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A sea of red has greeted stock traders across the world this morning after what one analyst called “monster moves” in U.S. Treasury yields.

The bond rout that sent 10Y Treasury yields to the highest since May 2011 promoted by stronger than expected US economic data, and which accelerated after upbeat, hawkish comments from Fed Chair Jerome Powell after the close, spread into Asia and Europe on Thursday, spurring more gains for the dollar and triggering widespread declines in equities.

The catalyst for the selloff was the stronger than expected ADP private payrolls print and the near record print in the Services ISM survey which showed activity at its strongest since August 1997, sparking speculation the payrolls report on Friday could also surprise, with some suggesting a print as high as 500,000 was possible. Subsequent comments from Powell who said the economic outlook was “remarkably positive” and that rates might rise above “neutral” helped the 10Y yield climb to 3.18% on Wednesday. U.S. jobs data on Friday may stoke boosting expectations for rate hikes into 2019, with the jobless rate seen dropping to 3.8 percent, matching the lowest since 1969.

“Fixed income is the center of the financial world, and it’s hard to have a conversation without talking about the monster moves we saw in yesterday’s U.S. trade,” said Chris Weston head of research at Pepperstone Group. “It’s a very rare occurrence to see U.S. Treasuries undergo such a huge move.”

The selloff in 10Y Treasuries, which caught traders by surprise with both its velocity and magnitude, continued overnight on Thursday sending the yield on 10Y TSYs as high as 3.2325%, the steepest daily increase since the shock outcome of the U.S. presidential election in November 2016, before fading to catch its breath amid massive trading volumes.

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

The Stock Market Falls Another 724 Points! What In The World Is Happening On Wall Street?

March 23, 2018

The Stock Market Falls Another 724 Points! What In The World Is Happening On Wall Street?

We just witnessed the 5th largest single day stock market crash in U.S. history. On Thursday the Dow Jones Industrial Average plunged 724 points, and many believe that this is just the beginning of another huge wave down for stock prices. After this latest dramatic decline, the Dow is now down 3.1 percent so far in 2018, and overall it is down 9.99 percent from the all-time high in January. A 10 percent decline is officially considered to be “correction” territory, and that means that we are just about there.

So why are stock prices falling so much? Well, USA Today is blaming the potential for a trade war with China, the latest Facebook scandal and “the impact of rising interest rates on the economy”…

U.S. stocks sold off sharply Thursday, with the Dow tumbling more than 700 points amid growing fears of a trade fight between the U.S. and its trading partners after President Trump said he will impose billions of dollars in tariffs on Chinese imports.

The heavy selling on Wall Street was exacerbated by continued weakness in shares of Facebook as well as concerns about the impact of rising interest rates on the economy.

Of course the possibility of a trade war between the two largest economies on the planet is certainly the greatest concern that the markets are grappling with at the moment. According to Ian Winer, any sign of retaliation by China “will really spook people”…

“A global trade war, whether it’s real or perceived, is what’s weighing on the market,” said Ian Winer, head of equities at Wedbush Securities. “There’s this huge uncertainty now. If China decides to get tough on agriculture or anything else, that will really spook people.”

Trump announced tariffs on about $50 billion worth of Chinese imports on Thursday afternoon. It’s not clear which products will be hit, but the action is aimed at curbing China’s troubling theft of US intellectual property.

And we can be quite sure that China will retaliate.

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

The Dow Jones Industrial Average Falls Another 420 Points As Investors Panic About A Potential Trade War

March 2, 2018

The Dow Jones Industrial Average Falls Another 420 Points As Investors Panic About A Potential Trade War

Many had been hoping that the financial shaking on Wall Street that we witnessed in February would subside in March, but so far that is definitely not the case. On Thursday, the Dow fell another 420 points as investors fretted about the potential for a trade war. Over the past month, we have seen many days when stock prices have been way down and other days when stock prices have been way up. This is precisely the sort of wild volatility that we would expect to see if a major financial crisis was brewing, and the truth is that our financial system is far more vulnerable today than it was back in 2008.

