As I'm typing this, the Dow Jones is already down 1,000 on the day, less than 5 minutes into trading. We're less than a percentage point away from a forced halt of 15 minutes on trading to let the markets settle.
Got a feeling this is going to be a major story over the remainder of this week. Might as well discuss it here.
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The Great Correction of 2015. Economic analysts have been predicting it for almost a year now.
Yeah, no doubt.
That said, looks to be more global than US-centric this time. The Chinese bubble is popping, India screwed the pooch, the Russian Ruble is devaluing as we speak, Greece is Greece, and oil prices are probably going to where they should be.
That said, if your business has a significant portion of its workforce/manufacturing in China, you should be worried right now.
How much, if any, has the increase in oil production by the US driven the downward trend of oil prices? I can't remember the last time I saw $40 a barrel for crude, and I just don't follow global oil markets enough to know of anything else that's going on with production besides us being on pace to become the largest world producer.
There are a number of elements at play. The US's increased crude production, decreasing reliance on global markets, and major increase in natural gas production; the increased usage of renewables; OPEC's repeated decisions over the last few years not to cut back on production; and more recently, the potential re-emergence of Iran on the global trading market.
Totally agree. This has been a long time coming. The good news is, up until now, the US economy continues to move along well according to most economic indicators. I wonder if this forces the Fed to reverse course and not increase interest rates in mid-September...could help buoy the domestic markets a bit...
@ Pierson - I also think the Fed will hold off on their presumed fall rate increase. The housing market is taking off, and I'll bet they don't want to slow that down.
Since artificially manipulating interest rates worked out SOOOO well last time.
We haven't had a real market since they let Lehman fail in 2008.
The Fed has been dumping money into this market since then (bank bailouts, QE 1-3, operation twist, cash-for-clunkers, cash to Europe, S&P futures, etc.) with little to show for it other than filling a HUGE hole of lost (stolen) cash. (BTW, no one has gone to jail for any of this in the US.)
Now the Fed has threatened to raise interest rates from zero to 0.25% and the banks (investment and corner) decided to dump their stock market shares they bought with borrowed fed money. They're holding the market hostage to get what they want, similar to 2008 when Congress voted against the first bailout. "Wrong answer, -1000 on the Dow. Right answer, we'll put the people's money back into the "markets".
Pretty solid summary of the evils of crony capitalism.
So a great time to buy stocks and fill up the car with gas soon already below 2 here in SC.
Yes
Don't really understand stocks but what the heck is going on? I heard China's economy is falling apart and the price of oil has something to do with it?
Part of it is Chinese Government trying to prop up their currency.
Marketplace had a piece on that a couple of weeks ago. Beijing had just announced one of the largest stock buys in the nation's history. The Chinese economy is so incestuous it might as well be in ruled by the Lannisters.
The may be the single greatest economics joke of all time. Well did.
And what does this have to do with the price of tea in China?
It's going UP.
Not the World Market I was thinking of...
I love that place. It's like Big Lots for the Pier 1 crowd.
My wife just found out about these places a couple weeks ago...
I tried so, so hard to avoid it, too. *sigh*
Your wife is single handedly trying to save the global economy. Props.
Believe me, she is not single handed in her efforts....my wife is doing her best as well.
In my experience, World Market tends to locate in or very near strip malls, where there is almost always a sports bar...
Which would be nice.... if she left me enough money to buy a beer....
I was thinking more of this place
Been waiting on this for over a year now. Time to pour money into the market!
Absolutely! For any investors that have a good amount of time until retirement, this is good news! Buy buy buy!
The DJIA is recovering some which is good to see.
It corrected itself back to around 500 down, but seems to be creeping back down further.
If it's not below 15,000 or close to 14,000 by the end of the week, I'd be slightly surprised. If it dips below 14,000, that might be a little worrisome.
As a financial consultant on large group retirement plans, these days are always a real treat.
It's a great time to buy a long as you don't have to retire next week. Long term this is "good" for the market if you will, but people rarely think long term these days.
It will be very interesting to see what China does moving forward. The unspoken bargain there has always been that the people took an iron fisted corrupt government in exchange for economic security. Now they have one without the other...
Would it be fair to say China is a Keynesian economy, or is there not enough free market to make that claim? I know China isn't a socialist state like the USSR was, but I have no idea how much interaction and control Beijing has on "private" Chinese corporations.
As it currently sits, no they are not a Keynesian economy. But they have certainly flirted with the notion. Their Peoples Congress recently proposed an increase in deficit spending, which is a hallmark. But they aren't quite there yet. As an aside, I also am not sure I would call the USSR a socialist state. It was an interesting propaganda point that both sides seemed to settle on during the Cold War, but there was little truth to it. Once Stalin took charge it pretty much became the ultimate capitalist state.
As to your second point, I believe the answer there is "A LOT"
More Totalitarian than Kaynesian or Socialist. People own close to nothing and government controls most everything. They create their own currency and can implement stimulus quickly with only a few people making the call, but they are not simply spending from savings earned in the good years. How they respond could have great implications for the IMF decision in the next fee weeks.
