Stock Markets in China & Honk Kong Dive, Yuan Slides, Crude Oil Drops on Confidence Crisis in China

The Shanghai Composite and Hang Seng fall to where they’d first been in 2007 during the run-up of the bubble.

By Wolf Richter for WOLF STREET.

The Shanghai Composite Index plunged 5.1% to 2,928 on Monday, the biggest one-day drop since February 2020, during the Wuhan crisis. The index is now down 20% year-to-date and down 14% from a year ago. And for folks promoting buy-and-hold: The index has now returned to a level it had first reached in February 2007 during the run-up of the ridiculous stock market bubble just before the Beijing Olympics.

Also gone is the hype-and-hoopla bump that Chinese stocks got in mid-March when Vice Premier Liu He, in order to stem the slide then in progress, came out with promises of market-friendly measures.

The CSI 300 index, which tracks the biggest blue-chip stocks trading in Shanghai and Shenzhen, dropped 4.9% on Monday, to 3,933, is down 23% year-to-date, and is down 25% from a year ago.

Hong Kong’s Hang Seng Index, where many Chinese companies are listed, plunged 3.7% on Monday and is down 31% year-over-year. At 19,869, the index has regressed to a level first seen in January 2007.

The offshore yuan, after dropping 2% last week against the dollar, fell as much as 1.3% on Monday to 6.60 per dollar, the lowest since November 2020.

When it hit that level, the People’s Bank of China came out to support the currency and said it would cut the foreign-exchange reserve requirement ratio for banks next month to 8%, from 9%, thereby “increasing banks’ capabilities of forex fund use,” the PBOC said, according to Bloomberg. This announcement caused the currency to recover some from the losses earlier today, and it ended down 0.7%.

Last year, the PBOC had raised the foreign-exchange reserve requirement, from 5% to 9%, to tamp down on the appreciation of the yuan against the dollar.

Crude oil prices fell globally, with WTI now down 5.1%, at $96.87 a barrel, on fears of demand destruction resulting from further supply chain chaos due to prolonged lockdowns in Shanghai and potentially in Beijing, that would trigger broader and even bigger inflation that will hit demand.

Suddenly forgotten are the factors that had powered the spike in oil prices to begin with, such as Russia’s invasion of Ukraine that has made Russian oil toxic on parts of the global markets. Markets are kind of funny about these memes that suddenly do U-Turns.

What rattled markets on Monday was the fear of a draconian lockdown in Beijing, similar to the draconian lockdown in Shanghai that is now entering its fifth week and entailed measures such as fences around some residential buildings so people couldn’t get out, mass testing, and forced quarantine in massive quarantine centers.

Surging cases in Beijing’s Chaoyang district – which includes the central business district and most foreign embassies – caused authorities to order three rounds of mandatory Covid testing of the 3.5 million people living there. They also announced that the movements of residents in a portion of the area, covering about 2.5 square miles, would be limited during the Covid tests. Authorities identified a school in Chaoyang, a tour group, and a deliver service as transmission clusters.

These announcements were seen as signs that the draconian lockdown in Shanghai will be duplicated in Beijing. In response, residents began stockpiling food, and the empty-shelves syndrome started cropping up in supermarkets.

Investors were already worried about slowing consumer demand in China amid the resurgence of Covid and the resurgence of the lockdowns.

These worries pile on top of the slow-motion collapse of the housing and property development sectors, led by the not-so-slow-motion and now government-controlled collapse of China’s second largest property developer Evergrande that commenced in the second half last year and is now in full bloom. Construction has been one of the primary drivers of economic growth in China, and the slow-motion collapse of the property-development sector is hitting the overall economy hard.

There are now growing worries, as China’s Covid Zero strategy is backfiring, that President Xi Jinping cannot or will not deviate from the political narrative that features him as having come up with the world’s most successful virus-fighting strategies, and that he will not adapt China’s response to the new reality on the ground, and will thereby crush the economy. And so now there’s this confidence crisis as investors take a second look at China’s reality.

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  124 comments for “Stock Markets in China & Honk Kong Dive, Yuan Slides, Crude Oil Drops on Confidence Crisis in China

  1. Degobah Smith says:

    My kid asked about my view of the world’s economic outlook recently. I told him to visualize a very large house of cards in a stiff breeze.

    • phleep says:

      A clusterf*ck of vortices.

      • Djreef says:

        If the CCP weren’t running the Chinese economy into the ground there wouldn’t even be a story here.

      • NBay says:

        Just a bit of recalled history:

        In 2006 I sold my unfinished 16 year long off-grid living project, and moved into an apt. Having nothing to do I decided to learn about investing/finance for the first time ever. I didn’t know a stock from a bond, honest.
        Naturally, I watched hours of CNBC, and looked up lots of charts/jargon….Bloomberg was too advanced for me for a long time.
        I recall two main themes leading up to the GFC. (and watched the S&P bottom live…666 and change…..thought the religious bunch would make something of that, but I guess anyone who made enough money in the god-biz to have a national voice was also heavily invested and scared…I’m sure some poor small town preachers did)

        One, a 3-4% daily change in the S&P was pretty regular, especially Fridays, which means at these stupidly high levels, 2% just makes me yawn….the final peak before it all came crashing down was only around 1507, IIRC.

