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Dow in correction territory as investors hit ‘sell’ button

North American stock markets closed sharply lower again today, ending what was a dismal week for equities as fears about the global economy and falling oil prices had many investors selling.

The main benchmark index of the Toronto Stock Exchange sank to its lowest point in almost 18 months. It ended a busy trading day down 263 points, or 1.9 per cent, at 13,473. That followed a drop of almost 300 points on Thursday. Once again, the heavily weighted financial and energy groups led the declines.

Oil drops below $40 US a barrel for 1st time since 2009

“Everybody’s concerned about China,” said David Baskin, president of Baskin Wealth Management. ‘If there’s lower growth or even a recession in China, obviously that has a major impact because that’s, by most measures, the second biggest economy in the world.”

Much of the TSX’s slide stems from oil, which has now declined for eight straight weeks. That’s the longest losing streak for oil since 1986, a time when OPEC drove the price down as low as $10 a barrel. Oil settled Friday at $40.45 US a barrel, down 87 cents. At one point, it traded as low as $39.86, the first time it had dipped below $40 since 2009.

The Dow Jones industrial average plunged 531 points, or 3.1 per cent, to close at 16,460. With that drop, the Dow entered official correction territory, which refers to a drop of at least 10 per cent from its most recent high.

The broader S&P 500 index suffered its biggest daily percentage drop in nearly four years.

European concerns

European markets were also rattled by news that Greek PM Alexis Tsipras would step down and hold new elections on Sept. 20.

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

We Have Already Witnessed The First 1300 Points Of The Stock Market Crash Of 2015

August 21, 2015

We Have Already Witnessed The First 1300 Points Of The Stock Market Crash Of 2015

What has been happening on Wall Street the past few days has been nothing short of stunning. On Thursday, the Dow Jones Industrial Average plummeted 358 points. It was the largest single day decline in a year and a half, and investors are starting to panic. Overall, the Dow is now down more than 1300 pointsfrom the peak of the market. Just yesterday, I wrote about all of the experts that are warning about a stock market crash in 2015, and after today I am sure that a lot more people will start jumping on the bandwagon. In particular, tech stocks are getting absolutely hammered lately. The Nasdaq has fallen close to 3.5% over the past two days alone, and it has dropped below its 200-day moving average. The Russell 2000 (a small-cap stock market index) is also now trading below its 200-day moving average. What all of this means is that the stock market crash of 2015 has already begun. The only question left to answer at this point is how bad it will ultimately turn out to be.

When stocks were booming, tech stocks were leading the way up.

But now that the market has turned, tech stocks are starting to lead the way down…

The Dow and the S&P 500 are negative for the year. The so-called “FANG” stocks – Facebook, Apple, Netflix, and Google – were some of the biggest losers, and helped send the Nasdaq more than 2% lower. Biotechs also suffered big losses; the iShares Nasdaq Biotechnology ETF fell 4% to a three-month low. The Vix, which gauges market expectations for near-term shifts in the S&P 500, surged more than 21%.

And Twitter is absolutely imploding. It has fallen below its IPO price, and at this point it is now down 65 percent from the peak.

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

23 Nations Around The World Where Stock Market Crashes Are Already Happening

August 18, 2015

23 Nations Around The World Where Stock Market Crashes Are Already Happening

You can stop waiting for a global financial crisis to happen. The truth is that one is happening right now. All over the world, stock markets are already crashing. Most of these stock market crashes are occurring in nations that are known as “emerging markets”. In recent years, developing countries in Asia, South America and Africa loaded up on lots of cheap loans that were denominated in U.S. dollars. But now that the U.S. dollar has been surging, those borrowers are finding that it takes much more of their own local currencies to service those loans. At the same time, prices are crashing for many of the commodities that those countries export. The exact same kind of double whammy caused the Latin American debt crisis of the 1980s and the Asian financial crisis of the 1990s.

