Some big gainers too, as everyone plowed into energy, mining, and fertilizers.
By Wolf Richter for WOLF STREET.
What got crushed today were some of the giants as the market is coming unglued in a serious manner. The highfliers, the SPACs, the IPO stocks, the Ark Innovation ETF, etc., peaked in that infamous February last year and have been zigzagging lower ever since.
But the giants held up the overall market, thanks to their huge weight in the indices, until November when the Nasdaq started heading south.
The Nasdaq Composite fell 3.6% today to 12,830, a level first seen in December 2020. Since the November 2021 peak, the Composite has dropped 21% and is now deemed to be in a “bear market.” In percentage terms, it’s no biggie and still a relatively mild decline for the Nasdaq; during the dotcom bust, the Nasdaq collapsed by 78% (data via YCharts):
It was the giant 7 stocks that dragged down the Nasdaq today. The former Facebook got halved since August last year and at $187.47 has now dropped below where it had first been in February 2018. Apple, the hugest stock of them all with a market cap of $2.6 trillion, is still propping up the Nasdaq with its relatively small decline. Below: % drop today, and in bold, the % drop from the peak.
| The Giant 7 Stocks | Today | From high | |
| Nvidia | [NVDA] | -6.9% | -38.0% |
| Meta | [FB] | -6.3% | -51.0% |
| Amazon | [AMZN] | -5.6% | -27.0% |
| Alphabet | [GOOG] | -4.3% | -16.9% |
| Tesla | [TSLA] | -4.0% | -35.0% |
| Microsoft | [MSFT] | -3.8% | -20.2% |
| Apple | [AAP] | -2.4% | -13.1% |
The Wolf Street index of these Giant 7 Stocks, which tracks them by market capitalization, fell 4.0% today and is down 20.0% from their combined peak.
In dollar terms, $2.4 trillion vanished from their hugely inflated valuations at the high on January 3, 2022. But hey, no biggie: That $2.4 trillion had magically appeared in the six months before the high, and now it has magically vanished in two months. In other words that 20% decline just rolled the Giant 7 index back to Jun 2021:
The S&P 500 Index fell 2.9% today, to 4,201, a return to its May 7, 2021 level. From its high, the index fell 12.8%. This is still fairly minor. By comparison, over the past 22 years, the index has twice plunged by over 50%.Lower lows, lower highs:
The Big Four Banks – JP Morgan, Bank of America, Citigroup, and Wells Fargo – tanked 4.8% today based on their combined market cap, bringing their stocks back to 2019 levels. Since January 11, the Wolf Street Big Four Banks index is down 21.5%:
The good old airlines again. Airline stocks plunged today, on the radical spike of crude oil futures Sunday night to briefly $130 for WTI, which translates into surging jet fuel prices that form a large portion of the expense for airlines. The Wolf Street Airlines Index, which tracks the largest 8 US airlines by market cap, plunged -13.6% today, on top of the plunge on Friday and the prior days. Over the past six trading days, it has plunged by 25%. This is one of the most relentlessly dismal long-term industry charts out there:
But there were some huge gainers today. Everyone plowed into energy, mining, and fertilizers. These were the top 10 gainers of the S&P 500 today.
| Biggest S&P 500 gainers today | Industry | % |
| Schlumberger | Oil & Gas | 8.1% |
| Halliburton | Oil & Gas | 6.2% |
| NextEra Energy | Electric Utility | 5.0% |
| CF Industries Holdings | Fertilizers | 4.9% |
| Newmont | Mining | 4.8% |
| Baker Hughes | Oil & Gas | 4.7% |
| FirstEnergy Corp. | Electric Utility | 3.9% |
| Lumen Technologies Inc. | Telecom | 3.7% |
| Exxon Mobil Corp. | Oil & Gas | 3.6% |
| Coterra Energy Inc. | Oil & Gas | 3.4% |
The Russell 2000, like the Nasdaq is now in a “bear market,” having dropped 20.6% from its high in November, and is back where it had been in December 2020:
The usual suspects…
The Ark Innovation EFT [ARKK] dropped 3.6% today and has now plunged by 64% from its high on February 16, 2021, yes that infamous February after which the highflyers came unglued one by one. The ETF – which tracks a great collection of plunged highfliers, such as Tesla, Zoom, Coinbase, Twilio, Spotify, Roku, and others – is now back where it had first been in February 2020:
The Renaissance IPO ETF [IPO], which tracks the largest IPO stocks that went public over the past two years, dropped 5.2% today and is down 50% from February 2021:
On the positive side…
Among what has become meme stocks, Bed Bath & Beyond [BBBY] soared 34.2% today, and nearly doubled at the open, after Ryan Cohen revealed that his investment company RC Ventures bought a stake of nearly 10%. Cohen is chairman of GameStop, which plunged 11% today and is down 80% from its peak in January last year. Cohen is also cofounder of Chewy, which dropped 5.4% today and has plunged 65% from its peak in February 2021, yup, that one. Bed Bath & Beyond has had two similar meme-spikes, one in January 2021 and the next in October 2021, both of which re-collapsed. Now it was time to engineer a third spike.
