How to Profit From These Massive, Brexit Induced Trends

By Justin Spittler

This has the makings of a classic speculative opportunity—one where politically caused distortions are liquidated and prices readjust. But a word of caution. It’s going to take place within the context of the Greater Depression. And, as Richard Russell, who lived through the last depression, observed: In a depression, nobody wins. The winner is just the person who loses the least.

The EU will disintegrate. It never made sense from the beginning to try to get Swedes to live by the same rules as Sicilians or Germans by the same rules as Portuguese. Not to mention that the rules are entirely arbitrary. Worse, almost all the rules are economic in nature, with legislated winners and losers. Deals like that always lead to resentment, among both the winners and the losers.

In addition to this, the EU is very problematical when it comes to immigrants. There will be more migrants trying to settle in Europe. Why? Because the Muslim world, the swath of countries extending all across northern Africa, through the Middle East, Central Asia, and the Far East, is likely to become increasingly unstable. The EU, as a very politically correct organization is loathe to turn them away. However, once they’re within Schengen, the migrants can travel anywhere. Perhaps where welfare benefits are best and where other migrants are gathering. Remember, when times get tough, both politicians and the capite censi look for someone to blame.

How to profit from this? Most people don’t think the EU will collapse just because Britain (which has always been closer to the U.S. than the Continent anyway) has left. They’re wrong. For one thing, although Brussels won’t become a ghost town, it’s going to lose scores of thousands of highly paid Eurocrats and their minions. I recall that property there was some of the cheapest in Europe in the early ’80s, it’s going to return to that status. We’ll look for a REIT to sell short, specializing in the Brussels market.

It will accelerate the disintegration of nation-states everywhere. 

There are about 200 nation-states in the world. The international “elite,” the “intelligentsia,” the members of the Deep State everywhere, and organizations like the EU in Brussels, would like to see a much smaller number of more powerful states. Orwell anticipated just three mega-states in his dystopia. But the actual trend is in the opposite direction.

It’s not just the UK seceding from the EU, but Scotland from the UK. The Basques and Catalans may eventually secede from Spain. Belgium, a totally artificial country, may eventually break up into Flemish-speaking Flanders and French speaking Wallonia. France has half a dozen secession movements. Italy was only unified into its present form from scores of principalities, duchies, and baronies in 1871 by Garibaldi. It was the same with Germany until Bismarck in 1871. 

The break-up of the USSR in 1990 into 13 smaller states was a good start, but Russia itself is a small empire with dozens of distinct ethnic and linguistic groups. You will rarely hear about this in the mass media, but there are dozens of secession movements throughout Europe. That’s one more reason why (in addition to the interest rate risk and the inflation risk, which are both substantial) you should stay away from long-term government bonds.

The euro will cease to exist.....
The Esperanto currency was doomed from the beginning. It was not just an “IOU nothing,” like the U.S. dollar, but a “Who owes you nothing” since it’s not even backed by a specific government’s taxing power. How to profit? I’ve put on long-term futures contracts, long the British pound vs. short the euro. My rationale is simple. Britain will benefit from exiting the EU, attracting capital and strengthening the pound—which is down 11% against the euro since Brexit. The euro, meanwhile, will approach its intrinsic value at an accelerating rate.

A truly major banking crisis.....
Much worse than that of 2007–2009. Governments, who are all bankrupt, borrow money from commercial banks. Commercial banks have lent it to them because they believe it’s a risk free loan. Governments encourage them to lend recklessly, hoping that will jump-start sluggish economies. Central banks, which are the arms of their governments, have taken interest rates to zero and below for that reason and to make it easier for governments to service their debt. This policy has encouraged businesses to take on debt.

It’s an idiotic and reckless experiment that will end—likely in this cycle—with bankrupt central banks and governments bailing out bankrupt commercial banks and businesses. Just the way they did in 2007–2009. Except this time, the situation is much more serious. How to profit? Don’t own European companies, stocks or bonds, and banks in particular. In fact, even though they’re already down considerably, they’re going lower and are excellent candidates for short sales, or the sale of naked calls.

A panic into gold..... 
You’ve heard this story many times before here. But it’s truer than ever as we approach a genuine crisis. There are no stable paper currencies anywhere in the world. The dollar has been strong only because it’s liquid. Liquidity is good, but here, we’re talking about liquid like nitroglycerin. Hedge funds will start buying gold in size. As will central banks, who don’t want to hold each other’s paper. As will individual investors. Right now, few people even think about gold, much less understand it. How to profit? Buy gold. I expect we’ll see it well over $5,000 this cycle. Silver should do even better in relative terms. And gold stocks have explosive upside.

An exodus of capital and people from Europe.....
to parts of Latin America, plus to the U.S., Canada, Australia, and New Zealand. This is, obviously, bad for Europe and good for the recipient countries. In recent years, I might not have included Latin America, but things have changed. Argentina and Colombia are liberalizing economically. The continent isn’t involved in any entangling alliances, isn’t on the migration highway, and has low costs. Why a wealthy European would stay in that stagnant and unstable continent when he could live better, and mostly tax free, at a fraction of the cost in Argentina is a mystery to me.

Chaos in Africa..... 
Almost every country in Africa is an ex-European colony. Over the last 50 years, Europe, with the U.S. and now China, have shipped over a trillion dollars to the continent. Most of it has been recycled back to Europe by the African elites that stole it, and the rest has mostly been wasted. 

That flow is going to stop for a number of reasons, but among them is that it makes no sense in an “every-man for himself” world. At the same time, essentially all of the world’s population growth over the next couple of decades is going to come from sub Saharan Africa. It’s a nasty economic environment that’s a formula for conflict. 

Millions of Africans will want to emigrate, especially to the homelands of their ex-colonial masters in Europe. They won’t, however, be welcome. How might one take advantage of this? The higher population is going to put upward pressure on commodities, and the chaos is going to make their production much riskier in Africa.

In conclusion..... 
Brexit itself is likely to be good for Britain. And it augurs some big changes in the world at large. Don’t forget that it will all be in the context of both the Greater Depression and the accelerating and world-changing technological revolution I described last month. Our objective here remains to not only keep you advised of what’s happening, but help you profit from opportunities while avoiding major dangers.

Editor's note: The biggest threat to your wealth right now isn’t an economic recession, a stock market crash, or even a global banking crisis. It’s something much bigger and far more dangerous. This short video explains more…

It explains how violent currency moves—like we’re seeing today—have preceded some of the worst financial disasters in history. By the end of the video, you’ll know why you can’t afford to ignore the warnings we’re seeing right now. You’ll learn how to protect yourself and profit from the coming crisis. Click here to watch this free video.

The article Weekend Edition: How to Profit From These Massive, Brexit-Induced Trends was originally published at caseyresearch.com.

Get our latest FREE eBook "The Rebel's Guide to Trading Options"....Just Click Here!

Why the “Bond King” Is Having Flashbacks of the 2008 Financial Crisis

By Justin Spittler

As you probably know, Great Britain stunned the world by voting to leave the European Union on June 23. The “Brexit,” as folks are calling it, triggered a selloff that wiped $3 trillion from global stocks in two days. The announcement also shook the currency market. The pound sterling plunged 8% the day after the news broke. It was one of the British currency’s worst days ever. The U.S. dollar, euro, and Japanese yen experienced huge moves too.

