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Let’s dispense with the pleasantries, euphemisms or jargon. More and more emerging market currencies, stock markets and ETFs are outright crashing.
Take the Global X MSCI Colombia 20 ETF (GXG). As the name suggests, it invests in the top banks, energy firms, electric utilities, and other companies in that South American nation. Do you know what its year-to-date return is? Minus 30%! In the last year, it has shed even more – 55% of its value.
As you can see in the following chart, it’s now trading for only a couple bucks more than it did during the depths of the financial crisis.
Or how about the iShares MSCI Malaysia ETF (EWM)? It just plunged for 10 straight trading days, losing almost 15% in the process. That puts it at its lowest level since late 2009.
Meanwhile, the Malaysian ringgit currency just suffered its worst one-week plunge since the Asian financial crisis of 1997-1998. As a matter of fact, the currency is now worth the least since the depths of that regional economic collapse almost two decades ago.
Some pundits are tempted to just blame it on energy, and the energy sensitivity of those two economies. OK. Then how do they explain the 24%, one-year decline in the iShares MSCI Turkey ETF (TUR)? Or the one-year loss of 25% on the iShares MSCI South Korea Capped ETF (EWY)? And the 16% drop in the iShares MSCI Singapore ETF (EWS)?
While I’m at it, what about the 12% loss on the iShares MSCI New Zealand Capped ETF (ENZL)? The negative 20% move on the iShares MSCI Chile Capped ETF (ECH)? And how about the 25% plunge in the iShares MSCI Emerging Markets Eastern Europe ETF (ESR), which owns Russian, Polish, Hungarian, and Czech stocks?
You don’t exactly need to be Sherlock Holmes to see a pattern here. It’s not just oil-sensitive economies and markets that are falling sharply, and in some cases, crashing. That makes it clear my recent dabbling in a very limited foreign stock position or two was premature, and why I just exited and moved on.
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| The Malaysian currency suffered its worst one-week plunge since the Asian financial crisis of 1997-98. |
The bigger question now, though, is: “What does this all mean for U.S. stocks?” Will all the capital flooding out of those foreign markets come here and prop our stocks forever? Or are we reaching the point where the sum total of all these corrections, bear markets, and outright crashes overseas is too much for the U.S. market to bear? Can we really continue to be an island of prosperity in an ocean of misery?
The market hasn’t rendered its ultimate verdict yet. But I’m a conservative guy by nature. I see all this stuff going on around the world … and the fact many U.S. investors are just ignoring it and going along their merry way … and I get worried.
So rather than just embrace that complacency, I’ve been actively taking protective steps against greater turmoil. We’ll see if it pays off. I figure that in the worst case, I give up some potential upside and can always buy back in later. And in a true crisis, I will succeed in protecting your capital like a junk yard dog – my ultimate, all-encompassing goal each and every day.
How about you? Do you think we can remain above the fray here in the U.S.? Are there foreign markets that particularly worry you? Or are you taking advantage of the overseas turmoil to buy select U.S. stocks at cheaper levels? What other moves have you been taking lately, if any, to adjust to the changing environment? Hit up the Money and Markets website and share your comments if you get a chance.
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What happens next to stocks? That was the primary focus of discussions over at the website, and for good reason.
Reader Norm X. weighed in with a bearish take on the latest action, saying: “According to the Flow of Funds data, ‘smart’ money has been increasingly selling stocks for well over a year. As of last month. even the ‘dumb’ money investors have been net sellers! So what is holding up stocks? Companies borrowing cheap money to buy back their own stocks. How long can that last?”
Reader Tony D. added the following on the interaction between junk bonds and equities: “Stocks in the energy sector are in a bear market, so if the junk bond market decline is related to the energy sector, then stocks have confirmed. As far as the broader market, we can only hope that ‘this time is different.’ And it may be, in light of international money flows.”
Reader Mike P. picked up on the energy-junk bond linkage too, and suggested it could ultimately spill over to the broader economy. His view: “The high yield bond market has been falling ever since oil crashed. There is a high possibility of defaults among oil related company bonds that, in some cases, make up a sizeable percent of the holdings of some high yield funds. JNK is one of them.