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Check out the DAX index of German stocks, which in a free fall crash. There’s a US ETF ticker DAX that tracks this index.
https://wolfstreet.com/2022/03/06/stocks-in-germany-the-uk-france-italy-and-spain-plunged-below-year-2000-levels/
Over on ZH they say:
‘a unit of China Construction Bank Corp – one of China’s “Big Four” banks – was given additional time by the London Metal Exchange to pay hundreds of millions of dollars of margin calls it missed Monday amid an unprecedented spike in nickel prices.’
They were short nickel.
Xi will not be amused. .
Expect some more revival speeches.
Around the same time: Peabody was not given time to settle a coal short and had to get a multi-million loan from Goldman.
Is ordinary boring plain stuff back?
Nick Kelly,
BS. Turns out, it was a CLIENT of the bank that couldn’t meet the margin call, and the bank acted as the broker, and since the margin call was issued in the UK after hours in China, it was difficult for the bank to get the client to deal with it. The LME then gave the bank reprieve until tomorrow so that the client can deal with it. Also look at the numbers: in the millions — whereas the bank, one of the largest in the world, has multi-trillions with a T in assets.
This whole Zh headline you dragged into here is braindead BS. Why do you feel compelled to drag this BS into here repeatedly??? Esp. if you haven’t bothered to even figure out the actual story and might not even have read the ZH article??? I have to waste my time shooting this BS down. At least find the Bloomberg article that ZH ripped off and read it. I hate this braindead spreading of braindead BS. And people take this braindead BS seriously. And YOU are responsible. If you’re going to do it, do NOT do it here.
Plus Wolf’s site has the Z-site on his banlist. Thou shalt not speaketh it!
Nick Kelly and in general here,
Many times, ZH will actually contradict in the article what the headline said. If the headline interests you, read the entire article. And then click on the source in the article and read that too.
ZH has a lot of good stuff about arcane financial things that no one else covers.
But the ZH headlines are often the worst clickbait and very misleading. If you get your info from ZH headlines, you will be misinformed.
Sorry I fell for ZH misinformation and you can rest assured I will NEVER quote them here again.
However, I think a moderator should be that. The last time you were upset by an item from me it was simple fact from the Canadian print media. I dragged in the fact that Tesla’s and Nissan dealers’ quotes to replace batteries are very expensive. We agreed that some third- party alternatives are evolving. Is not that fact alone remarkable, that small third- parties are the only viable option? Shouldn’t a potential buyer have that information.
Whether my info was correct or not as in this case the tone of the correction might have been more moderate.
“…the tone of the correction might have been more moderate.”
Yes, it should have been. And I love you, but these ZH headlines in the comments drive me up the wall, as you can tell.
Here is the process I go through:
I read the article on Bloomberg early in the morning, and I cringe, knowing what ZH will do with it, and fearing that someone will drag the ZH headline into the comments. And sure enough, a few hours later, I see a headline on ZH about the topic of the Bloomberg article, but totally twisted around and misleading. And for the next few hours I dread the moment when the misleading ZH headline shows up in the comments. And then, sure enough there it is, with even more misleading stuff added to it.
That’s what I go through. I feel lucky when that twisted misleading ZH headline doesn’t make it into the comments, which is most of the time. I only get a few ZH headlines a day, thank goodness.
ZH has a lot of good stuff about arcane financial things that no one else covers. But you’ve got to read the whole article to find out.
The ZH headlines are often the worst clickbait and very misleading.
In the article itself, ZH will often contradict the headline and give you the actual info. But you don’t know that unless you read the entire article. So, if the headline gets your attention, read the entire article on ZH.
If you get your info from just ZH headlines, you will be misinformed. And it’s the worst headlines that people like to spread around.
Thanks
How to read ZH.
There is always truth in it.
And it extrapolated to the worst case of a worst case scenario.
Or ask yourself, is this “doom porn” or is it a logical and realistic outcome?
Gave up on ZH long ago; while there did appear to be SOME truth in SOME of their ”stories”,,, most of them are fictitious click bait and not much more.
Zh has close ties to Russian Intel. You can read about it yourself on Wikipedia. It’s not subtle. And to me, it looks like they promote malaise and chaos in the US over any other kind of message.
