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Crash 2014?
Is It Fair to compare this sell off to the Great Recession of 2008 and 2009?
Sort of, Kind of, and not really. No Baby, No bathwater, not yet.
Let’s check the tape. SP500 at the peak of the “unrest” in the crisis was at 666.79, March 2009. Dollar index (DXY) during the same week was 89.522.
Conversely, March 2008 DXY was at 70.698. SP500 was 1325.61 during the same time period. The high for the SPX before the crisis was 1578.11. From the high to the low of the crisis the SPX index fell 57.74%. (1578.11-666.79/1578.11)
Crisis SPX volatility

The DXY increased 26.63%. (89.522-70.698/70.698)
DXY crisis volatility

Let look at the current situation, numerically. High of the SPX before this sell-off was 2019.26. Let’s suppose we close near the 1850 levels. From this recent high to current levels, we have a sell-off of 8.38%. Apples to Apples, we have about 1/6 of the move from 2008.
Recent SPX volatility

Recent DXY volatility

Let’s bring the dollar back into the picture. We can infer that the DXY was at 78.906 (May 8, 2014) October 3, 2014 the DXY hit a high of 86.732. The increase in the DXY was 9.91%. The recent increase is 37.21% of the move during the crisis of 2008.
Equating the DXY increase with the SP500 decrease (26.63/57.74) we get a factor of .4612. Equating the current situation (9.91/8.38) we get a factor of 1.1826. In order this market to react in a similar way as in 2008/2009 we would need the SPX to move 21.49% lower from the high of 2019.26. This would mean the SPX would need close at 1585.32 to make the equation work. And yes, this would put the index in a bear market.
Economically and philosophically speaking, the two situations are difficult to equate. The Great Recession, The Crisis of 2008, The 2008 Depression, whatever you want to call it, the impedance for the event was on several fronts. Over bloated lending mechanisms, consumer mortgage based debt, Asset Bases Securities (ABS) euphoria, popularity of Collateralized Debt Obligations (CDO), rampant involvement in Credit Default Swaps (CDS) by institutional and Hedge Funds. At the peak of this euphoric period, the notional value of ABS, CDS, CDO held by investors was 14-16 times global GDP. To complicate matters, the internals of CDO’s held highly suspect securities and reaped the benefit of high ratings from trusted analysts. These CDOs found their way into balance sheets of banks, funds, and government entities.
The crisis was not only a perfect storm of complication and insolence but involved multiple industries and worked perfectly into the disruptive nature of events. Since then we witnessed a deleveraging by investors across the globe. The perception of risk and ratings on securities has changed. BASEL III has now entered the picture and financial institutions have revamped their Tier 1 ratios to comply with the new regulations. As a side comment, perhaps this is why we have a bid in the 10 year US notes. But that is a topic for our next article.
Let’s return back to the present. Do we have a market addicted to QE? Yes. Commodities, Energy, and Raw Materials have dropped significantly in recent weeks. What is this reason behind this drop? Potential recession in Europe, Chinese economic slowdown, OPEC countries jockeying for position to gain market share? Are these inter-industry, potentially disruptive events? Not sure, yet.
Putting things into perspective: Here is a slight philosophical and macroeconomic opinion on developed G8 category economies. No matter where the leading economic are pointing to, a developed economy has a set amount of implicit activity to sustain some level of growth. Short of a cataclysmic or debilitating event; i.e. a full pandemic EBOLA outbreak that has infiltrated a New York, London, Paris, etc; economic activity will churn to some degree to sustain some semblance of an isolated GDP.
Let’s recap: We do not have a banking crisis on our hands. We do not have a systemic financial crisis. We do have a softening of global macro-economic growth. Certainly, the recent memory of the crisis conjures up unpleasant and extremely volatile conditions.
A check of oil: Although we did not provide analysis of oil in this article, suffice it to say that oil’s low during the crisis of 2008/2009 was $33.2. The high was $147.27. This current oil swoon took us from $107.21 to current levels of $81.66. Certainly, this has been a tighter range of momentum.
The dovetail risk: EBOLA. This is the only non-quantified aspect of most trader’s models and algos. This would be a very difficult scenario to quantify with respect to markets, domestic and global economies. Since we live in an interconnected world, the fact that EBOLA has reached industrialized countries should not be a huge surprise. The objective is to quantify the potential disruptive nature of EBOLA on society and the functionality of economies. Could this be the proverbial Black Swan? Maybe. From a social and humanitarian perspective, this is the last thing we need. This is the possible inter-industry, inter-global economic disruptive event.