        Two, their was almost endless talk about whether we were “coupled” to emerging markets, and no mention of the RE rot in our own country.
        Nobody committed suicide like in the GD, except a European Noble feeding royalty and other big shots to Madoff.
        I knew then we were dealing with people with no empathy, sense of duty (work ethic), honor, etc. A new breed of financier/entrepreneur. My mom said during the GD people were jumping in Wall St and local bankers shot themselves almost daily, for failing to do right by their depositors and ruining their lives. Even though it wasn’t their fault, they couldn’t expect the people who trusted them to understand that.

        Yeah, a clusterfuck of vortices. A lot of which get unraveled here, just to re-tangle or get even worse thanks to short term greed driven financial engineering changes.

        Soros’ testimony at his dog and pony post GFC hearing was correct, “They will invent the stuff faster than you can make laws to stop it.”

        • NBay says:

          Maybe we ARE moving into that more often and larger day by day S&P swings that I remember. Need a tech like ME to explain the phenomena (if true), maybe?

        • NBay says:

          Well, there’s the 3-4% Friday Effect, anyway……

          Forgot to mention, having 2+ years to go to SSC and burning up house selling profits and very last of IRA, I immediately put in job apps on my very FIRST (“retail/consumer”) computer…IOW, I owned it….at all the big box places (10+) stressing either my electronic tech or construction experience, but would also accept just unloading trucks and any shift/wage. Got NO word back from any of them, even after 2nd inquiry/app…except for Lowes.
          One’s criminal record (ANY run in with the law) goes back to 18, and why hire a “troublemaker” when there are so many applicants.

    • Kunal says:

      True while US stock markets are still near all time high and PE ratios are insanely high and showing very high resistance to decline.
      RE is even more strong, still rising in sale prices even though volumes have reduced. Looks like sellers will simply refuse to reduce prices so except lower volumes it still rising prices. It’s a bit insanity but it is what it is, benefits of being the country of global reserve currency.
      All so called bears have been calling for a crash in RE and crash in US equity and Tesla but none of them are giving in. Some companies have dropped but broader indexes are still near all time high.

      • Einhal says:

        You are right. The PPT came along and started purchasing around noon. The market is straight up since then. They will never tolerate a dropped market again, inflation be darned.

        • Putter says:

          No PPT. Market very oversold. Needed a bounce into the next leg down.

        • Wolf Richter says:


          Just let’em have some fun. Zero Hedge has been having a blast with the PPT stuff for years. I think I’m going to have some fun with it too.

        • SoCalBeachDude says:

          False. There is no such thing as the PPT which was entirely disbanded back in 1993.

        • Wisdom Seeker says:

          Putter is right.

          When everyone knows what the market is going to do next – something else will happen. It’s one of the classic market rules.

          Because everyone knows the market has to tank, everyone who cares has positioned themselves for that already. So there’s no one left to sell. Hence the price has to go up.

        • Halibut says:

          It was me. I bought just enough to prop up my funds. I might buy twice as much tomorrow, so shorts be warned.

        • Einhal says:

          Yeah, some random buyers caused an 800 point swing in a matter of hours. Suppose it’s the algorithms. Whose bidding do you think the algorithms are doing but the various governments?

        • Wisdom Seeker says:

          @Einhal: wrong question. Governments are not all-powerful monoliths, they’re collections of people with certain motivations.

          Whose bidding do you think the government officials are doing?

        • RedRaider says:

          I agree. Markets were oversold. But the PPT exists. AKA the President’s Working Group on Financial Markets created under Reagan admin. Involves Secretary Of Treasury, SEC, CFTC and chair of the federal reserve. The working group is chaired by the secretary of the treasury. Purportedly they intervene in stock market via market futures contracts. I can’t remember whose administration it was, but one time the secretary of the treasury was being changed and while congress was busy with confirmation all hell did break loose in the stock markets. The theory being no intervention possible if no working group chair. Even Mnuchin said in December of one year that the PPT was meeting. The very next trading day the DOW went up 1k points. Coincidence? Count me a skeptical believer.

        • NBay says:

          Does RedRaider have the “REAL” conspiracy theory “right”, (more or less) or is it just his own version?
          (I know, it’s a “weird”, to say the least, question).

          This is the only financial site I read, other than general stuff on Yahoo and on TV, and really would like to know about the true believers in this PPT leap of faith. Moment by moment “pump and dump” trading algos likely exist, but this is another thing entirely, and obviously much bigger.

          I already understand the “free market” leap of faith, as well as the religious ones.

        • NBay says:

          Forget it. I just went to good old Wikipedia and got as good a picture as anyone, which is not saying much. Personally I won’t waste any mental time on it, but I do still wonder what holds all this idiocy up……my guess is there is still fleecing to be done, but not very damned much.

        • Wolf Richter says:

          The “idiocy” is NOT holding up. It’s coming down, just not all in one day.

      • Josh says:

        For RE, I think you have it backwards. It is because of the lack of inventory that prices are so high in many areas. We are all waiting to see if investors and people with second homes rush to the exits and sell but short of that (or a recession leading to job losses) I don’t think prices will drop.

