Tuesday, October 13, 2015

Global Equity Markets Are Teetering On The Edge Of A Cliff.........

Global Equity Markets Are Teetering On The Edge Of A Cliff

Europe's markets are cratering, with Germany's DAX, the bulwark of the European Union, starting to rollover to the downside.

More than half of all publicly traded U.S. stocks are now down more than 20% from their record highs.

The Dow Transports are now down 15.43% from the record high Nov. 14.

The Dow Utilities have slid as much as 18.8% since their January record high.

And many U.S. stocks are down even more, many losing more than half their value since their record highs over the past year. It's going to get much worse  for stocks.

Bubbles are bursting in the biggest markets of all, sovereign debt.

In Europe, German bunds are starting to look like they will implode any day now. Same for Japan, where the Japanese government continues to print money with reckless abandon and Japanese government bonds have nowhere to go but down. Here in the U.S., hardly anyone realized it, but interest rates started moving up way back in July 2012, when the 10-year U.S. Treasury note yield bottomed at 1.394%. Slowly, but surely, investors worldwide are starting to shun sovereign debt, realizing that there are no returns to be had there and that the safety of government debt today is nothing but a mirage. Short-term interest rates, on the other hand, are indeed falling, with  three-month Treasury bill yields now negative at -0.02%. They could get even more negative as investors flee the stock markets and park capital in money markets, pushing short-term yields even further into negative territory. Even in the short end of the yield curve, a government debt bubble bursting looms high.

Then there is the commodity sector, in one of its worse deflations ever. So bad that the world's largest and most sophisticated commodity company, Glencore, has seen its share price plummet more than 70% this year, with half that loss occurring on Sept. 28. Copper annihilated. Other base metals prices shedding 70% or more. Grain markets reeling. Soft commodity prices such as coffee, cocoa and sugar cut in half or more.

And what about the geo-political scene, where war cycles are ramping up. Consider the refugee crisis in Europe — while I am for humanitarian efforts, the strain of the crisis will be the final nail in the coffin for indebted European governments. And where cultural conflict is sure to rise. ISIS and Syria — where for the second time since the Cold War, Russia and the U.S. are polar opposites, just like they are regarding Ukraine. Potential for a future international war? Very possible. Leaders in Washington, Brussels and Moscow need to divert their peoples' attention away from the lousy state of domestic economic affairs.

How about the rise of Donald Trump, who is anti-establishment. His popularity is threatening the status-quo in Washington, showing you that the people are finally rising up against harebrained politicians who want nothing more than to save their butts at your expense.

All of this is coming together on the world stage, starting to turn nearly all markets upside down and inside out.

No comments:

Post a Comment