As you read this article, almost every single stock market in the world is down significantly from a record high that was set either earlier this year or late in 2014. But even though stocks have been sliding in the western world, they haven’t completely collapsed just yet.

In much of the developing world, it is a very different story. Emerging market currencies are crashing hard, recessions are starting, and equity prices are getting absolutely hammered.

Posted below is a list that I put together of 23 nations around the world where stock market crashes are already happening. To see the stock market chart for each country, just click the link…

1. Malaysia

2. Brazil

3. Egypt

4. China

5. Indonesia

6. South Korea

7. Turkey

8. Chile

9. Colombia

10. Peru

11. Bulgaria

12. Greece

13. Poland

14. Serbia

15. Slovenia

16. Ukraine

17. Ghana

18. Kenya

19. Morocco

20. Nigeria

21. Singapore

22. Taiwan

23. Thailand

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

Doomsday clock for global market crash strikes one minute to midnight as central banks lose control

August 17, 2015

Doomsday clock for global market crash strikes one minute to midnight as central banks lose control

China currency devaluation signals endgame leaving equity markets free to collapse under the weight of impossible expectations

When the banking crisis crippled global markets seven years ago, central bankers stepped in as lenders of last resort. Profligate private-sector loans were moved on to the public-sector balance sheet and vast money-printing gave the global economy room to heal.

Time is now rapidly running out. From China to Brazil, the central banks have lost control and at the same time the global economy is grinding to a halt. It is only a matter of time before stock markets collapse under the weight of their lofty expectations and record valuations.

The FTSE 100 has now erased its gains for the year, but there are signs things could get a whole lot worse.

1 – China slowdown

China was the great saviour of the world economy in 2008. The launching of an unprecedented stimulus package sparked an infrastructure investment boom. The voracious demand for commodities to fuel its construction boom dragged along oil- and resource-rich emerging markets.

The Chinese economy has now hit a brick wall. Economic growth has dipped below 7pc for the first time in a quarter of a century, according to official data. That probably means the real economy is far weaker.

The People’s Bank of China has pursued several measures to boost the flagging economy. The rate of borrowing has been slashed during the past 12 months from 6pc to 4.85pc. Opting to devalue the currency was a last resort and signalled the great era of Chinese growth is rapidly approaching its endgame.

Data for exports showed an 8.9pc slump in July from the same period a year before. Analysts expected exports to fall only 0.3pc, so this was a huge miss.

The Chinese housing market is also in a perilous state. House prices have fallen sharply after decades of steady growth. For the millions who stored their wealth in property, it makes for unsettling times.

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

Chinese Stocks Suffer Second Biggest Crash In History, 1,500 Companies Halted Limit Down

July 27, 2015

Chinese Stocks Suffer Second Biggest Crash In History, 1,500 Companies Halted Limit Down

This was not supposed to happen.

After pledging, investing and otherwise guaranteeing the Chinese stock market to the tune of 10% of GDP, and intervening on at least 40 different occasions in the past month ever since China’s stock bubble burst in late June, with the subsequent crash nearly taking the Shanghai Composite red for the year, overnight China officially lost control for the second time, when after a weak start to the Monday trading session, things turned very ugly in the last hour, when the Shanghai Composite plunged by 8.48%, closing nearly at the lows, and tumbling some 345 points for its biggest one-day drop since February 2007 and its second biggest crash in history!

The selling was steady throughout the day, but spiked in the last hour on concerns China would rein in its market-supporting programs following IMF demands to normalize its relentless market intervention. According to Bloomberg’s Richard Breslow: “fear that the extraordinary support measures employed to hold up the market may be scaled back caused heavy afternoon selling resulting in a down 8.5% day.” Of course, one can come up with any number of theories to explain the plunge: for example the PBOC did not buy enough to offset the relentless selling.

The last thing the communist party and the PBOC wanted was another massive sell off after having not only fired the “bazooka” but come up with a different bazooka to halt “malicious sellers” virtually every day, including threats of arrest.

