Legend Warns Global Stock Market Rout To End In Full-Blown Panic!

On the heels of the Dow plunging more than 500 at one point in the trading day and global markets continuing to get pummeled, today a legend who warned just 8 days ago that the carnage in global markets would continue told King World News that investors should expect to see an acceleration of the global stock market rout that will end in panic.

Eric King:  “Bill, people are wondering if we could see a rebound next week?”

Bill Fleckenstein:  “Of course there can always be a rebound but I don’t think it will carry very far — in the same way that none of the little rally attempts have carried very far that we’ve had in the past eight or nine sessions…

Global Stock Market Rout To End In Panic

Fleckenstein continues:  “So I don’t think the market can rally very well at all and I think there is a much better chance that we will see an acceleration to the downside.

They managed to pull the market back over the August/September lows in the S&P but some of the other indices have already broken through those lows.  So I think there is a better chance of an acceleration of the selling.  And if there is any kind of a bounce I don’t think it will be very meaningful.  I don’t think that the stock market can have any kind of a meaningful bounce until we either get real panic and/or the Fed rides to the rescue.”

Fleckenstein had warned King World News just 8 days ago that there would be more carnage in global markets (see below).

Eric King:  “The fantasy is coming to an end but this day had to come, right?”

Bill Fleckenstein:  “You’re right, it had to come to an end.  One of the hardest things for people who aren’t investment professionals and even for many investment professionals to understand is how something (an investment strategy) that is so clearly destined to work can sort of lie there and not respond and not do what you think it ought to do for as long as this insanity has gone on.

What I’m particularly referring to there is how well and how long the stock market managed to levitate on the back of not much more than outright monetization.

The Gigantic Suspension Of Disbelief

The first couple of years after 2008 there was a snapback after they stopped the carnage with all the programs and government bailouts and money printing.  But from 2011 on, when QE3 started, that’s when we really had a gigantic suspension of disbelief.  That’s when the vast majority of people really concluded, ‘Gee, these guys really know what they are doing and it’s going to work this time.’  They didn’t stop to think that it was these very same policies that got us into this mess and all we do is keep pursuing the same strategy in a bigger and bolder fashion.

But nonetheless, it’s taken quite some time for the ultimate failure of this fantasy to start to unfold.  Now, it’s not the 25 basis points that is breaking the market.  They stopped QE 14 months ago and the market kind of went sideways.  So the top took about a year to produce on the major averages, but beneath the surface lots of stocks have been weak.

This Has Been A Long Time Coming…
The economic data has been pretty damn poor considering rates have been zero for 7 years and we monetized $3 trillion here in the United States and the same thing is going on in most of the G7 countries.  So the economic recovery has been nothing and this has been a long time coming.

But China Is Being Blamed For The Panic

You couldn’t predict when the market break was going to occur but we kind of got some hints of that last year and the way the market has broken in January.  Now, people here want to blame this market break on the North Korean hydrogen bomb or the Chinese devaluation and their stock market plunge.  But China’s got a misallocated capital and debt problem — that’s we have and that’s what the whole world has.  China has a different variation than we do and in some ways they are better than us — in some ways they are worse than us.

This isn’t about China.  China is getting blamed because it’s the spark, right?  But meanwhile you see that credit spreads are widening, junk bonds have collapsed, the oil patch is a wreck.  What do you think is happening to all these insurance companies and pension plans that reached for yield in different credits?  And what about the poor bastards from the public who felt they had no choice and felt they had to reach for yield and buy stocks?

The bottom line is that this misallocation of capital has gone on for so long that people look at individuals like Jim Grant, Fred Hickey, or even me, and people would laugh at us.  I’ve gotten quite a volume of hate mail where people say, ‘You’re an idiot.  Why do you keep saying this stuff?’  Well, you don’t know how long it will take for the chickens to come home to roost, you just know they are going to have to.

There Is No Saving This Market – QE4 Is Coming

So we’re at that moment now, and it’s liable to get quite a bit worse because there is no saving the market.  The numbers have been bad, the speculation has been high, and the world economy is getting worse, but the Fed can’t come to the rescue until global stock markets break and break hard.  Then we’ll have QE4 and in that phase we will have to see how well the Fed is believed, what they do, and what we think the ramifications will have to be at that time.

The Carnage Will Play Out Faster Than People Think

There’s no guarantee that people are going to believe the central banks because in 2008 they didn’t believe them all year, and in 2001 – 2002 they didn’t believe them.  Right now they still seem to have total confidence.  So the stock market has been an accident waiting to happen and now the accident is happening, and the carnage is going to play out much quicker than people think.

