Home » Posts tagged 'bear market' (Page 3)

Tag Archives: bear market

It all started in mid/late 2014, when the first whispers of a Fed rate hike emerged, which in turn led to relentless increase in the value of the US dollar and the plunge in the price of oil and all commodities, unleashing the worst commodity bear market in history.

The immediate implication of these two concurrent events was missed by most, although we wrote about it and previewed the implications in November of that year in “How The Petrodollar Quietly Died, And Nobody Noticed.”

The conclusion was simple: Fed tightening and the resulting plunge in commodity prices, would lead (as it did) to the collapse of the great petrodollar cycle which had worked efficiently for 18 years and which led to petrodollar nations serving as a source of demand for $10 trillion in US assets, and when finished, would result in the Quantitative Tightening which has offset all central bank attempts to inject liquidity in the markets, a tightening which has since been unleashed by not only most emerging markets and petro-exporters but most notably China, and whose impact has been to not only pressure stocks lower but bring economic growth across the entire world to a grinding halt.

The second, and just as important development, was observed in early 2015: 11 months ago we wrote that “The Global Dollar Funding Shortage Is Back With A Vengeance And “This Time It’s Different” and followed up on it later in the year in “Global Dollar Funding Shortage Intensifies To Worst Level Since 2012” a problem which has manifested itself most notably in Africa where as we wrote recently, virtually every petroleum exporting nation has run out of actual physical dollars.

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

Death Throes Of The Bull

January 31, 2016

Death Throes Of The Bull

The fast money and robo-machines keep trying to ignite stock rallies, but they all fizzle because bad karma is beginning to infect the casino. That is, apprehension is growing among whatever adults are left on Wall Street that 84 months of ZIRP and $3.5 trillion of Fed balance sheet expansion, aka money printing, didn’t do the trick.

Not only is the specter of recession growing more visible, but it is also attached to a truth that cannot be gainsaid. Namely, having stranded itself at the zero bound for an entire business cycle, the Fed is bereft of dry powder. Its only available tools are a massive new round of QE and negative interest rates.

But these are absolutely non-starters. The former would provoke riots in the financial markets because it would be an admission of total failure; and the latter would provoke a riot in the American body politic because the Fed’s seven year war on savers and retirees has already generated electoral revulsion. Bernie and The Donald are not expressions of public confidence in the economic status quo.

So the dip buying brigades have been reduced to reading the tea leaves for signs that the Fed’s four in store for 2016 are no more. Yet even if the prospect of delayed rate hikes is good for a 50-handle face ripping rally on the S&P 500 index from time to time, here’s what it can’t do. The Fed’s last card—-deferring one or more of the tiny interest rate increases scheduled for this year——cannot stop the on-coming recession.

And it is surely coming. We got one more powerful indicator on that score in this morning’s data on core capital goods orders (i.e. nondefense excluding aircraft).

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

Wrong For The Right Reasons: And Why It Matters

January 24, 2016

Wrong For The Right Reasons: And Why It Matters

There’s been a consistent theme of retort from many across the financial media. It consists of a two-sided response. The first sounds something like this: “How long have you been saying things were dire while the markets have continually risen?” This is a backhanded way of dismissing anything one has said previously, currently, as well as followup during the discussion. i.e., You’ve been labeled a scare monger. And a poor one at that.

The other is the outright or, blatant dismissive. It sounds something like this, “Well that’s your opinion. I should state there are many more who take the opposite view.”

Well, yes there are. However, that doesn’t mean they are either correct in their assumptions or, can argue why their view is correct. Yet, this is what’s done when someone wants to invalidate your point. It’s a snarky little way to dampen any legitimacy to one’s argument without further discussion. It’s a technique that’s used by many across the financial media as well as others. It’s subtle, however, to a trained ear – it speaks volumes about the user.

Personally I’ve had such things thrown at me and I detest them, for they’re vapid statements made by people who have either lost an argument they can not win or; think they are so smart they openly tout they don’t need deodorizers in their bathrooms. When I’ve been faced with the latter response my knee-jerk reaction has been to cite something similar to following:

“Well, that may be the case. But let’s just remember: Many a bull or pig believed based on valid assumptions that indeed; the farmer has their best interest at heart. After all who could argue otherwise based on all the free food, room, and board they receive?

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

Bear Necessities

January 20, 2016

BEAR NECESSITIES

“At first sign of crisis, the ignorant don’t panic because they don’t know what’s going on. Then later they panic precisely because they don’t know what’s going on.”

– Jarod Kintz.

In a crisis, it helps to have good counsel. Investment strategist Mike Tyson is pretty good at summing up the problem:

“Everyone has a plan ‘til they get punched in the mouth.”

