How Artificial Intelligence Triggered The Stock Market Plunge

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How Artificial Intelligence Triggered The Stock Market Plunge

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Experts are warning that artificial intelligence (AI) may trigger the next stock market or financial crash – especially in light of Monday’s freefall that was triggered in part by computers.

The financial industry’s rush to replace human traders with AI can intensify market shocks and make crashes worse, a panel of financial experts said.

“Taken as a group, universal banks’ vulnerability to systemic shocks may grow if they increasingly depend on similar algorithms or data streams,” a November 1 report from the Financial Stability Board (FSB) warned. The FSB is a group of experts that advises central banks like the Federal Reserve and the Bank of England on risks.

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The FSB is worried about next-generation trading technologies that use advanced software algorithms based on AI and machine learning to make financial decisions, Bloomberg Markets reported.

Will AI Take Over Wall Street?

“These risks may become more important in the future if AI and machine learning are used for ‘mission-critical’ applications of financial institutions,” the FSB warned. “Moreover, advanced optimization techniques and predictable patterns in the behavior of automated trading strategies could be used by insiders or by cyber-criminals to manipulate market prices.”

On Monday the Dow Jones plunged 800 points in about 10 minutes. It ended the day down 1,175 points.

“The explosive speed of the fall … that is done by machines,” Tom Stevenson of Investment Director at Fidelity Personal Investing told the BBC.

A major fear is that AI might start making trades so fast that humans will be unable to keep up with the process. Another is that hackers or terrorists would be able to sabotage the markets.

Artificial intelligence is closer to taking over the financial industry than many people believe. The world’s first hedge fund run by artificial intelligence, Numerai, went online last year.

Since then, at least two other efforts to create AI hedge funds, Sharpe Capital and Algo Marketplace, have been proposed.

“If computing power and data generation keep growing at the current rate, then machine learning could be involved in 99 percent of investment management in 25 years,” Luke Ellis of the British investment firm Man Group Plc told Bloomberg.

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Former U.S. Senator Warns: ‘We’re Going To Crash’; ‘No Country’ Has ‘Ever Survived’ This

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Former U.S. Senator Warns: ‘We’re Going To Crash’; 'No Country' Has 'Ever Survived' This

WASHINGTON — A former U.S. senator is warning that America is headed toward a financial “crash” unless D.C. politicians begin making hard choices about its debt.

Former U.S. Sen. Tom Coburn (R.-Okla.), who served two terms in the Senate and three in the House, made the comments Monday on radio on the “Laura Ingraham Show.”

“There’s no urgency” to fix America’s debt problems, Coburn said, “because very few people have a correct understanding of what’s happening to us”

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“If you take total debt, right now, we’re over 240 percent of our GDP,” he said, referencing the gross domestic product, a phrase that represents the total dollar value of goods and services in a nation. “If you take real government debt – debt that has to be paid back by the millennials – we’re at about 180 percent.

“There’s no country that’s ever survived that.”

Coburn believes Trump would “make the hard choices,” but Congress won’t.

“We’re going to crash unless we start making the hard choices, and Congress refuses to make the hard choices,” he said. “… But you have career politicians on both sides who refuse to make the hard choices because it might affect their political career. Well, what about our kids?”

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5 Good Reasons To Believe A Stock Market Crash Is Looming

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5 Good Reasons To Believe A Stock Market Crash Is Looming

Many investment experts believe that a major decline or even crash in the stock, real estate and bond markets is imminent – despite what the Dow Jones is telling us.

The Dow jumped more than 300 points Tuesday to finish above 21,000 – a record – but if you dig a little deeper you’ll discover that things aren’t all that rosy.

In fact, some of the smartest brains on Wall Street are convinced that a major fall is just around the corner.

Jim Rogers, George Soros’ partner in the Quantum Fund, believes a $68 trillion crash will occur in 2017 or 2018, Investopedia reported. Swiss economist Marc Faber has said the market will fall after the S&P 500 (an index of stocks in America’s 500 largest corporations) hits 2,300; the S&P was at 2,390 early Wednesday.

