Why I think the Ugly October in Stocks Is Just a Preamble

Yet, the crybabies on Wall Street are already clamoring for the “Powell put.”

Let me just say right up front: The stock market did not “collapse.” It has experienced a sell-off that made some people’s ears ring, as sell-offs normally do, and October has been ugly so far, but it wasn’t a “collapse.”

This matters because the crybabies on Wall Street are already clamoring for the “Powell put.” But the folks at the Fed have been around, and they know what a routine sell-off looks like and what a crash looks like, and they’re glancing at these numbers, and they yawn. Because in the grander scheme of things, not much has happened yet. The next uptick lurks around the corner, powered by the dip buyers and massive corporate share-buybacks.

After the dotcom bubble, the Nasdaq plunged 78%. Wave after wave of dip buyers were rewarded with small goodies and then taken out the back and shot. Many companies disappeared entirely. That was an example of a collapse. That’s when the Fed got nervous.

Today there are only some segments that have gotten hit very hard, though it’s still no collapse, and we’ll get to a few of them.

The Dow was well-behaved. It fell about 3% for the entire week and is about flat year-to-date. Nothing special. The Dow is only 8.4% off its peak. And compared to a year ago, it’s still up 5.4%.

It’s not a crime for stocks to be flat year-to-date. Stocks might actually be down for the year, and they might be down for years. But people have forgotten, and younger people have never experienced it in their life, after a decade of blatant market manipulations by central banks that have created this centrally planned Everything Bubble that is now “gradually” deflating.

The S&P 500 fell about 4% this week and is only 9.3% off its peak. It’s about flat year-to-date (well, down a minuscule 0.6%) and up 3% compared to a year ago.

The Nasdaq fell 3.8% in the week and is down 12% from its peak, nearly all of it in October. But it’s still up 3.8% year-to-date and up nearly 7% from a year ago. This is a far cry from being down 78%!

Fed Chairman Jerome Powell isn’t going to get rattled by these numbers. Young investors who’ve never seen a real sell-off might, but Powell is an old hand, and this sell-off overall is nothing yet, especially after the huge run-up. For real damage to occur, the trip south would have to take a long time – years! And we’re just looking at the beginning of it.

And the crybabies on Wall Street are just crybabies.

That said, it’s getting interesting in some sectors. And this too is typical for the beginning of a stock-market downturn: Some segments let go first, others follow. When story-segments lose their story, they plunge. It’s that simple. Here are a few examples:

Homebuilders are getting crushed. Homebuilder stocks took off after the election in 2016, on a wing and a prayer, powered by hype about a Trump-inspired housing construction boom. The IShares US Home Construction ETF [ITB] soared 51% from November 3, 2016, through January 22, 2018.

But then reality set in that there would be no Trump-inspired housing construction boom, and that instead the housing market was beginning to hiss hot air. The ETF then plunged 34% over the nine months. Nearly the entire “Trump bump” has been wiped out even as the housing downturn has just begun (stock data via Investing.com):

Building and Construction stocks surged 50% after the election in hopes for a mega construction boom, based on the story of a $1.5 trillion infrastructure plan. Much of that $1.5 trillion would be distributed to these companies, that was the hype. When markets realized that this plan was a head-fake, these stocks started to crash.

The PowerShares Dynamic Building & Construction ETF [PKB] has plunged 30% since January 23 and is back where it had been right after the election. This shows the “Trump bump” in operation: soaring on Wall-Street hype and crashing on reality:

Small-cap stocks are letting go. The Russell 2000 index, which tracks the stocks with smaller market capitalization, has plunged 15% since August 31. These companies are heavily focused on US operations, unlike their big brethren that have large operations overseas. The index is now down year-over-year, and is back where it had been on September 28, 2017:

The Big Banks are losing it. The US KBW Bank index, which tracks large US banks, spiked after the election in November 2016 on hope – now being realized – of banking deregulation by the incoming administration, at the time being staffed with Wall-Streeters. Then these stocks floundered until late 2017. When the corporate tax cuts started becoming reality, the bank stocks surged again. From the election through January 26, the KBW Bank index soared 55%.




But that was the peak. The index has since plunged 19%, and is back where it had been in February 2017, or about 18 months ago, having unwound over half of the banks “Trump bump”:

The FANGMAN stocks – Facebook, Amazon, Netflix, Google’s parent Alphabet, Microsoft, Apple, and NVIDIA – have lost $538 billion in market capitalization from their combined peak of $4.63 trillion on August 31. In other words, $538 billion went where it had come from.

But that 12% dive took them back to where they’d been on May 30. So, given the ludicrously ballooning share prices, nothing serious has happened yet. Remember: the entire Nasdaq plunged 78% over the years following the dotcom peak. And many stocks disappeared entirely.

Nevertheless, there was some variation: Apple [AAPL], the giant among giants, has dropped only 6.6% from the peak on October 3, and Microsoft [MSFT] only 6.9% over the same period. But Amazon [AMZN] has plunged 20% since September 4 and Facebook [FB] 33% since July 25.

So it boils down to this: Some stocks have gotten crushed, but the market overall has barely been dented – though the fundamentals are rotten, shares are still ludicrously overpriced, enthusiasm is still exuberant except on bad days, and blind faith in annually rising stock prices still reigns. And the fact that stocks like Tesla [TSLA] or Netflix continue to levitate beyond all reality shows that this downturn has a long way, and years, to go. 
 

Would you like to be notified via email when WOLF STREET publishes a new article? Sign up here.

 

  116 comments for “Why I think the Ugly October in Stocks Is Just a Preamble

  1. Oct 27, 2018 at 12:29 pm

    Bounce this week and into the election to the .618 retrace (2820), then all hell breaks loose.

    The S&P @2320 a delicious treat for Thanksgiving.

    Get some!

    • jest
      Oct 27, 2018 at 3:32 pm

      yes! I see that same thing but for 2 weeks a counter rally.. then a slaughter till early next year, then a fair sized push , and then decaying rot for years! I believe in the Wolf not goldilocks!

      • Chris
        Oct 27, 2018 at 3:51 pm

        Only thing is, there are a lot of people calling for one more rally to sell into before the real pain begins. Perhaps too many.

  2. Don
    Oct 27, 2018 at 12:44 pm

    I agree completely. The tech-wreck of 01, now THAT was a massacre!

    • RangerOne
      Oct 28, 2018 at 8:31 am

      00-01 always looks nuts on graphs. Every tech company that was around then and still alive today had a record stock price which basically all had the reset button hit at the same time…

      I would like to think that was a great time to invest in tech. But it was probably impossible to predict companies like Netflix and amazon would experience the run up they did over the 2 decades that followed.

  3. Old dog
    Oct 27, 2018 at 12:46 pm

    “And the crybabies on Wall Street are just crybabies.”

    When the Wall Street babies are crying wolf we shout Wolf :)

    • Saltcreep
      Oct 27, 2018 at 1:42 pm

      Or bark woof..? (Sorry, but your username made me do it…)

  4. Howard Fritz
    Oct 27, 2018 at 12:52 pm

    What’s with the big space after The Big Banks are losing it. paragraph

    • David
      Oct 27, 2018 at 3:18 pm

      I’ve noticed odd spacings in articles as well before. I’m convinced it’s a code meant for only those in the know.

      Wolf is Q. :)

    • Oct 27, 2018 at 4:33 pm

      Normally, you’d see an ad in this space.

      Are you using ad blockers/Firefox again??? Ads are my livelihood, because this site is free, and now you’re complaining that the ad doesn’t display because you blocked it?

      In case you’re not using ad blockers or Firefox, the ad misfired and didn’t display. In that case, try it again. The ad shows nicely on Chrome :-)

      • Ed
        Oct 27, 2018 at 10:19 pm

        Rest assured, ads are working in general. Today you want to sell me cowboy boots, a RAM 1500, an Intel PC memory upgrade, and a Purdue education.

