This definitely adds some perspective on current market conditions.
Hope everyone enjoyed the Holidays. Now things get real again.
Flat as your returns.
It is no secret that we at ACC believe there are deep systemic problems in the economy. All the current cronyism, economic obfuscation, over spending, over taxation, government intrusion, and most importantly Keynesian central bank meddling does not bode well for the future. (Though we can and must correct our ways in an historic way.)
Will 2015 be looked upon as the year the “recovery” began to completely stall? Will 2016 be worse than a stall?
The Communist Party of China has lost some credibility, at home and abroad. The recent crash in Chinese stocks was ugly and exposed the tenuous underpinnings of the Ultimate Crony Capitalist State. China’s unstoppable rise to the top of the global economy suddenly didn’t look as unstoppable as it had. Economic issues which critics had raised for years (particularly the real estate bubble) and which had been glossed over by international analysts and Chinese leadership alike suddenly became of serious concern.
This speaks to the “financialization” of the modern economy we referenced in a post yesterday. In a fiat currency world the banks truly, and almost totally run the show. The central banks particularly. And the American Federal Reserve most of all. If one is riding the financial asset train one is likely better off than one was in 2000. If however one is not on that train, if one lives in the real economy as most middle class Americans do,
It happens. It hasn’t for a while. But it happens.
Still, pretty crazy if you think about it.
We’ll see how the rest of the day pans out. At this moment we’ve got an hour and a quarter to go. But medium term sentiment on Wall Street appears to be be shifting as we see yet another day of broad selling.
It’s been a weird ride since midsummer. Mostly down but with a few big pops up. The Dow is off 2000 points or so from its high. People are starting to look around with a little more adrenaline in thier veins.
“Black sky reality.” Oooo. Scary.
Actually it is kind of of scary. But it’s not the end of the world. It makes sense that Hong Kong’s sky has darkened given its proximity to China. Heck Canada has fallen into recession.
Things just keep getting wackier in The Ultimate Crony Capitalist State.
Hey, why not just have the government come in and buy up the stock market? That ought to do the trick. Nothing could possibly go wrong with that. It’s not like this whole crash was precipitated by central planning and malinvestment or anything.
Isn’t this fun!?
The good news is the market is up right now. The bad news is the Dow was up yesterday for most of the day but then closed 200 points down.
It should be remembered that even in tumultuous moments like the one we are in the market rarely goes straight down.
At the start of the day everyone had “plunge protection team” in the back of their minds. (Even if they wouldn’t say it.) It looked as if the short term fix was in. But it turned out to be more short term than many expected. When the dust cleared we were down, again, for the 6th day in a row.
Not sure when this screen shot was taken today but you get the point.
Black Monday 1987. Market was up soon after this. Different vibe this time?
China down 8.5% FOR THE DAY. Europe down broadly, 3-4% on huge volume. And on Bloomberg everyone is asking, why?
The new China ride?
Why? Because China (just China?) is in deep trouble. Because the Chinese central bank has intervened big time and has failed. The market has overwhelmed a large central bank and that is new.
I’m guessing that there were more than a few meetings at the Federal Reserve over the weekend.
Here’s a good dose of gloom for you. The author is not saying it will happen, but he is arguing that Dow 5000 is not completely crazy. Frankly I’d be for it. If we could carve out all of the central bank fluff created post-2008 and returned to a real live market such a crash would be worth it. (It might not be so great for all those baby boomers who have ridden the Fed induced rally right before retirement however.)
I wouldn’t say that a crash on this scale or a re-institution of real,