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Now THAT was ugly! The Dow plunged a whopping 531 points, after losing 358 yesterday, while the Nasdaq Composite shed 3.2%. That makes this the worst week for the Dow since 2011. All in all, the Nasdaq 100 Index lost more value in the last two days than at any time since March 2008.
Safe haven investments like Treasuries predictably surged. But most remarkably, the VIX volatility index soared to around 27.6 from 19.1, a shocking one-day gain of 44%. It has now more than doubled just since Monday!
I warned that capital markets overseas and here at home were both signaling impending stock market turmoil. And boy was that call ever right!
But if you step back from the short-term action, and look at the big picture, I believe something very, very important is happening – a sea change in market thinking the likes of which we haven’t seen in years. Let me explain …
The “Greenspan put.” The “Bernanke put.” The “Yellen put.” The “put” from the heads of the ECB, BOJ, PBOC, etc., etc.
Mainstream pundits and big money Wall Street investors have grown so use to having central bank puts, they don’t know how to function without them. But they better learn fast – because they’re getting torn up now!
For background, a “put” option is a contract that gives you the right, but not the obligation, to sell an asset. It comes with a specified price and expiration date. You can think of puts as hedges – “insurance policies” that guarantee you won’t lose more than a certain amount of money your underlying investments.
For 6-1/2 long years, investors have come to believe that central banks will always and forever be there to draw up a new put every time the markets stumble. And they’ve come to accept those puts will always function as intended – or in plain English, work to drive the markets right back up.
Heck, I can’t blame them. Central bankers have indeed proved time and again they have no spine, can’t handle corrections, and are deathly afraid of their own shadows. So they have stepped in repeatedly – with multiple interest-rate cuts, multiple rounds of quantitative easing (QE), and in the case of Japan, Switzerland, China and others, outright manipulative buying of assets like stocks and ETFs.
Wall Street made a devil’s bargain and accepted this behavior because it saved their bacon. They front-ran central bank purchase programs because it made them money, even if doing so left a bad taste in their mouths. Frankly, I did as well despite my own misgivings (and in some cases, outright disgust with what the Fed and its foreign counterparts did). If you fought it, you got run over.
But you know what? It looks like the days of relying on central bank puts are over. And I think China is the reason.
Look, central bankers and other government policymakers there basically launched an economic war against stock market sellers. They slashed interest rates. They cut bank reserve requirements. They lent hundreds of billions of Chinese yuan to brokers and told them to buy stocks. They froze all initial public offerings to keep new stock supply from hitting the market, and forbade big company officials from selling their shares.
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| Are the days of the central bank ‘put’ that served as insurance against market losses at an end? |
But the stock market plunged anyway. Investors fled anyway. They didn’t buy on news of these massive new puts, they sold. And overnight, the Shanghai Composite Index sank back to its 200-day moving average and the key 3,500 level at which central bankers first started panicking and intervening.
Meanwhile, ECB President Mario Draghi’s Euro-QE experiment is failing. The entire post-QE rally in inflation expectations that he sparked this spring has now been given back. That mirrors what is happening here in the U.S., where inflation expectations priced into the 10-year Treasury market are back to half-decade lows. Heck, even the Federal Reserve’s own experts admitted this week that QE doesn’t work.
The St. Louis Fed released an economic paper by VP Stephen Williamson a few days ago, one that contained this damning quote: “There is no work, to my knowledge, that establishes a link from QE to the ultimate goals for the Fed – inflation and real economic activity.”
The paper went on to say QE, so-called “forward guidance” on policy, and zero interest rates have all failed to boost inflation or wages in the U.S., Switzerland, Japan, or anywhere else where massive QE programs have been launched.
Long story short, reality is intervening into the markets. Confidence in the central bank put is fading – and for good reason. Even the policymakers who wrote the puts are admitting they don’t work!
Most importantly, rallies based on policy expectations are lasting for a shorter and shorter period of time. Just look at the market bounce on Wednesday after the latest Fed meeting minutes were released. It lasted for all of 15 minutes.
| “Even the Fed’s own experts admitted this week that QE doesn’t work.” |
None of this precludes oversold rallies, or short-term bounces. But it fits entirely with the increasingly cautious market stance I’ve been laying out all summer, including here, here, and here.
That last one is key. I suggested the “Autopilot Market” may be coming to an end. Everything I’ve seen since then only seems to confirm that a sea change is at hand – that we’re in a new market regime where you can’t just sleepwalk through each day and count on central bank puts to bail you out. So invest accordingly.
Am I right? Wrong? Will the Fed manage to put everyone back to sleep with its next major policy initiative? Or is its bazooka more like a pea-shooter these days? Do you believe a sea change is at hand, or that I’m making too much of recent market action? These are incredibly important questions, so make sure you weigh in at the Money and Markets website.
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Judging by the comments I’m seeing over at the website already, it’s clear you are getting increasingly worried about the stock market, global deflation and the worldwide currency wars.
Reader Carla warned of much more damage to come, saying: “I am very much on the same page as you and think the nastiest is still ahead. It’s late in the cycle, but take profits, counter balance with selling losses to offset tax liability, and hold tight. To me, it’s a tsunami in process.”