Nobody was spared in the selloff and of the 1,114 stocks in the Shanghai Composite, 13 closed higher on Monday.

Here, courtesy of the WSJ, are some of the more amazing numbers of today’s selloff:

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

Forget Greece … China Is the Real Threat

July 2, 2015

Forget Greece … China Is the Real Threat

When the ATMs Went Dark …

There’s a time for calm, rational behavior … and a time to panic. On Tuesday, investors in U.S. stocks decided not to panic. Monday’s sell-off halted. But it did not reverse.

And it left the street with its worst half-year performance since 2010. Gain for 2015 so far? Zilch. But have we seen the top? We will have to wait to find out.

Fox News reports that Greeks are eyeing Bitcoin to protect their savings. At midnight Tuesday night, the Greek government defaulted on a €1.5-billion loan repayment to the IMF. And it has imposed a 60-euro-a-day limit on cash withdrawals.

As of today, depositors reportedly only get 50 euro per day, because the banks have run out of 10s and 20s.

This leaves many Greeks short and looking for alternatives. Pity those who were last in line at the ATMs before they went dark. Says a restaurant owner in Athens, quoted by the Associated Press:

“You don’t know what can happen. In my case, I have money, and I don’t have money in a sense. I have it in the bank, but I can’t get it in my hands. It’s crazy.”

As we’ve been pointing out, money in the bank is not the same as money in hand. The first is just a loan to what could be a bankrupt institution. It could be worth nothing. The second is cash – ready, handy, and extremely useful.

In a financial emergency, there won’t be a liquor store in town that won’t welcome you as a customer. A Greek butcher… also to Associated Press:

“I have no cash to pay for meat supplies for next week because of the capital controls. Sooner or later, probably in this month, I’ll have to let 10 people go.

The people are buying with cash, not credit cards, and the problem is the customers don’t have cash.”

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

Who Will Be the Last to Crash?

July 2, 2015

Who Will Be the Last to Crash?

This is the question that astute investors are forced to ask themselves these days. No reasonable person believes that a system of ever-expanding debt can resolve painlessly. It simply cannot happen… not, at least, until 2+2 stops equaling four.

But the international money system, while deeply interconnected, can implode in sections. In fact, it’s highly unlikely that it will crash as a single unit.

So, if you have significant moneys to invest, you end up coming back to our question: Who will be the last to crash? Once you decide that, you can concentrate your assets in that place, hoping to come through the crash with at least most of your value intact.

Let’s look at several aspects of this:

#1: Background statistics:

World debt is upwards of $200 trillion, and growing steadily. World GDP is $70-some trillion, only about a third of the debt. This debt will not be paid back. Massive amounts of debt will have to be written off in losses.
US debt is north of $18 trillion. (Amazingly, *cough*, it hasn’t changed in months *cough*.) Forward promises are north of $200 trillion, meaning that a child born today is responsible to repay $625,000. And since roughly half the US population pays no income tax… and presuming that this newborn will be a member of the productive half… he or she is born $1.25 million in debt. Such repayments will never happen. Most of those debts will not be repaid.
Japan is worse off than the US. The UK is bad. Many EU countries are worse.

These numbers, by the way, are ignoring more than a quadrillion dollars of derivatives and lots of other monkey business. (Rehypothecation, *cough*, *cough*.)

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

Collapsing CDS Market Will Lead To Global Bond Market Margin Call

June 28, 2015

Collapsing CDS Market Will Lead To Global Bond Market Margin Call

As Zero Hedge previously noted, liquidity is there when you don’t need it, and it promptly disappears once it is in demand. Consider it “cocktease capitalism.” If liquidity lasts longer than 4 hours, call the CFTC because you may be experiencing a spoof. Right now, the ultimate spoof is setting up as the credit default swap market collapses, and a global bond market margin call is just around the corner.