        Not too far off, but I still think Google could do a lot better, if they’ve been reading my mail. ;-)

        • Samurai
          Oct 28, 2018 at 7:30 pm

          You’re lucky… I only get wacko ads on this site: the secret Soros thing or the hidden truth about the Clintons. Very weird – especially that I don’t care about batshit conspiracy stuff and I never get those messages elsewhere.
          Other sites constantly try to get me to buy again at Home Depot and Macys! That feels more like my usual life.

        • Oct 28, 2018 at 8:23 pm

          Clean the cache in your browser. That’ll give you a fresh start with ads :-]

      • RedRaider
        Oct 28, 2018 at 5:27 am

        I turned off Adguard but I’m still not seeing ads. What else would cause this using Chrome?

      • RD Blakeslee
        Oct 28, 2018 at 7:44 am

        Some of us who hate ads kick in a contribution, from time to time ..

        • Oct 28, 2018 at 9:54 am

          RD Blakeslee,

          I just go the friendly smile from PayPal about your donation. Thank you!!

      • Oct 28, 2018 at 1:40 pm

        Are you saying ads simply won’t work in Firefox? I’ve tried whitelisting your site but haven’t succeeded. You should be flattered that I’d be TRYING to get ads to show for you folks! ;) I’ll try to remember to use another browser for your site, but if you have a solution for FF that would be ideal.

        • Oct 28, 2018 at 8:05 pm

          ChangeMachine, and all other commenters with the same question about Firefox and ads:

          Yes, I am flattered that you’re trying to allow ads on WS to pass on Firefox.

          There are different ways you can allow ads on Firefox (this does NOT include popups; they’re blocked separately, and you should keep those blocked):

          A. To allow ads on all sites:

          1. Click on the hamburger icon (menu, top right)

          2. Selection “Options”

          3. Select “Privacy & Security”

          4. Uncheck to top item “All detected Trackers.” That’s it.

          B. To allow ads only on WOLF STREET

          1. Make sure wolfstreet.com is in the address bar

          2. In the address bar, there is a shield icon to the left of wolfstreet.com

          3. Click the shield icon to bring up the Control Center.

          4. Click “Disable Blocking for This Site.”

          And that’s it.

          If you do NOT see “Disable Blocking for This Site,” but instead see “Disable Blocking Temporarily,” you’re in “Private Browsing” mode. The only way I know of to allow ads in “Private Browsing” is to perform #A above, which will allow it for all sites. I do not know how to allow ads in Private Browsing permanently only for a specific site. Maybe someone smarter than me can answer that.

      • Steve
        Oct 28, 2018 at 2:14 pm

        I am not using any ad blockers that I know of yet I see “Are you using ad blockers/Firefox again??? “.

        Mostly I use the Opera web browser and the Opera ad blocker is disabled.

        So far, for months, I have not been able to find a decent article to address how to fix this.

        Does anyone know?

        • Oct 28, 2018 at 8:10 pm

          Steve, see my reply to ChangeMachine above. Thanks!

      • Brian
        Oct 29, 2018 at 7:36 am

        Ok. I shut it off.

        • Riverwind
          Oct 29, 2018 at 10:43 am

          just turned off my adblocker on this site
          may we all live through this downturn, and get some good deals on houses in a couple of years.

  5. Andoheb
    Oct 27, 2018 at 1:02 pm

    plus VIX still way below Feb. peak

  6. Curious
    Oct 27, 2018 at 1:22 pm

    Except it’s all relative, and stocks could hover or go up as markets in other economies sink faster. From Europe to Asia to Africa and S. America.

    Smart money in Spain, Italy, Turkey, China, and are still placing their bets on the U.S. economy, including its housing market, as the safest place to invest. It’s conceivable that a flood of foreign dollars could be coming back which will keep our stocks from dropping too far. If the dollar stays strong “relative” to other economies, it will still attract investments.

    A common story everywhere:

    “In Zimbabwe, where an economic meltdown grows worse, businesses increasingly want payments to be made in U.S. dollars.”
    https://www.voanews.com/a/zimbabwe-s-businesses-want-dollars-not-bond-notes/4630104.html

    • IGW
      Oct 27, 2018 at 7:39 pm

      Yes, Martin Armstrong also says strong SM & USD – or rather, his amazing computer does and his amazing computer is never, ever wrong.. But mild sarcasm aside he has made some pretty spectacular calls.

      I think he’s essentially saying SM/USD will be last men standing before a general descent into The Fourth Turning & Hell on Earth.

      Sounds fun.

    • Lance Manly
      Oct 28, 2018 at 5:28 am

      The dollar is strong now but its long term strength is in question. That is why people still by Euro bonds because it is too expensive to hedge the currency risk.

  7. Bellinghouse
    Oct 27, 2018 at 1:39 pm

    While I would agree with you that the US stock market overall is still is way overvalued, I think there are reasonable values to be had in many overseas stock markets. Checking the valuation metrics for Vanguard’s Developed (VEA) and Emerging (VWO) markets, things looks quite reasonable in terms of P/E, P/Book, P/Cash Flow, and Buffett’s favorite, Price to Sales.

    Near term, non US markets may go down just as much as US if things get ugly, but long term (10-20 years) I think the overseas stock markets represent reasonable value (neither cheap or expensive) at today’s prices. Especially so if the big debt to GDP burden that confronts the world is somehow inflated away. Which is preferable to massive bond default and a long lasting global depression!

    • Mark
      Oct 27, 2018 at 2:48 pm

      I wouldn’t touch EM with a 10 foot pole right now. This year feels a bit like 1997-98 repeating: the Fed’s tightening cycle is starting to inflict pain with EM getting absolutely smashed as the dollar rises, and US markets doing a double take on going higher (for the moment).

      Strain in EMs gets worse when it starts showing up in DMs. Problems start in the periphery and slowly work their way in.

    • IdahoPotato
      Oct 27, 2018 at 3:45 pm

      The Singapore index ETFs (like EWS) are very well priced. The Singapore dollar has a good history of holding its own against the U.S. dollar.

      Ditto with some other Asian and European markets. Some biotech stocks worldwide are also reasonably priced.

      • Nick
        Oct 28, 2018 at 2:07 pm

        Singapore’s economy is basically an extension of China’s. Betting on Singapore is the same as a bet on China.

        • Robert
          Oct 28, 2018 at 6:45 pm

          Well, there is a difference. They never pretended to be Communist.

    • Oct 27, 2018 at 6:37 pm

      2 things drive asset prices such as stocks:

      1. Total liquidity available to push values higher
      2. Relative valuation based on the story.

      When the US government is running large deficits while the Fed tightens, the money has to come from somewhere. This reduces the liquidity available elsewhere, similar to the overall water level going down with the tide.

      Historically, emerging markets have been beaten badly whenever global liquidity levels decline.

      Don’t let the overused idea of safety through diversification make you lose sight of the fact that emerging market investments are “risk assets.” “Safe havens” by contrast tend to hold their value better when all values are falling, but to make sense of it realize the mindset driving this is not “gains” but “protection from losses”

  8. OutLookingIn
    Oct 27, 2018 at 1:39 pm

    “the fundamentals are rotten”.

    The fundies are what I pay attention to. Diverse as long term earnings per share, to the amount of Suez Canal cargo traffic.
    eg:
    The reported earnings per share since 2009 have soared 336% yet sales per share has only increased by a marginal 49% during the same period.
    Suez Canal net tonnage has sharply declined.
    A myriad other fundies are screaming the same negative message.

    Asset prices are no longer driven by the economy, but now drive the economy. The phantom wealth that has been created since the 2008 financial crisis, is going to basically evaporate. This evaporation has now started and the rate of vaporization will continue to increase.

