Has The Crash of 2016 Now Begun?

[seemslikeadream]

https://www.youtube.com/watch?v=JwEDvXYVE_g


"Has The Crash of 2016 Now Begun?"-Prof. Wolff on The Big Picture with Thom Hartmann
Published on Jan 5, 2016
Economist Dr. Richard Wolff, Democracy At Work, goes off on the state of the economy w/Thom. What no one is talking about is the fact that that China isn't driving the looming economic crash - what's driving it is the fact that so-called "free market" capitalism and austerity politics are failing at a global scale.

Full Show 5/28/15: How to Prevent the Next Global Recession

https://www.youtube.com/watch?v=nUWaXZWhnqA

Published on May 28, 2015
Thom discusses the state of the U.S. and world economies with economist and author Richard Wolff in tonight's special hour-long discussion.

SEPTEMBER 11, 2015
Why Are Stocks Going Berserk?
by MIKE WHITNEY


If you’ve been following the markets for the last three weeks, you’ve probably figured out that something is wrong. The markets are no longer behaving the way they should, and that has people worried. Very worried. In the last 15 trading days, the Dow Jones has experienced an unprecedented 13 triple-digit days, which means that stocks have been sharply rising and falling without any rhyme or reason. The financial media has tried to explain-away the extreme volatility by pointing to slower growth in China, troubles in the Emerging Markets or various dismal data-points. But none of these adequately explain what’s going on.

What’s really going on is a tug-of-war between current high stock valuations–which are the product of Fed intervention–and much lower valuations, which are based on fundamentals. Some analysts think that the volatility indicates that the Fed’s zero rates policy has damaged the market’s price-setting mechanism, that six years of overmedication has spawned an unresponsive, drug-addled system that can no longer perform its primary function. This is a persuasive argument, but it’s wrong. In fact, stock valuations are not really inflated at all given the colossal amount of support they’ve gotten from QE and zirp. (Zero interest rate policy) Since 2009, the Fed has made it clear that it is committed to asset-price inflation as a way create the “wealth effect” which is supposed to stimulate growth. Naturally, investors followed the Fed’s lead and took on more credit risk, reached for more yield, and loaded up on stocks and bonds confident that the Fed had their back. And the Fed did have their back. The “Bernanke Put” is a term that reflects investors confidence that the Fed would prevent stocks from falling too fast or too sharply. And the Fed has honored that commitment. Stocks have more than doubled in a six year, Fed-fueled “monster” rally.

The point is, the Fed’s policy is the issue not the market. The market is not a sentient being. It merely responds to input, the buying and selling of paper and the reporting of prices. But the market DOES send signals, and the signal it’s sending now is that there is a vast disparity between stock prices with Fed support and stock prices without Fed support. You see, investors are still uncertain about the way this is all going to shake out. Is the Fed going launch a cycle of rate hikes or keep rates at zero? That’s what everyone wants to know.

One group of investors think the Fed will move ahead and start to “normalize” rates while the other thinks the Fed will stand pat. The group that anticipates a rate hike, thinks stocks are overpriced and will drop precipitously. Conversely, the group that thinks the Fed will stand pat, believes stocks are fairly priced and could go higher still. It’s the competing expectations of these two main groups that’s causing the extreme volatility. Each group thinks they know what stocks are worth, but they’ve based their calculations on ‘what they think the Fed will do’.

Does the Fed understand this? Does the Fed realize that investors have already repriced stocks according to their own assumptions about rate hikes? Does the Fed see the vast disparity between stock prices “with” a rate increase and stock prices “without” a rate increase? And is the Fed prepared to initiate a cycle of rate increases (in the name of “normalization”) that could send stocks plunging by 50 or 60 percent?

I don’t think so. The Fed is so blinded by fear, it doesn’t seem to know whether its coming or going. Sure, they talk about normalization, but are they really going to end the meddling and allow the markets to function according to normal supply-demand dynamics?

Not a chance. What the Fed wants is normalization on its own terms, that is, permanent high stock valuations and a free market where prices are determined by fundamentals. Unfortunately, the two are mutually exclusive, which is why the Fed is in such a quandary. There’s simply no way to undo the extreme accommodating policies that tripled the value of stocks and created the biggest bond bubble in history without reversing their impact on the market. The Fed isn’t prepared for that. No one is. So there’s not going to be any return to normal, not in the foreseeable future at least.

