Executive Summary

• What the key crash indicators are telling us
• The timeline to the next recession
• How far will the fall be?
• Time for action

If you have not yet read Part 1: Is The Long-Anticipated Crash Now Upon Us?, available free to all readers, please click here to read it first.

It’s our view that “the big one” is not here yet. There are plenty of signs that the prior period of excesses are not even close to be wrung out of the system, and there’s plenty of official support for these “markets” still to be seen.

We’ll show signs of official rescues and such below, and what we’re looking at to suggest that a big crash is not imminent. What is a “big crash?” that’s when the market hits a big air pocket and has to be halted for a period of time.

These “circuit breakers” are currently set of intraday drops of 7%, 13% and finally 20% of the closing price for the previous day. A mini-crash is the 7% breaker being tripped followed by a resumption of trading after the requisite waiting period with the most likely direction being “up” (because that’s just how the rescue teams operate).

A more serious crash would trigger the second breaker.

The most serious crash would trigger the third breaker with the break lasting over the next set of days or weeks while the damage is sorted out.

This remains a distinct possibility because of two things:

1. The excesses accumulated during the past ten years are profound
2. Computer algorithms now dominate the trading landscape

The “broken markets” idea is simply that computers may be very efficient at making trades but they are terrible at making markets. They lack the “market maker” ability and responsibility that used to be invested in specific individuals that would make markets for specific equities, bonds and/or commodities.

Those individuals would have the obligation to step in and create a bid when none existed and that would soften the declines. Today we have to rely on an untested network of computers, operating enormously complex strategies to respond appropriately when officials step in and try to reverse the direction of things.