It’s now been two weeks since the historic event and panic is still in the air. Investors around the world have piled into government bonds, which are widely considered safe assets. Yesterday, the yield on the 10 year U.S. Treasury hit a fresh all time low. Yields on British, Irish, German, and Japanese 10 year bonds also hit record lows. A bond’s yield falls when its price rises. Investors have loaded up on gold too. The price of gold has shot up 8% since June 23.
 
This shouldn’t surprise you if you’ve been reading the Dispatch. Regular readers know gold is the ultimate safe haven asset. It’s preserved wealth through every sort of financial crisis because it’s unlike any other asset. It’s durable, easily divisible, and easy to carry. Its value doesn’t depend on “confidence” in any government. In other words, it’s real money. After its Brexit fueled rally, gold is up 29% on the year. It’s at its highest price since March 2014. Yet, this rally is showing no signs of slowing down.

The SPDR Gold Shares ETF (GLD) just had one of its best days ever..…
On Tuesday, investors put $1.3 billion into the fund, which tracks the price of gold. According to Investor's Business Daily, it was the fund’s third best day ever. It was also the fund’s best day since stocks crashed on August 8, 2011. Investors have now plowed $15.26 billion into GLD this year. That’s the most of any of the 1,931 ETFs tracked by global analytics and research firm XTF.

In London, the panic has gotten so bad that several fund managers stopped their funds from trading..…
The Wall Street Journal reported yesterday:

Henderson Global Investors, Columbia Threadneedle and Canada Life are the latest fund managers to stop investors pulling their money out against a backdrop of political and economic uncertainty following Britain’s vote to leave the European Union. The fresh moves by fund companies to suspend redemptions Wednesday came after Standard Life Investments, Aviva Investors and M&G Investments suspended trading on U.K. property funds earlier this week. This means that half of the 10 largest U.K. property fund managers have suspended trading temporarily.

In other words, these managers have trapped their investors’ money to keep their funds from collapsing.

"Bond King" Bill Gross says something very similar happened just before the 2008 financial crisis..…
Gross is one of the world’s most well-known investors. He founded Pacific Investment Management Company (PIMCO) in 1971. Under his watch, PIMCO grew into the world’s biggest bond fund. Today, he runs his own bond fund at Janus Capital. Like us, Gross is worried about what’s happening in London right now. Bloomberg Business reported yesterday:

“It’s reminiscent of Bear Stearns’ subprime funds before the Lehman debacle,” Bill Gross, a fund manager at Janus Capital Group, said on Bloomberg TV. “The system doesn’t allow liquidity to flow into the proper places. If these property funds are just one indication, perhaps there will be others to follow. I think it’s something to worry about.”

The collapse of Lehman Brothers in 2008 helped set the global financial crisis in motion. The S&P 500 went on to plunge 57% in two years. And the U.S. economy entered its worst downturn since the Great Depression.

Government officials are scrambling to contain the crisis..…
Last week, the Bank of England (BoE) pumped £3.1 billion into Britain’s banking system. It pledged to inject as much as £250 billion to stabilize its financial system. And on Tuesday this week, the BoE announced more “stimulus” measures. It eased special capital requirements for Britain’s banks. Specifically, the BoE lowered how much money banks need to hold as a “buffer.” The move increases the lending capacity of U.K. banks by as much as £150 billion. Economists at the BoE believe more borrowing and spending will stimulate the economy. As we’ve shown you many times, this won’t work. Casey Research founder Doug Casey explains:

It’s part of the Keynesian view, in which spending and consumption drive the economy. This isn’t just wrong, it’s the exact opposite of what’s true. It’s production and saving that drive an economy. You have to save to build capital, and capital is necessary for…everything. What these people are doing is destructive of civilization itself.

Still, this won’t be the last stimulus measure that the BoE rolls out..…
Last Tuesday, we said the BoE would likely cut interest rates. Two days later, Mark Carney, who heads the BoE, said the central bank needs to cut rates soon. The Wall Street Journal reported:

Mr. Carney said it was his personal view that the central bank would need to cut its key interest rate, currently 0.5%, “over the summer,” adding that an initial assessment of the economic damage caused by the vote to leave the EU would be made at the Monetary Policy Committee’s July meeting, and a “full assessment,” alongside new forecasts for growth and inflation, would take place in August. That suggests he favors an August move, while leaving the door open to an earlier decision.

According to The Telegraph, the BoE could cut rates much sooner than August. That’s because the financial markets have “priced in” a 78% chance that the BoE will cut rates next week. But there’s a problem. The BoE’s key rate is currently 0.50%. In other words, it doesn’t have much room to cut rates. To stimulate the economy, the BoE will likely have to launch quantitative easing (QE), which is just another term for “money printing.”

The BoE won’t fix Britain’s economy by cutting rates or printing money..…
According to MarketWatch, central banks have cut rates more than 650 times since Lehman Brothers collapsed in September 2008. They have also “printed” more than $12 trillion over the same period. And yet, the global economy is barely growing. The U.S., Europe, Japan, and China—the world’s four biggest economies—are all growing at their slowest rates in decades. There’s no reason to think these easy money policies will work this time. It’s much more likely that central bankers will destroy the currencies they’re supposed to defend. Doug Casey explains:

In a desperate attempt to stave off a day of financial reckoning during the 2008 financial crisis, global central banks began printing trillions of new currency units. The printing continues to this day. And it’s not just the Federal Reserve that’s doing it: it’s just the leader of the pack. The U.S., Japan, Europe, China…all major central banks are participating in the biggest increase in global monetary units in history. These reckless policies have produced not just billions, but trillions in malinvestment that will inevitably be liquidated. This will lead us to an economic disaster that will in many ways dwarf the Great Depression of 1929–1946. Paper currencies will fall apart, as they have many times throughout history.

If you do one thing to protect yourself from reckless governments, own gold. As we mentioned above, gold is real money—it’s the only currency that doesn’t depend on a government or central bank doing the right thing. For other ways to safeguard your wealth, watch this free presentation. We encourage you watch this video even if you don’t have a dime in the stock market. That’s because the coming crisis will hit you no matter where you keep your money. The good news is that you can protect your money if you make the right moves soon. You could even turn this threat into an opportunity to make a lot of money. Watch this short video to learn how.

REMINDER: Doug Casey will be in Las Vegas next week..…
Doug will be at FreedomFest 2016: Freedom Rising, an annual festival where free minds meet to talk, strategize, socialize, and celebrate liberty. Doug will be giving several speeches, and he’ll also receive an award for his new novel, Speculator. He’ll join a star-studded lineup of speakers that includes Libertarian presidential candidate Gary Johnson, Senator Rand Paul, and Agora founder Bill Bonner. FreedomFest takes place July 13–16 at Planet Hollywood in Las Vegas. To learn more, visit www.freedomfest.com. Enter the code SALEM to get $100 off the ticket price.

Chart of the Day

Silver just set a new two year high. As you can see from today's chart, silver has soared 45% this year. On Monday, it topped $20 for the first time since August 2014. Longtime readers know that silver is gold’s more volatile cousin. Like gold, silver is real money. But unlike gold, it’s an industrial metal. It goes into everything from solar panels to batteries. Because of this, it's more volatile, and more sensitive to an economic slowdown than gold is.

So, if you’re nervous about the economy or financial system, the first thing you should do is own gold. We encourage most folks to hold 10% to 15% of their wealth in gold. Once you own enough gold, consider adding silver to your portfolio. It could see even bigger gains than gold in the years to come.