        • Augustus Frost says:

          The real estate bubble is entirely dependent upon the bond market mania. So is the stock market mania for that matter.

          It’s not just rising rates but credit availability. Rates can be low but there is no mania or bubble if hardly anyone will lend. Conversely, the real bubble in theory can inflate indefinitely no matter how rates get if credit conditions are loose enough.

        • SocalJohn says:

          Prices will drop, and they will drop a lot. The vast majority of purchases require mortgages. Cash purchases are a minority. This means that the majority of the market is now experiencing a huge decline in the amount they can borrow, which will hammer transaction levels. This is just getting started. Too soon to see it yet. For every one percent rise in interest rate there is a decline of about 10 percent in amount that can be borrowed for a fixed payment level. The payment level is essentially fixed for most borrowers. This 10 to 1 relationship doesn’t seem to be widely understood. With a 3 percent rise in rates the decline would be roughly 30 percent. This is a huge force.

        • Josh says:

          Agreed SocalJohn, but in some areas like the Bay Area, what you are mentioning won’t necessarily bring prices down if the inventory stays low. If each house now has 100 prospective buyers and 80 of them won’t be able to afford anymore due to higher interest rates (or no longer having the down payment due to a stock market crash), you still have 20 people propping up the prices. I think it’s going to take something like mass layoffs before the inventory reaches a level where the prices go down. Note I’m not an RE cheerleader and I’m waiting with a pile of cash to buy but I’m still seeing way too many buyers for the houses around here.

      • JeffD says:

        “Looks like sellers will simply refuse to reduce prices”

        The problem is that most of those sellers will need to buy another home, and they are going to be facing higher purchase prices and also much higher monthly mortgage payments. Most of the new inventory will likely come from liquidation of deceased parents property or bad divorces.

      • jon says:

        My gut feelings is: It’s a matter of time. The real estate all over the world went up like crazy because of cheap money. Now the punch bowl is taken away so it has to go down. But remember, Real Estate is like a titanic. Last time it took 4 years to bottom out. Have patience.

        • SocalJohn says:

          I agree. If we’re lucky it might go faster this time. Last time the Fed was able to stimulate like crazy during the collapse. But now we have inflation. One of the Fed people recently described the new situation as a monetary recalibration, or something like that. If we are truly transitioning into something like that, then a lot of things are going to be changing. For real estate, it will still take time because the psychology of the herd is like the titanic, as you’ve aptly indicated.

        • HowNow says:

          In my experience, when the bottom of a major bear market can be ascertained is when there is widespread conviction that one of three things is imminent:
          1) Currency collapse, 2) the economy is unraveling in all directions, or 3) everyone senses that it’s time to change their underwear. When people are paralyzed with fear and hope is lost, it’s probably the bottom and a good time to invest.

      • andy says:

        Kunal, serious question. Where do you take your Tesla when ‘check engine’ light is on?

    • Harry Houndstooth says:

      The Omicron variants (extremely contagious but mild disease) are better than any available vaccine (based upon the first variant) in terms of a lasting immune response. Covid is over in Florida. China’s Covid strategy (requires a authoritarian government) is counterproductive.

      The enormous overbuilding of entire cities which remain vacant in China is being made worse with their Covid strategy.

      • Lune says:

        Not true. The antibody levels you get from a full regimen of vaccines (ie 2 doses and a booster) is far more than you get from a single past infection:

        Covid is “over” in Florida because they suppress accurate counting of covid deaths. Sure, it may not be as bad as the worst of the previous waves, but it’s by no means “over”. Several hundred people a day still die from covid, which is far more than “the flu” ever kills.

        I actually agree with you that China’s extreme strategy is counterproductive and is coming at a tremendous cost. But there’s a huge leap from there to the cry babies whining about having to wear a mask and get a vaccination.

  2. Beck Matthews says:

    Is Honk Kong the poor man’s King Kong?

    • Phoenix_Ikki says:

      No, the real meaning behind the name is even stupider, literally translate to Fragrant harbor. With the market lately, the only Fragrant is that smell of the brown turd floating around..

      • NBay says:

        Market aside, Hong Kong has one of the biggest slums in the world (easily in top 20 I bet) and even setting that aside, it is extremely packed with people. I seriously doubt the sewage/drainage infrastructure will keep up with increasing rain due to climate change, if it even is already.

        The “brown turds floating around” will be/already are REAL.
        Thanks for translation, though.

  3. phleep says:

    Globalization swept away a lot of things. So too, now, its unwinding. A lot of balls are headed for the wringer.

    Meaning, yes, opportunity, in minefields of risk.

    • Levi C. says:

      Speaking as a reasonably ignorant investor the most prudent thing to do in my eyes is to pick a point when interest rates stabilize to whatever the new norm will be and pick broad index funds to ride out the last trashes of the zombies and ride the new wave when it comes. Mind you the timescale I’m thinking is about 2024 for when conditions start to favour growth again although I expect it will take longer still before actual stability.

      • HowNow says:

        A sure indicator is if things get bad enough and the FED hurriedly lowers rates, the new bubble is about to be blown.

  4. Flea says:

    Maybe people are waking up to the fact that CHINA ,has been fleecing the world ,fake financials fake bond market ,sounds familiar

  5. Augustus Frost says:

    The Hang Seng is moderately up from the levels on the eve of the handover from the UK. Yes, so much for buy and hold.