    Two leading scenarios are now clear:
    1/ An outright crash of the markets that is global in scope.
    2/ A slow ‘bleed out’ that will take years to clear with much pain.

    res ipsa loquitur

    • THE MAN
      Oct 27, 2018 at 1:48 pm

      Option 3: Central banks manipulate system to hold it up until demographics and real economy catch up.

      This is the most likely next step because it is the most recent last step in this data series…

      Additionally, this is exactly what has happened and IS happening…

      • OutLookingIn
        Oct 27, 2018 at 2:42 pm

        THE MAN

        If you believe in financial fantasy and the hocus pocus that is generated by the global banking sector.
        Sooner or later the rubber meets the road.
        So party on and ignore that “man” behind the curtain.

        • THE MAN
          Oct 27, 2018 at 2:50 pm

          It’s not hocus pocus. It is fractional reserve banking. And it’s been working for decades weather you believe it or not. So my money is on the near future looking like the recent past (probably a safe bet)…

      • FluffyGato
        Oct 27, 2018 at 3:13 pm

        Demographics are terrible and will never catch up.

        • Oct 28, 2018 at 4:01 pm

          try to explain the last election in terms of demographics

      • Oct 27, 2018 at 7:08 pm

        You’re right that central bank intervention is the most likely response, probably with a narrative that it will somehow help the job market and allow demographics to catch up.

        The problem is it doesn’t work. Central bank intervention in their current method drives global inequality and makes the system ever more fragile – both politically and economicly. The voters in the US and Europe are already reacting to this in ways that shock the elites, and non-democratic systems will have political instability shown in other ways.

      • Ed
        Oct 27, 2018 at 10:23 pm

        The problem is the Central Banks have (desperately) wanted to get out of the business of propping up markets. It makes them nervous because they have zero ammunition for the next crisis.

        And also they get criticized at all of the Christmas parties they attend. No fun.

      • Robert
        Oct 28, 2018 at 6:59 pm

        “Central banks manipulate system to hold it up until demographics and real economy catch up.”
        It might be more helpful to say “Central banks manipulate the system to hold it up until they decide to take it down.” Why is it never mentioned that the Fed manages one of, if not the greatest trading desk in the world? That it is owned buy the too-big-to-fail-banks which during the2008 Crisis extracted trillions from taxpayers (to the extent they helped enable expansion of the national debt) through “TARP” and “QE.” Where an insurance company’s derivative position was regarded as a matter of too-big-to fail, and bailed out by Joe Sixpack?
        But students with massive unplayable debt are not regarded as too essential to the nation’s future to fail (they can’t even deduct the interest on their loan like a corporation), nor is anyone looking at annual double digit insurance hikes (or patients with triple digit Rx hikes.)
        And for all you know their trading desk might have massive short FANG positions, or the like. The central bankers are probably smarter than the Congressmen whose prerogatives they have been allowed to assume , (and where the Treasury Secretary is nothing more than a rubber stamp for the bankers.), but they are no paragons of ethical virtue.
        In England, at least, traitors face confiscation of all their worldly goods. Not their heads, mind you, but that is a start. Read, in the book Spycatcher where the Queens’s art curator is found to be a traitor, about the look on his face when confronted with the goods.

    • KPL
      Oct 27, 2018 at 2:22 pm

      Two leading scenarios are now clear:
      1/ An outright crash of the markets that is global in scope. – Hussman
      2/ A slow ‘bleed out’ that will take years to clear with much pain. – Mish and Wolf (I think)

      IMO – bleed out is what the central bankers would try to do given that it is Everything Bubble and it is global. Whether they can remains to be seen.

      • IdahoPotato
        Oct 27, 2018 at 3:48 pm

        In other words

        1. Purgatory

        and

        2. Hell

    • van_down_by_river
      Oct 27, 2018 at 4:01 pm

      I hope you are correct, but I fear the central banks will never allow the bubble to deflate. The world economy has become dependent on the tidal wave of government deficit spending that flows out into the economy and keeps people earning money doing unproductive activities – this deficit spending needs to be monetized via currency debasement.

      The central banks know the world economy, they created, depends on currency debasement, expect QE4 (likely a permanent QE program) to start up soon enough. We all know QE4 will arrive sometime in our future, but only the CEO’s of large investment banks (the guys who seem to take frequent taxi rides to the NY Fed just prior to big announcements) will be given advance knowledge and opportunity to take advantage – it is the patriotic duty of the rest of us to buy assets after the Fed starts the next huge bubble and after prices have already run-up. The beat goes on.

      • Patrick
        Oct 28, 2018 at 2:36 am

        I completely agree.

        Many seem to assume that the Fed and other CB’s will prioritize fighting inflation over propping up stocks & bonds; perhaps due to Volcker’s response in the 70’s. But there are no more Volckers on the Fed anymore and the entire economy is now utterly dependent on debt, so stocks must be supported and rates cannot rise so much as to pop existing debt bubbles. It’s unwise to underestimate the Fed’s current power to stop any sell-off in it’s tracks and manufacture an instant rally with only 2 words, “Rate Pause”. Permabears tend to place all their eggs in a basket of belief that there will somehow come a time when the Fed loses control or markets will ‘next time’ magically not react to stimulus like the salivating dogs they are.

        Yes markets will languish while the Fed tightens, but the moment they ease the party resumes brighter than ever, in no small part because algos ‘are’ the market. And for those that disagree, please explain exactly why what passes for markets these days will somehow shun moar free money next time?

        And that inflation? Believe me the Fed and every other central banks firmly believes it’s ‘manageable’ and that they are in full control. And you know what? They’re absolutely right – at least until a loss of confidence occurs a decade or three from now. Otherwise explain how the BoJ has printed recklessly for decades, bought up 1/2 it’s bond & stock market, and inflicted negative rates while the Yen that’s not only thumbed it’s nose at hyper-inflation but stubbornly resisted even moderate inflation?

        We have a long way to go until collapse and the Fed does in-fact still hold all the cards. My recommendation is go half in around DOW 21K when they ‘pause’ and again on the ‘possible’ return trip back to 18K when they ‘print’.

        While MSM pundits will intentionally mislead that all is well…some of the most dangerous predictions I see today are coming from alt-economists, who carefully layout good fundamentals, followed by a sharp disconnect in logic as to what happens next, based in large part on having missed out on the QE party. Following their advice at exactly the right time might just save you from what will be increasingly truncated bear markets, but will also have you sit out (yet again) on the next gargantuan debt fueled bull market.

        Yes it’s all fake but it’s been that way since before the 1600’s. Economic Reality has a long track record as a fleeting anomaly that’s never become a natural stable state of human existence.

        • Delikon Threetree
          Oct 28, 2018 at 1:39 pm

          You’re probably right that we’ll have multi decadal bull markets reaching to 300,000 DOW and solar system sized bubbles but the Earth’s natural resources are VERY finite and are running out REAL FAST!!! The day is coming where there will be no fresh water to drink or food to eat and no amount of wealth will save our behinds and the human race will finally be extinct.

        • economicminor
          Oct 28, 2018 at 5:00 pm

          Patrick and Van,

          What your scenario is short on is that debt must be repaid or repudiated. It can only grow with the ability to repay it. Oh it can also be rolled over if a willing investor is available. It isn’t the federal deficits I see as the problem but consumer, student loans and corporate debts that are at record levels.

          In the current paradigm even Zombie corporations have been able to roll over their debts. You assume the FED will continue to make money available to the Zombies indefinitely and that the US will not have any major recessions.

          To me this thinking is akin to believing in Unicorns.

          As risk continues to build, this risk is surrounded by Magical stories that keep people from realizing how it will ever be resolved. All we ever hear are the rosy scenarios while the accountants make rainbows of the books. History is replete with examples of how risk can only be ignored for so long. Minsky documented this in his Financial Instability Hypothesis.