The article Why the “Bond King” Is Having Flashbacks of the 2008 Financial Crisis was originally published at caseyresearch.com.

Get our latest FREE eBook "Understanding Options"....Just Click Here!

This 5,000 Year Low Is Ruining Your Retirement

By Justin Spittler

The global banking system, and your financial future, are at serious risk right now. To understand why, just look at what's going on with the government's latest radical policy. Regular Dispatch readers know we're talking about rock bottom interest rates. According to MarketWatch, global interest rates are at the lowest level in 5,000 years. Credit is cheaper right now than at any point since the First Dynasty of ancient Egypt, around the 32nd century BC. Today, we'll explain what this means and how to protect yourself going forward..…

Interest rates didn’t get this low “naturally.” They’re at record lows because central bankers put them there..…
In 2008, the Federal Reserve dropped its key rate to near zero to fight the financial crisis. It’s kept rates there for eight years to encourage borrowing and spending. Other major central banks did the same thing. According to MarketWatch, there have been more than 650 rate cuts since September 2008. Rates in Canada and England are also near zero. In Europe and Japan, rates are below zero.

As we’ve explained before, negative interest rates basically tax your bank account. Instead of earning interest on the money in your bank account, you pay the bank. Not long ago, negative rates were unheard of. Today, more than $12 trillion worth of government bonds pay negative rates, up from $6 trillion in February. 

They’ve even seeped into the corporate debt market. According to Bloomberg Business, more than $300 billion worth of corporate bonds now “tax” bondholders. Central bankers told us low and negative rates would “stimulate” the economy. But, as you’re about to see, they’ve done far more harm than good.

Central bankers made it much harder to retire..…
That’s because rock bottom rates don’t just make it cheap to borrow money. They make it tough to earn a decent return. From 1962 to 2007, a U.S. 10 year Treasury paid an average annual interest rate of 7.0%. Today, a U.S. 10 year Treasury yields just 1.5%, an all time low. It’s the same story around the world. Last week, 10 year bonds in Ireland, England, Germany, France, and Japan all fell to record lows. In Japan, you actually have to pay the government 0.23% every year you own one of its 10 year bonds.

This is a serious problem for hundreds of millions of people. For decades, retirees could earn a safe, decent return owning these bonds. Some folks even lived off the interest they earned from these bonds. These days, you have to own riskier assets like stocks to have any shot at a decent return. Central bankers have effectively forced retirees to gamble with their life savings. Rock bottom rates are a serious threat to major financial institutions too.

According to U.S. banking giant Citigroup (C), low and negative rates are “poison” to the global financial system..…
They could make pension funds, insurance companies, and banks “no longer viable in the long term.” Business Insider reported last week:

As Citi notes: "Viability in its strong sense means profitability (a rate of return on equity at least equal to the cost of capital). In its weak sense, viability means solvency." Basically, Citi is warning that the negative rates may stop institutions being able to make money, which in turn would hit their ability to pay out on things like pensions and insurance policies.

This is a major risk even if you don’t have a pension or life insurance policy. That’s because pension and insurance companies oversee trillions of dollars. They’re pillars of the global financial system…and negative rates are destroying them.

Rock bottom rates could also put some of the world’s biggest banks out of business..…
You see, banks earn most of their money making loans. When rates are high, they make more on each loan. When rates are at record lows, like they are today, banks often lose money. Business Insider explains how today’s record-low rates are starving banks of income:

Citi points out that: "Banks in large part live off the differentials between lending and borrowing rates or between investment returns and funding rates." Persistently low interest rates could hit these differentials, lowering profitability and seriously harming banks in the long run.

Profits at America’s four biggest banks fell by an average of 13% during the first quarter…
This group includes Citigroup, Wells Fargo (WFC), Bank of America (BAC), and JPMorgan Chase & Co. (JPM). European banks are doing even worse. Swiss bank UBS’s (UBS) profits plunged 64% during the first quarter. Profits at Deutsche Bank (DB), Germany’s biggest lender, fell 58%. Spanish banking giant BBVA’s (BBVA) earnings fell 54%. The CEO of Deutsche Bank warned last month:

In the banking world, we are currently struggling with negative interest rates.
We will struggle more as the effect of those negative interest rates plays out into our deposit books.

Dispatch readers know some of Europe’s most important financial institutions are looking for ways to get around negative rates..…
Commerzbank, one of Germany’s largest banks, said last month that it was thinking of pulling money out of Europe’s banking system to avoid paying negative rates. Other banks have started making riskier loans and buying riskier assets to offset rock-bottom rates. The Financial Times reported in March:

Gonzalo Gortázar, chief executive at Spain’s Caixabank, expressed concerns about a build up of risk in the banking system as a whole. “In a world of low or negative interest rates, that is a possible consequence; you could see banks taking more risk,” he said.

Longtime readers know excessive risk-taking by banks contributed to the 2008 financial crisis. As a result, the S&P 500 plunged 57% from 2007 to 2009. And the U.S. entered its worst economic downturn since the Great Depression.

Bank stocks are already trading like a financial crisis has begun..…
Swiss bank Credit Suisse (CS) has plummeted 63% over the past year. Deutsche Bank is down 60%. Royal Bank of Scotland (RBS) is down 59%. Mitsubishi UFJ Financial Group (MTU), Japan’s biggest bank, is down 39%. These are huge drops in short periods. Remember, these are some of the most important financial institutions on the planet.

We encourage you to take action now..…
Our first recommendation is to avoid bank stocks. Low and negative rates are eating these companies alive right now. And it could be years before governments abandon these failed policies. According to Fed Chair Janet Yellen, low interest rates are the “new normal.” We also encourage you to own physical gold. As we like to remind readers, gold is real money. It’s preserved wealth for centuries because it has a rare set of characteristics: It’s durable, easy to transport, and easily divisible. A gold coin is valuable anywhere in the world.

This year, gold has jumped 26%. It’s trading at its highest price in two years. But Casey Research founder Doug Casey says this rally is just getting started. According to Doug, gold could soar 500% or more in the coming years. If you’re nervous that central bankers will take this interest rate experiment too far, own gold. It’s the best way to protect yourself from desperate governments.

We also encourage you to watch this short presentation. It explains how these failed monetary policies could spark something much worse than a banking crisis. As you’ll see, this is a threat to you even if you don’t a have a single penny in the stock market. Click here to watch this free video.

Chart of the Day

Deutsche Bank is trading like a financial crisis has begun. Today’s chart shows the performance of the German banking giant. You can see its stock is down more than 50% over the past year. Last Thursday, it hit it a new record low. Like other European lenders, low rates are killing Deutsche Bank. Last year, the company lost $7.5 billion. It was its first annual loss since the 2008 financial crisis. And yet, its plunging stock suggests more bad results are on the way.

According to the International Monetary Fund (IMF), Deutsche Bank is the world’s riskiest financial institution. That’s a problem even if you don’t keep money with Deutsche Bank or own its shares. The Wall Street Journal reported last week:

The IMF also said the German banking system poses a higher degree of possible outward contagion compared with the risks it poses internally. “In particular, Germany, France, the U.K. and the U.S. have the highest degree of outward spillovers as measured by the average percentage of capital loss of other banking systems due to banking sector shock in the source country,” the IMF added.

In other words, problems at Deutsche Bank could spread to other banks around the world. It’s another reason why you should avoid bank stocks and own gold right now.

