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On Wednesday, the day after tomorrow, I will host the most important live event in the 46-year history of my company.
I will issue a brand-new forecast unlike any we’ve issued before. We will take questions on ANY topic. And we will give you our answers — in real time.
To register and receive your instructions for attending online, be sure to go here.
Also, please remember that it WILL be live, starting promptly at 2 p.m. Eastern time. So, if you arrive late, you will miss the all-important beginning. I recommend you log on a few minutes before the hour.
From the many questions we’ve already received, it’s clear that the topics will include …
- The great convergence of historic cycles now in the making.
- Its immediate impact on inflation, bonds, commodities and precious metals.
- Its long-term impact on the economy and stocks.
- When and where the next major collapse will begin.
- Which investments will be hit the hardest. Which will benefit the most.
- Plus, any new topic you want to ask about.
During the live session, my entire focus will be on answering your individual questions about what will happen in the future. We won’t have time to talk about past crises. So, to help prepare you for the event, that’s the focus of my article today …
Panics, crashes and collapses often
begin in strange or faraway places.
The true canaries in the coal mine are often hidden in nooks and crannies, or in a distant economy that virtually no one pays attention to. Even expert historians — with teams of Wharton economists and the benefit of hindsight — sometimes fail to uncover the true origins of a crisis.
Hard to believe? Let me take you on a whirlwind tour of the past. I think it will surprise you in more ways than one.
The Crash of ’87
Our first stop is …
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Tokyo, early April 1987. Shohei Matsumoto is a bond trader in an Osaka-based brokerage firm in Tokyo. Seven years earlier, I worked with him in the same firm. That’s when I was writing Japan’s first bond market newsletter, and he was my mentor.
“Japanese government bonds have just taken a big hit here,” he writes in a fax to my Florida office. “Beware: Bond market collapses are highly contagious, and this one looks like it’s going to spread fast.”
New York City, April 14, 1987. John Hartman is a dealer who specializes in bonds issued by the Government National Mortgage Association (Ginnie Mae), a government-sponsored agency.
The bonds are considered virtually as safe as U.S. Treasury bonds. Trading is usually so dull, even the strongest of coffee can’t wake him from his typical morning slumber. Just a half-point drop or rise would be “big drama.”
It’s 8 a.m., and the day’s opening price pops up on Hartman’s screen, blinking to signal that it’s a new offer. A shiver goes up his spine.
Never before in his lifetime has he seen these securities, held by hundreds of thousands of U.S. savers, fall so far, so fast! The opening price for the bellwether Ginnie Mae bonds is down ten full points, over 15% of their value.
It means that the interest rate on these (and other mortgages) has just skyrocketed by more than two full percentage points. Soon the prices on other U.S. bonds are falling in tandem.
Tokyo, late June 1987. This time Mr. Matsumoto reaches me by phone. It’s dinner time in Tokyo, early morning in Florida.
“Ariehen!” he exclaims in his native Osaka dialect, which he falls back to in times of distress. “Unbelievable!”
Just two months ago, the price of the 10-year Japanese government bond — the 5.1% coupon kokusai expiring in 1996 — reached a historic high of 125. Its yield was down to 2.6%. Now, suddenly, the price has plunged to 100, as the yield has surged to 4.6%. That’s an unbelievable 77% increase.
“Honma nande ya nen? What the heck is really going on?” he asks.
New York, Friday, Oct. 16, 6 p.m. “When you go home tonight,” says an official at a major Wall Street firm, tongue in cheek, “walk close to the buildings” (to avoid investors jumping from windows).
He’s referring strictly to Friday’s market decline of 138 points on the Dow. But at Harry’s Bar, a popular Wall Street watering hole, yuppie brokers and traders are more preoccupied with getting dates for the night. They have no clue of the impending market collapse.
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New York, Black Monday, Oct. 19, 1:15 p.m. I’m on the phone with two brokers at Pru-Bache. They handle a lot of our managed accounts, which are holding large short positions, and I’m trying to find out where the Dow is currently trading — to help me decide when to start taking profits.
“Nobody knows. It’s impossible to know,” they say in obvious desperation. “The selling volume is so overwhelming, the New York Stock Exchange ticker is 85 minutes behind the actual trading.”
It’s now 4 p.m. Quote machines in Grand Central Station are spitting out stock prices that are as much as three hours old. So it’s only later in the evening that we find out how bad the crash really was: The Dow is down by 508 points, or 22.6%. That’s nearly double the decline of Black Tuesday, Oct. 28, 1929. (In today’s market, a similar one-day decline would equate to a Dow collapse of 5,058 points!)