Or as the military strategist Helmuth von Moltke the Elder put it, somewhat more formally:

“No battle plan ever survives contact with the enemy.”

The enemy has been quick to show himself this year, in the form of a bear market, at least for stocks. This bear has so far been quick, and indiscriminate: the US; Europe; China; stock markets have fallen sharply, internationally. Investors, being human, have scrabbled in search of an explanatory narrative.

Some have blamed the Fed’s baby steps towards normalising interest rates (if a rise from 0% to 0.25% can cause this much investor concern, get a load of history). Some blame the collapse in the oil price. Last week we watched David Cronenberg’s 2012 thriller ‘Cosmopolis’, which has Robert Pattinson playing a 28-year-old hedge fund billionaire driving around town and losing his entire fortune in a single day due to the unexpected rise of the yuan. Other than getting the direction of the renminbi wrong, it could have been shot yesterday. (The film, like the financial markets of 2016, is largely unfathomable.)

But as CLSA’s Christopher Wood points out, perceptions of emerging markets, including China’s, are becoming increasingly divorced from reality. The oil collapse, for one, is a huge red herring. Asia in aggregate

“is a massive beneficiary of lower oil prices.. [and] Asia now represents 72% of the MSCI Global Emerging Markets Index.”

So the narrative on oil is probably wrong, at least as regards most Asian economies, including Japan’s.

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

Italy, Greece, Financials Crash As European Stocks, Peripheral Bonds Plunge

January 20, 2016

Italy, Greece, Financials Crash As European Stocks, Peripheral Bonds Plunge

Led by a broad-based collapse in financial stocks, European markets extended and accelerated their plunge today. Thanks to the increased systemic linkages enforced by The ECB, peripheral sovereign risk is spiking as their national banking systems crash. Every European nation is now in at least correction since the end of QE3.

Europe crashed today…

Led by utter carnage in financials…

(note that thanks to Draghi’s liquidity spigots financial credit remains suppressed -for now – relative to equity. We do note that Sub financials credit is blowing out)

And every EU nation is now in at least a correction since the end of QE3 (Italy, Spain, and Greece in bear market)

And as EU financials tank, so sovereign risk soars for peripheral nations…

Average:

Welcome To The New Normal: The Dow Crashes Another 390 Points And Wal-Mart Closes 269 Stores

January 16, 2016

Welcome To The New Normal: The Dow Crashes Another 390 Points And Wal-Mart Closes 269 Stores

Did you know that 15 trillion dollars of global stock market wealth has been wiped out since last June? The worldwide financial crisis that began in the middle of last year is starting to spin wildly out of control. On Friday, the Dow plunged another 390 points, and it is now down a total of 1,437 points since the beginning of this calendar year. Never before in U.S. history have stocks ever started a year this badly. The same thing can be said in Europe, where stocks have now officially entered bear market territory. As I discussed yesterday, the economic slowdown and financial unraveling that we are witnessing are truly global in scope. Banks are failing all over the continent, and I expect major European banks to start making some huge headlines not too long from now. And of course let us not forget about China. On Friday the Shanghai Composite declined another 3.6 percent, and overall it is now down more than 20 percent from its December high. Much of this chaos has been driven by the continuing crash of the price of oil. As I write this article, it has dipped below 30 dollars a barrel, and many of the big banks are projecting that it still has much farther to fall.

The other night, Barack Obama got up in front of the American people and proclaimed that anyone that was saying that the economy was not recovering was peddling fiction. Well, if the U.S. economy is doing so great, then why in the world has Wal-Mart decided to shut down 269 stores?…

Walmart (WMT) will close 269 stores around the world in a strategic move to focus more on its supercenters and e-commerce business, the company said Friday.

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

The Dow Falls Another 364 Points And We Are Now Down 2200 Points From The Peak Of The Market

January 14, 2016

The Dow Falls Another 364 Points And We Are Now Down 2200 Points From The Peak Of The Market

It was another day of utter carnage on Wall Street. The Dow was down another 364 points, the S&P 500 broke below 1900, and the Nasdaq had a much larger percentage loss than either of them. The Russell 2000 has now fallen 22 percent from the peak, and it has officially entered bear market territory. After 13 days, this remains the worst start to a year for stocks ever, and trillions of dollars of stock market wealth has already been wiped out globally. Meanwhile, junk bonds continue their collapse. JNK got hammered all the way down to 33.06 as bond investors race for the exits. In case you were wondering, this is exactly what a financial crisis look like.

Many of the “experts” had been proclaiming that “things are different this time” and that stocks could defy gravity forever.

