Dear Money & Crisis Reader,
For a split second, I was flat on the hood of the station wagon.
This is how I die.
The fender popped my right knee out of its socket.
This is my own fault.
The driver jammed her foot on the brakes, catapulting me into the air.
I should have been more careful.
I spun two, maybe three times… and landed next to the curb on the other side of the road.
Bizarrely, the angle and force of the hit had launched me at an almost 90 degree angle from the impact, like a pool trick shot.
And it all happened in slow motion… like I was swimming in molasses.
I had time to consider my own mortality. And feel like a total chump. And even feel bad for the poor lady who rammed me with her wood-paneled station wagon.
This effect of time slowing down is commonly reported by survivors of life-or-death experiences. But financial expert James Rickards says we can see this exact same effect play out as markets plunge toward a financial crisis.
And he says we might just be in the slow motion moment, right now.
All the best,
Editor, Money & Crisis
P.S. After 15 years of secrecy, Jim is finally able to reveal this sensitive information on camera. It has everything to do with a powerful tool he developed while working with the U.S. government… that can predict surprising political and economic events before they happen. Click here for Jim’s shocking confession.
Don’t Miss the Signs of Another Slow-Motion Meltdown
If you’ve ever lived through a life-threatening emergency like a car crash, you might have noticed that time seems to slow down to a crawl.
This effect is commonly reported by survivors of life or death experiences. But studies show that time doesn’t really slow down for those in jeopardy, nor do their perceptions slow.
What actually happens is that the stress of the experience causes the brain to create extra layers of memory, known as a saturation effect, compared with everyday experiences.
And according to researcher David Eagleman, “The more memory you have of an event, the longer you believe it took.”
So yes, time does seem to slow down in a crisis, but it’s just a cognitive illusion when you look back on that traumatic experience.
That slowing down effect is important to bear in mind as we encounter the 10th anniversary of the Lehman-AIG financial crisis of September 2008.
For investors, those events were the financial equivalent of falling off a tall building or being strapped in during a plane crash. If you lived through them, you’ll recall that hours that seemed like days and days seemed like weeks.
The Domino Effect
Most investors can recall exactly where they were and what they did during the absolute height of the panic — Sept. 15, 2008.
But most investors weren’t aware that these peak panic moments had actually been playing out for over 15 months.
Investors who closely observed the early signs of trouble had ample time to get out of the way of the panic itself. That 15-month build-up was a real slow-motion event, not an illusion.
In June of 2017, HSBC reported weaker-than-expected earnings due to higher mortgage defaults in the subprime sector. And a month later, two Bear Stearns hedge funds collapsed due to an inability to roll over their short-term financing of long-term mortgage securities.
In August, the panic intensified and the Fed cut the discount rate, the first in a long series of rate cuts to zero.
Three major money market funds sponsored by BNP Paribas closed their doors and suspended redemptions.
Bank-sponsored off-balance-sheet special-purpose vehicles could not obtain short-term funding.
Again, markets calmed down in the winter as sovereign wealth funds pledged billions of dollars of new money to prop up U.S. banks.
But the panic returned in the spring with the failure of Bear Stearns in March 2008, followed by the collapse of Fannie Mae and Freddie Mac in June.
The panic turned into a global liquidity crisis and reached an apex with the bankruptcy of Lehman Bros. on Sept. 15, 2008, and the subsequent insolvency of insurance giant AIG.
Wall Street was facing a sequential collapse of other banks, beginning with Morgan Stanley when the Fed and Congress stepped in with trillions of dollars of guarantees, swaps and bailout money.
History Repeats Itself
As you can see, the crisis began over a year before they reached the level of an acute global liquidity crisis.
Investors had ample time to reduce risky positions, increase cash and gold allocations and move to the sidelines until the crisis abated.
At that point there were bargains galore for those with cash. An investor with cash in 2008 could have preserved wealth during the crisis and quadrupled his money since then by buying the Dow Jones index at 6,550 (today it’s around 26,000).
Relatively few investors did this. Instead they suffered from “fear of missing out” as markets rose until the panic began.
They persisted in the mistaken belief that they could “get out in time” if markets reversed, not realizing that reversals happen much faster than rallies. They held onto losing positions hoping they would “come back” (they did after 10 years) and so on.
Simple behavioral biases stand in the way of doing the right thing almost every time.
Are we in another slow-motion meltdown, right now? Are markets telling us that another global liquidity crisis is on the way in 2019?
It’s impossible to know, yet the signs are not encouraging.
Venezuela is an economic and human rights tragedy. Turkey, Argentina and Indonesia, all major emerging-market economies, are in complete meltdown. India, Malaysia, Brazil and Mexico are in the midst of currency collapses. South Africa is in recession. China’s growth is slowing and its debt is unsustainable. The trade war between the U.S. and China is starting to take its toll and will get worse.
Then there are geopolitical hotspots like the South China Sea, North Korea, Syria, Iran, Ukraine, Taiwan and others that could turn into shooting wars in little or no time.
Investors do not have to take an all-or-none approach. They can keep a hand in the stock market while increasing their allocations to cash and gold. Lower yield on those assets will more than pay for itself if a new liquidity crisis emerges and as bargain prices appear.
The point is to act now and not wait until reality catches up to the slow-motion perception.
P.S. This could be my most important message of 2018.
It contains sensitive information that I’ve only just revealed. I can’t reveal everything, for national security reasons. But I say as much as I can legally say. And everything’s true, I promise.
To date, the CIA has given clearance to fewer than 100 people in the entire world involved with this project.
I happen to be one of them!
But what I reveal has implications far beyond national security. As a tax-paying American citizen, you deserve to know the truth.
Click here for all the details.