"The biggest financial bubble in British history is about to burst"
Steve Wallis
For 18 years this bubble has been growing deep inside the UK economy...
And one economic ‘think tank’ believes it’s finally ready to pop – sending THREE tidal waves of destruction through the financial markets… and straight towards you.
Will your finances survive intact? Take a look at what we believe and decide for yourself…
A BRUTAL FTSE 100 CORRECTION: Bought stocks thinking the recent rally will continue? Think again. If this historic bubble bursts, we believe the FTSE could take a major fall – and blindside many unsuspecting investors…
HOUSE PRICES SET TO DROP £60,000:The housing market is sat on a powder keg. If it blows, we predict the entire market could go into freefall…erasing the gains of the last 12 years… and potentially wiping over 35% off the average house price.
PRIVATE PENSIONS FALL 40%: We believe your pension could be about to take another major tumble. Find out how this bursting bubble could see every single pension pot in the country ‘downgraded’ by 40%.
Dear Friend,
The last time a bubble like this burst in a major economy, the years that followed were some of the most painful times in history to be an investor:
- House prices dropped on average 30%
- The stock market HALVED in value in 13 months
- And the economy fell into an immediate - and deep - recession.
But this time around, I believe the destruction is set to be even greater… even more far reaching… even more painful and right here in the UK.
See, right now the biggest and most dangerous bubble in British history is sat deep in the heart of the economy.
And it could be about to pop in a BIG way.
As and when it does, it could trigger a series of events that could ruin the wealth and retirement dreams of thousands of British investors… including you.
Just think about this…
Ask yourself right now what you'll do if the FTSE100 takes a plunge…
Could you survive watching 10%... 20%... or 30% of the value of your stock portfolio disappear?
How would you cope if house prices correct back to 2002 levels, wiping £60,000 off the average home.
Would you be one of the thousands of people plunged into negative equity?
Or consider what you’d do if your private pension is slashed by as much as 40%. Would you still be able to enjoy the retirement you deserve… or would you find yourself struggling to make ends meet?
All of these things, I believe, could happen in the coming years.
Though I should make one thing immediately clear upfront – my warning to you today goes much further than another 2008-style banking disaster, a stock market crash, or any single “crisis event” like that.
This goes much deeper than any of that.
So you have every right to ask: Why haven’t you heard about it until now?
Put simply, there’s been a concerted effort to keep this out of the news, for fear of the panic it would cause.
In fact, David Cameron tried to address one aspect of it personally in a speech in 2011…
But the Prime Minister was advised by his aides not to go there.
In fact, one financial expert called it “the scandal of which we no longer speak… the mad aunt in the attic.”
Today, I’m going to tear down the ‘wall of silence’ surrounding this imminent crisis.
I’ll show you precisely what could be set to happen… and what I think you MUST do now to stand any chance of protecting your wealth.
I can’t promise you’ll escape all of the fallout.
But I can almost guarantee you that by understanding what’s happening and moving ahead of the coming crisis, you’ll be in a much stronger position than thousands of other investors. They’ll have no idea what to do. But keep reading and you will. Let me show you…
There’s a ticking timebomb buried in the economy…
and it could be about to blow
Britain is now the most heavily indebted country in the world.
That’s official.
You may never have heard that before, because the true level of debt in Britain is rarely talked about. Sure, everyone knows about our huge national debt; the £1 trillion-plus reckless governments have borrowed.
But you may not know there could be ANOTHER wave of debt which makes the national debt look like an unpaid library fine.
Incredibly, this glut of debt is FIVE TIMES bigger than the national debt.
Yes, you read that right – five times worse than the debt the government is so desperate to ‘cut’.
And this bubble of debt is MUCH more dangerous.
It is connected to every part of the economy… the housing market… the stock market… and even the pensions system.
What I’m talking about here is private debt, or the amount households, banks and businesses owe… which currently stands at a whopping £7 trillion… or 450% of our entire economy.
That makes us – by a long way – the most heavily indebted country in the world.
Not one country in the world has more private debt than us – not Spain, not Italy, Ireland, Japan…
Not even Greece!
The fact is, countries being torn apart by their debt problems are less in debt than Britain.