Basically, if you sign on to work in China, the Chinese gov't essentially controls that arm of your company as the contractor whom all work goes through. They get to learn the intricate details of how your operations work in China, and they have the ability to terminate the contract at any point, absorbing all your Chinese employees in the meantime.
Thanks. So does China allow any free market competition between companies producing goods for consumption by the Chinese market?
China is completely free market. However, foreign imported goods are considered "luxury" items and all come with 40% minimum tax on them. They are protecting their domestic brands because if they flooded with international brands at domestic pricing it would kill domestic economy. that is bad when China is trying to change from export economy to domestic. However, if you manufacture an approved product domestically you can avoid that tax, which is why you see more and more international brands with local manufacturing such as dannone and yoplait yoghurt, doritos, and even Ferrari cars.
Okay, so, if China is completely free market, and spends aggressively to stave off recession, why exactly isn't it a Keynesian economy? Or is it because the government is ALWAYS an economic driver, and not just during periods of recession?
Sorry, the Chinese economy is kind of fascinating to me, so I'm really curious about the best way to characterize it.
You are pretty spot on. Basic Keynesian theory revolves around the idea that the government is a temporary economic driver during periods of downturn or recession. They become a big ticket purchaser in things like roads, bridges, military equipment, etc. But the government itself does not own or manage the firms that provide these items.
In China, for the past several decades, the government is basically the permanent economic driver. Couple that with the fact they also own most of the assets in the economy or control them indirectly through various forms of manipulation, state run banks, etc.
It is a subtle distinction on the permanent vs temporary nature, but a key one. So China really doesn't fit the mold of classic Keynesian theory.
Also interesting to note would be that under the theory, China's first response to their tumbling stock market or slowing growth rate would be to "print money" to prop it up. They havnt decided to do this. Speculation suggests this also may be causing some of the biggest divides behind closed doors that the CCP has ever faced.
Given that they peg the value of the yuan at a 1:1 value to the dollar, if they start printing money, it necessarily devalues our currency. If that looks like it's going to happen, things are gonna get awfully tense between us and them.
This is true but it goes both way. China is the largest foreign holder of American debt so when the USA market tanks it affects them monetarily as well.
Not nearly as much as it benefits them in pretty much any trade situation. Pegging the currency upsets normal market balancing in trade, because the relative value never changes. Combine that with their steep taxes on imports, and we end up getting hurt rather often by their drastically protectionist policies.
oh for sure. just highlighting that it's not entirely one sided
Technically you are both right. But China government is ALWAYS involved. ALWAYS. They're are State Owned Companies that are anchor economic drivers that are used to position and move markets , like China Mobile or China Construction, etc that has always been controlled somewhat but also was affected by corruption. that is getting cleaned up big time. China spends A LOT on many things like high speed rail networks, ports, etc. That's not stopping for a long time
This is not entirely accurate. or at least doesn't come close to explaining how or why those situations have come to pass.
Yeah, but it is a little worrying to log onto my computer and find 7 messages that my trailing stop losses have triggered already.
Wake me up when in year 2040 and I'll start worrying about it!
The world needs structural reform instead all we get is cheap money. How bout we elect a person who doesn't like lawyers and paperwork? Burning half the rules and regulations handed down over the last 20-30 years by repubs and dems alike would pretty much do the trick for us. The Greek thing is dangerous because Greece is bankrupt eventually everyone will say yes.... we shouldn't be making them sell the Parthenon we should just take a loss on the debt and move forward hand in hand.... or they'll say we hate you and you hate me and screw us all. Then the light shines on other socialist states such as the PIGS, and lets not forget all the damage the French folks have been doing to their economy while the Greeks are gettting proctolized? If the dollar gets pummeled and reserve currency status comes into play... watch out. If Eurozone breaks up there will be a mad rush to get trade zones set up.... dollar status will almost certainly become "should we use" instead of "we gotta use".
USD has much to do with this. Cheap money has fueled massive carry trades. The fed has been telling these hedge fund managers to get out of their carry trades. Methinks there are a few who are probably facing massive redemptions and gambling their days and dollars away. Yet I think it is probably limited in their impacts. Who in their right mind would be doing highly levered macro stuff these days? The world has gone off its rocker... little historical data to use to guess what will happen.
Europe is not that bad unless Greece goes out. China has been letting their citizens gamble on markets etc and they as a society are not ready. Wild west, no rules, lots of fraudulent companies.... people losing life savings, levered up etc., etc. The big question is how bad things are in China. They seem to have bought ALOT of gold, then somehow have sold alot of it...so they seem to have gone from aggressive about their future to completely lets just defer it and sell the gold, work this out.... the Yuan devaluation seemed to be a shock, but most who saw the gold reversals believed something was about to happen. Noone knows what the next shoe may be to drop in China.... hopefully its picking up the pieces from their stock market bubble popping and nothing more.
