{"id":16611,"date":"2016-01-18T11:04:55","date_gmt":"2016-01-18T16:04:55","guid":{"rendered":"http:\/\/olduvai.ca\/?p=16611"},"modified":"2016-01-18T11:05:19","modified_gmt":"2016-01-18T16:05:19","slug":"consensual-hallucination-fades-global-stocks-crushed","status":"publish","type":"post","link":"https:\/\/olduvai.ca\/?p=16611","title":{"rendered":"Consensual Hallucination Fades, Global Stocks Crushed"},"content":{"rendered":"
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Consensual Hallucination Fades, Global Stocks Crushed<\/a><\/h3>\n<\/header>\n
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Something big has changed.<\/strong><\/div>\n

Stock markets around the world are getting crushed. Some markets are down 20%, 30%, 40%, or more, even those where central banks are pursuing a scorched-earth wealth-effect strategy of mega-QE and\u00a0negative-interest-rate policies. Something big has changed.<\/p>\n

Early Thursday morning, I posted an article [When \u201cStory Stocks\u201d Crash Like this, the Market is Kaput<\/a>] that mentioned as an aside the inevitable \u2014 that there would certainly be \u201ca rally someday that lasts longer than a few hours.\u201d Because in US stocks in 2016, there hadn\u2019t been such a rally.<\/p>\n

That \u201crally\u201d came on Thursday. And it did last \u201clonger than a few hours.\u201d It lasted the entire day! But on Friday, all heck re-broke lose, creating for US stocks what\u00a0MarketWatch<\/a>\u00a0poetically titled, the \u201cworst 10-day start to a year in history.\u201d<\/p>\n

A market that can\u2019t put together a dizzying rally after what it has been through for the past three weeks is in serious trouble. And this sort of display of risk aversion into the weekend shows that investors have lost confidence in the markets.<\/p>\n

The rout on Friday ignited in Asia, with the Shanghai Composite plunging 3.5% to 2,901, the lowest since December 2014, right through the Maginot Line that the Chinese government last summer vowed\u00a0to\u00a0defend. But the \u201cnational team\u201d apparently sat at the sidelines. The index plunged 9% for the week. It\u2019s off 44% from the high in June 2015. Since then, over $5 trillion in fake wealth has re-dissolved into polluted\u00a0air.<\/p>\n

The 25% rally in between is gone. It punished all those who\u2019d acted on Goldman Sachs\u2019\u00a0prediction<\/a>\u00a0last July that Chinese stocks would rally. The Chinese government and government-owned enterprises are big clients of Goldman, and a little favor goes a long way.<\/p>\n

For the daily details, hover over the interactive chart:<\/p>\n

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