          There always come a point where the risk is acknowledged. When it comes to the fore front. It could be anything that causes this to happen but it is basically when the stories just have no more credibility. At that point the sentiment changes from mystical thinking to fear and at that point there will not be enough liquidity to prevent a melt down.

          I know Wolf and others think that there is a good chance that the markets slowly unravel. I think it is more likely that there will be a liquidity crisis. Either from EM or Pension Funds or someone will no be able to roll over their unsecured debt or??

          Because so much of the market is in ETFs, once the real selling starts, there won’t be any liquidity on the buy side. The door will not be big enough and the market crashes. Add in Margin debts of both kinds and I think once it starts, it will truly be a blood bath.

        • Robert
          Oct 28, 2018 at 7:04 pm

          You give Volker entirely too much credit. The Fed took the market up, and Volker of the Fed, as “bad cop” was told to take it down.
          Jerome Powell is not about to suddenly impose double-digit interest rates (my home mortgage in 1980 was 11%), but the deck of cards has been stacked so high that it would only take a few hundred basis points to tank it this time.

  9. THE MAN
    Oct 27, 2018 at 1:41 pm

    Yes. As rates increase the value of equities will decline.

    Dividend Discount Model:
    https://www.investopedia.com/terms/d/ddm.asp

  10. Oct 27, 2018 at 1:48 pm

    The growth of leveraged products allows for institutions to go short without sullying up the options market. Premiums took off this week anyway. Bullish sentiment can turn bearish and act bearish in an instant. Typically money disappears in a deleveraging event, shorts or hedges preserve the losses, and wealth changes hands. However the disruption hurts the general economy, without reducing the overall money supply, hence inflation.

    • gary
      Oct 27, 2018 at 2:31 pm

      “However the disruption hurts the general economy, without reducing the overall money supply, hence inflation.”

      Yes, so many people think an economic slowdown means deflation (since less business activity). I actually think your view is correct, and we will see inflation increase even as the economy slows down.

      • HowNow
        Oct 28, 2018 at 7:11 am

        Gary, in spite of the feeling that inflation is growing, and that the Fed is going after it with higher interest rates (and the fear that tariffs will increase inflation) the Econ. Research Cycle Institute (ECRI) believes that inflation is actually slowing right now. They follow a multitude of indicators, unlike most of us reacting to headlines and intuition, and have had a pretty good (but not perfect) history of calling turns in the economy.

    • Reinhard Stompe
      Oct 28, 2018 at 1:36 am

      The implosion of margin debt and myriad other forms of debt in this rigged system and the effect on the money supply dwarfs profits from hedging or short sellers. Good luck with making money in a “slow bleed out”.
      My money is on a global crash, just not yet. At some point after the crash the deflationary pain will hurt so much that the FED will transfer freshly printed CB money into your account, since nothing else is politically correct.
      Then inflation might set in, but as Japan clearly proves, once the mentality has changed it is difficult to inflate the bubble again.

  11. Bet
    Oct 27, 2018 at 1:58 pm

    Small caps, Semis chips ,and tech. The last two tops these suffered the most when rates go up. Another tell. Chinese stocks. They get whacked first. A “normal “ over due correction would be back to the lower 2017 levels. But then these markets have had no semblance of normality for years and all will pay for that. One bank I had been watching all year is Goldman Sachs Supposedly the smartest of the banks. Yet has been sinking all year. What kind of garbage are they holding? JPM is the last big bank standing. Watching it closely. They all will catch the financial flu
    Another variable to exacerbate the sell offs will be the massive amounts in etfs the passive investing, when they get sold everything gets sold plus there is the possible danger of liquidity issues with etfs, especially the more specialized ones. I remember last January when the VIX etfs blew up.
    What saddens me the most is retail investors finally got sucked in the last 18 months and now the sharks and elephants of wallstreet will once again have their bag holder muppets .

    • Tinky
      Oct 27, 2018 at 5:21 pm

      Those “bag holder muppets” have been there all along in the form of pensions and 401Ks. Ordinary citizens have no capital at all to invest in the markets.

      • Oct 27, 2018 at 6:24 pm

        relative of mine had his own business, (travel to china) house and wife in 2008 and now he lives in a hotel room alone on SSN and HE LOVES TRUMP.

        • IGW
          Oct 27, 2018 at 7:53 pm

          Maybe he just wasn’t a very good businessman…or husband.

        • alex in san jose AKA digital Detroit
          Oct 29, 2018 at 8:12 am

          Bet he yells at his TV a lot.

  12. Ididsa32
    Oct 27, 2018 at 1:59 pm

    Very good article Wolf. I was thinking the exact same thing yesterday. What’s the big deal so far?

    Now the dotcom bubble was my introduction to financial humility (and humiliation:) )
    There’s still way too much financial arrogance floating around, and once the arrogance is purged, we will know that we are at bottom. Financial arrogance is a major driver of market sentiment.

    All this Trumpian chaos for nothing, but perhaps a whole bunch of debt that our unfortunate children will have to deal with.

  13. THE MAN
    Oct 27, 2018 at 2:09 pm

    Dividend Discount Model also applies to bonds and real estate cap rates. The world economy is basically bott strapped off of the treasuries curve. This is why the Fed is raising rates and unloading their balance sheet as a curve steepener at the the same time. They are aiming to normalize rates and the economy in a controlled way. They will very likely succeed. Theready will be pain but it won’t be a bloodbath. Remember, we have state sponsored capitalism not a true free market. It’s like bowling with bumpers in the gutters…

    • HowNow
      Oct 28, 2018 at 7:46 am

      I’m always amazed that people worship a “free market” where price discovery and rational behavior will somehow create an economic nirvana. And in contrast you have the wizards of Oz who are operating in some kind of evil cabal, to fleece the powerless “muppets”. Free market is good, “state sponsored capitalism” is evil. Make Mother Nature great again!
      If there were truly a free market, the “market” would disappear… into the pockets of the most shrewd players. Consider the history of the “Robber Barons”. What’s to stop someone from controlling big chunks of the economy? T Roosevelt stepped in to stop the monopolization of entire industries. If we have a truly “free market”, what’s to stop an oligarch from polluting entire regions if they choose to to make a buck? Adam Smith warned about the potential abuse from oligarchs (although he didn’t call them that). Yes, the degree of regulation is an issue (and regulatory capture a bigger one) but the “free market” fantasy needs a reality check… or some medication. And if you’re all twisted-up over the Federal Reserve system, try the repeated bank failures of the late 1800s to see why it was created. Unhappy with what they’re doing? Think Volcker had it right? Volcker was hated and railed against by all politicians, but his rate hikes stopped a growing inflation that people were totally freaked out about. I remember those days and remember when people were thinking of investing in warehouses to store lumber in because the cost of commodities were ramping up so fast and the fear was that companies’ profit margins would wither in the run up in the cost of doing business.

      • THE MAN
        Oct 28, 2018 at 10:28 am

        @how now

        I agree with much of what you stated. However, preference for how one wants things to be leans toward more of a political discussion than an economic discussion in my opinion.

        As far as worshipping the free market, that absolutely is not my point of view. Capitalism and free markets are a framework for a society. So are socialism, fascism, feudalism, and many other possible systems. Is the current system of state capitalism (or whatever it is) ‘the best’? Would free markets or socialism be better? Who knows? But the current system better than many alternatives. With this in mind, all anyone can do is make the best decisions within the current framework using the available information.

        Working within a system or framework doesn’t necessarily equate to allegiance.

    • alex in san jose AKA digital Detroit
      Oct 29, 2018 at 8:14 am

      It’s Socialism for the fat cats and “Capitalism” (economy red in tooth and claw) for the workers.

  14. KPL
    Oct 27, 2018 at 2:16 pm

    “The stock market did not “collapse.” It has experienced a sell-off …This matters because the crybabies on Wall Street are already clamoring for the “Powell put.”

