Every S&P 500 Sector Fell in First Half, Except Energy. But in June Even Energy Let Go. Bonds Got Crushed. I’m Not Even Going to Mention Cryptos & DeFi

But cryptos and DeFi created a big mess as hidden leverage is blowing up, and the mess spread to stocks.

By Wolf Richter for WOLF STREET.

The most interesting thing that shows up today in the stock market nightmare figures of the first-half of 2022 isn’t that it was the worst first half for the S&P 500 since 1970, which was just a coincidence of the calendar in that the S&P 500 peaked at the very beginning of the year, on January 3, and then spiraled lower for six months; whereas, for example, in the year 2000 at the beginning of the dotcom bust during which the S&P 500 would eventually drop by over 50%, the index rose 3.9% through the peak on March 23, and then fell 4.8% through June 30, for a first-half dip of just 1.0%.

No, what was really interesting in the first half of 2022 was that every major S&P 500 segment was more or less deeply in the red – led by Consumer Discretionary (-32.8%), Communication Services (-30.2%), and Information Technology (-26.9%) – except Energy, and that even energy then cratered in June.

Energy was king of the hill until June 8, then cratered too.

The energy sector was up for the first half by 31.8%, the only sector to be up in the first half – and it was a big gain even after the red-hot run-up that started in November 2020.

This 31.8% gain came despite the big sell-off in energy starting around June 8, when energy stocks lost their grip and let go. For the entire month of June, the stocks in the S&P 500 Energy sector dropped by 16.8%, according to data from S&P Dow Jones Indices, leaving every S&P 500 sector in June in the red.

Exxon [XOM] peaked on June 8, closing at $104.59 that day, and then dropped 18.1% in the three weeks since then, closing at $85.64 today. Chevron [CVX] also peaked on June 8, closing at $181.13, and has since dropped 20.2%.

Here are the performances for the first half of 2022 and or June of the major indices and of the major S&P 500 sectors:

Major Stock Indices June YTD
S&P 500 -9.4% -20.6%
Dow Jones Industrial Average -7.4% -15.3%
Nasdaq Composite -10.5% -29.5%
Russell 2000 -10.0% -23.9%
S&P 500 Sectors June YTD
Energy -16.8% 31.8%
Utilities -5.0% -0.6%
Consumer Staples -2.5% -5.6%
Health Care -2.7% -8.3%
Industrials -7.4% -16.8%
Materials -13.8% -17.9%
Financials -10.9% -18.7%
Real Estate -6.9% -20.0%
Information Technology -9.3% -26.9%
Communication Services -7.7% -30.2%
Consumer Discretionary -10.8% -32.8%

Bonds got crushed too across the board.

Investment-grade bonds, as tracked by the iShares Core US Aggregate Bond ETF [AGG] fell 10.3% in the first half.

The bond fund that tracks Treasury maturities of 20 years or longer, the iShares 20 Plus Year Treasury Bond ETF [TLT] fell 20.4% in the first half.

Junk bonds, as tracked by iShares iBoxx High Yield Corporate Bond ETF [HYG], fell 15.4% in the first half.

None of these bond ETFs go back to the last period of big inflation and big rate hikes in the 1970s and early 1980s. These ETFs are relatively new creatures that have been around for less than 20 years and have not been tested in this high-inflation and Fed-tightening environment.

I’m not going to even mention cryptos and DeFi.

I’m just going to ignore the collapse of cryptos – they’re down by about two-thirds – and the entire space of DeFi that has provided large amounts of leverage to the crypto sector and is now collapsing due to the collapse of cryptos, taking down hedge funds and a number of publicly traded stocks.

There is a whole gaggle of crypto-related stocks that are down over 80% and 90%. For example:

  • Coinbase [COIN]: -89% from the peak in April 2021; -81% in the first half.
  • MicroStrategy [MSTR]: -88% from the high in February 2021; -71% in the first half.
  • Hut & Mining [HUT]: -92% from the peak in November 2021; -83% in the first half.
  • Riot Blockchain [RIOT]: -92% from the peak in February 2021; -81% in the first half.
  • Marathon Digital [MARA]: -94% from November; -84% in the first half.

You get the idea. It’s a mess out there in crypto land, and unlike the last crypto sell-off, this time there is a huge amount of leverage involved, and the extent of the leverage is oozing from the woodwork as DeFi is blowing up, and there are now publicly traded companies involved, and the shrapnel is flying far and wide. Cryptos alone have lost $2 trillion in market cap, and then there are the losses by DeFi and in publicly traded stocks and in loans whose collateral has vanished. Thankfully, a big part of the losses go to holders overseas, and so this is much less of a US problem.

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  238 comments for “Every S&P 500 Sector Fell in First Half, Except Energy. But in June Even Energy Let Go. Bonds Got Crushed. I’m Not Even Going to Mention Cryptos & DeFi

  1. HR01 says:


    All this carnage and STILL…no real bottom in sight. No capitulation.

    Suppose we should not be surprised given that we have a generation who knows only QE Infinity. Now they get to see it in reverse.

    There’s practically no liquidity out there. No depth. Lots of issues sit for long stretches with no trades due to wide spreads. Frankly am surprised that SPX isn’t hovering closer to 3K. We’ll get there soon enough.

    • Anthony says:

      All this carnage and STILL…no real bottom in sight. No capitulation.

      I guess it’s because it’s just starting and too many people think we are just in a “gully”. News media make their profits selling bad news and the war in Europe seems to have taken everyone’s attention, for now.

      • Harrold says:

        Carnage is when housing prices correct and banks are stuck with underwater mortgages. Just like in 2008.

        Carnage is when company earnings correct and mass layoff are announced. That’s when the market indexes tank.

        This is just the 2nd inning.

        • Flea says:

          Banks no longer carry mortgages,taxpayers do

        • phleep says:

          I think a lot of sentiment is, folks just waiting for a bottom and another magic rise. They may have avoided some of these grotesque losses, and still have (as I still have) enough cash to jump back in. The animal spirits are not thackamuffled yet. The crypto voices are still trumpeting they will soon enough conquer the world, laughable as those are about to have big legs down.

        • Miller says:

          My thoughts totally on this. We haven’t even gotten started in the asset price declines yet, especially for the housing bubble and so many overvalued stocks–including the FAANG stocks (Apple, Meta and Microsoft if anything even more than the others). An asset bubble by definition is when prices far exceed Americans’ incomes, especially for basic necessities like shelter and rent (and in ex. healthcare and education)–those prices simply have to come down, way way down, probably 70 to 80 percent declines in many sectors where the housing market has truly gone insane. In the process the Everything Bubble has swept up other assets in similar manias, including of course equities (and not even getting started on crypto and SPAC’s). Inflation is one of the ways that societal costs from these asset bubbles gets quantified, and interest rate hikes and QT have to be necessarily aggressive to correct them. There’s gonna be a rough, deep recession in early 2023, but it’ll be temporary and the US economy overall will be healthier for it.

        • Augustus Frost says:

          To the above post, the end of the credit cycle from 1981 means lower living standards for the majority of Americans for as long as it matters to anyone reading this blog, whether it happens immediately or not.

          It would be one thing if the country is what it used to be, but it isn’t. That’s what is truly “different this time.” The actual societal and economic fundamentals in the US are either mediocre or totally “suck”.

          There is a consequence to extended social decay and economic rot.

        • georgist says:

          Powell needs to break the assumption that taking a leveraged position on stocks via ETFs will inevitably pay more than creating wealth yourself.

          To do this he has to let the market drop. Then he has to raise rates again until it drops more. Then he has to come out, look into the camera and say:

          > not my problem.

          Then it needs to really drop and he needs to appear like he doesn’t care.

          That will do it. Nothing less.

    • andy says:

      Some popular stocks are setting new 52-week lows. Need to see Tesla under $50 before we even talk capitulation.

      • Miller says:

        Yep. The very fact that TSLA was valued more than all other car companies combined (and people still buying into the “it’s really a tech company” BS when all of its promises about battery tech and self-driving haven’t come to fruition–or are done better by other car-makers) shows that Tesla still has a long, LONG way to go down. It’s a viable company but it’s valuation should be what any other car company with its sales and profit profile would have, especially now that the big car-makers (even Ford and GM) are going all-in to make competing electric cars, China already makes a cheaper but functioning version and Kia, Hyundai, VW and Volvo are making (arguably) superior alternatives while BMW and Mercedes are moving in fast on the luxury EV market.

        • Massbytes says:

          Too bad none of the Tesla competition can make enough of them to beat out Tesla in any close timeframe. It is huge market since the vast majority of ICE vehicles need to be replaced. There is room for a few vehicle makers for a significant period of time. As an example, GM is ramping up the Hummer EV production to….12 per day.

