless!
Martin
Dr. Weiss founded Weiss Research in 1971 and has dedicated his entire career to helping millions of average investors find truly safe havens and investments. He is Chairman of the Weiss Group, which includes Weiss Research and Weiss Ratings, the nation’s leading independent rating agency accepting no fees from rated companies. His last three books have all been New York Times Bestsellers and his most recent title is The Ultimate Money Guide for Bubbles, Busts, Recession and Depression.
{ 34 comments }
Hi Martin
At some point in time those with capital will decide that regardless of the meagre returns the principal is worth protecting.
What the fed is managing at the moment is the recapitalisation of their member banks at the expense of consumers.
Black swans are unpredictable and unforeseeable. by definition. Therefore, anything that is listed here is not a black swan, it was predicted and foreseen. you hear a clatter of hoofs, and you say zebras, but everybody tells you no, its likely horses. Black swan:rampaging giraffes,
That black swans are by their very definition unpredictable is an excellent point, Thomas. Whatever the future may bring, it is likely to be different than we expect.
We can probably have a sense of whether the future will be supportive or problematic. If we live near a lake, and dump a variety of toxic chemicals in it, we can probably feel confident that sooner or later something bad will happen – we just don’t know exactly what.
I encounter a number of stories in the news describing people who are doing some incredibly positive things to insure a bright future – but their influence, regrettably, doesn’t match that of the dominant culture. Whatever may lie ahead of us, there’s plenty of reason to be concerned.
If the Feds raise rates I think that would cause a problem
Companies wouldn’t be able to pump their stock as much if the Feds raised rates
Still at some point those companies have to still pay back the money they borrowed to buy back there shares. Would it hurt there earnings if payments come due at the same time a recession hits ????
i think the best stock to buy is in the health and food industry. people need to stay healthy and eat good food. water is my third choice. peace and security are the big issues today and if things continue down the same road , as now, you will see governments shut down religion . they will blame religious faith as there biggest problem.
Two more need to be added to your list. Attacks on our cyber and electrical grid systems. We appear to be vulnerable to both of these very critical areas. Scary to think about the numerous and very serious problems these could cause
The flow of oil and power are not one in the same and neither will ever be shut down.
To much revenue lost. The threats we hear about are contrived to raise price.
I agree with Stu about the problems with the GRID. If we are plagued with black outs in our major cities there will be big problems. No one is prepared for these situations. Most people do not have generators to keep their refrigerators running or to power some lamps to provide light at night. Our old bridges are very dangerous. Our old sewer systems have been collapsing left and right and cannot handle heavy rains. I hope whoever is in the oval office will start working on these problems.
Make the regulations sensible for coal fired plants . We have the best scrubbing technology in the world and we are the Saudi Arabia of coal .
End the Fed!
Hi from the UK,
is this WWIII or just the end game of WWII?
Kind Regards
Predicting the next Black Swan is, by definition, impossible. Therefore, most of the predictions offered being based on clear data are not Black Swans. The withdrawal of foreign monies from New York Stack Exchange is unthinkable, and therefore I’ll stick to my original prediction, based on no datas at all, that foreign monies will withdraw from New York Exchange and cause our collapse. RP
I like your response, Ralph. The dilemma with imagining the unthinkable, though, is that to make a prediction based on that process requires that the unthinkable enters into our thoughts – and then, perhaps, is as ineligible for becoming a black swan as everything else.
That sure doesn’t mean your forecast won’t come to pass, though. I have to admit some discomfort with the idea that massive capital will ultimately flee Europe for the “less bad” opportunities in the U.S. P/E ratios on U.S. stocks are already pretty high on average, and the market averages are apparently being driven by a high levels of corporate buybacks and margin debt. If a rational investor perceives that European stocks become terrible investments based on their underlying fundamentals while American stocks are merely bad ones, s/he would most likely be prone to just hold cash – or perhaps precious metals in an inflationary scenario.
A cheep dollar is needed to pay off the dollar denominated debt of the world, so I remain extremely skeptical that foreign funds will continue unabated to flow into the US Stock Market for any extended period of time. The price you pay today to convert yen, pounds, euro or what have you needed to buy US stocks will later offset any profits when you convert your dollars back to your home currency at repatriation time. Flight money will more likely convert to gold that will be harder for politicians to tax and/or steal from people; after all, isn’t that what the Japanese recently stuffed into their home safes. That same gold can then later be used to get back into the home market for stocks, property and other investments when the time is right. This will particularly be true when US politicians look for ways to confiscate your bank, savings and brokerage accounts to pay off their sins of the past. Furthermore, Bernakie advising Abe and Obama telling the Brits what they should and can not do has not exactly won over world confidence in the US, and thereby the US stock market. If you wish in one hand and crap in the other, which will get full first?
Next Black swan,I bet the readers cannot predict it,nobody can,but I wish I could and when,but then nobody would believe me.
As previous readers have responded you will not know the next Black Swan event until it happens. However, most readers that responded have touched on financial events. I think the next Black Swan event will be one that is a social event that affects all of our society. One possibility is that the President will declare Martial Law (he has already mentioned the possibility in published statements) and will stay in power until Martial Law is repealed. If this happens before the November elections it will temporarily nullify our elections and leave the country in chaos.