    The cry babies at wall street never want to grow up. They want to suck up to the Fed’s teats FORVER…NEVER WILLING TO LET GO. After all it has been gushing as much as money as they wanted (they just need to wail a bit and lo and behold the money spigot gushed forth readily) for the last decade so you cannot fault them for expecting it is there for the wailing. So here they are!

    “That’s when the Fed got nervous.”

    It is then we will have to see what the Fed happens.

    “It’s not a crime for stocks to be flat year-to-date.”

    It is when you have intervened everytime the market dropped less than 1% (Bullard Low and the like — all the Fed comes cooing as soon as it happens).

    “Fed Chairman Jerome Powell isn’t going to get rattled by these numbers.”

    Remains to be seen for how long…if this gets going. And it can really get going if it is allowed to…so it won’t be. It would get interesting if it gets one of the big banks.

    “And the crybabies on Wall Street are just crybabies.”

    Moral hazard be damned as it has been the last decade. Heard the word “entitlement”. Higher market is these wailers’ birthright.

    IMO, Wolf, you really seem to trust Powell and his ability a bit too much. That too after knowing fully well how the Fed have screwed savers, retirees, prudent people with their repressive monetary policy (ZIRP and QE) over the last decade and made people who might not have taken risks take the risks that can literally hand them their heads. Scoundrels one and all!

    • van_down_by_river
      Oct 27, 2018 at 4:23 pm

      Very well said!

      The Fed have kicked the can to a fork in the road. The first path leads to higher rates and stabilization of the currency but also asset price correction and a sovereign debt crisis. The second path leads to a currency crisis as the Fed seeks to monetize government spending and keep assets inflated. Having reached a fork in the road Jerome must now decide which path to follow.

    • Oct 27, 2018 at 5:00 pm

      KPL,

      Ha, I “trust” Powell as far as I can throw him, which isn’t very far. But “trust” is irrelevant here.

      I’m looking at what these people are doing and saying, and how much it has changed from not too long ago. They’re trying to get back to “normal.” And no Fed ever had any kind of “put” when the S&P 500 dropped 20% or 30% over a longish period of time. Those fluctuations are considered within range of the normal.

      There may be a “Powell put” but at a much larger drop of the S&P 500 over a longish period of time, or if it drops 20% in one day (I don’t see this).

      When credit freezes up, this is when the Fed will get very serious, very quickly. But we’re far from it. Look at CCC yields, and CCC spreads to Treasuries.

    • JZ
      Oct 27, 2018 at 5:06 pm

      The while flaw in the argument is assuming central banks are “cooperating” to work with each other to kick the can. The
      situation has changed. The central banks are now competing and tries to destroy each other for political reasons.

      • Oct 27, 2018 at 6:29 pm

        kudos to you for declaring the rift in global central bank cooperation is insurmountable. i do think it will come to the IMF which has a number of equal seats but some seats are larger than others. US is largest. whether they are seen as impartial may repeat the problem in 2008, only who tells Argentina they have been sold to Brazil (without shareholder approval)

  15. Unamused
    Oct 27, 2018 at 2:24 pm

    The Fed is trying to deflate asset bubbles without collapsing them. It doesn’t seem to have ever been done so it may not succeed, particularly given the tendency of investors to rush the exits when prices start falling.

    Besides, tariffs ramping up in 2019 may guarantee a soft landing won’t be possible.

    Worse, the so-called Trump Bump may properly be seen as a fiscally-irresponsible political ploy, designed to juice the markets ahead of the elections but thereafter fizzling into a slump and further weighing on the markets and the economy.

    There’s more.

    • Setarcos
      Oct 28, 2018 at 3:58 am

      “Fiscally irresponsible political ploy”

      As if those before had the US fiscal house in order. Ha!

      • Unamused
        Oct 28, 2018 at 9:21 am

        P42 nearly balanced the US budget, and P44 reduced deficits year by year. Their successors both blew up the budget out of hand.

        How could you have forgotten? Selective memory, ideologically induced?

        • Setarcos
          Oct 28, 2018 at 4:08 pm

          Presidents can offer a budget proposal, but Congress is responsble for passing budgets. So who is Pres. is of secondary importance. Actually, there was no Congressional budget passed for several years during P44.

        • Setarcos
          Oct 28, 2018 at 4:20 pm

          As it relates to fiscal matters, my idea is that most are concerned with “buying votes”, directly &/or indirectly. So it is and has been a widespread and common “political ploy”. Another idea is that anyone who believes that either “side” is righteous with regards to spending hasn’t looked deeply enough into the subject.

  16. Realist
    Oct 27, 2018 at 3:02 pm

    Of all the recent news, the one piece I find most interesting is Amazon’s downplay of earnings to come. Because Amazon is the retailer of choice for a lot ( most ? ) Americans today, this means that Amazon isn’t too optimistic about Holiday sales simply because they regard John Sixpack as being maxed out.

    In a perverted way, weak holiday sales would probably be a sign of common financial sense making a return among the population.

    But this October will probably be remembered as one of those months when things did really start going south, me thinks.

    • alex in san jose AKA digital Detroit
      Oct 29, 2018 at 8:17 am

      So not only is Joe Sixpack nearly broke, but his brother, John, is too.

      A spare battery for my 6-year-old camera is $40 at Fry’s and $12 from Amazon. And I only bought it because I make my living with that camera and need spares.

  17. Soothsayer
    Oct 27, 2018 at 4:47 pm

    If you are a technical analyst you live and die by the charts…there is an old saying in TA…”all gaps must close”…if you go back to the week of July, 2009….you will see the gap that must close…eerily similar to the closing of the gap in December, 1998 to when the gap closed in March 2001…only during that time it was the Dot com and there was no QE…Nasdaq will get to 1800 without QE…just a matter of time.

  18. Everett Martin
    Oct 27, 2018 at 5:13 pm

    Wolf, I hope you are right. But the Asian currency problems are massive and they will infect all markets. How long can you keep pumping a deficient of 300 + percent of GDP???? We will see probably shortly.

  19. FDR Liberal
    Oct 27, 2018 at 5:27 pm

    Some holdder of bond, equity and leveraged loan markets are having a taper tantrum part 2 moment. If one turns on Bloomberg TV, some of the broadcast journalists, guest “experts”, etc., are acting like Chicken Little.

    What did US markets expect? China is down over 20%, Europe is swooning due to Italy, Brexit, etc., emerging markets have been struggling for some time. Stock and borrowing markets are interconnected across the globe so I’ve been told so wouldn’t you think that eventually what happens in Shanghai, Bonn, Paris, London, Buenos Aires, etc., will hit Wall Street.

  20. Oct 27, 2018 at 6:35 pm

    i opt for a short sweet end of the world party. technology moves markets way too fast for the old circuit breakers, lets close the markets for a few days and see. the destruction of institutions like the ECB will be swift and decisive. ‘whatever it takes’ is replaced by ‘there is nothing we can do’. of course they will regroup later, a shadow of their former selves. and we have the perfect catalyst for a constitutional convention in the US right now. it would be a shame to waste that.

    • Unamused
      Oct 27, 2018 at 7:14 pm

      -> we have the perfect catalyst for a constitutional convention in the US right now.

      Corporations are counting on it.

      As for everybody else, now is not the time to panic. You should have done that a long time ago.

  21. Lion
    Oct 27, 2018 at 7:05 pm

    Wolf, is not the Intercontinental Exchange (ICE) which owns the NYSE and others worldwide, basically controlled by the same folks that own / control the Fed ?

    • Oct 27, 2018 at 7:23 pm

      There appears to be some confusion.

      ICE is a publicly traded company [NYSE: ICE]. Shareholders own it. You might own some in your mutual fund.

      The Federal Reserve Board of Governors — the entity that Powell belongs to — is an independent federal agency of the US government. It has 7 board members. Powell and the other 6 board members are federal employees. They’re appointed by the Prez and confirmed by the Senate.