Reader James C. also sounded an alarming note: “It looks like we are heading for another Great Depression like in 1929, where gold is the last standard of value.”
Reader Frebon added: “This market and the entire world economy has become central bank dependent. They may have the right idea about re-inflation, but are going about it the wrong way. They need to put money into the hands of those that will actually spend it by buying things … not banks to raise their tier levels … or corporations to buy back stock … or even investors who just want to see their portfolios grow.”
And finally, Reader Robert C. said: “These currency devaluations are accelerating. The race to the bottom is accelerating!”
At the same time, not everyone is ready to run for the hills. Reader Bill V. countered that: “A drop of slightly more than 2% in the Dow Jones Industrial Average is hardly worth hyperbole. It is, after all, a marketplace where investor sentiment can oscillate by several percentage points.
“Right now the stock market is like a herd of restless cattle before a big thunderstorm — ready to bolt at the least provocation. But sooner or later, they settle down and go back to grazing when the perceived threat has disappeared.”
Thanks for weighing in. While we could easily see a very short-term bounce given the drubbing we’re seeing here, I still am not seeing signs of true panic – the kind that leads to significant, long-lasting bottoms.
If anything, I believe many Wall Street pundits and mainstream investors have grown wildly complacent thanks to six long years of easy money, moral hazard, and shrinking volatility. They don’t want to accept that this regime may be over, and that a sea change in thinking could be at hand. But that’s just me. If you want to share your thoughts on this important topic, make sure you use this link to do so.
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Former tech darling Twitter (TWTR) is continuing its meltdown, with the social media stock dropping below its November 2013 IPO price of $26 this week. All told, its value has been more than cut in half – to $17.6 billion from $41.5 billion.
The wide-ranging commodities decline claimed another victim today, when Deere & Co. (DE) warned that it wouldn’t make as much as expected this year. The world’s biggest maker of farm equipment warned it would earn only $1.8 billion in 2015, $100 million less than it forecast as recently as May. Equipment sales are now expected to plunge 21% for the year.
China’s manufacturing sector is falling fast, according to a just-released purchasing managers’ index for August. The gauge of factory activity slumped to 47.1 this month from 47.8 in July. That was worse than economists expected, and the lowest reading since early 2009.
Everyone’s favorite Greek Prime Minister, Alexis Tsipras, resigned yesterday and said the country would hold snap elections. The move is designed to fight off a rebellion from hard-liners in his Syriza party, but it’s unclear whether it will strengthen his mandate or result in him losing his job permanently.
Lastly, former President Jimmy Carter revealed he is suffering from brain cancer, in addition to the liver cancer that he had already been fighting. He will undergo treatment for the melanoma, but at 90 years old, also said he is willing to accept whatever happens.
So what’s the verdict? Is China falling apart, or just going through a minor downturn? Is the next act in the Greek drama about to play out, with consequences for Europe’s economy? And what do you think about the meltdown at Twitter? Are other social media stocks going to hit a wall next? Share your thoughts over at the website.
Until next time,
Mike Larson
Mike Larson graduated from Boston University with a B.S. degree in Journalism and a B.A. degree in English in 1998, and went to work for Bankrate.com. There, he learned the mortgage and interest rates markets inside and out. Mike then joined Weiss Research in 2001. He is the editor of Safe Money Report. He is often quoted by the Washington Post, Reuters, Dow Jones Newswires, Orlando Sentinel, Palm Beach Post and Sun-Sentinel, and he has appeared on CNN, Bloomberg Television and CNBC.
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You tell everyone about all the problems but never offer any remedies and yes I am a subscriber to many subscriptions including Safe Money Report and that portfolio isn’t doing much. Offer some cures that work.
peter,even if someone gives a hot tip,do you jump in,or do you use your head.Today I just loved UVXY just a inverse,watch the charts,just the charts.I would not believe the world was ending till I saw the charts
How is the “once in a generation” energy rally coming?
You need to re study “rights” & “obligations” of SELLING any Option contract.
Obama has increased the National Debt in 7 years from $10 Trillion (and that dates from the days of Geo. Wash) to almost $19 Trillion. He has spent us into a hole of red ink that reaches China. Add to that the freewheeling money giveaways to his cronies and the lead up to what is coming…..it all does resemble the scandals of the Roaring 20s. Obama has signed a treaty with Iran with side deals that allow them to inspect themselves(!) He has corrupted our IRS, tried to turn our Republic into a dictatorship and left our borders wide open. But he ultimately will be remembered for one thing…….the coming great collapse. That is all that Hoover is remembered for and that is all he will be remembered for……
Obama will not make it to January 20, 2016…
At least not as president of the U.S.