The article This 5,000-Year Low Is Ruining Your Retirement was originally published at caseyresearch.com.

Get our latest FREE eBook "Understanding Options"....Just Click Here!

Warning: This Could Be the Start of a Global Banking Crisis

By Justin Spittler

Europe’s banking system is collapsing. Over the past year, shares of Deutsche Bank (DB), Germany’s biggest bank, have plunged 56%. Swiss banking giant Credit Suisse (CS) is down 62% over the same period. Yesterday, both stocks hit record lows.

Dozens of other European bank stocks have also crashed. The Euro STOXX Banks, which tracks 48 of Europe’s largest banks, is down 48% over the past year. This is a major issue. That's because banks are the cornerstone of the financial system. They keep money flowing through the economy. If they’re struggling, it often means the economy is having major problems. Right now, European banks are flashing bright warning signs. That’s not just bad news for Europe—it’s also a serious threat to the rest of the world.

In today’s Dispatch, we’ll show you why Europe’s banking crisis could turn into a global banking crisis. You’ll also learn how to transform this threat into a chance to make big gains.

European banks are struggling to make money..…
Spanish banking giant BBVA’s (BBVA) profits fell 54% last quarter. First quarter profits at Deutsche Bank were down 58%. Swiss bank UBS’s (UBS) profits plunged 64%. European banks are hurting for a couple reasons. One, Europe is growing at the slowest pace in decades. Banks are making fewer loans as a result.

Two, negative interest rates are eating European banks alive. If you’ve been reading the Dispatch, you know negative rates are the latest radical government policy. They basically flip your bank account upside down. Instead of earning interest for keeping money in the bank, you pay the bank to hold your money.

Negative rates are clearly bad for savers. They’re also hurting Europe's biggest banks. That’s because these huge institutions have to pay their “bank,” the European Central Bank (ECB). Today, European banks pay £4 for every £1,000 they store at the ECB for a year. That might not sound like a lot. But it adds up quick when you manage trillions of euros like these banks do.

Last week, investors got another reason to avoid European banks..…
On Thursday, Great Britain voted to leave the European Union (EU), which it’s been in since 1973.
The “Brexit,” as the media is calling it, blindsided investors. As we explained yesterday, the market was expecting Great Britain to stay in EU. The unexpected outcome triggered a global stock market crash.

U.S. stocks had their worst day since August. Japanese stocks had their worst day in five years. European stocks had their biggest decline since the 2008 financial crisis. Friday’s global selloff erased $2.1 trillion in value from global stocks. It was the global stock market’s worst day in history. The panic didn’t die down much over the weekend. By the end of Monday, another $930 billion had disappeared from the global stock market.

European bank stocks were hit the hardest..…
Deutsche Bank plunged 22% between Friday and Monday. Credit Suisse fell 23%. UBS fell 20%. Barclays (BCS) and Royal Bank of Scotland (RBS) each plunged 37%. Both stocks are down more than 57% over the past year. These are gigantic moves in a matter of days. Remember, we’re not talking about small biotech stocks. These are some of the most important financial institutions on the planet.

Government officials are scrambling to contain the crisis..…
Today, the Bank of England (BoE) injected £3.1 billion into Britain’s banking system. It’s pledged to inject as much as £250 billion to stabilize its financial system. The BoE made its cash injection hours after the Bank of Japan (BOJ) pumped $1.5 billion into its banking system. As we'll show you in a second, we don't believe this will end well. That's because this excessive money printing (sometimes called "quantitative easing") doesn't stimulate the economy like governments intend it to.

Credit Suisse says other central banks could soon print more money too. Bloomberg Business reported on Friday:

“Market liquidity and overall liquidity in the U.K. is drying up as we speak in a very rapid way,” said John Woods, chief investment officer for Asia-Pacific at Credit Suisse Private Banking, told Bloomberg TV in Hong Kong. “It’s highly likely that we see monetary easing in a coordinated response” from central banks across the world, he said.

Great Britain is headed for a recession..…
A recession is when an economy shrinks two quarters in a row. Goldman Sachs (GS) says Britain could be in a recession by early 2017. But here’s the thing. We don’t think the BoE will let this happen. That’s because central bankers will do anything, including using reckless, unproven monetary policies, to avoid a recession these days.

Credit rating agency Standard & Poor’s agrees with us. Reuters reported today:

"Brexit is likely to represent a drag of about 1.2 percent of GDP for the UK in 2017," Jean-Michel Six, S&P's chief economist for Europe, the Middle East and Africa told a conference call for investors on Tuesday. "We have a significant slowdown but growth remains positive although obviously in a much more disappointing way. That is because we anticipate a very strong monetary response on the part of the Bank of England, in the form of additional quantitative easing, in the form of a further cut in interest rates," he added.

Bank of America (BAC) and Deutsche Bank also expect the BoE to fire up the printing press again. Bank of America says it could happen as soon as August.

QE won’t help Great Britain’s economy..…
As we told you above, QE doesn’t work. As regular readers know, the Federal Reserve pumped $3.5 trillion into the U.S financial system after the 2008 financial crisis. This massive money printing effort was supposed to juice the economy. But the U.S. is growing at its slowest pace since World War II. QE also failed to jumpstart Japan’s economy, which hasn’t grown in two decades. There’s no reason to think it will work this time.

If you’re nervous about the global financial system, we encourage you to take action today.…
The first thing you should do is own physical gold. Gold is real money. It’s held its value for thousands of years because it has a unique set of attributes: It’s easy to transport, easily divisible, and durable. You can take a gold coin anywhere in the world and folks will immediately recognize its value.

Unlike paper money, central bankers cannot create gold from nothing. It’s the ultimate antidote to crumbling paper currencies. That’s why the price of gold often soars when governments print money. This year, gold is up 24%. It’s trading at the highest price in two years. But it could go much higher as governments continue to run reckless monetary experiments.

If you want big profits from rising gold prices, own gold stocks..…
Dispatch readers know gold miners are leveraged to the price of gold. A small jump in the price of gold can cause gold stocks to surge. Gold’s 24% jump this year has caused GDX, a fund that tracks large gold stocks, to soar 96%. We believe this gold stock rally is just getting started. During the 2000 and 2003 gold bull market, the average gold stock gained 602%. The best ones soared 1,000% or more.

Nick Giambruno, editor of Crisis Investing, has recommended two gold stocks this year..…
He already closed out one of them for a quick double. It surged 103% in 14 months. Nick’s other gold stock is up 30% since March and is still dirt cheap at today's levels. Nick currently rates this stock a "Buy"…and says it could soon start paying a double digit dividend yield if gold keeps rising.

You can learn more about Nick’s gold stock by taking advantage of our special 60%-off sale for Crisis Investing. If you sign up today, you’ll be enrolled in a trial membership, which gives you 90 days risk-free to decide if the service is for you. But we encourage you to act soon. This special offer ends soon, and we likely won’t open this offer again for a long time.

You can learn more about this incredible offer by watching this video presentation. You’ll also learn about an even bigger threat to your wealth than Europe’s banking crisis. As you’ll see, almost no one is talking about this coming crisis. Yet, it could cause millions of Americans to lose their entire life savings. By the end of this video, you’ll know how to protect yourself. And just as importantly, you’ll know how to profit from this coming crisis. Click here to watch this free video.

