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Is This Black Monday Crash The BIG ONE? It Doesn't Matter
Submitted by Raul Ilargi Meijer via The Automatic Earth blog,
After losing 11% last week, Shanghai this morning was down almost -9% at one point, after lunch went back up to -6.5%, and ended its day at -8.49%. A Black Monday for sure, but is this the BIG ONE? It really doesn’t matter one bit. Unless perhaps you persist in calling your self an investor, in which case we pity you, but not for losing your shirt. Because God knows we’ve said enough times now that there are no functioning markets anymore, and therefore no-one who can rightfully lay claim to the title ‘investor’.
Plenty amongst you will be talking about economic cycles, and opportunities, and debate how to ‘play’ the crash, but all this is useless if and when a market doesn’t function. And just about all markets in the richer part of the world stopped functioning when central banks started buying assets. That’s when you stopped being investors. And when market strategies stopped making sense.
Central banks will come up with more, much more, ‘stimulus’, but what China teaches us today is that we’re woefully close to the moment when central banks will lose the faith and trust of everyone. After injecting tens of billions of dollars in markets, which thereby ceased to function, the global economy is in a bigger mess then it was prior to QE. The whole thing is one big bubble now, and we know what invariably happens to those.
More QE is not an answer. And there is no other answer left either. Those tens of trillions will need to vanish from the global economy before any market can be returned to a functioning one, and by that time of course asset prices will be fraction of what they are now. It may not happen today, but that doesn’t matter: what’s important to know is that it WILL happen.
And if you keep being out there trying to outsmart a non-functioning market, you’ll get burned as badly as the millions of Chinese grandmas who already lost 20%+ so far just this month. And that’s just on their share holdings; Chinese property ‘markets’ will be at least as badly burned.
China’s leaders, and its people, have walked eyes wide open into an ugly albeit nigh perfect trap. They’ve all started to believe that borrowing more could make them richer. Outstanding credit across the entire society has reached idiotic proportions. We can get somewhat of a glance at what levels debt have reached in Steve Keen’s Is This The Great Crash Of China?, in which he argues that a crash is inevitable, simply given those levels.
But we can at the same time be sure that this doesn’t tell the whole story. Much of what has gone on in the shadow banking sector remains unknown and carefully hidden. Thousands of local governments have plunged themselves into the deep end borrowing from trusts and other often shady instruments, at interest levels much higher than the ‘official’ ones. Even these shadow trusts last week have begun asking for bailouts, a development that can only make one think of a Godfather episode of one’s choice.
China’s first big mistake is that Xi and Li and their ilk think they can control housing and stock markets. Which basically means they think they can stop people from selling property and assets when they feel these might go down in ‘value’.
China’s second big mistake is that so many people believe that Xi and Li actually have any such control. Which means the people don’t sell nearly soon enough, and will be saddled with the losses. From an economic perspective, it’s an exercise in stupid futility, or, if you prefer, futile stupidity.
Add to this that the credit that allowed the Chinese to purchase all these alleged assets came from nowhere, and will therefore of necessity have to go back to nowhere, and you have a recipe for deflationary debt deleveraging the likes of which the world may never have seen before in history, unless perhaps you count the tulip- or South Sea bubbles, but they are just small scale anecdotes compared to today.
This deleveraging will be global. We pity the many millions of poor souls who think that countries like the US and Britain will be spared the worst because their economies are doing ‘so well’. Doing well in a global Ponzi is not a recommendation.
China’s fall is being exacerbated by the fact that it has two -heavily intertwined- parties who believe in their own omnipotence, the government (Politburo) and the central bank. Both are being found out at the same moment. And both will resist this discovery. As will all central banks in the west, where at least any idea of omnipotence of governments has long been eradicated.
But the entire west has become so addicted to China’s debt, and the illusion of prosperity and economic recovery it has brought, that all prices everywhere must come down, as noted above, until the tens of trillions of dollars in stimulus measures have vanished into the thin air they were fabricated in. Until value becomes real value again, not this virtual zombie Ponzi pricing.
Today may be just a warning sign, and it may take a while longer before the deluge, but it will come. And since China has nothing left to fall back on but even higher private and public debt levels, make that sooner rather than later.
The main advice we’ve always given with regards to debt deleveraging stands: get out of debt.
Meanwhile, the western financial press, which has been reporting on non-functioning markets for years as if they actually were still functioning, is worrying about a potential Fed rate hike, telling its readers and listeners that the US central bank ‘looks set to make a dangerous mistake’. But the real ‘mistake’ was made a long time ago.