Many Americans have assumed that the U.S. economy must be in great shape since the stock market has just kept going up for the past several years. But the reality of the matter is that stock prices are no longer connected to economic reality whatsoever. The U.S. economy has not grown by 3 percent or more in 12 years, but stock prices have been shooting into the stratosphere thanks to relentless central bank intervention.

But what goes up must eventually come down, and on Thursday we witnessed another stunning decline…

The Dow Jones industrial average closed 420.22 points lower at 24,608.98 after rising more than 150 points earlier in the day. The 30-stock index fell as much as 586 points.

The S&P 500 declined 1.4 percent to end at 2,677.67 — erasing its year-to-date gains — with industrials as the worst-performing sector. It also briefly broke below its 100-day moving average, a key technical level. The Nasdaq composite fell 1.3 percent to 7,180.56 and dipped below its 50-day moving average.

So why did this happen?

Well, the mainstream media is placing the blame for Thursday’s decline on Trump’s new tariffs…

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

-1,175 Points! We Just Witnessed The Largest One Day Stock Market Crash Ever

February 6, 2018

-1,175 Points! We Just Witnessed The Largest One Day Stock Market Crash Ever

The mainstream media seems so surprised that the stock market is crashing, but the truth is that it isn’t a surprise at all. In fact, this crash is way, way overdue. If the Dow Jones industrial average fell another 10,000 points, stock prices would still be overvalued. I have been warning and warning and warning that this would happen, because stock valuations always return to their long-term averages eventually. On Monday, the Dow was down a staggering 1,175 points, which was the largest single day decline that we have ever seen by a very wide margin. In fact, it shattered the old record by nearly 400 points.

Shortly after 3 PM, all hell broke loose on Wall Street. The Dow dropped by more than 800 points in just 10 minutes. At one point on Monday, the Dow was down nearly 1,600 points, but a brief rally cut those losses roughly in half. However, the rally did not last long and stock prices collapsed hard as the market closed. At this moment, the Dow is already down more than 2,200 points from the peak of the market, and we are not too far from officially entering “correction” territory.

Once stocks start falling, it can trigger a massive rush for the exits, and that is what happened on Monday. In particular, investors started to panic once the Dow broke through the 50-day moving average…

“As soon as we broke the 50-day moving average … we saw volatility spike,” said Jeff Kilburg, CEO of KKM Financial. “It’s just been downhill from there.”

Other waves of selling were triggered once the 25,000 and 24,000 barriers on the Dow were breached. In order to protect against losing too much money, many investors have stop losses set at psychologically-important levels. The following comes from MarketWatch…

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

-666 Points: We Just Witnessed The 6th Largest Single Day Stock Market Decline In U.S. History

February 5, 2018

-666 Points: We Just Witnessed The 6th Largest Single Day Stock Market Decline In U.S. History

On Friday, the Dow Jones Industrial Average fell 666 points (665.75 points to be precise), and many are pointing out that this was the 6th largest single day crash that we have ever seen. This decline happened on the 33rd day of the year, and it was the worst day for the stock market by far since President Trump entered the White House. I have been repeatedly warning that we are way overdue for a stock market crash, and many are concerned that we may be on the precipice of another great financial crisis. We shall see what happens on Monday, because that will set the tone for the rest of the week. If we see another huge decline early Monday morning, that could easily set off full-blown panic selling on Wall Street.

Rising interest rates appear to have been the trigger for the enormous market drop on Friday. The following comes from the New York Post…

“We all know that many bull markets have ended by the Federal Reserve as they raise the rates to the point of slowing the economy down perhaps too much,” Quincy Krosby, chief market strategist at Prudential Financial, told The Post.

“It’s come on quickly and it caught the market off guard,”Krosby said.

The Dow sell-off brought it below the 26,000 plateau — to 25,520.96 — the biggest points drop since Dec. 1, 2008.

It is quite rare for the market to drop this much in a single day. The largest single daily decline was a 777 point drop in 2008, and overall the Dow has fallen by more than 600 points less than 10 times throughout history…

The index posted a loss of nearly 666 points, its sixth-worst decline ever on a points basis.

