Tag Archives: Stock Market Crash

Business, Crypto, Observation, Stock Market

The September Swoon has Started: Nasdaq drops 2.83%, collapse blamed on bond rate rise

Above: Photo Collage / Lynxotic

Bond jump should have been seen coming, yet the reaction is nevertheless a big rush to the exits

In what some are calling a Taper Tantrum, the markets dropped with a sense of purpose today, with little bounce after the close in the futures market. With Fed rate hikes now a certainty, inflation concerns real, and bond yields spiking today, there were plenty of things to point to as catalysts.

This could be, and this is extremely likely regardless of what endless permanent-bull commentators would have you believe, the start of a tough two months, with late September and October being known as a very dangerous time in markets, especially whey they exhibit pre-crash signs and warnings.

Insane valuations that have preceded past September / October disasters are back

It’s unbelievable that the fall of 2008, when the financial crisis came to a head with the Lehman Brothers collapse, was 13 years ago, and the prior peak in November 2007 was a full 14 years.

I guess we can observe that we now have the iPhone 13, with the iPhone “1” which was just called “iPhone” at the time, has been marking the time with yearly iterations, not always named in sequence:

iPhone: June 29, 2007

iPhone 3G: July 11, 2008

iPhone 3GS: June 19, 2009

iPhone 4: June 24, 2010

iPhone 4S: October 14, 2011

iPhone 5: September 21, 2012

iPhone 5S & 5C: September 20, 2013

iPhone 6 & 6 Plus: September 19, 2014

iPhone 6S & 6S Plus: September 19, 2015

iPhone 7 & 7 Plus: September 16, 2016

iPhone 8 & 8 Plus: September 22, 2017

iPhone XS, XS Max: September 21, 2018

iPhone 11, Pro, Pro Max: September 20, 2019

iPhone 12, Mini, Pro, Pro Max: October 23, 2020

iPhone 13, Mini, Pro, Pro Max, September 24, 2021

And during all these years, for the most part the artificially inflated Fed “bubble of everything” has continued.

Here is a disturbing chart, courtesy of Elliott wave International at Elliottwave.com:

This behavior, seen across nearly all markets since extreme measures were taken to respond when the March 2020 pandemic crash occurred, has been building to a crescendo. And today was a tiny pin-prick that could augur ill for October.

What this has led to, naturally, is an overvaluation beyond anything seen in modern times, perhaps 500 years. The previous all-time-peak for overvalued stocks (S&P) was in March 2000. August 2021 is far beyond that peak and likely will stand as the most overvalued moment for decades.

Above: photo courtesy of Elliott Wave International

Unless, that is, somehow the insane valuations are pushed even higher. Which is unlikely, but not impossible, given the state of delusional euphoria that pervades the financial markets.

Many 2021 characteristics, such as the Crypto, NFT frenzy will be seen in a similar light to the tech stocks in 2000 or Real estate in 2007

There’s a sense that it is normal for bored apes NFTs to experience a multimillion dollar bidding wars, or for crypto alt coins with dog mascots to explode 10,000% or more during this, possibly final phase, of what has been called the “everything bubble”.

And why not? If you bought and held almost anything in March 2009 or again at the bottom of the crash on March 16, 2020, then you have seen nearly continuous gains that you’d be eager to risk on, well, anything.

And if you were 10 years old in the year 2000, you’d not have known about NASDAQ drops that take around 13 years to regain what was lost after a 1 year bear market, so why worry?

Perhaps the Fed and the markets seemingly infinite ability to expand and inflate will go on for years. Or the next bear, possibly the one that already kicked off today, and will accelerate into October, is one to take seriously.

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Books, Business, Economics, Stock Market

Looming Economic Collapse and Ways to Prepare; Historic Echos and Warnings

Photo Collage / Book Publishers

2008 and it’s Aftermath was a Wake Up Call that was Heeded by Virtually No-one

There are many good films on the economic collapse of 2008 (The Big Short is a favorite), also known as “The Great Recession” for fear of using the “D” word. Books too have opined on the lessons learned and, in some cases, taken dubious credit for the “rescue” of the world economy.