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“Get prepared,” Rogers said in an interview with MacroVoices. “We’re going to have the worst economic problems we’ve had in your lifetime or my lifetime and when that happens a lot of people are going to disappear.”

Here are five good reasons why you should be afraid of the current bull market:

1. The increase in stock prices is largely artificial. Stock prices are rising because corporations are using their own cash to buy back their own stocks. Companies spent $500 million on stock buybacks between 2014 and 2016, HSBC analysts determined. Since 2010, corporate America has spent $2.1 trillion on stock buybacks. Walmart alone has plans to repurchase $15 billion worth of its stock. When the buybacks end, stock prices will fall back to earth.

2. The increase in stock and real estate prices over the last seven years has been driven largely by the Federal Reserve’s printing of money. This is done by keeping interest rates artificially low, which spurs borrowing. If the fed raises interest rates, the boom will end and real estate and stock prices will collapse. The Fed started raising interest rates on Dec. 14, and many observers think it will keep doing so to prevent inflation.

3. Economic activity and the number of jobs are actually declining. Massive cutbacks are taking place in some industries, including retail. JC Penney last week announced plans to close 130 to 140 stores — 14 percent of its operations — and eliminate 6,000 jobs. Macy’s is closing 100 of its stores and Sears is closing 150 stores, including 108 Kmarts. Walmart eliminated 7,000 back office jobs last year and is laying off 1,000 people at its headquarters. And it’s not just retail; last year; Bank of America closed 112 branches, Citibank closed 116 locations and JPMorgan Chase shuttered 161 branches.

4. There are similarities between today’s market and 1987. That year, the Dow lost 30 percent of its value in a crash. Experts told CBS that the Dow hit 10 record highs in 1987, and then crashed after the Federal Reserve raised interest rates. Another similarity: Some investors’ might have unrealistic expectations about President Trump and Congress. Back in 1987, the market was expecting tax cuts that did not occur for more than a year.

5. Some investors have quietly cashed out of the market or parts of it. Warren Buffett sold all of his Exxon Mobil stock last year and got rid of $900 million worth of Walmart stock this year. Nor is it just Buffett; prices in alternative investments that speculators use as a hedge or protection against market losses are going up. Gold prices soared to $1,250 an ounce on Feb. 24, and bitcoin reached a high of $1,204.77 on the same day. That’s a sure sign that investors are looking seriously at liquid investments.

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25 Things That You Should Do To Get Prepared For The Coming Economic Collapse

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25 Things That You Should Do To Get Prepared For The Coming Economic Collapse Before I start, I just want to say that I do not fear monger, I do not push anything down anyone’s throats, I just want you to survive if something bad happens. This new looming economic crisis has me worried. I …

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Motorcycle Hits dog

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Motorcycle hits dogOn what was supposed to be a relaxing group ride on their motorcycles, Travis Meyer and his friends were met with an unexpected catastrophe when a small dog ran across a rural highway. Meyer’s helmet camera caught the shocking footage from beginning to end, which clearly shows himself quickly swerving to dodge the dog. Meyer then turned his head to the left, only to see one of his friends crashing into the dog. After that, another friend from the group also wrecked his bike, not into the friend who had crashed, but the same dog, making for an incredibly unlikely freak accident.


Travis’s voice came through as he continues to ride forward, slowing his bike down. “No fucking way,” he said to himself, convinced what he’d seen didn’t actually happen. “No fucking way,” he repeated, showing extreme concern for the safety of his friends. As the driver u-turned, he saw that one of the young men that had crashed his bike was standing unscathed, but angry.

The rider who was the first to hit the dog, however, wasn’t as lucky. Unfortunately, he walked away with bruised bones, road rash, and an injured kidney, but he still walked away relatively unhurt when he could have been seriously injured. There is no news, however, on the health of the dog or who the owner of the dog was.