Chart of the Day

U.S. bank stocks are also headed lower. Today’s chart shows the performance of the Financial Select Sector SPDR ETF (XLF) over the past year. XLF holds 94 major U.S. financial companies including behemoths JPMorgan Chase (JPM), Wells Fargo (WFC), and Bank of America (BAC). You can see XLF is down 11% since last June. While that's not as severe as the near 50% drop in European banks over the same period, it's still a clear sign to stay away.

U.S. banks have many of the same problems as European banks. Like Europe, the U.S. economy is growing at the slowest pace in decades. And while the U.S. economy doesn’t have negative rates yet, Fed Chair Janet Yellen has said they aren’t “off the table” if the U.S. economy runs into trouble. The arrival of negative rates to the U.S. could tip bank stocks into a crisis, just like they have in Europe.

The article Warning: This Could Be the Start of a Global Banking Crisis was originally published at caseyresearch.com.

Get our latest FREE eBook "Understanding Options"....Just Click Here!

This $1 Trillion Market Is Cracking…Here’s How to Profit From Its Collapse

By Justin Spittler

Americans are falling behind on their credit card debt. As you’re about to see, credit card “defaults” are rising for the first time in six years. This is a serious problem for credit card companies. It’s also a big problem for retailers, car makers, and any other company that depends on consumer credit.

If this keeps up, shares of America’s biggest consumer companies could plunge. You could even lose a lot of money without having a single penny invested in this sector. That’s because consumer spending makes up about 70% of the economy. When the “consumer” hurts, the entire economy feels it. So, if you have any money at all in stocks, please read this Dispatch closely.

Credit card company Synchrony Financial (SYF) issued a serious warning last week..…
Synchrony issues more retail store credit cards than any other company. Its performance can say a lot about the credit card and retail industries. Right now, Synchrony’s customers are struggling to pay their bills. The Wall Street Journal reported last week:

“We expected to see some softening,” Brian Doubles, Synchrony’s chief financial officer, said at an investor conference Tuesday. “We weren’t sure when it was going to come and I think we’re starting to see some of that.” Mr. Doubles added that the ability of card holders to get back on track with payments after falling behind has been “challenged all year.”

The company said it could see a jump in “credit charge-offs”..…
This is basically the default rate for the credit card industry. The company warned that its charge off rate could spike from about 4.4% to as high as 4.8%. For perspective, the industry charge off rate was 3.1% during the first quarter. During the first quarter of 2015, it was 3%. This was the first time since 2010 that the industry charge off rate has increased from the previous year. Many investors are now worried other credit card companies could take big losses in the coming months. Synchrony’s stock plunged 14% after it issued the warning.

Shares of other major credit card companies also tanked on the news..…
Capital One Financial (COF) closed Tuesday down 6.6%. Ally Financial (ALLY) sunk 5.6%. These giant credit card companies are now trading as if there could be much bigger losses on the way. Synchrony’s stock has plunged 22% over the past year. Capital One is down 28%. Ally Financial is down 30%.

Other major credit card companies have also plummeted. American Express (AXP), the nation’s largest credit card company, has fallen 23% over the past year. Discover Financial Services (DFS) is down 10%.
For comparison, the S&P 500 is down 2% since last June.

As of the first quarter, Americans had more than $950 billion in credit card debt..…
That’s 6% higher than the first quarter of 2015. And it’s the highest level since 2009.
Folks have been racking up bigger debt despite falling behind on their payments. The Wall Street Journal reports:

Capital One, the nation’s fourth largest credit card issuer, said credit card sales jumped 14% in the first quarter from a year earlier. At Citigroup Inc., average credit card balances in the first quarter posted the first year over year increase since 2008. Such balances also grew at Discover Financial Services Inc. and J.P. Morgan Chase & Co., the nation’s largest lender.

U.S. credit card balances are on pace to hit $1 trillion by the end of the year. They could even top the all-time high of $1.02 trillion set in July 2008.

The Federal Reserve made it cheap for folks to borrow money..…
As you probably know, the Fed has held its key interest rate near zero since 2008. The Fed dropped rates to the floor to encourage folks to borrow and spend money. In 2007, the average credit card holder paid 13.3% per year in interest. Today, the average annual interest rate is 12.3%. Credit card companies and banks have also loosened their lending standards. The Wall Street Journal reports:

Because many creditworthy consumers are still cautious about spending, lenders are turning more aggressively to subprime borrowers. Lenders issued some 10.6 million general purpose credit cards to subprime borrowers last year, up 25% from 2014 and the highest level since 2007, according to Equifax.

A “subprime” loan is a loan made to someone with poor credit. You may remember that the collapse of the subprime mortgage market sparked the 2008 financial crisis and worst economic downturn since the Great Depression.

The Fed also made it cheaper to buy a car..….  
Last quarter, the amount of U.S. auto loans topped $1 trillion for the first time in history. This is a sign of a very unhealthy economy. That’s because many folks buying cars these days could never afford them in “normal” times.

The Wall Street Journal explains:

Lenders gave out $109.4 billion in subprime auto loans last year, up 11% from 2014 and nearly three times the low of $38.3 billion in 2009, according to credit reporting firm Equifax. Subprime auto loans account for a growing share of new auto loans, making up nearly 19% of auto loan balances given out last year, up from 13% in 2009.

It’s only going to become more difficult for folks to pay their credit card bills and car loans…
That’s because the economy is barely growing. As regular readers know, it’s growing at the slowest pace since World War II. And it’s only getting worse.  

Companies are hiring at the slowest pace in six years. Corporate earnings are drying up. And major retailers are warning of big sales declines for this year.

Meanwhile, debt is growing at the fastest pace in years. This can’t go on forever. As the economy weakens, more Americans will fall behind on their debts. Credit card companies, banks, and other lenders will see huge losses. Many retailers will also see sales plummet.

E.B. Tucker, editor of The Casey Report, just shorted a company that depends heavily on cheap credit..…
Shorting is betting that a stock will fall. If it does, you make money. Nearly 62% of this company’s customers pay with credit. A “spend now, pay later” business like this can work when the economy is growing. It doesn’t work well when the economy is shrinking. Folks buy less stuff once they realize they can’t really afford it. Some customers don’t pay back their loans.

E.B. says this is already happening at this company. He wrote in this month’s issue of The Casey Report:

From 2014 to fiscal 2016, the company’s annual bad debt expenses rose from $138 million to $190 million. That’s a 30% increase. Over the same period, credit sales grew by only 20%. That means bad debt expenses rose 50% faster than credit sales.

If this continues, the company could end up with huge piles of unsold inventory. To pay the bills, it may have to sell merchandise at deep discounts, even if it means losing money on every sale. In less than two weeks, this short has made Casey Report readers 5%. But that could just be the start. According to E.B, there’s “more pain to come as credit financing dries up…sales continue to drop…and more loans go unpaid.”

You can learn more about this trade by signing up for The Casey Report. If you sign up today, you’ll get 50% off the regular price. You can learn how by watching this short presentation. You will also learn why today’s “credit crunch” is the No. 1 early warning of the next big financial crisis. More importantly, you’ll learn how to turn the coming crisis into a moneymaking opportunity.

Click here to watch this free video.

Chart of the Day

Airline stocks are breaking down. Airline stocks have been one of the hottest investments since the end of the 2008 financial crisis. The Dow Jones U.S. Airlines Index, which tracks major airline stocks, surged an incredible 861% from March 2009 through December 2014. It’s since fallen 26%. You can see in today’s chart that airline stocks are in a sharp downtrend. And if the economy gets as bad as we think it will, the sector could plunge.

