[anarchist23]

The Dow Jones Industrial Average has closed down by 1,175 points in the biggest one day fall since the financial crisis.
The leading US stock market index closed down 4.6% at 24,345.75.
It is the worst drop in points since September 2008 when a plan to rescue the US banking industry was rejected.
The decline extended losses on Friday, when strong wage growth data raised the prospect of accelerated interest rate rises.
Monday's sell-off surpassed a 777.68 points drop on the Dow Jones on 29 September 2008 when Congress rebuffed a $700bn bank bailout plan following the collapse of US investment bank Lehman Brothers earlier that month.
The decline in the Dow was closely followed by the wider S&P 500 stock index, down 3.8% and the technology-heavy Nasdaq, down 3.7%.
The Dow's dramatic fall marks a turnaround from January, when it raced past the 25,000 and 26,000 point milestones in less than a month.

http://www.bbc.co.uk/news/business-42942921

[Crantag]

It is very preliminary to say strongly one way or another, but I am suspecting no short-term end in sight.

That we are at a point where growing wages slay Wall Street profits is just one instance reeking of contradiction.

A new Fed chairmain was sworn in, today.

Raising interest rates in order to slay wage growth to attempt to reel in the stock market will have the predictable effect of further inflating bond yields. 10-year treasuries are currently approaching 3%, and they spiked in response to the sell off. Their high yields are mostly a function of trading volume, a result of bonds functioning as a hedge against stocks. I heard a commentator still mimicking the lie that Treasury bonds are considered the safest asset in the world. This lie has been a transparent one since the US credit rating was downgraded by Moody's.

When money starts to flee bonds, it may threaten the solvency of banks.

[Stormsmith]

That sounds dire. I'm hoping it's just a correction,possibly involving automation as opposed to people driven selling. If so, could lead to a good buying time.

[Crantag]

That sounds dire. I'm hoping it's just a correction,possibly involving automation as opposed to people driven selling. If so, could lead to a good buying time.

The only exchange which has been positive in recent days is the Shanghai exchange.

This also seems to me logical. Chinese internal investment has been huge, accompanying the economic growth there, and has been strategically directed.

[Rancid]

Don't we want the fed to cool off the stock market by raising interest rates? The boom over the last 6-12 months has been a bit odd.

The overall economy is strong, might as well raise rates to give us some ammo for when the economy is weak. I say raise rates, and wall street should just have to accept this already.

[Crantag]

Don't we want the fed to cool off the stock market by raising interest rates? The boom over the last 6-12 months has been a bit odd.

The overall economy is strong, might as well raise rates to give us some ammo for when the economy is weak. I say raise rates, and wall street should just have to accept this already.

I think they basically have to raise rates. But the problem is the bond market.

The bond market is already a bubble, and raising rates will further inflate the bubble. What goes up, must come down, andt he bond market going down would be a financial nuclear bomb. I don't know if it's avoidable, either.

Bonds have been held as the sanguine alternative to stocks, stocks being privy to high volatility. That is why the collapse of bond markets would be so devastating. But, I think we could be already at the abyss. Broadly speaking, these are all consequences of finance unchained. (It can be deceptive to talk about regulation, because it is controversial the extent to which financial speculation is driven by financial deregulation, or visa versa. But 'finance unchained' is an extant phenomenon either way.)

[Rancid]

Ok, so let's say the bond market crashes. How would this affect the actual economy? Things like wages, company bottom lines, etc.?

[blackjack21]

The Atlanta Fed predicted first quarter GDP at 5%+, which is the biggest quarter we've seen in a very long time. In other words, the economy is beginning to roar. So that implies an increase in interest rates. In addition to the Trump rally of the last year, we've also had 8 years of a bull market largely underwritten by near zero interest rates. That means that stocks that have been buoyed by free money are going to take a hit as rates increase, and we'll get back to competitive asset allocation.

So when you think of stocks that have been dependent on cheap money, it is now time to rotate out of those stocks and into stocks that can grow in a normal interest rate environment.

With the corporate tax cuts leading to higher wages, the Fed will start looking at wage and price inflation more carefully--even though we haven't seen real wage increases in a long time. For poorer workers, like Walmart workers, getting $1000 bonuses, they have a higher marginal propensity to spend. So consumer spending is likely to increase. With corporations repatriating money to the United States, we will also see higher direct investment. We're still not at a completely rocking economy, but we're on the way to good times again.

Corporate profits are strong, so I don't see a secular bear market coming. We could have a big correction though. I'm not even convinced this is necessarily the top yet. However, we're long overdue for a correction.

The other area I think where this spells some additional risk is urban real estate in high priced markets like San Francisco, Vancouver, New York, etc. The suburbs have rebounded, but aren't necessarily in bubble territory as they have a lot more people with 80/20 LTV ratios or better. However, urban areas have depended upon people being willing to finance purchases with short term money at lower rates of interest with much less skin in the game. Those loans will start getting expensive in a few years as rates increase, and we'll likely see more defaults again but I think more focused on urban areas. That's still a few years off though.

[The Immortal Goon]

There are also some big ticket items coming up in the next several weeks so far as Federal financing. The debt ceiling debate, funding the government, things like that have not been worked out yet. The market, typically, doesn’t love this kind of instability.

But, as has been noted, it was going to come down at some point anyway. The question is the interest rates and if there is a panic to sell.

[Crantag]

Ok, so let's say the bond market crashes. How would this affect the actual economy? Things like wages, company bottom lines, etc.?

The bond market crashing could threaten to wipe out accumulated savings across all sectors of the economy, freeze credit, and cause banks to become insolvent.