The video has gone viral overnight, accruing over a million views in less than three days, making for an important to lesson to bikers everywhere, one that Travis Meyer himself presses in the footer of his video – be sure to wear your gear! Riding motorcycles can be especially dangerous, making it very important to dress appropriately. If a small sized dog can run out and hit, not one, but two small sized vehicles in what looks like the middle of nowhere, anything can happen.

Watch  Video of Motorcycle Hits Dog Below

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Major Bank Warns: Prepare For A Stock Market Crash

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Major Bank Warns: We’re Headed For A Stock Market Crash

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Investors need to sell all of their stocks because a cataclysmic crash, like that of 2008, is imminent – so say economists at one of the world’s largest banks, the Royal Bank of Scotland (RBS).

“Sell everything except high quality bonds,” The European Rates Weekly, prepared by RBS’s Rates Research Team states. “We have been warning in past weeklies that this all looks similar to 2008. We dust off our old mantra: this is about ‘return of capital, not return on capital.’”

A combination of low oil prices, the collapse of commodities prices, growing income inequality and the economic slowdown in China will cause a repeat of the financial meltdown of 2007-2008, RBS’s head of European economics, Andrew Roberts, predicts.

Roberts says such a meltdown is imminent in the near future.

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Following is a more detailed look at why RBS says a crash is coming:

The plummeting price of oil. RBS’s experts believe oil will drop to $16 a barrel (it was trading at around $30 a barrel on January 14). Falling oil prices are driving down the value of oil stocks and hurting oil companies. Royal Dutch Shell saw its income drop by $11.87 billion over the summer of 2015. Oil companies have already laid off around 90,000 people in the United States. Some experts, including The Wall Street Journal’s Nicole Friedman, think oil prices could drop even down to $10 a barrel.

Commodities prices are devastating entire industries, such as mining and agriculture. Bloomberg estimates that mining stocks lost $1.4 trillion in value between 2011 and 2015. The prices for America’s two main export crops, soybean and corn, have fallen by half since 2012, Bloomberg said.

The Chinese economy is falling. Commodities prices are dropping in part because the economy is slowing in China, the world’s largest market for commodities including minerals and foodstuffs. The LA Times reported that scores of factories in Shenzhen, one of China’s largest industrial centers, have closed in recent months. Even Apple is considering slashing iPhone production because of falling demand. Some Chinese factories have shut down without even paying their workers. Chinese stocks lost 10 percent of their value in 2016.

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The world has too much debt. China’s debt quadrupled between 2007 and 2014, growing from $7 trillion to $28 trillion. That means China’s debt now exceeds the economic output of the United States.

Other economies elsewhere in the world are dragging. Venezuela is already suffering hyperinflation — it was 180 percent in October – and Russia had a rate of inflation of 12.9 percent in 2015 and the ruble lost half its value during the year. Brazil in early January was experiencing a rate of inflation of 10.67 percent, according to Bloomberg.

It looks as if 2016 is not going to be a very good year for investors.

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The Dow Is Plunging (And Here’s 5 Other Reasons We’re Teetering On Another 2008)

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The Dow Is Plunging (And 5 Other Reasons The Economy Is Teetering On Another 2008)

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The economy could be on much shakier ground than you think, and the stock market may be only the latest indication.

With the Dow Jones falling 392 points Thursday and 252 points Wednesday, there are a number of indications that 2016 could see an economic meltdown much like the one in 2008. In fact, this year is off to the worst four-day start — down 910 points — on the stock market ever.

Here are five very good reasons why the present state of the economy should frighten you:

1. The Chinese stock market is collapsing — and it could bring down our stock market with it. Trading on the Shanghai stock exchange was halted on January 7 after the Shanghai Composite Index (China’s Dow Jones) lost 7 percent of its value in just 29 minutes of trading, The Wall Street Journal reported. Officials stop trading to prevent panic and a stock market crash.

“This is insane,” Chen Gang, the chief investment officer at an asset management company in Shanghai, told Bloomberg. “We were forced to liquidate all our holdings this morning.”

