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First the Miners, now the Banks, then Property? Going to be a Hard Landing for… Australia

August 26, 2015

First the Miners, now the Banks, then Property? Going to be a Hard Landing for… Australia

A housing market set for the mother of all corrections.

“I think it’s important that people don’t hyperventilate about these type of things.” With these words, Australian Prime Minister Tony Abbott tried to soothe the world’s rattled nerves today about the ongoing crash in China. Australia is heavily exposed to China, the biggest consumer of its commodity exports.

“It is not unusual to see stock market corrections,” he said about the relentlessly brutal three-month crash that has taken the Shanghai Composite down 43% so far.

“It is not unusual to see bubbles burst in particular markets and for there to be some flow-on effect in other stock markets, but the fundamentals are sound,” he said, speaking of the Chinese fundamentals, and by extension, of the Australian fundamentals that depend so much on Chinese fundamentals.

And he said this though factory activity in China shrank at the fastest rate since the Financial Crisis, other indicators are heading south, cars sales are suddenly plunging, and the People’s Bank of China started devaluating the yuan to mitigate the problem, thus further hurting Australian exports to China.

So here’s Lindsay David, founder of LF Economics in Australia, weighing in on the “sound” fundamentals in Australia.

 

…click on the above link to read the rest of the article…

The REAL Reason China’s Economy Is Crashing

August 25, 2015

The REAL Reason China’s Economy Is Crashing

China 2015 = U.S. 2008

We noted in 2009, in a piece titled “China 2009 = America 2001 = Rome 11 BC“:

One of the top experts on China’s economy – [economics professor] Michael Pettis – has a very long but interesting essay arguing that China is blowing a giant credit bubble to avoid the global downturn.

Pettis documents reports and statistics from modern China, of course. But he ends with a must-read comparison to ancient Rome:

Let me post here a portion of Chapter 15 from Will Durant’s History of Roman Civilization and of Christianity from their beginnings to AD 325

The famous “panic” of A.D. 33 illustrates the development and complex interdependence of banks and commerce in the Empire. Augustus had coined and spent money lavishly, on the theory that its increased circulation, low interest rates, and rising prices would stimulate business. They did; but as the process could not go on forever, a reaction set in as early as 10 B.C., when this flush minting ceased. Tiberius rebounded to the opposite theory that the most economical economy is the best. He severely limited the governmental expenditures, sharply restricted new issues of currency, and hoarded 2,700,000,000 sesterces in the Treasury.

The resulting dearth of circulating medium was made worse by the drain of money eastward in exchange for luxuries. Prices fell, interest rates rose, creditors foreclosed on debtors, debtors sued usurers, and money-lending almost ceased. The Senate tried to check the export of capital by requiring a high percentage of every senator’s fortune to be invested in Italian land; senators thereupon called in loans and foreclosed mortgages to raise cash, and the crisis rose. When the senator Publius Spinther notified the bank of Balbus and Ollius that he must withdraw 30,000,000 sesterces to comply with the new law, the firm announced its bankruptcy.

 

…click on the above link to read the rest of the article…

BLACK MONDAY: The First Time EVER The Dow Has Dropped By More Than 500 Points On Two Consecutive Days

August 25, 2015

BLACK MONDAY: The First Time EVER The Dow Has Dropped By More Than 500 Points On Two Consecutive Days

New York City Empire State Building - Public DomainOn Monday, the Dow Jones Industrial Average plummeted 588 points. It was the 8th worst single day stock market crash in U.S. history, and it was the first time that the Dow has ever fallen by more than 500 points on two consecutive days. But the amazing thing is that the Dow actually performed better than almost every other major global stock market on Monday.  In the U.S., the S&P 500 and the Nasdaq both did worse than the Dow. In Europe, almost every major index performed significantly worse than the Dow.  Over in Asia, Japanese stocks were down 895 points, and Chinese stocks experienced the biggest decline of all (a whopping 8.46 percent). On June 25th, I was not kidding around when I issued a “red alert” for the last six months of 2015. I had never issued a formal alert for any other period of time, and I specifically stated that “a major financial collapse is imminent“. But you know what? As the weeks and months roll along, things will eventually be even worse than what any of the experts (including myself) have been projecting. The global financial system is now unraveling, and you better pack a lunch because this is going to be one very long horror show.