If we continue to receive news that EU countries are at the ready for possible QE-like actions and “dovish” sentiment from the US FED, we will most likely avoid a major relapse of the macro markets. The proverbial “bid” in the market.
We will certainly continue with the volatility but instinct and a bit of history dictates that rational thought should supersede “fear”, just don’t forget about EBOLA.
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The Fed's jawbone tactics have long passed their expiration dates, and yesterday's appeasement will prove to be temporary, and any attempt to continue QE in a couple of weeks will reak of desperation and backfire. I believe Grandma Yellen knows that current global economic woes are basically unfixable - thanks to America infecting the entire world with our disease during the Great Recession - but failure on her watch is unthinkable, so Granny will kick and claw and continue to print money until she collapses the dollar and destroy's America's once-mighty reputation around the world.
Bullshit article....blah blah blah EBOLA blah blah blah DON'T FORGET ABOUT EBOLA.....
(....thought we'd finally gotten rid of PivotFarm...)
"Unask the question".
No doubt about it. Much better in our society to stay dumb, happy and not ask questions. even dumb questions.
Question is who is in control and what is their motivation > Seems Federal Reserve which is a private institution owned by the banking system in charge of monitary policy, interest rates, liquidity, inflation targeting, including enployment responsibility for the USA, is in full control. Indirectly through jaw boning and public pronouncements from Fed officials they even control day to day stock market movements as witnesses by BULL ARD's announcement yesterday on Fed's intention to continue QE , Fiscal policy within Executive Branch and Congress is just a spending instrument out of control. Dont put any faith in talk of lowering budget deficit this year when the overall national debtt is $17 Trillion with more to come considering the new Fed mandate to bailout the entire global financial system which includes fighting all sorts of wars, Ebola, terrorism, and anything threatening the reserva status of US $. Bottom line is we will experience a collapse of financial system when reserve status of dollar collapses, bond yields skyrocket or become confiscatory with no buyers except the Fed. We are near that point.
this was not a crash, just a correction. we used to get them all the time to blow off excess. since the fed began their financial engineering and control project they have not allowed the market to correct before taking action, thus perpetuating a bad situation. they cannot stop the inevitable market blow up, only delay it.
Being addicted to growth we don't have, and trying to sustain our lifetsyles via credit and financial tricks seems like kind of a crisis to me.
Sure; it is. and growth is in the past. the stock market? well, it's one among many markets; but until I see S&P above 2000 again; it's now a bear market and not a bull market, so you sell rallys instead of buying dips. Let's just wait and watch and each day we'll accumulate more data. if it gets high enough; I'm definitely going to short it again. just don't buy any dips.
Speaking of the crash of 08...
Who is OSP taking to District Court on grounds of breach of trust?
http://www.icenews.is/2014/10/16/who-is-osp-taking-to-district-court-on-...
The Office of the Special Prosecutor in Iceland took the Board of Directors ofSPRON, Iceland´s largest Savings Bank before the bank Collapse in 2008, to District Court on Monday, for breach of trust.
This is the first time the OSP has charged a Board of Directors in connection with alleged criminal activities leading up to the fall of the Icelandic financial system in October of 2008.
Questions were immediately raised about whether the members of the Board of Directors at SPRON could and should step aside in light of the seriousness of the charges, but who are those the OSP in taking to court?
Margret Gudmundsdottir is the CEO of Icepharma, one of the leading companies in Iceland in the healthcare market and represents brands like Baxter, Bayer, Lilly, Merck Serano, Mylan, Pfizer, Roche, Johnson & Johnson, CSL Behring, Biomet, Coloplast, Hill-Rom, Hospira, Smith & Nephew and Nike, to name a few. She is also the Chairman of the Board of N1, Iceland´s biggest fuel retail and service company. Ms. Gudmundsdottir worked for N1’s main competitor, Shell, for 10 years and was a director at Q8 in Denmark, and is on the board of the Federation of Icelandic Trade, before she joined Icepharma
Rannveig Rist is the CEO of Rio Tinto Alcan in Iceland. She has been on the Board of Directors of HB Grandi, Confederation of Icelandic Employers, Iceland Drilling and Skipti. She was also at Promens and Director of the Icelandic Chamber of Commerce. Ms. Rist is a Lecturer at the University of Iceland.
Johann Asgeir Baldurs is the Chairman of the Board at Frumherji, the leading company in Iceland in inspecting, testing and legal metrology in Iceland. He was the CEO of VIS, Iceland’s largest insurance company and a member of the Board of Directors at IGI Group, Lysing financing company and was the Chairman of the Board of Viking Redningstjenese A/S in Norway.