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

Bank Of America Analyst: A ‘Flash Crash’ In Early 2018 ‘Seems Quite Likely’

November 21, 2017

Bank Of America Analyst: A ‘Flash Crash’ In Early 2018 ‘Seems Quite Likely’

Is the stock market bubble about to burst? I know that I have been touching on this theme over and over and over again in recent weeks, but I can’t help it. Red flags are popping up all over the place, and the last time so many respected experts were warning about an imminent stock market crash was just before the last major financial crisis. Of course nobody can guarantee that global central banks won’t find a way to prolong this bubble just a little bit longer, but at this point they are all removing the artificial support from the markets in coordinated fashion. Without that artificial support, it is inevitable that financial markets will experience a correction, and the only real question is what the exact timing will be.

For example, Bank of America’s Michael Hartnett originally thought that the coming correction would come a bit sooner, but now he is warning of a “flash crash” during the first half of 2018…

Having predicted back in July that the “most dangerous moment for markets will come in 3 or 4 months“, i.e., now, BofA’s Michael Hartnett was – in retrospect – wrong (unless of course the S&P plunges in the next few days). However, having stuck to his underlying logic – which was as sound then as it is now – Hartnett has not given up on his “bad cop” forecast (not to be mistaken with the S&P target to be unveiled shortly by BofA’s equity team and which will probably be around 2,800), and in a note released overnight, the Chief Investment Strategist not only once again dares to time his market peak forecast, which he now thinks will take place in the first half of 2018, but goes so far as to predict that there will be a flash crash “a la 1987/1994/1998” in just a few months.

That certainly sounds quite ominous.

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

The Last Time These 3 Ominous Signals Appeared Simultaneously Was Just Before The Last Financial Crisis

November 17, 2017

The Last Time These 3 Ominous Signals Appeared Simultaneously Was Just Before The Last Financial Crisis

We have not seen a “leadership reversal”, a “Hindenburg Omen” and a “Titanic Syndrome signal” all appear simultaneously since just before the last financial crisis. Does this mean that a stock market crash is imminent? Not necessarily, but as I have been writing about quite a bit recently, the markets are certainly primed for one. On Wednesday, the Dow fell another 138 points, and that represented the largest single day decline that we have seen since September. Much more importantly, the downward trend that has been developing over the past week appears to be accelerating. Just take a look at this chart. Could we be right on the precipice of a major move to the downside?

John Hussman certainly seems to think so. He is the one that pointed out that we have not seen this sort of a threefold sell signal since just before the last financial crisis. The following comes from Business Insider…

On Tuesday, the number of New York Stock Exchange companies setting new 52-week lows climbed above the number hitting new highs, representing a “leadership reversal” that Hussman says highlights the deterioration of market internals. Stocks also received confirmation of two bearish market-breadth readings known as the Hindenburg Omen and the Titanic Syndrome.

Hussman says these three readings haven’t occurred simultaneously since 2007, when the financial crisis was getting underway. It happened before that in 1999, right before the dot-com crash. That’s not very welcome company.

In fact, every time we have seen these three signals appear all at once there has been a market crash.

Will things be different this time?

We shall see.

If you are not familiar with a “Hindenburg Omen” or “the Titanic Syndrome”, here are a couple of pretty good concise definitions…

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

This Is What A Pre-Crash Market Looks Like

November 13, 2017

This Is What A Pre-Crash Market Looks Like

The only other times in our history when stock prices have been this high relative to earnings, a horrifying stock market crash has always followed. Will things be different for us this time? We shall see, but without a doubt this is what a pre-crash market looks like. This current bubble has been based on irrational euphoria that has been fueled by relentless central bank intervention, but now global central banks are removing the artificial life support in unison. Meanwhile, the real economy continues to stumble along very unevenly. This is the longest that the U.S. has ever gone without a year in which the economy grew by at least 3 percent, and many believe that the next recession is very close. Stock prices cannot stay completely disconnected from economic reality forever, and once the bubble bursts the pain is going to be unlike anything that we have ever seen before.