      • kam says:

        The rotten corpse of Modern Monetary Theory was beget by Greenspan as his patrons stroked his ego.
        The problem with centralized control of an economy (and the U.S. like Europe and the old Soviet Union is definitely centralized control) is it takes a long time for the boat to start sinking.
        Now, there are little in the way of actual private, value-added tax-foundational enterprises to refloat the old hull that used to the “Made in the USA” proud and productive.

        • Digger Dave says:

          The Hummer is just another example of GM’s stupidity. That giant brick is only going to appeal to a tiny segment of the market. With all the mid-size and small crossovers out there, why they are not mass-producing in that segment is baffling, except when you look at the profits.

    • andy says:

      “Frankly am surprised that SPX isn’t hovering closer to 3K.”

      And that is why January 300 SPY put will probably return 400%.

      • sunny129 says:

        The Bear mkt bottom(SPX) is closer to 2600 but it has to go thru a lot of volatility + strong bounce(bear traps!) back – Lower of the HIGHS and Lower of the LOWs!

        Another 30%+ to go but how ‘long’ is the unanswered question!

    • Miller says:

      “All this carnage and STILL…no real bottom in sight. No capitulation.”

      Yep, especially in the housing market with the most absolutely ridiculous housing bubble in history and home prices still inflating in many US markets (not to mention Canada, Australia and NZ where it’s often just as bad)–this is one of the other devastating long term costs of irresponsible ZIRP and QE policies even when inflation was clear. Not just moral hazard, but investors totally losing their commonsense, and reckless speculators being rewarded while patient, thrifty savers and workers get harshly punished with the inflation (aggravating the FOMO stupidity fueling the Everything Bubble and its component asset bubbles in the first place). Even now with rampant inflation and the Fed clearly committed (and correctly) to halting it and shutting it down to save the USD and what’s left of confidence in US financial institutions–there are still idiots out there yapping that “stonks and housing only go up, better buy now!”. Interest rate hikes and QT are about to get even more aggressive, Paul Volcker-style. But the speculators are in full South Sea Bubble mode now.

      • Miller says:

        In fact the US housing market is so ridiculous and out of control that even 50 percent drops in home prices would be insufficient, it’ll likely take drops of around 70 to 80 percent in many markets to bring real estate prices and rents (worsened by the US housing bubble) back to the level of affordability for Americans in general. Of all the idiotic things about the Everything Bubble, perhaps the dumbest was extending its reach to basic necessities, particularly housing and shelter (along with healthcare and education). By definition, bubbles in such sectors are immediately apparent when prices out-strip Americans’ incomes, and housing has been one of the worst affected asset bubbles in one of Americans’ most basic needs. Incomes haven’t gone up any level near enough to afford the outrageous costs of homes in America today (or in Canada, Australia or NZ for that matter), so those prices have to come down. Way, way down–the price declines are only getting started.

        • georgist says:

          Housing bubbles are even more damaging than just impacting workers who can’t afford a home.

          Making money by simply speculating on homes is rentier activity. By definition it adds no value.

          As the bubble inflates more and more people realize that rentiers are making more money than teachers, than engineers, than most people adding real value. So they join them. People who were creating wealth stop creating wealth and become rentiers.

          The money supply expands as private banks issue credit like confetti, but the actual wealth creation is going down. It’s inflationary, but house prices are not included accurately in inflation stats. As real productivity drops the economy starts to stall, so the government cuts rates. Credit issuance increases again, rewarding rentiers. More people then become rentiers, dropping real wealth creation. Necessitating another rate cut.

          This has gone on for 20 years. People don’t understand what real wealth creation even looks like. Bankers have, via the financial press, changed our language. The word “rentier”, once common, no longer appears in the financial press. Landlords are always described as “investors”, despite being middlemen, forcing families to hand over part of their wages.

          Until this distinction is rediscovered, Americans are flaying around in the dark. Unable to lay a finger on the real enemy, as they lack the intellectual framework to describe the outline of their opponent.

          Instead of left vs right we need rentier vs wealth creator.

        • cb says:

          Georgist said: “Landlords are always described as “investors”, despite being middlemen,”

          some landlords like to describe themselves as housing providers

          isn’t that special?

        • eg says:

          georgist, the word “rentier” has disappeared because Economics has banished the history of political economy from its curriculum in order to bury the distinction between earned and unearned income — all manner of disordered thinking blossoms from this poisoned root.

    • Arya Stark says:

      The real carnage comes when tech jobs start disappearing in droves. Until then, party on Wayne

      • kam says:

        The real question about tech companies, Google, FaceMeta, etc. is how much will their advertizers pay in the future as the economy slides.

    • Nate says:

      One reason there is no capitulation or bottom is that the headline of worst half S&P 500 is accurate, but misleading. We think that means the stock market was historically bad when, in fact, the stock market began tanking at a near-perfect spot in the calendar to hit the record. Panic needs real drama and we haven’t seen mass layoffs, foreclosures, being imprisoned in our homes for a couple of months, etc.

      Part of the reason why it’s the worst half is that the market peaked right around the end of December / beginning of January and began its bull run. A 20% drop is painful, but just barely qualifies as a bear market. Heck, we recently experienced a 30% plunge during COVID when things seemed more chaotic and uncertain. If you aren’t prepared to weather this 20% punch in the face, then you really shouldn’t be putting money in the stock market for your own health and wellbeing. Put your money into less volatile assets, I guess.

    • Seen it all before, Bob says:

      Is nothing safe anymore??? To top this, the inflation rate of 8+% makes all of these losses even worse if you were eating and living off gains.

      I suppose it is to be expected when compared to recently when everything made at least 30% in gains. You couldn’t lose. The side effect was huge egos from the Crypto crowd after they initially made 10,000% gains with investing in ethereal coins. They reminded me of the DotCom crowd of 1999/2000.

      What goes up must come down. I think everything tries to eventually settle to the mean which is the inflation rate.

  2. OutWest says:

    This market collapse is breathtaking, and it’s just getting started…

    • Mad Puppy says:

      I have begun to wonder how the excessive leverage on Main Street is comprised and how it will unwind. The stimulus cheques that went to credit card debt may give people a bit of breathing room and probably some time. Cash out refinancing could become a significant problem before credit card debt pushes people over the top. It boggles the mind that anyone with a pulse and awake in ’08 could find themselves in such a predicament.

      • TryingToLearn says:

        I had a 3 year ARM on my first home and made my final mortgage payment from across the country in late 2007. Barely got out from under it.

        After two years of study I serviced grad school loans for the better part of a decade. Another poor financial choice just on the other side of desolation.

        After paying off my loans I had enough scars pay attention to the hype of the markets.

        I had many conversations with my wife about ignoring the real estate apps and fomo emanating from people throwing money at bad housing deals.

        It was unreal. If I hadn’t made so many mistakes before, I’m sure we would have fallen into this from multiple angles.

        I had well off educated parents but they did not teach or practice financial prudence. Had to learn the hard way. Multiple times.

        This is the third recession of my adult life, as I completed my undergrad in 2003.

        With a family now, we want a home of our own. I’m tired of fixing up someone else’s place.

        We’ve been saving in cash and I’m just waiting for it to all come crumbling down, hoping this time a macro economic cycle can go in my favor.

        • rojogrande says:

          I grew up solidly working class and in hindsight learned a lot from my single father about money. I hope the cycle goes in your favor, even at the expense of my asset values. I want my son to be able to afford a home too.

        • phleep says:

          Financial savvy (the real kind, not the fake boosterism recently) became important starting in the 70s inflation. We went off gold, Volcker cracked down on inflation, financial markets came alive, lots of training wheels fell off. My parents knew nothing of markets, but lucked into a great house deal and the Great Moderation, decades of stock growth with low inflation (and defined benefit pensions still paying out nicely for mom). It aint so easy nowadays. The Great Moderation is cracking up. But it always took discipline and common sense (if it wasn’t all handed to you).

        • Miller says:

          Glad you got things paid off just in time before the 2008 crash! Yeah one of the most embarrassing things about the recent asset bubbles in the US is how they’ve gotten Americans hooked on the “normalcy” of going deep into debt for assets (and even basic goods) that are way overvalued. Americans used to be famous for thrift and building savings, and to be fair that’s still the case in some parts of the world (ex. the Koreans and Chinese, or households in Nordic countries, Germany, even most of France value debt avoidance far more). What’s most frustrating is that the shift in US culture to debt tolerance makes things difficult even for those of us who value savings and frugality–it forces up prices for unavoidable necessities like housing, healthcare and education that should be much lower to match incomes, and encourages FOMO mentality making problem even worse.

        • TimmyOToole says:

          Good luck TryingToLearn be ready to pounce! Also stop fixing up your landlord’s rentals (if I read that correctly) :)

        • Seen it all before, Bob says:

          Good luck!

          In retrospect, it was in my favor at the housing bottom in 2012. I just didn’t see it.