    It’s coming to the US, as there has been more “growth” during this time there than there has been (or will be) in the US economy.

    China’s stock market bubble in 2007 isn’t any worse than the one in the US after the March 23 low, the one in effect now. The US stock mania has lasted longer and is much bigger than China’s ever was at the time.

    • phleep says:

      China’s real estate sure has wobbled though.

      Their wide-prosperity domestic consumer promises seem to always be postponed. Reminds me of a classic, the Volkswagen, “peoples’ car,” many prepaid in the 1930s and some still not delivered to customers per contract in the early 1960s.

      • robert says:

        I have one of those little KdF books, picked up at a yard sale, half-filled with the stamps you got when you paid your incremental deposit.
        About 5 minutes after the war ended they were making VW again but the stamps were not honored.
        Class action!

    • sunny129 says:

      Augustus Frost

      ‘China’s stock market bubble in 2007 isn’t any worse than the one in the US after the March 23 low, the one in effect now’

      It would have been a lot worse, if NOT for Mr. Powell to shower 4,5 Trillions to bail out the mkt! I wonder what he will do when the mkt plunges 30-35% in the next 6-8 months?

      A lot of miracles can happen, when they print $$ out thin air!? Now the piper is waiting to collect!

  6. Ted says:

    A recent editorial in the WSJ said that “The (U.S.) government has grown too large to be competently managed by anyone.” Multiply that by a factor of, what five or six for China?

    • Augustus Frost says:

      Too big to govern happened a long time ago in the US government. It isn’t anything recent.

      I worked for BAC for a short time about 10 years ago. At the time, they had 283,000 employees, equivalent to a moderately sized city. I’d place them in the too big to manage category also.

      • Harrold says:

        Walmart has 2.2 million employees.

        • Augustus Frost says:

          Yes, I know that but have never worked at Walmart. I can’t tell you whether they are or are not.

          More importantly, without government created moral hazard, I don’t believe any of these too big to fail banks would exist. Their actual risk profile without this backstop is a lot higher than with it.

        • Escierto says:

          I once had a job interview in IT at Walmart. They paid to fly me there along with a hotel and a rental car. They were so clueless when I got there, they had no idea who was interviewing me or why.

        • NBay says:

          When you are talking about the FED, you are talking MORE about private banking cartels than you are about the “government”.
          You learn very slow…..or don’t want to for whatever reason.

    • MR says:

      That’s why it’s wise to keep gov’t small, in my opinion. The Founders of the United States never desired that the gov’t would become the gargantuan behemoth that it is today. They understood that bigger gov’t invites more corruption, incompetence, and waste.

      • John H. says:

        Yes, MR!

        I just read this on the Fed’s Board of Governors website:
        “Federal Reserve Board employs just over 400 Ph.D. economists…”

        The statement was in a job posting from Dec. 2021. (read it and weep: )

        It doesn’t count the non Ph.D. economists, nor does it include all of the economists at all of the regional reserve banks.

        I’m guessing the staff and management ranks have exploded over the last couple of decades too.

        Thankfully, the quality of monetary policy over the last 15 years justifies the the investment in personnel, right?

      • NBay says:

        Total BS.
        The “Founders” were more afraid of Corporations, and “government” kept them VERY tightly regulated, granted their charters, and disbanded them when their mission (building a dam or canal) was done. However by Lincoln’s time their “borers” (lobbyists) had used all their usual tricks to restore Corporate power. (as Lincoln said, “the corporations have become ENTHRONED”, and feared their threat to the Republic more than the Southern Army, and said all the wealth will end up in the hands of a few and the Republic will be destroyed”. We are now there, wouldn’t you say?

        We didn’t revolt against King George, we revolted against the English corporations who ran things in England. Now we have our own Corps running things.

        Read some damned history…and the Gettysburg address…..please. Thank you.

        • NBay says:

          And as for the Fed, see my reply to AF. I get really TIRED of replying to you brainwashed trolls who hate your own government and want it to all go away and play Gilded Age “Social Darwinism”…which you will discover you do not like AT ALL…….but too late to stop it.

    • fajensen says:

      I think differently. I think that the US government has been crowded with “talent” suffering from ODD – Oppositional Defiant Disorder. People, who simply refuse to follow any rules, even those of their own making. They will fight over anything, yet sometimes not, and very little work will ever get done, which fits their sponsors agenda very well indeed.

      In China, they simply shoot those people if they are stupid enough to use their hard-won platform to mess with the CPP. They sometimes send some of them to work the rice fields up north, if they think some use may eventually be had from them once they simmer down a bit.

      Therefore, China will not have the same “chaotic government problems” that the US does. It has many different problems, sure, probably many of the are bad also, but “The American Experience” does not apply to China.

      • Prince Gbanga says:

        The rice fields are in the south. Northern China is more wheat fields.

  7. Sams says:

    Oil price fluctuates around US$ 100 a barrel? Do that imply that no investments in oil that can not be sold in the future for less than 100 dollar a barrel with profit will be done? If so, the “peak oil” is when there is no more oil at a 100 dollar a barrel.

