But the market is due for a bounce, according to the WOLF STREET dictum that “Nothing Goes to Heck in a Straight Line.”
By Wolf Richter for WOLF STREET.
Monday would be a good start for a bounce. It could also start on Tuesday or in November or whenever. And maybe not much of a bounce. But the market is due for a bounce after what it has been through in September, or actually since August 16, which was the end of the bear-market rally.
The unsightly demise of this bear-market rally is adding to the spooky parallels to the dotcom bust, which was also interrupted by a rally in the summer of 2000, when the Nasdaq Composite rallied 33% without getting back to its previous high, and then ultimately collapsed by 78%, from which it wouldn’t fully recover until 15 years later, in July 2015, after the Fed had thrown trillions of dollars at the market with QE. But back then, inflation was well below the Fed’s target. Now inflation is raging well above the Fed’s target.
So since the end of this summer’s bear-market rally on August 16, the S&P 500 Index has dropped 16.7% and the Nasdaq has dropped 19.5%, both of them just barely above the February 2020 levels.
Many of the stocks on my list of Imploded Stocks have plunged by 50% or more over the same period, to carve out new lows after having shot up by 100% over the prior weeks – such as Carvana [CVNA] which roundtripped from $20 on July 14, to $54.59 on August 16, and back to $20.30 on Friday, September 30. Up 170% in five weeks, and giving up all of it over the subsequent six weeks. Carvana is down 95% from its intraday high on August 10, 2021.
That’s how crazy this market still is, and that’s why the bottom is not anywhere in sight, and there is absolutely no capitulation, but stocks are due for a bounce.
In September, the S&P 500 Index dropped 9.3%, the worst monthly drop since March 2020, and the worst September since the dotcom bust.
Every sector got whacked in September, even energy. Healthcare got hit the least (-2.6%). The sectors that got whacked the most in September were: Information technology (-12.0%), Communication Services (-12.1%), and Real Estate (-13.1%).
Year-to-date, Energy was the only sector that was up (+34.9%), though the sector dropped 9.3% in September, according to S&P Dow Jones Indices.
In further spooky parallels to the dotcom bust, year-to-date: The two tech-related sectors – Communication Services and Information Technology – have plunged 31% and 39%. And several of the Big Tech stocks have plunged far more than that from their respective highs; more in a moment.
| S&P 500 Index Sectors | September | YTD |
| Energy | -9.3% | 34.9% |
| Utilities | -11.3% | -6.5% |
| Consumer Staples | -8.0% | -11.8% |
| Health Care | -2.6% | -13.1% |
| Industrials | -10.5% | -20.7% |
| Financials | -7.8% | -21.3% |
| Materials | -9.4% | -23.7% |
| Real Estate | -13.2% | -28.9% |
| Consumer Discretionary | -8.1% | -29.9% |
| Information Technology | -12.0% | -31.4% |
| Communication Services | -12.2% | -39.0% |
But it’s worse when compared to their respective highs:
The S&P 500 Index closed on Friday at 3,586, down 25.6% from its intraday high on January 3, and where it had first been in November 2020.
The Russell 2000, which tracks small-cap stocks, is down 31.8% from its high on November 5, having thereby maintained its function as early warning signal.
The Nasdaq closed at 10,576, down 34.8% from its intraday high on November 22, the very day Microsoft CEO Satya Nadella dumped 50.2% of his Microsoft stock in a bunch of frenzied trades, totaling $285 million. On the list of best-timed insider trades ever, he must be at the very top. Since then, Microsoft shares have plunged 33.4%, to $232.90, the lowest closing price since March 2021.
The Big “Tech” plunge from recent highs.
But Microsoft is the second-best-performing stock of the cadre of Big Tech stocks. Apple is the best-performing, down “only” 24.5% from its high at the beginning of January 2022.
The worst-performing Big Tech stocks are Meta, Netflix, and Nvidia, all of them down about 65% from their respective highs. These are massive sell-offs for big companies.
Two of those companies — Cisco and Intel — had peaked 22 years ago; Cisco is down 51% and Intel 65% from that peak 22 years ago.
The drops “from high” shown in the table are the drops from the recent highs.
| “Tech” Giants | $, Sep 30 | From high | Date of high | |
| Apple | [AAPL] | 138.20 | -24.5% | 01/2022 |
| Microsoft | [MSFT] | 232.90 | -33.4% | 11/2021 |
| Tesla | [TSLA] | 265.25 | -36.0% | 11/2021 |
| Alphabet | [GOOG] | 96.15 | -36.8% | 02/2022 |
| Amazon | [AMZN] | 113.00 | -40.1% | 07/2021 |
| Cisco | [CSCO] | 40.00 | -37.8% | 12-2021 |
| Salesforce | [CRM] | 143.84 | -53.9% | 11/2021 |
| Adobe | [ADBE] | 275.20 | -60.7% | 11/2021 |
| Intel | [INTC] | 25.77 | -62.3% | 04/2021 |
| Meta | [META] | 135.68 | -64.7% | 09/2021 |
| Nvidia | [NVDA] | 121.39 | -65.0% | 11/2021 |
| Netflix | [NFLX] | 235.44 | -66.4% | 11/2021 |
Big Tech stocks are now back where they had first been in…
- Apple: January 2021.
- Microsoft: January 2021.
- Tesla: January 2021.
- Alphabet: January 2021.
- Amazon: April 2020.
- Cisco: November 1999. Peaked in March 2000 at $82 and has spent 22 years declining by 51%, nightmare-come-true for tech-stock buy-and-holders.
- Salesforce: July 2018.
- Adobe: September 2018
- Intel: 1998. Peaked during the infamous bear-market rally in 2000 at $75 and has spent 22 years declining by 65% – even bigger tech-stock buy-and-holder nightmare-come-true.
- Meta: January 2017.
- Nvidia: August 2020
- Netflix: April 2018
When a bubble like this unwinds, it can get brutal. As Cisco and Intel show, some of the stocks may “never” recover to their bubble highs – “never” meaning either “never” or just beyond a reasonable time frame for long-term investors. During the years of the dotcom bust and the years that followed, hundreds of stocks vanished, either going to zero or getting bought for a few bucks a share. We only remember the winners to come out of the dotcom bust and thrive, such as Amazon. But Amazon was a rare exception.
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I’m of the age that the the dotcom bust shaped how I think about money, investing, and technology.
I was looking for my first tech job in Seattle right when tech was collapsing and as it turns out, the Nasdaq Composite dumped 78%.
I’m expecting that to happen again this time around.
Wiil see, too much money around, government continue to
spend like drunk sailor
please do not insult drunken sailors, it is a bad analogy…the sailor is spending his/her own money!
This reminded me of a folk song/ditty my mum used to sing me (they sang it in Girl Guides).
[Wolf– hope you don’t mind the long-ish lyrics but it is a classic… and timely!]
“I’ve Got Sixpence”
I’ve got sixpence
Jolly, jolly sixpence
I’ve got sixpence to last me all my life
I’ve got twopence to spend
And twopence to lend
And twopence to send home to my wife–poor wife.