If you think that these ridiculously absurd stock prices are sustainable, there is something that I would like for you to consider. The only times in our history when the cyclically-adjusted return on stocks has been lower, a nightmarish stock market crash happened soon thereafter…

The Nobel-Laureate, Robert Shiller, developed the cyclically-adjusted price/earnings ratio, the so-called CAPE, to assess whether stocks are likely to be over- or under-valued. It is possible to invert this measure to obtain a cyclically-adjusted earnings yield which allows one to measure prospective real returns. If one does this, the answer for the US is that the cyclically-adjusted return is now down to 3.4 percent. The only times it has been still lower were in 1929 and between 1997 and 2001, the two biggest stock market bubbles since 1880. We know now what happened then. Is it going to be different this time?

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

The Federal Reserve Has Just Given Financial Markets The Greatest Sell Signal In Modern American History

November 6, 2017

The Federal Reserve Has Just Given Financial Markets The Greatest Sell Signal In Modern American History

Why have stock prices risen so dramatically since the last financial crisis? There are certainly many factors involved, but the primary one is the fact that the Federal Reserve has been creating trillions of dollars out of thin air and has been injecting all of that hot money into the financial markets. But now the Federal Reserve is starting to reverse course, and this has got to be the greatest sell signal for financial markets in modern American history. Without the artificial support of the Federal Reserve and other global central banks, there is no possible way that the massively inflated asset prices that we are witnessing right now can continue.

The chart below comes from Sven Henrich, and it does a great job of demonstrating the relationship between the Fed’s quantitative easing program and the rise in stock prices. During the last financial crisis the Fed began to dramatically increase the size of our money supply, and they kept on doing it all the way through the end of October 2017…

Unfortunately for stock traders, the Federal Reserve has now decided to change course, and that means that the process that has created these ridiculous stock prices is beginning to go in reverse. In fact, according to Wolf Richter this reversal just started to go into motion within the past few days…

On October 31, $8.5 billion of Treasuries that the Fed had been holding matured. If the Fed stuck to its announcement, it would have reinvested $2.5 billion and let $6 billion (the cap for the month of October) “roll off.” The amount of Treasuries on the balance sheet should then have decreased by $6 billion.

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

Top Financial Expert Warns Stocks Need To Drop ‘Between 30 And 40 Percent’ As Bankruptcy Looms For Toys R Us

September 19, 2017

Top Financial Expert Warns Stocks Need To Drop ‘Between 30 And 40 Percent’ As Bankruptcy Looms For Toys R Us

Will there be a major stock market crash before the end of 2017? To many of us, it seems like we have been waiting for this ridiculous stock market bubble to burst for a very long time. The experts have been warning us over and over again that stocks cannot keep going up like this indefinitely, and yet this market has seemed absolutely determined to defy the laws of economics. But most people don’t remember that we went through a similar thing before the financial crisis of 2008 as well. I recently spoke to an investor that shorted the market three years ahead of that crash. In the end his long-term analysis was right on the money, but his timing was just a bit off, and the same thing will be true with many of the experts this time around.

On Monday, I was quite stunned to learn what Brad McMillan had just said about the market. He is considered to be one of the brightest minds in the financial world, and he told CNBC that stocks would need to fall “somewhere between 30 and 40 percent just to get to fair value”…

Brad McMillan — who counsels independent financial advisors representing $114 billion in assets under management — told CNBC on Monday that the stock market is way overvalued.

“The market probably would have to drop somewhere between 30 and 40 percent to get to fair value, based on historical standards,” said McMillan, chief investment officer at Massachusetts-based Commonwealth Financial Network.

McMillan’s analysis is very similar to mine. For a long time I have been warning that valuations would need to decline by at least 40 or 50 percent just to get back to the long-term averages.

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

2016: The Year Wishful Thinking Fails

February 16, 2016

2016: The Year Wishful Thinking Fails

If we collectively choose wishful thinking, catastrophic consequences are guaranteed.

Wishful thinking has been an integral driver of the “recovery” 2009-2015:asset bubbles aren’t bubbles, central bank policies are brilliantly successful, unemployment has dropped to levels of full employment, and so on.

