The “Stock Market Crash
Of 2018” Is Rapidly Transforming Into “The Financial Crisis Of 2019”
Stock
markets are crashing all over the world, we are seeing extremely violent “flash
crashes” in the forex marketplace, economic conditions are slowing down all over
the globe, and fear is causing many investors to become extremely trigger
happy. The stock market crash of 2018 wiped out approximately 12 trillion dollarsin global
stock market wealth, but things were supposed to calm down once we got into
2019. But clearly that is not happening. After Apple announced that
their sales during the first quarter are going to be much, much lower than
previously anticipated, Apple’s stock price started shooting down like a rocket and by
the end of the session on Wednesday the company had lost 75 billion dollars in
market capitalization. Meanwhile, “flash crashes” caused some of the most
violent swings that we have ever seen in
the foreign exchange markets…
It took seven
minutes for the yen to surge through levels that have held
through almost a decade.
In those wild minutes from about 9:30 a.m. Sydney, the yen jumped almost 8 percent against
the Australian dollar to its strongest since 2009, and
surged 10 percent versus the Turkish lira. The Japanese currency rose at least
1 percent versus all its Group-of-10 peers, bursting through the 72 per Aussie
level that has held through a trade war, a stock rout, Italy’s budget dispute
and Federal Reserve rate hikes.
This is the kind of chaos that we only see during a financial
crisis.
Investors are also being rattled by the fact that China just
experienced its first
factory activity contraction in over two years…
The People’s Bank of China said on Wednesday evening it had
relaxed its conditions on targeted reserve requirement cuts to benefit more
small firms.
The move came after
China reported its first factory activity contraction in over two years in
December. A long-term Chinese slowdown would cause global havoc.
But of course the biggest news of the day was what happened to
Apple. The Dow Jones Industrial Average was down 660 points on Wednesday,
and the huge hit that Apple took was the biggest reason for that decline.
Including the 75 billion dollars that was just wiped out, the
value of Apple has now fallen by 452 billion dollars since
October 3rd…
In only three months, Apple has
lost $452 billion in
market capitalization, including tens of billions on Thursday
as the tech giant’s stock sank further.
Apple shares have fallen by 39.1 percent since Oct. 3, when the
stock hit a 52-week high of $233.47 a share. With its market cap down to about
$674 billion, those
losses are larger than individual value of 496 members of the S&P 500 —
including Facebook and J.P. Morgan.
Ironically, the truth is that Apple is actually one of the
strongest companies on Wall Street financially. It is just that the
company was priced well beyond perfection, and so any hint of bad news was
likely to cause a decline of this magnitude.
The amount of paper wealth that stock market investors have just
lost is absolutely staggering. To put this in the proper perspective,
here are some more facts about the money that Apple investors have lost that
come from CNBC…
At this point U.S. financial markets are hypersensitive to any
piece of bad news, and the fact that Apple sales are way down in China is definitely bad news.
One analyst said that this was “Apple’s darkest day in the iPhone era” and
he expressed his opinion that “the magnitude of the miss with China demand …was jaw-dropping.”
Of course Apple is far from alone. Economic activity is
slowing down substantially all over the planet, and on Wednesday we learned
that U.S. factory activity just declined by the
most since the last recession…
Beyond Apple, investors were also rattled by the biggest one-month decline in US
factory activity since the Great Recession. The closely-watched
ISM manufacturing index tumbled to a two-year low, providing further evidence
of slowing growth and pain from the US-China trade war.
In addition, both of Bloomberg’s economic surprise indexes
have “turned negative for the first time since Trump was elected”.
The hits just keep on coming, and it is becoming quite clear
that this is going to be a very tough year.
As this crisis continues to escalate, keep an eye on our big
financial institutions. Italy’s tenth largest bank just imploded, and it
is likely that we will see more financial dominoes start to topple as the
losses mount.
Over the past decade, there have been other times when Wall
Street has been rattled, but those episodes only lasted for a few weeks at the
most.
It has now been three months, and this new crisis shows no signs
of abating any time soon.
What that means is that we are in a heap of trouble.
Because once this giant financial avalanche fully gets going, it is going to be
impossible to stop.
For the moment, I think that this current wave of panic selling
is subsiding and that Friday will be better for investors. Of course the
markets are so jittery at this point that a single piece of bad news could
instantly send them tumbling once again. But barring any bad news,
hopefully things will be calmer on Friday.
There will be good days and there will be bad days in 2019.
There will be ups and there will be downs.
But it has become exceedingly clear that the downturn that so
many have been anticipating has finally arrived, and the financial crisis of
2019 looks like it is going to be a doozy.
