Friday Hasn’t Even Started Yet, But It’s Already Ugly

The FANGMAN stocks went to heck afterhours.

Just a note to show how decrepit and ephemeral the enthusiasm for stocks is.

So far in October, the S&P 500 has booked 13 losing days, including October 10, when the index dropped 3.3%, and October 24, when it dropped 3.1%. Then came today, with the feel-good moment of a boisterous 1.9% gain. And then came after-hours trading, and nearly everything went to heck, particularly the FANGMAN stocks that weigh so heavily on the index with their $4-trillion market cap. And Friday morning looks already ugly. All of the FANGMAN stocks were in the red in late trading:

  • Facebook [FB]: -2.3%
  • Amazon [AMZN]: -7.4%
  • Netflix [NFLX]: -2.8%
  • Google’s parent Alphabet [GOOG]: -3.7%
  • Microsoft [MSFT]: -1.5%
  • Apple [AAPL]: -0.4%
  • NVIDIA [NVDA]: -2.8%

There were some standout reasons:

Amazon plunged after it reported record profit but missed on revenues and guided down Q4 expectations for sales and profits, a sign of slowing revenue growth. It was down as much as $150 a share, or almost 9%.

Google’s parent Alphabet reported that revenues grew 22%, which missed expectations. Earnings beat, but a considerable slice – $1.38 billion! – of those earnings came from the gains in its portfolio of equity securities. CFO Ruth Porat warned that traffic acquisition costs would increase further as consumers are shifting search activity from desktop computers to mobile devices. Shares plunged up to 5%.

Intel [INTC] reported earnings that beat expectations, and shares initially jumped, but during the earnings call, things got muddled fast, and shares gave up their gains.

Advanced Micro Devices [AMD], an Intel competitor, had plunged 15% during the day despite the big rally in tech shares, after reporting results and discussing a graphics-chip glut resulting from the collapse of the crypto-mining business. It lost another 3% after hours.

Tesla [TSLA], which had surged 9% during the day after reporting a profit [read: The chart that makes me scratch my head: What I Think about Tesla’s Financials], gave up 1.5% in late trading.

And there were others, such as:

Mohawk Industries [MHK], a global flooring company, reporting that revenue inched up 4% to $2.5 billion and profit came in at $227 million, which disappointed everyone. Shares plunged 18%.

FirstSolar [FSLR], the solar power company, reported a Q3 profit, up from a loss a year ago, but cut guidance. Shares plunged 10%. Folks are a little edgy these days.

And here’s one for your amusement:

Snap [SNAP], purveyor of the Snapchat app, plastic sunglasses with a built-in camera, and other must-die-without stuff, announced it had lost two million users last quarter. Only two million, you ask? Shares plunged over 10% to $6.26.

If it closes at this level on Friday, it would mark a new closing low. At this level, shares have plunged about 80% since their peak on the second day after the IPO in March 2017, which I amply lambasted before and after.

This plunge is twisting the knife that is already stuck in the gut of Chinese tech giant Tencent, which had acquired 146 million shares of Snap in November 2017, after the shares had plunged, thus heroically grabbing a falling knife. On the day the purchase was announced (no purchase price was named), Snap traded at around $13 a share. If that’s the price Tencent paid, and if it still owns the stake, it has lost nearly $1 billion.

But this is small fry for the giant Tencent. Since its peak in January, its shares have plunged 43%.

OK, we will end on a positive note. There were some big winners too, including toymaker Mattel [MAT], which jumped 7%; and Expedia [EXPE] which rose 4.5% after-hours. And a few others too. But they weren’t enough to compensate for losses of the FANGMAN and other giants. But maybe a miracle will happen Friday morning, and it will all just blow away.

The rot is now oozing to the surface. Read…  This Stock Market Is “Gradually” Rotting Under the Covers  
 

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  121 comments for “Friday Hasn’t Even Started Yet, But It’s Already Ugly

  1. Four Zhu
    Oct 25, 2018 at 8:39 pm

    I have two stupid questions. Is this volatile market new normal? Will it stop when interest rate is stable?

    • jest
      Oct 25, 2018 at 9:20 pm

      No, and No

      • nick kelly
        Oct 26, 2018 at 5:52 am

        Yes and yes. Stable interest, i.e., a regression to the mean of the last 50 years, probably means i.5 to 2 percent over where we are. The market will probably stabilize at some point after that between 20 and 40 % lower than now. This ls the optimistic view.

        But it will be a bumpy, volatile ride back to reality. Reality being the point where stocks can be bought for their dividend and a reasonable hope of capital gain, rather than no dividend and all hope.

        • Jack
          Oct 26, 2018 at 11:33 am

          Nick, I don’t know about that; I think the new “normal” is “no normal.” Anything goes.

        • Four Zhu
          Oct 26, 2018 at 4:10 pm

          Thanks Nick and guys. :)

    • Unamused
      Oct 25, 2018 at 9:36 pm

      They’re not stupid questions. You can tell because there are no good answers for them. Even the best honest answers will be conjectural and tentative.

      Even the very knowledgeable do not know. They’re the ones taking the losses.

    • FromKS
      Oct 25, 2018 at 10:53 pm

      I believe volatility will stop when margin debt is back to <2% of GDP.