Ari Bergmann Einarsson, investor, was a Branch Manager for SPRON Savings Bank and now works as and independent investor.
I think this might be the big correction. What's different between this correction and 2011 is that leverage today is much much higher. People have never been more all-in than they are right now. Leverage makes markets unstable due to margin calls. When you invest with your own money, nobody forces you to sell at a loss and further drive the market down. When you invest with borrowed money, that's exactly what happens, and it triggers other people to sell. It doesn't matter if current valuations are justified based on interest rates. If margin calls start, this can very quickly turn into a disaster.
It's pretty much now or never. If the fed doesn't announce more QE, the market will crash before the year ends.
The fed will end up printing money no matter what. The only question is when. They either print now and cause the start market to reverse before the crash, or they print after the crash because they can't drop interest rates lower than zero. I'm guessing the second scenario will happen - crash then money printing.
Good lord man get a grip.
It's not "the Great Recession of 2008 and 2009". It's The Great Recession, and we are still in it. That's what makes it great.
looks like a re ramp under way for another round of volatility. fleece time coming...
50% probability; but another way to look at it is another chance to short the S&P. after todays trading day we'll have more information; the article we're supposed to be commenting on is awful rubbish.
Waiting for the third shoe to drop : see
https://www.academia.edu/8816411/Rogue_Swan_EU_disintegration
October 28th this year is a Tuesday. Black Tuesday some 86 years later?
Dude, I hate articles with a Question Mark in them, but I will engage if you want a serious discussion.
1) Where's "the crisis"? We need a crisis that will cripple American society. US banks don't own EU soverign bonds, front-running Draghi's EuroQE. Or do they?
2) Deflation is a bad thing? Only if its bonds that the banks hold, see reason #1. Otherwise, gasoline at $2.99 (Sunoco US1 @ I-95 Ormond, FL) is a GOOD thing.
3) There are people who own MO & KO for 30-40 years, whose quarterly dividends are more than their original investment cost, they would never sell. So Who are the Sellers?
If you would like to have a discussion about "How the Nervous Sellers Incite OTHER Nervous Sellers through Web Posts", then join in. Oh, you already have.
Recognize that dividends create a pool of stability among PRIVATE stockholders, not ETFs.
Stain you make good points here. I have some to say on that.
1. Sure US banks own a lot of crap. Nobody can really tell because accounting does not disclose it. But for sure they own also European bonds in the global search for yield. Also if a European (French) bank falls they all fall. That can trigger a real crises and a new Lehman moment that is according to me the real dove tail in this market, Ebola is an extra goody.
2. Deflation is good for the people but not for holders of risky assets. Markets will crash then like Japan.
3. Good point on dividends. Unfortunately almost everybody that is a significant investor is now a marked to market player. That is for the prop desks, Hedgefunds, asset managers with their monthly performance and even pension plans with their crazy ALM models. The only one not are central banks that is why they have this insane behaviour.
4. ETF 's are created by thieves (banks) that steal income from the investor also often from a tax point of view.
"We do not have a systemic financial crisis". Only the mammoth legacy of one, it's called Q E. No mention of kamikaze like sanctions against Russia and blowback repercussions on an economically fragile E U, nor a collapsed middle east. Of course the global elite have given us Q E and war as the remedy (the tri-factor could be a genetically engineered Ebola). Nice work!
Isn't Ebola a war on ourselves?
Certainly the response is.
Sell
Sell
Sell...
They're already intimating that the Fed ended its bond-buying program too early, and will have to fire up the printing presses again. I mean come on, QE ends (October, remember?) and things begin to tank, is it really that complicated? Why all the technical analysis and mathematical gobledygook?
ta-da....
http://www.telegraph.co.uk/finance/newsbysector/epic/ftse100/11166684/Ma...
Shemitah!
BTFD
In 2008 the FED's software applications were not connected like today.
This is beyond insane when people are discussing QE theft and false markets as normal behaviour.
To even contemplate any of this propoganda is deluded market intervention.
I think we need to roll our collective perception and judgement way way back to find honest markets. Like way way back. 1960? 1913?
And all this discussion of "is this like 2007/8" is utter nonsense.
Better to compare to 1929.
And even then the discussion is foolish. Why are people even discussing this in a serious manner when it is obvious it is all rigged and broken? People can't work. Jobs are shipped offshore to benefit corporate profits (and now these are sinking as well. None of it made sense 20 years ago.).
You have greed machines that own the countries and are busy raping and pillaging everything in their path.
Why does a supposedly intelligent article even start to consider why the markets may fall?