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Answer to question: No.
bob pasini has mentioned that ford halted UP every time he gets a chance this morning. what a tool
http://www.bloomberg.com/news/articles/2015-07-15/china-s-debt-to-gdp-ra...
T'is ugly.
I hope the jumps are televised.
Have you noticed that they seemed to have stop killing bankers? Did they run out of nailguns?
I did.
Perhaps the 'purge' set the tone - or instilled the amount of Fear necessary for compliance.
Green we will be
I just can't find any nails. It seems someone has bought up the current supply...At least that what the inventory reports.
Former advisor to Gordon Brown seems to think it's "a" big one, if not "the" big one. Warns to stock up on food and water, and yank your cash out of the banking system. Seems prepping is going mainstream, if at the 11th-and-a-half hour
http://www.independent.co.uk/news/uk/politics/stock-up-on-canned-food-fo...
Same advisor that told him to sell gold at the bottom ?
It probably only cost the ESF $100 billion or so to buy the market back.
He means well, so give him a break. /s
https://www.youtube.com/watch?v=H6SXi4I47Qw
True, this isn't the big one, but the media plan is to make this seem like it's the big one so their sheep think that was it and it's over and they should go back to the BTFD mantra.
-5% on tech stocks is nothing but they want to make it seem like it is.
The bubble is because all the stocks including the commodites and the housing and real estate markets are tied in never ending derivatives. And, the U,S, dollar is hog tied to the petrol-dollar, which is part of the commodities market on the stock exchange. So if the bubble bursts, then the stocks along with the commodities market will sink into a black hole which will then crash the dollar.
Just remember, the 'con' in con-game and con-man is short for confidence. Bernie Madoff got away with it for years because his marks had confidence in him, but nothing last forever and the markets are losing confidence. Full faith and credit actually means something besides "Gimme all your money".....
If the FED raises the market is ultimately fucked.
If the FED doesn't raise the market is fucked.
Sincerely hope they don't raise because their impotence is about to be exposed. The bankers have no clothes. Let the FED try and follow China's plunge protection model. More bankster epic fail and great schadenfreude as the rentiers and specuvestors get crushed. Let it happen at the zero bound with the FED in the corner. Can't wait to watch Grandpa Yellen sweat as she tries to explain why the money masters can't fix it.
The real crash will not be played, it will be survived.
well played sir.
Still here, fuckers! ;)
https://www.youtube.com/watch?v=W2Taxuott5s
No, it's a heist.
Call me when sovereign debt markets close.
Wall Street psychos dancing around the hole of a volcano.
Crazy bastards?
Yes.
As long as the Empire holds its ground.
The "big one" happens on 9/15/15 -> "El Paso" Area Code -> https://www.youtube.com/watch?v=PPcormivj2A
(some city needs to burn for our sins, and El Paso is as good as any)
http://iamsully.com/?p=14709
When all markets are manipulated you go from investor to gambler. At least in Vegas you know the rules of the table and the odds.
"Never tell me the odds." - Han Solo
It's all a big sham ...
(all hail kortan)
https://www.youtube.com/watch?v=HL5MRrJFFxs
The Ponzi will continue because of various scenarios of the following:
"These questions came to mind when we learned that the central bank of Switzerland, the Swiss National Bank, purchased 3,300,000 shares of Apple stock in the first quarter of this year, adding 500,000 shares in the second quarter. Smart money would have been selling, not buying.
It turns out that the Swiss central bank, in addition to its Apple stock, holds very large equity positions, ranging from $250,000,000 to $637,000,000, in numerous US corporations — Exxon Mobil, Microsoft, Google, Johnson & Johnson, General Electric, Procter & Gamble, Verizon, AT&T, Pfizer, Chevron, Merck, Facebook, Pepsico, Coca Cola, Disney, Valeant, IBM, Gilead, Amazon."
-Dr. Paul Craig Roberts
And you know, maybe cannot prove but still know that the Swiss Central bank is not alone in holding equities.
I seriously did not even know that was legal. Central banks can purchase equities? I know our Fed can accept assets as collateral for loans which is similar. That is how they "loaned" money on depreciated housing assets. Equities are a dangerous new ball game.