    • Paul
      Oct 26, 2018 at 6:08 am

      I can’t answer that because I don’t expect interest rates to stabilize.
      As far as I can see, the Fed sets a floor under rates, but the market sets ceilings. Not sure where the money will come from to fund the federal deficit, QT, continued growth in consumer credit, margin trading, etc. when foreign sovereigns have quit buying and are maybe going to be selling on net, savings rates are near record lows, etc.
      My guess is it will take MUCH higher rates to attract that money.
      And yes, such rates would trash everything, except maybe PMs.

    • Gershon
      Oct 26, 2018 at 8:11 am

      There are no stupid questions.

      However, millions of retail investors will be asking the same questions, which are anything but stupid. The answer will largely depend on whether or not market forces will be allowed to play out – and to punish greed and recklessness – or if the Federal Reserve and the Keynesian fraudsters who have held sway there since Greenspan will once again start meddling with “the markets” using ill-considered and highly unsound policies like QE and artificially low interest rates to force savers and yield-seekers to play in Wall Street’s rigged casino.

    • JZ
      Oct 26, 2018 at 11:31 am

      My take is that until China and Europe is fully destroyed financially, the FED will NOT stop hiking. US will take flesh wounds and the world will take a head shot. The FED works with Donald Trump although they point at each other confusing the “Fellow Americans” about the flesh wound they are taking. Fed draining liquidity and trade war together will do damage. They are trying to break China and Eruope like they broke Russia in 1990 or at least push China and Europe back by 20 years like they did to Japan in 1990. This is the “bigger game”. And if China and Erope survives, they will trade with each other and Russia and bypass US as the world power. US will lose the trade “WAR” although they are winning the “battles” now. If China is kicked into Chaos and Europe break into pieces again, the world will be US’s puppy for another half a century.

    • RangerOne
      Oct 26, 2018 at 12:27 pm

      The market (equities) are always volatile. If you think or thought otherwise then you were simply mislead by people enamored with recent returns.

      I was volatile, it is volatile and it will have been volatile as long as it exists.

      Interest rates are one of many factors that influence trading behavior and stock values daily.

      • Oct 26, 2018 at 5:08 pm

        RangerOne,

        I’m going to add this to my list of funny meaningful typos: “I was volatile.”

        I’ve become famous for “brick-and-mortal retail,” which must be Freudian. It’s now at the top of this list. But yours is close.

        :-]

  2. Beverley L Kennedy
    Oct 25, 2018 at 8:46 pm

    It also heralds a change in direction
    Don’t forget the impact of midterms

    • safe as milk
      Oct 26, 2018 at 7:49 am

      yes. i think the midterms are a big part of the volatility we are seeing now. pipebombs aren’t helping. i sold my meager portfolio last week and am sitting on the sidelines until the dust settles.

  3. CRD
    Oct 25, 2018 at 8:48 pm

    It’s going to be interesting how much more of tech selling off the Bay Area housing market can take before the dam breaks. The growing cracks are pretty obvious to anyone who is watching.

    • rhodium
      Oct 26, 2018 at 8:10 am

      Popping stocks won’t do it directly. Tech will have to start laying people off or reducing compensation, and that depends on revenues not what’s going on with the stock. The only way the stock market can significantly effect the real economy is if it scares people into spending less if they begin to seek security.

      • Wisdom Seeker
        Oct 26, 2018 at 10:27 am

        Wolf had an article just last week showing that tech stock valuations have a direct impact on SF Bay Area housing market buyers. The way the stock market connects here is that a huge fraction of compensation is in stock and/or options, and in turn this is where a large fraction of buyers manage to scrounge up their down payments and/or feel wealthy enough to pay the local nosebleed prices for housing.

        Otherwise you would be right, the stock market doesn’t directly affect the economy immediately. But weak stock prices are considered a signal of weak growth prospects and that does impact corporate hiring and investment plans which DO affect the economy.

    • Gershon
      Oct 26, 2018 at 8:13 am

      Millions of muppets who bought into the Fed’s Ponzi markets and asset bubbles are going to discover the joys of the “reverse wealth effect.”

      • RangerOne
        Oct 26, 2018 at 4:58 pm

        Deflating leveraged assets?

  4. Unamused
    Oct 25, 2018 at 9:43 pm

    ->But maybe a miracle will happen Friday morning, and it will all just blow away.

    And maybe not. There are no miracles.

    SPX futures are down 20 points. DJIA futures are down 167. Always in motion the future is.

  5. Bruun
    Oct 25, 2018 at 9:45 pm

    So, I have a dumb money 401k half in large cap value, half in money market. Do I get out of stocks now or wait until we’re down 40%?

    • David
      Oct 25, 2018 at 11:18 pm

      You wait until you are down 60%. Then you panic and sell. This way you join the masses that sell at the bottom a week before the market turns and a new bull market is born.

      • Kent
        Oct 26, 2018 at 5:27 am

        And don’t forget to buy back in at the peak of the new bull!

      • MooMoo
        Oct 27, 2018 at 10:15 am

        Exactly!

    • Ed
      Oct 26, 2018 at 12:16 am

      I think it has further to go, but I don’t know if it’s now or in six months.

      Anyway, that’s my bet. ;-)

    • Get some
      Oct 26, 2018 at 2:44 am

      Wait till it’s down 60% just to be sure

    • Paul
      Oct 26, 2018 at 6:10 am

      Sadly, when bonds and stocks are positively correlated, your choices are limited.
      Maybe best to sell it all and buy precious metals.

    • IdahoPotato
      Oct 26, 2018 at 10:18 am

      Sell when the black line is below the blue, buy back when it gets back over the blue.

      https://mebfaber.com/timing-model/

      Keep the guesswork and emotions out.