The problems with wishful thinking that I describe in my book A Radically Beneficial World are becoming more apparent by the day:

1. Elite/Technocrat self-confirmation: Those in the top technocrat/financial layer of the economy look at their own success and think since the status quo is working great for me and my peers, it’s working for everyone.

2. This wishful thinking reinforces the positive bias of status quo institutions run by the technocrat caste and state apparatchiks: the mainstream financial media, government agencies, etc.

3. Wishful thinking appears less risky that gambling on new ideas that might not pay off; wishful thinking is thus viewed by those benefiting from the status quo as the safe bet.

4. When we face difficult problems, wishful thinking is counter-productive because it doesn’t generate solutions. Wishful thinking satisfies our preference for low-risk comfort, but it doesn’t solve problems.

If you’re running a real enterprise, i.e. one that will bankrupt you if you fail to solve problems, wishful thinking is catastrophic. There are few guarantees in life, but wishful thinking guarantees failure.

Consider a short list of conventional economic/financial beliefs that are shot through with wishful thinking:

— China will manage to slowly depreciate its currency without upsetting the apple carts of global growth and capital flows (never mind that China’s leadership has no history of managing such a transition.)

— Unemployment in the U.S. is less than 5%, a rate that signals full employment and a robust, durable job market (never mind the number of full-time jobs that can support a household remains anemic.)

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

Guess What Happened The Last Time The Price Of Oil Plunged Below 38 Dollars A Barrel?

December 8, 2015

Guess What Happened The Last Time The Price Of Oil Plunged Below 38 Dollars A Barrel?

On Monday, the price of U.S. oil dropped below 38 dollars a barrel for the first time in six years. The last time the price of oil was this low, the global financial system was melting down and the U.S. economy was experiencing the worst recession that it had seen since the Great Depression of the 1930s. As I write this article, the price of U.S. oil is sitting at $37.65. For months, I have been warning that the crash in the price of oil would be extremely deflationary and would have severe consequences for the global economy. Nations such as Japan, Canada, Brazil and Russia have already plunged into recession, and more than half of all major global stock market indexes are down at least 10 percent year to date. The first major global financial crisis since 2009 has begun, and things are only going to get worse as we head into 2016.

The global head of oil research at Societe Generale, Mike Wittner, says that his “head is spinning” after the stunning drop in the price of oil on Monday. Just like during the last financial crisis, we have broken the psychologically important 40 dollar barrier, and there are concerns that we could go much lower from here…

One analyst told CNBC that he believes that we could soon see the price of U.S. oil go all the way down to 32 dollars a barrel…

“We’re in a tug-of-war between a heavily shorted market and a glut of oil in the U.S. and globally, as Saudi Arabia continues to produce oil at elevated levels to maintain market share,” said Chris Jarvis at Caprock Risk Management, an energy markets consultancy in Frederick, Maryland.

“Couple this with a strengthening dollar as the market anticipates a U.S. rate hike this month, oil is heading lower with a near term target of $32 for WTI.”

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

Here Come the Money Helicopters!

October 3, 2015

Here Come the Money Helicopters!

$10 Trillion Goes to Money Heaven

We interrupt our series on what to do if you have no money to bring you an update on those who are losing it. (You can catch up on Parts I and II of that series here and here.)

What was the best place for your money so far in 2015? Cash! Compared to cash, almost everything is down. We are headed for the worst quarter for stocks since 2011, says the lead story in today’s Financial Times.

Global stock markets have lost $10 trillion of their value over the last three months. What? Where did all that paper wealth go? The old-timers say it went to “money heaven.”

One fine morning in money heaven….will it ever rain down again? Of course, no money has actually disappeared. Only make-believe values have. Image credit: Salvatore Vuono

We’re not so sure. But we stop. We stare. We look at it as we would at a corpse. What happened to its life force? Where did it go? Why is it no longer there? We have no answer. But looking at a stock market sell-off is like standing over an open coffin: We are in awe at the power of the gods to take as well as to give.

They ask no one’s permission. They follow their own playbook (which they never reveal to mortals). And they are as much a law unto themselves as the NSA. But what’s $10 trillion that never actually existed anyway? Easy come, easy go, right?