Debt expert Steve Keen summed our situation up, “I never thought that another developed economy could make the USA’s debt bubble look trivial, but clearly I was wrong.”
That worries me a great deal.
It should worry you too.
Because every single private debt bubble in history has followed a very predictable pattern, one that always causes financial chaos:
First, there’s a major build-up of debt, which artificially inflates almost every asset in the economy...
Second, the bubble bursts and the debt has to be repaid… which often triggers a monumental drop in stocks and house prices.
For instance, when the US private debt bubble burst in 2008, house prices went into free fall, cratering 55% in some places.
Or for example Japan – when its private debt bubble burst in 1989, the stock market went into a ten year slump, losing nearly 70%.
It’s happened time and time again: When a private debt bubble pops, thousands of private investors are wiped out.
And Britain’s private debt bubble looks ready to burst RIGHT NOW.
What’s more, because our private debt is the biggest in the world… the drops for UK shares… houses prices… and pensions could be even worse than anything that happened in Japan or America.
That’s why I’d like to show you some very simple steps you can take today that aim to help shield your wealth from the destruction… and make sure you’re in a better position to profit when it’s all over. This isn’t just about surviving the coming downturn – this is about biding your time and aiming to make money when the dust settles.
In fact, I’ll give you detailed instructions on what I believe you should do, including what to BUY and SELL to help guide you through this downward spiral, in just a second.
But first, let’s quickly step back and look at what got us in to this mess in the first place…
The “debt trap” that condemned Britain to a decade of decimation
For households and businesses, the last two decades have been nothing short of a debt binge.
Whilst Gordon Brown was busy ‘ending’ boom and bust, people up and down the country went on the borrowing spree of a lifetime…
Want a new house? Borrow 100% of the money.
A new car? Buy it on finance.
A conservatory on your house? Take out an ‘interest free’ loan.
A holiday? A new sofa? A new kitchen? Use your credit card.
This culture of ‘spend today, pay tomorrow’ turned millions of people into ‘debt-slaves’ – with bonus hungry bankers encouraging ever more borrowing, loading households up with huge debts…
And it wasn’t just people piling on the debt – corporations and banks joined the binge in a BIG way too…
Between 1988 and 2008, private debt in the UK TRIPLED, creating a massive, artificialboom. In that time:
- The FTSE 100… tripled.
- The price of the average UK house… also tripled.
- And the GDP of Britain – the ‘value’ of our economy – you guessed it, tripled.
This is no coincidence.
In that time, we borrowed more than any other nation on the planet (compared to the size of our economy)… and enjoyed the boom it created.
For two decades, more debt led to higher stock prices, higher house prices, and more growth.
In fact, debt expert Steve Keen described it as, “The biggest debt-financed bubble in human history.”
Yet it’s not the build-up of all this debt that’s going to trigger this crisis… but how we pay it back…
"Payback time"
You might well be thinking, “Surely paying the debt back is a good thing? How can paying your debts be bad for the economy?”
And you’d be right.
On a personal level paying debt down IS a good thing.
But when millions of households, businesses and banks ALL pay debt down at the same time… it’s incredibly destructive (in financial jargon it’s called deleveraging).
You see, to purge the debt from the system, households, banks and businesses have to suck trillions of pounds out of the economy, the stock market and the housing market – often dragging them down massively.
Our leaders know this, and they’re terrified of the consequences. For example, in 2011 David Cameron wrote a speech calling for people to ‘pay down their debts.’
Sounds good in theory, doesn’t it?
Until his economic advisors allegedly told him that a mass deleveraging would trigger an economic collapse… and Cameron struck the line from his speech.
In short, we are trapped.
If we don’t want to default completely, we HAVE to pay the debt back… but the act of doing so will pull trillions of pounds out of the economy.
Either that, or the government will be forced to inflate the debt away, ruining millions of savers.
There is NO WAY to escape the pain.
This isn’t something that can be kicked down the road for future generations to deal with, either. With the stagnant economy, and banks still recapitalising after the financial crisis, the deleveraging has already begun:
- Since 2008 British households have sucked a staggering £235 billion out of the economy to pay down debt.
- According to the British Bankers Association businesses paid down £2 billion worth of debts in February and March of 2013 alone.