One thing ZH does is give voice to a few writers/reporters that most of the rest of the media does not.
Without mentioning names, these are people that I enjoy reading and people who report “world events” accurately IMO.
Dear Phil.
Never, ever use Wikipedia on anything that touches the political.
1970s Pravda would be a better source of balanced facts.
I can filter ZH all by myself. Just like you have to filter any news source. The problem comes when you are prevented from receiving a variety of sources to allow you to analytically cross check. Complain all you want but don’t censor.
That said it looks pretty doomy to me based on what our politicians are saying. Maybe they should be censored?
I didn’t know ZH was banned, but the last time I referred to them it was not a compliment. Anyway here is the gist of the nickel squeeze from Bloomberg via Yahoo Finance.
‘Monday, the LME decided to allow traders to defer delivery obligations on all its main contracts — including nickel — in an unusual shift for a 145-year-old institution that touts itself as the “market of last resort” for metals. The LME also gave a unit of China Construction Bank Corp. extra time to pay hundreds of millions of dollars in margin calls that were due Monday, according to people familiar with the matter ‘
Here is a question to which I don’t have the answer: if the party who was short can’t meet the cash demand who is on the hook?
https://wolfstreet.com/2022/03/08/nickel-futures-spike-ridiculously-trading-halted-in-short-squeeze-on-chinese-tycoon-facing-billions-in-losses/
Wolf, that very “brain dead” exercise you just did (and do often) actually adds value to all of us readers!
Remember that discerning (and weeding out) wrong information is just as good as getting right information!
The Zerohedge comments section is the only reliable comments section for your daily news source.
When I first started watching the bottom line financial news, still a novice, a well meaning friend sent me to ZH. I read a few of their articles and stumbled across your site with in a comment like this. That was two years ago and you have had a loyal follower since. Now, I suggest WS to well meaning friends who are trying to find a balanced voice in finance news backed with facts. As a writer – I love defining irony.
Facebook dot com lost $0..5 Trillion dollars in market cap in 6 months. And is still $0.5 Trillion dollars.
Welcome to bear country y’all
Apple is the only thing propping up this market. Just wait until they warn that earnings will miss because they can’t get the metals needed to make their phones.
Kaboom. I don’t think the market is discounting this possiblity. Apple is in the top 10 holdings of every major hedge fund. Some will rush to sell.
I’m also wondering when Xi will announce that buying an iPhone is “unpatriotic” and that people should buy Huawei instead.
Or that buying ANY western products is “unpatriotic” if there are Chinese alternatives for them available. They don’t have to ban western products and face sanctions as a result, because they can simply make buying them socially unacceptable using propaganda. The mainland Chinese are fiercely nationalistic and will follow suit, voluntarily.
This way they can also specifically target companies that prop up the western stock markets (like Apple), knowing that American policy makers and elites are obsessed with stocks.
China has walked a fine line on these things for awhile. It tries to stay behind its walls but then suffers for it. It would be a huge move to go to reliance on domestic consumer-buyers. This has been bandied about for a long time, but has not materialized so far. China still needs exports, I think. And it still does not have the brand charisma some western firms do.
The USA took hundreds of years evolving its currency, financial systems, and labor and consumer markets. I think Xi is not stupid in this regard, he is measured in many kinds of progress, though some heavy handed moves do betray a tendency to lurch “forward” at heavy cost.
Assuming Chinese government will choose this course of action, did anyone estimated what impact this would cause on US economy and its stock markets ? My understanding is that China is not a major consumer of US finished goods.
What you are describing is a negative fundamental waiting to burst out into the open when the bear market ending this mania has clearly arrived.
It’s an example of de-globalization.
It’s one of the major negative fundamentals coming along with:
The end of the bond mania which will reverse decades of decreasing interest expense, especially for companies with stable rags for balance sheets which is most now.
Lower demand by Americans who are destined to become poorer or a lot poorer over the indefinite future.
AK,
The more important point is that China is viewed as a growth market or potential growth market even where it is not now.
It’s also a lot more significant for some companies versus others. I recall reading this week or last that China accounts for 20% of Apple’s sales. This came up in the context of potentially sanctioning China for not cooperating with the US on the Ukraine fiasco.
If China accounts for 20% of Apple’s sales and they lose most or all of it, the stock price is going to absolutely tank.
For other companies, I can assure that even though the supposed prospects are disproportionately a complete fantasy, it sure isn’t usually based pr exclusively based on US led growth since there is little or none in this fake economy.
Once they start getting negative points on their social credit system for having a non Chinese phone then the fat will be in the fire.
it’s not just metals. it’s also that apple has been a huge beneficiary of stimulus for the past two years. their customers were dropped helicopter money, and they took that money and bought new cell phones.