Yes, the Fed can (probably) safely raise rates by a .25 basis points without too much risk. But if the Fed indicates its determination to normalize rates via a cycle of rate increases, the stock market will crash before the increases ever go into effect. That much is certain.

The Fed is probably aware that its meddling has greatly effected the credibility of US markets, but it simply doesn’t have the guts to put things back in order. The pain would just be too much to bear.

That’s why the volatility will persist while more and more investors head for the exits.

[Novem5er]

It's frustrating that so many American jobs and lives are effected by economics 12,000 miles away. So many of my right-wing friends continually bash the poor for not working hard enough or not working at all, but then simultaneously blame the government for wrecking the economy. I point out that a bad week in Shanghai can wipe out billions of dollars in American equity and they agree that globalization has run amok - but then will still blame the poor family for sucking off welfare.

[seemslikeadream]

It's divide and conquer full force time

Stock markets continue to plunge amidst growing signs of economic crisis
By Andre Damon
8 January 2016
World stock markets continued to plunge on Thursday. The sell-off began in China, where trading was suspended for the second time in four days when stocks fell by more than seven percent in 30 minutes, resulting in the shortest trading day of the Chinese stock market.
Losses extended to Europe, where major indices fell between one and two percent. In the United States, the Dow Jones Industrial Average (DJIA) fell by 392 points, or 2.3 percent. The S&P 500 fell by 2.37 percent, while the NASDAQ Composite Index fell by 3.03 percent.
Both the S&P 500 and the DJIA are off to their worst annual starts in history, with the DJIA down by 5.2 percent in the first four trading days of the year, and the S&P 500 down by 4.9 percent.
The NASDAQ has now officially entered a “correction,” defined as a decline of 10 percent or more from the recent peak, while the DJIA and S&P 500 are down by 9.8 percent and 8.8 percent, respectively.
The continued sell-off points to growing fears of a divergence between global stock market values, which have been rising for nearly six years, and the ongoing slowdown of the world economy.
Economic growth in 2015 is expected to have been the lowest of any year since 2009, and International Monetary Fund Managing Director Christine Lagarde has hinted that 2016 could be even worse.
The fall in economic output has contributed to a steep drop in demand and prices for commodities. The price of Brent crude oil fell by another 2.1 percent Thursday, hitting $33.27 a barrel, down from nearly $65 in May and its lowest level since February 2004.
The global sell-off centered on fears of a further deterioration of China’s economy, amid concerns that the country’s slowing growth could lead to a significant destabilization of its exchange rate regime. The country’s annualized growth rate in the fourth quarter of last year is expected to have been less than 7 percent, down from 14.2 percent in 2007.
China’s central bank reported Thursday morning that it would set the target value for the renminbi at 6.56 to the dollar, the lowest valuation in nearly six years. While Chinese monetary officials have allowed the country’s currency to depreciate in an attempt to boost exports, they have been forced to burn through foreign exchange reserves in an effort to defend the currency’s value and prevent it from falling even faster.
The country’s foreign exchange reserves fell by $108 billion last month, hitting $3.33 trillion, after a fall of $87 billion in November.
The New York Times reported that a “quarterly survey of 2,000 Chinese manufacturers and other industrial companies shows that almost none are currently investing in new equipment and factories.” The newspaper quotes Gan Jie, the director of the Center on Finance and Economic Growth at the Cheung Kong Graduate School of Business in Beijing, who said, “In the past four quarters, it’s only 2 to 3 percent that are making expansionary investments.”
The latest stock market falls follow the panicked sell-off in the Chinese market over last summer, which led the country’s benchmark index to fall by up to 45 percent from earlier highs. The Chinese government was able to halt the sell-off with massive injections of cash into the financial markets totaling some $234 billion, according to an analysis by Goldman Sachs.
Fears that the current sell-off in China could be the start of a much broader correction were intensified when billionaire investor George Soros drew a parallel between the current economic conjuncture and the 2008 financial crisis. Speaking at an economic forum in Sri Lanka, Soros pointed to the uncertainty related to China’s slowing economy and unstable currency regime.
“China has a major adjustment problem,” Soros said. “I would say it amounts to a crisis. When I look at the financial markets there is a serious challenge which reminds me of the crisis we had in 2008.”
Whether or not the current market moves are the beginning of a significant unraveling remains to be seen. Most of the markets are still significantly higher than lows from last year. Regardless, there is a growing nervousness in the ruling class about the state of the world economy seven years after the 2008 crash, and the markets function as something of a barometer for this sentiment.
Among the concerns are not only the slowdown in China and the general stagnation of the world economy, but also the signs of a significant growth of opposition in the working class. The entire financial system is a house of cards, built on a foundation of free money from the central banks, and premised on the assumption that there will be an unending transfer of wealth from the international working class into corporate coffers and the speculators on Wall Street.