[Rancid]

The bond market crashing could threaten to wipe out accumulated savings across all sectors of the economy, freeze credit, and cause banks to become insolvent.

Weren't there so called stress tests banks were put through to deal with this kind of situation? Would it really be that bad?

[Crantag]

Weren't there so called stress tests banks were put through to deal with this kind of situation? Would it really be that bad?

If you want to know my feeling on it, I think it's the Wild Wild West out there on Wall Street.

The actual collapse of the bond market would basically be financial Armageddon, it seems to me. That doesn't mean it is around the corner or anything. What it does mean is that if you have circumstances which are fueling a bond bubble, you have a Sword of Damocles hanging over you.

Earlier this century, there was some fear mongering over the possibility that China could crash the US bond market by selling their bond holdings, as a means of economic warfare.

One of the many problem with this conspiracy theory was that it didn't consider the fact that this would reverberate to Chinese exports.

But the underlying fear had to do with the fragility of the bond markets.

[Rancid]

It's all good, I'm stocking dollars in my mattress.

[jimjam]

Barely a week went by last year when Mr. Trump did not crow about the rising market, making it a major talking point for his case to the country that he had made a difference. He took credit for the market at least 25 times in January alone. Even when the Dow fell 363 points on the day of his State of the Union address last week, Mr. Trump simply ignored the drop and talked about how the market had “smashed one record after another” since his election.

As President Trump boasted about the economy during a speech on Monday, he left out one of his favorite lines. Nowhere did he mention the skyrocketing stock market.

President Trump on Monday accused Democrats who did not clap during his State of the Union address of being un-American and even treasonous. His remarks came in a rambling, discursive speech at a factory in Ohio, during which he celebrated his revival of the American economy as the stock market plummeted by more than 1,000 points.

“Can we call that treason?” Mr. Trump said of the stone-faced reaction of Democrats to his speech. “Why not? I mean, they certainly didn’t seem to love our country very much.”

My guess is that the treason committed by the Democrats who did not clap for Donald was the cause of the stock market drop.

[Crantag]

Oh by the way.

We now might have some insight on why The President and His Men went to Davos.

It seems to me like it might have been the case that they went to Davos to announce a new weak dollar policy.

There is more or less assumed to be an inverse relationship between the value of the currency and prices, meaning that a weakening dollar effects rising inflation in the US. The wage report in this context seems to have occurred as an unexpected additional overarching phenomenon (US economic governance is largely captive of Wall Street ideology. But but but, it must be noted the Treasury Secretary, Steve Mnuchin, as well as the new Fed Chairman, are each trump appointees. Trump, owing to many factors, is not a status quot guy, and we see how here it is no different).

Another association worth pointing out is that of the value of the dollar, and debt and deficits. Is the weakening dollar talk reflected in the foreseeable debt and deficit increases in the coming years? It doesn't even seem cynical to suppose this to be so.

I'll repeat the term 'Compound Recession'. It makes me want to give another try at reading Yoshikazu Miyazaki, in particular his 1992 book, 複合不況（fuku.gou.fukyou--Compound Recession). Yoshikazu was a preeminent economics professor in Japan and renowned scholar on Keynsian and New Keynsian economics.

His analysis starts in the Japanese and American monetary systems, and proceeds to explore how the things in Japan aligned with such bad results.

[Godstud]

This is completely relevant!!



So when's he leaving?

[jimjam]

It's all good, I'm stocking dollars in my mattress.

I have always been extremely conservative. I got out of the stock market many years ago opting for long term security and lower but more assured growth in lieu of potentially large gains that are in tandem with potentially large losses. I'm sitting tight with gold, cash and real estate.

Why the sell off? I think that is obvious. Economics frequently mirrors human nature. It is human nature to thirst after fast, easy and big money. This will inevitably lead to irrational exuberance. In this case an over valued stock market. All bubbles pop sooner or later. After last Friday I called Monday's mess. Why? Once again, human nature. In this case the herd mentality kicks in. .......... Big drop on Friday....they stew all weekend and ............ run for the door on Monday.

Long term growth? Market turmoil should make us take a hard look at the economy’s prospects. And what the data say, I’d argue, is that at the very least America is heading for a downshift in its growth rate; the available evidence suggests that growth over the next decade will be something like 1.5 percent a year, not the 3 percent Donald Trump and his minions keep promising.

[Rancid]

I kind of have to have a lot of my money in the market. 401ks have to be invested. You take a big hit for taking it out.

[jimjam]

I kind of have to have a lot of my money in the market. 401ks have to be invested. You take a big hit for taking it out.

Don't they offer a "safe" option for nervous people. Fixed income? Of course "fixed" is just that fixed, the game is rigged and "fixed" is pretty much zero. But, it offers safety and protection.

I opened a bank account recently that offered $250 for a new account. I had to sit through an hour or so listening to a nice young lady explain all of the bank's "products" that I could avail myself of. At one point she got to the interest rate I would reap on my new account ...... 0.01% I asked her if she was embarrassed to make such an offer to customers.

[Igor Antunov]

The quantitative easing funny money blew up a fake economy. The recovery itself was a bubble made by central bankers and financiers. There was no recovery, at least outside of Asia where things were actually constructed and produced.

This is completely relevant!!



So when's he leaving?

That's a fake tweet.

Anyway, this will be worse than 2008. Certain groups couldn't handle the memo, trying to draw attention from it by letting the Obama-era illusion slide.



This will only serve to push Gen-Z to the right and away from social democratic lies. Migration crisis, highly polarized banana republics in northern america and western europe plus this = the perfect storm. It may even lead to re-introduction of state capitalism and autarky in the west under right-wing regimes.
The 2020's/2030's may in fact become a repetition of the 1920's/1930's.