Read More: Conspiracy Theories are gaining adherents like never before: where’s the Reality?

Watched or read closely, these books, with the exclusion of the self-congratulatory ones mentioned above, all point to a sobering conclusion: the underlying issues that nearly led to a protracted worldwide economic collapse were not solved or fixed but “the can was simply kicked further down the road”.

Unfortunately, they also agree that “further down the road”, currently around 11 years later, translates to “soon”. Accordingly, we’d all be wise to revisit the 2008 crisis and read some of the conclusions, in detail, that have been drawn from a deeper study of the remaining and very serious issues faced as we go further forward into the 2020’s.

So much of our destinies are tied to economics, it is always a wise area to begin to look for solutions to all macro-dilemmas 

Of course, now, in a crowded life-raft of a planet, we also have the rising threat of Climate Change, the ongoing and terrifying challenges associated with global pandemics and sociopolitical trends, that point towards anything but harmonious co-operation, within and between societies around the world. 

All the more reason to embrace what at times appears to be the lone bright spot, in this saga of seemingly-endless doom and gloom: we have educational resources available and the modern marvel of human-networked-communication devices (a.k.a. the internet and the software and hardware we use to access it), is becoming a more powerful ally by the hour. 

Here are books we highly recommend to start your journey towards your heroic contributions to finding solutions and hope, as we look to the future:

The Great Devaluation: How to Embrace, Prepare, and Profit from the Coming Global Monetary Reset

Click here to see “The Great Devaluation”
and help Independent Bookstores.
Also available on Amazon.

The Great Devaluation is the #1 bestselling book that explains why the real crisis facing the world today is not the Coronavirus. The real crisis facing the world is explosive government debt and deficits. Governments are now left with no choice but to spend more than they make, borrow more than they can ever repay, and devalue their currencies to cover it all up.

Former Hollywood storyteller Adam Baratta brings monetary policy to life in this follow-up to his national bestseller, Gold Is A Better Way. You’ll learn how and why Federal Reserve polices have facilitated an explosion in government debt and have systematically undermined the world financial system in the name of profit. The result? An out of control system where financial inequality has become a ticking time bomb set to blow up the global economy. Click here to see “The Great Devaluation” and help Independent Bookstores. Also available on Amazon.

Crashed: How a Decade of Financial Crises Changed the World

Click here to see “Crashed”
and help Independent Bookstores.
Also available on Amazon.

We live in a world where dramatic shifts in the domestic and global economy command the headlines, from rollbacks in US banking regulations to tariffs that may ignite international trade wars. But current events have deep roots, and the key to navigating today’s roiling policies lies in the events that started it all–the 2008 economic crisis and its aftermath.

Despite initial attempts to downplay the crisis as a local incident, what happened on Wall Street beginning in 2008 was, in fact, a dramatic caesura of global significance that spiraled around the world, from the financial markets of the UK and Europe to the factories and dockyards of Asia, the Middle East, and Latin America, forcing a rearrangement of global governance. With a historian’s eye for detail, connection, and consequence, Adam Tooze brings the story right up to today’s negotiations, actions, and threats–a much-needed perspective on a global catastrophe and its long-term consequences. Click here to see “Crashed” and help Independent Bookstores. Also available on Amazon.

Manias, Panics, and Crashes: A History of Financial Crises, Seventh Edition

Click here to see “Manias, Panics, and Crashes”
and help Independent Bookstores.
Also available on Amazon.

This seventh edition of an investment classic has been thoroughly revised and expanded following the latest crises to hit international markets. Renowned economist Robert Z. Aliber introduces the concept that global financial crises in recent years are not independent events, but symptomatic of an inherent instability in the international system.

Covering such topics as the history and anatomy of crises, speculative manias, and the lender of last resort, this book puts the turbulence of the financial world in perspective. Click here to see “Manias, Panics, and Crashes” and help Independent Bookstores. Also available on Amazon.