Indeed. People working from home, saving tons of money, yet getting stimulus checks. Where did that money go? Luxury stuff like iPhones.
yushan,
it’s so patently obvious, which is why i can’t tell whether people are being purposely ignorant or if they’re just lying to keep others in line.
much of the “spectacular” growth in gdp was not growth in production, but growth in consumption, fueled by printing, debt, and stimulus. how could we not have a recession unless the helicopter money was repeated forever? the baseline is now based on stimulus, and it can’t be repeated without making the inflation problem even worse.
What can new cells phones do lately, beyond a few marginal improvements? The iPhone broke through with new stuff, but what now? More megapixel cameras? 75 percent of what I do could be done with a spreadsheet and word processor and Windows 3.1, and contemporary accessories, almost 30 years ago. So many features strike me as merely intrusive. This, from the highest-valued firms in the world.
So we get forced obsolescence to keep the gravy train going.
phleep, yes. when you actually dig down into the technology, the main differences between the original iphone and the new ones are:
– better cameras
– bigger screens
– higher resolution/brighter screens
– more storage
– faster processors
that’s it. there is nothing revolutionary about the new iphones, so much of the replacement is driven by the old ones breaking or mere “i’m buying it because i want it”
Jake W,
You are describing another aspect of the modern economy, planned obsolescence. The new product is usually only marginally better than the old one but without this involuntary replacement cycle, these company’s revenues, profits and stock price would tank.
This waste adds to GDP and therefore, “growth”, even as the country if often actually poorer for it.
Yes! I call the relentless parade of new versions of hardware and software the “upgrade treadmill”. Some of it fixes the bugs in previous versions that were rushed out to keep the treadmill moving (faster?), and most of the rest is not essential. Of course there have been a few innovations that are useful, but most of what people do with MS Office today could be done with Office 97.
And the planned obsolescence really drives me NUTS. What a waste of time and precious finite resources as the global corporate machinery grinds the planet into rubble!
Apple just punched themselves in the face.
People buy our products and then we use it against those same people if their government does something we don’t like.
That sure aint gonna fuel sales…
And today’s Apple Event a big nothing burger. Canceled the Mini but left SE the same form factor? Really??? iPad Air update…yawn. Mac Studio…interesting if producing 4 K video, small market. Many thought Mac Mini would have an update.
The “Russian Bear”…..hence the name.
Just don sell the fur before the bear is shot.😁
First 1/3 is irrelevant since everything was briefly lower on the 2/24. If anything we may be going down for a retest before a leg up.
Or the margin calls may slip up a reasonably institution at a speed too great for it’s local central bank to do anything about.
Then dominoes start to fall as fear of counterparty risk overwhelms the amygdala of those involved or in any way indirectly exposed
I want to the markets fall a ton but in an orderly manner like the dot com bust. If chickens enter panic mode the Fed will once again arrest the market swoon and prop it up. Keep it orderly all the way down and we might actually get a real market. Nothing to see here, just a 1% decline this week. And next. And next.
Retest should be right here it seems. Amazon and Google within few points. But Tesla should be $650 by now.
Can’t wait for that 0 5% rate hike, now that pandemic is over.
Keep dreaming
The Fed is NOT bigger than the market.
Commercial paper rates shot up…
Inflation will only be fueled by Fed not addressing the inflation.
The Solution for Inflation can not also be that which CAUSED the inflation….ie the big jump in money supply combined with fake low ….RECORD LOW…interest rates.
The Fed must act, and resolutely. They have “kept an eye” on the problem long enough.
Raise rates 1/2pt for starters.
Raise margin requirements for commodity futures. (Reg T)
We will see on Thursday with the CPI print. They have repeatedly touted the “data driven” angle.
“The Fed is NOT bigger than the market.”
Yes they are. They control the money supply so YES they are bigger than everything. There is no real market.
Perhaps they will be forced to hike in 1% steps a few months from now. This may seem unlikely now, but a lot of stuff that I thought could/ would never happen, HAS actually happened in the past decade.
Everybody is now so conditioned to think that the stock market is the center of the universe and that the central banks have full control over everything. “They will never let it collapse”.
But perhaps it is already not in their hands anymore. And recent developments (like cutting Russia off SWIFT and freezing central bank assets) will hugely accelerate de-globalization and the demise of the US$ reserve currency status, and therefore even further limit the options that the Fed has.
Perhaps they can pull it off one more time, but we can all see that the unipolar world has ended and this has huge consequences for the financial system and stock market.
The Fed is not bigger than the market….and we have seen this in the last two weeks.
The talking heads on Bloomberg still expect the Fed to “save the day”, but the “save the day” buttons are already pushed (.05 Fed Funds)
Bloated balance sheet.
