Market Crash

In 1932, approximately 80 years ago, 43,000 marchers (17,000 veterans) descended upon Washington D.C. The Bonus Expeditionary Force, also known as the “Bonus Army”, marched on Washington to advocate the passage of the “soldier’s bonus” for service during World War I. They set up a camp with tents to bring attention to their cause. After Congress adjourned, bonus marchers remained in the city and became unruly. On July 28, 1932, two bonus marchers were shot by police, causing the entire mob to become hostile and riotous. The government turned the U.S. military upon its citizens. Army cavalry units led by General Douglas MacArthur dispersed the Bonus Army by riding through it and using gas. Fifty five veterans were injured and 135 were arrested. Critics of the marchers described them as communists, troublemakers, and criminals. Fast forward 80 years and we have protestors setting up camp in a public square, not far from where the same exact banks that caused the Great Depression have created the Greater Depression. The biggest Wall Street banks have gotten bigger. The Federal Reserve, in collusion with the Wall Street banks, has engineered a two year stock market rally, while the average American has seen their wages decline, food and energy prices soar, home prices fall, and banks paying them .1% on their savings. Anger and disillusionment continue to build in this country like a volcano preparing to blow. Some people are angry at Washington politicians. Some are angry at Wall Street. Others aren’t sure who to be angry at. The evil oligarchy of bankers, corporate titans, and bought off Washington politicians that control the agenda and mainstream media, continue to scorn, ridicule and denigrate the middle class of America. Their financial engineering is failing. They’ve gone too far. The debt accumulation is unsustainable. The mood of the country has darkened and talk of revolution and the shadow of impending violence is growing.

The most comprehensive summary of the main bullish and bearish events in the past week.

My daily charts are mostly long, so I'm ignoring them.

What eventually became the Arab Spring is spreading and quickly becoming a Western Winter. Protests in Europe and America are growing in size and intensity. Awareness of the unfair and crony-capitalistic nature of our current political/financial system is spreading. Americans of all economic, geographic, philosophic and political stripes are questioning the very foundations upon which our “prosperity” has been based for decades. Slowly they are realizing that they were always playing a rigged game that they were never designed to win. As you’d imagine, this is not sitting so well with them and some are starting to stand up and make their voice heard. Don’t think for one second that this is going to stop. Americans by the millions are losing their homes, their jobs, their savings and their futures.

I do not toss around the idea of a market crash lightly. If you've been following me long enough, you know that only in very rare instances do I issue a cautionary Alert (I've only issued four since my website launched in 2008), and I am generally not given to hyperbole. Let's be clear: I'm not issuing an Alert at this time. But I am concerned that a materially adverse disruption to the financial markets is increasingly likely in the near future. Perhaps a definition will be helpful as we begin. A 'market crash' is an event where there are no bids to meet a wall of selling. The actual amount of the percentage decline is less important to note than the amount of chaos, or loss of control, that a given market experiences. Some like to say that a market downdraft requires a decline of 10%, or maybe even 15% or 20% (or more), in order to qualify as a 'crash.' For me, the key factor is not so much the amount of the decline, but the pace of the decline. With perhaps a quadrillion US dollars of hyper-interconnected derivatives outstanding -- that's the notional value, but who really knows what the real number is? -- an orderly market is essential for knowing whether or not the counterparty to one's trade is solvent. During periods of intense price swings in the market, such things are simply not knowable, and spawn the fear and paralysis that really define a market crash.

Geithner said US banks aren't at risk, shares spiked. He's considered a (super)hero by some. I say look to track record, TRUTH, facts & actual accomplishments for our new superheroes! Here are some Goldman Sachs FACTS Geithner forgot to mention!!! Must have left them home with his cape...