The plunge in Shanghai caused US markets to fall as well. Other markets, including Japan’s Nikkei, also fell.

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Manufacturing in China is down, and the country’s government has been trying to stimulate economic growth with massive amounts of stimulus money.

2. One of the world’s most successful investors, billionaire George Soros, thinks such a crisis has already begun. Soros told conference goers in Sri Lanka that he believes China’s currency, the Yuan, is about to collapse and bring the markets down with it.

The Dow Is Plunging (And 5 Other Reasons The Economy Is Teetering On Another 2008)

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“China has a major adjustment problem,” Soros said. “I would say it amounts to a crisis. When I look at the financial markets, there is a serious challenge which reminds me of the crisis we had in 2008.”

Soros previously has successfully predicted such collapses. In 1992, he correctly predicted that Britain was about to devalue the pound, and he made $1 billion betting against it.

3. The price of oil is collapsing and causing serious damage to the economy around the world. The cost of a barrel has fallen by half since June 2014. On January 7, oil prices had dropped to around $32 a barrel, the lowest in 12 years. Around 200,000 oil industry workers in the US have already lost their jobs, according to The New York Times.

Cheap oil is wreaking havoc elsewhere, including in Alaska, where the state government has seen its revenues fall by 81 percent since 2012, the Empresa-Journal reported. The state’s governor is so desperate for money he’s even proposed bringing back the income tax, which Alaska abolished 35 years ago.

Saudi Arabia has had to cut government spending and raise the price of utilities and gasoline to cover an $87 billion budget deficit.

4. Several top economists interviewed by Politico think that the economy will tank in 2016. Tyler Cowen, a professor of economics at George Mason University, believes we are facing “what could be the beginnings of a major global recession.”

Others agreed.

“The next president will inherit an economy teetering on the edge of recession,” former Labor Secretary Robert Reich told Politico.  Reich thinks the economy is in trouble because people simply don’t have enough money to pay for all the goods and services being produced.

“American consumers account for almost 70 percent of economic activity, but they won’t have enough purchasing power in 2016 to keep the economy going on more than two cylinders,” Reich said. He noted that the average wage in the United States is now four percent lower than it was in 2000.

5. The retail apocalypse is heating up. Major retailers are closing hundreds of stores and laying off thousands of workers. After lousy sales over Christmas, Macy’s announced plans to eliminate 4,800 jobs and shut down 36 to 40 stores.

It is not just Macy’s. JC Penney is planning to close 39 stores and lay off 2,250 workers, CBS Money Watch reported. Sears has closed around 235 stores in the past year, and some observers predict that chain could go out of business completely in 2016.

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Preparing for Recession

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Financial crash concept on whiteWhat would do if you had a strong impression that another recession was coming soon? What kinds of actions and changes would you take to weather the coming storm? The steps that I list below aren’t a complete list by any means, and I don’t expect that anyone would be able to accomplish them all, but if any of them sparks something in you to do something that you’re not already doing to become better prepared for a sudden and significant economic downturn, I will have fulfilled the purpose of this blog.

The signs of a coming new recession are all around us:

  • There has never been a sufficient recovery from the Great Recession that started in the autumn of 2008 with the collapse of the housing market. A huge number of people have been unemployed or severely under-employed since that time. They haven’t experienced any recovery or reprieve, just a severe downslide to the brink of poverty and a radical adjustment to what for them has become “the new normal.”
  • Having tens of millions of new people become dependent on the government for food stamps, medical care, and other necessities of life has been a boat anchor for the economy. In a real recovery they would find decent jobs, they would produce something, make their own money, spend their own money, and save some of their own money. All of these things would make life better for everyone. Instead, it is a growing problem that will continue to apply downward pressure on the economy.
  • Big companies have begun laying people off again. Sandy and I run a business-to-business company. Our client businesses have stopped spending money, are laying off employees, and are offering early retirement deals to help save money in the future. All of these are signs of economic contraction.
  • The stock market has been climbing to record highs, but it’s all smoke and mirrors. The rise isn’t caused by underlying economic strength, but because of years of “economic easing,” the federal policy of printing billions of dollars of new money out of thin air. It creates the illusion of wealth without having any real foundation for it.