Chorus:
No cares have I to grieve me
No pretty little girls to deceive me
I’m happy as a lark believe me
As we go rolling, rolling home
Rolling home (rolling home)
Rolling home (rolling home)
By the light of the silvery moo-oo-on
Happy is the day when we line up for our pay
As we go rolling, rolling home.
I’ve got fourpence
Jolly, jolly fourpence
I’ve got fourpence to last me all my life
I’ve got twopence to spend
And twopence to lend
And no pence to send home to my wife–poor wife.
I’ve got twopence
Jolly, jolly twopence
I’ve got twopence to last me all my life
I’ve got twopence to spend
And no pence to lend
And no pence to send home to my wife–poor wife.
I’ve got no pence
Jolly, jolly no pence
I’ve got no pence to last me all my life
I’ve got no pence to spend
And no pence to lend
And no pence to send home to my wife–poor wife.
(Rather like the UK economy in some ways.)
Pavel,
“Annual income twenty pounds, annual expenditure nineteen nineteen and six , result happiness.
Annual income twenty pounds, annual expenditure twenty pounds ought and six, result misery”
One of the best Dickens quotes I know of.
(Btw, Dickens’ father had managed to land the family in debtors’ prison).
“The Pivot Expectation” is still so strong that every bad news is celebrated by Wallstreet.
For example, now with credit suisse trouble, ECB is expected to Pivot to QE, just like BoE, that pivoted before even a tiny fund or bank went bankrupt.
Why such communism for our financial sector? Why every bank and ever fund needs to be saved during QT?
Also the 10 year has recently dropped by 30 basis points and is now close to Fed rate.
“Why such communism for our financial sector? Why every bank and ever fund needs to be saved during QT?”
They control the government, and they know it.. that is why.
Those houses in the Hamptons don’t pay for themselves!
England is running 10% inflation, there won’t be a wholesale pivot by the BoE anytime soon.
There is a huge amount of nonsense floating around out there — just stunning. Wall Street folks HATE QT because they’re losing their shirts, and they HATE higher interest rates because they’re losing their shirts, and they don’t mind even 10% inflation if they can make money on it with their derivative products, and so they spread no-matter-what BS to force markets their way. So this is wave #2.
But any chance of a pivot just evaporated. The BOE’s “pivot” never did much to begin with — it didn’t buy a lot of bonds — and now, with gilt yields plunging, the expiration data of that pivot in two weeks seems to hold. And then it’s re-start QT time because the UK has 10% inflation. And the Fed is on track to hike rates further — we’ll find out by how much and for how long… my original 4% target may be reached this year, and then it may go over a little, and pause, as it should — and QT runs on auto pilot just fine.
Wolf – I believe you have mentioned that once the fed raises rates to ~4.5% then Fed will stop raising rates to see its effect on inflation as the effect of rate hikes are delayed by 12 to 18 months.
Do you think they will also stop QT when they stop raising rates to see its effect on inflation/economy or will they QT continue even when they stop raising the rates?
QT is scheduled to run on autopilot for years unrelated to rates.
Rumor : Nov. G20 meeting may include new Plaza Accord. The Sept 1985 version: U.S. devalued to help G5. U.S.
1985 gdp 4.2%, unemployment 7.0%, inflation 3.6%.
Fed fund rate was 8% Dec 85. Volcker was cutting, raising, cutting. But not fast enough for G5.
A year later fed fund rate was 5.88%. U.S. gdp 3.5%, unemployment 6.6%, inflation 1.9%.
I’m sure Wolf knows many ways to get to a Plaza II without rate cuts but would G20 buy?
One of the things that I will remember about this latest bubble is how few people who were around back during dot-com were willing to admit the parallels now. I’m not talking about the parallels of the current down-slide, I’m talking about the parallels during the latter end of the upside bubble. I saw all sorts of red flags that if I were younger I wouldn’t have recognized.
I know this sounds absurd, but one of the chief things that convinced me “the end is near” were the crypto Super Bowl commercials and the crypto.com $700 million deal in Nov 2021 to get the naming rights to the basketball arena in Los Angeles. There were other things, like crypto all over Formula 1 cars and race tracks, and crypto logos on baseball umpire uniforms and crypto logs all over basketball courts.
Means nothing for people who don’t watch sports, but for me, the parallels were loud and clear to dotcom-era and in retrospect served as a solid canary-in-the-coal-mine leading indicator. The same kind of things happened at the end of the dot-com era.
The dotcom bubble was similar to pre-pandemic bubble that started popping in Dec 2019 causing Fed to Pivot on rate hikes.
Nasdaq is still higher than pandemic highs. What has deflated was the pandemic bubble that was the result of irresponsible money printing and not of consensual hallucination that fuelled the dotcom bubble.
The Prepandemic bubble was a result of consensual hallucination aided by QEs and that has still not started deflating. If Fed really sticks to QT, expect Nasdaq to correct by 50% from here.
Correction: Nasdaq is still higher than pre-pandemic highs.
Yeah I think the way to look at this is act like the last couple years never happened, then think with raging inflation and inflated asset prices, how far should the market fall to be at fair value, and then think the the market always overshoots. That lead me to think there’s a lot more downside.
Seems like the gilt situation last week was a warning shot.
Agreed. The crypto ads were a sign of peak investor enthusiasm. Contrarianism works well at market extremes, but not all the time. Clearly, 2021 was a market peak for the ages.
Those were some of the cleverest commercials I had ever seen (CNBC ones). That was one of the only redeeming features of that era.
Also SPACs and SPAVs: because traditional IPOs were not risky enough
So much for crypto being immune to market forces and a safe place to store money.
Nvidia is a huge fraud. 52 wk high msft = 52 wk high adobe /2 = 52 wk high servicenow/2 clue about where msft, and now are headed. service now has highest PE in spy.
Yes, it’s true that crypto vastly inflated Nvidia earnings. Don’t expect Nvidia to return to its market cap highs of late ’21 anytime soon! And expect a quarter or even a few quarters of bad revenue numbers.
But a “huge fraud”? The company and AMD sell the fastest mass market computational chips in the world. That’s the reason the crypto companies had racks and racks of Nvidia and AMD chips.
Yes, some of which are now being sold on secondary markets now that crypto has crashed. But after those cards are flushed from the sales channels, Nvidia and AMD are still likely to have the fastest computational chips in the world. That means profit. It was true for mainframes. It was true of Intel’s fastest chips too but much less so for roughly the last decade.
AMD and Nvidia sport very high P/E’s . . . still. This is not a recommendation of any kind, in case that wasn’t obvious. Cheers!