#444444; font-family: Verdana, Geneva, sans-serif; font-size: 12px; line-height: 16px; background-color: #ffffff;">If Goldman rules the world where governments around the world fail as #444444; font-family: Verdana, Geneva, sans-serif; font-size: 12px; line-height: 16px; background-color: #ffffff;">Alessio Rastani claimed#444444; font-family: Verdana, Geneva, sans-serif; font-size: 12px; line-height: 16px; background-color: #ffffff;">, then GS stock chart should not look this ugly-- down almost 50%-- in the past 24 months.

It may not be quite the Lehman weekend when the first ever Sunday CDS trading allowed pros to get out of Dodge early, but those who can't wait to put some insurance on against the market crash that is currently roiling the world, with everything tumbling in what is becoming a carbon copy replica of 2008, will be able to do so 20 minutes earlier. The CBOE has announced that"beginning on Monday, September 26, the CBOE Volatility Index (VIX) futures contract opening time moves to 7:00 a.m. from 7:20 a.m., pending regulatory approval. The 3:15 p.m. closing time for VIX futures remains unchanged. The earlier opening offers market participants more time to establish or offset VIX futures positions surrounding potential market-moving events - overnight news, banking actions or key economic reports - before the general market opens." Judging by /ES, something tells us the line around the block to put these on will be longer than for the new iPhone if and when it comes.

Flashy Crashy. Is History repeating itself, or is this time different?

On September 15, 2011, beginning at 12:48:54.600, there was a time warp in the trading of Yahoo! (YHOO) stock. HFT has reached speeds faster than time itself. Up to 190 milliseconds into the future, or 0.19 fantaseconds is the record so far. It all happened in just over one second of trading, the evidence buried under an avalanche of about 19,000 quotations and 3,000 individual trade executions. The facts of the matter are indisputable. Based on official exchange timestamps, there is unmistakable proof that YHOO trades were executed on quotes that didn't exist until 190 milliseconds later!

I fully believe that we may in fact be on the verge of a Crash in the markets. All the Red Flags are there. Europe’s entire banking system is on the verge of systemic collapse. Take a look at European banks and you’ll see what I mean.

In his increasingly desperate attempts to pander to a population that has by now entirely given up on the hope, and barely has any change left, Obama is going for broke (or technically the reverse) by setting the class warfare bar just that little bit higher. This time around, his targets are millionaires, who according to the NYT are about to see their taxes soar. Or not: nobody really knows if the proposed "Buffett Rule", affectionately known for crony communist #1, will impact just millionaires income tax, which incidentally is the same as what everyone else is paying, or, far more importantly, their Investment Income, which is where the bulk of America's wealthy income comes from. Which incidentally makes all the sense in the world: two and a half years after Bernanke has been desperately doing everything in his power to raise the "wealth effect" if only for the richest 1% of the US population, it is, from the government's perspective, time for the taxman to come knocking and demand his share of the capital gains. Yet what is lost in this ridiculous proposal are the unintended consequences, which always follow idiotic decisions arising out of central planning, number one of which would be a market crash as those who have paper gains since the market lows of 2009, scramble to lock in the old capital gains tax rate of 15% instead of holding on to paper profits that could end up being as high as 35% (or more): an event that would cut actual income by over 25% should one wait to cash out! And since 25% is substantially more than anything that Twist and QE3 and 4 could hope to achieve, it is all too conceivable that those holding on to profitable positions will have had enough, and take their profits, likely converting them into physical and non-dilutable assets along the way. As to whether they would subsequently relocate to far more hospitable countries, such as those that don't foment class warfare, and implicitly invite a civil war, that remains yet to be seen.

All you need to read.

This post, in and of itself, should demonstrate to the entire Sell Side of Wall Street, the MSM/pop media outlets and all who may follow them that BoomBustBlog forensic research and analysis is simply superior to much of what is available and significantly overpaid for in terms of investment advice and opinion.

Let’s be honest here. Neither China, nor the ECB, nor the Federal Reserve can stave off the collapse that’s coming. Indeed, the Fed spent $900 billion and nearly one year to prop the markets up… and we’ve wiped out ALL of those gains in just one month.