    • SoCalBeachDude says:

      Oil has ranged in price from $147 to -$33.00 per barrel over the past 20 years and will always be available at whatever prevailing market price.

      • Sams says:

        Oil will probably be available at whatever prevailing market price. The question is volumes. What is the demand in the market for oil at 100 dollar a barrel, 200 dollar a barrel and say 500 dollar a barrel? If, the market for oil diminishes at higher prices, how fast do demand drop with rising prices?

        The fluctuation in oil price may indicate that above somewhere between 100 and 150 dollar a barrel demand diminishes. If so “peak oil”, in the sense of volume extracted and consumed yearly peak out at this price. Any higher price and the consumption fall of at some rate.

        The catch, with cheap oil depleted, will there be profit to be made in extracting expensive oil?

      • robert says:

        Probably the most perfect example of a price sensitive and responsive supply and demand market.
        The only time(s) the petroleum/gasoline industry failed to function was when the government got into ‘supply management’ to protect the consumer.
        The lineups went for miles. If supply management were still in place you’d need a passport to buy gas at 20 bucks a gallon.

  8. Dan Romig says:

    “Fences around buildings.”

    My wife is currently “fenced off” inside a solitary confinement room; which is in a separate building; fenced off inside a prison, which is encircled by fences. Why? Because one week ago her broken off, but still partially there at the bottom, right maxillary 1st bicuspid was painful and very heat sensitive. Therefore, she limited her food and fluid intake during the day.

    Bad timing, as a random drug test was given to her in the early evening, and she was unable provide a urine sample in the allotted time. So, as a result, Elizabeth sits in solitary confinement. No Idea when she will be released, but I write her every day with as much info on the things she loves, and drop the letters off at the Shakopee, Minnesota post office to be delivered to her ASAP at the women’s prison in Shakopee.

    Prior to being in solitary confinement she wrote:
    “The window in my cell faces north, where two fat robins hop upon sparse patches of newly seeded grass along the sidewalk of my living unit. The birds are oblivious that they set up shop in a prison. They are free to fly over the fence. (Millions of humans now wish they too were free to fly over a fence)

    This past year, the world learned about freedom and subsequent lockdowns stripped people of their own. Everyone’s ability to do what they wanted was curbed. I was stunned that so many people on TV were talking about how isolated they felt.

    Like breathing, the need for freedom is innate; our bodies are made to move (I just got off my bicycle and went a few extra km thinking of my wife), our minds are programmed to learn, and our hearts are constantly contracting and expanding. Freedom is expansion and joy.”

    Freedom is also the fuel for “Business, money, and finance.”

    Take away humanity’s freedom, as is happening, and you take away commerce. Result? The stock markets plunge.

    My wife understands this. She works relentlessly in her prison cell to help make the world a better place. Before reading this report from Wolf, I was at my bank depositing a fairly large check that just arrived to me on behalf of Elizabeth’s work in contributing to a textbook being published by The Vera Institute of Justice, Inc..

    As Oly says to Otto in Repo Man, “Keep making me money kid.”

    Once again, thank you Wolf for everything you do. Consider my recent donation to be from Elizabeth too.

    ‘I have learned that real freedom is in the mind and heart. It is there I focus my attention.”

    Yeah, the world is messed up …. As The Clash say, “Stay Free.”

    • The Colorado Kid says:

      Thank you for this post – it makes me cherish what I have, which isn’t much, but at least I’m free. I hope your wife is soon free, too.

    • Wolf Richter says:

      Thank you for sharing. I will keep my fingers crossed for Elizabeth.

    • phleep says:

      I am so happy to say my own moment that was most like this, signaled a turning point. A new life blossoming in the middle of my life. For so long, it doesn’t seem to make sense, until it does. Sometimes it really is darkest before dawn. I am a couple decades away from it now.

      This has its analogs in finance too.

    • Dan Romig says:

      Well, Elizabeth will not have to worry about anymore pain in the tooth behind her upper right canine. It got pulled out of her mouth Thursday.

      Letter from 21 April, which arrived late today & I just read: “Update: Just got back from the dentist. Tooth pulled. Doesn’t hurt (yet). Bleeding a lot.”

      The first thing I did after getting a call from her Tuesday evening was write letter to the DOC Commissioner and Warden. Dropped off the letter in St Paul @ 8:15 am Wednesday, 20th to ask that circumstances be taken into account and my concern for her health. Next, went to warden at prison with same request.

      The prison fixed things their way. Even though I’ve offered to pay for any needed dental care, and our dentist would travel to the prison and do it, a shot of novocaine and a pliers is cheaper.

      One would think that this would be enough to be let back into general population, but since I have heard nothing, she is still in solitary.

      Elizabeth was commissioned by Solitary Watch out of Washington DC in 2019 to investigate and report on women being put into solitary. It was widely published and influential in policy change, to a degree, in prisons across the USA.

      Life ain’t always fair …

  9. Escierto says:

    Not just Asian markets being trashed today. Gold and silver were annihilated by the rising dollar. Whoever said precious metals were a haven? When you look at the dollar strength you would think interest rates were at 6 or 7 per cent! Looks like the Feds talk talk talk is quite effective. They don’t even have to raise interest rates – all they need to do is babble about it every day!