What really caused the crash? To this day, it’s often blamed more on technical anomalies like “computer trading” than on any economic reality. But the true origin was the bond-market collapse that began six months earlier in Tokyo … soon spread to the U.S. … continued until October … and was accompanied by an unusually sharp, global rise in interest rates.
The Great Debt Crisis of 2008
October 2006. Mike Larson, a senior analyst at our research firm, seems to be fixated on a single problem in a small niche of the U.S. housing market. No matter where the conversation goes, he always begins and ends it with two words: subprime mortgages.
“They’re the junk bonds of the mortgage market” he explains. “In other words, loans to borrowers with the highest default rates. If a bank has, say, 5% of its mortgages in this insecure, high-risk category, maybe that wouldn’t be so bad. But what we’ve seen in recent years is the emergence of big lenders, so-called ‘nonbank banks,’ which have huge exposure to these junk mortgages.”
Federal Reserve officials pooh-pooh the notion. Along with famed Wall Street economists, they insist that it’s just a “small niche,” representing a tiny fraction of the overall mortgage market.
Mike insists they’re dead-wrong. “This is much bigger than that,” he argues. “I’m talking about the entire mortgage market, which will impact bonds of all stripes and colors. And I’m not talking just about names everyone knows about, like New Century Financial and Countrywide Financial. The coming disaster is also going to hit big Wall Street firms that finance the mortgage industry like Bear Stearns and Lehman Brothers. It’s all going to end in the biggest mortgage and housing collapse of our lifetime.”
March 2007. “Now I have conclusive proof,” he says on a hot Florida afternoon. “It’s Iceland! The collapse we’re seeing right now in Iceland’s financial markets is what you’re going to see replicated in New York, London, Tokyo, you name it. Their external debt is close to seven times their GDP. Their banks are bloated with loans, most very shaky, that are over ten times GDP. Sure, that’s a lot worse than ours. But Iceland is the canary in the coal mine for the entire world.”
Again, officialdom responds with disbelief. “Iceland?! Hah! Who the hell cares about tiny Iceland?”
August 2007. Banks all over the world announce multibillion-dollar losses in subprime mortgages. Investors recoil in horror. But the U.S. Federal Reserve, the European Central Bank and the Bank of England intervene. The crisis subsides temporarily, and everyone breathes a sigh of relief.
January 2008. The warning signs of a looming financial catastrophe are multiplying:
The nation’s largest mortgage insurers, responsible for protecting lenders and investors from mortgage defaults on millions of American homes, are ravaged with losses.
Municipal governments and public hospitals are slammed by the failure of nearly 1,000 auctions for their bonds, causing their borrowing costs to triple and quadruple.
Low-rated corporate bonds are being abandoned by investors, their prices plunging to the lowest level in history.
Hedge funds are also getting hit hard. One fund, CSO Partners, has lost so much money and suffered such a massive run on its assets that its manager, Citigroup, is forced to shut it down.
The big question is no longer “Which big Wall Street firm will post the worst losses?” It’s “Which big firm will be the first to go bankrupt?” In Money and Markets, we name Bear Stearns and Lehman Brothers as the most likely candidates for failure.
March 14, 2008. Bear Stearns files for bankruptcy. The Federal Reserve Bank of New York is providing a $29 billion emergency loan to finance a forced merger with JPMorgan Chase, with Bear Stearn’s shares valued at $2, or less than 10% of its most recent market quote.
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Sept. 15, 2008. Now, it’s Lehman Brothers’ turn to go under — the big bang of the Great Debt Crisis, the landmark event that sets off the greatest threat to financial markets since the 1930s and sends central banks on the greatest money-printing spree of all time.
Where will the next collapse begin?
No one can say for sure. But I’m sure you won’t hold it against me if I venture a guess …
As in 1987 and 2007, the first signs of a collapse will appear in a faraway place that no one is paying attention to.
As in 1987 and 2007, it will be in a niche market or sector that is initially pooh-poohed as “tiny.”
As in 1987 and 2007, the first cracks will appear in some kind of bond, mortgage or other form of debt.
As in both those occasions, the breakdown will be accompanied by a sudden, sharp rise in their yields.
And as we saw in 1987, don’t be surprised if the canary lives in Japan.
Questions? Please submit them in the comment section below. Then, go here to register for our live Q&A session this Wednesday. That’s the day after tomorrow at 2 p.m. Eastern.
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.