          “I have no desire to suffer twice, in reality and then in retrospect.”
          ― Sophocles, Oedipus Rex

        • georgist says:

          Just having a nation of “financially savvy” citizens won’t cut it.

          If you are all living in a system that rewards rentier activity over real wealth creation, it doesn’t matter how well people can play the system.

          You will all be playing the system in a world where many people are in a zero sum game, adding no value, and therefore living off the back of others who do create real value.

          You need a system where it pays more to start a company than to flip housing.

      • Augustus Frost says:

        “I have begun to wonder how the excessive leverage on Main Street is comprised and how it will unwind. ”

        I suspect a noticeable proportion of home buyers who bought since the start of the pandemic are going to find themselves underwater, under duress, or both.

        But this time, I expect the source of the financial stress is going to come directly from corporate credit and somewhere outside the US most aren’t noticing, yet.

        Corporate credit quality is garbage. Many corporates have adequate (or even good) coverage ratios now, but many don’t (cash burn machines losing money. It also won’t take long before supposedly “good credit” start “sucking wind” as credit conditions tighten and the layoffs start. Many companies will also preemptively send pink slips in an attempt to meet EPS targets and save the value of C-Suite equity awards.

        • Cytotoxic says:

          “I expect the source of the financial stress is going to come directly from corporate credit and somewhere outside the US most aren’t noticing, yet.”


        • Cytotoxic says:

          No wait, I’ve got one better: ITALY. No economic growth in decades, immense debt. Greece but with more organized crime and a far bigger problem.

        • Augustus Frost says:

          I think Italy is a better candidate than Japan. The break-up of the Eurozone is a distinct possibility, despite all efforts to prevent it. I expect the “core” to survive and eventually federalize without the “periphery”.

        • Cas127 says:

          Re Corporates.

          I think the day of reckoning comes when a given junk corp has a significant liability (loan or bond) maturing and has to “roll over” the debt – but finds that it can only do so at 8% (or 12%) or maybe not at all.

          At Peak Stupidity, already junk rated companies were able to get hundreds of millions in bonds (each) at an insane 4%. These are companies that are near (or beyond) cashflow negative…at 4%. They survive only because they can draw on the loan and *maybe* sell something to keep the loan current.

          But the baseline for all loans in one way or another (Treasuries) has gone from 1% to 3% (so far)…and that incremental 2% (applied against hundreds of millions in debt) is enough to kill off companies that have been cashflow negative for years.

          If they can get the rollover loan at all – lenders know they are tossing hundreds of millions into close proximity of a furnace…and just because they did it once at 4%…doesn’t mean they’ll do it again (even – or especially – at 8% or 12%) once the lenders have sobered up.

          It would be really nice to find a consolidated Corp debt database, showing all corp debt maturities by individual day – that way those furthest down the gang plank could be easily identified.

          But while a Bloomberg terminal may have something like this (for $20k+ per yr) I’ve never been able to locate a free version.

        • c_heale says:

          The UK could be a candidate.

    • Augustus Frost says:

      What collapse?

      There has been no collapse. It’s been a very orderly selloff. Nothing even close to panic.

      What does remain is still the most inflated and most maniacal stock, bond, and real estate market until the eve of the pandemic. Stock prices are still about 10% higher versus February 2020. Not even close top “cheap”.

      Bonds are lower but yields are still in the basement, especially considering inflation and actual credit quality which is in the gutter. Real estate is still in a massive bubble. It hasn’t declined at all, yet.

      • The Real Tony says:

        If the stock market wasn’t 100 percent rigged an orderly selloff should have looked like a ponzi imploding. All the indexes imploding one day tripping all the circuit breakers and then everything shutdown down for 2 weeks to a month with a reopen at least 50 percent lower on everything then an orderly collapse after the initial sucker’s bounce at the reopen wiping out all the dip buyers as the indexes finally start to fall back to fair market value. This is what it should have looked like. This is how you know everything is still 100 percent rigged.

        • Augustus Frost says:

          Give it time. What you describe is coming, on the way to a 90%+ loss if there is a deflationary asset collapse or adjusted for price changes if it’s inflationary.

    • AuHound says:


      “What if they gave a recession and nobody got laid off?”

      You are right about it just getting started, and not just the market (be it stocks, bonds, crypto crap, or the entire economy)

      Specifically, the Fed’s “real time” GDP indicator, according to CNBC today, Just went from positive to negative of about -1.2% or so for Q2. As Q1 was also negative we are now in an official recession if the data does not change by July 28.

      I see a recession, but I don’t see any massive layoffs so far, just a few starts on that.

      If the recession is just getting started, along with 75 point interest rate hikes and QT, where will we be a year from now?

      And two years from now during election season?

  3. Anthony says:

    “It’s a mess out there in crypto land, and unlike the last crypto sell-off, this time there is a huge amount of leverage involved,”

    I wonder how much is actually leveraged and by who……and then what the losses are. I guess it will all come out in the wash……

    • andy says:

      Whomever commented they will not bet against Google. I’m starting to agree. It’s just too omnipresent. It will go down like the rest, but so many better targets to bet against.

      • Petunia says:

        I would bet against google.

      • Augustus Frost says:

        Google is predominantly an advertising company, not “tech”. That’s what they mostly sell, not “tech”. The advertising market is currently in a massive bubble thanks to the fake “growth” of the last 13 years.

        I expect the bottom of the ad market to fall out in the second phase of the bear market. By fall out, I’m talking about crashing.

        I might even be overly optimistic. Google has benefited from both an expanding pie and taking market share. They may continue to take share from traditional media (and maybe competitors) but the pie is destined to shrink, drastically.

        • phleep says:

          Google is trying to cozy up to the national security/surveillance state, posing as an indispensable partner to the future national government. It is juiced in deeply to the functional internet. It is a huge center of R&D. My prediction is that it will suffer a few regulatory slaps on the hand but is here to stay, almost as Bell Telephone once was. It is a national champion, from tghe perspective of USA’s self-image.

        • Augustus Frost says:

          I’m not predicting it will go away, only that its stock price will collapse along with the rest of the stock market. Probably worse (from the peak) since it’s a bigger beneficiary of the mania.

          I agree it’s part of the US national security state, which is a good reason it may eventually get kicked out of China altogether. If it happens, it will later in the bear market when the fundamentals are much worse.

          See what that does to its growth prospects.

        • Venkarel says:

          Googles next big play is AI. The have poured significant money into it, it is needed as designing chips are not cheap. I know someone how worked on their tensor project and he considers googles efforts up there with open AI.

        • Venkarel says:

          Well crap no edit feature. I apologize for the horrible grammar and word choice. I usually type out my thoughts out then edit, but that does not work when you accidentally hit the enter button before you are ready.

        • Anthony A. says:

          @Venkarel, Since there is no edit function here, I have started typing out my comment(s) in a Google doc, letting it sit a few minutes, then proof it again, then copy and paste it here.

        • Carlo says:

          If it’s advertised, you probably do not need it.
          The more it’s advertised, the less quality and lower quality it has…i.e. J**P.

          Saw a great sign on a car:
          “Boycott All Advertised Goods”

          The author of that is positively unAmerican!

        • DawnsEarlyLight says:


          Grammarly fixxes my mistaikes inn reel thyme!

    • perpetual perp says:

      Nice to see the illegal syndicates lose some money, while it was still in the wash, no less!

  4. Ravi says:

    The decline in the overall market will continue till cryptos find a bottom. And they will find a bottom at their true intrinsic worth of zero.

    • phleep says:

      There is some value that will survive, but nothing like the huge overhang that is still there. FTX’s play (cash-rich, cherry-picking among the scraps) is interesting to watch.

      • Miller says:

        Yep crypto has a ways to go down still, though I suspect there’ ll still be some underlying base value for it in some form in part because of the instability of some fiat currencies in many places (even though cryptocurrency is usually a lousy alternative), and because there are so many shady transactions where they prefer crypto as alternative (even though the blockchain can be easily followed–the whole point of the blockchain is to monitor and record transactions). That’s probably where the main demand will come from. If nothing else, crypto will always have a good market with money launderers, not just criminals and drug cartels but also many billionaire Americans and from other countries trying to find tax shelters, based on things like the Pandora papers. And even now having purchases available in crypto is an in-thing in the marketing of more companies with online advertising.

        • phleep says:

          > even now having purchases available in crypto is an in-thing

          That will vaporize with pet rocks and beanie babies, for a long winter.

          Folks on the street in El Salvador won’t even accept it though it is legal tender. That kind of people’s noncompliance is saying a lot. The US dollar is still de facto money everywhere.

        • Flea says:

          Uncle is watching crypto ,part of controlling everything

        • Seen it all before, Bob says:

          Even tulips, beanie babies, and pet rocks didn’t drop to zero.
          There is some value in crypto. I suspect we are finding out that value.