Up until tonight I really haven’t paid much attention to Donald Trump. I watched his rally in Alabama and was quite surprised by his presentation. Who says you have to like somebody for them to be an effective leader? Anybody that doesn’t take him seriously is making a big mistake. A very smart, successful business leader just might pull this off. The majority of the nation is so disgusted with what’s gone on the last six years that anything is possible. He may not become President but he is finally drawing attention to problems that need to be addressed, particularly the politically incorrect ones. He says he doesn’t have time for political correctness and the country doesn’t either. I like what I heard. Dr. Smith, I really hope you are right. Jim
Fred 151, I think you are wrong about Obama being remembered mainly for the coming great collapse. Any collapse will STILL be the fault of Bush, and some will extend it all the way back to Reaganomics, and they will blame the current Republican House and Senate. If a collapse occurs under a new Republican president it will automatically be his (or her) fault for not continuing Obamanomics. I have stopped talking to most Democrats I know because ALL stock market corrections and ALL economic problems are the fault of Republican leaders, according to them, and ALL years of growth and prosperity are the direct result of Democratic (Liberal) policies even if a Democratic president is not in office during the time of that prosperity. You can’t win with these people, for, while they are often very nice and intelligent folks, they have extreme and permanent myopia, and they can never see the forest for the trees.
Amen brother!!!!
You are a real cynic, but I think it’s justified. Very insightful. If a meteor hit the Earth and split it in two it would be Reagan’s or Bush’s fault. I too am through arguing about it. It’s an exercise in futility. Jim
Um Jason, I must disagree with your assessment of Democrats being “often very nice intelligent folks”. They are the rudest, angriest, foul mouthed bunch of morons ever to walk the earth. I have not met a single one that could be counted on to do the right thing because they have no moral compass nor any empathy for anything or anyone unless it is for themself, which only means they are jealous, self centered and self serving to such extremes they frequently, if not always, never have anything nice to say about others. The only people they ever say anything nice about are Obama and Hillary. The two worst people in this country. Saying liberals are intelligent does not compute and that equation is automatically tossed to the trash bin.
It’s not Obama. It’s the exponential function
https://www.youtube.com/watch?v=F-QA2rkpBSY
The curse of the Kenya fathers(sins of the fathers) in Obama to head up United States what did you expect would to happen to America.. Again the Federal Reserve will raise the rate the 28th of October 2015 . Which I have said since January 2015. NO MATTER WHAT HAPPENS!!. Only a 1/4 of a point though. You think stocks have drop today watch what happens in October.. Will investors dump there bonds like crazy in September . Get Ready Get Ready. Make millions on October rate hike.
I think the hike will come in the form of only 1/10th of a point. Possibly even a 1/20th or .05 % hike. They still want to play their monopoly money games because destroying the currency is a bad bad bad bad bad outcome for the entire planet.
Interesting thinking going on today. It doesn’t help to preach DOOM . Put your brains on – go to work – and for goodness sake, let’s find some plausible answers. We do not need people who preach disaster. Come up with some suggestions. Smile – grow up and work out the plan of attack.
Judging by your comments mrs. ab, it is likely you are suffering from Normalcy Bias, which leads people believe that since something has never happened before in their lifetime, that it never will happen.
The Normalcy Bias is part of human nature and, to some extent, WE ARE ALL guilty of participating in it.
Like nobody ever makes a left turn in front of your car going the opposite direction… Until they do and unfortunately you are not prepared…
You see, the Normalcy Bias inhibits our ability to cope with an adversity once it is underway.
People with Normalcy Bias have difficulty reacting to something they may have heard about, but never personally experienced.
Normalcy Bias also leads people to interpret warnings and inaccurately reframe information in order to form and project an optimistic outcome which leads to the person to infer a less serious situation.
In short, Normalcy Bias is a kind of pain-killing drug which numbs a person to an impending danger.
I’m guessing you’ve taken your scrip today like a good little statist. The suggestion were already available to you before you elected an alien to the presidency.!
And your ideas for successful remedies are? We can all complain-WE don’t need that. We need thoughtful suggestions to help us solve these problems. Come on. Get with it.
hey I got an idea mrs a. b. groves jr let have a general vote in this country immediately to impeach OBAMA for his lies about being the most transparent president this country has ever if OBAMAS PRESIDENCY IS SO TRANSPARENT WHY THE COVERUPS WHY THE LIES especially with this nuclear deal with Iran AND NOW EVERY AMERICAN HAS TO TAKE IRAN AND OBAMAS WORD THEY ARE NOT PRODUCING MORE WEAPONS GRADE PLUTONIUM and part of this deal with IRAN IS…… they check everything themselves AND WE HAVE TO TRUST THEM . OBAMA has surrounded himself with a crony government hey mikey if we put a R in front of obamas name and call him a republican will you start ranting how bad and the horrible things he has done
Here is an idea to solve these problems:
Reduce government drastically, get government out of business.
Reduce regulations that are hindering business growth and the start of new business.
Stop all government subsidies of existing business and support competition of those businesses to reduce the cost to society.
Support individual savings and debt reduction.
Break up Wall Street Banking monopolies and derivatives, which only serve to put banks in a better position to compete with individual investors and turn the market into speculators instead of investors in America while stopping derivatives and the increasing risk they put on markets and the eventual tax on society as these bank bets fail.