I don’t think crypto was ever slated to be that, only Bitcoin. It’s still very young and so far has tracked like the Amazon chart of young. Time will tell as all currencies are collapsing world wide save the dollar and several trillion are on the sideline and slated to deploy when they think the bottom is in or near. Fidelity, Black rock and on and on are advising Bitcoin exposure of 1-3 or 2-5% for their clients. With a current market cap of $500 billion, that would at least cripple the value back to $60k. IMO it’s a matter of when not if.
sine99
The crypto situation poses a different danger to the nation. It is the ultimate ‘privatization’ of a public asset. The dollar. Congress has a monopoly, per the Constitution, over the currency. Crypto is going to compromise that monopoly and thus compromise Congress, the government, and naturally, the nation. It is the libertarian ‘wet dream’ to control a currency. Especially the dollar, which is (at present) the primary currency backing up central banks.
keep dreaming … 😊
JamesO, if the central banks do not get inflation under controll without crashing the economy they have a problem. Countinius high inflation or an economic crash may provide the opertunity for other than the central banks to provide money for payment transfer.
Historically, after the death of fiat currencies there has been a reversal to gold as money. For todays use, gold have some practical issues. That is the transport from one place to another of the money. The crypto technology do overcome that problem.
100% This is why the EU is about to release crypto, semi friendly regulation in November. The US is a wait and see. Will they fight it out of fear or hedge their bets and allow Bitcoin to prosper while acquiring all they can. They can’t kill it and if they try, it will only further it’s demand.
I don’t recall the stock market at the time.
I was working for a large old tech company and all the orders disappeared overnight, and very soon after many of the jobs disappeared.
I was lucky enough to skip between three jobs, from layoff, to just getting out before a complete shutdown, finally to a small tech company; within the span of like six months.
Those were the good old days, where you didn’t have to worry, as there always seemed to be a job around the corner!
The question is whether this is the start of a global melt-down in the debt bubble. I think that could lead to larger downside than the dotcom bubble, which was really just a valuation bubble. Debt bubbles are insidious because debt is a bedrock that is supposed to continue to be paid and have little risk, whereas equity is known to rise and fall.
The other side of the debt bubble are assets, in particular real estate, which needs to implode. The companies that are highly leveraged with debt against asset values will find that their asset values are all based on ZIRP debt, which will never return.
The government could solve the housing crisis in short order*, But will they? Nah.
* They just need to phase out the dozens of laws that make homes attractive as investment assets.
And get out of the business of guaranteeing mortgages while they’re at it.
You guys forget that Congressmen run for re-election.
I see a lot of insurance companies going under as a result of being under capitalized for the disaster in Florida. People down there who survived the storm will see their premiums go higher than their mortgage payments. It will take two years to remove the debris.
Floridians have been underpaying for insurance. Time for the free market to rear its ugly head.
I have a friend who’s monthly payment in a town west of Orlando just went up 60% *before* Ian due to increased insurance costs.
not going under … just getting out. the state of Florida will become the largest property insurer in the state if they aren’t already. given the state’s reliance on real estate for revenue, they’ll just have to build more … concurrent with all of the rebuilding.
“all based on ZIRP debt, which will never return.”
—————————————-
how could we ever know that?
Agreed. What’s amazing to me is Wolf literally calling this pump the day before, wow. Wolf you are my absolute favorite financial person to listen to. Thank you for taking your time to do these posts. I read them every day.
Apple and Tesla are still in the green for 1 year. Which is crazy considering what is going around.
Aplple still has good 40% to go on the downside (if earnings hold up). Tesla has good 90% to go (if earnings.. what earnings).
The amazing part is that most of those big tech stocks are solid companies. Minus maybe NFLX and FB. And while TSLA is insanely overvalued, insanely, it is still a company making actual stuff that lots of people appear to want.
Funny, I saw Cisco on that list and it brought me back to when I had to leave them in November or 1999 because of my Mental Health issues. Cashed out my options just in time.
everyone is so scared by the so called bust but seriously these valuations in stocks and housing were so insane and detached to reality. this is not a crisis but a mere return to sanity and normal
20 years of Fed bast-rdizing Price Discovery is going to take a long time for reality to settle in.
Tiny example, but same situation all over the place.
My wife had to get an eye exam, so when I took her in I thought I’d get the ear pads replaced on my own glasses. The gal at the desk said, it’s $8 to fix. I said sure. She does the repair and comes back and says, “I didn’t look at the new prices for that. It’s now gone up to $20.”
So I pulled out the $20 and said, “Now I know that you don’t own this place, but you can tell the owner that neither I, nor my wife will ever be back in the store.”
Screw me once, shame on me.
39 cents worth of rubberized Chinese plastic and 5 minutes to re-and-re.
You’re a better man than I. I would have said “Here’s the $8 you quoted me. I’ll keep the $20 new price under advisement for the next time, if there is one.”
If you are in CA, check out Civil Code section 1770.
Also classic contract law, there was arguably a contract when the person took possession of the glasses at the quoted price. Also various fall-back legal theories related to unjust enrichment. (Not legal advice!)
150% inflation for that item! =:o
There have been a rash of articles on ZH lately quoting various “analysts” saying that credit market stress is reaching “critical” levels and that the Fed will be forced to pivot soon (nevermind that real yields of course are still deeply negative).
Any time “pivot talk” resurges you know a bounce must be approaching as investors begin to convince themselves that the great put in the sky will soon be descending upon the markets.
Some very big and well-connected pieces of the architecture have to start breaking this time, before a pivot, methinks. The Fed, even absent inflation, has in past let some big pieces slide before stepping in at the big level. But we can hear rumbling and a few things creaking and snapping globally, and I assume soon, domestically too. There will be financial scandals. Not everybody can roll their paper over, especially here in Fed-abetted zombie-land.
Happy Hollow-ween!
I was hearing quotes of Volcker, mid-80s, to the effect that the strong dollar in that tightening period had some links to the hollowing out (offshoring) of our manufacturing economy. I wish I had that source, it was in an audio article. Of course, globalization and financialization back then were already well underway, and would have happened one way or another.
The Biden inflation reduction act (so-called) just passed, has lots of support for re-shoring to North America, coupled with new tech in cars and energy. I think North Korea is outside that zone, and may be hollowing as a result.
I think we could have another couple of weeks before a good bounce because the new lows are not much lower than the previous ones, Nasdaq hasn’t even breached the summer low I think… But also the bounce could happen after the midterms.
Correction: Nasdaq is lower than the summer low by just a little.
Everything is supposed to crash after the midterms except commodities which will go the other way straight upward.
Simple daily exercise: go to Yahoo Finance, markets, biggest losers (of the day). Always astonished to see so many of these companies down 50% – 90% already, yet ‘the market’ is still up there.
The reason is the few giant like Apple and Microsoft. They are huge part of the indices percentage wise.
I remember last winter when a lot of investors and analysts were talking about “rotation”. Basically, markets are still not beat up on the whole because a lot of capital is still alive and not incinerated and is looking for returns and/or safety elsewhere as tech, especially startups, collapses.
I wish I had the articles handy but someone was explaining this idea that more capital tends to concentrate in a smaller number of stocks seen as “safe” when risk increases which boueyes the indexes. I think the term is “market breadth” and I believe it is shrinking and I think that’s what’s happening and is why the market reaction takes so long, if those few “safe havens” turn downward that is when the market moves down fast because then there is nowhere left to go. Probably then USD spikes followed by gold.