I could go on, but if you’re reading this article, you probably don’t need to be convinced. You just want to know what to do to help you prepare for it.

  • Stop the bleeding! Are you spending money as if all is well and everything will go on as it always has? Stop it. Take an honest look at every aspect of your life and look for places where you are spending money that you may soon wish you still had. Sandy and I love to travel, but because of the recessionary clouds on the horizon, we’re not going anywhere for a while. Our DirecTV bill is $100 per month. I’m looking into pulling the plug on it and going with all Internet-based streaming TV. Eating out can be another huge drain on a household budget. You can eat like royalty at home for a week for the price of one or two meals out at a marginal restaurant. Make sacrifices. Stop the bleeding.
  • Reduce your debt. Debt is the obligation for payment of money that you spent sometime in the past. Debt is just like the government’s economic easing policy — you generate cash out of thin air to buy things you can’t afford today and hope that you can find a way to pay for them tomorrow. When a recession hits and you aren’t making as much money as you used to (or no money at all), you don’t want to have to pay for purchases you made a long time ago. You’ll need everything that’s coming in to go toward current expenses. Reduce or eliminate your debt now so that you won’t be trying to pay for past expenses at a time of increased current need.
  • Spend wisely. Is there anything that you could buy now that would be a good investment against hard times to come? Is there anything that you could buy now that would either help reduce your expenses or increase your income in the future? I’m thinking about things like:
  • Sell some of your stuff. Do it now. We all have stuff that we don’t really use or need, but for some bizarre reason we hang on to. Sell it now, while you can find a buyer who has the money to pay you what’s it’s worth. The other option is waiting until a major recession hits, needing to sell it to generate cash, and not being able to find anyone who can afford to buy it.
  • Save wisely. It’s tempting to spend all of your money now to buy things that you expect to need in the future. Prices continue to inch upward on almost everything, while incomes remain flat or actually decrease. Some staples that we stocked up on a couple of years ago are selling for 25% more now. That’s a pretty good investment return. Some people believe that our money won’t be worth anything in the not-to-distant future, so they say you need to spend it now to get anything at all from it. I don’t know enough about that stuff to have an opinion on it, but I do know that having a cash reserve has always been a good idea in the past and looks like it’s still a wise choice for the foreseeable future. Saving wisely can be a tricky one. Save as much as you can afford to now so that you are able to meet future expenses, emergencies, or can pounce on a great deal if the opportunity presents itself, but don’t save so much that you can’t spend wisely and reduce your debt now.
  • Increase your income. Earning more money will help you accomplish all of the bullet points in this article. There’s a lot of talk these days about creating multiple revenue streams, which is just another way to say adding an additional source of income to your primary job. You’ve heard the old saying that “it takes money to make money.” Yes, but to meet the goals of the challenge of preparing for the sudden onset of a significant recession, you want to find something that you can do to earn extra money that won’t cost you an arm and a leg to set up. What can you do to earn a buck on the side without a lot of start-up costs?
    • Build things
    • Repair things
    • Cook / bake / cater food
    • Sewing and alterations
    • Create and sell crafts or works of art
    • Sell new or used products on Amazon (yes, you can do that), eBay, or Etsy
    • Pet-sitting or house-sitting
    • Do yardwork
  • Trust God. I really wanted to lead with this point, but I also didn’t want anyone to tune out before I got to it. You won’t find “God helps those who help themselves” quoted in the Bible anywhere, but I believe that God expects us to do our part, and He wants us to trust Him to do what we can’t. Some people refuse to prep because of their faith in God. I’m just the opposite — I prep because of my faith in God. I take action because I trust in Him.

Even since I sat down to write this I’ve received word of one of our client companies cutting their budget to the core and requiring all employees to take a week off without pay this summer. The storm clouds of recession (or worse) are everywhere. It’s time to get busy and it’s time to trust God.

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