In the February issue of The Casey Report, E.B. Tucker wrote that the good times were ending for the airline industry. He put his money behind this call by shorting one of America’s most vulnerable airlines. This short has returned 20% in four months. And that’s just one of six holdings in E.B.’s portfolio that’s up 20% or more right now. To learn more about E.B.’s investing approach, watch this short video.

Regards,
Justin Spittler

The article This $1 Trillion Market Is Cracking…Here’s How to Profit From Its Collapse was originally published at caseyresearch.com.

Get our latest FREE eBook "Understanding Options"....Just Click Here!

The Bear Market in Commodities Is Over…Here’s How Casey Analysts Are Cashing In

By Justin Spittler

It’s official. The bear market in commodities is over. If you’ve been reading the Dispatch, you know commodities have been in a crushing bear market for more than five years. The Bloomberg Commodity Index, which tracks 22 different commodities, has plunged 58% since April 2011.

In January, it hit its lowest level since 1999. Then, commodity prices took off. According to the Financial Times, 15 out of the 22 commodities that make up the Bloomberg Commodity Index are up on the year. The price of oil is up 85% since February. Sugar is up 81% since August. Soybeans are up 33% since March.

The index is up 11%. It’s off to its best start to any year since 2008. And it’s up 21% since mid-January.
According to the popular definition, a bull market begins when a stock, commodity, or index rises 20% from a low. By that measure, commodities are “officially” in a bull market.

You can see how commodities have bottomed in the chart below:

For months, we’ve been saying commodities were close to a bottom..…
The 5-plus year bear market in commodities has slammed the world’s largest miners. According to accounting giant PricewaterhouseCoopers, the world’s 40 largest publicly traded miners lost a combined $27 billion last year. To survive, commodity companies have cut spending to the bone. They laid off hundreds of thousands of workers. They sold parts of their business and abandoned projects. Some companies even cut their prized dividends.

This is classic behavior of a bottom..…
As you may know, commodities are cyclical. They go through big booms and busts. That’s because commodities like copper, natural gas, and oil have unique supply/demand dynamics. For example, when oil prices get too low, many companies that produce oil go out of business. Also, when oil prices are cheap, folks are likely to use more of it. You’re likely to drive more when gasoline prices are cheap than when they’re expensive.

Eventually, prices get so low that demand exceeds supply. Prices bottom out and begin to rise. That’s when a commodity bear market turns into a commodity bull market. When a commodity bull market gets going, the gains can be huge. During the 2002–2008 commodity bull market, the Bloomberg Commodity Index rose 172%. Shares of some of the world’s largest mining companies climbed many times higher. For example, Anglo American (AAL.L) returned 464% over the period. BHP Billiton Limited (BHP) returned 1,106%.

The weak dollar has also given commodities a boost..…
The U.S. Dollar Index has fallen 5% this year. This index tracks the dollar’s performance against major currencies like the euro and Japanese yen. The dollar is the world’s most important currency. Most investors “think” in dollars. If you look up the price of sugar, corn, or gold, you’ll see its price in dollars. So when the dollar loses value, it takes more dollars to buy the same amount of a commodity. That’s why a weak dollar is good for commodities.

Still, there’s at least one reason to be skeptical about the rally in commodities..…
Commodities are the “building blocks” of the global economy. And Dispatch readers know that economic growth has come to a standstill. China, the world’s largest commodity consumer, is growing at its slowest pace since 1990. The U.S. is growing at its slowest pace since World War II. Japan’s economy hasn’t grown at all in two decades. When the economy slows, developers build fewer homes, office buildings, and bridges. That means they use less copper, aluminum, steel, and other commodities.

If you’re buying commodities today, make sure to buy ones that can do well while the economy struggles..…
Some commodities depend more on economic growth than others. For example, lumber, which is used to build homes, benefits from the tailwind of a growing economy. Soybean prices, on the other hand, can rise no matter how well the economy is doing. That’s because people have to eat no matter what’s happening with the economy.

So while the Bloomberg Commodity Index is up 11% this year, not every commodity has rallied. Natural gas prices are still down 9% on the year. Copper is down 3%. Meanwhile, soybean prices are up 34% Although several Casey analysts have recommended commodity investments this year, they’ve been very selective about the types of commodities they recommend. This approach has paid off…..

➢ Nick Giambruno, editor of Crisis Investing, used the crash in oil prices to pick shares of a world-class oil company. This stock is up 13% since March.

➢ E.B. Tucker, editor of The Casey Report, used the turnaround in commodities to buy two gold stocks. One of those is up 47% since March. The other is up 31% since April. He also recommended a silver stock that’s jumped 36% since April.

➢ Louis James, editor of International Speculator, is cashing in on the commodity rebound too. One of his stocks has surged 162% since September. Another is up 122% since July. A third is up 63% since March.

Most investors would do well owning just gold..…
As we often say, gold is real money. It’s preserved wealth for thousands of years because it has unique set of qualities: It’s durable, easy to transport, and easily divisible. It has intrinsic value that folks recognize around the world. Like many commodities, gold “officially” entered a new bull market earlier this year. It’s in an uptrend, yet still cheap. It’s trading 34% below its 2011 high. Unlike many commodities, gold can do well even if the economy is struggling. It’s a safe haven asset that’s protected wealth through history’s worst financial crises.

Casey Research founder Doug Casey thinks we’re on the verge of a major financial crisis..…
Doug says the coming crisis will be “much more severe, different, and longer lasting than what we saw in 2008 and 2009.” When it hits, “paper currencies will fall apart, as they have many times throughout history.”
Doug says this will spark a “true mania” in gold. That’s why we encourage everyone own physical gold. Putting just 10% or 15% of your wealth in gold could help you avoid big losses during the next financial crisis.

Finally, an important announcement from Jim Rickards..…
Part of our job at Casey Research is to share interesting opportunities with you. That's why we're passing along this important news from our good friend Jim Rickards. You've probably heard of Rickards. He’s one of the most respected analysts in the business. He’s a gold expert and author of The New Case for Gold. Jim recently launched a new service to help readers take advantage of the coming gold boom. Because he’d like as many folks as possible to read his service, he’s arranged a special deal exclusive to Casey Research readers. You can learn more by watching this free video. In short, if you take Rickards up on his special offer today, he’ll send you two “G-series” gold coins in the mail.

Again, this deal is only for Casey Research readers. Click here for the full story.

REMINDER: Casey Research founder Doug Casey will be in Poland next weekend..…
Doug will be presenting at the "Alternative for Difficult Times" seminar in Warsaw on June 18 and 19. Nick Giambruno, editor of International Man, will be there too. Doug and Nick will be there for the Polish launch of Doug's classic book, Crisis Investing. They will also be presenting at a seminar discussing the impending global financial hurricane, the state of freedom around the world, and how you can protect yourself and even profit from these trends.

Click here for more information.

Chart of the Day

Gold has been one of the best places to put your money this year. Today’s chart shows the performance of gold, commodities, bonds, U.S. stocks, and global stocks this year. You can see gold is up 17% this year. It’s crushed stocks, bonds, and even commodities as a group. For most of this year, gold was the top performing commodity. It was up more than 22% at one point. Then, it cooled off. It’s down more than 3% since late April.