Now we seeing that was not true at all.

So how far could stocks ultimately fall?

I have been telling my readers that stocks still need to fall about another 30 percent just to get to a level that is considered to be “normal” be historical standards, but the truth is that they could eventually fall much farther than that.

Just this week, Societe Generale economist Albert Edwards made headlines all over the world with his prediction that we could see the S&P 500 drop by a total of 75 percent…

If I am right and we have just seen a cyclical bull market within a secular bear market, then the next recession will spell real trouble for investors ill-prepared for equity valuations to fall to new lows. To bottom on a Shiller PE of 7x would see the S&P falling to around 550.

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

Albert Edwards Hits Peak Pessimism: “S&P Will Fall 75%”, Global Recession Looms

January 13, 2016

Albert Edwards Hits Peak Pessimism: “S&P Will Fall 75%”, Global Recession Looms

2016 has thus far been a year characterized by remarkable bouts of harrowing volatility as the ongoing devaluation of the yuan, plunging crude prices, and geopolitical uncertainty wreak havoc on fragile, inflated markets.

With asset prices still sitting near nosebleed levels after seven years of bubble blowing by a global cabal of overzealous central planners with delusions of Keynesian grandeur, some fear a dramatic unwind is in the cards and that this one will be the big one, so to speak.

December’s Fed liftoff may well go down as the most ill-timed rate hike in history Marc Faber recently opined, underscoring the fact that the Fed probably missed its window and is now set to embark on a tightening cycle just as the US slips back into recession amid a wave of imported deflation and the reverberations from an EM crisis precipitated by the soaring dollar.

One person who is particularly bearish is the incomparable Albert Edwards. SocGen’s “uber bear” (or, more appropriately, “realist”) is out with a particularly alarming assessment of the situation facing markets in the new year.

“Investors are coming to terms with what a Chinese renminbi devaluation means for Western markets,” Edwards begins, in a note dated Wednesday. “It means global deflation and recession,” he adds, matter-of-factly.

First, Edwards bemoans the lunacy of going “full-Krugman” (which regular readers know you never, ever do):

I have always said that if inflating asset prices via loose monetary policy were the route to economic prosperity, Argentina would be the richest country in the world by now ?and it is not! The Fed?s pursuit of negligently loose monetary policies since 2009 is a misguided attempt to boost economic growth via asset price inflation and we will now reap the whirlwind (the ECB, Bank of Japan and the Bank of England are all just as bad).

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

2016 Will Be A ‘Cataclysmic Year’ And ‘Investors Should Be Afraid’

January 13, 2016

2016 Will Be A ‘Cataclysmic Year’ And ‘Investors Should Be Afraid’

The Royal Bank of Scotland is telling clients that 2016 is going to be a “cataclysmic year” and that they should “sell everything”. This sounds like something that you might hear from The Economic Collapse Blog, but up until just recently you would have never expected to get this kind of message from one of the twenty largest banks on the entire planet. Unfortunately, this is just another indication that a major global financial crisis has begun and that we are now entering a bear market. The collective market value of companies listed on the S&P 500 has dropped by about a trillion dollars since the start of 2016, and panic is spreading like wildfire all over the globe. And of course when the Royal Bank of Scotland comes out and openly says that “investors should be afraid” that certainly is not going to help matters.

It amazes me that the Royal Bank of Scotland is essentially saying the exact same thing that I have been saying for months. Just like I have been telling my readers, RBS has observed that global markets “are flashing the same stress alerts as they did before the Lehman crisis in 2008″…

RBS has advised clients to brace for a “cataclysmic year” and a global deflationary crisis, warning that the major stock markets could fall by a fifth and oil may reach US$16 a barrel.

The bank’s credit team said markets are flashing the same stress alerts as they did before the Lehman crisis in 2008.

So what should our response be to these warning signs?

According to RBS, the logical thing to do is to “sell everything” excerpt for high quality bonds…

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

Canadian Stocks in Bear Market, Loonie Swoons, Crude Crashes to $16, Consumer & Business Confidence Dives…

January 13, 2016

Canadian Stocks in Bear Market, Loonie Swoons, Crude Crashes to $16, Consumer & Business Confidence Dives…

“Investment and hiring intentions lowest since 2009”: Bank of Canada

Since Christmas Eve, the Toronto Stock Exchange index has dropped every single day, 10 trading days in a row, including so far today as I’m writing this, the longest losing streak since 2002. Now at 12,210, it’s down 21% from its 52-week high, set on April 17, and thus in bear market purgatory.

Beaten down energy producers, at about 20% of the index, have had a big impact. But the problems are broader. Among the standouts is the must-own, super-growth, TSX mega-cap Valeant, whose shares have plunged 65% from their 52-week high.