[Iamwhomiam]

And that what's so very frustrating to me about those who support the Republican Party, while believing it represents their interests, when it in fact works at every level to their disadvantage. Right now the Koch's have a case before the US Supreme Court that has the very real potential to eradicate collective bargaining and will destroy unionization. To finally realize what Carnegie Regan began. re-initiated.

[parel]

And that what's so very frustrating to me about those who support the Republican Party, while believing it represents their interests, when it in fact works at every level to their disadvantage. Right now the Koch's have a case before the US Supreme Court that has the very real potential to eradicate collective bargaining and will destroy unionization. To finally realize what Carnegie Regan began. re-initiated.

Won't the TPP take care of all of that?

I get frustrated with the union movement in Australia for focussing on single gains or losses (like penalty rates) and saying nothing about the TPP.

[82_28]

If all this shit can be taken care of, wouldn't it follow that shit like this never has to happen in the first place? You see it coming and you make preparations to make sure of no hardship for anyone.

[Wombaticus Rex]

If all this shit can be taken care of, wouldn't it follow that shit like this never has to happen in the first place? You see it coming and you make preparations to make sure of no hardship for anyone.

There's no profit incentive in prevention.

https://en.wikipedia.org/wiki/Fire_sale

[Iamwhomiam]

Well, 82, we could have skipped the last eight years, and instead just jumped into a full blown world wide depression the ghosts of the last would be horrified by, but waiting till now made so many new billionaires, so now it's ok to fail.

parel, I can't fault anyone for their feelings about unions, as there is plenty of room for improvement. If I recall correctly, the large unions here also supported the TPP. These days it seems most rank & file members have to bend to their employers will or risk becoming unemployed.

Like right here, now, there are more than two pipelines proposed to carry hydrofracked natural gas through my region. Many object to the pipelines due to the danger they pose to their personal safety, while others decry the project as contributing to climate change, but the laborers and pipefitters union members are out in force demonstrating their support for the project and the jobs it will provide.

Our unions are in desperate shape and we're losing our skilled workers rapidly, those who would to train newcomers.

What's being threatened is not just the unions, but the ability to bargain collectively.

[Nordic]

Fwiw my union opposed the TPP

[Grizzly]

You really need to go see this...

[JackRiddler]

Since crashes will happen no matter what as a necessary function of the economic system, this one is nicely timed. It might get Sanders elected - or Trump! (Fuckin a.)

[seemslikeadream]

Sell everything ahead of stock market crash, say RBS economists
Royal Bank of Scotland warns of ‘cataclysmic’ year with slumps in shares and oil and advises clients to shift to bonds
A trader works the phones at the London Metal Exchange
Stock markets have already come under severe pressure in 2016, with the FTSE 100 down more than 5% in its worst start since 2000.
Tuesday 12 January 2016 05.42 EST Last modified on Tuesday 12 January 2016 06.16 EST

Investors face a “cataclysmic year” where stock markets could fall by up to 20% and oil could slump to $16 (£11) a barrel, economists at the Royal Bank of Scotland have warned.

In a note to its clients the bank said: “Sell everything except high quality bonds. This is about return of capital, not return on capital. In a crowded hall, exit doors are small.” It said the current situation was reminiscent of 2008, when the collapse of the Lehman Brothers investment bank led to the global financial crisis. This time China could be the crisis point.