      The 12 regional Federal Reserve Banks are private entities owned by the financial institutions in the their districts. The governors of these regional FRBs sit on the FOMC and rotate into voting positions based on a schedule. The sole exception is the governor of the NY Fed, whose slot on the FOMC is a perma-vote slot.

      If you have a major bank in your portfolio, you also own a tiny slice of the Federal Reserve Bank in whose district that bank is, if it makes you feel better :-]

  22. Aussie
    Oct 27, 2018 at 7:20 pm

    I’m feeling much the same as the author, and am like, watching the 10yr Bonds for a massive crack to open up, yet to happen because its obvious to all that these current dips in the 10 year are currently being met by Central Banks. The hole will get bigger yet!

  23. Bobber
    Oct 27, 2018 at 8:16 pm

    I’d like to short this market, but I don’t think I have the patience. The bear rallies can be vicious. I think I will buy a mix of 1-3 year CDs and wait this out.

    Some well known stocks like GE, IBM, Ford, etc. have taken a beating already, but those companies have high debt and have permanently lost earnings power. I think they could drop another 50% quite easily.

    Short term fixed income investments are about the only safe thing out there now.

    • Lance Manly
      Oct 28, 2018 at 5:48 am

      If you are going to buy and hold to maturity short term treasuries are not a bad option right now. You can get them on Treasury Direct.

  24. Rcohn
    Oct 27, 2018 at 9:04 pm

    On Oct 19 the St Louis financial stress index closed at -(1.125) still indicating a considerably lower than level of financial stress
    The stock market which is one indicator in this index went down% 4 this week(NYSE index) so this might raise the level of stress very slightly, but will still leave this index at below average levels of financial
    This is a major stress index that the Fed monitors
    At current levels, there is NO chance for any Fed easing or a cessation of rising short term rates
    Until the Fed sees a dramatic fall in equities and /or the Fed sees credit spreads deteriorate considerably
    the Fed will continue tightening despite the cry babies on Wall St

  25. raxadian
    Oct 27, 2018 at 10:33 pm

    Facebook: Lawsuits and fines. Data leak, data leak, and another data leak!

    Amazon: Brick and mortar takeover is not going as good as hoped? End of cheap credit. Because they raised minimum wage?

    Netflix: From monopoly to having to face several competing streaming video services and losing Marvel thanks to Disney. Also end of cheap credit and huge huge huge debt. Next year is gonna suck for Netflix.

    Google’s parent Alphabet: Rise of costs for publicity despite having a mobile monopoly thanks to Android and Google Android services. The problems with the Eurozone and the fines. Oh and at least one data leak.

    Microsoft: Oops our update deleted your stuff! Windows 10 adoption not going as fast as hoped.

    Apple: People are getting tired of so many Iphones? Also when was the last time they did a power Mac? The market is saturated and people don’t buy Iphones every year.

    NVIDIA: The rise and fall of crypto currencies plus bugs bugs bugs!

    Did I miss anything important?

  26. Mean Chicken
    Oct 27, 2018 at 11:07 pm

    ” the fundamentals are rotten, ”

    Thus, the FED’s bubble accomplished it’s goal of allowing special interest groups to distribute their assets to mom and pop, aka: muppets.

    Who does the FED work for?

  27. KPL
    Oct 28, 2018 at 12:05 am

    One of the cry babies talking here… (https://www.zerohedge.com/news/2018-10-27/paranoid-traders-have-seen-market-only-twice-1970s-stagflation-and-global-financial)

    According to JPMorgan (could have died in 2008 but for the Fed) there are three likely explanations for this “misery”:

    the global economy and US earnings have reached a major turning point;
    the Fed is committing its habitual policy mistake by overtightening; and
    after the pre-Lehman experience with complacency, markets are so paranoid they will overreact late-cycle to even minor changes in fundamentals.

    Now look at the second point “the Fed is committing its habitual policy mistake by overtightening”

    Mind you…Fed never commits a mistake of over-loosening (ZIRP, QE, forward guidance as in lower for longer). That is ALWAYS A STEP IN THE RIGHT DIRECTION.

    These cry babies come out of the woodwork as soon as the market drops a wee bit. Don’t you feel like skinning them. I do.

    My only wish is that this time round the scoundrels at the Fed get their just desserts [hung from the nearest lamp post would be appropriate for the damage they have caused to people’s lives just to save a few banks from bankruptcy and the bankers from a well-deserved jail-term instead of being able to preen about it on the bodies of savers, retirees, prudent people (and soon you will be able to add people who have been forced into risks that they might well have not taken) due to their demented monetary policy over the last decade].

  28. MD
    Oct 28, 2018 at 4:39 am

    What we see now is the self-entitlement and hubris of the financial speculator class- they DEMAND action in order to protect their wealth and that of their wealthy clients – which is very strange, because those who have lost their jobs in manufacturing over the last 40 years have been told TOUGH that;s ‘market forces’ and you just have to deal with it (and we’ll smash your labor union if you try to prevent the ‘rightsizing’).

    I wonder if these people who eschew ‘free market capitalism’ are willfully blind to the fact they scweam and scweam and demand government intervention when their rampant speculation causes problems?

    Are they willfully blind to the fact it’s only artificially manipulated CB interest rates that keep the whole sorry edifice going?

    Whatever – one thing is very clear: it’s socialism and ‘big government’ when it suits the wealthy, and free market forces and insecurity only for the rest of us.

    And it’s our own fault for letting it happen, by voting in one of the same duopoly of clowns every election, and for allowing corporate lobbying to pervert democracy.

  29. Sporkfed
    Oct 28, 2018 at 7:33 am

    It is one large game of musical chairs with the FED playing the music.
    The over leveraged, needing to roll over debt, are scrambling for chairs
    as assets lose value in comparison to the dollar. Your stock portfolio, your
    house, and your labor are all losing value. If was fun while it lasted.

  30. Silly Me
    Oct 28, 2018 at 8:04 am

    Unquestionably, much of the faux wealth of US GDP is generated by the computer-generated insider trading. Why build or maintain infrastructure when that is for old times; today’s mobsters can make multiple times the cuts without lifting a finger. Of course, they need to destroy competing economies in order to stay in business, and the competition has by now realized it’s a zero-sum game, so they started to fight for their own lives, primarily by buying gold and ditching the dollar. As no doubt they’ll succeed, it’s only a matter of time before the racket collapses. However, that can take a lot longer than what doomsayers predict (I personally opt for 2033 or so, because it’ll take time for the variables accumulate to the point when they can’t be controlled anymore).

    One more thing: why is Netflix calculated in FANGMAN? It is notorious for overspending in accordance with the not-so-new get-rich scheme that eventually bankrupts companies, while making a select few even dirt-richer (thinking of Sears as a well-documented case). They might as well use Tesla…

  31. Sneaky Pete
    Oct 28, 2018 at 8:06 am

    We happen to be alive,and witness to, a 4th Turning. Things will get worse before they get better again.

    • Robert hughes
      Oct 28, 2018 at 10:00 am

      4th Turning authors say we are entering worst part of this turning and it will be till about 2025 till the eventual course / direction the country will be taking is clear enough to see. I guess we will see.

  32. Unamused
    Oct 28, 2018 at 9:01 am

    OutLookingIn:

    ->Two leading scenarios are now clear:
    1/ An outright crash of the markets that is global in scope.
    2/ A slow ‘bleed out’ that will take years to clear with much pain.

    First the one, and then the other. But why would you suppose it may clear?

    WR:

    ->this downturn has a long way, and years, to go.

    If not entrenched.

    It should be easy enough to see why.