The Fed and Lehman Brothers: Setting the Record Straight on a Financial Disaster

Click here to see “The Fed and Lehman Brothers”
and help Independent Bookstores.
Also available on Amazon.

The bankruptcy of the investment bank Lehman Brothers was the pivotal event of the 2008 financial crisis and the Great Recession that followed. Ever since the bankruptcy, there has been heated debate about why the Federal Reserve did not rescue Lehman in the same way it rescued other financial institutions, such as Bear Stearns and AIG. The Fed’s leaders from that time, especially former Chairman Ben Bernanke, have strongly asserted that they lacked the legal authority to save Lehman because it did not have adequate collateral for the loan it needed to survive.

Based on a meticulous four-year study of the Lehman case, The Fed and Lehman Brothers debunks the official narrative of the crisis. It shows that in reality, the Fed could have rescued Lehman but officials chose not to because of political pressures and because they underestimated the damage that the bankruptcy would do to the economy. The compelling story of the Lehman collapse will interest anyone who cares about what caused the financial crisis, whether the leaders of the Federal Reserve have given accurate accounts of their actions, and how the Fed can prevent future financial disasters. Click here to see “The Fed and Lehman Brothers” and help Independent Bookstores. Also available on Amazon.

Too Big to Fail: The Inside Story of How Wall Street and Washington Fought to Save the Financial System–And Themselves

Click here to see “Too Big to Fail”
and help Independent Bookstores.
Also available on Amazon.

Brand New for 2018: an updated edition featuring a new afterword to mark the 10th anniversary of the financial crisis. The brilliantly reported New York Times bestseller that goes behind the scenes of the financial crisis on Wall Street and in Washington to give the definitive account of the crisis, the basis for the HBO film.

In one of the most gripping financial narratives in decades, Andrew Ross Sorkin–a New York Times columnist and one of the country’s most respected financial reporters–delivers the first definitive blow-by-blow account of the epochal economic crisis that brought the world to the brink. Through unprecedented access to the players involved, he re-creates all the drama and turmoil of these turbulent days, revealing never-before-disclosed details and recounting how, motivated as often by ego and greed as by fear and self-preservation, the most powerful men and women in finance and politics decided the fate of the world’s economy. Click here to see “Too Big to Fail” and help Independent Bookstores. Also available on Amazon.

Crash of 2008 and What It Means: The New Paradigm for Financial Markets

Click here to see “The Crash of 2008“
and help Independent Bookstores.
Also available on Amazon.

In the midst of one of the most serious financial upheavals since the Great Depression, George Soros, the legendary financier and philanthropist, writes about the origins of the crisis and proposes a set of policies that should be adopted to confront it.

Soros, whose breadth of experience in financial markets is unrivaled, places the crisis in the context of his decades of study of how individuals and institutions handle the boom and bust cycles that now dominate global economic activity. In a concise essay that combines practical insight with philosophical depth, Soros makes an invaluable contribution to our understanding of the great credit crisis and its implications for our nation and the world. Click here to see “The Crash of 2008 and What it Means” and help Independent Bookstores. Also available on Amazon.

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Breaking News, Coronavirus, Stock Market

Dow Drops Nearly 3000 points – -12.93 percent after Surprise 1% Fed rate cut has no Juice

Photo / Adobe Stock

Bear has begun and shows no signs of Returning to Cave anytime soon

Historic is hardly the word for it. At times like these it seems like we have to repeat to ourselves “it’s just stock prices”. The VIX, a measure of “fear” in colloquial terms, rose 40% to hit the highest point in history at 80, two points above the level that it was at on two previous occasions. Both of those previous occasions were during the 2008 financial crisis.

The unique fact in the mix, this time around, is that these extreme readings in the fear gauge and the obvious volatility that has the Dow up and or down one thousand to three thousand points on any give day and it’s almost “normal” is all happening barely a month from the all time high that was reached on Feb 12th.

