Friday, February 12, 2016

The Bears Are In Control And Investors Are Very Worried..........

 The Bears Are In Control And Investors Are Very Worried

Thursday was an all-around chaotic day in global markets as stocks tumbled, gold prices spiked, oil prices dropped and Treasurys continued to grind lower. Markets started the day deep in the red and stayed there.

In the U.S., the Dow lost 254 more points on Thursday,

Dow: 15,660.2, -254.6, (-1.6%)
S&P 500: 1,829.1, -22.8, (-1.2%)
Nasdaq: 4,266.8, -16.8, (-0.4%)
WTI crude oil: $27.20, (-0.5%)

Stock markets around the world continue to collapse as this new global financial crisis picks up steam. The world has entered a bear market. On Thursday, the MSCI All-Country World Index ended down 20% from its May peak, marking the start of a global bear market. European stocks have been getting obliterated, and financial institutions are leading the way.

Stocks in Japan suffered a terrible start in early trade on Friday. After falling 918 points on Wednesday, the Nikkei plunged another 760 points early Friday. The Nikkei has now fallen for seven of the past eight days, and investors in Japan are in full panic mode. Banking stocks are feeling the pain. The Japanese bank Nomura fell more than 12% to hit its lowest level since 2012. Markets in China are still closed for the Lunar New Year holidays, but Hong Kong's Hang Seng is open, and it fell.

17 trillion dollars of global stock market wealth has already been wiped out.

The upcoming recession could easily be comparable to or worse than the 2008 Crisis. Another financial crisis on the scale of 2008 would trigger "a cataclysmic  uncontrollable backlash" across the globe. It is becoming exceedingly apparent that none of our problems from the last crisis were ever fixed, the publics frustration with this fact is going to be off the charts. Ultimately this new crisis is going to turn out to be far worse than what we experienced in 2008. Many people believed that the day of reckoning would never come, now it is here.

Investors have lost faith in central banks and are now very worried about the financial condition of banks. A growing sense of nervousness about the health of stock markets world-wide, a slowdown in the global economy, flagging corporate profits, and fading confidence in the ability of central bankers to navigate these choppy waters has investors very concerned.

Central banks cannot manufacture the environment necessary for a real recovery let alone repair the structural damage they have done to our economy. The false hopes of their solutions are fading fast and the business cycle is reasserting itself,absent any real solutions. Valuations based on these false hopes have only just begun to be corrected. Any mainstream narrative that ignores these facts is nothing but a lie designed to further dupe participants and foster more false hope. Do not be fooled, central banks have fixed nothing, in fact their incredibly foolish policies have made things much worse.

Thursday's moves follow a late-session selloff on Wednesday, when the Dow average logged its longest losing streak since late August and the S&P 500 index  matched its longest run of losses since November.

On Thursday the 28th trading day of the year, more than half of those sessions have seen moves of 1% or more on the major indices, well above the average volatility.

All 10 sectors in the S&P 500 finished in the red on Thursday with financials slumping 3.2% as Bank of America Corp.and Citibank Inc. both down sharply.

Banks were also leading the carnage in Europe with Société Générale tumbling 15% following a disappointing fourth-quarter earnings report.

Financials were leading the S&P 500 losses, down 2.6%, as ultralow interest rates and widening credit spreads have recently fueled widespread worries about banks' balance sheets, sparking a selloff in the banking sector. The SPDR Financial Select Sector exchange-traded fund has tumbled 15% year to date.

Every company that went public this year is now trading below their IPO price.

I said this yesterday: Two levels EVERYONE needs to watch: first, if the index sees a weekly close below 1,816 and then if rising channel support around 1,786, drawn off the 2011 low, also gives way.  

The market bounced off the 1815 to 1825 level twice yesterday and held. I would not count on it holding above this level for long.

Gold prices rocketed higher, and demand for physical gold is going through the roof all over the planet. Overall, gold is having its best quarterly performance in 30 years. Traders are piling into gold fearing the world is on the brink of another financial crisis. Thursday, gold futures rocketed nearly $60 higher in a single session, topping $1,250 an ounce.

And Now Everyone Is Jumping On The Gold Bandwagon: BofA Says To Stay Long Gold Until $1,375, "$1,550 A Possibility"

Gold prices are breaking above triple resistance forming a technical bottom and channel breakout. This projects gold higher to 1,315 and 1,375 with 1,550 a near term possibility.

Goldman Says: Gold has reached, and so far held, notable resistance around $1200, there's now scope to extend much higher over time.

How bad are things? Even billionaire Dallas Mavericks-owner Mark Cuban has said he's buying gold.

Lines Around The Block To Buy Gold In London; Banks Placing "Unusually Large Orders For Physical"

This is the best quarterly performance for Gold in 30 years... "It's been crazy – it's been the best week since 2012. We've had people queuing round the block..."  I THINK IT IS OBVIOUS THAT PEOPLE ARE STARTING TO GET IT!

There is still a significant amount of time and price appreciation to garner once a bottom has been confirmed. You are not missing out on much by allowing gold to confirm a long-term bottom. So, please remember that investing is a marathon, and not a sprint.

Crude oil prices, meanwhile, hit a new low with West Texas Intermediate, the US benchmark, falling to as low as $26.07 in afternoon trade, a fresh 13-year low for the commodity. Not even during the worst parts of the last financial crisis did oil ever go this low. The price of oil was sitting at about $108 a barrel back in June 2014.  Since that time it has fallen about 75 percent. 67 U.S. oil and natural gas companies filed for bankruptcy in 2015. That represents a 379% spike from the previous year when oil prices were substantially higher.

Large U.S. banks JPMorgan Chase (JPM) and Wells Fargo (WFC) that helped bankroll the energy boom are already setting aside billions to cover potential loan losses in the oil industry. Investors are worried about imploding energy loans for European banks like Deutsche Bank (DB).


Table of bank performance prior to todays rout;


Of course, bank CEOs will all tell investors there is nothing to worry about.

Remember, when the crunch comes, bank CEOs lie so they can keep their paycheck.

If credit is right - and it usually is on a cyclical basis - US bank stocks have a long way to go until they reach a sustainable bottom. SEE THE CHART BELOW THE TABLE.

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