We all know how manic stock bubbles end…
Badly.
So it should come as no surprise that when China decreased the amount of play money, the Shanghai Stock Market, the SSE as it’s called, had a very bitter day: Down more than 5% in a single session.
You can see a one-month chart of the SSE over here.
Here’s the problem in a nutshell and why the US market is set to drop more than 100 points at the open this morning:
In the days before globalism, when the Shanghai market dropped, it was mainly a concern of the Chinese trading there.
Fast-forward to Globalism 2.0, under which everything is linked and a bubble popping in China results in losses all over the world. In fact, if we look at Euro at the moment, what we see is most of the major indices are down 1.5%, and if that level of decline carries over into the Dow, it would set up a decline to something like 267 Dow points.
Not that we expect things to get that bad today, but down 150 for the day isn’t out of the question, at least at some point during the trading session.
From the long wave economic perspective, we don’t really fear a major bottom until the 2015 to 2016 (and maybe as late as 2018) time frame. But, if that’s going to be a stock bottom like we had during the First Depression, remember that 1929 was only the beginning. You didn’t see the actual bottoms put in for a couple of years (more tomorrow for Peoplenomics subscribers).
So whether this Chinese sneeze is the start of the market flu, doesn’t seem likely, but it’s not out of the realm of possibilities, either. Major long wave bottoms take over a year to form…so yeah, you can start to worry now, but save the panic for later.
We should never see a US market collapse before 37-days after a major high, but more ideally around 55-days later. Give the recent highs, you can run out the numbers yourself.
Bloomberg’s got a dandy story on how Central Banks are pumping like crazy in an attempt to keep the globalism 2.0 model going, but with all this pumping, notice how the price of gold is moving. You can’t just make up money out of thin air and have markets not collapse after a while.
But, collapse they will when the last damn fool has bought at the top. It’s hard to call precisely because I keep discovering new caches of fools… most rational people would have never thought there to be so many, but when you look at who holds office in America, there’s a hint in there…
Still, the NFIB Small Business Report this morning looks great:
“The NFIB Small Business Optimism Index jumped up 2.0 points to 98.1, just a tick lower than its historical average before the Great Recession.”
Oh, wait…this wouldn’t be a double top formation, would it?
Meanwhile the Baltic Dry Index is down to 933 this morning, never a good sign as it’s often a leading indicator by a month to three of bad things to come.
More after this…
My, What Curious Timing
OK, so we have a whole mess of confessionals about terror and torture in the wake of 9/11. And out comes a security warning about the same time. Quick, look surprised.
Top republicans are griping about the report which they say will cause security concerns – and no double this would bolster the conspiracy theorists who believe government is trying to screw up the country.
Our Laughable President
Which I think is the gist of the story about how his O’ness did the Colbert report.
Wait….is O’s job to do stand-up or is this a continuation existing policy? I’ll leave that for you to judge.
Hype-o-tainment.
PBS host Tavis Smiley, for one, wasn’t amused with O’s stand-up, either.
Congressoids: Ultra-Slow Learners
Hope you’re braced for the latest: The folks in Washington getting ready to vote on a $1-trillion budget and without taking the time to even read it…
Blood Pressure Alert
New report out says the food packaging material BPA used in cans and plastic bottles can raise blood pressure.