The Canadian dollar just dropped below US$0.70 for the first time since spring 2003, to US$0.6996. It now takes C$1.43 to buy a US dollar, up from about parity in 2011, 2012, and much of 2013. That year, Stephen Poloz became governor of the Bank of Canada. His solution was to demolish the currency. So he took it down 28% against the US dollar, with a big supporting hand from the collapsing prices of the commodities that Canada exports. Oil joined them in mid-2014.

The US benchmark WTI is trading just above $30 a barrel. Pundits at major investment banks have their eyes set on $20. Doom-and-gloomers see $10.

Canadian producers aren’t so lucky. Alberta’s heavy crude blend, Western Canada Select, plunged 30% so far this year, and on Monday hit US$16.51 a barrel, according to PSAC. “Lowest close on record,” according to the Globe and Mail.

Canadian producers are already experiencing what doom-and-gloomers are predicting for WTI. The swoon of the Canadian dollar is in part a reflection of this. Poloz is patting himself on the back. He sees benefits for big exporters outside the resource sector, such as auto manufacturing plants and component suppliers to the US auto industry that compete with Mexico.

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

Bear Market: The Average U.S. Stock Is Already Down More Than 20 Percent

January 11, 2016

Bear Market: The Average U.S. Stock Is Already Down More Than 20 Percent

The stock market is in far worse shape than we are being told. As you will see in this article, the average U.S. stock is already down more than 20 percent from the peak of the market. But of course the major indexes are not down nearly that much. As the week begins, the S&P 500 is down 9.8 percent from its 2015 peak, the Dow Jones Industrial Average is down 10.7 percent from its 2015 peak, and the Nasdaq is down 11.0 percent from its 2015 peak. So if you only look at those indexes, you would think that we are only about halfway to bear market territory. Unfortunately, a few high flying stocks such as Facebook, Amazon, Netflix and Google have been masking a much deeper decline for the rest of the market. When the market closed on Friday, 229 of the stocks on the S&P 500 were down at least 20 percent from their 52 week highs, and when you look at indexes that are even broader things are even worse.

For example, let’s take a look at the Standard & Poor’s 1500 index. According to the Bespoke Investment Group, the average stock on that index is down a staggering 26.9 percent from the peak of the market…

Indeed, the Standard & Poor’s 1500 index – a broad basket of large, mid and small company stocks – shows that the average stock’s distance from its 52-week high is 26.9%, according to stats compiled by Bespoke Investment Group through Friday’s close.

“That’s bear market territory!” says Paul Hickey, co-founder of Bespoke Investment Group, the firm that provided USA TODAY with the gloomy price data.

So if the average stock has fallen 26.9 percent, what kind of market are we in?

To me, that is definitely bear market territory.

The rapid decline of the markets last week got the attention of the entire world, but of course this current financial crisis did not begin last week.

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

For Commodities, This Is The Next Great Depression

January 7, 2016

For Commodities, This Is The Next Great Depression

While the “sell in 1973, and go away” plan had worked out for some in the commodity space, the destruction of the last decade has only one historical comparison… the middle of The Great Depression.

The 10-year rolling annualized return for commodities is -5.1% – the lowest since 1938…

During the same period Stocks are up 7.3% annualized, Bonds 6.6%, and Cash unchanged. Dip-buying opportunity? Maybe.

UBS thinks so: Tactically we can see a bounce in Q1 before the capitulation starts

Tactically, in September 2015, we actually expected a more significant oversold bounce in commodities from last year’s late September risk bottom into ideally early Q2 2016 before we anticipated more weakness into later 2016. So far, the bounce failed since particularly in the energy complex we saw further weakness into December and the metals have been actually just trading sideways. Nonetheless, according to our Q1 US dollar pullback call, we still see the chance for another rebound attempt in commodities into later Q1, and if so the move can be significant (short covering). Such a rebound would however not change our underlying cyclical roadmap for commodities, and this means that any rebound in Q1 should be limited in price and time before we expect another and potential final capitulation wave to start into H2 2016, where we expect the CCI index to minimum test its 2008 low at 350 to worst case 320.

Commodities… on the way into a multi-year buying opportunity

All in all we are sticking to our last year’s projection and strategy call that commodities are on the way into an important H2 2016/early2017 cyclical bottom. What is missing in our view is the final act in this first bear market.

