To recap:
On Monday we were down 600 points, Tuesday down 200, Wednesday up 600 and Thursday the Dow is up 200, at this point.
We’ve ended up in the same place, so far, that we began on Monday.
Still: volatility. Mixed with emotions.
BZ
Today is Wednesday.
Today, NYSE stocks “shot up” 600 points.
It’s being termed the “best day” since 2011.
One possible reason for today’s performance may be:
In addition to an oversold bounce, some analysts also attributed the gains to comments from the Fed’s William Dudley that a September rate hike looks “less compelling” and a strong durable-goods report.
Monday was termed the “worst day” since 2008.
And here’s another interesting point:
U.S. economy looks better than the stock market
The recent American stock market tumble stands in sharp contrast with sentiment about the U.S. economy.
Further evidence of that was received on Wednesday. The government said orders for big-ticket items like appliances and cars jumped by 2% in July from June. That was significantly more than economists had anticipated.
Clearly, you’d best buckle up for the continuous stock market rollercoaster ride. Because I don’t think we’ve seen the end of this at all. Down up down up down up.
This may be the start of a “new normal.”
On the other hand, don’t take a cavalier attitude. Don’t place all your rocks in stocks. Diversify. And moreover, be prepared for the Mysterians to step in at any time and kick the slats out of the stock market.
BZ
[Apologies for being late with today’s post; I had to go qualify at the range before the temperatures reached a post-apocalyptic 100-degrees. -BZ]
Yesterday, Monday, the stocks dropped over 1,000 points then rollercoasted a bit until, at the close of the day, they were down 588 points. That’s some pretty serious shite.
Some people were saying that, because of it, Janet Yellen did some yellin’ of her own, to the tune of possibly considering a QE 4.
Today, Tuesday, the market rallied a bit until, again, the close of the day when selling took precedence and the market dumped its earlier gains, down over 200 points to 15666.
Get it? That evil 666.
Time for pants-shitting-hysteria, or is this something of a correction?
I’m favoring the latter, for the reasons I explained yesterday.
The NYSE tried self-correction and it began to work. Stock sharks picked up some good buys. Then the Mysterians stepped in and kicked the slats out of the stock market.
Above, Mysterians step in and kick the slats out of the stock market.
That’s as sage and cogent an amount of analysis as I’ve heard from anyone today attempting to explain the behavior of this week’s stock market.
BZ
P.S.
China is not done with us yet.
China is in terrible shape.
Essentially, the feelings about the economic turmoil in China is having its way with the NYSE and the Dow.
The Dow dumped over 1,000 points in the first five minutes of the market opening on Monday the 24th. The numbers rollercoasted and the day ended at -588.
Nine “big” stocks today, including Walmart, Dupont and Apple, went down 20% on Monday. That’s a pretty large chunk of cash in a rather disconcerting event.
So if you’re the Fed, what’s to do?
Janet Yellen raising your rates? In September? Some are saying — Barclay’s — that this plan may be pushed back to March of 2016.
Others, like ZeroHedge, are indicating there may possibly be a QE 4 in the offing.
From Tyler Durden:
Forget Rate Hikes: Bridgewater Says QE4 Is Next; Warns World Is Approaching End Of Debt Supercycle
That’s where we find ourselves now—i.e., interest rates around the world are at or near 0%, spreads are relatively narrow (because asset prices have been pushed up) and debt levels are high. As a result, the ability of central banks to ease is limited, at a time when the risks are more on the downside than the upside and most people have a dangerous long bias. Said differently, the risks of the world being at or near the end of its long-term debt cycle are significant.Leading to the conclusion that “We Believe That the Next Big Fed Move Will Be to Ease (Via QE) Rather Than to Tighten“
Today meant: households just saw about $1.8 trillion dollars of wealth disappear.
And what about Mr Obama, his administration, and China itself? Donald Trump said:
“I’m the one that says you better start uncoupling from China because China’s got problems, and they have big problems, and they’re bringing us down.”
The US is more dependent on China’s economy now than when Obama became president. Our trade.deficit with China is on track to be more than double what it was in 2009. US trade with China occupies a greater percentage of our total foreign trade than it did then. Exports to China make up a greater percentage of our total exports than they did six years ago. Chinese holdings of our Treasury Bonds have almost doubled since 2009, and direct foreign investment by China in the US has doubled under Obama.
“Experts” say that the US is staying at about a 2% growth scenario. Some people say that’s a load of crap. It’s worse. Many are pointing their fingers at China for the entire schmeer. Some people say that too is a load of crap, and can be traced back to George Bush and his TARP program, the beginning of the massive, massive bank and industrial bailouts continued and exponentially increased by Obama.