Our world has not seen a day quite like Monday in a very, very long time. Let’s start our discussion where the carnage began…

Asian Markets

For weeks, the Chinese government has been taking unprecedented steps to try to stop Chinese stocks from crashing, but nothing has worked. As most Americans slept on Sunday night, the markets in China absolutely imploded…

As Europe and North America slept on Sunday night, Chinese markets went through the floor — the Shanghai Composite index of stocks fell by 8.49%, the biggest single-day collapse since 2007.

…click on the above link to read the rest of the article…

It’s easy to deny a bubble but impossible to deny its implosion.

August 25, 2015

It’s easy to deny a bubble but impossible to deny its implosion.

We’re having the kind of day when the New York Stock Exchange felt compelled toannounce very encouragingly before markets opened that it would halt trading for 15 minutes if the S&P 500 drops 7% to 1,833 before 3:25 p.m. Once trading restarts and the index plunges 13% before 3:25 p.m., trading would be suspended for a second time. If the index plunges 20% at any point today, NYSE would shut the market entirely for the rest of the day.

Monday’s meltdown commenced in Japan.

A follow-on to Friday’s debacle. The Nikkei started out in the hole and dove from there, ending the day down 4.6%. This is a market where the central bank has a mega-QE program in place with an explicit policy to buy equities to inflate them. Yet, despite the furious efforts by the Bank of Japan’s trading desk, the Nikkei dropped to 18,541, down 11.5% since June, the lowest since February.

It was in reaction to a whiff of panic in China, triggered by a total loss of faith in the government’s and the central bank’s machinery designed to prop up the markets.

The Shanghai Composite Index opened down nearly 4% and went to heck from there, closing at 3,210, down 8.5%. It annihilated the entire phenomenal bubble gains this year.

The thing is, the government vowed to support the stock market when it hit the “policy bottom” of 3,500 to 3,600 points. Now that it crashed through what was nothing but a line in the sand, hopes have shifted down to a new line in the sand of 3,000 points.

In all Chinese stock markets, only 12 stocks rose, and 2,200 stocks hit their 10%-down limit.

…click on the above link to read the rest of the article…

The Global Economy Is Officially Melting Down

August 24, 2015

The Global Economy Is Officially Melting Down

stockmarketcrash

As much as the financiers on Wall Street and the officials at the Fed would like the party to keep going, it looks it’s finally about to stop. Years of bailouts and monetary expansion have created one of the most inflated and artificial economic booms in history, and now it appears that this global economic bubble is deflating. Markets across the board are melting down as we speak, and the financial crash that supposedly “fringe” analysts have been predicting since 2008, is finally upon us. Take a look at what’s going down right now.

  • The Dow has fallen 1300 points from its peak. On Friday alone, it fell by 530 points, making it the 9th worst stock market crash in US history.
  • The Shanghai composite fell by more than 11% this week. All told, China’s stock market has lost a third of its value since its previous peak, and the only thing holding it up is their government’s intervention. It lost 4% of its value on Friday after it was revealed that their manufacturing activity had reached a 77 month low.
  • 400 of the world’s richest people lost a total of $182 billion this week, amounting to 6.3% of their collective wealth. When the people who benefit the most from inflated markets are getting hurt, you know that the bubble is bursting.
  • The dollar’s rally may be finally nearing its end. Its value has fallen slightly, but consistently for the past 2 weeks.
  • Commodities have fallen to a 13 year low. The price of copper has reached a 6 year low while oil has suffered its longest decline since 1986.

That last one is very telling. You can always tell when the global economy is in bad shape based on the value of various commodities. It’s one of the strongest indicators for an economy, since it reveals how many real, tangible goods are being produced. Curiously, many of these commodities have been falling in value throughout the supposed recovery that we’ve been in since 2009.

…click on the above link to read the rest of the article…

“Black Monday” – Shanghai Composite Goes Red For The Year, Wiping Out 60% In Gains, 2000 Stocks Limit Down

August 24, 2015

 “Black Monday” – Shanghai Composite Goes Red For The Year, Wiping Out 60% In Gains, 2000 Stocks Limit Down

China Xinhua News 

✔@XHNews

Black Monday! join global panic selloff, dive 8.5%, worst since Asian financial crisis at midday

George Chen 

✔@george_chen

FACTS: By midday break, nearly 2000 stocks down 10% daily limit in Chinese market — only 13 stocks up; Shanghai benchmark index down 8.45%

But… but… pension funds are “allowed” to buy stocks.