    • Wisdom Seeker says:

      LOL. Gold has most definitely not been “annihilated” yet. A 2% drop in gold is not that unusual and it’s still within 7% of all-time-highs.

      There may well come a point in the tightening cycle where gold drops in price as people desperate to meet margin calls liquidate (or short) whoever they can sell (or borrow). But it’s not that time yet.

      For reference: The peak-to-bottom drop in gold in 2008 was around 30%.

      Disclosure: Long PHYS.

      • Escierto says:

        The 2% drop today was a down payment on the carnage to come. No one wants precious metals anymore except your grandfather who can’t remember where he is half the time anyway.

        • andy says:

          Yep, the NFTs beat gold every time as far as the record goes. Same for the crypto and other virtual assets.

        • Anthony says:


          No one wants precious metals other than, Tesla and all EV makers, Battery and solar panel makers, Russia, China, India, most seriously rich people, citizens of half the world, when their currency decides to tank, preppers who worry about the end of things and of course The Bank of England who “stores” the stuff for the other half of the world…oh and me, as the 10,200% rise since 1970 against my Englash pounds kind of gets my attention……

        • John H. says:


          “It’s hard to make predictions, especially when it’s about the future.”
          – Yogi Berra

        • MooMoo says:

          the people who own the Euro sure wish they’d had Gold instead!

    • Sams says:

      What gold and silver?
      Future contracts on a commodity exchange? At least the price of gold as an exchange “commodity” some say is heavy manipulated. Price of gold and silver to be delivered and used in production of industrial goods might be more interesting to watch.

      Anecdotal from years ago. The commodity exchange price of aluminium was if not at an all time low, it was low. The local smelter did well anyway, the price difference between commodity exchange “aluminium” and a quality to be physically delivered to someone making something out of aluminium was if not at an all-time high, very large.

  10. Gen Z says:

    Good…Let it drop!

    Fed up of working for low wages, while Trudeau is doing indirect union busting by importing massive cheap labour masquerading as the Ponzi scheme of immigration.

    • phleep says:

      I think the world is being over-connected in some wrong ways. Now I understand both sides — and the “populism” people have been hand-wringing about. At least our sort of system, imperfectly, has some means of undoing some mistakes, messy as ours is.

      One aging sclerotic dictator can do so much damage! We have a few around.

    • Flea says:

      Maybe Trudeau could give Amazon,Starbucks some pointers while thereCEO s steal the companies blind

    • Gen Z says:

      At my workplace, we had the chance to advocate for a 10% pay increase. Guess what? The employer hired a temp agency to hire a bunch of scabs who worked for minimum wage, while we were working for C$24/hr with benefits. We were being told that the company will be restructuring their operations next year.

      My friend who works at a large warehouse in Toronto told me that the company (a large Telecom which is in a shareholder dispute) shut down almost everything in their Toronto-area warehouses, and hired a contractor to do the job for lower pay. Thousands of jobs lost.

    • The Real Tony says:

      It’s gotten so bad fewer are coming to Canada due to the sky-high cost of living. Most of them are now coming in from Nigeria. That will help push down wages.

  11. Ben S says:

    Oil price futures from came show prices decking to low 70s in 2025 and low 60s in 2027 basically a slow decline
    Commodities bounce around all the time based on demand supply balance and oil production a function of investment. Plenty of oil reserves to be produced at different prices globally some of which are in venezuela iran and russia. More difficult to access financially,
    Just search for oil futures for details

  12. michael says:

    “I picked the wrong week to stop sniffing glue.”
    — Steven McCroskey, Airplane (1980)

  13. Bet says:

    The indexes are still up because a handful of stocks keeps it up there. Growth stocks are smashed. Second tier are on the way down , so it’s just the bigs left Of which they are a high percentage of the components. Twenty percent of the SP is Msft. Aapl amzn googl goog. FB and NVDA have been taken out and shot. Commodities are showing weakness. Industrials like DE crushed today. Give it a bit more time and the SOX NDX DOW and SPX will find lower levels. I have been shorting to the 2020 levels as they are all headed back there. And why not? That punch bowl has been taken away. Indexes do not gain 100 percent in 18 months historically . What goes up hard and fast comes down harder and faster.

    • sunny129 says:


      Lower of the HIGHS and lower of the LOWS, hall mark of a secular Bear mkt! Violent volatility with us for a long time!

  14. Michael Engel says:

    1) GOOGL dma50 < dma200, under the spell of it's death cross.
    2) For entertainment only : In the Last 14TD GOOGL plunged
    from BB #3 : Sept 1/3 2021 to Apr 28/ May 12 2021 Buying Clmax/ AR, but snapped out of it..
    3) Tomorrow 4/26 AH, GOOGL + MSFT report earning.
    4) China might suck the air out of the market, but DIA lower highs, lower lows and still under Feb 9 high, look like an inverse H&S.
    5) GOOGL + MSFT might send DIA up to dma200 to close Apr 21/22 gap.
    6) We don't know if DIA will close Jan 13/14 gap.
    7) A bearish option : after closing either one or both gaps, the plunge.
    8) A bullish option : DIA to 400.

  15. SoCalBeachDude says:

    The equities, commodities, bond, and real estate markets along with currencies are likely to be highly volatile throughout this year, and the one constant is that the US dollar will continue to steadfastly rise right along with interest rates rising throughout 2022.

