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Financial news I consider important, with my opinion, which is worth as much as you paid for it.
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Monday, August 24, 2015

Market Rumblings

Now the public media is screaming panic over the markets.  Is this the next leg down? Possibly.
As long time readers know, for years now the next issue i said would come as we come closer to 2017.

I honestly don't know where this is going, but we do have several screaming warning signs.
First China's stock market has been in a freefall (chart below), along with natural resources already collapsed months ago.  The world's government bond markets have historically low rates, with some countries requiring YOU PAY THEM to buy their bonds! (negative interest rates).

The VIX (Volatility index) has been off the charts, with the markets not able to price the VIX for 30 minutes on Tuesday.

Gold and gold miners pre-collapsed before all of this.

What makes all of this disturbing is the world has already done everything within reason to keep the market valuation rocketing higher for the past few years.  The Banks since 2009 do not have assets valued by market prices, but rather mark to 'declared value'.   So the banks already have a positive an outlook as possible for valuations.  Combine that with interest rates at historic lows, and the Federal Reserve bank recently purchasing federal bonds directly with Quantitative Easing, owning trillions of US mortgages and bonds.

So the question is, assuming we do start on a year long decline, what will governments do next to spur the next leg back up?  I have no idea what that could be,  please put in comment what you think the world can do to spur demand like was done in 2001 and 2009.

Let me remind readers of a fairly neutral signal that has historically been a good indicator of long term downturns, see post here.

If there is a significant plunge still ahead, I am hoping for a snap back rally in days ahead, that will be the last place to get to safety.

To the charts!




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