      • Oct 28, 2018 at 12:13 pm

        That means… sell everything?

    • Maximus Minimus
      Oct 26, 2018 at 11:09 am

      Wait until 40% down will be looked upon with nostalgia.

  6. Oct 25, 2018 at 9:49 pm

    GDP will save us in the morning. MAGA!

  7. Suzie Alcatrez
    Oct 25, 2018 at 9:50 pm

    Why on earth would Tencent invest so much in Snap? Those shares come with no voting rights.

    • Oct 25, 2018 at 11:25 pm

      This was done when the sky was the limit for Chinese companies buying crap overseas. Nothing mattered. I’m not even sure they were aware of the voting rights issue. It was a spur-of-the-moment deal. I don’t think it was planned. Snap was crashing and some moron at Tencent saw a buying opportunity.

      • notBuying
        Oct 26, 2018 at 12:48 am

        Do you think Tencent can redeem themselves with NIO?

        • Oct 26, 2018 at 7:41 am

          :-]

          That’s another billion they’re going to watch swirl down the drain.

      • safe as milk
        Oct 26, 2018 at 7:47 am

        hey, it looks like the snap is at fiftycent of tencent’s cost basis. so i’d say they still have another 40cent to go!

  8. Bet
    Oct 25, 2018 at 9:54 pm

    I have posted several times. Markets are so crazy parabolic that this slight move back to the monthly 15ma is so frightening
    There is a long way to go yet
    The Dow is being held up by four stocks
    Semis crushed. The financials falling housing crushed ,Chinese internet’s crushed. Industrials like Catapillar crushed
    FAANG stocks toothless. The fruit is likely to be next. I figure it’s been a relentless up for nine years. Maybe a relentless down is in the works

    • David
      Oct 25, 2018 at 11:22 pm

      Bet

      I think you erase the word “maybe” from the last sentence of your post and then you have nailed it.

  9. red pill economics
    Oct 25, 2018 at 10:08 pm

    1) This (was) either the longest, or second longest bull market in history. Nothing lasts forever. TPTB can extend the expansion (i.e. “new” FICO scores, 97% LTV, 50% DTI, etc.), but that just means that the contraction will be all the more severe. They can’t prevent the contraction (Humpty Dumpty syndrome).
    2) Valuations are ridiculously high.
    3) The Fed has switched from Quantitative Easing (QE) to Quantitative Tightening (QT), to the tune of -$50B/mo.
    4) The Fed is a “progressive” institution and is no friend of DJT. Think of it as a Democrat with a printing press, but I repeat myself.
    4) Markets are cyclical; not linear.
    5) Reversion to the mean happens.
    6) The mean is a long way down, but it won’t be a straight line. Just know that 2-3 years from now “there be bargains”. I have no idea what happens in the short-term.
    7) This time it’s the “everything bubble”. Lots of asset classes will be whacked.
    8) That’s enough! May you live in interesting times…

    • Unamused
      Oct 26, 2018 at 12:15 am

      Blue pill economics:

      1) Don’t worry. You have plenty of credit.
      2) Be happy. Look at all the stuff you’ve got.
      3) Count your blessings. You have thousands of friends, and they all like you.
      4) Here, take this. Don’t worry, it’s non-prescription.

      Honestly, red pill economics is so confusing. Blue pill economics is so much nicer. I just don’t know what your problem is.

      • Bill from Australia
        Oct 26, 2018 at 2:40 am

        Took a blue pill last night ,wife still not happy,help.

        • safe as milk
          Oct 26, 2018 at 7:56 am

          my wife is still blue pill but i’m mostly #walkaway. it makes for some interesting conversations.

        • kitten lopez
          Oct 26, 2018 at 6:31 pm

          that blue pill does nothing for a man’s TIMING… which as you see here, is EVERYTHING. it just hammers these poor sweet little things monotonously.

          x

      • kitten lopez
        Oct 26, 2018 at 6:32 pm

        YOU ARE SO FUNNY AND SUCCINCT IT HURTS LIKE MY HAIR IS BEING PULLED FROM ACROSS THE ROOM

    • Unamused
      Oct 26, 2018 at 12:18 am

      ->May you live in interesting times…

      Thank you! For a minute I was afraid you were going to finish up with an old Chinese curse or something. You’re a nice guy after all, even if you don’t make any sense.

    • two beers
      Oct 26, 2018 at 4:19 am

      “4) The Fed is a “progressive” institution and is no friend of DJT. Think of it as a Democrat with a printing press, but I repeat myself.”

      Any Rand fanboy Alan Greenspan and longtime neo-liberal Republican Ben Bernanke will be enlightened to learn they are “progressive,” They are the ZIRP masters. Wasn’t milquetoast Democrat (but I repeat myself) Janet Yellen the Fed chair when the first tentatively steps to end QE and raise rates were initiated?

    • HowNow
      Oct 26, 2018 at 5:15 am

      On several measures of total market value, yes, the S & P is overvalued. But, regarding “reversion to the mean”, the S & P, from about 1978 to now, is almost exactly at the “mean”. This is based on a CAGR ,compound annual price growth rate, of 7.8%.

      Please correct me if I’m wrong…

      • IdahoPotato
        Oct 26, 2018 at 10:26 am

        If you peel off the FANGMAN brigade, the S&P is not that outrageously valued.

        https://www.ofwealth.com/sp-500-much-cheaper-looks/

        • MooMoo
          Oct 27, 2018 at 10:18 am

          True!

          People forget… everyone as been screaming CRASH!!!! since 2010… and it never happened.