There’s many smart people here who can maybe comment and correct what I wrote, I remember being fascinated by the topic but I don’t work in finance so it’s all left me now
The only way “capital” (I presume you mean dollars) gets incinerated is by the creation of too much of it. That is what diminishes the purchasing power of your dollar.
The indices as well as all of these stocks need to crash and burn for decades, not just a few months.
That’s so true as everything has just been a ponzi fraud circus sideshow since around 1993 or 1994.
Cash still has a real rate of around -5%. I would rather plunk my money into a “real asset.” Whatever the price is, I still have 1/1,000,000,000,000th or whatever equity stake in a public company I believe in with a chance to average down and sometimes earn dividends at an ever increasing yield. You can’t time a market bottom unless you are buying every week.
If your portfolio is down 25%, your “real” portfolio is down 33%, with 8% inflation. NO ONE and NOTHING escapes inflation. Think about that.
Well, the best-performing sector YTD by far is the one whose price goes up with inflation, has mostly inelastic demand and structural constrictions on supply. Yup, oil.
I am sure you want to say you can’t escape inflation right now. If assets are deflating it’s hard. Historically assets offer inflation protection and the same should be true in future.
Stocks and gold have been a very good protection of your wealth. Look at the long term charts.
To be clear, I would not buy stocks right now.
I will never understand gold bugs and their complete refusal to look at reality. Gold peaked in January 1980 at $850 an ounce, ADJUSTED FOR INFLATION that is $3,235 an ounce today. The most recent price of gold? $1,677 an ounce. Literally half what it was 40 years ago. On what ridiculous timeline are you looking at that you think gold keeps up with inflation? Gold is DOWN recently. Do you know why? Because the fact is the number one use for gold (not counting just smelting it into a brick and tossing it right back underground to collect dust) is to make jewelry. This may be hard for the spendthrift to understand but demand for jewelry tends to fall in bad economic times. People prioritize groceries over necklaces, even when they are made from a shiny yellow metal. But the biggest question mark still bouncing around my brain is why people only ever talk about gold. What about platinum and palladium? Literally every single (wrong) argument you could make for gold being some kind of value retaining asset applies to platinum and palladium and yet nobody ever talks about those for some reason.
Oh and just in case you missed the news: Uganda over the summer announced the discovery of one of the largest gold deposits on record. So that means production, and thus the supply, of gold will only increase in the foreseeable future. So, really, how many more years are there in this timeline you are looking at to get gold back above its 1980 peak when adjusting for inflation? “Hey, in another 235 years gold will perfectly line up with inflation. I swear!” And everyone investing today will be dead and buried.
In case you are going to try and say gold is still better than stocks over the same period Intel, one of the subjects in this article that has been beaten back 22 years is still significantly higher than it was in 1980, adjusting for stock splits. Price adjusted for splits 1980: $0.33, adjusted for inflation approximately $1.10. Giving a 250% return in the last 40 years. I’d say that is a bit better than losing half its value like gold did over the same period.
Gold is down year to date about15%.
Harrold,
If you live in England, and use the British Pound as your fiat currency, gold is up 10.5% since New Year’s Eve.
But the dollar is up more against the pound than gold is. You would have been far better off exchanging pounds for USD and then buying US Treasury securities, which actually have been paying interest for months.
” NO ONE and NOTHING escapes inflation”
.Compared to everyone else (the little people) the rich feel the pain very little. They get the money first. They escape the most.
They and their children, and their grandchildren will be always be rich.
Unlike the rest of us.
@ Wolf – Debtors escape and often benefit from inflation.
cb-often thought just this re: the myriad of defaulted big-finance U$ loans to South American nations back in the inflation of the ’80’s…
may we all find a better day.
So true, NOTHING escapes inflation. Even if you’re up, you may only be “up” in nominal terms. Or if you are up in real terms, you’re still up a lot less than in nominal.
And OF COURSE, taxes are applied to your NOMINAL basis. So even if you are up on a real basis, you may be down after tax. So rude!
Inflation has turned many a debtor into a rich person. Inflation pushes up rents which allows an indebted building holder to pay down loans.
This has been a big contribution to the wealth gap. This practice has turned a bunch of would be losers into big time winners. But shhhh,,,,,,,,,,,, don’t tell anyone
What do you think the Fed was fomenting the last several years.
This is such an important point. The fact that several people here of all places are arguing about it worries me.
UK just folded and set a two week QE announcement because of the UK pensions!
Go check the data. The problem already went away: Gilt yields plunged as the government rescinded its tax cut. The BoE’s emergency action, which didn’t amount to a lot of buying to begin with, is set to expire in two weeks, and then you may well be in for a “surprise” pivot back to QT. They’ve got 10% inflation, that’s the crisis right now. The gilts-and-pension crisis is fading as yields plunged below 4%.
10% inflation, with a 4% yield, is a crisis in itself.
I am struck by the number of market commentators in the press and elsewhere who are insisting on comparing the current situation to 1929, 1987, 2000, 2008 and various other crashes. What value can these comparisons have considering the Fed’s unprecedented wrecklessness over the past decade and the unprecedented economic shock caused by the pandemic. Seems to me like apples and oranges, but that they are sticking to their story because they have to say something.
Is it not different this time? Or am I wrong?
“Is it not different this time? Or am I wrong?”
Do you believe in magic?
I’m asking you because that’s what your question implies.
It’s never different because there is a limit between the cognitive dissonance of a mania (yes, the one we are still in now) and the reality of extended economic and social decay. Yes, the extended economic and social decay the country is experiencing now and has been for decades.
The only reason (literally) for the FRB’s (or any other central bank) “success” is manic psychology. If you don’t believe me, look at a long-term chart of every single other stock market from any country of any economic significance. There may be a few that are meaningfully above the late 90’s or pre-GFC peak but if so, it’s not evident due to their depreciating currency. I do know there isn’t a single one from any developed country, except the US. It’s been out on an island all by itself in deep outer space the entire time.
Japan and the EU had QE for years until recently. The BOJ also bought ETFs. It’s still lower now (26,000) than it was in December 1989 (39,000). That’s a 33% nominal loss after almost 33 years even with deranged monetary policy.
As the examples I provided prove, FRB QE doesn’t guarantee rising stock prices. It’s dependent upon market participant psychology which determines where this “money” goes and how much they decide to pay.
Given current debt leverage and the actual precarious state of the financial system as the UK demonstrated last week, there is absolutely nothing any central bank can do (either individually or collectively) to prevent a catastrophic systemic failure if market psychology moves against them. They cannot possibly “print” or act fast enough.
Japanese government debt to GDP ratio is 230%. By comparison, the USA ratio is 110%. Maybe the Wolfman, having lived in Japan, can explain how Japanese society continues to function under the weight of its huge debt burden.