“Also the Chinese slowdown and the rising value of the dollar have caused commodities to crash, raising the possibility of defaults among emerging market sovereign debt as well as emerging market corporate bonds. IMHO, the high yield bond market is signaling a slowdown in emerging markets and the oil industry. If the slowdown is deep and long enough, eventually it will affect the U.S. economy.”
Finally, Reader Jack McM. said: “For background, I am 71, a retired bank president/CEO in Tampa, FL. I’ve been investing in the stock market since 1968.
“The yellow ‘market risk’ warning signs are blinking loudly. I am sitting on a bunch of cash, out of the stock market, and am not now willing to invest in equities/fixed incomes just yet! There will be a market correction; we just don’t know when/what magnitude.”
Thanks for sharing your comments. As I mentioned earlier, the junk bond market has been a great leading indicator of broader problems in stocks – even if many pundits want to peg the problems solely on energy this time around. It’s another reason why caution and prudent risk-paring looks like the best course of action to me.
Here’s the link again if you haven’t added your comments to the debate yet. Have at it.
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The three biggest horses in the European economy appear to be tiring. Second-quarter GDP growth readings in Germany, France, and Italy all came in weaker than expected, dragging down growth in the 19-nation eurozone to just 0.3%.
The U.S. Embassy in Havana, Cuba has been open for business for a little while now. But today, everyone from Secretary of State John Kerry to the three U.S. Marines who lowered the flag from the embassy when it closed in 1961, celebrated its opening in a special ceremony. Career diplomat Jeffrey DeLaurentis will be the top U.S. representative there for now, since an official ambassador hasn’t been nominated and confirmed.
Coca-Cola (KO) has a new CEO-in-waiting, after James Quincey was named president and COO. There’s no indication that current CEO Muhtar Kent will step down soon, but the move should ease investor concerns about succession plans.
Ready for another political blast from the past? Well, reports suggest former Vice President Al Gore may be sounding out supporters and strategists to see if he should (or could) run for the 2016 Democratic presidential nomination. It seems like an unlikely move, but you never know.
So what do you think about a possible Gore presidency? The latest disappointing news out of Europe? Or the historic re-opening of a U.S. diplomatic post that has been shuttered for more than 50 years? Weigh in over at the website on these or other stories when you have a minute here.
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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I have followed your columns for about a couple of years now and they are very informative and interesting. As background, i am employed and 58 yrs old. I don’t have much “loose” money laying around to invest, however i have a fair sum tied up in my company’s 401K. I have a lot of different options there (Fidelity). What can you tell all of us that want to protect our 401K balances during this next market “correction” or crash….. it is coming, no way out. I don’t want to loose 40% like i did a few years ago.
Gore had his chance and blew it…
Let’s see… We let Nixon open China because the Conservative Ultra Wealthy (CUWs) of the One World Organization thought they could control that third world Communist government and their slave labor, then when that did not work so well they went to most of the third world countries and tried again… All that time millions of American jobs and those wages were disappearing from America… Now, some might have called that treason, but nothing happened as the Billionaire Conservatives were well entrenched in America.
Now Communist China has Trillions of dollars that America once had and they have the fastest growing military budget in the world and are currently building a new reef in the Pacific shipping lanes. How surprising…
Perhaps, one day soon, the political power in America will change and once again, our leaders will acting in ways that work best for the average American, rather than the couple dozen Billionaires who make up the CUWs, aye?
Now we let Obama open Cuba all the while disregarding THEIR horrible human rights record. I guess in 10 years another $2 Trillion American dollars will flow there too. Castro just said yesterday he will sue us for megabux. I guess Obama’s new friend isn’t all that friendly after all?
You think Cuba and Castro are a danger to America?
One can raise some legitimate questions about our own human rights record, lately. It hasn’t been exactly a great example.
Stupidity doesn’t excuse stupidity.