I wonder what the NY Fed is up to?
the only way they can “save the market” at this point is by further diluting the currency.
there’s no magic bullet. all the fed can do is transfer the pain from one party to another. it can’t eliminate it.
@Jake,
“Saving the market” means transferring losses to another market. Because you would be decreasing the real value of tens of $trillions of bond holdings. These are peoples savings / pensionfunds/ etc.
That central banks even consider saving stocks that way is testament to their evilness.
exactly. powell said in april of 2020: “People are undertaking these sacrifices for the common good. We need to make them whole.” but there’s no way to make a participant in a market “whole” without taking from someone else. in this case, it was by printing money and diluting the value of dollars already out there.
even mundane things like insurance losses don’t make society “whole.” they just make the policyholder “whole” by transferring money from other people paying premiums.
there’s no free lunch, and the fact that so many people believe otherwise is really scary.
Jake W
“all the fed can do is transfer the pain from one party to another”
Indeed. And the pain for 12 years has been on those who expected the Fed to stand to their duties and post. (fight inflation not promote it)
Hayek said…”when central planners decide, they intentionally assist one group to the harm of another.”
Well, we know who has been harmed the last 12 years…and who has been coddled with Fed help at every turn.
“ there’s no free lunch, and the fact that so many people believe otherwise is really scary.”
Jake,
The bottom 1/3 of the population would probably disagree with you…
cowg,
the problem is that the “goodies” that society has promised to all levels are not affordable based on our actual economic production, so it’s taken financial chicanery, debt, and printing to keep the illusion alive.
there’s still not something for nothing.
Print more tickets to the big (bread and circus) game, too many tickets for the stadium seats. What you get then is lines and shortages. Like the USSR in the 1980s.
We are already experiencing this. But the masses are still “heroically” spending? Oh, my. I’m waiting for the next populist “savior” to appear.
Keep dreaming. Fed will not raise rates by any meaningful value. The fact that you think fed cares about inflations and ordinary people means that you are just another sheep.
Kunal,
OK, I sense a pivot in you. From: they will never end QE and they will never raise interest rates; to: they will “not raise by any meaningful value” :-]
I noticed whenever there is a bounce back rally after a big drop, the big guys and insiders use the rally to unload their positions. They wouldn’t dare do that when the markets are going down. Their goal is to unload all their stocks so as not to disturb the markets too much, while the lemmings buy on the dip and think they are getting a bargain. I’m nearly 100% in cash and watching the carnage from the sidelines. That 37 basis point yield is looking better every day.
Or maybe they just posed that number for a photo?
Which would have brought more downside to the stock market, .5% hike or the Ukraine war? We’ll never know, the Fed messed around too long once again, thinking inflation has to be transitory or will just go away. Oooops, sorry, missed that option, the markets fell anyway.
how can a .5 pt raise “hurt” the markets? The markets have been fueled by the largest spread between rates and inflation in HISTORY.
Inflation just ramped up TEN .5pts since June of 2021….and one 1/2pt reaction is a caution?
It is clear who wasnt around in the late 70s early 80s to witness an engaged and determined Fed……doing their duties to HALT inflation, an inflation that once let loose is nearly impossible to contain. Half point won’t make a dent.
Holy Smokes!
Wake me up when we are back too 2019 prices and arguably even then it was overpriced for most companies if you look at PE
Well that’s it, really, isn’t it.
Phoenix
Just remember the FEDERAL RESERVE ….
FORCED INVESTORS TO TAKE MORE RISK….as admitted in “The Power of the Federal Reserve” documentary (PBS) and mentioned in the book “Lords of Easy Money.”
When they pounded down the long end with that intention, they also abrogated their THIRD UNMENTIONED mandate…”promote moderate long term interest rates.” (hence the “dual mandate” game”) (1977 Federal Reserve Act)
The wisdom of that mandate was to PREVENT just what they did, and they slipped the duty, ignored the rules.
When they FORCED (Fisher’s word) the investor to take more risk, the Fed altered, on their own….reasonable risk/return calculations and Price to Earnings ratios.
Maximizing employment was a port-war add-on that is often contradictory with stable prices. It gave too much discretion to the Fed and to politicized appointees to do whatever they pleased. Which was the easy path of printing. It was based on a faith in the “Taylor rule” that printing would lower unemployment. But in the 1970s that was debunked with the awful appearance of stagflation: a sputtering economy with hot inflation. I think we may be at that doorstep again. Those who unlearn the lessons of history are doomed to repeat it.
Don’t exactly get what u mean by collapse. All are still up at least 30% since 2020. S&P still at 4200. 30% since 2020 too. So what collapsed?