We think gold is in the early innings of a major bull market. And, as we often say, bull markets don’t move in straight lines. It’s healthy for gold to take a “breather” after its red hot start to the year. If you’re looking to buy gold, we recommend using down days as buying opportunities. And again, for specifics on a coming opportunity in gold, we recommend you check out Jim Rickards' short video right here.

The article The Bear Market in Commodities Is Over…Here’s How Casey Analysts Are Cashing In was originally published at caseyresearch.com.

Get our latest FREE eBook "Understanding Options"....Just Click Here!

Hundreds of Oil Stocks Could Go to Zero…Will You Still Be Owning One of Them?

By Justin Spittler

The largest shale oil bankruptcy in years just happened. If you own oil stocks, you'll want to read today's essay very closely. Because there's a good chance hundreds more oil companies will go bankrupt soon. As you probably know, the oil market is a disaster. The price of oil has plunged 75% since 2014. In February, oil hit its lowest level since 2003.

Oil crashed for a simple reason: There’s too much of it. New methods like “fracking” have led to a huge spike in global oil production. Today, oil companies pump about 1 million more barrels a day than the world uses.

Last year, America’s biggest oil companies lost $67 billion..…

To offset low prices, oil companies have slashed spending by 60% over the past two years. They’ve laid off more than 120,000 workers. They’ve sold assets and abandoned projects. Some have even cut their prized dividends.

For many oil companies, deep spending cuts weren’t enough…

The number of bankruptcies in the oil industry has skyrocketed….

Bloomberg Business reported earlier this month:

Since the start of 2015, 130 North American oil and gas producers and service companies have filed for bankruptcy owing almost $44 billion, according to law firm Haynes & Boone.

And that doesn’t even include two “big name” bankruptcies in the last couple weeks. Two weeks ago, Linn Energy filed for bankruptcy, making it the largest shale oil bankruptcy since 2014. It owes lenders $8.3 billion.

A week later, SandRidge Energy declared bankruptcy. It became the second biggest shale oil company to go bankrupt. The company owes its lenders about $4.1 billion. Ultra Petroleum, Penn Virginia, Breitburn Energy, and Halcón Resources also filed for bankruptcy in the past couple weeks.

Hundreds more oil companies could go bankrupt this year..…

The Wall Street Journal reported last week:

This year, 175 oil and gas producers around the world are in danger of declaring bankruptcy, and the situation is nearly as dire for another 160 companies, many in the U.S., according to a report from Deloitte’s energy consultants.

Defaults by oil and gas companies are already skyrocketing. The Wall Street Journal continues:

Oil and gas companies this year have defaulted on $26 billion, according to Fitch Ratings data. That figure already surpasses the total for 2015, $17.5 billion.

Fitch, one of the nation’s largest credit agencies, expects 11% of U.S. energy bonds to default this year. That would be the highest default rate for the energy sector since 1999.

Many investors thought the oil crisis was over..…

That’s because the price of oil has surged 80% since February. Dispatch readers know better. For months, we’ve been warning there would be more bankruptcies and defaults. We said many oil companies need $50 oil to make money. The price of oil hasn’t topped $50 a barrel since last July. Even after its big rally, oil still trades for about half of what it did two years ago.

Oil prices will stay low as long as there’s too much oil..…

Although the world still has too much oil, the surplus has shrunk in the past few months. In February, the global economy was oversupplied by about 1.7 million barrels a day. Thanks to U.S. production cuts, the surplus is now just 1.0 million barrels a day. The number of rigs actively looking for oil in the U.S. has dropped by 80% since October. This month, the U.S. oil rig count hit its lowest level in 70 years.

However, many other countries aren’t cutting production at all. Saudi Arabia and Russia, two of the world’s biggest oil-producing countries, are both pumping near-record amounts of oil. Frankly, these countries don’t have much choice. Oil sales account for 77% of Saudi Arabia’s economy. And oil accounts for 50% of Russia’s exports. If these countries stop pumping oil, their economies could collapse.

Low prices have made it impossible for some oil companies to pay their debts..…

U.S. oil companies borrowed nearly $200 billion between 2010 and 2014. If you’ve been reading the Dispatch, you know the Federal Reserve is mostly to blame for this. It’s held its key interest rate near zero since 2008. This made it incredibly cheap to borrow money. When oil prices were high, the debt wasn’t an issue. Companies made enough money to pay the bills. That’s no longer the case. Today, many oil companies are burning through cash to pay their debts.

To make matters worse, many weak oil companies have been cut off from the credit market..…

Before prices collapsed, oil companies could refinance their debt if they ran into trouble. This could buy them time to sort out their problems. These days, many banks will no longer lend oil companies money. Bloomberg Business reported last month:

Almost two years into the worst oil bust in a generation, lenders including JPMorgan Chase & Co., Wells Fargo & Co. and Bank of America Corp. are slashing credit lines for struggling energy companies…
Since the start of 2016 lenders have yanked $5.6 billion of credit from 36 oil and gas producers, a reduction of 12 percent, making this the most severe retreat since crude began tumbling in mid-2014.

Oil stocks are still very risky..…

But that doesn’t mean you should avoid them entirely. As we’ve said before, oil stocks have likely entered a new phase. You see, when oil prices first tanked, investors sold oil stocks indiscriminately. Both strong and weak stocks plunged. In other words, investors “threw the baby out with the bath water.” You often see this behavior during a crisis.

Exxon Mobil (XOM), the world’s biggest oil company, fell 34% since 2014. Chevron (CVX), the world’s second biggest, dropped 48%. Now that oil has stabilized, the stronger companies are separating themselves from the weaker companies. This year, Exxon is up 15%. Chevron is up 11%. The crash in oil prices has given us a chance to buy world class oil companies at deep bargains.

If you want to own oil stocks, stick with the best companies..…

If you're going to invest in the sector, there are four key things to look for: 

Make sure you buy companies that can 1) make money at low oil prices. You should also look for companies with 2) healthy margins 3) plenty of cash and 4) little debt.

In March, Crisis Investing editor Nick Giambruno recommended a company that hits all of these checkmarks. It has a rock-solid balance sheet…some of the industry’s best profit margins…and “trophy assets” in America’s richest oil regions. It can even make money with oil as cheap as $35.

The stock is up 9% in two months. But Nick thinks it could just be getting started. After all, it’s still 30% below its 2014 high. You can get in on Nick’s oil pick by signing up for Crisis Investing. If interested, we encourage you to watch this short presentation. It explains how you can access Nick’s top investing ideas for $1,000 off our regular price.

This incredible deal ends soon. Click here to take advantage while you can.

You’ll also learn about an even bigger “crisis investing” opportunity on Nick’s radar. This coming crisis could radically change the financial future of every American. By watching this video, you’ll learn how to profit from it. Click here to watch.

Chart of the Day

Oil and gas companies are losing billions of dollars, we’re in earnings season right now. This is when companies tell investors if their earnings grew or shrunk last quarter. A good earnings season can send stocks higher. A bad one can drag stocks down.

As of Friday, 95% of the companies in the S&P 500 had shared first quarter results. Based on these results, the S&P 500 is on track to post a 6.8% decline in earnings. That would be the biggest drop in quarterly earnings since the 2009 financial crisis.

Oil and gas companies are a big reason U.S. stocks are having such a horrible earnings season.

As you can see below, first-quarter earnings for energy companies in the S&P 500 have plunged 107% since last year. Keep in mind, this group includes Exxon, Chevron, and other blue chip energy stocks.