I would love to hear a take on this as well. I never understood how Japan has been able to do this while other countries seemingly have a limit well below that and when breached collapse is predicted.
Inflation is now surging in Japan, where NO ONE is ready to deal with inflation. So we’ll see how this turns out.
In Japan, households and companies have deleveraged over the past 40 years, while the government has levered up massively. That’s not the case in other counties, where households and companies have levered up massively.
Ummm… a couple things;
First, Japan is experiencing inflation now.
Second, the Nikkei’s performance during the debt ramp-up time has been pretty abysmal (unlike the US where the market has been on a continuous upward trajectory with a few bumps here and there). Basically, there are no free lunches, eventually somebody’s gotta pay somehow.
I think this era is most comparable to the mid-70s, including a Fed which kept money far too easy for far too long.
The Depression was aggravated by fiscal/political policy, with both parties equally at fault, although now I’m sure someone will replay saying no, THEIR party were the angels, it was the other guys. That does have parallels to today, although in different ways.
Nothing new here. I am always amazed by supposedly knowledgeable people who are a) shocked when the market drops and b) amazed when the stock price of non-economically viable businesses approaches zero. While I am not a Buffett fan, I do appreciate his pithy comments regarding investing. Paraphrasing one of his comments: If you can’t tolerate a 50% drop in your stock portfolio, then you shouldn’t invest in stocks.
It is different.
It may be worse or it may be better. We have some twists now that are different than 2000 or 2008. What does different mean?
We now have the Fed who could cave like the BOE and lower rates and launch into QE infinity. I doubt it, but we could.
It seems different than before. in 2000 and 2008, we didn’t expect the fascist Fed to lead us out of this.
Best guess. The current bear market is going to rival the aftermath of 2008, and it could well end up being worse. Let’s not forget that the greater the pile of mispriced assets that are priced at non-economic levels, the greater the pile that must be liquidated to new owners at a new prevailing lower economic price. Instead of just a dot.com or housing bubble, this time it’s the everything bubble – equities, bonds, commodities, real estate and crypto. The bigger the pile of mispriced assets, the larger the repricing (bear market).
This first phase of the bear market should rival the dot.com bust or GFC.
It’s still possible the final mania peak in US stocks is not in (I don’t believe it but it’s possible), but I’m confident the 39-YR interest rate cycle turned in 2020. Whatever the actual peak, this bear market will be a long process (multiple decades, longer than 1966-1982 which was essentially sideways in nominal terms) which will have multiple bear markets and bear market rallies. There will also be numerous bear markets the size of the GFC, over and over.
Look at 1966-1982 with bear markets in starting in 1966, 1968, 1973 and the late 70’s. The 1973-1974 bear market chopped 45% (worse in real terms), the over valuation wasn’t even close to this mania, and the fundamentals were better.
Augustus,
You forget that back then, that the bank run Fed was sleeping and letting capitalism control the market.
Now the Fed is high on caffeine (or something) and is directly controlling the market.
Your prediction might be true if we had free-market capitalism. However, we don’t.
“There is nothing wrong with your television set. Do not attempt to adjust the picture. We are controlling transmission. If we wish to make it louder, we will bring up the volume. If we wish to make it softer, we will tune it to a whisper. We will control the horizontal. We will control the vertical. We can roll the image; make it flutter. We can change the focus to a soft blur or sharpen it to crystal clarity. For the next hour, sit quietly and we will control all that you see and hear. We repeat: there is nothing wrong with your television set. You are about to participate in a great adventure. You are about to experience the awe and mystery which reaches from the inner mind to the outer limits. “
More belief in magical thinking.
The FRB isn’t omnipotent and cannot prevent a financial market asset crash.
Go look at Japan as I described in my above post. Stock market is 33% lower after 33 years even with deranged monetary policy.
The FRB doesn’t have any “tools” the BOJ doesn’t have and it makes absolutely no difference that the USD is global reserve currency either.
If the Fed pivots, lowered rates today and turned on the QE spigot. Assets would resume their upward path (at the expense of inflation).
The Fed is in control of assets but not inflation.
Even the belief that the Fed might pivot, sends asset prices up.
However, like with any control system, if the wings fall off at some point, there is no preventing a catastrophic crash.
The wings haven’t fallen off yet (But maybe Scotty is shouting in his Scottish accent, “It can’t take much more Captain Powell!”
The early 70’s were much different than today. Exiting the gold standard, OPEC coming into power, war economy winding down.
I don’t see parallels to today.
> I don’t see parallels to today.
Really?
70s Exiting the gold standard = recent Fed excess
70s OPEC coming into power = supply crunches in energy now
70s war economy winding down = hangover from fiscal and monetary excess now
the parallels are to ”LATE 1970s” and subsequent Harrold…
Definitely NOT ”EARLY ’70s’…
Been there, doing a LOT of biz, etc.
Certainly challenging times then and now, eh???
Folks just ”gotta have fun.”
The difference then was the stock market was trading at fair market value unlike today where its still trading at the summer of 1929 valuations.
…never neglect the fact that the demographic is constantly changing, and significant numbers, to paraphrase W’s immortal words, ‘don’t know what they don’t know’… (a generation’s understanding of its memory, cohesiveness and attitudes increasingly overwhelmed/fractionated/cognitively dissonated courtesy of our powerful and, too-often-misused, comms technology tools-among others…).
may we all find a better day.
It’s always just different enough to fool all the fools, both those that think it’s different and those that think it’s the same.
“History doesn’t repeat itself, but it often rhymes.” – Mark Twain
Markets are about to crash 50% lower than they are currently before the end of the year. Mark my words.
It wont be smooth ride, brace for impact.
Going to lay a chocolate egg
Wolf, you should also delete comments like these. What kind of clowns and negative people are these. Perhaps homeless on social welfare.
Dow under 15,000? That’s daft.
The Fed will not allow it; Go, Plunge Protection Team, Go!!
Some of the videos from female influencers showing their average workday at large-scale tech and financial firms are a bit disgusting in their opulence. I suspect those perks will be taken away in short order, and good riddance.
*on TikTok
Maybe… but why are you watching these influencers?
I’m not. The Youtuber making compliations losing his mind at their disconnect from reality and everyday working culture, amongst other content they publish, is the one having to suffer through.
SEC just jumped on Kim Kardashian for dodgy crypto hawking with undisclosed under-table pay for it
phleep, she needs more publicity, that’s what this is all about.
It already is unwinding. Google and Meta both have signaled that they’re cutting back on that stuff. Meta has their first ever layoff last week. Gergely Orosz Covers this pretty well on his sun stack but you have to pay to get the really good stuff.
I wouldn’t listen to what the attention mongers are saying, they’re just trying to get eyeballs.YouTube TikTok it’s all the same unreliable crap.
I doubt it. The companies offer those “perks” because they’re profit centers for the tech and financial companies.
Free food–cooked to order, 24/7? Free laundry service? Free car rentals for local errands (under 90 minutes)? Free haircuts? Doctors and pharmacy on site? Gyms? On-site daycare? “They let me bring my dog to work! It’s awesome!”