Well… yes… and no. It’s usually a pleasure to welcome a baby, but a funeral can be painful. And every one of those dollars – now headed for heaven or hell – will be missed by someone.

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

What the Heck’s Happening to the Global Stock Markets?

September 27, 2015

What the Heck’s Happening to the Global Stock Markets?

According to our soothsayers, when the Fed decided to keep interest rates where they’ve been since 2008, at near zero, rather than raise them, it should have triggered a big stock-market rally. But that’s not what happened.

Or rather, it triggered some rallies, but soon the hot air hissed out of them and they deflated. That’s what’s different this time: apparently nothing can keep these stocks propped up at these dizzying levels, not even the Fed.

Friday in the US, stocks rallied at the open, and by 1 PM, the S&P 500 hit 1,953, up 1% intraday and looking strong, when you could suddenly hear the hot air hissing out of it. In two hours it plunged 31 points to 1,922, before bouncing at the last hour to close down 1 point.

That left it down 1.4% for the week and 6.2% for the year. It’s down “only” 9.4% from its all-time high in May, with a lot more room to fall. Despite its nerve-wracking daily gyrations, it has gone absolutely nowhere since June 12, 2014.

The most hated asset class of all

The asset class that the Fed has been trying to render as appealing as a mildewed wet blanket – cash in bank – handily beat the S&P 500 without all the gray hairs and fees.

The Nasdaq wasn’t quite so sanguine on Friday, however. It opened up 51 points, at 4,785, then relentlessly dropped 126 points, for a 2.5% swing, before bouncing off a little at the end and closing at 4,686, down 1% for the day, and 3% for the week. Now it’s back where it had been on November 13, 2014, and in March 2000.

The Dow remained in the green all day despite its gyrations and closed up 0.7%. At 16,314, it’s down 0.4% for the week and back where it had been on Christmas Eve 2013. Yup.

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

Cheap Oil A Boon For The Economy? Think Again – The Automatic Earth

November 30, 2014

Cheap Oil A Boon For The Economy? Think Again – The Automatic Earth.

I thought it might be a nice idea to question a certain someone’s theories using their own words, while at the same time showing everybody what the dangers are from falling oil prices. There are many ‘experts and ‘analysts’ out there claiming that economies will experience a stimulus from the low prices, something I’ve already talked about over the past few days in The Price Of Oil Exposes The True State Of The Economy and OPEC Presents: QE4 and Deflation. And I’ve also already said that I don’t think that is true, and I don’t see this ending well.

Today, our old friend Ambrose Evans-Pritchard starts out euphoric, only to cast doubt on his self-chosen headline. He’d have done better to focus on that doubt, in my opinion. And I have his own words from earlier in the year to support that opinion. Ambrose is bad at opinions, but great at collecting data; his personal views are his achilles heel as a journalist. That’s maybe why he fell into the propaganda trap of picking this headline; after all, if you write for the Daily Telegraph you’re supposed to write positive things about the economy.

Oil Drop Is Big Boon For Global Stock Markets, If It Lasts

Tumbling oil prices are a bonanza for global stock markets, provided the chief cause is a surge in crude supply rather than a collapse in economic demand

Roughly one third of the current oil slump is a shortfall in expected demand, caused by China’s industrial slowdown and Europe’s austerity trap. The other two thirds are the result of a sudden supply glut, which Saudi Arabia and the Gulf states have so far chosen not to offset by cutting output. This episode looks relatively benign. Nick Kounis from ABN Amro says it will add $550 billion of stimulus to world markets. “That is fantastic news for the global economy,” he said. But it comes at a time when stocks are already high if measured by indicators of underlying value. The Schiller 10-year price earnings ratio is at nose-bleed levels above 27.

Tobin’s Q, a gauge based on replacement costs, is stretched to near historic highs. Andrew Lapthorne from SocGen says the MSCI world index of stocks has risen 38% over the last three years but reported profits have risen just 3%. “Valuations, as measured by median price to cash flow ratios, are near historical highs. As US QE has come to an end, depriving the world of $1 trillion printed dollars a year, there are plenty of reasons to be nervous,” he said.

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

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