RTGDFA
yes, you’re up if you bought years ago. but a lot of retail investors and others bought in relatively recently. so a lot of people are down.
This is a vicious reset. I’ve seen this a few times in my life and it never ends well. The Nadaq appears to be leading the way down, yet again.
At some point buy and hold investors sell because they cannot afford to lose more – they get cold feet and want out before they get wiped out. That is when the real carnage begins…
Dry powder ready
Yes, last year my buys were all lined up once prices dropped anywhere from 30-70%. Now it’s down to 10-50% declines needed. Here kitty, kitty….
Once chart technicals look bearish, hedge funds turn from buying dips to shorting rallies. THAT is when the carnage goes WTF to the down side.
We should assume they are in the office until midnight worrying about this.
I wonder how many people who have saved for their retirement (401k or otherwise) are still in this buy&hold TINA framework. At what point do they decide that it is not worth the risk anymore?
The returns that you can reasonably expect from current valuation levels are abysmal and normalization to historically average valuation requires losing 50-70% – not even talking about undershooting averages, which by definition happens from time to time.
Even with recent (modest) declines after a massive run-up, most still had an excellent run. So it seems prudent to cash out. But who will buy their stocks? The young generation has no money. And even if they had, will they even be interested in a failing buy&hold strategy in stocks?
From what I observe around me, people are still in buy the dip mode, relying on a Fed put. But people tend to change their minds all at the same time.
YuShan,
From a traditional valuation stand point, yes I do agree that forward expected earnings/dividends would be abysmal. But ZIRP has basically snipped the traditional linkages between everything that we used to depend on. Not saying it is right, but just objectively saying it appears to be this way. That’s how you get “magical” valuations (TSLA, NFTs, BTC, etc.). In your DCF when your risk free rate becomes zero, you divide by zero your cash flows. And everyone who has taken math up to the 5th grade knows you can’t divide by zero.
…or can you?
On stocks and the Fed, another radical though (or perhaps becoming less and less radical) is that potentially the Fed will outright buy stocks (e.g. BOJ) to “solve” our “pension problem”, in which case, valuations WILL NOT MATTER AT ALL.
And then we will truly see “magic”!
I still think investors should prepare for a deflationary scenario AND an inflationary scenario, as it is unclear which direction we could go.
The Fed buying stocks (which would be illegal, but they will find a way if they want to) would mean printing more money.
In the paradigm of the last decade, that would not be a big deal because there wasn’t too much inflationary pressure (in CPI, not assets!). That is one reason why QE wasn’t massively inflationary (pushing on a string).
However, that paradigm has now changed. CPI inflation is red hot (I would argue even out of control). Printing money to buy stocks will be inflationary.
Personally, I think the current decade could become a mirror image of the previous one. In the previous decade we had massive asset inflation and relatively modest inflation in CPI. This could now turn into hot CPI inflation while asset prices deflate.
In the previous situation, the Fed could look all powerful. In the new situation, they only have bad choices.
it feels good to know that my comment got you LOL. otherwise, why would you delete it. bloody loser. only thing that collapsed is your retirement fund. Old dog, who barely left a few years to earn it back
collapsed retirement fund,
Hahahaha, got your brain microwaved accidentally while fixing breakfast in Singapore? Your comment that you posted at 12:38 a.m. under the screen name “collapse” wasn’t deleted. It was in moderation because it was your first comment with this login. And this comment here is your last comment with this login.
FYI: I’m short this market, as everyone here knows because it’s public. And I own my own business, namely this website, and it’s doing just fine, and I have no intention of giving it up just to please you.
Maybe you should go see a therapist before your condition gets any worse, no?
Everyone’s retirement funds, and peoples savings are being used to fund the prolific government spending and deficits. When their funds have zero purchasing power and are completely depleted, then the government will have to cut back on their spending because there will no longer be any funds to loot from the retirees and savers.
I am an old dog. Why would any one take the loss of retirement as a pleasure or a good thing? A sick mind would be capable of thinking it was an advantage.
LOL… if I was Delta Airlines I think I would just park my jets for a while and make my profits off that little refinery they bought outside of Philly back in 2012.
How would you like to be a passenger in a commercial airline flying over the Ukraine right now? Or one that accidentally went off course in that area? Better take out a 1 million dollar life insurance policy before you board the plane.
The EU basically suicided all their airlines when Russia counter-sanctioning the EU airspace restriction with their own. It’s trivial for Aeroflot to fly around Europe, but not so much for European lines to fly around Russia. So all the EU-Asia flights are gobbled up by Middle Eastern and Asian airlines.