    • Wolf Richter says:

      Oh no! Now you jinxed the dollar :-]

      • VintageVNvet says:

        gonna be ”honking” bad, eh
        did you mean to leave the title as ”Honk Kong?”

        • drifterprof says:

          “Car horns are a major cause of noise pollution. In Hong Kong, there is a cacophony of raucous car horns from early morning til late at night. Drivers seem to think that by leaning on their car horns they can, magically, clear the traffic jam in front of them. It is not just bad manners or ill temper – it is plain stupid.”

    • Escierto says:

      Exactly right. They haven’t even raised interest rates yet and the DXY is over 101. By the time they raise rates and keep raising them, it will be knocking on 120. Then watch the complete destruction of the financial universe!

      • Einhal says:

        Unless of course the DXY is just “pricing in” what’s coming.

      • drifterprof says:

        I’d like to understand better the consequences of the dollar skyrocketing like that. Any specific predictions on what will happen macro-wise?

        Living in Thailand, I keep a close eye on the Thai baht. USD / THB has steadily risen about 14% from its low in 2021.

        After the dollar increased about 5% from its 2021 low, I started converting small chunks of dollars to baht as the dollar continued to increase. I’m unsure about how to predict when the dollar peaks and I should pull the big trigger.

        Fun to fantasize about making some arbitrage windfall and buy a nice full-service retirement cottage here in Thailand (mucho cheaper here in Thailand, and service people are so incredibly polite). I’ll need something like that in a decade or two when I won’t be able to get around as easily.

        Inflation here has risen to around 5%, but I expect it will remain significantly lower than the United States.

        • Jon says:

          Unless and until the foreign central banks front run the US FED usd eoykd keep going up.

          Us dollar is going up in relation to other currencurs not in a vacuum

        • Flea says:

          How’s the weather in Thailand been described as hot,hotter and damn hot

        • drifterprof says:

          It’s hot season, so would be unbearable without AC. Especially for people with a lot of heft to carry around. Most places we go have AC, and when I have to be out and about, I think of the humid heat as a free sauna. Actually it often feels good for an aging body if one doesn’t have to be trapped in it.

          It’s been a slow start to rainy (and hot) season, which helps cool things off and will peak in July-August. That gave me a chance to get my new sump pond swamp drainage system set up to drain vacant land next door which turns into a big swamp in rainy season (and breeds mosquitoes). The pump got clogged in the process of decapitating a snake this morning, but that was easily fixed.

          This morning we went out to our 5K tropical forest jogging/bicycling trail at the crack of dawn. It was about 77 F., which isn’t bad for me after becoming accustomed for a few years.

  16. sunny129 says:

    In spite of all the BAD out there this morning, Indexes made viplent recovery in the late after noon! DJA went from – 400 pts to + 238 pts’Same thing with other indexes. Same will be repeated every couple of days, as expected in secular BEAR mkt!

    Does anything change tomorrow? Hardly!

    But HOPIUM is still strong out there! As I have said before, Mr. Mkt wants more investors on his band wagon, before plunging down again!

    From inflation scare to slowly disinflation and probably deveraging deflation by next year or even early!? We are in uncharted waters!

    • The Real Tony says:

      If they want to get the inflation rate down the PPT should just let the indexes fall. The PPT can always push the indexes up when month end profit taking kicks in as the short sellers buy back shares. A lot of traders just trade by the month.

    • sunny129 says:

      AS I predicted, Mr Mkt picked up DIP buyers on Monday afternoon and plunged again today.
      This will be repeated NOT infrequently until the last bull gives up! Will that be this year or next year?

      • NBay says:

        I think dollar cost averaging is honest, whereas buying the dip is cheating……..possibly even lake of fire stuff.

  17. breamrod says:

    apples earnings come out on Thursday. It’s the gorilla of the stock market and we will see if this bounce will last. Cramer came out today and said the bear market was over. Lol

    • Flea says:

      Common sense Apple might be in trouble next quarter ,China on lock down ,stimulus money drying up in USA ,tightening fed. I believe that’s three strikes

  18. patrick helmick says:

    sorry off subject here – this relates to consumer spending and inflation – group of friends we lease a beach house every year – the same house and the lease is 44% higher than last year ! Leasing agent says its still a bargain and I looked and she is right ! She says in 26 years of doing this she has never seen demand like 2022 ! places that lease for $2-3000 a day are booked solid – she told us ultra luxury places are the hottest and in the most demand – so there is that !

    • SocalJohn says:

      This is an example of why big changes are coming. It’s like Wolf has been saying… inflation has become a mind set. It will be very hard for the CBs to crack this. Wouldn’t surprise me if interest rates go much higher than anyone is expecting. We could see asset carnage everywhere. It seems like the transition is still early in the first inning.

      • Augustus Frost says:

        Depends upon the timeframe.

        Years from now, interest rates are going to blow past the 1981 high. The bond bull market super cycle lasted 39 years. This bear market is going to last decades and unlike the last interest rate low in the 1940’s, the long-term fundamentals now are terrible.

        The interest rate blowout is not imminent but it’s coming.