Judging by the first few minutes of trading in the first thing to open this evening on the mainland, the CSI 300 Index Futures which immediately tumbled by 4% to 3340, China’s attempt to deflect attention from the fact that it did not do a 50-100 bps RRR cut is not doing too well.

Some other indicative levels which are in line with the CSI:

  • Shanghai Composite to open -3.8%, some 130 points below the 3,500 “hard line” support level below which it is a nothing but air back to 2000
  • Shenzhen down 4.3%
  • ChiNext down 5.1%

That said, we expect the National Team to not give up without a big fight, and forcefully step in any minute and do everything in its power to prevent the resultant plunge in the Shanghai Composite which is set to open shortly, or else SHCOMP 2000 beckons, and with it lots and lots of social unrest.

* * *

Update: Shanghai Composite now down -5.7%

…click on the above link to read the rest of the article…

It’s Not Just China You Should Be Worried About

August 21, 2015

It’s Not Just China You Should Be Worried About

Junk Rolling Over

TIVOLI, New York – Chinese stocks fell hard on Tuesday. The Shanghai Composite plunged more than 6% – the biggest fall in three weeks. Our research team in Beijing is downcast.

“Nobody here wants to hear about stocks,” they tell us.

roulettewheelImage credit: AP

And the junkiest – and riskiest – part of the U.S. bond market has taken a dive too. Here’s that chart of the big U.S. junk bond ETF that Chris highlighted in yesterday’s Market Insight. It has completely rolled over this year…

1-HYGiShares iBoxx High Yield Corporate Bond ETF (HYG), daily. HYG is down 6% from its high for the year (this chart shows solely the price of HYG, it is not a total return chart including coupon payments) – click to enlarge.

Meanwhile, U.S. corporate earnings have plateaued. And according to Deutsche Bank’s David Bianco, earnings are actually falling when you exclude companies’ slick accounting adjustments to “smooth” their numbers.

The only thing left propping up Wall Street stocks, as we explained yesterday, is insider trading.

Retail Rot

Recent sales figures from America’s retailers show how deep the rot has become.

Sales have been rising at an alarmingly slow rate – just 0.5% since 2007. Between 2000 and 2007, they went up four times as fast. In the 1990s recovery, they went up six times as fast.

Especially rotten are sales at America’s four largest mall retailers – Macy’s, Kohl’s, Sears, and JC Penney. Together, their sales are falling at a 10% rate per year… or four times faster than the fall in department store sales generally. What is interesting about these four companies is that they have been among the most aggressive of the stock market manipulators.

…click on the above link to read the rest of the article…

Signs Of Financial Turmoil In Europe, China And The United States

June 20, 2015

Signs Of Financial Turmoil In Europe, China And The United States

As we move toward the second half of 2015, signs of financial turmoil are appearing all over the globe.  In Greece, a full blown bank run is happening right now.  Approximately 2 billion euros were pulled out of Greek banks in just the past three days, Barclays says that capital controls are “imminent” unless a debt deal is struck, and there are reports that preparations are being made for a “bank holiday” in Greece.  Meanwhile, Chinese stocks are absolutely crashing.  The Shanghai Composite Index was down more than 13 percent this week alone.  That was the largest one week decline since the collapse of Lehman Brothers.  In the U.S., stocks aren’t crashing yet, but we just witnessed one of the largest one week outflows of capital from the bond markets that we have ever witnessed.  Slowly but surely, we are starting to see the smart money head for the exits.  As one Swedish fund manager put it recently, everyone wants “to avoid being caught on the wrong side of markets once the herd realizes stocks are over-valued“.

I don’t think that most people understand how serious things have gotten already.  In Greece, so much money has been pulled out of the banks that the European Central Bank admits that Greek banks may not be able to open on Monday…

The European Central Bank told a meeting of euro zone finance ministers on Thursday that it was not sure if Greek banks, which have been suffering large daily deposit outflows, would be able to open on Monday, officials with knowledge of the talks said.

Greek savers have withdrawn about 2 billion euros from banks over the past three days, with outflows accelerating rapidly since talks between the government and its creditors collapsed at the weekend, banking sources told Reuters.

…click on the above link to read the rest of the article…

 

 

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