Storm Warnings Are Up

I've been reading Bill Bonner and the Daily Reckoning now for at least 6 years, I suppose.  He is a contrarian economist, and it is largely due to his writing and others like it that I came to the conclusion several years before the '08 crash that there would be a crash.  Needless to say, I respect his thinking a lot.

Here's what he's saying now:

A colleague warns us: "It's time to save every possible penny. Next year is going to be worse than 2008 - a lot worse.

"Here's why:

1. The euro is going to fail. Ireland, Spain, and Italy's sovereign debt cannot be financed.

Shares of even the biggest and strongest of Europe's banks (Deutsche Bank) have begun to "roll-over."

2. More QE in Europe and America will make it much more difficult for businesses to invest across borders. That will result in massive trade problems and could easily cause a global famine. Most people don't realize how dependent the world has become on free trade for basics, like food. Here's what agriculture prices have done since July when QE II began. Vastly higher ag prices are not bullish for financial markets or world order.

3. Housing in the US is going to collapse, again. The various games that have been played to prop up the housing market in the US have failed. Tax credits, etc. haven't worked...and they never had a chance. I have good contacts in this industry and it is completely bleak. With foreclosed properties making up 25%-50% of the inventories, housing prices will continue to fall 10%-15% a year - or more. There will be no new net demand for homes for a long time. Several major homebuilders will go bankrupt, including the largest, Pulte.

4. Lots of major US corporations - see GE - have unsustainable debt loads. These companies will end up bankrupt and will fire at least 50% of their employees over the next three years.

5. Muni/State finance: You guys have seen all of the numbers. Probably half of the states and munis in the US are being run in a way that's completely unsustainable. As these cuts are made it will have a big impact on the economy. See what happened to Cisco last quarter, all because of cutbacks at the local government level.

"The problems of 2008 haven't gone away. We've just borrowed a lot more money to make people think everything would be okay. As the veneer wears off, there's going to be a real panic; and this time it will be worse, because there's zero trust and confidence left in the government or the bankers...