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Three key ‘indices’ point DOWN! What does this mean?

December 8, 2015

The Junk Bond index, the Baltic Dry index, and the MSCI emerging markets index ALL point down and suggest that a recession/depression is nigh! Finance professor, Edward Altman, of New York University says the Junk Bond index has jumped 5 points this year and will likely jump another 10 points in 2016. Altman was the inventor of this index. Mounting defaults in this Junk Bond market signal an end to the six-year bull run in our credit fueled markets, says Altman. Professor Altman says, in this WSJ article of December 7,  that downturns in the Junk Bond market often presage stock-price declines and economic slowdowns. Altman has been studying this market for some 50 years. I agree!

The Baltic Dry Index is now at 551 (a low for the year) and the one year return on this index is minus 42%. This index also presages economic activity and suggests that our global economy is now in recession heading for a depression. Check out this index at: http://www.bloomberg.com/quote/BDIY:IND. The one year range of this index has been 498 to 1222. We are near the low and I have been watching this index for weeks and the trend seems to hold. Economic activity is slowing rapidly and this means that our bubble stock markets will follow rather soon. Our corrupt Central Banks will try to pump these markets up with their trading strategies as long as possible…but their efforts will fail!

The third index which portends an ominous trend downward is the MSCI emerging markets index. Emerging markets have been in decline for a year and there is no recovery on the horizon. Witness the index at: https://www.msci.com/end-of-day-data-search. Each of the 34 areas which are surveyed are ALL down for the year and most are down for today. This index reveals that countries in Latin America, Asia, and Africa which make up these indices are ALL experiencing down economic activity for 2015 and a turn around is unlikely given the problems with debt, deficits, and trade activity. Developed countries are now also starting to trend downward joining the emerging markets and the frontier markets.

We should witness our bubble stock markets following this trend downward within the next few months (or even sooner). Our esteemed Central Bankers will try to reverse these trends with more QE and lending activities but our trading markets will eventually prevail as superior to these centralized Authorities. In reality, trading markets create real change and our Central Authorities must follow. Now is the time to follow what our trading markets are telling us. Get ready for the next downturn and get ready for major changes in all our bubble markets in the next few months. 2016 will reveal that our Central Authorities have ‘ no real answers’. Reflect and watch the markets! I am: https://kingdomecon.wordpress.com.

P.S. The credit default market also has reacted.  The cost of buying default protection on the debt of the 10 entities in the S&P/ISDA CDS U.S. Energy Select 10 Index has shot upward by over 150% since May 1st 2015 from 213 bps to end December 3rd 2015 at 539 bps.  This could be an indication that market participants are expecting more downward pressure for this sector over the near term.

The impact of low energy prices is rippling through the debt markets for bonds issued by energy related companies.  The S&P 500 Bond Index has returned a modestly negative total return of -0.31% year-to-date while the energy bond sector tracked in the S&P 500 Energy Corporate Bond Index is down 5.79% year-to-date.  See more at: http://www.indexologyblog.com/2015/12/04/two-ugly-views-of-the-energy-debt-markets. This is according to Charles Schwab Bond Index: http://www.schwab.com/public/schwab/nn/articles/How-Has-the-Rise-in-Distressed-Debt-Affected-the-High-Yield-Bond-Market.

 

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