Rowen,
“suicided all their airlines”
BS. That’s what Putin wants you to say. Maybe he paid you a commission to post it here? Airlines fly around Russian airspace just fine. It costs more in fuel and time, but it’s not huge, and it impacts only some routes.
It might be “trivial” for Russia to fly around Europe, but there’s nowhere to fly around to except for Central and Southern Americas – and getting there in one leg is not easy.
Most of the European and American air traffic is fine. But yeah, EU/UK – SE Asia and US – India are heavily affected. 17 hours from London to Tokyo via Anchorage, anyone?
In regards to the markets, besides russia, what countries will get hit the hardest when they default on their debt?
Have a look at Flightradar24.
No fly areas do not restrict routing that much yet.
great app!!
Thanks interesting app, but watch now.
I confirm, the airline companies are in great difficulty, the cost of airline tickets are doubled as the transport time with indirect flights, KLM has ceased operations, other European airline companies are in a very bad competitive position
European airlines do NOT fly across Russia on their intra-European routes, and between Europe and North America, South America, Africa, and the Middle East. They don’t have to fly across Russia to go to India. There are some destinations in Asia where a route over Russia would save some time. But the China traffic is still in near lock-down and not that many flights go into and out of China.
US airlines are more likely to fly over Russia when going to Asia. But they don’t fly over Russia to go to Europe on their big routes; they fly the other way. They don’t fly over Russia on most of their other routes either.
But all airlines are getting hit by soaring FUEL costs that affect EVERY flight to anywhere.
I see the WOLF is not amused and has some serious teeth ! as usual lots of good info and some entertainment
Nowhere near a bottom in risk assets. Jeez, most are sitting ready to buy rather than worrying about preserving capital. When that flips…Also the dominoes from this war in Ukraine literally just started. Long tail event bc of all the commodities involved. We are in inning 1.
As long as there are plenty of jobs
lots of noise is fine. People will
make their payments. Raise the fed rate very slowly
but end the liquidity. As paper rolls off don”t
replace it.Interest rates will then find their water mark.
I sure hope you are right gorbachev. If everything goes as planned, basically all that we can hope for is 3-5% annual inflation, continued excess asset price appreciation, and no looting in the streets.
…until China invades Taiwan
No answers if China invade Taiwan
Me thinks that Russia was being being used to test the water on how the world would react. The world has basically turned it up to 11. So now China will make it’s alternative to SWITFT more robust. It and the world know that the US and existing Global World Order will shutdown everything including basic services out of reach punishing users.
“Russian CDS Hit Record 2,757bps After Morgan Stanley Says Russia Set For Venezuela-Style Default”
“The Big Question on Wall Street Is Which Banks Owe $41 Billion on Credit Default Swaps on Russia”
There are now doubts that the CDS would even pay if Russia were to default on its debts. This kind of thing happened before with CDS on corporate debts.
Any chance that Russia leadership knew that this would blowback this bad and might have “invested” in this outcome?
Unintended consequences are the super destructive power of politicians. First close the economy for a Pandemic which mainly affected elderly and print money. Unintended consequences runaway inflation. Next sanction very large suppliers of basics of economy ( gas, oil, fertilizer, industrial metals ). Wonder what is going to happen?
Wolf.
Just heard an analyst saying the Fed wont raise rates due to a dollar shortage.
Then the working from home Wealth Management folk on cable touting the great deal of money on the sidelines.
These points seem contradictory.
To the first point, isnt that what swap lines are for?
And to the second point, if there is a shortage of dollars, then why dont those feeing the shortage “pay up”. ie pay a higher rate to acquire that which they need. It seems some of that liquidity on the sidelines could be put to use if the rates were more attractive, higher.
Your thoughts.
the people with “cash on the sidelines” are willing to deploy it for reasonable risk/return propositions.
they’re not willing to lend at 0.25%, so the fed has to play games to make that happen.
I do agree that there is a tiny bit of easing in terms of Fed urgency to raise rates since it appears the war has helped increase demand for the dollar.
But that small increase in demand for USD won’t help issues domestically, and with energy prices exploding in Europe, that is not going to help the US inflationary environment.
The primary driver of this all is that the Fed needs to start draining liquidity ASAP to quell domestic inflation. Prior to the war I would have also said they additionally needed to raise rates to restore demand/faith in USD as well, but the war is providing a little bit of demand even at these pitiful yields.
historicus,
This stuff always makes me laugh.
When I buy something on margin and the price crashes, and I get a margin call and have to cough up a huge pile of cash that I don’t have, well, then I have a “dollar shortage.”
When I want to buy a new car that costs $100k and I don’t have $100k, and I go to a lender and ask to borrow $100k at 2.9%, and they look at my lousy credit rating and say, 15.9% on a $20k vehicle is the best we can do since you’re deep subprime, well then I have a dollar shortage and I cannot buy that $100k vehicle.