          Now they are doing it again…

          The dog in the house ain’t equities…. its govvie bonds

      • Wisdom Seeker
        Oct 26, 2018 at 10:53 am

        “1978 to now” is not an appropriate timeframe for comparison, since it starts near a historic market low and ends near a major top. Anticipating that sort of growth to continue would be like anticipating corn to grow to the moon in 10 years because it grows 6 feet in 3 months with a compound growth rate of about 7.8%/day.

        Put another way, the stock market cannot grow faster than the economy forever, because pretty soon it would BE the economy. How fast do you see the economy growing for the next 10-20 years? One way to factor that:

        Economy = population x (fraction employed) x (output per worker) x (consumer price inflation).

        The population isn’t growing fast, the fraction employed isn’t growing fast, output per worker isn’t growing fast and the Fed has a mandate to keep a lid on inflation. No way the economy grows 7.8%/year and no way the stock market can grow faster than the economy from the current starting point near all-time-highs.

        P.S. Corn actually grows about 6.5%/day.

        P.P.S. Corn would actually reach the moon in just over a year if it kept growing for that long at that rate.

        • HowNow
          Oct 26, 2018 at 6:05 pm

          Using a 30-year span instead of 40-yrs., the mean is almost the same and the CAGR is slightly less: 7.1%.

      • Max Power
        Oct 26, 2018 at 12:22 pm

        Ummm… no. You can’t use a growth factor to determine the current valuation of stocks this way.

        What you can do is compare your growth factor to some underlying growth factor over the same time span and determine if it’s in or out of line with it.

        Probably the most appropriate measure would be nominal GDP growth over the same period. I am not sure what that number is but I would guesstimate it’s probably around 5-6% annually. If so, then the stock market is quite over valued since its grown 30-50% more than the underlying economy.

    • nick kelly
      Oct 26, 2018 at 10:58 am

      3) The Fed has switched from Quantitative Easing (QE) to Quantitative Tightening (QT), to the tune of -$50B/mo.
      4) The Fed is a “progressive” institution and is no friend of DJT. Think of it as a Democrat with a printing press….

      This is a contradiction: the Fed is removing liquidity it ‘printed’. Central bank tightening is more usually opposed than welcomed by ‘progressives’. The Italian ‘progressives’ are so upset with the ECB they are threatening to print their own euros.

      Having operated radically after the GFC the Fed it is now acting in normal text- book mode. It is not reacting to anyone personally.

      D takes everything personally: ‘the Fed has gone crazy! Obama had zero interest rates!’
      And he told his then financial adviser (Cohn) ‘to just print money’ if the budget was a problem.

      The Fed will (hopefully) ignore Trump’s prattle, but it is neither his friend or enemy.

      I agree with your points other than 4

    • red pill economics
      Oct 27, 2018 at 11:35 am

      Clarification here. a) I’m non-partisan. Neither party currently deserves my support. A fiscal conservative inside the beltway is as rare as hen’s teeth. My point is that the Fed is partisan. Keynes was a progressive. b) Origin of “red pill” here. I didn’t drink the economic cool-aid. “The Matrix” is a great analogy to U.S. economy and its Keynesian economics-based principles. Austrian school please.

      “This is your last chance. After this, there is no turning back. You take the blue pill – the story ends, you wake up in your bed and believe whatever you want to believe. You take the red pill – you stay in Wonderland and I show you how deep the rabbit-hole goes.” – Morpheus, The Matrix, 1999

      • Unamused
        Oct 27, 2018 at 6:59 pm

        ->Austrian school please.

        No thanks.

        Austrian economics is a political ideology that masquerades as an economic school of thought, rejecting scientific method, practical modeling, and empirical data in favor of logical fallacies, half-truths, and bogus rationalizations. Keynes is merely the favorite of its scapegoats for its own failings, which are too numerous to list. It has been so thoroughly and consistently discredited by real-world economic realities it really ought to be kept locked up under glass on display as a museum curiosity.

        For further information google ‘why is austrian economics discredited’.

        • Oct 28, 2018 at 12:43 pm

          Is “real-world economic realities” a bit of an oxymoron? ;)

        • Unamused
          Oct 28, 2018 at 2:31 pm

          No, ChangeMachine, it’s a redundancy for rhetorical emphasis. An oxymoron is a figure of speech of contradictory terms.

  10. timbers
    Oct 25, 2018 at 10:10 pm

    The solution is obvious:

    We need to solve the deficit crisis by cutting/abolishing Social Security, Medicare, and underfunding pensions that benefit working people who already paid into them but not yet collected what they paid.

    To stimulate the economy, we must draw upon the vast surplus accumulated in the Dept of War and Aggression Trust fund which is so fully paid for no one including the Fed Chairman Powell would ever ever ever utter one syllable suggesting otherwise in any way suggest even in the tiniest way that are so totally and awesomely paid for by fully funded trust funds, while telling us Social Security and Medicare are totally not funded and are causing all our deficit problems.

    Also cutting taxes on Rich Gigantic Corporations and the Ultra Rich pay for themselves, so we should do because they are Job Creator.

    • Unamused
      Oct 26, 2018 at 12:00 am

      Your solution is admirable, but some people aren’t going to see it that way because they’re only in it for themselves. That’s a problem.

      Naturally, some people will have to make sacrifices in order to make things better for everybody, except for our wealthy benefactors, without whom we’d all be living in caves. If we’re going to fix this we’re going to have to make allowances for some and put limits on others. That only makes sense.