The answers are so obvious.
all legitimate points. the article was trying to put the recent 8 years in some sort of perspective. i don't think the scope was to go back to 1913. question to you and i ask myself is what t. fuuk can i do. A)debt free B)pay cash whenever possible C) do not bank with wells, b of a, jp/chase ect. - credit unions!D)be against the grain kinda guy, resist/avoid sheeple trends, like needless gadgets that complicate your life,football,nascar, idol, voice ectE)train for independent survival F)use no pharm drugs,alternatives like essential oils F)eat right G)exerciseH)open mind, open eyes and avoid conflict, H)ignore the msm... I am doing all of the above, are you? oh and come to zh, ect for alternative news and know damn well this site and others are full of shit too. oh, and take a chill pill...you can make a difference but no waycan you save the ship, it's goin down...
Excellent posts you guys...yes it's going down. Ebola may be the harbinger that they wanted to bring it down with an excuse. My wife works at a major hosptial. I'm scared to death for her and for our family.
If ebola truly breaks out, it will have to run it's course which could be decades. It's like a smell that won't go away. The history of hemorraghic fever is the ugliest in the history of the world, rivaled only by the black plague.
I think someone forgot to adjust for inflation. Real inflation, not the punch bowl inflation.
Inflation? That is just more theft. Take a peek at long, long term infaltion going way back before you were brainwashed.
Who needs inflation (CLUE; the banks). Prices were stable for consumer goods until Central Banking took hold. Before corporations became "people". Before lobbyists bought off every rep.
USA has an awful lot to answer for.
There is no reason to require inflation for stability.
Many intelligent articles are being written right now. They miss the point that it is all just WRONG. Wrong.
It benefits only a few. Why do you think we got here? Even this article is sham. Roll back analysis to 2007? Give your head a shake.
Debt bubbles are unsustainable. That's why they MUST have inflation. To feed the bubble. It has to end in hyperinflation or bubble collapse. The 'debt' dollar has been been in death throes since 2008. They've only managed to keep it alive by exporting inflation. Watch out for the tidal wave returning. My guess, when bonds bottom out and head higher, they'll be heading higher because foreign holders are fleeing. Before that happens debt bubble deflation will spook the FED into QE4.
the only inflation we need is au-ag price inflation. mega banks (check out who's in Bucket 4 & 3) are in tight ropes now...liquidity/credit drying up fast, no? http://davidstockmanscontracorner.com/theyre-definitely-not-fixed-27-tbt...
ONLY thing a real, live, working person can do is GET THE FRIG OUT as fast and efficiently as you are able.
So you pay some tax? Will be nothing compared to what will be confiscated. Confiscate your savings and make you feel warm and toasty all the while.
Idiots.
We have not seen a crash or much of a correction up to this point but the road is being paved, Many of us the are far from optimistic. While the future is hard to predict, as in politics the people who watch and study the economy are becoming more polarized as to the direction of the economy. Many of us are slipping into one of the two distinct camps, one that sees this as an economy slowly on the mend with the worse behind us and the other who clearly takes the position that things are not working.
Not only have things gotten worse but the distorted economy and manipulated markets only mask the fact that a day of reckoning is fast approaching and we are facing a bigger and meaner economic set back then any the world has witnessed in modern times. More on this subject in the article below.
http://brucewilds.blogspot.com/2013/08/after-big-crash.html
It's not an economy slowly on the mend with the worst behind us; don't you have any hard questions to answer? The article is ridiculous; I don't have time for it.
If you're not on the inside it's a crap shoot at best, a rape at worst. The Fed will pump moar QE. Kick the can, anyone?
The can gets heavier each time they kick it. They are not getting much distance out of their kicks these days. With each passing day, we are getting closer to midnight...
The Fed was massively tightening going into 2008 as well.
Now we have "Ebola."
That is not tightening.
so the fall is done?...I thought maybe it was just getting started...
Cruise ship denied port in Belize as US tries to evacuate Dallas nurse who handled Ebola sample
http://wtfrly.com/2014/10/17/cruise-ship-denied-port-belize-us-tries-to-...
This supposed "fall" came right at the Financial War Games.
Trojan Horse.
"Ebola" says "mllions dead" to me. (I pray not you, not me...not anybody anymore.)
Ebola and how the outbreak is being dealt with is not recovery no matter what the Federal Reserve does now in my view.
Sell, sell, sell.
So more QE is our salvation? How about actually addressing the structural problems and balancing the budget? No, I didn't think so, easier just to keep kicking that can.
good article-thanks - perspective, man. correction-yes, crash-think not(yet),ha..,