But there is never a real dollar shortage. It’s just that borrowing in dollars gets more expensive for emerging markets for example. And some, such as Argentina, due to bad behavior, are locked out from borrowing in dollars, and when dollar debts come due and have to be refinanced, they face a “dollar shortage” of the type that I have when I get a margin call. Or when they want to borrow in low-interest-rate dollar-debt, and the lenders (such as bond investors) say, forget it, rates are much higher now, well then it has a dollar shortage of the type I have when a lender turns me down for a low-interest rate loan and offers a subprime loan instead.
Cash on the sidelines is a myth. There is no such thing and never has been. “investors” don’t own cash but someone else’s debt which must first be sold before they can buy anything else.
The only cash individuals have not in the market is currency notes. The only other cash is bank deposits at central banks. The combination is the only actual money. All other supposed “money” is just someone else’s debt.
Bank deposits and money market funds aren’t cash. A bank deposit is a loan (liability) to the bank. If you make a withdrawal, the bank can give you currency notes up to a point. Above that, they would have to sell assets on the balance sheet to pay your loan off.
The above two are the majority of “cash on the sidelines”.
Atlanta’s gdpnow Latest estimate: 0.0 percent — March 1, 2022. That’s what tanked the markets. Oil, Ukraine, interest rate spreads, swift counterparty risks, were only triggers.
To quote economist John Gurley, “Money is a veil, but when the veil flutters, real-output sputters.”
Spencer Bradley Hall,
No one pays attention to the Atlanta Fed GDPNow. It has been all over the place for years all the time. It’s nearly useless until about a month after the quarter ended. It’s so bad that the New York Fed came up with its own much superior measure during the pandemic – its “Weekly Economic Index” which you can google for more info. It also shows how its past predictions lined up with actual GDP growth when it was published so you have the tracking history (click on the chart to enlarge it).
Good point. But you could then look at: St. Louis Fed Economic News Index: Real GDP Nowcast (STLENI) which is showing 1.2%.
R-gDp and N-gDp are both down. Stocks followed R-gDp to 7% in the 4th qtr. 2021. O/N RRPs drain the money stock (contrary to the FED’s accountants). It’s a conversion of inside money to outside money.
The FED should do what Paul Volcker did in April 1981 (when N-gNp blew out with a 20.1% reading)- and reimpose reserve requirements on total checkable deposits – as well as on vault cash. Volcker back then imposed reserve requirements on NOW and SuperNow accounts (before he lost control again in 1983).
ARKK is back where it was on Ground Hog’s Day of 2020. Bill Murray reporting.
People keep bringing up either the 2008 or 2000-2002 bear markets. Couldn’t this bear market end up resembling the nasty 1973-1974 bear market instead ?
The three bear markets in your post were about the same size, measured by the S&P 500 or DJIA.
Also, the current market is a continuation of both the dot.com bubble and pre-GFC. It’s not like those two declines corrected the prior excess. The mania just got bigger and here we are now.
A 50% decline or somewhat more won’t even come close to correcting the current excess. A 50% decline from the January peak is just a retracement of the advance from the March 2020 COVID low. US stocks were still ridiculously overpriced then and would be now at S&P 2300+.
The metrics most people use to measure value (such as P/E) lag prices. In the GFC, prices declined steeply after Lehman Brothers blew up making many look “cheap”. Then earnings crashed and dividends were cut or eliminated, making stocks seem more expensive than at the peak.
My personal belief is that this will be a Russian bear market. 🐻
For those who don’t know who Lumen is it used to be called CenturyLink and acquired Level3. So it controls lots of fiber but still has POTS crap to deal with. Dividend is good.
The Wolf Street Giant 7 Stocks Index? The Wolf Street Big Four Banks Index? I’m going to start my own Andrew’s Good Time Index to chart my mental health during these heady times.
Great article and as these previous levels keep being broken sets up more selling as they become resistance levels especially given the carnage of the FB type companies.
My question for the audience is car sales will 4-5 usd gas change the buying public from the higher margin SUV to the sedans that many of the USA auto companies have eliminated.
IE lower profit margin and lower growth or recession like in the 1980 auto company business model.
We are now at a point where stock pickers will beat merely investing in indexes. There are some great quality stocks that have been trashed in the carnage, there are some stocks that are still wildly overvalued.
Great businesses with strong value propositions will do well, companies built on debt financing and growth through deficit financing will burn down.
Higher interest rates get rid of cheap money and that eliminates the ability for companies to fund growth through borrowing.
Basically, we are now at a point where the tide goes out and we see who is wearing shorts and who is naked.