        FRB has about 30 points of potential leeway on the DXY to keep on “printing”.

    • jm says:

      A lady I know who decides what room rates to ask for some high-end hotels in Miami likewise says she’s amazed at what people are willing to pay. She keeps raising the rates, and the customers keep filling the rooms.

      Lot’s of people out there who bought stocks years ago taking profits out of the stock market. Others probably spending money ripped off through the PPP program.

      • Jon says:

        This money would exhaust one day and I guess sooner.
        I wonder what would happen then once the punch bowl is no more there.

  19. yuanshan says:

    It is said that there are two indestructible investment products in the world. The first is the US stock market and the second is China’s property market. Now we have to add a third variety: the US property market.

    According to the Federal Housing Finance Agency (FHFA), the average house price index in the United States more than doubled from 180 in May 2011 to 367.2 in December 2022.

    Stocks account for no more than 10% of the wealth and assets of Chinese people. The average house price per square meter in Shanghai is more than 3300 yuan in 2022

    • yuanshan says:

      It is said that there are two indestructible investment products in the world. The first is the US stock market and the second is China’s property market. Now we have to add a third variety: the US property market.

      According to the statistics of the Federal Housing Finance Agency (FHFA), the average house price index in the United States rose from 180 in may2011 to 367.2 in december2022

      Stocks account for no more than 10% of the wealth and assets of Chinese people.

      In 2000, the average house price in Shanghai was 3300 yuan per square meter. The latest house price in 2022 exceeded 70000 yuan per square meter.

    • HowNow says:

      yuanshan, that’s an interesting stat. I tried to find something in the way of a stock vs. bond measure (of total wealth) in the U S and it’s almost equal: bonds at about $34 T and stocks nearly that. Nothing on the relationship of those assets to real estate (my cursory search).
      But if you consider the total population, you’ll find that about 89% of stocks in the U S are held by only 10% of the population. Not a lot different than what you’ve described in China. Were you suggesting that stocks, in contrast to real estate, represents 10% vs. 90% of Chinese wealth?

      • yuanshan says:

        The distribution proportion of wealth assets of Chinese people: stock assets less than 10%, real estate assets more than 60%, bank savings and other assets less than 30%

    • The Real Tony says:

      I could take care of the first one by putting all my money into U.S. stocks and doing a buy and hold. If I did that DOW 10,000 would look very good in the future.

  20. SocalJimObjects says:

    US stock markets rallied though. You’ve gotta celebrate King Musk’s acquisition of Twitter after all.

    • phleep says:

      Yeah, take the town square private, in the hands of its (second) biggest disruptor. Fun to watch. The USA was getting so boring.

      • drifterprof says:

        I’ve never been in that town square, although I’ve seen it a few times from alleyways. I view it more as a Tower of Babel. A boring distraction from savoring the sensual beauty of living in the moment without negative thoughts.

        How will it be more private than it already is?

      • SocalJimObjects says:

        Looking forward to T’s return. I like dumpster fire!!!!

  21. johnny says:

    Can you write an article of how Fed achieve “Demand Destruction” and how long does it take for the demand destruction to control inflation. Is just bringing rates to neutral would reign inflation? and what is the definition of neutral rates. Thanks in advance

  22. Harrold says:

    In the past a strong dollar and rising US interest rates always caused market crashes in emerging markets. The reason — dollar investments come home and cause a liquidity crisis. Cheap dollars are the speculative money in emerging markets.

    In the past couple of decades, it was cheap japanese yen financing all kinds of bubbles. The yen has been falling fast as the fed threatens to raise rates, while the BOJ promises to keep them around zero.

    Don’t be surprised if stock markets in the US don’t come down as much as bears predict. In volatile times, US markets get a flood of scared money from all over the world. There will be another bubble after this one, so long as human DNA doesn’t somehow change.

  23. perpetual perp says:

    Gone from looking at lower highs to waiting for higher lows.

  24. Swamp Creature says:

    I wonder what Jim Cramer has up his sleave with regard to explaining the recent 800+ plunge in the Dow, and crash of the other indexes. As fund manager for the FAANG stocks for his charitable trust which has plunged a record amount he may find himself on the unemployment lines like a lot other poor SOB’s that followed his advice. Robinhood just fired 10% of its workforce via a zoom call. These sorry a$ses that worked for this company will now have to get out of their parent’s basement and go get a real job.

    • Wolf Richter says:

      Cramer is a TV entertainer: Drama and humor. That’s his job. And he’s doing a pretty good job too. As long as people watch the show, he’s got that job, no matter what his trust is doing.

      • NBay says:

        I heard him say several times he always wanted to be a sportscaster……it’s not your normal “sport”, but I’d still say he’s made it.

  25. Swamp Creature says:

    Actually, to be fair, 95% of what Jim Cramer says is pretty accurate and somewhat useful financial information. That’s why I watch the show. It’s that last 5% where he goes off the rails and if you follow his advice, you can get burned. Like in 2008 when he recommended Bear Sterns as a Buy, Buy, Buy, just before they went bankrupt.

    • NBay says:

      He was friends with and admired Eddie Lambert, even put him on his CEO hall of fame, pre GFC.

      Btw, he is a grad of the GS lawyer and MBA “finishing school”.

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