Consensual Hallucination Fades, Global Stocks Crushed
Stock markets around the world are getting crushed. Some markets are down 20%, 30%, 40%, or more, even those where central banks are pursuing a scorched-earth wealth-effect strategy of mega-QE and negative-interest-rate policies. Something big has changed.
Early Thursday morning, I posted an article [When “Story Stocks” Crash Like this, the Market is Kaput] that mentioned as an aside the inevitable — that there would certainly be “a rally someday that lasts longer than a few hours.” Because in US stocks in 2016, there hadn’t been such a rally.
That “rally” came on Thursday. And it did last “longer than a few hours.” It lasted the entire day! But on Friday, all heck re-broke lose, creating for US stocks what MarketWatch poetically titled, the “worst 10-day start to a year in history.”
A market that can’t put together a dizzying rally after what it has been through for the past three weeks is in serious trouble. And this sort of display of risk aversion into the weekend shows that investors have lost confidence in the markets.
The rout on Friday ignited in Asia, with the Shanghai Composite plunging 3.5% to 2,901, the lowest since December 2014, right through the Maginot Line that the Chinese government last summer vowed to defend. But the “national team” apparently sat at the sidelines. The index plunged 9% for the week. It’s off 44% from the high in June 2015. Since then, over $5 trillion in fake wealth has re-dissolved into polluted air.
The 25% rally in between is gone. It punished all those who’d acted on Goldman Sachs’ prediction last July that Chinese stocks would rally. The Chinese government and government-owned enterprises are big clients of Goldman, and a little favor goes a long way.
For the daily details, hover over the interactive chart:
…click on the above link to read the rest of the article…