{ 30 comments }
Dear Martin Weiss And Team
This question is for Wednesday. I know that you are focused on the 2017-2022 forecast period, but 2017 is now almost over. Can you extend your forecast a little bit, and comment on Wednesday to the end of 2024/early 2025 period? The late Larry Edelson and the Weiss team in general have been largely silent on the following couple of years after 2022. This also applies to Martin Armstrong and his forecasts. Most Elliott Wave analysts are now forecasting a mega Fourth Wave down from 2020/2021-2024/early 2025. Your comments would be most appreciated as we get a next 7 year look.
Thank You
Kenneth Harmon
I understand that you are not forecasting a crash in US stocks (at least not for a while) and yet the Dow looks like it will shortly complete five waves up of primary degree from 2009, fives waves up of cycle degree from 1974, five waves up of supercycle degree from 1932 and conclude a third wave of grand supercycle degree from 1784! Comment please as the Elliott wave analysis suggests we could be on the verge of the largest stock market crash in history.
How sad ! A lovely concert evening turns tragic when a mad man gets access to high powered automatic weapons to target innocent people. Its all too common ! A changing world with many mad men ?
Martin goodday. Whereas it is impossible to make any prediction with definite accuracy in both timing and extent , my questions to you are :
1) Your best view of when the next crash will take place 2017 or 2018 ?
2) As per above , why these dates ?
3) The contagion effect – how wide will it be ? Only US or worldwide ?
Thank you.
I know its important, but to call each event as the “most important” event in the company’s history cheapens prior events. Do you think people don’t notice the words you choose?
Which political party held the Presidency in 1987? Which Political Party held the Presidency in November 2007? Which Political Party held the Presidency in 1929 and which Political Party holds the Presidency now? Statistically that is VERY Significant…. Happen chance? I think not!,,,, :(
What do you think will be the impact (if any) of the Caledonian independence on the stability of the EU.
Good morning Martin,
according to your forecast, fear money is going to flood Wall Street. So, why the US dollar is so weak against euro and yen? Thanks
Will the dollar keep it’s value? Will gold go up or down?
According to The Edelson Institute Oct will see marked declines in the price of gold and sliver (but that about Nov 1, the start of the first Tsunami occurs, which will boost gold and silver prices.) The Institute said that the graph was not to scale, but it appeared to show a very sharp decline of over 50%. What lows will gold and sliver test and where is the likely bottom? Also do the E Waves indicate when the sharp rise in zinc, lithium, and uranium will occur –late 2017 of in 2018.
Martin,
I know you have talked about the great amount of money influx coming to the US from Japan and then Europe as their markets decline and then eventually comes to roost in the US. How will the oil market react through these periods of stock market turmoil? Is it safe to stay invested in MLP’s throughout this period?
Thanks!
So the markets are going to collapse. Where do we keep our money: in gold, bitcoin or under the mattress?
What is suppose to happen to US markets from now until the end of the year?
Why is the end of October so important?
What’s gonna happen to the securities indices the NASDAQ, s and p 500, and the Dow Jones? What’s gonna happen to inverse ETFs? If there’s a crash coming in the economy, then also there’s a boom coming. What type of cycle are we in? Is it a kondratieff cycle, Kuznets cycle, or jugular cycle? I bet we are in a jugular cycle between a Kuznets cycle and a kondratieff cycle. We are in for one massive boom that’s for sure.
Is there gonna be a gold tranche, a return to the gold bullion standard? Might we even be in for a gold rush. The precious metals market look like there is gonna be a boom in them. What’s gonna happen to leveraged etfs, unleveraged etfs, mining stock and futures. If we have a call option we will have to call someone else, if its a put option, we need to put someone else in charge of the option. I am interested in t-bills, treasury bills because their low risk securities, I am also interested in inverse etfs, their could be a bull run, in that basket of assets, I think we are in for an improvement in the economy, in this prosperity, recessions, depression, and improvements economic cycle. We could be in for a massive boom in the precious metals market. Boom, recession, depression, recovery, growth. This boom could be even bigger than the last boom.
What is your prognosis on real estate trends in the near future – say one to two years?
My J O B precludes my listening to these Live Events. I would appreciate a transcript! PS The analysis of the last two crashes simply resonates with me as true.
you have not said much about bit-coin . whats your take on this new digital currency as being part of the future ? do you think the central banks will use it of destroy it? thank you.
Has the canary in Japan sung yet? What is the estimated time to hit the U.S. when she sings there?
Thank you for the historical tours of the 1987 and 2007 crashes. It was very enlightening and energetic — worthy of a book.
I, too, am interested in the Elliott Wave forecasts versus your AI model, the short-term timeframe for a correction and the timing for a longer-term crash. What will propel the market higher after our short-term correction? How many corrections will we have before the crash? What sectors will be crushed versus prosper?