Stop farm subsidies and drug support and health care insurance support and let competition reduce prices for society. Watch this video on regulations out of Stanford.
http://www.econtalk.org/archives/2015/07/lee_ohanian_arn.html
Or read some Austrian Economics, Dr Eamonn Butler or Frederick Hayek.
Chicken Little predicted this! Let’s see.. the sky fell in the ’70s, the late ’90s, after the millenium, and in 2008, Oh my! Run for your lives, he said! It is happening again!
Please pay attention to market dynamics and keep your wits about you. This appears to be the expected market correction after several years of market exhuberance. Relax and look for the bargains to come. Look closely.
You are going to make it okay Bruce S
Look, corrections can and do happen for any reason or not reason at all. Live with it!
Most asset management companies have been warning of a market correction around a FED rate hike. The emerging market issues will likely increase the depth and duration of the correction, but I don’t think anyone should be overly surprised by the selloff.
In terms of a “sea change” in markets, for a year, asset management companies have been warning US stock market investors to expect low returns and heightened volatility. This is the “sea change” for the next five years or more. To make the big bucks, you’ll need to be a trader or a stock picker. But overall, a US stock market investor should still see a net positive return over the next five years, albeit much smaller than the past five years. Most predictions for returns fall within a range of 2.5 to 5 percent annually, or 15 to 30 percent compounded over the next five years. Unfortunately, that’s barely enough to keep up with inflation. As a retiree, I’m beginning to see value in simple fixed life annuities relative to expected long-term US stock market returns and a risk adjusted basis.
Annuities are the reverse of life insurance: you’re betting you’re going to live, the company is betting you will die before you get back what you put in, or while they can make a profit off your investment. You’d better hope their actuaries are wrong, and that the company doesn’t go broke before you kick off
Mike,
You should ALWAYS invest in good, well run, dividend paying companies and not JUST low interest annuities. Good dividend paying stocks averaging 5-6% annually is safe, and you don’t worry about the short-term fluctuation of the principal. What are good companies to invest in? The obvious. Well managed mid- and large-cap companies that provide goods or services that consumers CANNOT or won’t give up: oil, gas, tobacco, pharmaceuticals, cell phone service, rent (REITs), food, electricity, water, booze, and some tech. If you think this way about stock market (equity) investing for both income and long-term growth you will do very very well, better than annuities, all though you should have one or two of those two. This is what my father did over 40 years of investing and he had a very comfortable 25 year retirement after working and investing for those prior 40 years. Now I am carrying on that legacy, and I get the SAME 15% annual average growth per year.
The laws of physics say what goes up must come down. Planet Earth calling Wall Street and friends, “. .All is not well down here on the ground.” In California agriculture is what still drives the state. The drought has made it a sick puppy. If you notice french fry prices going up in the North East, thank the folks at Tulare, that is where the vast majority come from. Most of the Almond supply on Planet Earth come from Stockton and Modesto. West of the Mississippi and even points east almost all the fruit paste comes from Smuckers at Pajaro. And the salad bowl of the Pacific Rim the Salinas Valley is in the middle of a labor shortage. And there is so much groundwater pumping the great Central Valley is sinking, Nasa can measure it from space. Bon appitite
Is the term ‘Climate Change’ in order here, or is that still taboo in these parts? You know, as in hotter temperatures, drought and larger more frequent wild fires. The warm water ocean currents are down to 20% of past flow strengths, with the North Atlantic current the Gulf Stream having been shut down altogether since 2011. It won’t take much more for the remaining 4 currents to shut down completely as well. When that happens we might see a “sea change” like we’ve never seen before. Fascinating choice of terms… Bon appitite, indeed.
Probably the safest bet on the planet is that the climate will change. Jim
And what goes down must go up. We’re just on the down wave. Hang in if you have a time horizon of a couple years or so. May be a good time for selective buying
who needs money the super RICH or the middle class, poor class? if you have Evil Greedy SOBS in charge Q .Es only benefit the RICH screwed the Tax Payers any where in the WORLD … but we need to bring AMERICA back to GOD JEHOVAH or we willl see the WRATH of GOD destroy our country in a matter of hours . . .
Humongous Resent coming in Sept.: Research Jonathan Cahn on youtube
Davis, you are among the few that have a clear picture of the future… Hang on Bro…!
Meant David…
Hence FEMA camps, martial law and mass executions.
Bought The Harbinger last night, stayed up all night reading it. David, I can’t thank you enough. A Revelation! Jim
Hi Ed,did you mean Obama,its taken him just a few years,but things to be speeding up
What happens when the government has a big cash flow problem and cant cash any checks?
Mike, it’s actually worse than it appears. Millions are now wondering if this money and banking system was set up “by design” to “allow” a banking crisis to just “happen” and then the plan is to come in and swoop up assets around the world at penny’s on the dollar. Many are saying this is EXACTLY what is happened with the EU, as the money center banks have piled Trillions and Trillions of dollars of debt on individuals, small and intermediate companies and governments worldwide…You and many columnists say the central banks are clueless, these leaders are dumb and stupid etc..etc..etc..NOTHING could be further from the truth. They know EXACTLY what they are doing..