The most serious risk at the moment is the lack of bond market liquidity. This problem was created by the Federal Reserve. By flooding the market with liquidity, the Federal Reserve paradoxically destroyed the liquidity it sought to create. Initially, the Federal Reserve’s actions helped stem the panic selling when it stepped in as the buyer of last resort. However, the Fed is quickly becoming the buyer of first resort. The CME even has a Central Bank Incentive Program to encourage foreign central banks to buy S&P 500 futures. It’s not a stretch of the imagination to presume the Federal Reserve is buying S&P 500 futures alongside the foreign banks.

As the Fed’s balance sheet expanded ever larger, they transformed from being a mere market participant to becoming the market itself. The Federal Reserve, along with the rest of the world’s central banks, are essentially engaging in a multi-year effort to corner the global bond market. As we have seen in every case, no one has ever successfully cornered a market indefinitely. From the Hunt Brothers in the 1980 silver market to the Saudi royal family in the modern fractured oil market to the Duke brothers in the frozen concentrated orange juice market, it simply has not worked. Running a monopoly is an uphill battle that eventually results in a spectacular blowup. Why would the central banks be any different?

As Zero Hedge pointed out recently, the run on the central banks has already begun. For the first time ever, QE failed. The first casualty was the Riksbank in Sweden.

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

The Global Credit Market Is Now A Lit Powderkeg

June 28, 2015

The Global Credit Market Is Now A Lit Powderkeg

And markets are totally unprepared

The financial markets have had a bit of a tough time going anywhere this year.

The S&P 500 has been caught in a 6% trading band all year, capped on the upside by a 3% gain and on the downside by a 3% price loss. It has been a back-and-forth flurry while the stock market up to this point has simply marked time.

We’ve seen a bit of the same in the bond market: after rising 3.5% in the first month of the year, the ten year Treasury bond has given away its year-to-date gains and then some.

2015 stands in relative contrast to largely upward stock and bond market movement over the past three years. What’s different this year and what are the risks to investment outcomes ahead?

Higher Interest Rates Ahead

As I have suggested in recent discussions, the probabilities are very high the US Federal Reserve will raise interest rates this year. Yes, Ms. Yellen intimated it may come later, but remember she also canceled her appearance at the Fed’s annual Jackson Hole soiree this year, a meeting that takes place just a bit before the September Fed FOMC meeting. I think the markets are attempting to “price in” the first interest rate increase in close to a decade.

Importantly, we’re talking about the re-pricing of credit in the US financial system and economy broadly. We all know how important credit has been to underpinning the US economy for literally decades now. I believe this is a key part of the story of why markets are acting as they are in 2015. However, there are much larger longer term issues facing investors lurking well beyond the short term Fed interest rate increase to come: bond yields (interest rates) rest at generational lows and prices at generational highs – levels never seen before by investors. Let’s set the stage a bit, because the origins of this secular issue reach back over three decades.

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

Recession time bomb ticking faster, louder

June 28, 2015

Recession time bomb ticking faster, louder

Americans are unprepared for the trillions they will lose again

America is its own enemy, trapped in new irrational exuberance

What’s even more disturbing than the near certainty of Grantham, Cook and the Economist in the dark predictions is what’s driving them, America’s self-delusional narcissism, overoptimism and irrational exuberance from the happy-talking bulls, which sets us up for huge losses, as in the recessions of 2000-2003 and 2007-2009, with trillions in lost market cap.

Individually and collectively, whether Washington, Corporate America, Silicon Valley or Main Street, most Americans, secretly believe in the American Dream, at least for themselves, perpetual opportunity, perpetual growth, perpetual prosperity. When we surveyed Wall Street years ago we found a 93% bias toward positive thinking, and a tendency to ignore or substantially discount bearish signals, to “accentuate the positive, minimize the negative.”