And therein, as they say, lies the rub. The bear market that started last week, based on the common but meaningless measurement of a 20% drop from that high, likely has a long time yet to go. Naturally there will be ferocious short covering rallies and even, eventually, slow days without mega up or down moves. But just because the percentages from the high are large, or because the VIX is at its all time high, does not mean that the bear market will be over soon.

The novel coronavirus is clearly a serious event and will cause disruption both economically and in the disruption of our daily lives, but the bear market that was, in truth, long overdue would have happened eventually in any case as bear markets always follow bull markets eventually. The concern is that the remedies and actions by the Fed and the political establishment never addressed the underlying causes and weaknesses of the entire system during the 2008 crisis, dooming us all to re-live that terrible time, potentially with an even more extreme set of circumstances.

Let’s hope that both the health crisis and the parallel financial crisis will be less dangerous and less extreme than it would appear on a day like this one.

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Business, Observation, Stock Market

Dow Plunges in Largest 1-Day Point Drop in History – and it’s Still not Because of the Coronavirus

Photo Collage / Lynxotic – Various

Down nearly 4000 points in Five Days in Correction Territory, but Bear is Still Hiding in Plain Sight

At the time of this writing the DJIA futures are down nearly 400 additional points (1.54%) at 25,161. As is often the case at major market turning points there is talk of corrections (commonly measured as a drop of 10% but less than 20%) and, naturally, afterwards, a probable return to all time highs.

There are ridiculous attempts to “blame” the drop on the election, Bernie Sanders, The Corona Virus and even an intentional combination of all of the above to sabotage Trump’s re-election hopes.

The financial press has a similar job to the President, to calm fears. That’s why there are numerous articles that all say the same thing: don’t worry, corrections are healthy, by definition they represent a decline of 10% or more – and are not the start of a Bear Market. Unless they are.

There are articles advising to buy the dip, or to wait a little longer and then buy the dip. There are literally dozens of articles saying that virtually 100% of the downturn is based on “fears” that can be directly attributed to the Coronavirus.

More honest are the articles that use the word “amid” as in “Dow tumbles almost 1,200 points, 124-year record, amid coronavirus scare”. The word amid implying that the two things – the scare and the drop in stocks are in proximity, yet not necessarily a case of causation and causal correlation.

Naturally, being a part of the world economic situation, the virus and fears that it will spread and become a Pandemic have an impact. But 100%? As if all sellers are literally freaking out together about precisely this one thing?

Just as Summer leads to Fall and Fall Leads to Winter, there’s another Explanation the we should All Consider

The minority of the media weighing in, and from anecdotal evidence it is a tiny, tiny faction of the whole, actually mention the most likely and even obvious “cause” for the market showing a very strong propensity for decline at this juncture. The fact that Bull markets always end eventually and are followed by Bear markets.

Further, that the many all time highs that Trump has been touting at every opportunity were, in reality, the last throes of a bull market that was juiced in every possible way, initially to stimulate the economy after the 2008 “Great Recession” and, more recently, at Trump’s prodding, to help with his re-election efforts.

Optimism has been off the charts, and investing and paying insane sums to invest in companies that have zero profits was, until very recently, considered by many a permanent condition that would just keep expanding, along with the beneficiaries.

So, in the midst of all kinds of likely causes and reasons, the most obvious, the most likely, the most logical and the reason that is being emphasized by the extent that it is being ignored and ruled out stands out clearly, like a beacon in the fog.

A long overdue Bear Market has started. Just as with a virus threatening our health, it is best to be prepared if there is a chance ( possibly, a very significant chance) that it is coming.

Say the B Word, have no Fear, as Forewarned is Forearmed

So, rather than being behind the curve as wishful thinking grips us and makes literally any other explanation than the obvious one more attractive, it’s best to at least come to grips with the Bear Market scenario.

If this is the start of a Bear Market phase, here is what will happen next. This initial drop will continue for hours or days longer but not weeks. That will be followed by a rebound, possibly sharp, that will last a few weeks or even longer – climbing and clawing up takes longer than a straight drop.