Leave it to our younger generations who know everything about tech and nothing about critical thinking and reasoning, to understand that all those bennies are just ways to keep them in the office 100 hours a week.
Everything on the freebie list is just a clever way to tell people there’s no need to go home. This company is home. This company is your family. Now get busy.
Even company shuttle buses are a low-cost way to make sure everyone shows up to work 30 minutes early, and nobody leaves until at least 40 minutes after their last meetings wrap up.
It’s brilliant. Google and their high-tech pals figured out how to turn “free” breakfast bagels and bad coffee into risk-free profits, soon as they realized that they stop making money when the neckbeards head home. So–let’s keep them here.
Hiring freezes, yes. Layoffs, no doubt. But the baristas keeping the coders caffeinated at Apple and Meta will be there as long as Apple and Meta are.
The bean counters at my old employer got the brilliant idea to end the subsidized lunches to “save” money. They weren’t free, but below market (likely cost). They did the same with the “free” coffee and tea.
What happened? When the cafeteria food went to market price, people started leaving the campus. So, instead of a 30 minute lunch where people continued to discuss work, they left and were gone for over an hour. No work was discussed.
Same happened with the “free” tea and coffee in the “pods” on each work floor. People had to go downstairs for a cup. Then blabbed for half an hour and came back. Then they put a Starbux in the lobby. People stood in line for 15 minutes and then blabbed for half an hour. The net savings for elimination of the coffee and tea? $400K. What do you think they lost in productivity?
The social media garbage is out of control. I just watched a brief documentary on a major streaming channel about a 16 year-old kid who moved into a “content house” with several other kids. They plan to make content for YouTube. I didn’t see any particular talent in this group, except from some common dance moves, trendy hair cut, and hand gestures.
Who do they think is going to watch this stuff? Why do advertisers think the people watching this stuff have any money to spend? Why aren’t these kids trying to do their best in school, so they sell a valuable skill?
This YouTube and TicToc business is NOT doing kids any favors.
Old mans shakes hand at cloud.
Great Simpsons episode !!
I think the headline was “Angry man (Abe Simpson) shakes fist at cloud.”
If the top is indeed in, which it may not be (I believe we will have more info on this soon) then the corrective phase we are in for will take possible two decades and will occur in waves, both up and down, of ever expanding size.
The most recent corrective market took from 2000 to 2009. Most people think of that as the dotcom bust, followed by a bubble, then another crisis called the GFC. This was in fact one large corrective phase of the market.
The one we are entering will be similar, but in a higher level (taking longer with bigger moves up and down). It will also have different names for the phases, but similarly will be one large correction.
Here it comes: I agree with you. I think a strong argument can be made that we’re still dealing with the fallout from the late nineties bubble. In my opinion, there is no doubt the real estate bubble of mid-to-late 2000s was directly caused by low interest rates that were a response to the dot-com bust. Then I think you can make a solid case that the latest bubble was just a continuation of that post-GFC response. Economies always have boom/bust cycles, but the two boom/bust cycles since dot-com era still seem to me to be quite linked. At the the very least, every Fed chair since dot-com Alan Greenspan have followed the precedent he set.
It’s all the same mania. It never ended.
It’s hard to call anything that happened with GFC corrective. It sure wasn’t and hasn’t been about true price discovery since then as if that’s what anyone wanted. The markets are screaming for more of the same, that’s all.
Anyone who knew anything about making money would have taken the profits from stocks during the last ten years and started their own business.
What happened since the GFC is NOT corrective. When the market bottomed during the GFC, that was the end of that corrective pattern which started 10 years earlier with the dot com bust.
The move since the GFC has been a very strong impulsive move that is nearly complete (or is complete). We will then enter a larger degree correction that is one higher level than the GFC (on the same level as the great depression). There are MANY analysis methods that point to this, with the most accurate that I know of suggesting that there could be one higher high coming before it begins in earnest (at least support as not broken yet).
One way or another, we are very well heading into a major downturn. The best time to have started a business was about 10 years ago, when he had one more leg of the bull market to ride.
NDX monthly for fun and entertainment :
1) In order to move lower in 2000 there should have been a close below
May 2000 low. NDX was down from 4,816 in Jan 2000 high to 2,897 in May 2000 low, or 40% within three months.
2) NDX was up to a lower high til Sept 2000 high. In Aug NDX closed above May high. June & July highs didn’t matter. In Sept, after a higher high, Billy had a fight with US gov. NDX turned south.
3) In Nov NDX closed below May low. The downturn cont until Oct 2002 low.
4) In order to move lower there must be a close below Sept 2020 low. NDX is down from 16,765 in Nov 2021 to 10,967 after ten/eleven months, at a lower speed.
Sept closed below June low, but it doesn’t matter. NDX failed to close below Sept 2020 low. NDX, so far, is down 34.6%. Options :
5) A bullish option : the uptrend is strong. NDX will easily exceed the Nov 2021 high.
6) A bearish option. After a lower high, or a higher high, there might be a close below Sept 2020 low. Then a close below Feb 2020 low, then a close below July 2019 low, then a close below Oct 2018 low…
> A bullish option : the uptrend is strong. NDX will easily exceed the Nov 2021 high.
So, zombies learned to fly, with higher debt loads?
Starting any day now, maybe today, I also envision an ascending stock market from here.
The election.
IF the reins change party hands, the perception will be more prudent fiscal policy and a move to domestic energy sourcing. Nothing immediate to solve the problems, but perhaps something to run the shorts. The closer we get to the election, the more the gloom will dissipate. IMO.
Putin is the geo political wild card that won’t go away.
So we can start the week with some inflation coming back if Crude Oil futures continue there rally.
Jim Cramer has most of his charitable trust managed funds in these high tech stocks. He’s still saying to Buy, buy buy!
Everybody’s now bullish. R-gDp is rising. The FED is concerned about liquidity. Major bottom.
Wolf, thank you for comparing this to to the DotCom bubble.
Could you superimpose a graph of the NASDAQ or QQQ then and now?
You did this earlier this year.
As you said, the similarities will be spooky. Including the bear market rallies.
Housing graphs in the Bay Area should be similar.
Unfortunately, the housing bubble has spread beyond the Bay Area this time.
This time it is different.
Today will tell if Powell is a true hawk or a political hack. If the Fed pivots today, he needs to resign in shame.
What’s today? Is something being announced?
Emergency closed door meeting
Arya Stark,
1. It’s not an “emergency” meeting. It was announced early last week.
2. Nothing to do with “pivot” but with the “discount window,” which is currently barely in use.
3. They had a meeting on this same topic in March, same thing, an announcement a week before, and then they tweaked some terms of the discount window. No one cared.
4. Some bloggers made a lot of hay spreading BS about this meeting, especially by sticking “emergency” in front of it, which was sheer clickbait. And you, Arya Stark, fell for it, hahahaha.
