Charles Nenner Warns "The Whole Thing Will Come Tumbling Down"

Renowned geopolitical and financial cycle expert Charles Nenner says, "The mainstream media talking heads are telling you to buy, but never tell you to sell." Nenner says the time to sell stocks is getting close and explains,

"It's just a hopeless situation. I feel sorry for people who invest their money. We have had a nice ride, but soon the whole thing will come tumbling down.

They listen to all these things and have no clue on how to invest... I think soon... this will become the longest expansion in financial history...

So, this could be the longest expansion ever, what are you playing with? You are gambling with nonsense. So, it's over."

Nenner goes on to say, "Then, you have the inflation story. The inflation story is brought about by people who don't do their historical homework. "

"They remember for the last 30 years, there was always inflation. So, they continue to talk about inflation. I proved that in most of the financial history that deflation is the norm...

They have talked about inflation for two years, and there is still no inflation. . . . Copper is going down. Crude is going down, and we have a deflation problem, not an inflation problem."

Nenner is predicting interest rates "are going down" and not up in the foreseeable future.

Nenner is also calling for the stock market to go on a "downward slide through the year 2020." Nenner says, "I can't explain it, but the cycle topped, and the cycle is down until 2021."

How bad will it be? Nenner says, "Very bad."

"I called for Dow Jones 5,000, and I still call for Dow Jones 5,000...

It's going to be a blood bath, but as I said the last time, in the 1990's when the Dow was 5,000, the world still looked okay."

Is there a big debt reset coming? Nenner says,

"The last time we were in this situation was when Roosevelt was President. It was very interesting because they paid off only 25% on the dollar because the inflation that came.

Now, the problem is if you don't have inflation, you still owe the whole amount of money. This is why they urgently need this inflation. So, the value of the money goes down, and you have to pay off less. There is no inflation. So, it is a big problem, but they can keep this going forever. I don't think it's a problem because countries can keep printing money as long as they want."

The other big cycle Nenner has been seeing is the so-called "war cycle." Nenner says,

"The next four or five years in this war cycle is very dangerous."

On gold and silver, Nenner is bullish, but "not until after this summer."

After the Interview: 

Charles Nenner points out if you look back every year that ended in the number 7, it was a market top year. He said, "2017 will follow the same pattern as 2007, 1997, 1987, 1977, 1967, 1957, 1947 and 1937."  Nenner contends 1927 was supposed to be a market top year, but things got distorted and it was pushed off until 1929.

Nenner predicts the next market crash will not be quite as bad as 1929, but it will be bad.

Moving Average Bounces Getting Weaker And Weaker: Mish Warns "Major Carnage Coming"

Bounces off the 200 Day exponential moving average lines keep getting weaker for all the major indexes.

S&P Daily

Russell 2000 Daily

Nasdaq 100 Daily

When those moving average bounces fail, and they will, what then?

For the answer, let's look at weekly charts.

Dow Weekly

S&P 500 Weekly

Russell 2000 Weekly

Nasdaq 100 Weekly

Those 50-week exponential moving averages will break. When that happens I expect a quick plunge to the 200-week EMA.

Will that be the end? If I am right, that's not even close.

I expect all the gains back to 2007 to be wiped out. To visualize, we need to look at monthly EMAs.

Dow Monthly

S&P 500 Monthly

Russell 2000 Monthly

Nasdaq 100 Monthly

With the exception of the Nasdaq 100, a decline to what is now the 200-month EMA would take us to where I believe we are headed.

Superbear?

Does this make me a superbear?

Hardly.

John Hussman, who does excellent technical and fundamental work is far more bearish: "I Expect the S&P 500 to Lose 2/3 of Its Value"said Hussman in January.

My charts suggest about 50% except for the Nasdaq.

Pension Fund Disaster

The sad part of this story is that despite the biggest bull market in history, pension funds are extremely underfunded.

Whether the decline is 33%, 50%, or 66%, pension funds will get crushed.

Heck, given 7% per-year assumptions, even flat returns for seven years will destroy many if not most of them.

By the way, asset bubble bursting episodes are anything but inflationary. If you think massive inflation is right around the bend, please think again: Velocity of Money Picks Up: Inflation Coming? Stagflation? How About Deflation?

Greg "The Big Short" Lippmann Says Corporates Will Cause The Next Crisis

Former Deutsche Bank trader Greg Lippmann is best known for having worn t-shirts with the logo "I am short your house" just before the financial crisis hit, and the US housing market imploded (making Lippmann very rich in the process). Logically, he is also very well-known for designing the trade against subprime mortgages that became known as the Big Short.

