Two Far Greater Black Swans Are On The Horizon

While the world continues to focus on the BREXIT, two other, much larger problems are emerging.

The first is that the US is back in recession. Labor Market Conditions, Industrial Production, the Dallas Fed Workweek, Commercial and Industrial Loan Delinquencies, Corporate Debt Levels, and Inventory Accumulation are ALL in recessionary territory.

Because it is an election year, there is an even greater need to maintain the narrative than usual. So don’t expect an official announcement of this recession until sometime in early to mid-2017.

Regardless of when the elites announce it, the fact remains, the US is in recession.  Seven years of ZIRP and $3.5 trillion in QE by the Fed generated the weakest recovery in seven years. And the Fed is now out of any effective ammo (the benefits of a rate cut would be transitory at best).

In short, the academically based theories of the Fed’s Presidents have been proven to be bunk. The Fed cannot stop the business cycles. All it has done is create a bubble in every asset class under the sun. And this time around, stocks will be crashing to new lows below the March 2008 levels of 666 on the S&P 500.

The second big issue is China’s hard landing/ devaluation. As the US moves into recession/ deflation the US Dollar will surge, putting increased pressure on the Yuan. China has devalued it steadily since 2015, but it’s still got 30%-40% to go.

With China already in a hard landing (real GDP growth is 3%-4% at best), China is in a position to stage a one off massive devaluation and blame the currency turmoil on the BREXIT.

In short, the two largest economies in the world are contracting. One is entering a currency Crisis (China). The other’s currency is part of a $9 trillion carry trade (the US Dollar).

This is a ticking time bomb waiting to go off. No less than the Bond King Bill Gross has stated that we're heading for a massive crisis. Investing legends Carl Icahn, George Soros, and Stanley Druckenmiller are all taking out MASSIVE trades to profit from a market collapse.

Say what you will about any of these individuals, ALL of them are masters of the financial markets. And ALL of them are preparing for a CRASH. 

Graham Summers

Phoenix Capital Research