      It’s all about shared sacrifice for the good of all. Private misfortunes make for the welfare of the public, so the more people who suffer private misfortune, the better it is for society, and the public would be best off if nearly everybody was as badly off as possible. Except, of course, our wealthy benefactors, who should be rewarded for giving jobs to the rest of us by profiting any way they can, even if it reduces the public to penury, which we know is for their own good anyway.

      Look at it this way. A poor person can lose their job and lose a few thousand in income over a year or two until they get another, but a rich person can lose millions just lounging around the pool after a round of golf at the club. Obviously a person who loses millions in a day suffers hundreds of thousands of times more than somebody who loses a few thousand spread out over time. There’s just no comparison.

      If people only knew the miseries hyperwealthy people go through for their benefit, they’d want to give them everything out of sheer gratitude, and starve to death in shame for not giving them half as much as they clearly deserve.

      People can be so selfish, and so cruel. Hopefully we can set up some firm guidelines and try to teach them that they can be better than that. We’d all be better off.

      • Kitu
        Oct 26, 2018 at 12:28 am

        I love it when people say I should drop dead to help the economy.

        • Oct 28, 2018 at 12:50 pm

          No, not DROP dead. It’s better for the GDP to let it fester for a good long while, until all of your assets have been liquidated. My understanding of economics is limited, so I’m not sure what level of medical and other indebtedness is best.

      • HowNow
        Oct 26, 2018 at 5:05 am

        Social Security and National Security:
        1) There is a “cap” on contributions, called “Maximum taxable earnings” which was moved up to $118,500 this last year. So, why is there a “cap” – for the very high income earners?
        2) The word “entitlements” is freely used by the hookers (Congressmen) to demean, discredit, and eventually destroy the social security system. S. S. is insurance, paid with forced, monthly payments. Would you call a payout of life insurance after someone’s death an “entitlement”?
        3) The wealthy have the majority of assets. The U.S. military, in the final analysis, protects those assets. All government services, in one way or another, protect and serve the wealthy to a greater degree than the average citizen. The wealthy should be expected to pay an inordinate share of the cost of the military (and government services) because they have the most to lose should the whole thing collapse, from war or internal conflict). And they should serve in the military. Can you think of any wealthy, high ranking politicians who ditched the draft?,
        4) If corporations’ “rights” are protected by the Constitution, the corporations should put on uniforms and serve in the military, like other citizens.

        • Unamused
          Oct 26, 2018 at 9:42 am

          ->All government services, in one way or another, protect and serve the wealthy to a greater degree than the average citizen.

          Civil government, so far as it is instituted for the security of property, is in reality instituted for the defense of the rich against the poor, or of those who have some property against those who have none at all.

          Wealth of Nations

        • Petunia
          Oct 26, 2018 at 3:16 pm

          Totally agree that there should be no cap on earnings for SS purposes. My biggest complaint is that they tax the benefits. Couples with income as low as $44K, pay taxes on up to 85% of their benefits. A total disgrace considering who is getting the biggest tax cuts.

        • sierra7
          Oct 27, 2018 at 5:43 pm

          Quite nicely said….even too nicely!!!!
          The word, “entitlements” drives me absolutely crazy!!
          Everyone should be paying into SS on the basis of what they make…no cap. Problem solved.
          We live in a criminal conspiracy economic system.
          Great article; great comments!

    • Nicholas
      Oct 26, 2018 at 9:54 am

      Dare I say it? How about tax the hell out of people like Megyn Kelly?????? $69 million!!!!!!! Oh but wait! She earned it! America has become a joke. It exists for the rich, connected, etc. There hasn’t been real capitalism for 100+ years.

    • MooMoo
      Oct 27, 2018 at 11:27 am

      nahhh… small businesses are the REAL job creators… slash their taxes and employment soars.

      Problem is, small business can’t contribute to politicians the way megaliths do

      ergo… our present state

  11. akiddy111
    Oct 25, 2018 at 11:37 pm

    This is an interesting inflection point. Will Amzn and Google stay down tomorrow or snap back ? Too early to tell.

    Importantly, AAPL and FB report next week and if those two underwhelm, then that could be the end of this bull market.

    What’s more, GE, AIG, DB, GM and Ford are all at or near 5 year lows …. Too much net debt sitting on large cap balance sheets across the board.

    Very, very interesting.

    • 728huey
      Oct 26, 2018 at 3:12 pm

      Both Amazon and Google (a.k.a. Alphabet) dropped big time today. (Disclosure: I own Amazon stock, but not enough to retire on.) :-( The Dow dropped just under 300 points today,which means yesterday was a dead cat bounce.

    • Petunia
      Oct 26, 2018 at 3:25 pm

      I think Amazon is an amazing company, but I don’t buy a lot from them. Instead, I buy directly from the brands I use and never have a problem dealing with any of them. This trend is what I think is affecting Amazon’s earnings. As other companies get their act together online, Amazon will lose sales.

      I think eventually Ebay will be affected by the same trend. I see a bunch of sites now specializing in reselling, especially luxury items, clothing, etc.

  12. economicator
    Oct 25, 2018 at 11:46 pm

    Spot on!

  13. Old dog
    Oct 25, 2018 at 11:47 pm

    In 1988 I was in NY and saw this magazine cover. Should have bought it.

    “Market up and down like the panties of a $2 hooker”.

    Ah, those were the days.