Auto delinquencies rise to new highs due to overuse in Subprime loans in there industry which once again weakens the banking system !
Possible Black Swans:
1. ISIS invasion of Turkey where massive 5th Column sides with the enemy…followed by invasion of Greece within 24 mos.
2. Widespread bank failures/runs that go worldwide and lead to massive panics/riots
3. Great natural disaster such as comet/asteroid strike
4. Nuclear event
5. Disease event
Almost anything is possible.
Or ALL of the above. I think F151 has a better handle on what actually may happen even if, on a beautiful sunny day, it all seems so preposterous and impossible. My concern will be a complete collapse of our money system from these events and have lost all our savings and investments for our retirement and for when we come out of it.
Questions such as, “Where and in what should we invest?” “How can we protect our wealth?” “Should we invest in survival food and personal electric generators?” are not really realistic. They should not be neglected by any means, but in fact, we should be planning for our collective security, because if the mud hits the fan, we are going to have to know such things as where we should look for leadership authority and how we can we organize our communities for mutual and united self-protection, how we can feed everyone a survival diet, how we can care for sick and injured citizens, how can we protect our municipal water systems, etc. In the event of a disaster, people will not go hog wild as some would suggest. It will be like a war in which people draw together and work to defeat a common enemy. If you think you can ride out a real national disaster because you have stored food, water, guns, and gasoline, you are living in a fools paradise. What happened when Pear Harbor was attacked? What happened on 9/11?
What happened when Germany invaded any of the European countries in WW II? If you have gold, where will you find market makers? A certain amount of individual responsibility was expected in WW II, but catastrophe draws people together for survival. We need leadership and planning now, not after everything falls apart. Personally, I believe that if we don’t take control of those @#$%^&* banks and the war mongers who are trying to start another war with someone and run the world, we will find out if I am right or not.
Bravo Fred – every word of yours is golden.
Fred,
Your comment—
“It will be like a war in which people draw together and work to defeat a common enemy.”
I wish I could agree with you on this because it will be such a crucial part of responding to a future national emergency. However, going back to the WW2 years, around 25% of the population were farm families. Another 25% lived in the small agricultural towns that supported local farm commerce. This half of the population were enormously productive and resourceful. Many of the cities of that time were populated by folks who had good manufacturing jobs and many practical skills. Fast forward to 2016– around 1% of the population are farm families. The small agricultural towns are dead or decaying. Manufacturing jobs in the cities have been decimated (think Detroit). Around 85% of Americans are living in cities. Around 8 million are unemployed and around 93 million are capable of working but have given up seeking work. Today, people are intelligent but have no practical skills–many can’t even change a flat tire. Needless to say it would appear that the ability to draw together and work to defeat a common enemy has been irreparably compromised for what lies ahead.
When people talk about debt in this country they talk about our $19.35 trillion national debt. However, nobody seems to talk about our $65 trillion plus total debt in this country. How long can we continue to spend like there is no tomorrow before we just can’t afford to spend any more and the whole financial breaks down under the weight of all of this debt.
While no one can predict what will bring down civilization as we know it several things come to mind. The best and most efficient form of government is a benevolent dictatorship. It’s just hard to find a benevolent dictator since even if you found one, power corrupts. Second my guess is it will be of “natural causes” because that unites people against a common foe, it removes blame from the deep state, it leads to power being place in big Daddy’s hands, and if I read Revelations correctly a natural event seems to start the ball rolling downhill. And to address the dilemma of security versus freedom I disagree. I’ll take freedom first. Some things are worse than dying.
All the utterings have been blah blah blah about this and that, but none is calling out to have these criminals and war criminals to be punished. Sheepish, sheepish people.
The biggest black swan may be the end of the reserve status of the $USD. No big economy wants to cause this as it would likely adversely affect the US economy and thus the market for countries’ exported goods … but it will come eventually, and given the debt the US is piling up, it will likely be sooner rather than later.
When all commentators claim that country A or B will leave the EU due to bank collapses, no-one asks the key question…Why didn’t Greece leave? The answer is simple, the population is old, they continuously complain about austerity imposed by “the strong EU center” but they are really TERRIFIED of being all alone on the outside. They will cling desperately to the strong center to avoid drowning. You should be asking when/if Germany wants to leave the EU
Britain has never been fully integrated in EU and has a long history of centuries of independence. BREXIT was no great shock. Almost all other European countries are artificial constructs where borders changed every 10-20 years so there is less a sense of “separateness”.
My question is this: If the international community is starting to drop their money in the U.S. stock market, investments, etc. Will this make the U.S. dollar stronger?
It seems to me that we have financial depression caused by an excess of goods produced by artificially low wages in countries as China and other countries. This drives our wages and employment down. There has to be demand to increase GDP. What happens when this ends?
The next Black Swan is Israel’s premitent attattack on Iran.Which is suddenly upon us. MAYBE TOWARD ThE END OF THIS MONTH
Perhaps due to the lack of leadership in Europe on the Migrant Issues a new Dictator Arises who vows to drive the Migrants out ! Maybe history does repeat and this will be the Start of World War 3 . This would be a Scary Black Swan indeed .