I agree with you Billy.
It’s hard to imagine they were stupid enough not have planned this much debt and and fully understood its consequences.
The Fed is a political entity. Listen to Alan Meltzer’s talk on the Fed in Econtalk.org. The chairman completely controls the voting due to timing of meetings and the power to make changes in Fed rates. It looks like a committee but the chairman has all the power to implement policy. Since he is appointed by the president guess where policy is coming from.
Congress and the president set monetary policy and guess who doesn’t want to lose office.
That’s why there is continuing debt increase. These guys simply don’t want to face reality because reality means they lose office. Wonder why we haven’t had budgets for 5 or 6 years? A balanced budget would mean a drop in GDP in a move toward economic stability, loss of government jobs and reality in terms of self sustaining economy but that would also mean most politicians would be at risk of losing their jobs.
this country usa needs a leader not a dumb ass.
Its just a 4th wave decline, once this abc move plays out the market will go up to all-time highs. After that, it will be Katy-Bar-the-Door! Understanding Elliott Waves are indispensable at these times..
I felt this correction was coming VERY soon after I closed on the sale of a house on August 6 and the money cleared a week later. I bought stocks too fast though (I’m a long-term investor and a dividend investor) but I kept some cash to BUY when everyone else reaches panic selling stage. I believe the DJIA was due for a 30% correction from the near 18,000 level, so I see it dropping to 12,000 before the end of 2015. I expect a 2,500 to 3.500 plunge on Monday, August 24, and then a total drop to the 12,000 level before bottoming out for a while. Later, after the market goes sideways for a year, the DJIA will start a climb again.
Everyone, take a deep breath. The market has been stellar over the last six years, now we’re getting a predictable correction. Be like Buffett and take advantage of this opportunity. Snap up high quality growth stocks (without Chinese exposure) at bargain prices. If your investing horizon is fairly long term (like mine is), you’ll relish this opportunity, and be rich down the road.
Hi Mike
Any taxi cab driver could see this coming. Maybe they are the smart ones. At least my driver thinks it is so.
Any thoughts on gold and silver? Larry Edelson feels that gold and silver will bottom in October or November of 2015. Others predict that we are now entering a period of rising prices. Any thoughts on the precious metals?
Larry has his cycles to bet on, and maybe he is right. Some analysts and big name investors think gold has already bottomed, and maybe they are right. The recent small run-up may be a harbinger. It WILL pull back at least a little before it takes off. If the pullback doesn’t go to a new low, it may be time to jump in. If gold makes a new low, then Larry may be right, and you should wait for the real bottom. Keep your eyes open.
Each central bank head knows the end game of total global financial collapse, and a final shift of power to the east . All they want to do, is ensure it doesn’t go bad on their watch. They will keep kicking cans down the road for as long as possible.
Mike,
Your word choices for this article clearly reflects how intense you felt while penning the article; well done.
Borrowing from your emotional energy, I would suggest that the fed, and our markets are now in completely uncharted waters. Their bogus Keynesian QE efforts, which didn’t even follow what Keynes said have created our current situation, and the uncertainty that lies ahead. Investors and markets “DON’T LIKE UNCERTAINTY”, which tells me that there is a very good chance that we are in for a really rough stretch of road, and there is no milestones along that road to guide us. Thus, if your investing behavior leans toward the gambler nature …. gamble on. If your investing behavior is safety first, it’s time to get to the sidelines.
Thanks for your recent great post.
Are “The Plunge Protection Team ” on vacation ?
Mike, You and the rest of the guys I read only agree on one thing. This is gonna suck
The Feds biggest concern is what may happen at the next IMF meeting on October 20-23rd. At the june 20 IMF meeting Its said several Fed higher ups begged, hat in hand that the IMF not install the Chinese Yuan as the new world reserve currency. It worked, they got there last reprieve, but now the day of reconing is less than 2 months away.
This one simple action by the IMF will devastate the USD and send our markets to the toilet, cause anarchy in the streets and seed skyrocketing values for gold and silver. This as a result will shake the entire world financial system. Pray with me friends that some how this may be averted thru providential interference someway. I dont see how the inevitable will not happen any other way .
Folks, stock up on food water, ammo guns, and lots of junk silver american coins, gold may only last a few days before washinton seizes all gold, like roosevelt did in ww2. Silver will surge 3700% and more in the first 30 days, a single silver dime will be worth $74 dollars in trade value. $100 in face value will be worth more than $412 k in direct trade value worldwide. Get ready folks we have 2 months, Father Yahuah have Mercie in the Name of Yahuasha amn
Charles,
The providential has already happened. The yuan has been excluded from reserve status consideration until at least NEXT YEAR! “Praize”
FDR didn’t seize gold. He ordered it to be turned in (a questionable act) then paid for it at the official exchange rate – then he raised the rate to make each dollar more valuable, since the currency then was still gold based. It was how he paid for some of his programs. Nixon ended the official exchange rate, which is why gold now rises or falls in value. If Washington SEIZES gold, it is time for a new Revolution, because they could seize anything afterward – including your life.