    The wealth of the world’s billionaire class increased by an all-time record of 19% in 2017, an amount greater than the growth in global GDP. The balance was captured from everybody else. Meanwhile, the global resources which ultimately support the creation of wealth are increasingly depleted. Both trends are accelerating. Moreover, repressive political trends are in place to guarantee that these processes of accelerating extraction, accumulation, and depletion become permanent and irreversible, to their eventual exhaustion and unenviable conclusion. I see no plausible or possible alternative scenario, not reform, not elections, not revolution.

    Do you?

    • OutLookingIn
      Oct 28, 2018 at 10:00 am

      Unamused –

      Suggest you read Howard Kunstler’s “World Made By Hand”.

      • Unamused
        Oct 28, 2018 at 2:14 pm

        Fictional fantasy, under the circumstances no more a realistic conjecture than Wells’ “Things to Come”, Rand’s “Fountainhead”, or James’ “Children of Men”, but less fantastic than Heinlein’s “Farnham’s Freehold”. McCarthy’s “The Road” or London’s “The Iron Heel” are at least plausible. My only interest in all such is strictly clinical, as these cultural curiosities do not actually rise to the level of definite possibility.

        Honestly, why resort to dystopian entertainments as escape from dystopian realities?

        I am an historian and deal exclusively in verifiable fact, credible evidence, logically valid inference, and well-supported theory. Try Zbigniew Brzezinski, Carroll Quigley, Antony Sutton, William Engdahl, David Griffin, Howard Zinn, Noam Chomsky, Russ Kick, and the correspondence of Lincoln and FDR. Ditch any ideologies, bring your skepticism, connect the dots, and don’t be so open-minded your brain falls out.

        Also, come to understand Richard III, discounting the fact that Shakespeare could not have written it.

        And remember that the mighty oak was once the nut that stood its ground – and yet still destined to become furniture and firewood.

        • Paulo
          Oct 28, 2018 at 6:22 pm

          Unamused,

          One factor you did not list in your reflection is the role of violence as the slow decline and wealth transfer continues. There is a point where people and other countries won’t take it anymore.

          The past 72 hours has provided a brief glimpse of a dystopian reality, albeit just a few well armed wackjobs with misguided axes to grind. What happens if the wealth transfer continues, and as the pie shrinks an additional pillage of ‘entitlements’ is foisted upon the general population to ensure the 1% remains secure in their wealth, influence, and privilege? Will the police/surveillance state continue to rise in order to enforce the rule of so-called democracy for the benefit of a few? Edward Snowden gave us a hint of what lies behind the ‘code’ of everyday, but take away opportunity and the perception of justice, and there is no telling what will unfold.

          When the voiced solution is armed guards at places of worship, education, and business I fear it is already too late.

          And then there is climate change and migration.

          Say hello to Mad Max for me. I hear him knocking.

        • Unamused
          Oct 28, 2018 at 7:08 pm

          ->One factor you did not list in your reflection is the role of violence as the slow decline and wealth transfer continues. There is a point where people and other countries won’t take it anymore.

          I alluded to it in passing, Paulo. It has been taken into consideration. Given the circumstances will not be a determining factor, for a variety of reasons.

        • kitten lopez
          Oct 28, 2018 at 7:32 pm

          WOW WOW and fxckin WOW. this place is getting otherworldly…

          “Honestly, why resort to dystopian entertainments as escape from dystopian realities?”

          “And remember that the mighty oak was once the nut that stood its ground – and yet still destined to become furniture and firewood.”

          “Ditch any ideologies, bring your skepticism, connect the dots, and don’t be so open-minded your brain falls out.”

        • kitten lopez
          Oct 28, 2018 at 7:44 pm

          …and Paolo:
          the same reason you cannot fathom the insane absurdity of the financial system all the way to the supremely crappy handwork in building and LIVING etcetera, is the reason there will be no fighting back by much of anyone really beyond a few absorbable tantrums.

          have you seen the kids nowadays? only the ones in silicon valley are keeping their kids off this stuff and everyone else is a strung out and twitchy bent over passive aggressive pavlov’s dog looking at screens.

          they don’t fight; they tweet complaints to get forwarded and thumbs up.

          there’ll only be fighting amongst each other, just like right now, actually. people only dangerously riot over teams losing and not anything relevant to actual life or living. you’ve gotta get permits for that and they likely will cost money soon. so how real is that? it’s theatre and 5-minute neck massages and hand holding after church photo ops.

        • kitten lopez
          Oct 29, 2018 at 11:37 am

          (Paulo-
          i don’t know if you’ll get this notification but i was thinking very fondly of you this morning and wrote you below on a new thread all for you!
          x)

  33. RD
    Oct 28, 2018 at 10:15 am

    Powell won’t stop until (he gets enough) the bubble in loans and CRE is deflated.

    Until then he CANNOT be “data dependent,” and ease if it proves necessary–which it will.

    This is all really just cleaning up the last mess from 2008.

    But there is more to it as well. The FED now has the non-banks holding the bag, and they will use the “normalization” process to destroy the pricing power that the non-banks have taken (from the commercial banks and depositories) using REPO and securitization.

    The FED WANTS banks making loans, all ion one place with traditional skin in the game.

    Letting non-banks do it CANNOT be made safe–ever.

    The policy tools don’t work either.

    Banks will see a GENERATIONAL buying opportunity on the other side of what will be a significant correction in financials and equities in general.

  34. Gorbachev
    Oct 28, 2018 at 2:32 pm

    So much drama.All that is going on is that equities and real estate

    have some competition.Cd’s pay a little more and as the Fed sells

    their holding there is one less major buyer of bonds. Adjust your

    holdings accordingly.

  35. Wendy
    Oct 28, 2018 at 5:00 pm

    This is true. I heard Warren Buffett is liquidating a lot of his holdings to take advantage of the likely bear market.

    A random walk down Wall Street is a bunch of crap, since we can all see what is happening here.

    Evan Yogi Berra said “predictions are easy, especially about the future.”

    Since 50% of market predictions are by definition wrong, I will take the opposite side of the trade, and say we will end up higher in the S&P by the next 6 months.

    • TXRancher
      Oct 28, 2018 at 7:28 pm

      Correction or sarcasm?

      “It’s tough to make predictions, especially about the future.”

      ― Yogi Berra

      • Wendy
        Oct 29, 2018 at 7:52 am

        Total sarcasm. Warren Buffett’s preferred holding time is forever, and he never tries to predict the markets.

        The book, A Random Walk Down Wall Street, illustrates the futile exercise of predicting stock markets.

        Yogi Berra says predictions are difficult, and I would go further and say they are impossible.

        If Wolf says things are going down, but I say they are going up, and I turn out to be right, am I suddenly a “guru”, worthy of adoration, and paid newsletter subscribers, and CNBC coverage? No. Just lucky.

        I have grown weary of all the experts that have predicted the end of this bull market, in 2012, 2013, 2014, 2015, 2016, 2017.

        I will go out on a limb and predict that there will be many bull and bear markets in the future.

        • Oct 29, 2018 at 9:18 am

          Wendy,

          Buffett got bailed out during the Financial Crisis. He was the single biggest beneficiary of the Fed’s bailout, which kept his financial empire intact. And he knew he would get bailed out. He said that much. He knew from his connection to Goldman execs, who told him. They knew because the New York Fed, which handled the bailouts, is partly owned by Goldman, and Goldman has its alumni on the Board at all times. This isn’t a secret anymore.

          Buffett has sold TONS of stuff. This “forever” theme is pure nonsense.

        • kitten lopez
          Oct 29, 2018 at 11:16 am

          ‘This “forever” theme is pure nonsense.’

          THIS is what your site is ALL about to me, Wolf: hosing away the b.s. before the sun even comes UP. i LOOOOVE it! first thing in the morning… aaaaah…

          thank you…

          x

  36. nick kelly
    Oct 28, 2018 at 6:01 pm

    The head ‘cry baby’ appoints the Fed chairman and along with Fed bashing, has publicly wondered if he made a mistake appointing Powell.

