Global Sell-Off Underway: New Questions Facing the Markets

[NHSparky]

Global Sell-Off Underway: New Questions Facing the Markets

Breakout.com
Jeff Macke
4 August 2011

LINK

(excerpt)

It's easier to find a baby pigeon than it is to find a trader who likes the Debt Ceiling agreement. The much derided deal effectively raises the amount the government is allowed to spend today in exchange for mythical cuts 10 years from now. It's obvious to everyone outside the Beltway agrees that endless hype and fear mongering did much more harm than good.  Since traders can't short Washington they're selling stocks instead.

With U.S. markets tumbling on both the rumors and the news of the resolution, it's time to look ahead and ask the new questions facing the markets:

*Is a recession getting baked into stocks?

*Is QE3 stimulus now coming sooner rather than later?

*Where can investors 'hide out' until the wave of selling subsides?

To help us come up with some best-guesses, if not answers to these questions, Breakout welcomed Todd Schoenberger, Managing Director at LandColt Trading LLC. Schoenberger has done the research on recessions past and has some firm, if disturbing observations on the economy. "Go back to 1948" he says, "anytime we dip below 2% in this country we always end up in recession 2 - 3 quarters later." Given that GDP is coming in below 1% with little reason to expect that number to be meaningfully higher in the near-term, a recession is fait accompli, if not already underway.


While stocks don't issue press releases announcing their collective economic opinion, the 8% (and counting) drop in the S&P since July 22nd suggests traders are fully aware of the economy's downturn. For better or ill every slump in the economy for the last 5 years or more has been met with aggressive stimulus. Couldn't traders expect the market to quickly digest the consensus view of a recession and anticipate another round of stock-friendly money printing?

Schoenberger says the "reactionary" Fed is going to wait for things to get even worse. He thinks Dr. Ben and Co. will hold their fire until late in the 4th quarter or even 2012. While QE2 was a boon for stocks, the tape doesn't look ready to rally in anticipation of an event 6-months from now.

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And so far today as of this writing, the DJIA is down 350, the NASDAQ is down 90, and the S&P is down 40.

Hopey changey, kids, hopey changey.

Oh, and DJIA down nearly 1K in the last 3 weeks.  Here we go again.

[beefeater]

What's really FUnny is to cruise the fever swamp, leftwing nutcase boards and watch the MORONS without a pot to piss in panic over something they know nothing about.

[Erasmus]

I'm sitting in cash for the moment.  I watch a couple of dividend stocks and will pounce again once Obama's second recession gets into full swing.

[NHSparky]

I'm sitting in cash for the moment.  I watch a couple of dividend stocks and will pounce again once Obama's second recession gets into full swing.

Unfortunately, your cash will be worthless pretty soon as well.  Look at the exchange rates of the dollar versus the Euro or the Yen.  Horrific.

[Erasmus]

Unfortunately, your cash will be worthless pretty soon as well.  Look at the exchange rates of the dollar versus the Euro or the Yen.  Horrific.

This is true probably outside of a year's time.  There are some Canadian oil companies that I like that pay a reasonable dividend in Canadian dollars, lol.  I wouldn't plan on sitting on cash past about a 12-month period though!

[BattleHymn]

Bush's fault.

[JohnnyReb]

Dow down 513 points today....glad I sold my mutual funds 2 weeks ago. Dow down over a thousand since then.

[Erasmus]

Dow: -512.76

It's the economy, stoopid.  Of course, telling that to a democrat doesn't work, because their "fixes" are what cause this type of catastrophe.

[NHSparky]

Bush's fault.

That's what my uber-liberal HS classmate basically told me on FB.  Logic and facts--never let them get in the way of a good rant.

[Ptarmigan]

Bush's fault.

That mantra don't get old for the moonbats.

[BattleHymn]

That's what my uber-liberal HS classmate basically told me on FB.  Logic and facts--never let them get in the way of a good rant.

   You can't fix stupid. 

[true_blood]

Dow: -512.76
It's the economy, stoopid.  Of course, telling that to a democrat doesn't work, because their "fixes" are what cause this type of catastrophe.

That, and because they really aren't democrats any more. They are communists and socialists working for the other side.

[Lacarnut]

Unfortunately, your cash will be worthless pretty soon as well.  Look at the exchange rates of the dollar versus the Euro or the Yen.  Horrific.