This behavioral tendency puts individual investors, stock markets, even nations at great risk. Harvard financial historian Niall Ferguson, author of “Colossus: The Rise and Fall of the American Empire,” asked rhetorically in a Los Angeles Times column:

“America, a Fragile Empire: Here today, gone tomorrow … could the United States fall that fast?” Yes. America could fall very, very fast, triggering an economic collapse with losses in trillions, the historic game-changer demanding a political course correction, like the 1908 antitrust laws, the 1932 banking and securities laws … or today’s massive takeover of American government by an anarchistic oligarchy of superrich billionaires.

Next crash, an ‘accelerating sports car … a thief in the night!’

The point, it’s sudden, fast, and you won’t see it coming. Nor will America’s leaders. Unprepared, says the Economist, unable to act in time to avoid the recession dead ahead.

Says Ferguson, “for centuries, historians, political theorists, anthropologists and the public have tended to think about the political process in seasonal, cyclical terms … we discern a rhythm to history. Great powers, like great men, are born, rise, reign and then gradually wane.”

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

When Bonds Go Kaboom!

June 24, 2015

When Bonds Go Kaboom!

We’re not the only ones giving Neanderthal advice about holding on to physical cash. British newspaper the Telegraph reports:

The manager of one of Britain’s biggest bond funds has urged investors to keep cash under the mattress. Ian Spreadbury, who invests more than £4bn of investors’ money across a handful of bond funds for Fidelity, is concerned that a “systemic event” could rock markets, possibly similar in magnitude to the financial crisis of 2008…

The best strategy to deal with this, he said, was for investors to spread their money widely into different assets, including gold and silver, as well as cash in savings accounts. But he went further, suggesting it was wise to hold some “physical cash,” an unusual suggestion from a mainstream fund manager.

The Fuse Is Lit

The markets seem to be in wait-and-see mode. Yesterday, we were waiting to see what happens in Greece. Today, we wait to see what happens in the bond markets. We watch them like we watch a stick of dynamite. For a long time, it might sit there… silent… still…

Then all of a sudden – kaboom!

At the end of January, it looked as though bond yields had finally found their bottom. With $5 trillion of sovereign debt trading at negative yields, bond prices began to fall. And yields, which move in the opposite direction to prices, started to rise.

Not for the first time did we think: The fuse is lit!

We were 33 years old when this bond market made its last turn. The yield on the 10-year Treasury bond hit a high of almost 15% in 1982. Yields have been trending downward ever since. If we had only imagined what would happen next!

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

How Much More Extreme Can Markets Get?

May 31, 2015

How Much More Extreme Can Markets Get?

These charts help us understand that a top is not just price, but a reversal in extremes of margin debt, valuation and sentiment.

In blow-off tops, extremes of valuation, complacency and margin debt can always shoot beyond previous extremes to new extremes. This is why guessing when the blow-off top implodes is so hazardous: extreme can always get more extreme.

Nonetheless, extremes eventually reverse, and generally in rough symmetry with their explosive rise. Exhibit 1 is margin debt: NYSE Margin Debt Hits a New Record High (Doug Short)

Note the explosive rise in margin debt in the past few months:

At tops, soaring margin debt no longer pushes stocks higher. I’ve marked up an excellent chart by Doug Short to highlight the diminishing returns of more margin debt at tops.

It’s clear this same dynamic of diminishing returns is in play now, as margin debt has skyrocketed while the S&P 500 has remained range-bound, with each new high being increasingly marginal.

Exhibit 2 is China’s Shenzhen stock exchange. The price-earnings ratio (PE) is a useful gauge of sentiment: when sentiment reaches extremes of euphoria, PEs go through the roof:

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

Government – Designed for Robbery

May 28, 2015

Government – Designed for Robbery

Why I’m Looking Forward to the Next Big Crash

First, the Dow dropped 190 points on Monday – or 1%. It was threatening to close below 18,000 for the first time in almost three weeks. We’ll wait to find out. Yesterday, a London-based magazine and a TV station interviewed us. Both asked if we were “pessimistic.”

