Tag Archives: Stock Market

Reality Dawning, by Sven Henrich

There are all sorts of indications that a recession is coming. From Sven Henrich at northmantrader.com:

Yesterday’s announcement by the Trump administration to delay some of the new tariffs on China it just announced a few weeks ago was initially greeted with relief by equity markets across the globe. This proved to be mistake as reality is dawning and global stock markets are selling off hard just a day later on ever weakening economic data in Europe and Asia and further yield curve inversions.

Call it a major hangover as the reversal in tariffs was not coming from a position of strength, it was coming as a result of global economic reality sinking in, a reality that is making its way rapidly to US shores as well. The collapse in global yields has been a theme since October of 2018 with the US 10 year dropping to 1.6% from its October 2018 high of 3.25%, but only now that the 2 year/10 year yield curve has inverted are the official recession alarm bells ringing. Why? Because every single recession in the past 45 years has seen a 2 year/10year yield curve inversion preceding it.

To believe no recession is coming is to argue that this inversion is defying history. And indeed let’s look at history, because it is now used to argue that this yield curve inversion leaves room for further market rallies to new highs. Does it?

If history is a guide, then the answer is yes but market relevant timing can vary quite a bit and depending on how the data is framed up you can get different conclusions.

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Could Stocks Rally Even as Parts of the Economy Are Recessionary? by Charles Hugh Smith

SLL’s bet is that the stock market swoon is predictive, but we’re willing to entertain other views. From Charles Hugh Smith at oftwominds.com:
It’s not yet clear that the stock market swoon is predictive or merely a panic attack triggered by a loss of meds.
We contrarians can’t help it: when the herd is bullish, we start looking for a reversal. When the herd turns bearish, we also start looking for a reversal.
So now that the herd is skittishly bearish, anticipating a recession, contrarians start wondering if a most hated rally is in the offing, one that would leave most punters off the bus.
The primary theme for 2019 in my view is everything accepted by the mainstream is not as it seems. Everything presented as monolithic and straightforward is fragmented, asymmetric and complex.
Take “recession.” The standard definition of recession is two consecutive quarters of negative GDP. But is this metric useful in such a fragmented, complex economy? What we’re seeing develop is certain sectors are already in recession, others are sliding while others are doing OK.
So the question of stocks rising or falling partly depends on which parts of the economy are most heavily weighted in the stock market. If the sectors most heavily represented by listed stocks are doing OK, then other chunks of the economy can be in freefall and stocks could still rise.

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The Ugly Truth, by Sven Henrich

The evidence piles up that the long-running bull market is over and things are going to get ugly. From Sven Henrich at northmantrader.com:

For years critics of central bank policy have been dismissed as negative nellies, but the ugly truth is staring us all in the face: Market advances remain a game of artificial liquidity and central bank jawboning and not organic growth and now the jig is up. As I’ve been saying for a long time: There is zero evidence that markets can make or sustain new highs without some sort of intervention on the side of central banks. None. Zero. Zilch.

And don’t think this is hyperbole on my part, I will present the evidence of course.

In March 2009 markets bottomed on the expansion of QE1 which was introduced following the initial QE1 announcement in November 2008. Every major correction since then has been met with major central bank intervention. QE2, Twist, QE3 and so on.

When market tumbled in 2015 and 2016 global central banks embarked on the largest combined intervention effort in history to the tune of over $5 trillion between 2016 and 2017 giving us a grand total of over $15 trillion in central bank balance sheet courtesy FOMC, ECB and BOJ:

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The “Stock Market Crash Of 2018” Is Rapidly Transforming Into “The Financial Crisis Of 2019”, by Michael Snyder

Nothing goes up forever, and when stock markets stop going up, it often means the economy will go down, too. From Michael Snyder at theeconomiccollapseblog.com:

Stock markets are crashing all over the world, we are seeing extremely violent “flash crashes” in the forex marketplace, economic conditions are slowing down all over the globe, and fear is causing many investors to become extremely trigger happy.  The stock market crash of 2018 wiped out approximately 12 trillion dollars in global stock market wealth, but things were supposed to calm down once we got into 2019.  But clearly that is not happening.  After Apple announced that their sales during the first quarter are going to be much, much lower than previously anticipated, Apple’s stock price started shooting down like a rocket and by the end of the session on Wednesday the company had lost 75 billion dollars in market capitalization.  Meanwhile, “flash crashes” caused some of the most violent swings that we have ever seen in the foreign exchange markets…

It took seven minutes for the yen to surge through levels that have held through almost a decade.