          However, bankrupt company stocks do drop to zero. Except on EBay where paper stock forms have some sort of sentimental value. ie You can buy a General Motors paper stock share grant for about $5 that used to have a value of $20,000. It is beautiful and has artistic value I’m sure. Crypto cannot declare bankruptcy so it is safer than some company stocks.

      • Augustus Frost says:

        Crypto is and has been in a massive bubble. It’s also aside consequence of the global asset mania and without it, wouldn’t exist at all.

        I mean, why would anyone outside of maniacal market conditions value nothing (what crypto actually is) at more than zero, never mind close to $1T now and $3T previously?

        Anyone can create a crypto at any time with no limitations on supply. Like the $47MM announced this week from some company I can’t even remember. Of course, offering 20% in a near ZIRP world to go with it is completely unsustainable but that’s beside the point.

  5. SnotFroth says:

    Powell must have nightmares of what putrid corpses are inexorably floating up to the surface of the financial system.

    • andy says:

      Nah, sleeps soundly and snores.

      • SnotFroth says:

        Perhaps that’s why he didn’t notice inflation creeping out from under his bed.

        • Old School says:

          Probably demonstrates that central bankers fear deflation a lot more than inflation.

        • phleep says:

          The Ghost of Stagflation Past is rattling its chains and calling his name.

      • Old Ghost says:

        I thought “oozing” was an apt verb to describe the markets. Much better than some of those from Dr. Suess.

  6. John Apostolatos says:

    What’s so scary about these numbers is that there was very little QT and rise in interest rates before all of this started happening. It happened mostly because confidence in the Fed Put was shaken.

    No doubt we will get at least a 50% haircut in equities (followed by home prices) as recession sets in and Powell refuses to restart QE and cut rates back to zero.

    Europe will be in recession by Fall the way things are going and Japan could fall apart, which will further effect corporate earnings and kill the zombie companies.

    • phleep says:

      > Japan could fall apart

      I wonder what THAT would look like for east Asia?

      Pillars of the postwar order are rattling a bit. Not to ignore the fragmentation of the EU (from the financial side outwards) if it goes worse-case.

      Worse-case (not even “worst”), a 1930s sort of profile.

      • Miller says:

        I’d just add that as bad as their own finances are too, one advantage that Japan and the EU have is as trade surplus countries. Plus having much lower private and household debt than the US, whatever the state of their public finances (where much of the EU, Japan and US are all a mess). That provides a lot of wiggle room.

        • Sams says:

          Actually, infrastructure may the largest adventage Japan and Europe have vs the USA. Scaling down, their infrastructure may still operate efficient.

      • Miller says:

        Putin’s Ukraine blunder–launching an offensive war as a clear aggressor–is ironically probably helping all those places, by providing an external bogeyman (and Russia no less) to rally the people around. Even though the EU, Japan and the US all have major messes financially and needs for institutional reform, recent events have given even their most incompetent leaders a basis to unify the people against an external problem, politically and administratively at least, to help distract from the bad policies at home. It buys time at least to get their act together, though it remains to be seen if Western leaders will actually use it effectively.

      • Flea says:

        Russia just nationalized there natural gas ,big problem for a country with no energy

    • Augustus Frost says:

      50% in this phase of the bear market. A 50% decline in the S&P500 would be around 2400, slightly higher than the March 2020 low.

      That wasn’t even close to cheap, which is before earnings collapse and dividend cuts start in mass.

    • MiTurn says:

      ” Japan could fall apart”

      JA, agreed. This is a fascinating problem with no clear solutions. It appears that Japan has painted itself, debt-wise, into the proverbial corner.

      With huge debt and demographics working against them, it’s only a matter of time before something breaks. At the very least, I suspect pensions will be cut…imagine a lot of old people with pitchforks.

      • NoPrep says:

        Elon wishes childless Japanese (and US) adults would follow his example and start making babies immediately, so as to prevent a demographic based collapse of civilization and human extinction that he clearly is worried about. But even his Twitter-based influencing and persuasive superpowers, which he has given a rest for over a week now, aren’t going to change many people’s reproductive behavior.

        • Ron Morse says:

          The administration seems to prefer we all learn to speak Spanish so as to be able to better communicate with the labor force.

          They may be onto something, but it’s one of the very few things that makes me glad I don’t have any kids.

        • Sams says:

          Elon and others may not consider that exponential population growt in other spieces usually follow a boom and bust pattern. Lemmings anyone?

      • Flea says:

        American is in same boat ,I believe we’re both on Titanic

  7. Matthew Scott says:

    What do people see for worse case scenario? What would be the chain of events that put us in a new 2008 type meltdown? Where are the land mines of financial system this time?

    • drifterprof says:

      Once the spinning top starts wobbling erratically, it’s very hard to predict which direction it flys off and crashes.

      • phleep says:

        My brain instantly starts producing scenarios, in a scary multitude. Suddenly I realize it is too easy to generate scads of these.

        At some moments (to borrow an ancient comic book phrase), suddenly the world is made of glass.

        • SoCalBeachDude says:

          Glass is actually very durable and transparent. I have hundreds of pieces that are at least 100 years old and they look and work just as beautifully as the day they were made.

        • rick m says:

          Scbd- glass is durable and transparent. It’s also fluid. Just takes a while. Windows in sixteenth century houses where I used to live in Diessen am Ammersee were thin on the top and thick near the bottom.

    • Augustus Frost says:

      The trigger for your scenario is psychological, equivalent to a “run on the bank”, always. That’s what happened in 2008 which changed perception towards mortgages and then other credits.

      Generically, risk aversion leads to tightening financial conditions, including central bank policy. Lending standards also may (and will) tighten independently of monetary policy, as creditors make their own decisions to lend and the terms.

      Specifically, I’m going to guess corporate credit and sovereign debt. Corporate balance sheets (including the US) are mostly garbage compared to the past. Huge debts incurred by very weak borrowers globally.

      • phleep says:

        > Corporate balance sheets (including the US) are mostly garbage

        Without a Fed bailout, that clock is ticking. This will be the real test of nerves.

        If the garbage debt can’t be rolled over, and sales don’t jump up magically, we get waves of layoffs, demand destruction, deflation, bankruptcies …. Lots of nice digital currency appears in the inbox, and we see if it finally IS different this time.

      • Sams says:

        Sovereign debt. If shortage of food start to make countries disintegrate no one will pay their debt.

    • Tom S. says:

      I think the fed will cut rates the second inflation dips below 2%. Then, they will act surprised when inflation returns with a vengeance. Then they will hike again and actually might even see an attempt at targeting r*. Once at r* the balance sheet unload ramps as well. Inflation remains elevated until all the liquidity is drained from the system.

    • The Real Tony says:

      The collapse that should have happened in 2007/2008 has just been postponed for all this time meaning it will be so much worse this time.

      • kam says:

        “Too Big To Fail”
        -translated into English, “our criminal pals in Banking and Wall Street, will be made whole from the wages of the little guy and his future children and grandchildren.

    • Flea says:

      Right in front of your face,everything is deflating which kills the rich,won’t be long before 2 faced Powell bends over for the elites again

  8. SocalJimObjects says:

    Even Amazon is getting desperate. They are planning to do another Prime Day in Q4.

    Prime Day = Save The Quarter Day.

    • phleep says:

      What if you had perfect logistics and nobody came?

      • SocalJimObjects says:

        American Muppets will come. Consumption is literally the raison d’etre of their existence.

        Let me give you a story. A friend of mine once went to a top ranked college for his Data Science Masters Degree. One of the assignments in a class was to predict if Amazon customers would buy an item given a number of variables. And yes, the class was using a data set that came from Amazon. As a first try he predicted yes for all entries in the test set, so he was basically not using any extra information at all for his predictions. When compared to actual results from Amazon, his results weren’t that far off. His “dumb” model predicted that 90% of the customers would end up buying, while the actual result from Amazon was 94%.

        Muppets will buy, buy, buy till the end of days.

        • c_heale says:

          But do people have enough money to buy things that aren’t essential to life, is the question.

  9. Franz Beckenbauer says:

    Funny that Mr. Richter does not mention the one asset that is up over the first half of the year while everything else has crashed.

    The one that the likes of Ray Dalio and Danielle DeMartino Booth recommend.

    But he “does not like it”.

    He cannot be taken seriously.

    • Wolf Richter says:

      Franz Beckenbauer,


      It’s making a yield over 2% and hasn’t lost a dime and there is no volatility. And you don’t wake one day, and see that you’re down 3% overnight.

      Or are you thinking of gold?

      It’s down just a tad for the first half, now at $1,788, pays no yield, and it had lots of volatility (it’s down 12% from March 8)…. In other words, there is some risk, and it has carrying costs and complications if you own physical gold, and there’s a spread between the spot price and what you get when you sell it.

      So there are lots of things I didn’t mention, including cash, gold, other commodities, foreign currency, etc. largely because they don’t belong into this line up.