Again, if you’re looking to buy oil stocks, make sure you “look under the company’s hood” before you buy it. Steer clear of companies that are losing money and have a lot of debt.

The article Hundreds of Oil Stocks Could Go to Zero…Will You Still Be Owning One of Them? was originally published at caseyresearch.com.

Get our latest FREE eBook "Understanding Options"....Just Click Here!

Do You Own the Next Enron?

By Justin Spittler

Companies are hiding more from you than you realize. Back in the late 90s, energy company Enron was a Wall Street darling. From 1998 to 2000, its stock surged 342%. It became America’s seventh biggest corporation…but the company was a farce. Management used shady accounting to inflate its sales and profits. When the fraud came to light, Enron’s stock plummeted. In 2001, it filed for bankruptcy.

In April, former Enron CEO Andy Fastow issued a serious warning…..
Fastow was one of the main actors in the Enron scandal. He spent six years in jail for his crimes. According to Fastow, many corporate executives are now doing what he did at Enron. He even accused tech giant Apple (AAPL) of misleading investors. Business Insider reported:

His point – an entirely correct one – is that the world’s largest company today is engaged in tax dodging behavior that, while perhaps technically legal, is clearly designed to increase profits and inflate the stock by misleading and confusing regulators (and perhaps investors) via a massively complex web of entities – exactly what he did at Enron! And this is 100% routine, common behavior among most large US companies.

Some people might find Fastow’s claim ridiculous. He is a convicted felon, after all. But Casey readers know better than to trust Corporate America.

Regulators have accused Valeant (VRX) and SunEdison (SUNE) of similar crimes..…
You’ve probably heard about the drug maker Valeant and the renewable energy company SunEdison. Their downfalls have been two of the year’s biggest investing stories. Like Enron, both companies were hot investments. From January 2013 to July 2015, Valeant gained 332%. SunEdison’s stock surged 892% over the same period.

Like Enron, both companies used “creative accounting.” According to The Wall Street Journal, the Securities and Exchange Commission (SEC) is investigating whether “SunEdison misrepresented its cash position to investors as its stock collapsed.” Valeant is under investigation for its pricing and accounting practices. And like Enron, both stocks have crashed. SunEdison plunged 99% before it announced plans to file bankruptcy. Valeant’s stock has plummeted 89%.

The mainstream media paints Valeant and SunEdison as a couple “bad apples”…
According to most reports, it’s rare for public companies to pull tricks on investors. But if you’ve been reading the Dispatch, you know that’s not true. For the past few months, we’ve been telling you about the huge surge in share buybacks. A share buyback is when a company buys its own stock from shareholders.

Buybacks reduce the number of shares that trade on the market. This boosts a company’s earnings per share, which can lead to a higher stock price. But buybacks do not actually improve the business. They just make it look better “on paper.” According to research firm FactSet, 76% of the companies in the S&P 500 bought back their own shares between November and January. Most companies used debt to pay for these buybacks. The Wall Street Journal reported last week:

The biggest 1,500 nonfinancial companies in the U.S. increased their net debt by $409 billion in the year to the end of March, according to Société Générale, using almost all—$388 billion—to buy their own shares, net of newly issued stock. Companies have become far and away the biggest customer for their own shares.

Companies are also using “financial engineering” to make their businesses appear healthier…
Financial engineering is when companies use accounting tricks to goose their sales, profits, or cash on the balance sheet. It’s how Enron, Valeant, and SunEdison hid problems from investors. Many other companies are doing similar things.

As you may know, U.S. corporations are required to report “GAAP” earnings per share. GAAP based earnings comply with accepted accounting guidelines. A growing number of companies are also reporting “adjusted” earnings that do not comply with GAAP. Many companies use adjusted earnings to strip out “temporary” factors like the strong dollar or a warm winter. Management decides what to leave out and include when measuring adjusted earnings.

Two-thirds of the companies in the Dow Jones Industrial Average report adjusted earnings…
In 2014, adjusted earnings were 12% better than GAAP earnings. Last year, they were 31% better. Companies say adjusted earnings give a more complete picture of their business. But it’s becoming obvious that companies are using non-GAAP earnings to hide weaknesses.

As Dispatch readers know, the U.S. is in its weakest “recovery” since World War II. Europe, Japan, and China are all growing at their slowest pace in decades too. With the economy so weak, many companies have had to “get creative” to grow earnings.

Sales for companies in the S&P 500 have fallen four straight quarters..…
Earnings are on track to decline a fourth straight quarter. That hasn’t happened since the 2008-2009 financial crisis. These results would be even uglier if companies didn’t report adjusted earnings.

You see, it’s much easier for companies to mask weak sales or profits when the economy is growing. When the economy slows, those problems become too big to hide. Right now, the global economy is clearly slowing. So expect to hear about more “Enrons” in the coming months.

The stock market is a dangerous place to put your money right now..…
If you're going to invest in stocks, keep three important things in mind. You should avoid investing in businesses you don’t understand. Many hedge funds wish they had followed this advice with Valeant and SunEdison. Despite these companies’ complex and unclear business models, some of the largest hedge funds in the world invested in them. This earned Valeant and SunEdison the nickname “hedge fund hotels.” We also encourage you to avoid companies with a lot of debt. These firms will struggle to pay the bills as the economy worsens.

Finally, we recommend you steer clear of companies that need buybacks to increase earnings. Buybacks can give stocks a temporary boost, but they’re no way to grow a business. In short, money spent on buybacks is money not spent on new machinery, equipment, or anything else that can help a company grow. It’s especially a poor use of cash when stocks are expensive…like they are today.

We encourage you to set aside cash and own physical gold..…
A cash reserve will help you avoid big losses during the next big selloff. It will also put you in a position to buy world-class businesses for cheap after the “rotten apples” are exposed. Physical gold is another proven way to defend your wealth. Gold has served as real money for centuries because it has a rare set of qualities: It’s durable, transportable, easily divisible, has intrinsic value, and is consistent across the world.

It’s also protected wealth through the worst financial crises in history. Investors buy it when they’re nervous about stocks or the economy. This year, gold is up 22%. It’s at its highest level since January 2015. For other proven strategies to protect your money from a stock market crash, watch this short video. In it, you’ll learn how to fully “crisis proof” your wealth. Click here to view this free presentation.

Chart of the Day

The U.S. stock market is wobbling on one leg. Dispatch readers know buybacks have been a major driver of U.S. stocks. Since 2009, S&P 500 companies have shelled out more than $2 trillion on buybacks. As noted, buybacks can make earnings look better “on paper.” They can also prop up share prices. With the economy slowing and earnings in decline, buybacks have been one of the things keeping stocks afloat…but even that’s starting to give way.

Today’s chart compares the performance of PowerShares Buyback Achievers Fund (PKW) this year versus the S&P 500. PKW tracks companies that bought back more than 5% of their shares over the past year. Holdings include McDonald's (MCD), Lowes (LOWE), and Macy’s (M).

From March 2009 to May 2015, PKW gained 314%. The S&P 500 rose 215% over the same period. Since then, PKW has fallen 10%. The S&P 500 is down 3%. Investors appear to be losing confidence in companies that buy a lot of their own stock. That’s a big problem for the stock market, which is showing major signs of weakness.

The article Do You Own the Next Enron? was originally published at caseyresearch.com.

Get our latest FREE eBook "Understanding Options"....Just Click Here!