The AUD is still under pressure this morning:
Bonds are consolidating after the big breakout:
XJO opened with a bang but his been sold to two year lows ever since:
Big Iron continues to outperform:
Big Gas is aflame:
Big Gold wants some Fed sweet talking:
Big Banks are still free falling except a teflon coated CBA:
Funding costs are still targeting the moon:
Big Realty is breaking down all over:
Iron ore giveth and the housing bust taketh away.
Avagoodweekend.
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By Chris Becker A big night on risk
This market rout is escalating much quicker than most people thought.
These consecutive 1-2% down days are a real killer.
There’s still an awful lot of attempts to rally that keep failing. I don’t think this will end until the dip-buyers throw in the towel for good.
If they can’t bounce it tonight it might be shortable for the first time in 6 years…………according to Bloomberg our 2/5 spread is now inverted
Yeah. The behaviour of the S&P500 recently has been astounding. And I haven’t seen anything convincing that explains it. It just seems like lunatic animal spirits, rather than anything reflecting changes in value of companies, or the worldwide geopolitical system or anything at all.
There are plenty of good reasons for individual stocks and sectors to fall:
-US banks are responding to the flattening yield curve (i.e. the Fed) their business model is to “borrow short, lend long”, so what happens when short term rates exceed long?
-A few big tech names that are close to 15% of the index are falling for various stock specific reasons. AAPL because iPhone sales look to be weakening, AMZN because concerns about future revenue growth and tiny profits. FB because privacy etc,many being targeted for global tax avoidance, monopolistic behaviours etc.
-Energy sector – well look at oil price. There is global oversupply thanks to US shale.
And macro concerns:
-China trade, rise in cost base, supply chain disruption.
-Full employment and potential for wage breakout.
-US budget deficit getting out of control on tax cuts and spending increases.
It was actually perfectly predictable. When you pump money (liquidity) into the system, asset prices go up. When you withdraw liquidity from the system, asset prices fall. Everything else is just noise. All market crashes are liquidity events.
That explains the tech stocks above, but what about Google? That’s getting chewed up also? Punished by association it would appear?
Large cap stocks like Google etc might be dragged down by association as people sell out of broad SP500 and tech ETFs which hold it.
Google faces similar problems to FB, though e.g. the EU fines, the UK revenue tax, the ACCC enquiry and the threat of these spreading to other jurisdictions.
@Kiwikaryn also correct. Even though the tightening has been happening for a while and the moment markets start to respond is hard to predict, there’s no doubt this gradual ratcheting tighter is the main cause behind falls not only in stocks, but many other asset classes.
Easy money drying up and risk increasing: the current market declines look like a healthy market response.
The Fed seems intent on returning to a data driven approach, which means the market having fit will only cause a Fed response if it bleeds into the real economy or if large declines are sudden and potentially crisis inducing.
The market is starting to price the Fed no longer acting as backstop, after 10 years of hand holding.
Look at the 2018 USA Margin Debt as another reason for the rout…..highest since the Dot Com boom/bust of 2000.
Where are all the expert advisors recommending US equities ? How is the MB LIC performing ?
A couple of small interest rate rises off a record low, and a mere $10B a month being withdrawn from the money supply is not going to have much of an impact. But when its 9 interest rate rises and $50B a month its a different story. The EU also stopped pumping money in this month, and they were the major source of liquidity this year. So the big Dec rout is a response to the end of EU QE more so than the US Fed. That just leaves Japan, and they have signalled they want to stop QE soon as well. So hang on to your hats folks, there be more bumps up ahead.
who wants to hold over the xmas break ?
I have no choice but to HODL… some of my stocks are bound by non-disclosure agreements.
BBSW sharp rate rises in March and June were glossed over by some commentators as an “end of quarter spike thing” – the graph seems to back that up to a point (not Sept) although the overall trend is also solidly up.
Anyone understand this dynamic?
Looking back it appears only 2018 has the end of quarter spike (sept 18 went down). Last dec was flat as a pancake.
Tracking LIBOR this time I think.
Thanks both.
I can’t recall ever a December where equities have tanked. I just checked the records. No wonder I have no memory of such an event, the last bad December crash was 1931. We all know what happened in 1932.
Cost of Living 1932 (USA)
Average Cost of new house $6,510.00
Average wages per year $1,650.00
Cost of a gallon of Gas 10 cents
Average Cost for house rent $18.00 per month
A loaf of Bread 7 cents
New Car Average Price $610.00
http://www.thepeoplehistory.com/1932.html
Could play Bingo with this list
The reasons for the Great Depression are varied and complicated but 6 major factors that are thought to have contributed are listed below not in any specific order as to relevance
1. Wall Street Crash on October 29th, 1929
2. Banks began to fail in October 1930
3. The US introduces import tariffs on over 20,000 imported goods to record levels leading to other countries following suit
4. Due to bank failures ( no federal deposit insurance existed ) people withdrew money from the banks to keep in currency or gold making the problem worse
5. Drought Conditions and over mechanization of farming caused great area’s of the midwest to become Dust Bowls
6. Economic cost of World War I still a problem stifling investment ( Worldwide )
The reasons for the Great Depression are well known.
It was the land flippers in Florida who were borrowing absurd amounts of money and just flipping land – in came the margin calls as prices reached absurd levels and there was a credit event which filtered straight back into Wall Street who were the lenders.
Its quite extraordinary the parallels to 2008 in the US and contemporary Australia.
..
If, as is aledged, debt is consumption brought forward, there is adjustment ahead. The discussion is about how and when, not if.