    • Covey
      Oct 26, 2018 at 1:42 am

      One of the joys of reading WS is that every now and again someone posts a comment which really makes me laugh, and restores a little sanity in what is a very strange world

      • kitten lopez
        Oct 26, 2018 at 6:42 pm

        Wolfstreet is like the sturdy guard railing around The Great Giant Endless pit of Unknowing that has become San Francisco and the whole world to me and i’m in a harness tied to the railing. i feel like i just got here and am back to 14 years old when i was trying to figure out how this thing worked.

    • Gershon
      Oct 26, 2018 at 8:32 am

      Permabulls who levered up on margin debt to buy Tech Bubble 2.0 stocks at the peak of the market are going to be as nervous as a six-year-old at the Neverland Ranch.

  14. Bobber
    Oct 26, 2018 at 12:01 am

    I think we are in a recession now.

    Real estate transactions are down 20-40%, and prices are dropping. I suspect activity in that sector has declined tremendously over the past few months.

    Auto sales are also dropping.

    These are huge industries that comprise a large share of GDP.

    Remember, by the time a recession is formally identified, stocks are usually down by 40%.

  15. KPL
    Oct 26, 2018 at 12:01 am

    What brought the market up from its swoon in Feb? Can that magic work again?

    While it smells different this time, I am been wrong each time (Aug 2015, June 2016, Nov 2016, Feb 2018) I thought THIS IS IT, that I am unsure whether THIS IS IT now, unless the shares really get whacked (US markets down at least 15-20%), talking heads like Bullard from the Fed DO NOT start talking of stopping rate hikes, QE4ever etc. and companies start going bankrupt (and are not bailed out)…

    Let us see how it goes.

    • Oct 28, 2018 at 12:52 pm

      QE to QT is different this time. Otherwise, Idunno. Props for keeping track of being wrong. More scientific than most.

  16. Mark
    Oct 26, 2018 at 12:03 am

    This is the first tranch of investors exiting long equity positions they’ve been in for years, as they believe the party over. These folks are about a year too early – this may be last call, but the party is not over.

    I fully expect markets to be choppy going forward as we are now out of a ZIRP environment, and equities will have to compete with bonds for capital. Some late comers to investing may not be used to 2%+ moves in a day being normal. But, marginally higher rates at the short end and 3% on the 10Y is not going to break this market. Fundamentals remain good, the yield curve is positively sloped and credit spreads are tight as can be. Nothing has significantly changed in October versus September other than market sentiment. Once upon a time, 10-20% corrections were commonplace. Once this temper tantrum passes, we will be heading back up to make new highs early next year.

    When the yield curve inverts and credit spreads begin loosening, it will be time to head for the exits. Selling now is a mistake.

    • Lance Manly
      Oct 26, 2018 at 6:14 am

      The problem is peak earnings. After the 4q the YoY comparisons are going to be done against earnings that already include the enormous tax gift. Add in any slowdown from a trade war and you have some real issues.

    • Gershon
      Oct 26, 2018 at 7:32 am

      Fundamentals remain good, the yield curve is positively sloped and credit spreads are tight as can be. Nothing has significantly changed in October versus September other than market sentiment.

      Step away from the crack pipe. The financial house of cards created by ten years of Keynesian financial lunacy and trillions in created-out-of-thin-air “stimulus” is imploding under the weight of its own fraud and make-believe valuations.

      We will not have honest markets or sound money until we end the Fed and lock up the Keynesian fraudsters whose monetary malpractice has created huge systemic risks while looting the productive economy and replacing it with Wall Street’s rigged speculative casino.

      • Kent
        Oct 26, 2018 at 10:02 am

        The Fed isn’t Keynesian. It’s Friedmanite monetarist all the way. Now the Republican’s tax cuts and expansion of the DOD budget are Keynesianism in action.

        • IdahoPotato
          Oct 26, 2018 at 10:31 am

          Thank you Kent.

        • Setarcos
          Oct 26, 2018 at 12:25 pm

          Kent got this about 1/2 right. The spending is Keynes in action. The tax cuts are based on the thought that people can spend their own money more efficiently that governments do. And also based on the fact that people and companies can (and many did) choose to locate where tax rates are lower, hence the giant sucking sound of companies moving their HW and jobs to other countries.

          Milton wasn’t a fan of govt spending. When visiting a foreign country he sees a govt run project where guys are digging with shovels. He asks the government official why not use bulldozers? Govt guy says because more jobs were created that way. Friedman, “Why not use spoons?

        • Max Power
          Oct 26, 2018 at 12:30 pm

          Sorry, but what you are simply plain wrong.

          You (like most people unfortunately) have a wholly incorrect understanding of Keynesianism.

          The core tenant of Keynesianism is that government should act in a counter-cyclical way vis-a-vie the economy. In other words, the government should run deficits in bad economic times and surpluses in good times.

          What the Republicans are doing now is not only Keynesianism, but the complete opposite of it.

        • Kent
          Oct 26, 2018 at 1:20 pm

          @Setarcos,

          Keynes was fine with reducing taxes as well as with increased government spending. Writing mainly in the Great Depression, there wasn’t enough tax revenue to cut, so creating jobs through government spending was his recommendation. And as

          @Max Power states, his intention was always for it to be counter-cyclical. I took the dig at Republicans (I’m one too) because they are doing it exactly backwards, but they are using Keynesian techniques to stimulate the economy, and it is working as advertised.

        • Setarcos
          Oct 26, 2018 at 4:38 pm

          @Maxpower
          It is indeed a risky bet, but it is a bet on the US. And nobody else has come up with anything new as this trend has been long term. They are trying to grow us out of this quagmire.