Well, Greg "The Big Short" Lippmann is back with a new warning, telling Bloomberg that the next crisis will emerge from corporate debt. Speaking at the Milken Conference, the former MBS trader who now runs his own, $3 billion hedge fund LibreMax Capital, told Bloomberg's Erik Shatzker that corporate debt and equities will face the biggest pain when the next downturn comes; meanwhile unlike the last crisis, investments linked to consumer debt should be relatively safe as companies have been the ones gorging the most on the ultra cheap interest rates during the past decade (alas, this is yet another analysis that avoids the impact of student and auto loans, which have taken consumer debt to new all time highs).

"If the first quarter's volatility is a harbinger of something bigger, I think that you're going to see a lot more trouble in the corporate market and the equity market than the structured products market," Lippmann said during a Bloomberg interview in Beverly Hills. "The consumer is in much better shape than corporates. Consumers are less levered than they were pre-crisis. Corporates are more levered than they were pre-crisis, and I think structured products are not going to be the epicenter."

Lippmann also predicted that while the next recession may not be imminent, "it is on the horizon" and will be less severe but longer than the global financial crisis of 2008 and 2009. It's likely to be more akin to 2000 through 2002, he said.

Of course, Lippmann has a reason to be bullish on structured products and bearish on corporates: he said that his fund has been heavily investing in other structured products such as commercial mortgage securities, collateralized loan obligations and student-loan investments. The fund has also shifted into the debt of some companies with exposure to real estate, such as homebuilders. One may almost call Lippmann "the big long."

"I Expect A Financial Accident To Occur": Gavekal Reveals A New, "Flashing Red" Warning

Much ink has been spilled by analysts sounding the alarm over the rapid flattening in the US Treasury yield curve observed over the past year, as many have rushed to remind markets of the conventional wisdom that an inverted curve is one of the most reliable indicator of an imminent recession.

At the same time, others have spoken out against this orthodoxy, pointing out that there can be as much as a 1-2 year lag between the moment of first inversion and when the economic contraction officially arrives.

Yet others, note that due to the Fed's direct influence on the long end (where the market tends to frontrun central bank monetization of Treasuries), the yield curve - which represents the market rate of interest on the short end, and the natural rate of interest, or "r star" on the long-end - has lost all signalling value.

Now, in a hybrid take on the yield curve concept, GaveKal's Charles Gave says that the yield curve is certainly informative... just not that of the public sector, but the private sector instead.

According to Gave, recession timers should ignore government debt and focus instead on the corporate credit market. Here, the U.S. natural rate of interest can be represented by yields on longer-dated industrial bond rated Baa by Moody's, while the market rate is captured by the prime lending rate charged by U.S. banks.

The problem is that if Gave's interpretation is right, the US economy is about to fall off a cliff.

"The private sector yield curve reading stands at zero, or right on the threshold where trouble can be expected to begin" Gave wrote today in a note to clients, quoted by Bloomberg. "Should this spread move into negative territory, I would expect a financial accident to occur outside of the U.S., a U.S. recession, or possibly both."

Translation: even the smallest deviation from the current unstable equilibrium could unlock a recession.

Looking at the chart above, Gave warns that either a U.S. recession has taken place within a year of the private sector yield curve inverting, or a "financial accident" has occurred in other economies with currencies linked to the dollar, which would be all of them.

Why does Gave pick this particular spread? Because as he explains, artificially depressed prime rates below the natural rate of corporate credit have allowed banks to generate "artificial" money, kept "zombie" companies alive, but most of all permitted most viable corporations to engage in "financial engineering" such as issuing debt to repurchase stocks, all of which are predicated on cheap borrowing costs continuing indefinitely; the risk of course, is that the credit-funded party ends once the curve inverts, Gave said.

Based on this measure, "we are entering dangerous territory," he concluded. If the private sector curve inverts, then zombie companies - the same ones we highlighted back in March as surviving only thanks to central bank generosity - "which will fail and capital spending will be cut, as firms move to service debt and repay principal. Workers will get laid off and the economy will move into recession."

In summary: to Gave the curve is not only informative, but is indeed flashing a "red warning", one which suggest a "financial accident is about to occur", only it's not the government curve, but the corporate curve where this particular Cassandra can be found.