- In fact, since the financial crisis a total of £400 BILLION worth of private debt has been paid down.
But as you’ve already seen, that’s just a drop in the ocean compared to the total debts we face.
And if the deleveraging continues at this rate, financial expert and commentator Adrian Ash claims “it would likely gut the UK banking sector, let alone the shopping malls.”
If you need any evidence of how destructive deleveraging can be over time, just consider what happened in Japan…
We’re all Japanese now…
For forty years after the second world war, Japan’s economy was envied around the world. As the original ‘Asian Tiger’ economy, Japanese goods were exported around the world, spurring incredible growth.
By the late 1980s, Japanese stocks and house prices were on the bull run of a lifetime, with Tokyo house prices multiplying by SIX TIMES between 1985 and 1987.
But the Japanese economic ‘miracle’ concealed a dark secret.
It was fuelled by a huge bubble of private debt – worth 187% of the economy – artificially pumping up assets all over the economy.
When the bubble popped and the debt had to be paid back, the Japanese economy descended into chaos…
The stock market slumped 70% over ten painful years. House prices in some places (like prime residential property in Toyko) lost a staggering 80%. In short, the entire economy went into meltdown.
And here’s the really damning part…
That was with a private debt pile of 187% of GDP.
Yet today Britain owes 450% of GDP – TWICE what Japan owed.
Shocking, isn’t it?
Yet the ‘lost-decade’ Japanese investors suffered is exactly what could soon happen in Britain…
Why the FTSE100 could soon take a major tumble
Company profits are the real key to the stock market.
If companies make more money, over time, shares rise. And if businesses are going to keep growing profits, they will need real economic growth to power up sales.
But where will this come from?
After all, most businesses are paying down their debts.
That pulls money OUT of the real engines of profit: investment in new business ideas…research… factories… and staff.
But that’s not all…
Consumer spending accounts for nearly two-thirds of Britain’s economy. As such many corporations’ profits are reliant on the ‘man on the street’ spending money on consumer items.
Problem is, the man on the street is busy paying down his debts too.
This puts a massive strain on company profits – especially those generated in the UK.
In fact, for businesses earning the bulk of their profits from INSIDE the debt ridden UK economy, the outlook is dire…
Just think about how many high street businesses have already gone under: HMV, Comet, Jessops, Blockbuster, Game, Clinton Cards – the list goes on.
And these High Street causalities could be just the start. In our opinion, its companies like this – businesses which generate their profits in the UK – that could be the biggest weight on the FTSE.
In short, many businesses aren’t investing… and consumers are broke.
And on top of THAT, the banking system is still drowning in a colossal amount of debt – around £3 trillion of it.
To purge the debt and pay creditors back, the major banks are going to have to choke off credit from the economy for years to come…
And all that’s bad news for stock prices
The fact is we’re in a very dangerous and unstable situation.
Years of cheap, easy money and an overload of debt have led to too many mistakes...
- Too many people have borrowed too much money they can’t repay...
- Too many people have bought houses they can’t really afford...
- On a national level, we’re drowning in debt…
- And paying all this debt back is going to drain trillions of pounds in productive capital out of the economy.
Just look at that economic “sick list” again and ask yourself...
Where do YOU think stock prices are heading?
Let’s face it, when you strip away all the money printing being pumped into the system right now, I think there’s only one way stocks look set to go…
And that’s DOWN.
How far?
Well, according to debt expert Steve Keen debt “acceleration” (the speed with which we’re borrowing or paying debt down) just fell off a cliff…
The last time this kind of thing happened was in 2008, which helped smash the FTSE100 down below 4,000.
If history repeats itself, the same thing could be about to happen again. According to Keen: “All this implies that when a debt slowdown hits the UK, it could do so with even more impact than it did in the USA.… that day of reckoning may be approaching.”
So how do you protect yourself?
It’s obvious, large parts of the FTSE are vulnerable. While printed money continues to prop it up, it may not collapse – but with deleveraging continuing I wouldn’t be keen to stake my future hard earned money on it...
But there’s a big silver lining to this, if you’re willing to take action.
You see, there’s a very special group of stocks I call “Wealth Fortress” investments that thrive in situations exactly like this.