Here’s a suggestion to get our country to get the US back on it’s feet, and solve 3 problems simultaneously. All this talk about unemployment and poor income, etc. It it a fact that our bridges and roads are in bad shape – getting worse! So Uncle Sam hires millions to fix them. Instead of giving millions (and more) to foreign countries, we employ and give the money to US workers. Second, it would immediately employ millions of workers, thereby solving the lack of jobs problems. And how about adding – only to legal US citizens? This could also be a partial solution to the illegal immigration problem? By virtue of paying our workers, they would have increased monies in their pockets in order to purchase goods. Bottom line? Solve a lot of the unemployment problems – increase income for those millions of workers – would purchase goods to stimulate the economy, and lastly, would solve the problem of decaying bridges and road problems throughout our country!!!!!!! (Similar to the old CCC program back in the 30’s), but only us Greater Generation citizens would remember all this – when we were (past tense) a GREAT NATION!!!!!!!
That very program has been before the Congress many times since 2009, brought by Democrats and OPPOSED by Republicans…. Now that the GOP has the majority in Congress, not a peep….. People’s party? I think not!… :(
And who is going to pay for all those bridges and highways? YOU WILL! In higher taxes and tolls!
More than a few guys are wearing their tin hats today…… They have been screaming that the sky was going to fall since “That Kenyan” was elected, incited by none other than the RNC, the very people that have brought us TWO Stock Market Crashes and Depressions in the last 100 years on their watch… Problem is that they have been DEAD WRONG!.. What a shame that they have missed all those gains while sitting on their cash in their mental bomb shelters after being snookered by the GOP….Much the same kinds of Right Wing Wacko propaganda assaults occurred in Germany in the 1930’s… Of course, they were wrong then also….. Enjoy your delusions boys… Talk about gullible….. :(
Mike S:
Laugh if you must, chicken little is coming home to roost very, very soon. In my opinion your view of the world is very narrow. I went total cash in July 2007 and held until 2010. I have traded in and out of the market ever since. I didn’t lose a dime. I just hope you can see the train wreck coming down the track. By the way, I am backing that big loser you call “TRUMP”. Heaven help you if you are pinning your hopes on Queen Hillary. King Jeb is a clone of Hillary and Billary.
Have a nice day
Sure it is and Trump who grew up wealthy gives a damn about us average citizens, right? The great wealthy Americans that gave a crap about the average American: Lincoln (Progressive Liberal), Both Roosevelt’s, Kennedy, Johnson, etc…. Great Wealthy Republican Presidents who gave a crap about the average American:NONE!… :(
A Spade is a Spade ! and a Pull back /10 per cent fall has the high Probability of being a Point to BUY INTO THE MARKET.
Buy when their is fear and the time is NOW!
Slidell, LA
Mike, this was all foreseen by the many who are not biased to one market or the other (Stocks, Corporate Bonds, Treasuries). From one who is familiar with your background as a journalist, I will not comment. But for one who is an average investor and knowing of your strong education as a journalist and experience working for an investment firm, you should be better at reporting the facts than making predictions. The treasuries did not go up yesterday but they declined significantly as they have been because of the QE. See below Treasury website that posts all treasuries at the end of each day. See http://www.treasury.gov/resource-center/data-chart-center/interest-rates/Pages/TextView.aspx?data=yield
As an investor for my own financial and retirement plan going back to June of 1985 and experiencing the damage done to the stock market in 1987, 2000, and lastly 2007-2009, I learned quite a bit. Between 1989 and 1994 I was in Graduate School at Drexel University for my Masters Degrees in both Electrical Engineering and Engineering Management, so I learned the Economics and Financial subjects and did extremely well. But nothing like experience doing it yourself as an investor. School taught me to follow the history (Facts) and read the wall street journal, and explore the S&P extensively when choosing stocks for your portfolio. They taught me to follow the company history, earnings, risk levels, and dividends paid out. What we did not get stressed to us as amateur traders was to pay even more attention to their real cash value on hand. It was not until after 2002, that a lot of company CEOs were going to prison for falsifying their earnings and other criminal acts that an outstanding investor like a Marc Lichtenfeld would have discovered, he probably reads all the articles in the wall street journal like the clergy read the bible.
So what have I really learned since the last bottom crash in 2009, that I did not previously know. One, when the market is in a major crash, never sell, it’s too late, go for the wild ride until it returns no matter how long. Unless you are a senior at that age 70-1/2 that has to start taking those IRS MWDs, which you should not have had all your eggs in stock and been more in equity like cash. So that is where I am at and have been since the Market returned from the last crash in April 2013. I missed out on some good gains but have not lost anything either. Certainly inflation has not been an issue considering where it is, and my present state that my wife and I can retire and live well into my 80s or 90s in 5 years if I did not have health issues that tell me my days are numbered.