If I work this out in my head it is how banks can end up owning the whole world, albeit at fake prices.
can't just print money out of thin air and do nothing with it
buying everything with nothing
It's not legal for the FED to do it, though I wouldn't be surprised if they aren't through some back channels. I think the larger issue is that in the end it simply will not work. The more outright intervention in the "market" the more it is exposed as anything but. The only thing that ever more desperate propping up of the mega-bubble does is exacerbate the inevitable correction.
The worst thing the FED can do for equities and everything else is to not raise this year. At that point they admit that the only way our eCONomy can function is at the zero bound and we become Japan and welcome perma-stagnation. With real inflation running rampant they just might help get a Bernie Sanders or a Donald Trump elected.
It is rare that I agree fully with someone but I think you scored 100% correct all the way to Bernie and The Donald.
The most important thing I do understand from reading Austrian and free market works is that the greater the intervention the greater the bust. The question is how we undo the entrenched interventionist central planning philosophies. I am not sure it is possible short of a complete apocalyptic bust. Too many egos at stake. You think Krugman would ever back down? He will just use the terms quadrillions and quintillion, if necessary.
Did you know that the greatest shareholder of the SNB is a german professor?
5-6% or so.
Trust is an opiate.
Is this the big one? No, not in my opinion, but it gives us a look into what the big one will look like. When the big one hits what is left of these "markets" will simply vaporize and fail to open. This is just another temper tantrum because the junkie needs a fix. It sends a signal to the fed while rapping a few muppets along the way.
These are the tremors leading up to the big quake.
Just a warm up for later next month.It could turn to panic though.
The waves of selling are different this time, like feeder bands in a hurricane.
Easy does it, folks...
No one ever said the big one would happen in one day. This is a process that may take a few days to identify itself. Perception is key. It isn't the realization that there may be a big one out there that will cause one. Rather it is the realization of just how phony our economic system (and the "markets" that are supposed to measure them) actually are...
I dare the Fed to act here. Their reluctance to act, if they don't, will speak volumes.
If they do act, and prove just as futile, it ends the same way.
What throws it all overboard is the dawning realization that they already HAVE ACTED numerous times (even nail biting over a measly microscopic rate hike that STILL hasn't happened)...and yet...we get today and last Friday.
What else can they possibly do?
THAT'S the trigger, and that takes awhile to sink in.
Remember, a lot of sharks are drunk now. They're still not getting it.
Watch what happens when the light bulbs go on...and they figure out (come to see) what you already know...
m
(The first) Black Monday happened after the market had already been in decline for about a month and I think 15%(?) or so from the peak. There were numerous downside episodes during that month as well.
So, yeah. Brace yourself. I wouldn't bet on any smooth sailing the next 6 months.
Stephen Roach formerly of JPM was talking this morning on CNBC how Central Banks have been propping markets for several years. The anchor cut him off and then he softened what he was saying. The truth coming out is good news. The bad news is the short term it is going to be a bad spanky unless you already very wealthy.
Step down for a few more months or a month of hard clearing, same end. Just dont buy or sell in panic mode. As for me, waiting a month then will evaluate.
Black Monday looks more like Black Friday. Fed and algos camped out in front of the exchanges waiting to buy the good deals after the open.
Stopped reading after "After injecting tens of billions of dollars in markets...".
so if you went long at 1841 2 /es and you sold them at 1911. your up 7k in about 15 minutes. but i still owe the irs 1050 bucks. sufferin succatash
Days like today show us what central banks really accomplish. They merely concentrate what would otherwise be modest, cyclic market moves over time into dramatic shocks. Thanks to automation and HFT, those shocks now occur over minute periods of time too short for most investors to react. By the time they even become aware of what has happened it’s too late.
Suze Orman says she loathes the experience, but, at the same time goes begging the Fed and Janet Yellen for more. So sad it’s funny.
Why the hell would I get out of debt? I'm betting against the currency itself, and that means staying in debt as long as possible. If you bought a house in 2000, your mortgage payments might be $300 per month for the next 30 years. Today, that's pocket change. You can't even rent a shitty basement suite for that much. Why would anyone rush to pay off debt with today's money when they know with absolute certainty that money will be worth less in the future? When that final payment is due in 2030, that $300 mortgage payment might be worth a couple gallons of gasoline.
But, in 2030 your annual property taxes will probably equal the original cost of your home.
You can’t win.
Since the markets are not true markets, but rather, manipulated markets, there may not be a sudden crash, such as what we saw at the open today in the US, but continual declines over a long period of time, say, two-four years, at which time stocks will be cheap, and the dollar worhtless.