In those wild minutes from about 9:30 a.m. Sydney, the yen jumped almost 8 percent against the Australian dollar to its strongest since 2009, and surged 10 percent versus the Turkish lira. The Japanese currency rose at least 1 percent versus all its Group-of-10 peers, bursting through the 72 per Aussie level that has held through a trade war, a stock rout, Italy’s budget dispute and Federal Reserve rate hikes.

This is the kind of chaos that we only see during a financial crisis.

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Which Side Are You On? by James Howard Kunstler

America’s corrupt economy and way of life are headed for a crack-up, regardless of anything President Trump may or may not do, but the mainstream media is blissfully oblivious. From James Howard Kunstler at kunstler.com:

You had to love the narrative that the financial media put over about the 1000-plus point zoom in the DJIA on Wednesday: that pension funds were “rebalancing” their portfolios. It dredged up the image of a drowning man at the bottom of the deep blue sea with an anchor in one hand and an anvil in the other, switching hands.

Thursday’s last minute 900-point turnaround was another marvelous stunt to behold. Somebody gave the drowned man a pair of swim fins to kick himself furiously to the surface for a gulp of air. The truth, of course, is that pension funds are sunk, however you balance their investment loads while they’re underwater. They over-bought stocks out of sheer desperation during ten years of near-ZIRP bond yields, and started rotating back into bonds as they crept above the ZIRP handle, and now with bond yields retreating, they’re loading up again on still-overpriced stocks that pretend to be “bargains.” Everybody knows that this will not end well for pension funds. Glug Glug.

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These 8 Red Flags Warn Us We’re Speeding Toward an Economic Collapse RIGHT NOW, by Daisy Luther

We’ve been speeding toward economic collapse for a long now, but maybe the capitalized RIGHT NOW means it’s just around the corner. From Daisy Luther at theorganicprepper.com:

This isn’t exactly an article loaded with Christmas cheer, but there’s a very good reason that my family has strictly limited our holiday splurges this year. It’s because all the signs right now seem to indicate the US is hurtling toward an economic collapse.

It’s inevitable, of course. Our economy has been artificially propped up for decades, since abandoning the gold standard. We’re $21 trillion dollars in debt, an unfathomable number. The fact that other countries still lend us money boggles the mind. If the United States was a person with such a high ratio of debt that we aren’t paying off, we wouldn’t even be able to buy a car with one of those 25% interest loans, that’s how bad our credit would be.

Not only that, but there are some parties who seem to want to see the economy go belly up for their own greedy and nefarious purposes.

Here are the red flags that have me concerned about an imminent economic collapse.

The stock market is crashing.

Right now, the market is on track for a month that is equivalent to the crash of 1929, when the Great Depression began.  Both the Dow Jones Industrial Average and the S&P 500 are down by 8% during a month that is usually really good. Michael Snyder reported:

The ferocity of this stock market crash is stunning many of the experts, and many investors are beginning to panic.  Back in early October, the Dow hit an all-time high of 26,951.81, but on Monday it closed at just 23,592.98.  That means that the Dow has now plunged more than 3,300 points from the peak of the market, and many believe that this stock crash is just getting started. (source)

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Corporate Share Buybacks Looking Dumber By The Day, by John Rubino

Somehow this is legal: stock-option laden managements authorize their corporations to buy back shares, often with borrowed money, thus theoretically supporting the share price and enriching management. It doesn’t always work out, especially when the stock market goes down. From John Rubino at dollarcollapse.com:

A recent MarketWatch article notes that:

GE was one of Wall Street’s major share buyback operators between 2015 and 2017; it repurchased $40 billion of shares at prices between $20 and $32. The share price is now $8.60, so the company has liquidated between $23 billion and $29 billion of its shareholders’ money on this utterly futile activity alone. Since the highest net income recorded by the company during those years was $8.8 billion in 2016, with 2015 and 2017 recording a loss, it has managed to lose more on its share repurchases during those three years than it made in operations, by a substantial margin.

Even more important, GE has now left itself with minus $48 billion in tangible net worth at Sept. 30, with actual genuine tangible debt of close to $100 billion. As the new CEO Larry Culp told CNBC last Monday: “We have no higher priority right now than bringing those leverage levels down.” The following day, GE announced the sale of 15% of its oil services arm Baker Hughes, for a round $4 billion.

Of course, since that sale values Baker Hughes at $26 billion, and GE paid $32 billion for 62% of Baker Hughes as recently as last year, which looks to me like a valuation for the whole company of $52 billion, GE shareholders appears to have lost half the value of their investment in Baker Hughes in about 18 months.

But GE is just one of several hundred big companies with CEOs who now have to justify a massive, in some cases catastrophic waste of shareholder cash.

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