Then, right around the time that all the articles are saying the worst is probably over, that all time highs are possible even likely, the next down phase will come. It will be at least as strong and deep as the current one and once it is about halfway through it’s decline many will begin to change perspective and become pessimistic for the first time in years.

So, prepare and be safe, both regarding your health, and finances. Hope for the best but prepare for the worst or, at least, the unanimously unexpected.

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Business, Stock Market

Black Swan? Coronavirus? Bernie Sanders? None of these are the reason for the Huge Stock Drop This Week

And, no, this is not a Conspiracy to Stop Trump from Getting Re-elected

This week, so far, the Dow Jones Industrial Average lost over 1900 points in two days. Although the percentages were not record breaking the point totals qualified as the third and fourth highest loses ever. In the S&P the two day loss percentage was the largest since 2015: 6.3%, while the dollar calculation in market value for that same index was $1.7 trillion, as tabulated by S&P Dow Jones Indices.

In addition to the supposed calculations above the an all time record low for the 10-year Treasury yield was also noted. It is possible that in some cosmic way all of these factors played a role, except perhaps Trump’s delusional conspiracy theory.

You can be sure that if the market continues to decline in a prototypical Bear market pattern, the President will twist this theory and any other that comes to mind in an effort to blame anyone and anything. And, in truth, the coming issues trace back to the stimulus “rescue” actions (TARP) taken in 2008 and many actions not taken since. However, that does not absolve the current occupant of the White House of his ill-advised self-congratulations each time the market made new highs.

There is a perverse tendency to ascribe correlation to virtually anything that is negative in the news on a given day to a concurrent stock market decline. The same bad news on a day the markets rise suddenly morphs into strong “shrugging off” of the “headwinds” or are seen as proof of a “resilient” bullish potential.

From the Ridiculous to the Sublime, Creative Explanations for the Consecutive Down Days Abound

How about Senator and Presidential candidate Bernie Sanders causing $1.7 trillion in losses by threatening to become the democratic nominee – which could happen maybe in July? Or it’s just a “Black Swan” out of nowhere a one in a trillion event that is aimed at some specific detail in your life – like Trump projecting that this is all a plot to ruin his re-election hope. All just reasons to pretend that Bull markets are not followed, inevitably, by Bear markets, which, unfortunately they always are.

However, as counterweight to that pattern of assuming a correlation where there is none, are other facts. Such as the fact that the Coronavirus has been known and killing people for months and during that entire time the markets have risen substantially.

And, further, these kinds of superficial causality explanations fail to add context of anything beyond news stories. For example, this has been a nearly 11 year Bull market, the longest in history and more than twice as long as the 4.5 year average.

The measurements that show a likely peak in sentiment and a potential end (bull markets are always followed by bear markets, without exception) to the climb have been flashing red for some time. Of course, since many pundits are invested, literally, in an endless continuation of rising stock prices, there are those that argue that there were several tiny baby bear markets during the last decade, which would negate the longest ever status.

Many indicators and the wise predictors among asset managers are pointing towards at least a drop of 38% likely, which would qualify as a Bear market, but that is also a very conservative estimate.

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Further, if available data and common sense are taken into consideration, it is possible that the markets could regain what has been lost in the last week and once again enter positive territory for the year. It is not likely, however, that any such bounce would be anything beyond a temporary respite before the Bear is back.

And the Cornavirus? We all hope that it will be contained and we can all rest a little easier. But don’t plan on stocks having a lock on the ups and downs of that saga, anymore that they are trading in lock-step with the trade war with China, for example. It is absolutely possible that both of those issues could be resolved and have no positive impact on stock prices whatsoever. Of course, if that happened there would be a new convenient scapegoat waiting in the wings.

All that being said, for anyone holding substantial sums in the markets, or if you happen to be an incumbent President, there is a dose of double trouble in the wind. Both the rapid plunge in stock prices and the rise of a potential global pandemic are negative and scary. One just doesn’t happen to be the cause of the other.