These kinds of companies don’t rely on consumer spending… and they’ve stayed away from the debt-financed bubbles of the last decade.
Many of them operate in sectors that have been around for hundreds of years – through crisis after crisis.
I think that makes them the perfect antidote to Britain’s debt problem.
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Not only do I think they could help your wealth survive any violent correction in the wider stock market… I believe they could make you some serious money in the years ahead.
The good news is, I’ve compiled a report with specific recommendations on 2 “Wealth Fortress” shares I think you should put in your portfolio.
I’ll show you how to claim a copy in just a second.
But first, it’s absolutely VITAL you find out about another area of the economy that looks set to take a nasty slide…
Why the average house price could soon lose £60,000
The people of Britain have enjoyed a 20 year love affair with the property market…
But it’s a relationship that could be about to sour in a big way.
Look. I’m not here to stick the knife in to the property bulls, or try and convince you to sell your house. Until now, the British obsession with property has been a profitable one. A lot of people have made big money – and well done to them.
Instead, I simply want to show you one fundamental reason why I think property in this country could be due a major fall.
Never mind the fact that when ANY private debt bubble bursts, property collapses. Let’s put history to one side for a second and look at the ‘nuts and bolts’ of the property market right now.
As you’ll know, for the vast majority of people buying a house, getting a mortgage – borrowing the money – is essential.
More than any other asset in the world, property is tied directly to debt.
In fact, according to the findings of one of the world’s most respected experts on private debt and house prices, Steve Keen, UK property prices are totally dependent on people borrowing more money.
To show you what I mean, I’d like you to look at a chart he put together. It’s one of the scariest charts I’ve seen for a long time – although it might look a little complicated at first.
Essentially, it shows the bond between increasing debt (the red line), and house prices (the blue line).
As you can see, when debt increases (the red line)… house prices go up.
Equally, when debt decreases house prices drop.
For instance, a 6% decrease in debt in 2010 – as households paid down their debts – led to a 16% drop in house prices.
Put simply, MORE debt equals HIGHER house prices. And LESS debt triggers a FALL for property.
By now, you’ll know what’s coming next…
The nation’s collective credit card is maxed out. People are paying down debt, not taking on more of it.
I believe that means house prices HAVE to fall.
Just consider the following…
- According to recent FCA figures 260,000 people on interest only mortgages have no idea how they’ll pay the money back. The average shortfall stands at a staggering £71,000.
- According to some experts, over 300,000 homeowners in Britain aren’t paying their mortgage at all. They’re in what’s known as ‘forbearance’ – squatting in their own home with the banks blessing. Nick Hopkinson, director of PPR Estates, called forbearance for borrowers who would never realistically be able to repay their mortgage “a sick joke”.
- Not only that, but interest rates on all this debt can only go one way: UP. In fact it’s already begun – in March of this year, 13,500 British home-owners saw their interest bills DOUBLE overnight, as the Bank of Ireland began to raise interest rates.
All the facts point in one direction:
The value of your house could be set for a major fall.
How far will prices drop?
Well, no one can say for sure. But we CAN use history as a guide.
For example, in Japan house prices in some places – like Tokyo – plummeted more than 80%. Sure, that’s the extreme end of the scale, but it shows what can happen.
A more appropriate example is America. When the US private debt bubble burst in 2008 house prices dropped by between 30% and 60%... dragging prices back to 2003 levels.
If the same kind of drop happens in Britain, the average house price could drop from £160,000 to around £100,000.
And remember, compared to the size of our economy Britain’s private debt bubble is MUCH bigger than those in Japan or America.
So the burning question is: What can YOU do about it?
How you could protect yourself if the bubble bursts
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I'm David Stevenson, Investment Director of The Fleet Street Letter.
Bengt Saelensminde.My name is David Stevenson.
I’m the Investment Director of The Fleet Street Letter – an independent investment advisory service dedicated to deciphering world trends for a select group of readers across the UK.
Since we warned our first readers back in 1938 that Chamberlain’s appeasement of Hitler would never stop the dictator... we’ve served our readers through war and peace... hard times and prosperity.
By warning of the potential consequences, our aim has been to protect our readers from the worst impact of serious world crises... and offered ways they could make money by going against majority opinion.