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

A Disturbing Warning From UBS: “Buy Gold” Because A 30% Bear Market Is Coming

January 6, 2016

A Disturbing Warning From UBS: “Buy Gold” Because A 30% Bear Market Is Coming

As Wall Street axioms (Santa rally, January effect, as goes January etc.) are rapidly falling by the wayside at the start of 2016, following a chaotic but return-less 2015, the UBS analysts who correctly forecast last year’s volatility are out with their forecast for 2016. It’s simple – Sell Stocks, Buy Gold.

UBS Technical Analysts Michael Riesner and Marc Müller warn the seven-year cycle in equities is rolling over.

UBS expects S&P 500 to move into a 2Q top and fall into a full size bear market, with risk of a 20% to 30% correction into minimum later 2016 and worst case early 2017

“The comeback of volatility was the title of our 2015 strategy. Last year’s rise in volatility was in our view just the beginning for a dramatic rise in cross-asset volatility over the next few years,”

Noting that while equities have had a good run, Risener and Muller warn, “we are definitely more in the late stages of a bull market instead of being at the beginning of a new major breakout.”

Our key message for 2016 is that even if we were to see another extension in price and time, we see the 2009 bull cycle in a mature stage, which suggests the risk of seeing a significant bear cycle event in one to two years.

S&P-500 trades in 4th longest bull market since 1900 Bear markets are defined by a market decline of 20% and more. It’s a fact that since its March 2009 low, with 82 months and a performance of 220%, the S&P-500 now trades in its 4th longest and 5th strongest bull market since 1900. So from this angle alone we suggest the 2009 bull cycle has reached a mature stage.

Keep in mind, since 1937 the average downside in a 7-year cycle decline was 34%…

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

Has The Market Trend Shifted From Bull To Bear?

October 23, 2015

Has The Market Trend Shifted From Bull To Bear?

Why the recent volatility may mark a secular shift

Emotions are running high for the investment community in the wake of recent market volatility. Up until August, we had been in the third longest period in market history without a 10% correction. Since then, stock indices sold off hard, only to bounce once again over the past two weeks of trading.

As you’d guess, the generic punditry has been out in full force. A good number of very well respected technicians are not mincing words: We’ve entered a bear market. No equivocation.

On the other side of the equation are plenty proclaiming a successful retest of the lows has been made, and now away we go. Earnings will be better next year. No recession in sight. Just another dip to be bought, right?

And certainly the truth is….No one knows. Especially in today’s world where global central banks can concoct further QE/monetary schemes at the drop of a hat. Let’s face it, at this point the global central banks are all in. In fact, beyond all in. Without question, the US Fed knows that if equities fall, they lose the high end consumer. (Wal-Mart shoppers have already long been lost)

I thought in this discussion I’d run through a number of indicators I’ve been watching that will hopefully help answer the key question – was the recent market turbulence a sign of a short-term correction, or something larger? We know there’s no single Holy Grail metric in this wonderful world, but I tend to think of indicators as mosaic pieces. If we can get enough pieces in the right place, we have a good shot at actually deciphering the “picture” of what is to come. And for that, we can only really rely on historical experience.

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

Equity Markets and Credit Contraction

September 26, 2015

Equity Markets and Credit Contraction

There is one class of money that is constantly being created and destroyed, and that is bank credit.

Bank credit is created when a bank lends money to a customer; it becomes money because the customer draws down this credit to deposit in other bank accounts and to pay creditors. It is not money that is created by a central bank; it is money that is created out of thin air by commercial banks to lend. Its contraction comes about when it is repaid, or if a customer defaults.

The recent sharp fall in equity markets is leading to two levels of contraction of bank credit. Brokers’ loans to speculating investors are being unwound from record levels, notably in China and also in the US where in July they hit an all-time record of $487bn. Then there is the secondary effect, likely to kick in if there are further falls in equity prices, when equities held as loan collateral are liquidated. This is when falling stock prices can be so destructive of bank credit, and as the US economist Irving Fisher warned in 1933, a wider cycle of collateral liquidation can ensue leading to economic depression.

Fear of an escalating debt liquidation cycle is always a major concern for central bankers, so ensuring the secondary effect described above does not occur is their ultimate priority. Macroeconomic policy is centred on ensuring that bank credit grows continually, so since the Lehman crisis any tendency for bank credit to contract has been offset by central banks creating money. The bald fact that equity markets have now lost upside momentum and appear to be at risk of a self-feeding collapse will be viewed by central bankers with increasing alarm.

– See more at: http://www.cobdencentre.org/2015/09/equity-markets-and-credit-contraction/#sthash.7O1UI6TY.dpuf

Tag Archives: bear market

Content

Post categories

Economic Links

Energy/Resource Links

Environmental Links

Geopolitical Links

Liberty Links

News Links

Other Links

Survival Skills

Post Archives by Category

Post navigation

Latest Posts