Next thing I learned is when another serious crash happens, like now, then it is time to move my funds that won’t adversely impact your retirement nest egg, another words invest in the risky stock market when it is a good time to buy when things start to gradually returning on a slow upward slope by putting as large amount in stocks then, but no more after that. Think about it, that is how Buffett got rich, you don’t see him putting gradual income in the stocks with new cash as it is near top. And he is smart enough to know what to leave ride and what to get out of at the right time. Does he lose Billions, probably, but what did he start with and is it really just a paper game with him, of course he is a billionaire, no matter what.
Corporate Bonds are very unpredictable in today’s market because of the FED implementing QE and screwing with the FED Rate by keeping it at bottom way too long to try and stabilize the market after bailing out banks and corporations that was not a good financial decision. They also poured a lot of money into knew small businesses knowing 80% of them would fail in less than 5 years (No news there, its history).
China and other countries followed suit a year ago and now we have a global mess. Our country, citizens, corporations, and small businesses are so much in debt because of spending what we don’t have and QE making it so easy to borrow and get more in debt. We also have a lot less people in full employment and without someone to increase jobs in both the private and government sectors with descent wages and benefits, it will get worse.
To prove the point on what damage QE did, just follow the historical curves going back to the great depression of 1929. Without QE, it took 3 decades to recover in the markets. The QE was established in 2008 to date by bailing out financial institutions, the majority of the auto industry, the housing market. They cut payroll tax by 2 % of the employee part of social security payments to generate spending. A lot of people were laid off and more so fired from full time jobs and/or put on part time pay status.
No one person can fix this, but a lot of people need to learn patience during such times. All QE managed to do is put people on a much quicker and wilder roller coaster ride up and down that will take over a decade to come back from the inevitable. The FED must start raising the rate and now is not soon enough. It will not stop the crash, but it won’t affect it either if they do it in ½ point intervals say 4 times a year until there is some control of our debt situation.
In addition to my comments and suggestion regarding the current economic problems here in our USA, I doubt that our government will do anything to implement to solve the problem – because our congressmen and senators have a reputation to NOT do anything of a logical, practical, nor sound solution to a problem. And Mike, “….a problem is a problem unitil it’s solved!”. Look up history to see what the CCC (Civilian Conservation Corps) did in the depression in the 30’s to improve our nation. It brought together thousands of the nation’s unemployed, primarily young men to battle the erosion and destruction of much of our natural resources. Take a look at history, CCC, to read exactly what it was all about! We can utilize a similar program to solve much of our nation’s problems today. But as I previous stated, only any of our Greatest Generation would understand and remember this – I do!
P..S. Mike – a former fellow Chicagoan – born, raised, and educated in “….my kind of town…..”. Cliff Z (An Elite subscriber and reader of every edition of your monthly Safe Money Report.)
After 1932 and 1934, almost every Republican had been voted out of Congress after Hoover’s 3 year Crash lost 90% of the Stock Market. that gave the Democrats a Super Majority and the NEW Deal and CCC’s were passed and put into action….
The Cheney/bush Stock Market Crash only lasted 13 months and lost only 60%. While the balance shifted to the Democrats there were still enough Republicans in Congress to keep a new public works program from passing Congress…. In my opinion, the Republicans left were more interested in saving their major benefactors the Big Banks that had been created by their one sided vote to removal of Glass-Steagall Act in 1999, when they had the majority… :(
OK, I think I have it. All Dems good, all Repubs bad. Keynes right, Austrians wrong. And it’s all Reagan’s and Bush’ fault. I’ll work on it. Jim
How about most, aye? Look at how the Stock markets and the Middle Class have been handled by the Republicans compared to the Democrats over the last 100 years… Of course, if you do the research, you might not like those facts… :(
HEY MIKEY S ……. do you still remember OBAMAS promises to everyone that the economy would grow at 6% or greater every year of his presidency that it was urgent that we should LET SOMEONE WHO KNOWS HOW TO RUN A COUNTRY RUN IT. OBAMA WAS SO SURE OF HIMSELF that he wanted to take over the day after the election in 2008 DO YOU REMEMBER THAT MIKEY CMON U MUST he is your greatest leader ever since all u do is rant about how bad Reagan is and the horrible things he has done to the country but I remember it the way others here too have and without a doubt OBAMA is the worst president this country has ever seen he promised transparency all he gave us was LIES AND DECEIT and a constant its not my fault its BUSHES fault .
Right off the RNC Comment Sheet…… Markets were way up when Cheney/bush took office and way down when the left. Market bottomed within 90 days of the Obama Administration and the Democratic Majority and now is at new highs, or at least it was before the GOP took over the Congress in January… Coincidence? I think not…
Reagan was bad. Perhaps you should do your own research and look at all the executive orders he took which drove the Middle Class down, aye? What, Limphog didn’t mention those problems? Gullible? I think so… :(
I REMEMBER when Obama promised he would cut 5 trillion from the national debt……………so according to his figures our national debt should be 5 trillion total right now…………… instead MICKY S WERE OVER 18 TRILLION 340 BILLION
Cliff Zalay:
To implement your program, how many Mexicans do you plan to import to perform the work? They used picks and shovels in the CCC camps. Americans will not work as long as welfare and food stamps exist.