      • Xavier Caveat says:

        I see Wolf as more of a myrrh man.

        • BobC says:

          Follow my lead, I took all my money out of crypto and put it into frankincense!

      • Iona says:

        Wolf, what do you make of the latest from Michael Burry?

        • Wolf Richter says:

          He is either #1 effing clueless or #2 trying to manipulate the markets with braindead BS. My vote goes for #2. I cannot believe that he is such a clueless idiot as to qualify for #1, but he could be.

          I will post my Fed balance-sheet discussion next Thursday, when the Fed’s balance sheet comes out that includes the Treasury run-off for June 30 (Treasuries run off mid-month and end of month), which wasn’t included in yesterday’s balance sheet which cut off on Jun 29 (Wed). MBS and Treasury holdings and total balance sheet are ALREADY DOWN by a bunch from the peak in April. But to get the complete June action, we gotta wait till next Thursday.

          I will make sure to ridicule Burry and all the other tightening-denier morons out there.

        • Iona says:

          Thanks wolf, thought it was probably a case of comparing apples to oranges based on the coverage and release dates. Burry posts a lot of cryptic stuff, I think he may be trying to seem smarter than he is.

        • Iona says:

          One more question Wolf, did you see the massive volume today in the 10 year ETF, ief? Is that selling into strength or something else? Sticks out like crazy.

      • Flea says:


  10. ispanyolca says:

    Dear Wolf
    Why do you use “DiFi” ? We know as DeFi
    ıs there any joke ?

  11. Greg says:

    Wolf, I have respect for your blog and economic insights and that is why I have been reading almost every blog for 6 years. In your words you “ridiculed” me for saying the “in their mind” the Fed Res does not want to hike rates or they wouldn’t have sat on red hot inflation for 18 mos and the ffr should be at 10% and not 1.5%. I also said the deficit numbers you posted were too low do to the Fed paying interest on reserves which means zero remittance to the treasury and the Fed Gvt, taxpayers on the hook for hundreds of billions in Fed losses due to zero remittance and losses at the Fed due to interest payments on RR and reserves. If rates rise fast and towards 7 to 8 % the losses will be 400billion annually and, of course, the Fed can’t rollover debt fast enough to stem these losses. Thxs for your economic insights as I do value them this was just released this morning

    • Wolf Richter says:


      You said:

      “which means zero remittance to the treasury and the Fed Gvt, taxpayers on the hook for hundreds of billions in Fed losses due to zero remittance and losses at the Fed due to interest payments on RR and reserves. If rates rise fast and towards 7 to 8 % the losses will be 400billion annually and, of course, the Fed can’t rollover debt fast enough to stem these losses. Thxs for your economic insights as I do value them this was just released this morning”

      This whole section is just nonsense, and I pointed out why before:

      1. remittances maxed out at $118 billion in 2015. They were $30 billion in 2007, and that’s kind of where they’re going back to as the Fed is shedding its holdings. The Fed should have never bought this pile of assets. So now it’s cutting the pile down, and the remittances will go back to pre-QE normal.

      2. The Fed is doing QT, which means it’s taking a few trillion dollars of liquidity out of the system over the next few years. Reserves will continue to plunge. Reserves already plunged by $1.1 trillion so far this year. Go LOOK AT IT!!! RRPs will plunge and go to ZERO as QT progresses. To speed up the process, the Fed can stop raising the rates it pays for RRPs, and then those amounts will vanish faster as money market funds will plow their falling balances (falling because the Fed is draining liquidity) into other stuff.

      3. the Fed earns about $122 billion a year in interest from the securities it holds (it did last year). That’s an income of $334 million a day. That’s enough to pay $250 million in interest on PPRs and reserves and have a profit of $84 million day.

      • SoCalBeachDude says:

        Moreover, the Federal Reserve annually rebates 94% of its earnings to the US Treasury and has done that for around 110 since its inception. It is the ONLY federal government agency that earns its own keep and generates an actual profit for the US government and its taxpayers.

        • Aging in AZ says:

          Please look up an electrical utility, San Carlos Irrigation Project. This is part of the Bureau of Indian Affairs under the Department of the Interior. The dam at the San Carlos Reservoir in Arizona silted up long ago, so this government agency resells Arizona Public Service power to four small communities in southern Arizona – at a profit – and is deemed by locals to be the only profitable federal agency. Further, is the Federal Reserve really a governmental agency?
          My apologies in case of error.

        • Wolf Richter says:

          The Federal Reserve Board of Governors, of which Powell is the chair, is an agency of the US government. The 7 board members are appointed by the President and confirmed by the Senate, and they’re employees of the USG.

          The 12 regional Federal Reserve Banks (such as the NY Fed and the Dallas Fed) are private corporations that are owned by the banks in their districts.

  12. Old school says:

    You never know where the bottom is. I picked up a few shares of 3 of the 5 stocks I try to value. None are at capitulation levels, but I try to be a little mechanical and buy when they hit a certain valuation metric. Have went from about 2% to 10% stock exposure. Seems like if you buy strictly on fundamentals you will buy early and sell early, but to each their own investing style.

    I missed the big run up in commodity stocks even though the signs were there to be a buyer.

    • historicus says:

      The old adage
      You don’t need to pick a bottom, just identify one

      • VintageVNvet says:

        Good ol’ JP Morgan’s adage was:
        Buy on the way down, but only if sure you can hold through the bottom,,,
        because you can never know exactly when the bottom will occur;
        sell on way up for same reason.
        Of course it’s different this time because of the very likely interference of the Federal Reserve Bank???

      • Charlie says:

        historicus – I was always told that the only ones who try to pick bottoms are proctologists :)

  13. SpencerG says:

    I swear that I will never understand the stock markets. How can Tesla still be at a P/E of 91 even though it dropped by half earlier this year… but meanwhile oil stocks dropped 16% in a single month when the price of oil has never dipped below $100 a barrel for even a single minute in June???

    As the country song goes, “God is great, beer is good… and people are crazy.”

    • Old School says:

      As Buffet says in the long run stocks are a weighing machine. Most good companies are going to grow until they get to a terminal PE between 10 – 20 depending on industry. If Tesla is around in 30 years they will be there as well.

    • phleep says:

      > How can Tesla still be at a P/E of 91

      Most all the supposedly objective and scientific people I know are shot through with faith-based quasi religious frenzy for all kinds of things. Not that I lack my own bits of it.

      Yet these same folks sneer at whatever faith isn’t their own. We are all helpless tidal creatures clinging to hope that is vapor. But sometimes we get lucky.

      • Jim Mitchell says:

        Hi Phleep
        “Everybody knows the dice are loaded. Everybody rolls with their fingers crossed.”-Leonard Cohen, “Everybody Knows”

      • The Real Tony says:

        A P/E ratio of 91 with every accounting trick in the book so the P/E ratio isn’t even higher.

    • MiTurn says:

      “I swear that I will never understand the stock markets.”

      Unfathomable. One word: Uber.

    • Augustus Frost says:

      The fundamentals have nothing to do with valuations.

      It’s psychological and this is a mania, the biggest one ever.

      • Nate says:

        I dunno tulips and stamps.com were pretty wild.

        Tech seems kinda obvious because we’ve seen it before. They don’t have to worry about earnings until, suddenly, they do.

  14. Michael Engel says:

    Stocks, bonds, creepto are all down, but Reverse Repo is up to $2.33T,
    to a new all time high.
    Something is wrong in the o/n market, sending our safest banks in the world down.

    • phleep says:

      If the plumbing cracks at that deep a level, we are scrooged.

      • phleep says:

        Pay no attention to the dollar-conjurers scrambling behind the curtain, in a fractally accelerating frenzy.

    • Old Ghost says:

      “Reverse Repo is up to $2.33T, to a new all time high.”

      Dang. There is that $2 Trillion number again. Isn’t that the amount that Biden is supposed to have handed out in 2021 ?

      ….and the amount that was destroyed in Crypto-garbage recently.

      Maybe the people asking where that money went can put it all together now. But I wouldn’t bet on it.

      Regarding inflation. The FRB has a plan to deal with that. It is a problem of wages; every problem that America has with inflation is the problem of the working people earning too much money.

      Now……..I am going to go take a lookie see if anyone is really selling gold at Wolf’s $1788 price.

    • Anthony A. says:

      Capital One 2 yr. CD @3.3%. Better than most things!

  15. Michael Engel says:

    The DOW made a round trip to Feb 2020 high. Wilshire 5000 weekly got support from ma200.

  16. Michael Engel says:

    The stock markets lost $12T in the first half.

    • Old School says:

      If as some say the reverse wealth affect is 3% then that is $360 billion less spending that’s going to happen the next 12 months. I would have thout it was maybe 4 – 5%.

    • Wolf Richter says:

      It lost the fake wealth that it created in the prior year.

      That $12 trillion in fake wealth went back where it had come from: nowhere.