Nothing about China asserting position in Ukraine agriculture, Russian wealth already in some command, and even US Embassy is on the take, corruption, thy name is Ukraine, with a few late pretense of notice, in case we want a 4 party war in small country with no value assigned to human life,,,Russia, China, EU and USA, just because we cannot stand to allow our international successes to go unheeded..I want John Kerry to live in the UKR for 250us a month, like the normal do, while the rich keep their feet on the necks of the poor,,,,cannot get a visa to US,,I guess we already have too many intelligent immigrants from Europe, God forbid we allow thinking persons loose in the USA who can can see for real what the US is about, and have a voice not silenced by fear…I think Ukraine is sleeping 4th reiche…a testing ground underreported.
You conveniently ignore the fact that there are more disgusting power hungry Democratic Billionaires than Conservatives. The Democrat Party is the party of the wealthy busy body that wants to tell us all how to live. The jobs that fled our country did so because of Union chicanery, the highest corporate taxes in the world, and the most onerous regulatory scheme in the planet, all Democratic self inflicted wounds. The Republicans have worked hand and hand with them. Mike, I think you are an intelligent person that needs to flush out his headgear and look at the big picture instead of your partisan and narrow world view. Jim
what signals the bottom for these crashing foreign markets?
When is it again prudent to invest overseas?
a good quest. I f we all knew that everybody would another Bill Gates.Steve
US Markets will only hold up so long – start crashing or at least declining in Sept. I think – there’s much skepticism so there is an ability for Markets to ‘climb Wall of Worry’, but it’s not worried enough w/ VIX around 13 – my read on it for now
Hi Mike!
As I’ve written before, the study of planetary influences (astrology) is truly a spiritual science in the realm of metaphysics, and these influences indicate the general—and even specific—activities and scenario for global economic/financial conditions. During the period 7/16/2014 to 8/11/2015, expansive, optimistic Jupiter was activating/transiting the zodiacal sign of Leo (speculation, risk-taking and even party time), and this kept global stock markets humming. However, Jupiter just entered/activated the cautious, anxious and restrictive zodiacal sign of Virgo (8/11/15 to 9/9/16), so the party really is over, especially when the Sun (main emphasis) leaves Leo also and enters Virgo for a month, along with the mental aspects of Mercury. Fortunately for goldbugs, this combined planetary scenario will create the necessary impetus to launch the precious metals and stocks to unprecedented heights in values/prices, which should be magnified during 2016 and 2017 when the world runs out of gold for purchase! Silver is even a better buy!!! Moreover, 2016 will be a number 9 world year of endings that should result in the U.S. dollar’s role as the global reserve currency. Hint: World War III already has begun!
I believe it was Arch Crawford (Astrologer and Investor) who called the Market high of 1987 and the day of the Crash of 1987 along with the end of that Crash…..
Let’s see: the CUWs of this country rebuild the Russian Gas and Oil operations and that new wealth has gone into their military as demonstrated by the Ukraine and Crimea..
Thanks to the CUWs, Communist China has become one of the biggest manufacturers in the world.
Both Bush’s destroyed the balance we had between Iran and Iraq and now the Middle East is a Calderon….
Yep, I think you might be on to something… :(
I think Mike must have been molested by a rich person as a child.
William
This is a financial bloggers page. We don’t need to know about Uranus.
The only good thing to happen if Gore runs is more dollars into advertising. He has about as much chance as this reader.
Postscript: I forgot to include the date August 23 for the Sun’s entry into Virgo until September 22. Also, I could have mentioned that my 2008 book (Amazon), with the audacious title, Universal Numbers and the Number 9 Destiny of Humankind, reveals and explains the prominent global mysteries that have plagued humankind for millennia, while also offering substantial proof for the validity of the spiritual sciences of numerology and astrology!
William
Do you honestly believe this crap will make a buck. I don’t
With the country going to the dogs, my dog (Heidi) and I are trying to figure out if she is a Republican or a Democrat. Me I will likely continue my voting strategy of voting NO for every office. As for stocks I still believe the classic physics rule that what goes up must come down even in Wonderland -er- Wall Street. Al Gore running. Why not the film companies are recycling old TV shows, Mission Impossible and the Man from UNCLE for starters, then Superman and Supergirl and Batman and pretty soon the Lone Ranger I’m sure, and don’t forget Cisco and Poncho.