5. You could have just read the Fed’s actual announcement last week about that meeting.
Update: OK, the Fed just announced that they did have this meeting, and as announced, and that they reviewed the “advance and discount rates to be charged by the Federal Reserve Banks,” meaning the terms of the Discount Window.
Any signs yet of a Powell “pivot” coming out of this meeting?
As Wolf mentioned, it was not an emergency meeting. It was a routine meeting under “expedited procedures” as they all have been. They announced it 4 days prior to the meeting…as they always do. They had the same type of meeting Sept 12th, Aug 22nd, July 18th, etc, etc. All on the SAME subject. “Review and determination by the Board of Governors of the advance and discount rates to be charged by the Federal Reserve Banks.”
You can see it here: https://www.federalreserve.gov/aboutthefed/boardmeetings/meetingdates.htm
Absolutely! I really want you to be right :)
Jeez I wasn’t making any claims either way. Sorry for calling it emergency but it was a bit last minute. :-[
Update: OK, the Fed just announced that they did have this meeting, and as announced, and that they reviewed the “advance and discount rates to be charged by the Federal Reserve Banks,” meaning the terms of the Discount Window.
Any signs yet of a Powell “pivot” coming out of this meeting?
The Fed with QE and low interest rates got us into this mess.
The Fed with QT and high interest rates are getting us into this mess.
Poor Fed. No respect.
Only the gods on Olympus can correctly control capitalism. Or, maybe it’s the Fates.
Maybe it is another troublesome deity that causes pandemics, hurricanes, wildfires, earthquakes, etc…..
“It’s not nice to fool with Mother Nature.” – Chiffon Margarine 1970’s
The very orderly pattern of stock price increase around the world today looks suspiciously like QE has returned.
Hahahaha, on the contrary. It looks like the UK government backed off its tax cuts, and the gilts yield plunged in response, and the crisis went away, the BoE’s “pivot” (it didn’t buy a lot of bonds anyway) will be allowed to expire as planned in two weeks, and QT goes on unperturbed at the Fed.
I will post the Fed’s September QT numbers on Thursday afternoon when the Fed’s balance sheet comes out. As I will every month.
It’s pretty hard to believe that a single announcement about backing off of tax cuts means that a huge pending bond crisis simply “went away.”
UK pension funds are still sitting on a strategy dependent on easy monetary policy. Their problems may have been very temporarily papered over, but nothing went away. Their underlying problems haven’t been addressed at all.
Wolf, you’ve wisely acknowledged many times that “markets go up and they go down” from day to day… How is it possible that a person of your caliber and experience believes that their bond crisis “went away” in a couple days based on such a clear short-term fix? I’m honestly and sincerely stunned.
OK, I’ll repeat it again. That tax cut — and the threat of the subsequent additional issuance of new bonds just when yields were going up — triggered the bond crisis when it became clear that she would become prime minister, and the crisis was made much worse when further details were announced. Yields spiked with every announcement. All you had to do is pay attention. That’s pretty clear by now. Then the spiking gilt yields triggered the pension crisis. Then the pensions started liquidating gilts to meet margin calls, and yields spiked further as buyers had vanished… and a panic ensued.
Sometimes it’s not all that hard to stop a panic when you undo the original trigger of the panic.
I understand it’s a lot more fun to make up stuff – such as some kind of generic “bond crisis” – than to stick to what actually happened.
Great call Wolf! Today is oh-so-BOUNCY!
About debt loads in general and Japan’s case in particular, I think the key aspect is that people like to look at gross debt but net debt (or better yet, net financial debt) is a better indicator.
Japan in particular has huge assets in it’s balance sheet, so it’s net debt is closer to the US’s (127% GDP). See more at https://data.oecd.org/gga/general-government-financial-wealth.htm#indicator-chart
The other key aspect is of course the cost of the debt. But a lot of countries afford to spend 10-15% of it’s revenues servicing debt. In the case of the US, if there is a Misnsky moment then it’s just a question of how much military spending to cut back.
Looks like Wolf’s bounce is here, an almost 1,000 point moonshot on the DOW – even more fuel for aggressive FED rate hikes. Inflation is not slowing down at all. My anecdotal evidence says the opposite, that it’s surging.
The YTD drop doesn’t rattle some deserving stock.
EBay P/E is 91 today (no typo)
Last quarter numbers:
Revenue -9.2%
Net Income -$531 Million (on 2.4 B in revenue)
Net profit -21.92%
Numbers make poor tools for value investing when mania is rampant.
The realistic valuation of the market is far, far away. In in some hopefully sane place.
Two hours ago, the WSJ posted this article:
“U.N. Calls On Fed, Other Central Banks to Halt Interest-Rate Increases
A U.N. agency warns that further policy tightening risks a global economic downturn”
Looks like even they are screaming that the FED’s QT (and other CB’s QT) is going to harm developing nations. The article is pay walled for me.
Is 10% food inflation is acceptable to the UN. It seems food price inflation should be their primary concern.
Also, don’t they realize that periodic recessions are necessary to ensure the long-term health of the global economy?
If things weren’t so hot and crazy on the way up, maybe the necessary downside moves wouldn’t be as painful. Gee, I wonder.
Since when do we suddenly listen to the UN? Just more Wall Street crybaby BS.
It’s always the same thing: What these countries have to do is NEVER EVER borrow in dollars and euros, but borrow in their own ruined friggin’ currencies which they control.
But since no one wants to buy bonds denominated in their trash currency, they sell bonds denominated in dollars, and US-based emerging-market mutual funds buy them with other people’s money, and Wall Street makes huge amounts of fees, and then it always ends the same: with a default and a crisis. US investors who buy foreign bonds denominated in dollars should lose their shirts when the countries and companies default. The bond fund managers should go to jail. And every time the UN comes out with this garbage, the Fed should double the pace of rate hikes to show these countries what happens when you ruin your peso or lira or whatever and then can no longer borrow in it.
This is stupdiest game in town, and anyone investing in these emerging market mutual funds is an enabler, and they should get cleaned out. I don’t even feel sorry for them anymore. They make all this possible.
Then there is politics. That borrowing in US dollars is part of the US dollar reserve currency foundation and money as debt. Without borrowing in US dollars, ther may not be that much borrowing at all.
These countries would then have to pay cash or possible barter. Their counterparts, at least Russia and China would switch to Rubles and Remimbri as currency for trading, eroding the US dollar position as a currency for trade.
Next, a move away from US dollar and a “western” payment transfer system would shorten the economic sanctions whip used by the USA as the trade move away from the US dollar influence sphere.
So borrowing in US dollar may be the stupiest game in town, but if the USA cracked down on it, the USA would loose economic power over the debt slaves.
I think you overlooked one step. The rumor is: When these funds are circling the drain, players, like say, Goldman Sucks and such buy the bonds at millicents on the dollar then later use the pressure of the IMF, US Military, etc. to get big payment.
Fact? or Fiction?
Sounds like good fiction to me.
Looks like you are spot on, the market is bouncing as hard as anything can bounce today.
