Could we Be Heading for Another 2008 Type Collapse

The media is jumping for joy over last week’s US jobs numbers. But beneath the veneer of headline numbers lies a truly horrible economic reality.

Let’s have a look at the two key economies for the world: China and the US.

For starters, China’s recent economic data, as massaged as it is to the upside, is downright awful. China’s PMI numbers were the worst in two years. Staffing levels in the Chinese service sector decreased for the first time since January 2009 (remember that year).

China’s LEI also shows no sign of recovery. If anything, it indicates China is heading towards an economic slowdown on par with that of 2008. And if you account for the rampant debt fueling China’s economy you could easily argue that China is posting 0% GDP growth today.

In the US, last week’s jobs report didn’t look too bad until you dug deeper into the report and found that the average workweek declined by 0.2 hours from March- April.

So what you may ask… 0.2 hours? Just under a 15 minutes per week?

The issue here is that if you apply this drop to the total number of people employed in the private sector, this is the equivalent of over 21 million work hours being lost in one month.

That is the single biggest drop since April of 2009 when the US economy was absolutely imploding. It’s the numerical equivalent of firing 718,000+ people.

This is how companies deal with economic contractions. They don’t start laying people off en masse… they start cutting work hours bit by bit. The mass layoffs don’t come until the official numbers announce that we’re in a full-blown recession.

The first stage of this is already happening. 99% of investors fail to see it, but the clear signs are there.

Investors take note, the market may be hitting new highs thanks to traders’ games, but the real economy is contracting sharply. This is precisely what happened during the market peaks before the Tech Crash and the 2008 Collapse.

We are getting precisely the same warnings this time around.

Four Major Warning Signs to Investors

The market is beyond overstretched at this point on a short-term, intermediate term, and long-term basis. The sheer number of warning signals is staggering.

The blow off top out of the rising wedge pattern we noted before is rolling over indicating this is likely a false breakout:

 

The Russell 2000 is lagging well behind the S&P 500. Small caps, in general, should lead a rally if it’s going to prove legit:

 

China, which has lead the S&P 500 in general since the 2009 bottom peaked months ago:

 

Copper, which serves as an excellent proxy for the global economy, is collapsing, showing that this rally in stocks is occurring while the global economy gets weaker and weaker.

 

If you are not already preparing for a potential market collapse, now is the time to be doing so.

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Graham Summers