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Economics, Stock Market

Stocks Dive, Trump Goes Berserk: It’s Not Sexy, but the Inverted Yield Curve has Never Been Wrong

Stocks decline a day after Trump gave the markets a jolt of optimism…

Truth is, no one knows why stocks bounce one day and collapse the next. Yesterday, the reduction in trade war tensions, due to the postponement of a tariff increase, was credited with the surge in market prices.

Today, all major indices are down around 3%, while the VIX, known as the “fear index” spiked 20% higher, and there are plenty of factors that may have set the sell-off in motion:

This time, it’s the inversion of the yield curve that is given the blame, primarily, for the Dow Jones Industrial Average being down, at the end of Wednesday’s session, over 800 points. Asleep yet?

Don’t worry, this won’t take long: 

The Mysterious Yield Curve, Deconstructed

When shorter dated bonds, bonds that “mature” sooner, have higher yields (pay a higher percentage in interest) than longer dated ones, that’s an inverted yield curve. Inverted, because, it is not “normal” to be paid more for taking less risk, that is to say, holding a bond for a shorter period of time. Also, it’s not logical. 

Unless, in theory, people are seeing the near term risk as higher than the long term one. Which, honestly, may or may not be accurate, but perception is all and all.

And this is not the first inversion lately. For several months, since March, the 3-month yield rose above the 10-year, then again in July and has remained so. However, today it’s the 2-year vs. the 10-year, and it is considered the “main” pair, and that’s what got the ball rolling down hill. 

Extremes are also a concern. For example, the 30-year Treasury yield dropped to it’s lowest rate ever at 2.05%.

And, to top it all off, the snowball begins to roll when the 2-year vs. 10-year curve inverts, particularly due to the history of what happens after this phenomena occurs. 

The R word. Yes, recession. Not sometimes. Always. At least so far. 

Not necessarily right away. The first inversion prior to the 2008 financial crisis was in December of 2005. However, according to the Fed Bank of Cleveland, a recession can generally be expected approximately one year after the yield curve inverts. 

Trump Goes Berserk. Blames Fed Chairman and the “Crazy” Curve!

Does this guy sound worried?

Germany and China Numbers and That Pesky Trade War that Tariff-man loves so much

Ok, that’s pretty much the bond story. Other factors weighing on stock prices? There’s that pesky trade war with China which, yesterday’s jubilation notwithstanding, is not over. Not by a long shot. 

Then, in came the news that Germany’s GDP contracted for the first time in ten years. What has been called the “Golden Decade” for the mighty Teutonic economy, the world’s 4th largest, is now officially at an end. 

This, again, ties back to the trade wars as Germany is an export driven economy and exports to the US and China, (who, as we know are locked in their battle over trade) primarily and mainly cars. Car sales, particularly in China, are very weak. In China the sales figure have gone down for the last 13 months. 

Also in China, industrial production, it was announced, in July of 2019 was weaker than for the same month in 2018. Still a positive number, mind you, at 4.8%, but the lowest growth percentage in 17 years. 

Other economic numbers for the Chinese economy, also announced today, were weak in many key segments. Retail sales were less than expected and unemployment is on the rise. All in all, a gloomy report for what has been the rising star on the world stage in terms of growth. 

Plenty of Triggers, not many Rainbows

So, if we are looking for reasons why people in the stock markets, generally, might be in the mood to sell, we can point to these factors, not to mention political dangers in Asia with the ongoing Hong Kong protests, and tension. 

Although sometimes people sell just to sell (often politely called “profit taking”) this appears to be something else. 

Also, while it is too early to say that any positive effect will arise in trade talks, with the US and China both feeling weaker and therefore more accommodating, that is, at least one possible silver lining. 

Another is that, for the first time in all recorded history of the bond market, the inversion might not lead to a recession, after all.

Find books on Big Tech, Sustainable Energy, Economics and many other topics at our sister site: Cherrybooks on Bookshop.org

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