          The answer is not replacing shovels with spoons instead of bulldozers. Unless you want what the US has had historically.

        • nick kelly
          Oct 26, 2018 at 4:43 pm

          If the Fed did not operate on Keynesian principles (like every other central bank) it would not be able to add or remove liquidity even if it wanted to.

          The greatest criticism of the Fed in its history was its failure to
          stimulate the economy with deficit financing to counteract the recession that turned into the Depression. But at the time, before Keynes, the idea was heretical: Sound money had to be backed by gold ( ironically the US WAS sitting on most of the world’s gold and could have increased the money supply to some extent with gold backed notes)

          Instead the government reacted to the fall in tax revenue by cutting spending, accelerating the downturn.

          Keynes may be the most misunderstood economist ever.
          He’s like a hobby horse the left wants to ride, and the right wants to flog, both for ideas he didn’t advocate.

          For one thing he believed in balanced budgets, but balanced over the economic cycle, not at year end. The government would spend in a downturn, using the SURPLUS accumulated in the good time. Imagine even suggesting a surplus now!

          He would roll over in his grave if he could see the endless debt politicians have incurred in his name and that this is considered normal and even healthy.

        • HowNow
          Oct 26, 2018 at 5:06 pm

          Keynes? Hayek? Friedman? “Invisible hands”??

          Republican tax cuts are not about business cycle timing, free-market ideology, moral philosophy, theories, kitchen tables, or “family values”. It’s about “GET THE GOVERNMENT OFF OUR BACKS!”

          Not your back, mind you… just THEIR backs.

          No ideology involved.

    • CRD
      Oct 26, 2018 at 7:59 am

      A year too early? Just look at a momo stock like FB. It hit an all-time intraday high above $217 in late July. Pre-market today it’s under $147. This is a near-40% drop in 3 months!

      Markets are forward-looking. The market sentiment has changed because participants are looking at the fundamental changes taking place (rising interest rates, balance sheet normalization, etc.) and evaluating how these are going to affect companies and their valuations, not to mention the real economy.

      If you wait until the yield curve actually inverts, etc., you’re going to be way too late. Institutions have been net sellers all year because they know this.

      • Mark
        Oct 26, 2018 at 9:24 am

        Perhaps you will turn out correct.

        I stick with my indicators through the noise of the daily headlines and price moves. And I don’t see a whole lot that’s changed.

        If there were strain and real fear in the system, we ought to see the 10Y/30Y aggressively bought to drive yields far lower, and high yield spreads blown out at least like what early 2016 looked like. That is not even close to the case right now.

        We’ll see where equities are in six months to a year.

      • MooMoo
        Oct 27, 2018 at 11:30 am

        “Markets are forward-looking. The market sentiment has changed because participants are looking at the fundamental changes taking place ”

        …nope. people are scared s$%it-less that the mid=terms could go the dems way… THAT is why the market is off..

    • Laughing Eagle
      Oct 26, 2018 at 9:16 am

      Selling now a mistake. I figure you do not have much upside with the risks around the world

    • Prairies
      Oct 26, 2018 at 9:55 am

      “Selling now is a mistake.” yet you say “expect markets to be choppy going forward as we are now out of a ZIRP environment”.

      Analyze the interest aspect closer, interest rates will continue to climb and this market is held up on top of debt. Bank of Canada just went up again so expect the Fed to do the same. Smart investors will be getting out now, while others are pulling out funds to cover their interest payments as the interest payments get tougher to pay.

  17. raxadian
    Oct 26, 2018 at 12:05 am

    Google has a monopoly wirh Android, Android has a Google search built in… so are you sure the fine and starting to charge for Android in Europe wasn’t at fault here? As in, Google ws punished because it will earn less in Europe thanka to the new regulations?

  18. Álvaro
    Oct 26, 2018 at 5:21 am

    Good ol’ VIX index is telling us to brace ourselves, for winter is coming.

  19. Gershon
    Oct 26, 2018 at 7:24 am

    Trillions of fake wealth created by the Fed’s tsunami of fake money is going to be wiped away as true price discovery, held at bay by ten years of Keynesian distortion of the markets, imposes itself on the Fed’s Ponzi markets and asset bubbles. By the time the financial carnage has finished playing out, millions of sheeple who played in the Wall Street-Federal Reserve Looting Syndicate’s rigged casino are going to be a lot poorer, but wiser – and we might finally get the financial system reforms, such as the reinstatement of Glass-Steagall and the imprisonment of the Wall Street grifters and their policy maker accomplices, that we should’ve gotten back in 2008.

    • HowNow
      Oct 26, 2018 at 5:37 pm

      Sounds good, Gershon. Will you want some help getting the horses back into the barn?

  20. Professor Plumb
    Oct 26, 2018 at 7:51 am

    Monday October 29th is the 89th anniversary of a major correction in the stock market. A Fibonacci coincidence?

    • nick kelly
      Oct 26, 2018 at 8:02 pm

      I noticed that. Long wave (Kondratieff ? ) theory opines a 90 year cycle between economic crises.
      So 2019 ?

  21. Jdog
    Oct 26, 2018 at 8:00 am

    Everything is a cycle. Either learn the cycles or be whipsawed and surprised the rest of your life.

    • safe as milk
      Oct 26, 2018 at 8:10 am

      yes, everything is a cycle. stocks crashed in ’29 but they went up considerably from ’32 -’37. the hard part is figuring where we are in the cycle.

