Friday, January 8, 2016

What Happens Next?...........SELL MORTIMER SELL!

What Happens Next?

STOCKS GET CRUSHED... The U.S. stock market is in free fall.

Dow: 16,514, -391, (-2.3%)

S&P 500: 1,943, -47, (-2.4%)

Nasdaq: 4,689, -146, (-3%)

2016 has offered investors nothing but pain. SELL MORTIMER SELL!

So far 2016 has had the worst first four day start to the year ever.

The Dow Jones Industrial Average has lost 5.2% of its value for the year after just four days of trading.

The S&P 500 index has dropped about 5% for the year. The S&P 500 lost money four of the last five trading days during the most bullish time of the year. 

So far 2016 has obliterated Nasdaq's 2015 gain. 
The Nasdaq Composite Index  has tumbled nearly 6.4%.

The main factor is diminishing global liquidity because of the decline in oil prices. Oil's slump—a big boon for U.S. consumers scoring cheaper fuel costs—will pinch export economies that sell to oil-exporting countries now facing ever-shrinking revenues. Saudi Arabia, the key swing producer of the Organization of the Petroleum Exporting Countries, is showing signs of the pressures of oil prices that are near $33 a barrel. When oil prices increase, it basically is a consequence of expanding global liquidity, so inversely, this unrelenting fall suggests contraction.

The U.S. benchmark for crude oil, West Texas Intermediate has plunged more than 10% for the year. Oil hit a 14-year low.

Brent crude is off 9.6% so far this year.

Market breadth is another reason to fret. The vast majority of the S&P 500 components are in bear-market territory, a move generally defined as a fall of at least 20% from a recent peak.

The last time things were this bad in a given week for stocks was the week of Aug. 21 2015 and the week's not even over yet.

The market is currently in panic mode........China's devaluations are not over yet!

Investors across the globe are wading in a sea of deep red, sparked by concerns about slumping global growth — otherwise known as China. China's stock markets are likely to drop 5-6% on Friday: "Based upon the ETF in the United States, China is predicted to be down 5 percent or 6 percent…It'll be a tough day again tomorrow.

The stock-market downturn could result in the S&P 500 hitting lows not seen in five years. The S&P 500, could plunge to its 2011 low. that would be 1,099.23, set that October.That's just the "medium bearish" scenario.

Hiking rates into a fundamentally weakening economy in a desperate bid to "convince markets that strong growth and inflation are on their way back,IS NOT WORKING!

Fed Policy has resulted in a deeply unstable outcome in the global economy and across markets. Significant damage has been done to the credibility of policymakers, and to the belief in normalisation, in inflation, and in the ability of risk markets to continue ignoring the harsh realities of weak growth, weak pricing power and weakening earnings.

The current selloff that has gripped markets over the past several days is a "selling stampede" and these things usually last about a month before they are  exhausted.

Is the market wrestling with a financial crisis as ugly as 2008?

It is perhaps too early to tell given that there are just a few days of 2016 trading under investors' belts. But so far, it is ugly and growing worse.

The unrelenting carnage in global markets has the markets facing a crisis and investors need to be very cautious.

One of the many fascinating things about this latest global financial crisis is that there's no single catalyst. Unlike 2008 when the carnage could be traced back to US subprime housing, or 2000 when tech stocks crashed and pulled down everything else, this time around a whole bunch of seemingly-unrelated things are unraveling all at once.

China's mal-investment binge is crashing global commodities, an overvalued dollar is crushing emerging markets (most recently forcing China to devalue), the pan-Islamic war has suddenly gone from simmer to boil, grossly-overvalued equities pretty much everywhere are getting a long-overdue correction, developed-world political systems are being upended as voters lose faith in mainstream parties to deal with inequality, corporate power, entitlements, immigration, really pretty much everything. 

Why do causes matter at times like this? Because where previous crises were "solved" with a relatively simple dose of easy money, it's not clear that today's diverse array of emerging threats can be addressed in the same way. Interest rates, for instance, were high by current standards at the beginning of past crises, which gave central banks plenty of leeway to comfort the afflicted with big rate cut announcements. Today rates are near zero in most places and negative in many. Cutting from here would be an experiment to put it mildly, with myriad possible unintended consequences including a flight to cash that empties banks of deposits and a destabilizing spike in wealth inequality as negative interest rates support asset prices for the already-rich while driving down incomes for savers and retirees.

And with debt now $57 trillion higher worldwide than in 2008, it's not at all clear that another borrowing binge will be greeted with enthusiasm by the world's bond markets, currency traders or entrepreneurs.

Easier money will have no effect on the supply/demand imbalance in the oil market, which is still growing. The likely result: Sharply lower prices in the year ahead, leading to a wave of defaults for trillions of dollars of energy-related junk bonds and derivatives.

As for stock prices, in the previous two crises equities plunged almost overnight to levels that made buying reasonable for the remaining smart money. 

Today, virtually every major equity index remains high by historical standards, so the necessary crash is still to come — and will add to global turmoil as it unfolds.

The upshot? It really is different this time, in a very bad way. And this fact is just now dawning on millions of leveraged speculators, mutual fund and pension fund managers, individual investors and central bank managers. Right this minute virtually all of them are staring at screens, scrolling over to the sell button, hesitating, pulling up Bloomberg screens showing how much they've lost in the past few days, calling analysts who last year convinced them to load up on Apple and Facebook, getting no answer, going back to Bloomberg and then fondling the sell button some more. Think of it as financial collapse OCD.

What happens next? 

At some point — today or next week or next month, but probably pretty soon — the dam will break. Everyone will hit "sell" at the same time and find out that those liquid markets they'd come to see as normal have disappeared and yesterday's prices are meaningless fantasy. The exits will slam shut and — as in China where the markets closed a quarter-hour into a recent trading session — the whole world will be stuck with the positions they created back when markets were liquid and central banks were omnipotent and government bonds were risk-free and Amazon was going to $2,000.

And one thought will appear in all those minds: Why didn't I sell 
when I had the chance? Why did I believe all the very obvious lies?

No late-day rally Thursday......down, down, down!  SELL MORTIMER SELL! 


Credit suggests more to come....

Stocks are "getting there"...

This Is The Dow's Worst Start To The Year... Ever!

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