Why doesn’t the fed stop paying out over night interest rates to central banks ,
And force them to loan out money to the average folks?
China is doing all this in retaliation to U.S. meddling in the pacific plus blocking china to be an imf member…again manipulation my personal opinion…
Sapiens Sapiens has reached (or over-reached) it’s peak,in 200 years after 300,000 years’ existence.Planet Earth has many experiences;perhaps Sapiens should ask for his opinion,-without due respect these days of course.
The Fed needs inflation to bail it out. And the only way to increase inflation in this environment is to raise wages for the middle class who spend (circulate) every dollar they make.
Enlightning
Actually, Ray, that is true….. When the average person has more money, they spend it and jobs are created too make the products that get bought… It is called the velocity of money. It falls when the GOP and their Ultra Wealthy handlers are in charge and and increases when more money is paid to the average citizen when the Democrats are in charge…Just ask any economist except the ones that work for the RNC…
We are in the grip of a deflationary crash. Central bank policy, of easy money, has only
increased asset bubbles, in my country the property market, so we are now ultimately looking at economies crumbling and sovereign debt defaults.
Perhaps we should also think about the mass migrations of people. In many different regions of the world, political and religious pressures are driving large numbers toward our “Western” economies. Germany plans to absorb 800000 this year but this barely scratches the European situation which is worsening daily. Social disruption is increasingly likely and law and order problems are beginning to surface. Government intervention is having almost no effect. What investments are safe when a government has its back to the wall?
Where can we buy protection from Mike S. and his same old stoopid crap broken record? I’d invest a hunk of money in that right now. LOL
I doubt the 92,000,000 not working and 49,000,000 on food stamps think very much of his broken record either. I don’t intend to dignify his drivel with a response ever again. I suspect he is on the DNC payroll. Jim
You’re right Jim on all accounts. It just gets old to see his inaccurate comments and same old insults.
He makes me want to legalize really, really, really late term abortion. I doubt if we could move the body parts though. Jim
Yep, that would be what I call “post partum abortion” but hey, it may come to that.!
To get inflation going the public, which is kinda broke, needs to spend. But the corporations distribute profits to a few individuals rather than those who make and buy the products. Time to set a standard % of the profits that employees must receive. Yes, yes, I know the old story of incentive to create companies. But an idea is only implemented by the many thousands of us who make and buy those products. As for jobs, what we need is rebuilding our US infrastructure. Also, we need more research personnel–more jobs in research. PR
So Mr. Trump wants to build an Iron Curtain on the Mexican border. But how about the Canadian border? How about all those miles of coastline? When you go to the beach at Coney Island, Miami Beach or Santa Monica, shouldn’t you have to pass a check point and prove your right to live in the United States afterward? He could really raise the employment figures with all those immigration agents that would be needed. Of course you would be willing to pay the bill for all that “Protection”, wouldn’t you? Gangsterism? HA!
That fall was predicted , the whole world is in turmoil, World markets are tumbling , led by china and the worst is still to come . What happened in the last few days or weeks is a mini crash , i think its going to continue for at least next year . A major crash is 50/50 we are in a crash mode and what nice about the FED cant do anything to prevent it they ran out of bullets , QE will not work for ever . Yes the market could bounce but it does not mean anything, and if you want to see something very bad that will happen to markets just wait for the next earnings in october the the S&P 500 will show very bad earnings and that will triger another fall . So what to do , just short the market and buy puts on it for now.
Wonderful thoughts and observations! Back in 1980(you know before computers?), I found that, once a top had been made, according to P/E: 25% of the market value practically never existed and was pure speculation, 50% had P/E over 20, and less than 2% were P/E value plays under 10. Since 2012, we have been in a new “bubble.” IPO’s with huge deals, M & A in multiple Billions: Solar, wind, pharma, tech, are ridiculously valued in many cases, “for those that have ears to hear,” … BRE-X, Nortel, etc. Until last week, there were fewer than 150 companies on the DOW/NASDAQ with P/E less than 10, similar to all previous corrections and crashes. Expect the market to rise and fall, most of us have been on the sidelines for quite some time waiting patiently for a significant pull back, to buy undervalued. BTW, QE does work, it’s been working since 2008. I believe it will work even easier in the next round, and the round after that. As long as people want to swallow the blue pill, they will ask for another. As for inflation and increasing wages, just think about that conundrum for a moment, more wages for youth = higher tax bracket and the balance going to pay off college debt…the result, government gets paid, and a night on the town.
Most countries are not owned by its citizens anymore,esp.US.That’s why ‘they’ couldn’t care less what happens to the whole world,if ‘they’ can steal/occupy all the resources for their own kind.It’s happening everywhere;that’s why Thailand needs the coup to get our own back a little(most is still controlled by them,thro.their’Multi-national’ but not multi-ethnic Corporations).
I’m probably late with this item, but another analyst, Jim Rickards, points out that the Fed people tend to see things as they wish they were, not as they really are. They could actually raise rates in September, even if we are actually in a period of deflation rather than inflation. The result could be catastrophic for the markets, turning what should be a fairly normal correction into a crash. Something to think about.