Having said that, this is going to be a two-step trade, right?  The first is going to be the big break in the stock market.  Then the Fed is going to do what it’s going to do, and then you’ve got to see what you want to do next.

As It Pertains To Gold And Silver…

As it pertains to the precious metals (phase two of the trade), they have been hated and avoided because nobody thinks they need them when the central banks are in control.  So they are basically the flip-side of the confidence trade that’s driven stocks to the moon.

It’s no coincidence that as the market has broken badly at a time of the year when it’s not supposed to, suddenly gold has started to move higher.  And what will happen is gold will start to go up and it will finally catch a bid and start behaving better.

Gold will start to trade higher once again on news that used to make it surge and people will come out of the woodwork and try to own it and there will be a gigantic scramble.  Has that process started?  Most likely it has.  It’s also worth noting that some of the miners are finally acting better.

So we are going to see both sides of the trade start to play out at the same time, but they are all different expressions of the same thing.  Gold is a way for people to say, ‘These policies are crazy.  I know what central banks are going to do and I can own this  in order to protect my capital and make money.  The stock market only went up because people believed in these idiots and that trade and that belief are now coming to an end.’

So people can express their doubt in what central banks can do by being short stocks or being long gold.  I’ve currently got both sides of that trade on.  Anyway, I think that’s the longest answer I’ve given to a short question in my career.”

Nomi Prins – Keynote Speaker Who Recently Addressed The Fed, IMF And World Bank, Warns “It’s All Coming To An End”

Today Nomi Prins, the keynote speaker who recently addressed the Federal Reserve, IMF and the World Bank, warned King World News “It’s all coming to an end.”

Eric King:  “Nomi, we went through a round of terror in 2008, and certainly China just went through that again recently when their stock market crashed along with the emerging markets, but when does this whole global Ponzi scheme finally come unraveled?”

Nomi Prins:  “We are seeing small unravelings all the time.  Brazil is doing badly, Mexico is struggling, currencies around the world relative to the dollar are hurting, which means relationships of imports to exports and money coming into those countries are hurting.

China has had problems but its central bank has been big enough and strong enough to boost it at least somewhat back up again.  The United States is in complete denial in terms of what the economic indicators are said to be vs what they actually are and how the markets themselves are being continually buoyed either by the Federal Reserve or the Fed’s associations with some of the big banks in terms of continuing to buy Treasury bonds.

“The ECB is still on a mission, and as of the November 12th announcement from Mario Draghi, an even stronger mission to continue to infuse those markets with artificial money and perhaps even enhance their quantitive easing program.

It’s All Coming To An End

So you ask, ‘When is this all coming to an end?’  It is all coming to an end, but you have all these actors trying to prop up different pieces of it (the global financial system) and so that’s why there is all this enhanced volatility and you have so many ups and downs (in global markets).

(The end will come) when there are no more creative concepts on the part of these central banks to provide the artificial stimulus to the markets.  And that could be the middle or the end of 2016, only because one big central bank in play has already committed to doing their part of it (with enhanced stimulus).

And so that’s why we continue to have enhanced volatility to the downside in global markets that is also met with intervention, which is unprecedented.  But it (the stimulus) does exist and we have to recognize that, as unprecedented and bizarre as it is, and there are indications that it will continue.  And so that keeps the artificial game in play through the middle or fall of 2016.

If Anything Was Stable For Real…

But in the core of markets and economies things are not stable, which is why all of these (volatile) movements are happening.  If anything was stable for real, the Federal Reserve would have raised rates years ago, the ECB wouldn’t have needed to come up with another round of quantitative easing, the People’s Bank of China wouldn’t need to reduce the reserve requirements to their financial institutions in order to give them more money to play with — none of that would be happening.

So we are in a state of deterioration.  The timing of an eventual implosion has to do with when the big banks have nothing left to counteract the artificial markets coming apart that they themselves have created.  Eric, this is why I’m working on a book right now titled Artisans of Money, to examine the extent to which the financial system is in play and is shifting in terms of its very paradigm.

We have never had what we’ve experienced since 2008 in terms of central bank interventions in the financial markets.  So what I am doing right now for this book is traveling and talking to central bank leaders and members around the world, and looking at how things are on the ground in major countries,and speaking with leaders who are involved in all of these interactions and artificial stimulants to the markets and piecing together this transitionary time in history where we will look back and say, ‘That is when everything…You can continue listening to this powerful audio interview with Nomi Prins, where she discusses the coming financial destruction that is in front of us, what is going to put an end to the manipulation of major markets, including gold and silver, what investors can do to protect themselves and much more, by CLICKING HERE.