      • Michael Fiorillo
        Oct 26, 2018 at 11:12 am

        Or as someone said, “I’ll believe corporations are people when Texas executes one.”

        • Michael Fiorillo
          Oct 26, 2018 at 11:14 am

          Sorry, this was a response to HowNow’s comment above…

      • nick kelly
        Oct 26, 2018 at 8:07 pm

        If you bought in 32 you were ahead by 37 but someone buying and holding in mid- 29 would not get even until 1954.

    • Gershon
      Oct 26, 2018 at 8:25 am

      The cycles used to be based on market forces and fundamentals. However, with Greenspan, Bernanke, and Yellen giving full rein to their Keynesian lunacy, unchecked by saner heads, and with regulators, enforcers, and policymakers all in bed with the Wall Street grifters they’re supposed to be overseeing, these “markets” have become so rigged, manipulated, and broken that only the Fed and its insider cronies know what’s coming.

  22. MD
    Oct 26, 2018 at 8:57 am

    What a bizarre system it is that a corporation can announce record profits, millions of dollars per day, but because some massively wealthy speculators aren’t happy that they may not be getting what they want in the near future (another classic car to add to the collection may have to be put on hold?) based on a number they see on a computer screen, its stock is sold off and the price tumbles.

    Next step is of course – layoffs, the business ‘easy option’ answer to keeping stockholders happy (easy option #2 = borrow money to buy back stock), when money such as this should be used to create jobs and not just extra returns for stockholders.

    Is this the best the human race can come up with..? Or do we just run things to keep the speculators happy from here on out?

    • CRD
      Oct 26, 2018 at 11:56 am

      I know it’s convenient to blame “speculators” for a stock not to rise indefinitely, but that doesn’t mean that speculators are actually to blame.

      As the environment changes, monetarily, fiscally and economically, market participants’ expectations change and prices are affected. Things like multiple compression are not a speculative evil.

      It’s funny you mentioned stock buybacks and portrayed them in a negative light. Where have you been the past decade? Stock buybacks have been a big part of the bull market. Instead of investing in job creation, lots of companies have been borrowing money to buy back shares of their increasingly overvalued stock.

      As a shareholder, were you complaining about this when prices were rising?

      • Dale
        Oct 26, 2018 at 2:29 pm

        The question wasn’t directed at me, but yes I was complaining even as I reaped the benefit. A buyback is an admission from the management team that they are incompetent to find and build on new opportunities.

        So GE, after spending $25B in buybacks in the last couple of years, sees its stock down 70% and no money to pay for the R&D required to get a position in new businesses. Very similarly for IBM. But the management has been well-rewarded for their incompetence. Even as buybacks were raging, ostensibly because the stock was undervalued, managers were selling from their personal accounts.

        Buybacks were illegal at one time because they could be construed as market manipulation. They *are* market manipulation. If there were some rule such as Warren Buffett’s where buybacks could be done only if price / book were 1.2 or less (he raised this to 1.3 or 1.4 recently) then I could see where buybacks made sense. Until then, they are just another way for management to loot the company. (The other popular way being LBO.)

        • Wisdom Seeker
          Oct 26, 2018 at 4:32 pm

          Amen. As a shareholder I’d much rather receive excess cash flow as a dividend to all shareholders, rather than a price-distorting buyback.

  23. Setarcos
    Oct 26, 2018 at 9:15 am

    A totally phony market for years and now ironically strong growth working against the stock prices. When good news is bad news for equities, you might just have a market addicted to free money and going through withdrawl symptoms.

    2018 will exceed 3%. sub-2% is not the “new normal” after all. Paul Krugman practically screamed “There is nothing in policy that can get you to 3%”! Nasty and very unhappy guy, but most of all, just wrong.

    After years of ZIRP and QE, the FED is nobly trying to move us to sobriety. Not fun.

  24. Harpoon
    Oct 26, 2018 at 9:51 am

    Who cares about Facebook? Flex (AKA Flextronics) is down 32%! Note the circuit board sector has long been used as a ‘canary in the coal mine’ for tech.

    https://www.stockcharts.com/h-sc/ui?s=flex

  25. Kent
    Oct 26, 2018 at 10:08 am

    We are down about 10% from the high. The US economy is strong. The rest of the world’s economy is pretty strong. American banks are healthy. This is a time to start buying.

    • Escierto
      Oct 26, 2018 at 10:50 am

      I think you should go all in.

      • Kent
        Oct 26, 2018 at 1:28 pm

        Oh, I’m in deep. Lost a lot of money this month! But I won’t start panicking until the Fed starts stepping in to control individual large banks. Then I intend to panic first, often and hard.

    • Harrold
      Oct 26, 2018 at 10:53 am

      HA! You made me chuckle!

  26. FluffyGato
    Oct 26, 2018 at 11:40 am

    American banks aren’t as healthy as you think.

  27. Mean Chicken
    Oct 26, 2018 at 2:17 pm

    Pump to dump in 300nS…..

  28. Bet
    Oct 26, 2018 at 4:28 pm

    The AAPL Tree literally is the last one standing. It’s in three indexes. BA is the heaviest weighted in the DOW 30. When They go……
    The ole saying is…… What goes up hard and fast comes down harder and faster
    This is now the Toonces market
    We know what happens when that cat takes the wheel

  29. R Davis
    Oct 27, 2018 at 7:24 am

    The product SUBSYS must have INSYS stocks up.
    INSYS website speaks very well of them.
    A most desirable company to take over or take down ??

Comments are closed.