Some people say those entities should have been allowed to fail and, having done so, we would now be mostly out of our own fiscal woods and much more readily able to deal with China and Greece, in terms of strength and resiliency.
That said, what’s ahead?
I’m listening to Gordon Chang.
And he says: you ain’t seen nothing yet from China in terms of fiscal problems. Further, the Chinese government is ill equipped to smooth things out. Like because they’re, you know, Communists and all. Which means their ability to “correct” is, well, not good.
In the meantime, Hillary says — in response — to increase capital gains.
Sure.
QE 4, here we come?
BZ
Stocks dropped about 500 points last Friday the 21st.
Today, Monday morning, stocks dropped roughly 1,000 points but buyers made up for some of that loss later on in the day. Now, the difference is about 475 points.
One immediate point: nature does in fact abhor a vacuum. One man’s tragedy is another’s opportunity. That is, cheap stocks become a bargain. Stick with me. We’ll be back to that in a moment.
Oil took a bit of a hit ($38 a barrel); bad for stockholders but good for consumers. Even in Fornicalia, at ARCO for example, a gallon of gas was $2.75 yesterday. Around here, that was the lowest I’ve seen in at least a year. Just a month ago a gallon of unleaded 87 octane was $3.29.
[In the process of writing to this point, the DOW has gone from -476 to -300.]
China is a factor, Greece was a factor.
Emotions are the greatest factor.
The focus of emotions upon the stock market begs a huge essay at this point and has certainly been addressed by better and more lucid persons than me. But I think I can sum it up in one sentence.
The dollar, the American dollar, is only as solid and stalwart as people think it is.
The stock market is all smoke and emotive mirrors. Thought is the foundational basis for the solidarity of the dollar.
Quick, before we go any farther, click on this link from 2011 for reference to understand the possibility of there being no gold in Ft Knox, and why that matters.
EO 6102 criminalized the possession of physical gold by anyone other than the United States government. People were paid $20.67 per troy ounce for the gold they possessed. People who, then, had large amounts of gold sent it physically to countries such as Switzerland because of various private banking laws.
The US government, of course, realized a profit from EO 6102 and used that money to create the Exchange Stabilization Fund brought about by the Gold Reserve Act in 1934.
The Gold Reserve Act had economic ramifications far beyond national finance. At that time many contracts stipulated that their monetary terms could be demanded in gold.
Such gold clauses were intended to protect against the United States devaluing the dollar.
When the Emergency Banking Act of 1933 and the Gold Reserve Act of 1934 outlawed the use of gold, then such contracts became sources of controversy.
In the gold clause case Norman vs. Baltimore & Ohio Railroad Co., 294 U.S. 240 (1935), the U.S. Supreme Court ruled that gold clauses were invalid. However, Congress later reinstated the option to use gold clauses for obligations (new contracts) issued after October 1977 in accordance with 31 U.S.C. § 5118(d)(2).
A viable country runs on what is called the Gold Standard. Meaning that, basically, whatever paper money exists is backed by an actual physical asset.
Until it isn’t.
Enter Richard Nixon.
The United States stepped completely away from the Gold Standard. All links were finally severed when President Richard Milhous Nixon ended any possible association between gold and the US dollar on August 15th of 1971.
In retrospect, that one move placed this nation — by extension, later, the entire world — into the situation it finds itself now. The die was cast. [A great UK article is here.]
From then on, until today, the dollar has not been “backed” by anything resembling a physical asset, but by trust and confidence.
Let me repeat that again, for those of you who may just have tuned in:
From then on, until today, the dollar has not been “backed” by anything resembling a physical asset, but by trust and confidence. That is to say: emotions. Thoughts. A belief.
And that, ladies and gentlemen, is quite how precariously our current dollar stands.
[As of this point in my writing of the post, the Dow has now corrected up to -150.]
What that means, now, is this: we are experiencing what I believe to be a “correction” in the stock market and not a full-scale meltdown. People fear a meltdown; I fear a meltdown. Rightly so.
But when you have stock sharks who sense a stock vacuum and step in, you don’t have a meltdown. Nature abhors a vacuum. So the stock sharks enter the bloody water and start to purchase the cheaper, recently-devalued stocks.
When the stock sharks cease their incessant circling, that’s when you know you need to stop on the way home for an assload of food and an assload of water. Because that means the stock sharks either think the point-of-no-return has been reached, or they have no liquid assets themselves to be able to move on cheap stocks.
This, here, now, is a correction.
More to come.
BZ
P.S.
At 1500 hrs. PDT, the market ended at -588 points.