Stocks
Plunge, Consumer Pessimism Grows And U.S. Home Sales Just Hit Their Lowest
Level In 3 Years
It
appears to be more likely than ever that the U.S. economy is heading for a
recession. On Tuesday, the Dow Jones Industrial Average was down 301
points as investors were rattled by several very important pieces of
news. Back in 2008, home sales began to fall precipitously just prior to
the financial crisis in the second half of that year, and now it is happening
again. Of course home sales are always going up and down, but the numbers
that we are seeing now are definitely very unusual. According to the
National Association of Realtors, existing home sales just hit their lowest
level in 3 years…
U.S. home sales tumbled to their lowest level in three years last
month and house price increases slowed sharply, suggesting a further loss of
momentum in the housing market.
The
National Association of Realtors said on Tuesday existing home sales declined
6.4 percent to a seasonally adjusted annual rate of 4.99 million units last
month — the lowest level since November 2015.
And when
you compare December 2018 to December 2017, the numbers look even worse.
According to Wolf Richter, last month existing
home sales were down 10.3 percent on a year over year basis…
Sales of
“existing homes” — including single-family houses, townhouses, condos, and
co-ops — in December, plunged 10.3% from a year earlier, to a seasonally
adjusted annual rate (SAAR) of 4.99 million homes, according to the National
Association of Realtors this morning. This was the biggest year-over-year drop
since May 2011, during the throes of Housing Bust 1
Those are absolutely horrible numbers, but thanks to high interest
rates they aren’t going to get much better any time soon. Just like a
decade ago, this is going to be a very tough time to be in the real estate
industry.
During
the “boom years”, the west was the hottest region for real estate in the entire
nation, but now it is leading the way down. And last month was just
abysmal, with sales falling 15 percent in that portion of
the country…
- Northeast:
-6.8%, to an annual rate of 690,000.
- Midwest:
-10.5%, to an annual rate of 1.19 million.
- South:
-5.4%, to an annual rate of 2.09 million.
- West:
-15.0%, to an annual rate of 1.02 million.
Unfortunately, these are exactly the kinds of numbers that we
would expect to see if the U.S. economy was heading into a recession.
Investors
were also rattled on Tuesday by news that trade talks between the U.S. and
China seem to be breaking down…
Stocks
fell to their lows of the day after the Financial Times reported the U.S.
canceled a trade meeting with Chinese officials. CNBC
later confirmed the report through a source. White
House economic advisor Larry Kudlow denied the reports, saying the meetings are
not canceled, giving stocks a boost into the close. China and the U.S. are
trying to strike a permanent trade deal with the U.S. Both countries have been
in a trade war since last year, slapping tariffs on billions of dollars worth
of their goods.
We’ll see what happens, but the Chinese appear to be dragging
their feet, and it does not look like there will be a major trade agreement
between the two sides any time soon.
And when you throw in the fact that we are in the midst of the
longest government shutdown in all of U.S. history, it becomes exceedingly
clear that the elements for a “perfect storm” are definitely coming together.
“And
they think simply because the Federal Reserve is no longer hiking rates that
they no longer have to worry about the Fed pushing the economy into a
recession. Well, it’s too late for that. The rate hikes of the past have already guaranteed that the
economy is headed for recession. It doesn’t matter whether they continue to
raise rates in the future. The recession is a done deal. It’s
just now you have that calm between the storm while investors are still
clueless and haven’t yet connected those, what should be, very obvious dots.“
When the
next recession comes, you will know who to blame. Every time the Federal
Reserve has engaged in a rate hiking program since World War II, it has always
ended in either a recession or a stock market crash. The Fed is the
reason why the U.S. economy has been on a roller coaster ride for decades, and
now we are steamrolling directly toward the “bust” portion of this cycle.
If we ever want to end this madness, we need to abolish the Fed, and that means
that we need to send people to Congress that are willing to take action
on these things.
Sadly, it
is probably going to take a major collapse before abolishing the Fed becomes a
big political issue again. Economic issues have been on the back burner
for a while, but that may be about to change, because pessimism about the
economy is growing. According to Gallup, the percentage of Americans that believe economic conditions are
worsening has risen by 12 points over the past two months…
Americans are not feeling very confident about the economy these
days.
Almost
half (48%) of Americans say economic conditions are worsening, up from 45% in
December and 36% in November, according to a recent poll by Gallup, a Washington, D.C.-based research and
consulting firm.
This is
more evidence of the national psychological
shift that I have been talking about. People are starting to
realize what is happening, and they are becoming deeply concerned about what
the future holds.
Well, the truth is that things are going to get a lot
tougher. But instead of getting down in the dumps about it, we need to
prepare for what is ahead, and we need to be ready to implement some positive
solutions in the aftermath of the coming crisis.
0 comments:
Post a Comment