MARKETS: The journey to safety continues, the fall in economic activity continues, and the debt maelstrom goes anarchic


U.S. stocks fell more than 1.3% yesterday, some 220 points down. The Nasdaq Composite lost more than 1.9%. The S&P 500 fell into negative territory for the year and only just became positive at the close. Very significantly when looking towards economic fundamentals, energy stocks this year are down 17%.

Average crude oil fell to $40.90; the forty-dollar line has been an emotional game-changer since last December. “Oil is poised to dip below $40,” admitted Larry Peruzzi, director of international trading at Cabrera Capital Markets LLC in Boston.

The PBOC’s balance sheet is astronomically bigger than it was five years ago (ie, they’ve been buying tons of junk) and the China money supply has risen 20% in three months. The Politburo knows this must shrink and money will have to get a lot more strict. As to how that can aid a recovery, your guess is as good as mine: but in reality, China policy is no longer about recovery, it is about surviving….and not allowing the future to become an infinite American hegemony.

Meanwhile, on July 27th 2015, the Shanghai Composite plunged 8%. On August 18th, it dropped 6%. Today (August 21st) it fell a further 4.3%….and that’s in the context of draconian Beijing controls on selling, as the PBOC has been buying. But (see above) now the buying’s eased as the Government tries to stop other excrement hitting hithertoo unseen fans in the attic and the cellar…so things seem a tad out of control.

Even the Wall Sreet Journal now accepts that: it opines this morning about ‘doubts building about Beijing’s ability to get the world’s No. 2 economy back into gear’, an exceptionally polite statement on the whole: exports having slumped some 8% last June, new Chinese data released today shows that factory activity fell to a six-and-a-half year low.

The simple truth is this: long-term Zirp installed by the West to save its financial system has built assets into gigantic, unstable bubbles in the East. These bubbles hid China’s cul-de-sac for a while, but now it too is running out of road.

The FTSE plumbed deeper correction territory this morning at 6274, but has regained some ground since. Nevertheless, since early August it is 400pts off. US crude is still unable to get much escape velocity from $40, UK (Brent) crude is also dropping back down towards $45. In the last hour (3pm CET) the Dow’s Top 30 shares have dropped from 17,500 to 16,875. Practically every measured commodity price is heading south…but gold has gained $36 in the last three days.

You can cut these data any way you like, they’ve all been pointing one way for over a fortnight now: a slump in economic activity, multivariately growing financial instability, and the break to safety gathering speed.

Enjoy the weekend.

15 thoughts on “MARKETS: The journey to safety continues, the fall in economic activity continues, and the debt maelstrom goes anarchic

  1. Sorry bagerap
    Small brainstorm there – it was over 3 days, since corrected. But it is as I write showing 11 bucks up on the day @ $1160


  2. Pingback: MARKETS: The journey to safety continues, the fall in economic activity continues, and the debt maelstrom goes anarchic… THE NEXT STEP: PANIC |

  3. WTI $39.98 6:11pm BST

    Not looking good, iterated prisoner’s dilemma being played out between US frackers and Saudi/Opec – neither can afford to blink so other factors will decide winner, don’t rule out a false flag initiated limited nuclear exchange to shake the game up.


  4. Some volatility at the moment but hardly a Minsky Moment.

    The fact that companies like Caterpillar and John Dere are producing horrendous results with $40 oil and commodities at decade lows shows how the real global economy is doing.


  5. As it all joins up together in the global economy the whole lot of them are printing to pretend it is fine.

    Just a pity Greece does not have its Drachma then they could have done the same.


  6. As I am up and about I listen to the BBC radio 4 today programme financial report at 06:15. At the beginning of the week the Chinese government interventions were just blips on China’s road to a true market economy (as if such exists). By this morning there was the beginning of a sense of unease – at least among the presenters. The financial experts interviewed were of the opinion that the world economy was sound – no need to worry. I think John Humphries nailed it when he said (to paraphrase) “You experts will tell us in great detail what went wrong after the event but never call it before it happens.”

    I keep hearing that the 2008 credit crunch was a black swan but it did not require a crystal ball to see it coming. In the run up we recieved junk mail and calls on a daily basis from banks peddling credit. This got truly frenetic before Xmas and before the summer holidays and if they got a negative response from me they called back to speak to my wife. Then also you could see the paper value of houses sky rocketing without any extra investment in either the house or the land (we got calls from banks pointing out how much the value of our house had risen and wasn’t it time we thought of using some of the equity). This was all magical thinking – a glamour and like all such prone to disappear if looked at to intently. I don’t think we have moved on much since.


  7. If anyone out there still holds out any hope of any kind of economic deliverance, then they just don’t understand what is going on. Watch this informative short movie, and you will comprehend the meaning of unconditional hopelessness !
    The love of money is very definitely the root of all evil ! Privately run central banks control the whole world, and have done for a long time. See you at the cliff my fellow lemmings !


Leave a Reply

Fill in your details below or click an icon to log in: Logo

You are commenting using your account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s