Wait till gold makes a 15 to 20 per cent correction or a silver correction back to $30 and then pounce on it. That is what I am waiting for.

[BattleHymn]

Wait till gold makes a 15 to 20 per cent correction or a silver correction back to $30 and then pounce on it. That is what I am waiting for.

My wife used to roll her eyes at my American Eagle Silver Bullion collection.  I'll have to trot my collection back out of the closet again, so she can marvel at how brilliant her husband is, and tell her I saw this whole thing coming.  I'm sure she'll buy that. 

[olde north church]

Another symptom of the chickens of socialism coming home to roost.

[NHSparky]

And just in case anyone thought this was confined to our shores:

Nikkei--down over 4 percent
Hang Seng--down almost 4 percent
Shanghai Composite--down over 2 percent
DAX and FTSE--currently down over 2 percent each, more to come when Spain and Italy start begging for bailouts.

Dow 10K?  Entirely possible by the end of the year.

[CG6468]

The big announcement that "the recession is over" was, as everyone knew, just another lie from this administration.

[Erasmus]

Well, the jobs numbers came out at +114,000 and unemployment down to 9.1%.  I wonder what these numbers will be "revised" to here in about two weeks.  We've lost more jobs due to Obama's "revisions" alone than we lost under Bush.

[CG6468]

My wife used to roll her eyes at my American Eagle Silver Bullion collection.  I'll have to trot my collection back out of the closet again, so she can marvel at how brilliant her husband is, and tell her I saw this whole thing coming.  I'm sure she'll buy that. 

You feel safe keeping it in a closet? Personally, and having been burglarized to the tune of $20,000+, I'd use a safety deposit box.

[NHSparky]

DJIA opened up 150 this morning, and given it all back and then some as people look into what the job report this morning REALLY means (not good.)

[Ptarmigan]

And just in case anyone thought this was confined to our shores:

Nikkei--down over 4 percent
Hang Seng--down almost 4 percent
Shanghai Composite--down over 2 percent
DAX and FTSE--currently down over 2 percent each, more to come when Spain and Italy start begging for bailouts.

Dow 10K?  Entirely possible by the end of the year.

I think the Dow could hit 10,000 sooner.

Payrolls Rose in July; Jobless Rate at 9.1%
http://www.bloomberg.com/news/2011-08-05/u-s-payrolls-rose-more-than-estimated-117-000-in-july-jobless-rate-9-1-.html

The jobless rate declined as 193,000 people left the labor force and the number of unemployed dropped by 156,000. The share of the eligible population holding a job declined to 58.1 percent, the lowest since July 1983.

[NHSparky]

The jobless rate declined as 193,000 people left the labor force and the number of unemployed dropped by 156,000. The share of the eligible population holding a job declined to 58.1 percent, the lowest since July 1983.

What a crock of horsecrap spin.  If we went by the average participation rate over the past 20 years, unemployment would be at least 12 percent, not 9.1 percent.  I'd be willing to bet that a large number of those who "left the labor force" are in fact discouraged workers, not those who have moved on.  If you look at the numbers, the total number of employed DROPPED last month, yet because of those same discouraged workers no longer counting against the unemployment rate, Obumbles and the BLS can claim a decline.

[Erasmus]

The jobless rate declined by 193,000?  Or was it that their unemployment just ran out and they're no longer counted.  It's impossible to say given that the government lies for a living.

[NHSparky]

The jobless rate declined by 193,000?  Or was it that their unemployment just ran out and they're no longer counted.  It's impossible to say given that the government lies for a living.

Yes.

And now the DJIA down 160.  In the words of Gremlins, "Right now we are advising all our clients to put everything they've got into canned food and shotguns."

[Ptarmigan]

What a crock of horsecrap spin.  If we went by the average participation rate over the past 20 years, unemployment would be at least 12 percent, not 9.1 percent.  I'd be willing to bet that a large number of those who "left the labor force" are in fact discouraged workers, not those who have moved on.  If you look at the numbers, the total number of employed DROPPED last month, yet because of those same discouraged workers no longer counting against the unemployment rate, Obumbles and the BLS can claim a decline.

I think the unemployment rate is higher than 9.1%, I think more like 16%.