How to Prepare for the Worst Bear Market You’ve Ever Seen

Justin Spittler

Two of the biggest names in investing agree with what we've been saying for months…

The world is racing toward a full-blown financial crisis.

As Dispatch readers know, Great Britain voted to leave the European Union (EU) on June 23.

The historic event, which the media is calling the “Brexit,” rattled financial markets from Tokyo to New York.

It triggered a worldwide selloff that erased $2.1 trillion from global stocks on Friday, June 24. It was the worst day in history for the global stock market. The panic spilled over into Monday when another $930 billion in value vanished from the global stock market.

Then, stocks rallied.

The S&P 500 rose 5.1% from Tuesday to Friday. The STOXX Europe 600, which tracks 600 large European stocks, jumped 7.6% over the same stretch. And the FTSE 100, Britain’s version of the S&P 500, soared 10%, its best four-day stretch in eight years.

Some in the financial media saw this as proof that investors overreacted to the Brexit.

We, on the other hand, cautioned readers. We explained why Friday’s bloodbath was a taste of what’s to come.

And as we mentioned, we’re not the only ones who think so. Two of the world’s top investors agree that a major global financial crisis is right around the corner.

• George Soros thinks the Brexit pushed the world closer to a major financial crisis…

You may have heard of Soros. He’s probably the world’s most famous investor after Warren Buffett, who runs Berkshire Hathaway.

Soros is a household name because of his incredible track record. From 1969 to 2001, he generated average annual returns of 20%. He nearly beat the S&P 500 2-to-1 during that time.

In January, Soros essentially came out of retirement to profit off a coming financial disaster. As we explained in May, he made a giant bet on gold. According to Bloomberg Business, he bought bullish options contracts on over one million shares in the SPDR Gold Trust (GLD), which tracks the price of gold bullion.

He’s also loaded up on gold stocks, which typically skyrocket during a gold bull market. And he shorted, or bet against, U.S. stocks.

And as we'll show you later in this issue, Casey Report editor E.B. Tucker is using this exact strategy right now to produce big gains for his readers.

• Soros says we could see a repeat of the 2008 financial crisis…

Bloomberg Business reported on Thursday:

Britain’s decision to leave the European Union has “unleashed” a crisis in financial markets similar to the global financial crisis of 2007 and 2008, George Soros told the European Parliament in Brussels.

“This has been unfolding in slow motion, but Brexit will accelerate it. It is likely to reinforce the deflationary trends that were already prevalent,” the billionaire investor said on Thursday.

• Soros also thinks the Brexit could rip Europe apart…

That’s because it could trigger a domino effect of other countries leaving the EU.

As we explained last week, politicians in France, Italy, and the Netherlands are now demanding “the right to choose” to leave the EU.

According to Soros, the EU could be finished if another country exits. Bloomberg Business reported:

“Will disaffected voters in France, Germany, Sweden, Italy, Poland and everywhere else see the EU benefiting their lives?” Soros asked. “If the answer is yes, the EU will emerge stronger. If the answer is no, it will eventually blow apart.”

• Jim Rogers also thinks “you should be very worried”…

Rogers is another investing legend. During the 1970s, he ran the Quantum Fund with Soros. The fund made a staggering 4,200% in 10 years. It nearly beat the S&P 500 10-to-1 over that stretch.

Like Soros, Rogers thinks the EU is doomed. Yahoo! Finance reported last week:

Brexit’s win will also embolden other countries to leave the EU and separatist movements to break up a few states, Rogers predicted. That could make the world to look significantly different in just a half a decade.

“The EU as we know it will not exist,” he said. “The euro as we know it will not exist."

• Regular readers know we feel the same way about the EU…

For years, Casey Research founder Doug Casey has said the EU was destined to fail:

The EU itself is a completely artificial and dysfunctional union. The Swedes are very different from the Sicilians, and the Portuguese very different from the Austrians. These people have little in common besides a history of fighting with each other…

Centripetal force will eventually tear it apart, with the EU as a whole disintegrating long before its individual parts—France, Italy, Germany, the UK, etc.—fall apart.


• Like Soros, Rogers thinks the Brexit will trigger a global financial crisis…

Yahoo! Finance reported:

The UK's decision to leave the European Union will lead to an economic crisis more severe than what the world faced in 2008, according to legendary investor Jim Rogers, chairman of Rogers Holdings.

“This is going to be worse than any bear market you’ve seen in your lifetime.”

Rogers went on to say the world financial system is more fragile today than it was before 2008:

2008 was bad because of debt. The debt all over the world is much, much higher now.

Like Soros, Rogers is shorting U.S. stocks to profit from the coming crash.

• For months, we’ve been saying that the global economy is drowning in debt…

Corporate debt in emerging markets has jumped five-fold over the past decade. Companies in the U.S., Europe, and Japan are also borrowing like there’s no tomorrow.

Last year, U.S. corporations borrowed a record $1.5 trillion in the bond market. According to Standard & Poor’s, U.S. corporations have nearly twice as much debt on their books as they did six years ago.

• E.B. Tucker agrees that we’re on the verge of a serious financial meltdown…

Like Soros and Rogers, E.B.’s “crash-proofed” his portfolio.

He’s encouraged readers of The Casey Report to own physical gold. As regular readers know, gold is the best way to protect your wealth from financial chaos. That’s because it’s real money. It’s preserved wealth for centuries because it has a rare set of qualities: It’s durable, easily divisible, and easy to transport. Its value doesn’t depend on any government or central bank.

As you probably noticed, the price of gold soared following the Brexit. It’s now up 29% on the year and at its highest price since March 2014.

E.B. also recommended two gold stocks this year. One has surged 62% since March. The other is up 64% since April.

Finally, E.B. has shorted two of America’s most vulnerable companies. One of these shorts has returned 22% since February. The other has returned 9% in less than a month.

Chart of the Day

A banking crisis is underway in Italy.

Today’s chart shows the performance of UniCredit S.p.A. (UCG.MI) and Banca Monte dei Paschi di Siena S.p.A. (BMPS.MI). UniCredit is Italy’s biggest bank. Banca Monte is the country’s third biggest.

You can see UniCredit’s stock has plunged 69% over the past year. Banca Monte is down 85%. These are huge declines for such a short period. Still, they could fall much further if we enter a new global financial crisis, as Soros and Rogers predict.

That’s because Italian banks are incredibly fragile. The Wall Street Journal reported on Monday:

In Italy, 17% of banks’ loans are sour. That is nearly 10 times the level in the U.S., where, even at the worst of the 2008-09 financial crisis, it was only 5%. Among publicly traded banks in the eurozone, Italian lenders account for nearly half of total bad loans.

According to The Wall Street Journal, stress at these institutions “could threaten Italy’s stability and, potentially, even that of the EU.”

Soros is also worried about the rest of Europe. Last Thursday, he said Europe’s banking system never fully recovered from the financial crisis. He warned that Europe’s bank will be “severely tested” as a result of the Brexit.

This is another reminder to stay away from bank stocks–especially European ones—at this time.


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