Live IMF's Lagarde calls for new push to help emerging markets - business live
IMF chief says global economy needs to tame hot money, to help developing economies achieve stable growth
Read more
Stock markets have already come under severe pressure in 2016, with the FTSE 100 down more than 5% in its worst start since 2000. In the US, the Dow Jones industrial average has made its poorest ever start to a year.

Oil prices have also fallen sharply on fears of lower demand and a supply glut, especially with Iran due to start exporting once more when sanctions are lifted. Tensions between Iran and Saudia Arabia make it less likely that Opec can agree to cut production to halt the slide in prices. Brent crude is down another 1% at $31.18, its lowest level since April 2004.

Investors have been spooked by fears of a severe slowdown in the Chinese economy and a fall in the value of the yuan, not helped by a crash in the country’s stock market despite attempts by the country’s authorities to curtail selling.

Andrew Roberts, RBS’s credit chief, said: “China has set off a major correction and it is going to snowball. Equities and credit have become very dangerous, and we have hardly even begun to retrace the ‘Goldilocks love-in’ of the last two years.”

Markets have been supported for some time by low interest rates, stimulus measures from central banks including quantitative easing, and hopes of economic recovery. But with the Federal Reserve raising rates and the Bank of England expected to follow suit, that prop is being removed.

Roberts said European and US markets could fall by 10% to 20%, with the FTSE 100 particularly at risk due to the predominance of commodity companies in the UK index. “London is vulnerable to a negative shock. All these people who are long [buyers of] oil and mining companies thinking that the dividends are safe are going to discover that they’re not at all safe.

“We suspect 2016 will be characterised by more focus on how the exiting occurs of positions in the three main asset classes that benefited from quantitative easing: 1) emerging markets, 2) credit, 3) equities … Risks are high.”

RBS is not the only negative voice at the moment. Analysts at JP Morgan have advised clients to sell stocks on any bounce.

Morgan Stanley has said oil could fall to $20 a barrel, while Standard Chartered has predicted an even bigger slide, to as low as $10. Standard said: “Given that no fundamental relationship is currently driving the oil market towards any equilibrium, prices are being moved almost entirely by financial flows caused by fluctuations in other asset prices, including the US dollar and equity markets.

“We think prices could fall as low as $10 a barrel before most of the money managers in the market conceded that matters had gone too far.”

[NeonLX]

Thom Hartmann advises me to "buy gold". With what?

I'm going to be flushed down the shitter with many millions of other people. Heck, there are millions of people being flushed *right this second*. See that baby starving in his mother's arms over there somewhere? BAM! He's dead.

But that's God's plan, don'tcha see?

[seemslikeadream]

can't eat gold...buy heirloom seeds

[Wombaticus Rex]

Via: http://fortune.com/2016/01/13/analyst-h ... eneration/

You don’t have to listen very hard to hear the bears growling on Wall Street, London, or Paris, these days. Indeed, the Dow Jones Industrial Average was down another 300 points on Wednesday to just under 16,200.

With the U.S. stock market sagging, oil off to its worst start ever, and the China’s economy continuing to deteriorate, bearish analysts have a wealth of evidence to point to.

And they don’t come much more bearish than Albert Edwards, strategist at Société Générale. He’s not had much nice to say about the global economy in years, and recent events have only hardened his convictions that the world is headed for disaster, and will take the prices of equities down with it. How much? Edwards predicts the U.S. stock market could plunge as much as 75%. That would be worse than during the financial crisis, in which stocks from their peak to trough dropped a brutal 62%.

...

It should be pointed out that Edwards has been making similar calls for years. Back in 2010, he called for the S&P to collapse to 450. It didn’t. And had investors taken his advice then, they would have missed out on one of the greatest stock market booms in history—the S&P 500 has in fact soared more than 80% since then, and now, even with the recent dip, stands at just under 1,900. Of course, this doesn’t mean that Edwards is wrong. It’s plausible that Edwards is correct in his analysis that global equity markets are hopelessly dependent on central bank stimulus, and that prices will somehow, someway crash down to earth when that stimulus is removed.

"...there's no difference between being early and being wrong." - Barton Biggs