Put Heidi s name forward,I will vote for her.
Both Gore and Westly Clark are intelligent and best candidates the US has today;for the rest of the world,no more republicans please.
Gore is a stalking horse for Biden. That is after Obama finishes off Clinton by metering out email information.
Hold your horses on Gore or whoever…
Trump may confound the entire process by running as a Democrat…!
Unlike Ross Perot, who really wasn’t all that committed to running and gave up to easy, Trump wants to be president…!!!
He could care less whether he has a D or an R behind his name… He’s in this for the sake of winning and possibly turning things around in this country…
And hey, since the US is bankrupt, who has the best experience among the candidates to getting things fixed than Trump…
They’re all politicians or wanna be politicians… Trump on the other hand wants a challenge… A fight… He’s a fighter…!
just about all the current candidates could run on either party’s ticket. They are all POLITICIANS, and all they really care about is getting elected. Office of almost any sort is a ticket to wealth, if they don’t blow it. The Oval Office is best, of course. Even Jimmy Carter and GHW Bush, who missed re-election, are not exactly poor. (Best wishes to Jimmy, for beating cancer). The Donald is just honest enough to admit he could happily go either way.
Good post Chuck… You’re on top of IT…
No more Clintons, no more Bushes, and Gore the bore – no more, no more!
Yaz za! XLNT Mike V.
When Obama declares martial law and cancels the next election we are all going to say ” We didn’t see that one coming”. Jim
Don’t bet he’s not thinking of it. G.Bush’s Executive Order No. 51 (I think it is) gives him the authority, if he declares a National Emergency.
All this talk about Biden or Gore running is complete nonsense, as they are unelectable. The secret Democratic weapon is none other than Caroline Kennedy. She’s out of the Washington mainstream, yet known and beloved as the current heir to the Kennedy throne. Down the line, look for Chelsea Clinton to ascend. Just remember–you read it here first, so be ready.
Foreign market deterioration was predictable. The third world has been borrowing cheep U.S. dollars, the carry trade, for development and now they “will” be paying their debt with expensive U.S. dollars. Things will get much worse before it gets better.
U.S. stocks will crash too. Earnings are down, debt, both business, government and public, is too high and still growing. It will take a serious correction before we have a stable foundation to go upon.
Big rich wind bag!!!
Just bought 40oz of silver dollars!
Fat-Al Gore can be destroyed by a simple campaign highlighting the history of climate change over the past 5,000 years and the historic consequences of periods of cooling. More than 31,000 climatic scientists including 9,000 PhDs support a current global cooling, not warming. But, consensus is a political term with no relevance to science or the scientific method. Global warming is a myth supported by government-agency payoffs to scientists willing to prostitute their reputations for grants. The Global Warming myth is now a trillion-dollar business venture filling the pockets of Al Gore (2-million to 200-million dollars), and supporting bogus business ventures enjoying governmental financial aid in trade to contributions to the Democratic Party. Global Warming is the largest scam perpetrated on the world in the history of mankind. The earth has been cooling for the past 15 years, and the sum total of all the so-called green-house gases cannot make a measurable dent on the effect of the sun and sun cycles.
Sorry, but Earth has been slowly getting warmer since the height of the Ice Age. It fluctuates, of course, sometimes going cooler for some period, but the overall trend is ever hotter. Maybe the reptiles will return to dominance yet.
Better stop with the wacky tobaccy Chuck… It’s been cooler ever since it was created… Just like the stars that eventually go out…
The Earth’s molten core is getting smaller and the earths crust is wrinkling like a rotting apple. The more it cools the more often the tectonic plates will shift causing more and more earthquakes and volcanic eruptions…
The ash shooting into the upper atmosphere from the eruptions could well bring on a ice age eliminating all life on the planet… Global cooling should scare the hell out of people. It will not be pretty when it eventually happens.
Jah vol!