“Of course not,” we replied. “We expect today’s financial system to fall apart in a terrible crash and depression. But we’re looking forward to it.”

This was not exactly the answer they were looking for… And there’s not enough time in an interview to explain why this view makes any sense at all. The audience must have thought we had lost our mind.

We also had a meeting with our old friend and editor of the Gloom, Boom & Doom Report Marc Faber yesterday. He helped make sense of our “pessimism.”

“The system is corrupt,” he said. “The government. The banks. The central banks. Big business.”

People always use their wealth and power to try to protect themselves. Sometimes they use it to take wealth and power away from others, too. That’s corruption.

Of course, that’s what government was designed for: to allow one group to rob another. If the elite could take no advantage from it, why would they bother with government at all?

Dirty Work

We baby boomers took over in the 1980s. We have been in charge ever since. Since then, we’ve corrupted the economy, the markets, and government. By the 1970s, some of the dirty work was already done: The Nixon administration had ditched honest money. Now, the coast was clear. We could use this new credit-based money to pervert the whole shebang.

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

A Global Recession Is Inevitable

May 26, 2015

A Global Recession Is Inevitable

In every market supply and demand are determining the price. Charles Biderman uses this simple logic as the foundation for his investment philosophy. The outspoken founder of the research firm TrimTabs is convinced that stock prices are a function of liquidity—the amount of shares available to buy and the amount of money available to buy them—rather than fundamental value. Therefore, he carefully tracks the announced actions of companies. In his view they are among the biggest players in the stock market and the driving force behind today’s bull market. For now, Biderman thinks that this trend will push stock prices even higher. For the medium term though, he cautions that the financial markets are poised for a severe crash. He spots the first signs of a global recession in the drop of the commodity prices and warns of the moment when people don’t trust the paper money of the central banks anymore.

Mr. Biderman, once again the economy is not doing well. Nevertheless, the stock market in the United States seems to be in record setting mood. What’s behind the rally?
What’s present in the stock market in the moment are companies, their transactions, buyers and sellers of stock. That’s all what happens in the market. So if you count the number of shares available and how much money is available you might get a sense of what’s going to happen. Since 2011, the amount of shares in the market has been declining every year. Even though individuals are taking money out of the market, companies have spent around $1.6 Trillion in cash on takeovers and stock buybacks.

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

The potential bond crisis most people have never heard of

May 26, 2015

The potential bond crisis most people have never heard of

While 007 goes from strength to strength, his financial namesake may be heading for a fall

“The name’s Bond,” goes the famous line. But in this case, it’s not James Bond. While nearly everyone knows every detail about the 007 super spy, his lesser-known financial namesake is many times more important.

The James Bond franchise is expected to continue strongly with the autumn arrival of Daniel Craig speeding through the streets of Rome inSPECTRE, but those in the financial know worry about the spectre of the other kind of bond heading for a crash.

Four out of five bond traders worry the market could collapse in a disorderly sell-off.

And while Bond villains jump right out at you, bond villains are hard to finger.

At their most basic level, bonds are anything but complicated. They are simply a legal arrangement where one person agrees to lend money to someone else for a fixed length of time at a fixed rate of interest.

Popping the bond bubble

In the public imagination, if we think of them at all, bonds are the epitome of safety. Which is why it is strange to read in one of the world’s most reliable business publications, the London Financial Times, that experts are terrified of an imminent crash in bonds that could destabilize the global economy.

The interest rates on Canadian bonds have been falling for decades, meaning existing bonds have risen in value. That could be about to change. (Pete Evans/CBC)

“This market could pop,” leading bond trader Brad Crombietold the FT. “There is more tension and anxiety over valuations than for a long while.”

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

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European concerns

1 – China slowdown

#1: Background statistics:

Higher Interest Rates Ahead

America is its own enemy, trapped in new irrational exuberance

Next crash, an ‘accelerating sports car … a thief in the night!’

The Fuse Is Lit

Dirty Work

Popping the bond bubble

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