      • Yancey Ward says:

        This is ignoring the changing between hands, though. Someone bought at that top, someone sold at that top.

        • Wolf Richter says:

          As an individual you can lock in your wealth by selling at the top before the price drops, with cash that the buyer, who bought at the top, gave you. You lock in your wealth and it remains flat, and the buyer loses his wealth when the price drops (but not you because you’re out of the market because you sold to the buyer), and the net effect for the overall market is that the wealth vanishes.

          When assets are repriced, everyone holding them at the time is losing wealth, which just vanishes.

  17. FuzzyBear says:

    Hey Wolf, I enjoy reading your blog, could you write a post about what blogs and websites you read and get your data from? Thanks!

    Also, I haven’t yet read anything anywhere about the effect money losers like DoorDash and Uber finally discovering fiscal prudence will have on Facebook, Google, Amazon, and to a lesser extent, Apple. When the rivers of cheap cash stop flowing, the billions spent on advertising and AWS will dry up and their famous flywheels will turn to millstones. Those salesforces and datacenters must cost a fortune.

    • Wolf Richter says:


      Stock data in this article comes from YCharts (behind paywall) and from S&P (the S&P 500 sectors) — as pointed out in the article. S&P sends this stuff to me by email.

      I don’t look at other blogs or YouTuber stuff. I do my research and data checking and analysis and thinking. That’s my job.

      I look at the data as released by data providers, such as government agencies, the Fed, and private-sector data providers, such as S&P (which now also owns the Case-Shiller). I look at 100s of reports every day. I get 100s of reports in my email every day. I’m on the mailing list of various Fed entities (such as the NY Fed) and other data providers. I look at everything at the WSJ, Bloomberg, CNBC, and MW. I glance at the ZH twitter feed to see what kind of braindead headlines are going to get dragged into my comments section a few hours later.

      • Wes says:

        Yes, they’re braindead and having to say so much about nothing.

      • kam says:

        ZeroHedge, once a rough-and-tumble war of competing ideas.
        Now (I think owned by Google or Goldman) a sight of mediocrity and shunning.

  18. phleep says:

    From the financial geek side:
    If you are right (to exhaustion), why aren’t you rich?

  19. drifterprof says:

    They shouldn’t have tried to DeFi the Fed’s power.

    They WILL be assimilated. Resistance is futile. They must comply.

    • phleep says:

      It would have helped if their internal finances were not such an investor-punishing shambles. That has been laid bare. Their risk controls were a very ugly joke, a low grade internally rigged casino bet (for the little guy) masquerading as the rebel future. Now their own elite is being bailed out and their peasants thrown under the bus.

      So, with due respect for experiments that might sometimes work, spare me the True Believer chants. Save that for bigger fools, and these are not in great abundance here.

      • phleep says:

        The Winklevii are touring and playing rock music, to show what heedless twits they are.

        • SoCalBeachDude says:

          The Winkletwinks need to find a new gig. Perhaps breaking rocks in a federal prison is in their future.

        • Nate says:

          Rock is deader than crypto. Not the brightest.

  20. Ben Sargent says:

    Oil price Oil Stocks Peak Shale Refining capacity
    Investing in domestic oil stocks
    Be sure one understands the relationship between production volume and reserves and future cash flows to understand how to value these USA shale oil companies.
    They can have spectacular short term profits but their sustainability needs to be well understood for any long term holding investor.
    Likewise refining capacity in USA long term will continue to decline as USA oil production peaks.
    Timing for this is uncertain of course.
    Recession global oil price and global demand all influence the outcome significantly.

  21. SoCalBeachDude says:

    Today is set to be yet another truly fun and amusing days in the adventures of true price discovery in the markets. Get out the caviar and crackers and enjoy the hilarity of it all.

    • phleep says:

      Watching illusions of free-stuff riches being vaporized, is a sort of invigorating sport, clearing the sinuses, like eating wasabe.

    • Anthony A. says:

      Elon’s Twitter silence is now at Day 9. His Tweets usually move the markets. Maybe he realized his Crypto losses a week ago?

  22. SoCalBeachDude says:

    We went to BBBY yesterday to pick up a $5.00 purchase to help them out in this time of dire financial need and the store near us had one single checkout clerk working and despite sending us two emails that the item was ready for pickup she couldn’t find it when we got there and personally went to get another one from the aisle where it was stocked while the 4 customers waited in her single line. I sure hope their Buy Buy Baby doesn’t quickly become Bye Bye Baby!

  23. David Hall says:

    2000-2010 was a lost decade. It was hard for retirees without much runway left to recover. They did not save enough.

    There is an energy crises in Europe. LNG prices surged. U.S. oil inventories have been depleted. There is supposed to be a chip shortage, but chip stocks are selling off. Chip fabs are under construction. New car inventory is depleted. There is a manpower shortage. Fewer people filed continued unemployment claims. Someone is working three part time jobs to try to pay the rent. Rents rising faster than wages. More wage push inflation is probable. Plenty of food in America while a fertilizer shortage threatens third world food security.

    • Cytotoxic says:

      That is very much the truth of that decade. The GFC wasn’t the real disaster, it was the cure to the real disaster which was the housing bubble and the USD bust that caused it and so many other pathologies.

      • Augustus Frost says:

        The GFC didn’t cure anything. If it had, the mania would be over with the economy recovering organically without artificial stimulus from monetary and fiscal policy. Instead, we’ve had a fake economy for the last 13 years.

        The mania is very much alive, even with the current limited retracement described in this article.

  24. Beardawg says:

    Market cratering, yet Bonds won’t give up viable yields. Feels like that slow walk to dependency on the gubment for retirees who saved is officially in motion.

    • historicus says:

      A slow walk back to having a choice between fixed income and equities….a choice that was around for decades, just not the last 12 years. It is fair and normal to have a choice between the two.

      Former Fed Gov Fisher said it all when he admitted the Fed FORCED, his word, investors to take more risk. ie, take away the fixed income avenue and force investors to buy stocks or real estate. Worked well for a while.

      • drifterprof says:

        An investor is NEVER forced to take more risk. It’s a choice.

        • phleep says:

          Every path now is fraught with risk. That’s the whole point of what is happening. That doesn’t make them equal (I sure prefer mine), but everybody, every “investor” (each of us, all of us) is being walked out onto a plank of “more risk.” So yeah, we are FORCED to take on more risk, structurally, ALWAYS for now, not “NEVER.” What’s YOUR supposed risk-free “choice?” Not doing something is a choice too.

        • drifterprof says:

          No one mentioned risk-free. That’s a straw dog.

          One can simply choose not to be an “investor” at the times it really sucks to be an investor.

    • Augustus Frost says:

      What cratering?

      Markets haven’t done that yet, not even close.

      • drifterprof says:

        It’s like, there is a sky-high volcano, and the magma is cratering at the apex of the volcano.

      • phleep says:

        Wilting, staggering, bleating, puking small bits. Looking green around the edges. But this party just started.

  25. historicus says:

    So the recession talk begins and the suspicion is that the Fed will begin to ease off rate increases …
    If the Fed does this, they will again make a mistake…and all their “mistakes” seem to be in the same direction….let inflation run.
    The Recession, IMO, is caused by the inflation we just incurred at 8%…but the mantra developing is that Fed Funds at 1.75% is too high.
    Inflation is crushing the economy, not high rates, and if the Fed fails to understand this and not stand up to it, we are in a bad bad place.

    • drifterprof says:

      Gridlock, partisan fanatics, and lobbyist corruption are what is “crushing the economy.”

      • rick m says:

        Isn’t gridlock the result of equal access by lobbyists and partisans on both sides? seems like that might not be all bad. If it keeps them from spending our money on anything except our highways and our armies, that would be ideal.
        America, the global leader in Awesome since 1776, as an ad says. May our “friends” always have reason to envy and fear the United States. These are more reliable than the softer emotions. We’ve fed and defended the world for generations. They can take a turn at the oars for a change.

    • ru82 says:

      Lots of talking heads of hedge funds are saying such things on Bloomberg.

      They are saying fast price drop in everything may mean the FED will not have to raise rates much more and just use QT to slowly drain the liquidity in the housing market.

      I don’t think the FED wants a complete crash in housing. There are so many jobs in this industry from construction, to remodeling, to furniture, to lumber, etc. I do think they want to reign in speculation. A crash in housing means that a lot of middle class people will lose their homes but I doubt if the deep pocket Wall Street landlords would be effected. They would just scoop up more homes?

      In my area, there is a housing shortage for starter homes but nobody is building them. I do think some of the Wall Street landlord companies like Blackstone that are building homes to rent are the ones actually building starter homes as they are not trying to maximize profits per home sale like a builder such as Toll Brothers. Blackstone instead is looking these homes as long term investments as a cash flow?

      I am just sort of rambling here and thinking out loud.