So, the question remains, when will sanity return? When gold hits $5000, $7500, or when silver revalues to $200 an ounce or $500 an ounce?
Does not matter, because price will be relative. The deflationary decline is well underway, but the hyperinflation will make the last seven years look like "the good old days."
Turning 62 in December, I only hope that I live to see the annihilation of the Federal Reserve, with or without my active participation.
The truth will come out, but when, no one knows.
Euro has unseated the $eppo
thanks, but no, thanks. I disagree on the "unseated" and I strongly disagree on the intent of any unseating
this currency war is between the Eagle and the Dragon, and the EM (or just all smaller) currencies are the most likely victims
for example this guy Raul Ilargi Meijer via The Automatic Earth blog, is making the same mistake, here
"But the entire west has become so addicted to China’s debt,..."
I don't remember the national bank of China buying up two cool trillions of european sovereign debt, do you?
and it does not explain the "eurozone savings glut" that was predicted for this year, and unfolding, next to the current and continuing €Q towards the old mark
the EUR was specifically designed for a probable and looming currency war, and we are witnessing it's design... working as intended, so far
as a stable transactional currency. nothing more, nothing else, nothing less. air below the mountain: the picture of a bunker
China is still run by clumsy Maoist era leaders. While they looked brilliant during expansion they have nowhere to hide, now. You look at their market interventions which are direct and strong handed...and unsuccessful. You'd be a fool to be on them long term.
On the other hand, the USA has an angry Kenyan socialist at the helm.
Ghordius - Sure but after currency wars come _________ fill in the blank. There is always the monkey in the middle which is _________. Yes, bunkers are specially appropriate for this last word problem.
Functioning market? Where our lords and masters can lose money? No. The point of this exercise is to eliminate anybody who poses a threat to their rule and expropriate their wealth.
Well, new lease on life for the millenials, if they would just stop voting for bailouts.
#BlackMondaysMatter
Beautiful
The 'Big One' is when China discloses its true physical gold holdings. The only question is, does a U.S. carrier battle group arrive before, or After that disclosure...?
Max Frost and the Troopers - Shape of Things to Come
https://www.youtube.com/watch?v=NbpcTwwtW3M
I feel that the world right now has 60% real mone....the other 40% is the newly printed crap....we need to get back to the 60%..and that means big drops in prices and less things being bought....we have tried to fake a market and now its time to go back to normal..if we ever can or they will ever let us go back there
"The main advice we’ve always given with regards to debt deleveraging stands: get out of debt."
The cast of 'Gilligan's Island' put that general message to music:
https://www.youtube.com/watch?v=bXId5jOTxdg
The stock market is just one market of many where the big fish who control the buying and selling, as well as the leveraging, shorting, etc., can fleece the little people. When you see such coordination in stock markets, you know someone has made a killing.
If you want to see "Plunge Protection" - see today.
But it's irrelevant. It didn't save China and it won't save this market.
But the difference between the US stock market, and the Chinese stock market ... is becoming pretty small (in terms of what Governments are willing to do).
"Self-organized criticality is a kind of tension that builds up in complex systems that causes them to fail, and the more self-organized criticalilty there is, the bigger the crash, the bigger the failure. So, an example would be the 2008 financial meltdown that we just experienced a couple of years ago. This is a classic example of the sandpile..."
"Bak's Sand Pile: Strategies for a Catastrophic World"by Ted G. Lewis
Link: http://amzn.com/098307450X
"Modern societies want to avert catastrophes, but the drive to make things faster, cheaper, and more efficient leads to self-organized criticality-the condition of systems on the verge of disaster. This is a double-edged sword. Everything from biological evolution to political revolution is driven by some collapse, calamity or crisis. To avoid annihilation but allow for progress, we must change the ways in which we understand the patterns and manage systems. Bak's Sand Pile explains how."
Dow down 130. Huh....I guess all is well.....that was weird. Buy, buy, buy!!!
big one? who knows. the big one will come when it finally dawns on everybody that:
a) the banking system is a transnational mafia loyal to no one
and
b) the banking mafia are made stupid by greed - obviously they're not literally so but they are blinded. that's what they always trash everything.
Big One? LOL Good one ZH.
Probably not...more likely a warm up for the big shake down.
For every seller, a buyer. The One Bank (/market pwner/SII) playbook: sell with the left hand, buy with the right to play the private money (shorts and longs) at will.
China turning Japanese on this next cycle...
Another dumb "we have problems, but China fell into the set trap without a clue" relativism article...