I am with you all the way and I am convinced that a crash is coming just around the corner. Where, when and why it triggers I don’t know, but looking around the globe there is plenty to choose from. I think it will be a ‘black swan’ event (read North Korea) followed by the serious debt problem. Can the US afford a new war? Nobody seems to care about any negative news and prices accelerate every day/week/month, but is this not the typical picture before a big crash?
Riis (Italy)
More of a request than a question:
Will you re-run the Q&A Session later in the day when those of us who still work will be able to view it later? You usually do, but would like to make sure.
Especially since many of us live in a different time zone and it will be right smack in the middle of our work day?
I am also concerned as to when you might estimate a MAJOR stock market crash (Larry said, if I remember correctly, that it would peak around 31,000) in addition to the war cycles ramping up?
Thank you!
When will the bottom be in for gold? When should we accumulate junior gold mining shares? What commodity should go up the highest & when will it start to happen?
What is your prediction of the high & low of gold by year through 2025. Thank you!
Hi, great history of the past crisis.
Similar to Marcy’s question. We read that gold will jump to $5000+, and the DOW needs to reach 31000 and even estimated to 45000 before a great tsunami crash comes around.
Will both Gold and the Dow climb all the way to their peaks, or one will crash to make space for the other to climb?.
Thanks.
The 1987 crash did not result in a depression or even a serious recession. We got through the 2008-09 Great Recession without too much pain because of the Fed’s enthusiastic money-printing. American’s living standards have remained very high. So why worry? The Fed’s unlimited money-printing capability, and the fact that it is not a profit-making institution, means that it can bail out whoever it chooses to bail out in a financial crisis. Please explain, Dr. Weiss, why we “men in the street” should be concerned if the markets go down for a time. (“What, me worry?”–that master economist, A.E. Neuman.)
Maybe the shock/surprise will be inflation surging up, and will force the Fed to hike rates.
I sincerely hope you answer this one:
Our central bank has been manipulating our treasury market for years for the purpose of stabilizing and maintaining abnormally low rates. As has the marketplace, our US government is even more adicted to low rates and can’t service the cost of our debt should rates rocket higher from a massive treasury sell-off. I believe that will never happen because Yellen and company will very simply mop up large blocks for sale and stabilize what happened in ’87’ before it becomes a panic situation that the US can’t afford.
Do you really believe a treasury sell-off like ’87’ is even remotely possible today?
dear martin,
lets face it; things move at super luminar speeds these days. totally altogether different to 1929, 1987, or even 2007. things flash into view then disappear amid new flashes of technology. remember that 1929 was a complete withdrawal of credit…the rothschilds are/were very good at creating crises, creating wars and general mayhem.
now we are at a ‘tipping point’ (oh, the words just keep coming in our modern world), meaning that in a world flooded with debt there is absolutely no wriggle room left. AT ALL! hence we have all of these cryptocurrencies emerging, to kid us into believing that there is a lifeline left for us to cling to. but if bitcoin etc. is valued against the dollar or any other currency now in use, how does that work in a world of fiat rubbish money? to me it is merely a mirage. ‘the day of reckoning is nigh’ yes indeed. but in a world of ‘normalcy bias’, wherein we all want everything to remain as is the day is upon us: we do want to acknowledge the obvious.
mh 370..remember? and i repeat, ask the u.s. naval base at diego garcia atoll or the chinmese government.
las vegas, merely one of a succession of c.i.a. executions with false flag names. the ‘maniac’ was a c.i.a. operative gun smuggler, transporting weaponry from israel to u.s.of a. but merely siphoned off a few for himself to perpetrate the scenario at las vegas.the israelis are most upset and want some explanations from u.s. of a. it is a very big deal indeed.
afghanistan : how is the poppy crop going? oh its ok we have our boys guarding it night and day with a bit of help from our allies from australia , britain etc. yes its a good thing you know…we have more cocain hitting the streets of new york than ever. bloody good money spinner:-) the afghanistan ‘campaign’ is run from diego garcia atoll. go read about it ..its all displayed on the internet about how britain and u.s of a. did a ‘dirty deal’ in transfer of said atoll from brits to america for some polaris missiles years ago, and kicked the 2,000 inhabitants off the island with only their shirts on their backs. nice work.
now the former inhabitants, scattered as they are around the immediate region have sought justice in the courts of britain, and are succeeding.
now martin please do have the decency to let this message go through as is. you do want honesty and truth, don’t you?
its all about nothing really. who wants to be a millionaire? life is for the living and helping others. it is better to give a little than to receive a lot. caring for the place we live..that is the planet. earth. where else is there? cheers ron from oz
When we lose the grid, will it really be like living in 1875?