I totally accept that “nothing goes to heck in a strait line” (I even “bought” the mug) but I am still a little shocked at the bounce we are seeing today. A pause in the blood letting sure that would make sense but people seem to be buying both stocks and bonds hand-over-fist today meanwhile the UK had to scrap their budget plans, the BOE barely made a stick save of all the British pensions, it is increasingly clear that even if the Fed were to pivot tomorrow there are a lot of zombie companies whose time may now be up because of the tightening of financial conditions, red-alerts are sounding in the credit markets all over the planet, Mark Cabana is warning that the risk of the UST market itself breaking is starting to increase dangerously, Germany as we have known it in the 21st century might not make it through this winter, we are teetering on the edge of WWIII, we just hit a month known to be part an average seasonal downtrend, we just hit the corporate buyback blackout period, the economic data that came out today for the US looks recessionary, depending on who you ask Credit Swiss may be preparing for its Lehman moment, etc…
I mean I get people are closing shorts and there was a big options expiry on Friday which changed the delta hedging and all creating an uptrend, but this still seems the most ridiculous time in my life to be going long risk assets the way the market makes people look like they are today. I get the UST buying — a relatively safe asset and we are not to far from the FED’s forcast rate-top and they are offering yields that we haven’t seen for them in like 15 years, but stocks?
Many of the strongest rallies have occurred during bear markets.
I get that, but they all have timing and causes even if they are not about the fundamentals. I am saying I don’t understand this one unless all the bug money desided that nothing in the entire universe mattered except for the “oversold” reading on the RSI
Just wait for tomorrow and the rest of the week.
Then wait for earnings report for 3rd qtr.
Inflation report within next 2 weeks.
Strong bear mkt rally NOT uncommon during secular Bear.
Things change but not under pinning fundamentals.
Earnings season where people get poorer and buy less and earnings defy all logic and go up instead of down. Just like a broken record. I’m ready for the through the Lookingglass malarkey another earnings season.
Never forget that the Plunge Protection team (aka NYFed trading desk) has $500 billion sitting in the Exchange Stabilization Fund to move markets however they want on any given day. If they buy a ton in premarket and at the open, everyone else’s algos follow. The catch is that they sell whatever they bought back into the market the next day or two later.
Assets prices may plunge, but do we get monetary deflation?
If there is no monetary deflation, where do the money sloshing around go next?
And if there is no monetary deflation, how are currencies to regain their buing power?
Due for a bounce because nothing goes to heck in a staight line.
I have that mug, I bought it for laughs.
You people are ghouls
The FED emergency meeting today will surely help!?!
Enjoy this one day stock gain while you can! I would really really like to see those leveraged pension fund managers behind bars!
We should be watching the FFR, screw the 10yr.
DawnsEarlyLight,
Don’t you people get tired of dragging this clickbait BS into here, over and over again, after I already wasted endless time debunking this BS? So I’ll just repeat what I said earlier here:
In reply to Arya Stark, who dragged the same clickbait BS into here:
….
https://wolfstreet.com/2022/10/02/big-tech-stocks-plunge-with-spooky-parallels-to-dotcom-bust-25-to-66-from-highs-so-far/#comment-470208
1. It’s not an “emergency” meeting. It was announced early last week.
2. Nothing to do with “pivot” but with the “discount window,” which is currently barely in use.
3. They had a meeting on this same topic in March, same thing, an announcement a week before, and then they tweaked some terms of the discount window. No one cared.
4. Some bloggers made a lot of hay spreading BS about this meeting, especially by sticking “emergency” in front of it, which was sheer clickbait. And you, Arya Stark, fell for it, hahahaha.
5. You could have just read the Fed’s actual announcement last week about that meeting.
…
https://wolfstreet.com/2022/10/02/big-tech-stocks-plunge-with-spooky-parallels-to-dotcom-bust-25-to-66-from-highs-so-far/#comment-470244
Update: OK, the Fed just announced that they did have this meeting, and as announced, and that they reviewed the “advance and discount rates to be charged by the Federal Reserve Banks,” meaning the terms of the Discount Window.
Any signs yet of a Powell “pivot” coming out of this meeting?
If the Fed is meeting about discount window operations that’s probably not a good sign since it’s historically been mostly used by banks in trouble, once other banks stop overnight lending to them. I agree that the Emergency stuff is inaccurate since the Fed pretty much labels every meeting outside of the FOMC official meeting schedule as expedited but the content of the meeting is concerning given the rest of what’s going on, like Credit Suisse and other banks/markets/assets being under stress.
You’re making up stuff.
Wolf, I don’t know where you get the patience to endlessly deal with these idiots over and over, but thank you for your perseverance.
Ok, just another ‘expedited’ meeting. I agree, no pivot forthcoming.
Correct that was not an ’emergency meeting’
That said, there might be emergency meetings happening to decide how to deal with what is a crisis that looks set to dwarf the GFC (raise rates to tame inflation > bond markets implode. Act as they did in the UK to stop that implosion > inflation fires back up and leads to hyper inflation at some point. Damned either way)
They don’t always announce when they have ’emergency meetings’ particularly when things are really bad. Don’t want to spook the markets.
And when it is really bad >>> Jean-Claude Juncker – “When it becomes serious you have to lie”
Seems this tech bubble deflation is a bit more orderly than 20 years ago.
That’s prolly good news and maybe a foretelling of how the overall market will slide….a bit more gently.
Short covering and they’re making a ton !
Hey, look! More “pivot” news! A headline on Yahoo Finance this morning: “Stocks extend gains as investors hope for policy pivot.”
Steve,
Notice how the wailing and gnashing of teeth about the Fed “breaking” something has suddenly died down? Every one of these bear-market rallies makes it that much easier for the Fed to do this business of hiking rates. The market is now giving the Fed another all-clear-for-a-rate-hike signal.
This is how the market digests those rate hikes — I’m going to do some more thinking about this because it may be worth an article. This is why the Fed cannot hike too fast because the market won’t be able to digest the rate hikes. And these rallies are part of the digestion process. It’s messy — like all digestion processes — but it seems to work.
It’s only when markets crash seriously that the Fed will prematurely pivot — before getting to 4% or 4.5% or something like that. And this bear-market rally is precisely what is needed to remove the threat of a pivot.
Thank you, Wolf. It’s almost ironic, or maybe a paradox. Whenever people think a “pivot” is coming is the one sure time you know it won’t happen. “A pivot is coming” = no pivot in sight, in reality. Maybe you could say it’s sort of the opposite of a self-fulfilling prophecy? Thanks again for keeping us all sane.
Market is rising on BOE intervention in the Gilts market succeeding. There was substantial Treasury debt issuance and Fed balance sheet roll-off that counteracted the intervention at the end of last week. Otherwise, the market has risen 2.6% on the days it’s been successful.
Hot off the press – not much of a “pivot”:
https://wolfstreet.com/2022/10/04/bank-of-england-bought-no-bonds-today-after-buying-only-22-million-on-monday-instead-of-5-billion-per-day/