    • Wolf Richter says:

      “… and the suspicion is …”

      No, not suspicion, but “wishful thinking” or “fervent hopes” or “dreaming.”

      There is no room for suspicion. Everyone at the Fed has been very clear on that. Those rate hikes are coming till they hit “neutral” and a little beyond.

      • Nate says:

        I think you’re right that’s their posture now but Powell is kind of a flake. He clearly owns the housing bubble as it’s classic asset inflation by running rates too low for too long, letting things get out of hand.

        If you are counting on Powell or this fed of Keynesian Trump and Keynesian Dems appointees maintaining a firm hand, I would hedge a bit.

    • Jdog says:

      The Fed primarily concerns itself with what benefits its member banks, not the economy. High inflation kills banks profits as it erodes the value of the future loan payments, making long term loans unprofitable or even creating loses. That is why the Fed will do what it can to snuff out high inflation regardless of the cost to consumers, or markets.

  26. Poor like you says:

    “I’m Not Even Going to Mention Cryptos & DeFi”

    You just did! ;P

  27. drifterprof says:

    INTC down to 36?

    What’s up with that?

  28. ru82 says:

    Commodities have been crushed the past 2 months and are still falling.

    The grains (wheat, corn, oats,) are down 20% to 40%. Oil is down 20%, Nat gas is down over 20%.

    Everything is pricing in a recession and less demand it appears.

    Has a drop in demand started yet? I am not seeing at restaurants or cars.

    The market it down but the home builders ETF is up. Companies in this industry like LEN, TOL, HD, and SHW. What is up with that.

    New home sales rose in May after declining for 5 or 6 months. I don’t understand that either.

    • ru82 says:

      I meant the markets are down today but home builders are up today.

      • drifterprof says:

        Maybe retail buyers are thinking a real estate ETF is a safer refuge, and are transferring their money from “growth” stocks.

        • ru82 says:

          @drifterprof. Good point. New homes sales did rebound in May which is odd. Maybe they think the downward trend is over and mortgage interest rates have peaked. Afterall, 6% is still a historical good rate.

          But I don’t think the slowdown in housing is over?

      • sunny129 says:

        Home builders ETF – XHB ( which contains LEN, DHI, HD and LOW+) is down by 35% YTD!
        They will go down as the earnings recession creeps in the next 2-3 weeks. And then CPI on July 13th!

    • Lauren says:

      In regard to oil and coal at least, Governments continue to tax supply (windfall profit taxes) and stimulate demand (gas cards and gas tax holidays).

    • Jdog says:

      “Everything is pricing in a recession and less demand it appears.”

      There it is.. Inflation is not just killing disposable income in the US, it is doing it worldwide. Food, transportation, and housing are necessities, and when they eat up a bigger share of disposable income, there are repercussions.

  29. SoCalBeachDude says:


    MW: Forget the 1970s — this market is drawing comparisons to the 1870s…

  30. phleep says:

    Can Xi bail out/buy out Italy? Japan?

  31. Jdog says:

    For everyone who worships government and the Fed as all powerful entities who are able to fix whatever happens, watch carefully over the next year or two as the economy spirals out of control, crashes and burns.
    This should be an educational experience, and a testament to trusting corrupt institutions…

    • Wolf Richter says:

      “…as the economy spirals out of control, crashes and burns.”

      Financial markets and housing markets will do that. The economy will be ok-ish.

      A recession is precisely what is needed to work off the excesses and let supply chains catch up and become efficient again, and to blow out the zombie companies that are clogging up the land, and to blow out the zombie debts. So yes, investors are already coming to grips with some of this stuff, and there will be a lot more for them to come to grips with as some of their fake wealth returns to where it had come from (=nowhere). The real economy, after some muddling through this phase, will come out ahead, if that process is allowed to play out.

      • SoCalBeachDude says:

        What ‘real economy’ are you talking about?

      • Augustus Frost says:

        What’s your timeframe?

        I ask because your scenario isn’t consistent with a major turn in the credit cycle if it actually changed in March 2020. That’s the only thing keeping this house of cards of a financial system and economy afloat.

        The excesses and distortions in this economy (US and all major countries) are the worst ever and it isn’t just post-pandemic either. It’s not even close.

        I get your argument about the cash floating around but if it were that simple, it would be possible to maintain artificial prosperity essentially forever. That’s not going to happen.

        Right now, I think market interest rates might have peaked short term or will soon, irrespective of FRB monetary policy. If it has, that will or may provide temporary respite, like maybe six months to a year. But after that, I’m sticking with rates “blowing out” or if the FRB tries to prevent it, the DXY tanking.

        Either way, living standards are going to decline more than what’s happening with current inflation. A lot more.

        • VintageVNvet says:

          Don’t agree AF:
          ”I get your argument about the cash floating around but if it were that simple, it would be possible to maintain artificial prosperity essentially forever. That’s not going to happen.”
          Some folks, maybe a bunch, think the entire ”prosperity” concept IS a scam that CAN be ”maintained” for eva.
          Only question is for whom and where.
          We certainly know of families all over the globe that have been ”prosperous” for many many centuries;
          some folks think the current situation is just part of the inevitable and continuous ”re-balancing” of world hegemony between oligarchy of the two branches of humanity, one that went north and east and the other north and west meeting in North America starting in early 17th century.
          And likely to take another century or three to be settled.
          That and the advances of theoretical physics also continuing will lead to a veritable horn of plenty for everyone.
          Just a few wrinkles to straighten out on the way, eh???

      • Sams says:

        I fear that this time is different. Evererything finnced and leveraged may cause supply to be shut off as producers and manufacturers don`t get financing to start the next production run.

        The farmers don`t sow, no new oil and gas fields developed and so on. Famine with food on the shelfes as there is no purchasing power.

      • Jdog says:

        “The economy will be ok-ish.”

        IMO that is going to depend a lot on where you are, and how much of your local economy depends on the construction industry, and how much is in recession proof industries. When a large segment of the population is employed in construction related employment, and construction goes away, unemployment skyrockets and local business suffers.

  32. Michael Engel says:

    If we are in recession JP isn’t likely to raise rates, or raise them gently.
    If we are not, the stock markets might rock and wall street will send the FANG up.

    • Putter says:

      JP needs to crush oil. This will achieve 2 of Bidens goals. Stomp inflation and Putin. There will be no relief until that happens, which will require a recession.

      • Sams says:

        And it may stomp future supply. Why invest in oil production if the prices will remain low?

        The combination will be interesting from the economy theory side. Low price and little supply.

      • Jdog says:

        Crush oil, crush the economy that runs on it.

    • sunny129 says:

      We are already in recession technically! Atlanta Fed – 2nd Qtr GDP is NEGATIVE 1.6%!
      NOT easy to tame inflation after 41 yrs of deflation by this ‘dovish’ Fed, way behind the curve! The truth will come out on July 13th 8.30AM

      More likely a huge (Private) credit event like LEH within 3-6 months.
      ECB and BOJ are also prime candidates.

    • Jdog says:

      What you fail to understand is that that what is good for the US economy, and what is good for the member banks of the Federal Reserve are not necessary the same. As you saw plainly in 2008, the interests of the banks always comes before the US Citizens. Banks cannot tolerate high inflation so JP will crush it regardless of the effects on the economy. You have to realize who your masters are….

  33. Michael Auten says:

    Every S&P 500 Sector fell in First Half, Semiconductors cut in half!

  34. unamused says:

    I was musing on the meaning of the word ‘unsustainable’ the other day when it occurred to me that when you remove the flywheel from an internal combustion engine and open the throttle all the way you run the risk of having the push rods blow through the top of the engine. The present state of the global economy seems to fit as an analogy in certain ways.

    When do we get to talk about taxing the rich and regulating the Financial Industrial Complex?

    Or is that a Bad Question?

    Or is it too late?

    Günther Anders thought it was too late, but that was a long time ago. He was probably right but is not now in any position to gloat about it.

    I think it might be better to do something than nothing, but that’s just me. At this point it just doesn’t seem as if coming up with a net-positive investment strategy is going to be anywhere near enough.

    Now then. Where was I?

    • unamused says:

      I meant “isn’t going to be anywhere near enough”. Dang fingers anyway.

      The equity markets seem to be hanging in there, ‘hanging’ being the operative word here, but the push rods haven’t blown through the top of the engine yet.

      Maybe later.

  35. DR DOOM says:

    The Fed fueled crack party past memories are still strong in the narrative. Recent market movements are toward a Fed pivot due to the “looming recession”. Fed pivot crack party part 2 dreamers are ignoring that inflation was not around to spoil the first party. Inflation is here now and it is a spoiler for Fed crack party 2 . The kill zone is filling up with new suckers to be harvested and they are to be laughed at when they get harvested. They got the memo but the memories of easy money Fed crack strokes their greed triggers and greed is blinding. The market never runs out of suckers but the suckers can run of money.Jump in and get a dose.