You left out how ridiculous it is to classify CO2 as a pollutant, like our lying President just did. Nothing could be further from the truth. It is the basis of our entire food chain. Going from three tenths of one per cent to four tenths of one per cent only means more food for the plants that form the basis of all life on the planet. In the past life has flourished with much higher levels. I think though that we have not been in a cooling period but that temps have been very stable the last twenty years or so. I still feel the Green Movement is about control and money and is really just the Reds adopting a new color. This whole business is a testament to the proposition that if you tell a big lie often enough people will believe it. Jim
Is it the effect of Jupiter that has turned you from merely one of those climatic scientists without a Ph.D. into a seer who not only knows previous, albeit unmeasured and unmeasurable, atmospheric CO2 compositions, as well as the motivations of millions of people, mainly not wealthy, involved in the “green movement”. You are truly admirable.
Is it the effect of Jupiter that has turned you from merely one of those climatic scientists without a Ph.D. into a seer who not only knows previous, albeit unmeasured and unmeasurable, atmospheric CO2 compositions, as well as the motivations of millions of people, mainly not wealthy, involved in the “green movement”. You are truly admirable.
I believe that is called a ad hominem argument. Stick to the facts, mine of which you have not refuted. Marx called those well meaning millions useful idiots. I all fairness I should call the Green Movement what it is. It is a pagan religion based on belief and not fact. Jim
I have a doctorate degree from Tulane University. My measurements are accurate.
I’m quite interested in your 22,000 climatic scientists who DON’T have a Ph.D. Was their scientific expertise in this area gained from swinging in a hammock in the great outdoors? Or maybe from camping out under the stars. I wonder how many of them were abducted by aliens?
Until a theory meets the strict standards of The Scientific Method it is irrelevant how many ” scientists” believe or don’t believe it. Consensus is a word that has absolutely no place in the entire discussion. Jim
Mike V, you are right on. Let a real man handle the Presidency – Donald Trump.
He gets my vote.
the biggest bubble in america is education. tuition and housing costs have caused huge amounts of student debt that will never be repaid.
Right. And education is so overhyped. Just read the comments on this website for solid evidence of that. Time to get back to chopping wood and digging for coal.
I really like this web site because for the first time in my life i can rattle off my sometimes outrageous opinions without getting in trouble. What I’m about to say is really going to make some people angry. I have a real problem with snide remarks about how horrible the rich are. If I were to say all blacks are bad or all gays are weird I would be strung up from the nearest politically correct light post. Somehow though it’s acceptable to say all rich people are wicked. Nor are all poor people righteous. Nothing could be further from the truth. The political propaganda machine has been driving a wedge of jealousy between the successful and the not so successful for so long it’s taken as fact. A society that attacks it’s successful individuals is in real trouble. Most rich are very smart, some very hard working, and of course some are just plain lucky, but they are not a group of people conspiring to come up with a scheme to relieve the poor of all their money. They are preoccupied with holding on to what they have. The easiest thing in this world is to be rich one day and not the next. Just look at the
Forbes 500 from twenty years ago and see how many names are missing from this years list. Most are rich because they have provided humanity with something that makes everyone’s life better, like Bill Gates or Steve Jobs. I would like very much to achieve something that makes me one of them rather than someone who resents them. Thank You. Jim
Jim well constructed.
‘Might add that there are good people in all branches of society, and there are wicked people also in all branches. As for luck, it consists chiefly of making correct judgments of available information, but it can also happen by pure chance (being in the right place at the right time). Those with a fairly high level of “smarts” are statistically more likely to make the correct judgments, or take advantage of happenstance. But even smart people can fritter away their luck.
Am I crazy or what? In October of this year the IMF will grant the yuan reserve status joining the USD and other bankrupt currencies like the yen, euro, and who knows what else. The Chinese are savers and their government hoards gold, and already conducts business with the yuan with Russia and our friends in the Middle East. Their currency has appreciated 33% vs. the USD, so what is the big deal about a couple of 1.9% de-valuations? Will not the yuan soar after the IMF grants it reserve status? I am long yuan john!
It’s time for some puts I think Facebook might be a good one.