Take the credit crisis...
You may remember Gordon Brown claimed no-one could have foreseen damage reaped by the subprime fallout...
Well our readers did – we’d been warning them about it for some time.
Years before the papers even used the term “credit crunch” we highlighted the reckless lending between banks. Our then Editor-in-chief, Lord Rees-Mogg predicted colossal bail-outs… and massive losses for shareholders:
“A bail-out of the banking system, which the authorities will surely attempt in the event of a debt collapse, does not mean a bail-out of bank holding companies or shareholders...”
Our forecasts often shock our readers, but they often come true
Take “Black Monday” when thousands of ordinary British people lost their savings in the stock market crash in October 1987...
Fortunately for our readers, we’d warned about high share prices...
“Hold some cash and gold,” we said, “we are almost certainly about to see a period of significant correction.” On 10th October, we told readers even more plainly, “time to be out!”
Nine days later, the FTSE began the biggest decline in recorded stock market historyfalling 26.4% in just two days.
Do we claim to get every issue right? No. But we DID see the cracks in the global financial system. And we took these trends seriously.
In fact, we watch all these trends carefully. We try to anticipate them. We try to understand them. And when we get them right – our readers can do very, very well.
And this is how we approach all our investment research.
So, let me show you how we believe you can prosper – even as many stocks and house prices take a turn for the worst…
Steve Wallis
The following are their "sources":
U.S. house prices dropped an average 30% – jparsons.net/housingbubble
David Cameron’s speech in 2011 – The Guardian, Cameron rewrites conference speech to remove credit card pay-off call, 5 October 2011
Jeff Randall’s quote – The Telegraph, The debt trap time bomb, 31 October 2011
UK private debt is five time bigger than the national debt – Steve Keen’s Debtwatch, 31 December 2011
£7 trillion or 450% aggregate private debt – Steve Keen’s Debtwatch, World Development Indicators database and World Bank, 15 April 2013
Steve Keen first quote – Steve Keen’s Debtwatch, 31 December 2011
Japanese stock market lost nearly 70% – Bridgewater, An In-depth look at deleveragings, February 2012
UK average house price tripled – Data from Nationwide
UK GDP tripled – World Bank
Steve Keen second quote – Yahoo Finance, The stock market is a debt-fueled bubble: Steve Keen
UK households take out £235 billion of the economy – Market Oracle, UK household debt deleveraging: Are we there yet? 31 October 2012
UK businesses paid down £2 billion debt in February and March – The Wall Street Journal, UK firms, households pay down debt again in March, 24 April 2013
A total of £400 billion worth of private dent has been paid down –
Adrian Ash quote – BullionVault, UK Deleveraging: Are we there yet? 31 October 2012
House prices in Tokyo multiplied by six times between 1985 and 1987 and prices collapsed by over 80% over the following decades – Housejapan.com, A history of Tokyo real-estate prices, 10 November 2012
Japanese private debt of 187% of GDP – International Monetary Fund, International Financial Statistics and data files, and World Bank and OECD GDP estimates
Consumer spending accounts two-thirds of the UK’s GDP
£3 trillion debt in banking system – Office for National Statistics, Budget Report 2011 – HM Treasury
260,000 people on interest only mortgages do not have a strategy to repay their mortgage – The FCA publishes findings of review into interest-only mortgages and reaches agreement with lenders to contact interest-only borrowers, 2 May 2013
The average shortfall stands at a staggering £71,000, according to the FCA – The Guardian, Interest-only mortgages: how to tackle the shortfall, 2 May 2013
300,000 homeowners in Britain are not paying their mortgage at all and Nick Hopkinson call forbearance “a sick joke” – mortgageintroducer.com, Lender forbearance becoming “a sick joke”, 29 May 2013
13,000 British homeowners saw their interest bills double overnight – The Guardian, Bank of Ireland doubles and triples tracker mortgage payments, 2 March 2013
The average house price in Britain is £167,912, Nationwide house price index May 2013
The average pension pot could be worth 38% less – Howard Worth, Pension growth rate predictions must fall
Joanne Segars quote – The Telegraph, Pension pots to plunge under new rules, 1 November 2012