I feel it’s time to give you an advance warning of a market crash on the near horizon.

Bonds:

Long-term bonds first began plunging this year in Japan. Then, the crash spread to the U.S. and abroad.

And just this past week or so, it began to accelerate in a big way. In fact, the price of U.S. Treasuries have sunk so rapidly that 5-year notes suffered their worst one-day percentage drop in recorded history, as their yields surged.

Meanwhile, bonds of emerging market countries have plunged across the board. And even the bond market of cash-rich China saw chaos this week.

And today, bonds of every shape and color — including municipal bonds, mortgage bonds, corporate bonds and U.S. government agency bonds — are taking still another beating.

In a long time I have been telling this, that what we’ve seen so far could be just the opening act in a global drama of historic dimensions.

Reason: Central banks may be forced to wind down what has been the most reckless money-printing-bond-buying scheme of all time.

Moreover, even if central banks continue printing money like crazy, the law of diminishing returns has already begun to strike, says Mike: The more bonds that central banks buy up, the less they get for their money in terms of lowering bond yields.

Commodities:

Gold has just plunged by the most in two years. Silver, palladium, platinum and most commodities have also been smacked down. We’re now very close to a major bottom in gold, probably in the $1,100-$1,200 per-ounce area, setting the stage for the next phase in gold’s bull market to $5,000 and beyond.

Stocks:

The sequence of events we’re witnessing today is uncannily similar to that of 1987: Japanese bonds crashed in April of that year. Then the crash spread to U.S. mortgage bonds, and next to U.S. Treasuries and bonds globally.

Five months later, U.S. bank stocks fell off a cliff. And in the following month, the Dow suffered its worst one-day crash in history.

Will this pattern repeat itself in 2013-2014? If so, how long will the time lag be this time? Will the stock market decline be just a sharp correction followed by a new upswing as in 1987? Or will it mark the beginning of a new long-term bear market?

I think in a very short term we will see what is the scenario to count on. Stay tuned and be careful out there.

 

Have a safe trading

Erik