    • DR DOOM says:

      My wife read my comment and said I was full of shit about greed. She pointed out about my bitching and moaning about selling all my SQQQ and leaving money on the table after a 30% return. After 30% she said I, or anyone sane, should STFU and be happy and SATISFIED.

      • eg says:

        You are fortunate to have such a wise wife — it is a prize beyond price …

  36. Xavier Caveat says:

    What if the powers that be were behind crypto and used it as a stalking horse to blame the fall of traditional stocks on Wall Street?

    • SoCalBeachDude says:

      All of the 19,000 or so craptocurrencies are nothing but a Ponzi scheme scam and fraud for suckers.

    • Wolf Richter says:

      If some Silicon Valley billionaires turn out to be the founders of bitcoin and some of the others, that wouldn’t surprise me at all. They would have managed to engineer the biggest scam of all times. Of course, getting out at these levels is hard without tanking the price.

      But “the powers that be” — meaning political powers? I can’t imagine that. Those folks aren’t smart enough to pull this off.

      • Xavier Caveat says:

        Wall Street could have only pulled this off with the help of Silicon Valley, and you have to love the Satoshi Nakaoto nonsense of a cover story.

      • VintageVNvet says:

        Most, if not all politicians are puppets on a string controlled by ”the powers that be” Wolf.
        No names on the front door, and not much — a few hundred billion or so — of the ”family” wealth is showing to any public, etc.
        (BTW, NOT suggesting any global conspiracy, because as you say, those who actually ARE conspiring are too dim to pull of much of anything, no matter what side of the aisles. )

  37. gorbachev says:

    I have been reading and listening to all
    the talking heads saying households and
    businesses have more cash and or access to cash
    than they ever had . It may cost businesses 3 or 4 more points to borrow than they are used to but I can’t see a road to armageddon because of this. In my life, the only time I was in trouble was when I had no access to cash. This doesn’t seem to be the case today.

    • Halibut says:

      I think Wolf posted something about that talking point (households having cash) recently. I think he said it was misleading because it was averaging in the rich folks that have cash but the average household didn’t exactly have the average cash. Maybe I imagined it, but I think he made that point.

      • ru82 says:

        There is 27. 3 trillion in home equity.For a comparison. HB1 peaked at 11 trillion

        Thus that is a lot of money that can be tappe.

        But only 65% of families own a home. only 17% below the medium family income own a home. So this 27 trillion is concentrated.

    • David Hall says:

      Things cost more than ever before.

    • georgist says:

      The Canadian papers do that too.

      Households have 18 kazillion etc.

      Well when you divide their number by the population you find it’s about $5k CAD. And that assumes it’s evenly distributed, which it won’t be.

      Even if it is, whoopedy doo! 5K clown CAD won’t last people long.

      • eg says:

        Endorsed. And what is worse there is almost never any consideration of the distribution along the income or wealth spectrum — this grade school adherence to the useless “mean” as a representation of central tendency would be simply embarrassing were it not likely evidence of outright malfeasance.

    • Jdog says:

      50% of the population does not have access to $500 cash without borrowing. Millions.. perhaps hundreds of millions of people are losing serious amounts of money from over valued assets losing value.
      When asset values drop, banks get religion and become very careful about lending. I cannot remember any time when listening to the talking heads was a good idea….

  38. unamused says:

    Don’t look now, but the USSC has blown up the entire system of federal regulation, including regulation of the Financial Industrial Complex. In West Virginia v. EPA, it confirms that it will veto any federal regulation it wants. And it apparently doesn’t want any.

    You now live in a regulatory free-for-all populated by corporations with the morals of a famished barricuda with the backing of the Supreme Court.

    No, no, don’t thank me. I tremble at your doom.

  39. AuHound says:

    I am 73 so have lost count of the financial cycles I have been through.

    I am looking at a Merrill Lynch, Pierce, Fenner & Smith (they were independent at the time) brochure on “investing” in the computer industry dated Oct. 1967. The stock charts all look worse than Wolf’s housing charts, as follows, for 1965 to Oct 1967. All of these stocks were rated a BUY at the time:

    American R & D 30 to 130
    Burroughs 30 to 170
    CalComp 7 to 45
    Computer Sci 4 to 30
    Comp & Soft 8 to 38 – 8 was their IPO in 66
    Control Data (CDC) 27 (in late 1966) to 140 in Oct 67
    Data Processing 15 (late 1966) to 90
    Data Products 2.5 Dec 66 to 17 Oct 67
    Digital Equip (DEC) 20 (IPO dip late 66) to 107 Oct 67
    Memorex 25 to 235
    Mohawk Data 3 (IPO in 66) to 138 for a keyboard to mag tape unit

    There are several dozen more, but you get the idea.

    How many of them are still in existence? None. (other than some being taken over via fire sale)

    How many have you even heard of without looking them up in Wikipedia, unless you are over 50 perhaps.

    I especially love Mohawk Data – it sounds so much like crypto crap today with the exception it actually made something.

    Different names, same pattern.

    Is it really different this time?

    • Xavier Caveat says:

      The only difference really was there was actual stock certificates which had to be mated up with sales, for things moved glacially back in the day of high finance.

  40. Crush the Peasants! says:

    First Guaranty Mortgage no longer guaranteed.

    • Wolf Richter says:

      How would you like to run a business where your revenues suddenly collapsed because mortgage rates go up, and there’s suddenly near-zero demand for your bread-and-butter revenue generator — mortgage refis?

      We are going to see more to this. The layoffs have been going on since last year.

      • The Falcon says:

        I’ve got a friend at Wells and another at US Bank. The mood at Wells is “tense” and the mood at US is “a little jittery”. The US guy just paid a small fortune to remodel his house with peak-cost finishes.

        Look out below.

      • Crush the Peasants! says:

        Will there be any accountability at all for the trillions in stimulus free monies that resulted from the non-science based lockdowns and resutling economic destruction?

  41. RemoteWorks says:

    I’m having a ton of fun watching this trainwreck from my leanFIRE position.
    Pouring my energy into Permaculture while crashes go on is just fun and more rewarding.

  42. Citizen AllenM says:

    What an interesting divide between the economy=stock market+defi crowd and the old regular readers including Wolf.

    I see a lot of air coming out of everything speculative as a safe have CD finally has a return. Very interesting, I guess finance folks have once again put a rate of return on safe investments to goose returns and trash valuations. After all it seems the entire world is priced like a bond. Is all valuation currently done simply as a variant of Black-Scholes?

    What I find interesting is the soaring dollar reflected in everything but oil prices, which is deflationary in the long run. Now, next I would expect a Chinese *adjustment* devaluing the Yuan and then forcing Chinese to start divesting their foreign holdings….but of course that couldn’t happen, could it?

    The markets also seem to be discounting a long war again, which is very interesting.

    Housing is going to be very interesting as it now has the added complication of so many houses in use as AirBnBs- and that demand could drop and houses hit the market as the metrics no longer support holding a property for a tough use. I was scanning the listings and quite a few properties were prices to perfection for the summer, and looking further our were going to be empty for months….high fuel prices are going to make a miserable winter for many, and crimp budgets for expensive travel….

    Someday this war’s gonna end…

  43. Uber Driver says:

    We are in a finacialized economy that leads the real economy. That was the whole point of raising interest rates after all. Kill the stock markets (and crypto) and that sucks the air out of the economy.

    From my personal observations and the plunging commodity prices I’d say we’re already in recession. Most of the non-wealthy population is in distress. I think of the car trips I’d taken with my family in the past and I just realized they have doubled in cost- I won’t be making them again. I see the strip-malls with blossoming vacanies and empty restaraunts. I think of the millions of people who can’t afford rent and will be thrown out on the streets in the coming months. (There are now bidding wars for tenants to see who will pay the most rent).

    Given that China will not be saving the global economy this time, I now think we are heading toward global recession. We are at the tipping point and people are way too complacent about the risks.

  44. sunny129 says:

    Uber driver

    “We are in a finacialized economy that leads the real economy”

    Financialization of the economy took the capital AWAY from PRODUCTIVE segment of the economy like manufacturing and living wage jobs. Instead it went for MERGERS (NOT R&D) and Buy-Back shares
    Financial economy is NOTHING but “paper shuffling’ by MBAS, Investment Banks, Accountants and Attorneys! No wonder Buy-Back program was illegal prior to 1986!

    • VintageVNvet says:

      Good point re ’86 change of buyback law sunny.
      Reminded me of one reason that I got OUT of the SM in that era, though the main reason was I became convinced it was ALL a scam/party to which I was NOT invited ‘behind the stage’ as were those doing the massive manipulations.
      That I could not see the manipulations soon enough was very clear.
      From what I read, certainly seems like the SM situation is even worse currently, so am planning to go to bonds as I am too old for RE fixer or builder game.

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