    Given that the GOP, historically the party claiming fiscal responsibility, has completely abandoned that cause, maybe the Fed needs to come to its own PR defense.

    The Fed is in control (or seeks to control) monetary policy.

    It can’t save the US from misguided fiscal policy, i.e. runaway deficits paid for by mortgaging the US.

    If the head of the executive is to break tradition (and arguably the oath of office) by criticizing Fed monetary policy, maybe the Fed should note its job is made harder by inappropriate fiscal policy.

  37. Rick
    Oct 29, 2018 at 7:46 am

    Since 2007, the market return for Shanghai and Italy are deeply negative. Hong Kong, London, and France markets have barely produced any return at all. In 10 years! These are the largest stock markets in the world producing NO return for their investors during a historic bull run. Is it any wonder why everyone in the world has piled into US equities? A US equity market ever shrinking in available shares due to TRILLIONS in buybacks. It should make more sense as to why our market can keep going up even though company revenue and profit keep going down. The US stock market is too big to fail. It will be preserved at all costs.

  38. breamrod
    Oct 29, 2018 at 8:12 am

    Trump knows the economy is weakening so Powell is being set up to take the blame. The Fed always tightens till they break something. That will never change as long as there’s a fed. Their buddies love them! Buying assets for 10 to 40 cents on the dollar is fun!

  39. kitten lopez
    Oct 29, 2018 at 11:35 am

    Paulo-
    i’m 51 and was raised Quaker by a couple of brilliant bad ass civil rights activists who brought us up optimistic and with shades of reality (pops is Puerto Rican born there (BIG difference); hence realist/and my mom’s upper middle baby boomer ivy league sister school mt holy oak liberal elite YOU CAN DO it, ilk.

    i grew up on picket lines and crossing one i believe would make me turn into a pink mist. and i’m dorky enough to STILL scream for joy and yell for the firemen to ring their bell whenever i’m dancing and they pass or i see them on my bicycle in the road.

    i was taught to fight and be always optimistic and fight for the ideals of this country blah blah blah (i’m in the states).

    it’s been an existential crisis of them ALL to realize like “Unamused” says: “now’s not the time to panic; that was a long time ago.” and that a long time ago is O-V-E-R. i see why old black men are reduced to tears by King and Malcom’s deaths and all that power hope and optimism…

    but King got it right on his way out. we can’t want into a burning HOUSE. he got it that the system depended on the continued suffering and exploitation of others, here at home and all around the world in the name of empire and all the cheap crap that brings.

    it’s unholy and profound beyond words.

    BUT i do believe as an artist and suddenly overly empathetic woman (i FEEL the terror and sadness and despair just leaving my apartment.. everyone’s working too much and stressed and have no personal lives no personal SPACE or time to think nor do they WANT free time to think because when you do, you could end up in the fetal position doing that deep existential scream).

    this is akin to finding out nothing is as it is or WAS. and we are all connected and you cannot wall yourself off from this and barricade yourself from all the piss in the swimming pool. there is no smoking section. there never WAS.

    so i don’t give you hopium. but this site and i think this new era is gonna have to be about no B.S.

    that’s no small undertaking. the only reason people think i’m a witch around here and fear me is because i’m just like i am on here dead on in person. i am sad and yet i am ecstatic that i am alive in this world. my heart is broken but i aim to wake people up to life and life within THEMSELVES so they can feel others.

    so i think your artistry and reverence for craftsmanship is like you being an evangelist for all that is holy sacred and BEAUTIFUL. and just because you may seem to be surrounded by impending crap, your talents and your prayers–for that’s what they are when you send your artistry and care and beauty and STURDINESS and REALITY into the world, it’s a form of deep love.

    yeah, this is a money site. but not really. this shit hurts to see what’s BEHIND all these games. the tragedy of it all.

    so i write on here this long because it’s the end of the initial party- it’s after hours to comment so long and personally (to me)– after the heat has dissipated.

    so as one artist to another, i DO see some kind of underground of resistance happening on a whole other level. is that cute? maybe. but that we are ANY of us is here is improbable. i don’t believe we’re turnign any of this around as the mind set that CAUSED it is even more entrenched than ever.

    but for anything to continue on its own elsewhere, we must ferret out the abused hiding and odd ones who have the stamina to take a punch stand out be different and see ANOTHER WAY.

    the only chance we’ve got is to save the wild ones from suicide drugs prison… caving from not fitting in or being able to pretend none of this is going on. the sensitive ones such as yourself. the ones who NOTICE the beauty of detail… you can’t NOT notice the pain anguish and unholiness of ALL this. this gift of life on this earth and … THIS is the best that folks came up with???

    i’ve no answer.

    only that my dear man, Mad Max is ALREADY here.

    x

    from the mission in san francisco.. now onto breakfast with my bestest friend in the whole world, James.
    have a good day you all.

    and you, too. Wolf. money site! highlarious…

  40. kitten lopez
    Oct 29, 2018 at 12:13 pm

    P.S. Paulo- the REASON i sound so sure even as i admit i know NADA about NOTHING, is because i’m learning custom clothing on my own off library books and chasing guys around the gym and conning them into standing still for 20-45 minutes at a pop.

    and in researching ways of working OFF actual bodies, i came across the name of Elizabeth Hawes, she brought couture to america in the 1930s during the DEPRESSION (i so neeeeded this!!!) and wrote books because as a designer she kept giacommetti’ing her way to the Truth of WHY do we wear this and that? trying to wean americans off french fashion, she realized in the 1920s that americans were sheep and didn’t have their own style and just wanted to be told what to wear.

    (see? time for panic WAS a long time ago…)

    during ww2 she closed shop due to cloth restictions and joined the war effort in the factories, then became a union organizer til she realized it was all b.s. and then took off for st. croix and got into the thick of american imperialism and racism.

    she’s my long lost “grandmother” i craved and NEEDED.

    she was basically totally forgotten but lately she’s finding a kind of PRIVATE resurgence. there’s not much about her online so a growing number of people like me are taking her 1930s-’50s books out via inter-library loans and such. almost each book i’ve taken out has a date-due stamp from 5 months to a year AGO!

    i used to be a writer before computers made us all cheap whores, and i came to fear the b.s. abstraction of the written word taking over for the act of DOING.

    Wolf’s site has been healing regarding words that way. i get CHILLS when i hear he frets over his use of “homes” vs. “houses” and such! i’ve seen his eyes and he’s no lie.

    so i know that this Elizabeth Hawes is like a teacher from the great beyond not just for ME, but for others who’re trying to get back to what we were before all this industrialized or tech bs thinking.

    when i’m making something custom, no one’s thighs are “big” or their arms aren’t “long” because compared to WHAT? some arbitrary size for generic people that fits no one? we all learn to judge ourselves by something given to us that was cheap stretchy boring.

    so i hope that you don’t despair that others won’t have what everyone had before; i hope that while you’re here you pass on the gift of patience artistry and grounded VISION.

    manifesting things REAL things for ourselves and others.. .i get it. it sounds california woo woo but we’re in a twisted age of abstraction and b.s.

    we need the elders, even us who are elders.

    i just wanted to share the magic i’m seeing over here so you pass your own on. good craftsmen are like priests to me. and i’m grateful so grateful that Hawes WROTE because as an artist i was so confused and didn’t understand my fascination with making custom things. it seemed like burrowing underground just as the world is burning.

    but i’ve also built a whole economic PHILOSOPHY around how i’m gonna do business. it’s related to ghandi’s means of production and keeping money and training and customers LOCAL. my way of trying to stay far far away from the whorish art of making a living online which is CONSTANT begging for attention i cannot do. i seduce by doing my own thing. i cannot court mass followers. it’s against my DNA.

    • Juanfo
      Oct 30, 2018 at 6:00 pm

      I read it

Comments are closed.