AL Bore! Yikes vat is going on in dis country? Too many crazie peoples…
No more Democans… or Republicrats…”same old wine in brand new bottle”
The world financial, political and military turmoil is indeed worthy of US investor consideration. It is a time to be conservative but intelligent in investing and divesting choices. There is a difference between price and value. I am looking for value by considering the near and long term performance of various companies and sectors. My portfolio has fared well since 2011 and is still in the black by a nice margin. I recently trimmed former winners that are now volatile or predominately sinking. I added some solid companies that have persevered over the last year, month ,days with consistent positive results and good price/value points( they do exist). I also looked to sectors with solid companies that have been beat down, by “Market Mentality” not their fundamentals. Diversify and plan long term, set your portfolio with consistent and promising performers, trim losers and volatility. Balance your portfolio with strong performer predominance, Create a “Watch List” where you may choose some additions as the markets stability returns ???? eventually.
I just wondering if this is the right time to short the dollar, maybe the PowerShares DB G10 Currency Harvest Fund?!
The only thing through all of this…….which has been stirring for quite some time now……where do the people with money invest in the whole wide world today?……..only one good looking place!……..and I think that’s what’s happening(real estate too)………..so just when can you get off this train?……….I hate to guess at it.
Let me be the contrarian here. While Mike and others and saying dump stocks. I say buy into high quality stocks with not a lot of China exposure. Google comes to mind. This is a great buying opportunity if you know the right stocks to look for.
There is always a bull market somewhere! Jim
I AM BUYING SOME INVERSE3x ETFS of spxs,edz,yang nugt, start collecting as insurance and take profit on some if any opportunity and keeping some for the major correction. begining of the year I had 75% invested in stocks now I have only 35%. with a 6 year market bull , one has to know when to take profit and be ready for ” bottom fishing” when the market correction is a year or more old.
Al Gore as president…he probably have George Soros as Vice President, what an ugly thought!
of course gore wants to be prez , as the owner in companies who will profit from carbon tax/credits and watching obuma mis-use the laws to enact policy , he sees a way to profit !
Martin Weiss points out in his column this morning that the biggest potential danger in the Middle East lies not with Iran, but with a nuclear power, Pakistan. It was the center for al Qaida, after our occupation of Afghanistan, it is now the center of power for the Taliban, and the Taliban is turning toward merger with ISIS. I would add that the main financial support for all of these organizations is our supposed “ally” in the region, Saudi Arabia, with its Wahhabi culture. Netanyahu worries about Iranian nukes targeting Israel – maybe he should think about Pakistani nukes based in much nearer Arabia. We might consider the possible threat to us and our interests, also.
So Mr. Trump wants to build an “Iron Curtain” along the Mexican border. “Mr. Gorbachev, tear down your wall.”
A short time back when the Dow was around 18,300 or so I went to all an all cash position…the repeated attempts to break through this threshold had not succeeded an this was an alarm bell to me…the market is simply too extended. This coupled with some other major events (political, economic, religious, etc) happening in September of this year has caused me to believe that it is simply not worth the risk. I would much rather miss a 5% move to the upside than risk things to a 30%+ downside which is a very real risk in my opinion.
I am taking further steps to protect our hard earned nest egg…with precious metals being at the center…what I want to know from Larry is when to “back up the truck”! (By the way…Harry Dent is saying that going into precious metals is not the right thing to do due to continued deflation….can Larry explain why he disagrees!)
You seem to be reading Larry differently to me, George. He does NOT say back up the truck, yet. He and Harry are on the same page regarding deflation, and your cash position seems wise at this time, unless you want to play with inverse ETFs and such. Precious metals, like all commodities, have NOT hit bottom yet.
Precious Metals (physical..in your hand), Inverse ETF’s and Cash. Wait for the housing crash and get that 500K house for 300K. Done and done (for now).
I was on the receiving end of the housing market last time. Bought a condo for 285K..it appraised a year later for 400K and then sold a year later (short) for 100K. I now have a condo that I bought for 200K…if it even scratches 250K I will sell. Wait a year and buy 2 for 250K….and I will get that 500K house for 300K. Can’t wait for a crash this time!!
Although the miss is likely to be modest, more attention than usual is likely to be paid to the composition of that growth and in particular the health of the Chinese property market.