Then there is our president's foreign policy. Last time we had a president who favored Iran over Saudi, same sh** happened... Saudi's cut prices to cut legs out from Iran. Since Iran deal was signed crude has been pummeled ALMOST every day. WW output decreasing? Mebbe, but mebbe the Sauds are voicing their displeasure. The US OIL debt crisis at $30 oil is estimated 5-10x the subprime. Yes Sauds want electric vehicles, fracking deferred.... but they are more afraid of a world where Iran has allies in China and Russia, Sauds are shacked up with the Jews who we are also giving the Heisman to. Say what you will about this policy... but it sure ain't traditional foreign policy. Why did traditional foreign policy prefer the Sauds? Its not oil you undereducated numnutz. Its the dollar clearing of oil. Whoever is willing to produce quality weapons for the Sauds may get oil cleared in their currency and that could be a very serious shift, perhaps the seminal economic event of most of our lifetimes. Yes it is unlikely, but I don't know how long the Sauds can wait before taking a deal. Not sure they can wait til the next election / january inauguration. There will likely be more aggression in the oil patch as countries make deals or countries get taken over on account of their cheap energy supplies.
Then there is Russia. Cornered. But we've ceded Ukraine to them. How long til Russia does a deal with Greece or Saud? Does he go after something more strategic (than Ukraine) before or after that deal?
Anyway, could go on and on.... what a freaking mess. Politicians used to come and go, the professionals did their thing. Now it seems politicians come in and professionals cower. When everything is run by narcissists, nothing will be stable for long because they don't have any principles. Repubs and Dems alike are narcissists... so I'm not necessarily for one party or the other, though I wish we would make friends with the Sauds and Israelis again.
Sorry if a couple of statements could have been interpreted as inflammatory or racist. Other presidents have tried shifts in foreign policy... not a black white thing....and the Sauds have done a number of things that have showed their "independence from the US" in recent years.
Bottom line is I think things recover, but the wild card is geopolitics... stuff like North Korea, Russia, Iran, Saud, etc starting wars over natural resources etc. I think that is why things have dropped.
I just wanna point out the irony of your screen name given the length and passion of your comment
I feel like the slacker take would be more like this:
LOL point taken. Crazy days wish I had a crystal ball. Thx for letting me vent.
Dude haven't you learned from TKP that crystal balls are useless?
I thought that was 247 with the useless crystal balls?
Until this latest article, (seriously?8 win season?) TKP has been pretty spot on.
Fundamental to any cult activity, we should all drink the cool-aid together ; )
Yeah I was being sarcastic and referring to 247 crystal balls and how frustrating they can be
Nows a really good time to buy pie and get rid of all your cake.
That's certainly what the market would have you believe.
Normally I'd be with you, and long term you're right, but these are strange times.
What is great for me is that I get paid in dollars and then it is converted to rubles on payday. My salery has more than doubled in the past 18 months.
I am a Russian Prince who needs to hide some money during this big downturn, if you give me your checking account I will deposit...
Putin, is that you?
Rough past few days; my trip to the beach came at the right time, it seems...
There are a lot of comments/questions here that i am happy to answer if anyone wants to ask specifically. let me give some short answers though.
china's bubble bursting: uh, no. I have been hearing this for the last 14 years. China has 300+ Million people urbanizing in next 10 to 15 years. that's the pop of USA. The bubble isn't bursting in the slightest. it's readjusting. from an export to domestic economy. there are so many adjustments to be made doing this that the water will get choppy.
china has totalitarian control over market: yes, sure it does. but honestly if it didn't this market tumble would be affecting the world A HELLUVA LOT more. it needs to have control because mob mentality is rife in Chinese mindset and a full blown market collapse is not something they want obviously. You want Beijing to have that control, believe me.
But there are several things that aren't being reported on much that should be addressed:
a) China's stock market has been infamous for insider trading. wherever it was or is now is a false number. no way stocks are that high. It had to come down.
b) China's stock market is located in Shanghai. there are big political reasons why this important. you would need to know Chinese politics to understand but suffice to say Shanghai and Tianjin are two of the last bastions of former presidential power, power that was known to be corrupt. Anyone see something about a huge explosion in China two weeks ago? what city was that located in? hmm.....
c) The current president is leading the world's largest and most wide spread anti-corruption effort in history. The shanghai market was highly corrupt . if you haven't guessed, there is a correlation here. hint: see point b
c) domestically this is not hurting China much. Yes, many people have lost money and even some suicides sadly. however, China as a country is humming along more powerful than ever.
Great. Now tell us something we can use, like some undervalued stock we can invest in.
That explosion was like nothing I have ever seen before. And you're right about corruption, was reported that storehouse was less than half the distance from residences that Chinese law allows, and something like triple the amount of calcium carbide that was allowed to be stored there.
So as of 9:45 am on Tuesday, the major indexes seem to be on the upswing. No telling if this will sustain itself just yet, but a lot of basic technical indicators seem to show a slowing down of the sell off. If you have any money on the sidelines and want to make a quick buck, that opportunity might be presenting itself here in a bit!
The market never truly bottoms out in August. Wait until September or even October for a reliable bottom before you go shopping.
And... Pumpkin pie is a nice safe haven this time of year.
Pumpkin Spice Futures are about to skyrocket.