The month of August sure has started off with a bang. Tech stocks are crashing, oil is crashing, industrial commodities are crashing, Greek stocks crashed the moment that the Greek stock market reopened for trading, and Chinese stocks continue to crash. At this point we have not seen a broad crash of U.S. stocks yet, but it is important to note that the Dow is already down more than 700 points from the peak in May. If it continues to slide like it has in recent days, it won’t be too long before we will officially reach “correction” territory. Just a few days ago, I described August as a “pivotal month“, and so far that is indeed turning out to be the case.
This is more of a “correction” than a “crash”, but it is very noteworthy because it is happening to one of the most important U.S. stocks of all. The price of Apple stock has already broken through the 200 day moving average, and at this point it is down nearly 11 percent from the peak…
Shares of Apple are down 10.9% from their highest point in a year — which places the stock squarely in what’s considered to be a correction. The unofficial definition of a correction is a 10% or greater drop from a recent high. Shares of Apple hit a 52-week (and all-time) high on $134.54 on April 28.
If you want to see a real crash, just look at what is happening to Twitter. The stock was down close to 6 percent on Monday, and overall it has fallen 58 percent since early last year. The price of Twitter stock has never been lower than it is right now, and many investors are very apprehensive about what comes next…
Twitter shares hit a record low on Monday, closing down nearly 6% to $29.27.
That is 58% below their peak in January 2014.
Of course there are tech companies that are in far worse shape than Twitter. For example, just consider what is happening to Yelp. Shares of Yelp recently plummeted 25 percent in a single day, and they are down about 70 percentover the past year.
The Greek government was quite eager to reopen their stock market this week.
Perhaps they should have waited longer.
On Monday, we witnessed the greatest stock bloodbath in Greek history. The following comes from Reuters…
Greece’s stock market closed with heavy losses on Monday after a five-week shutdown brought on by fears that the country was about to be dumped from the euro zone.
Bank shares plummeted 30 percent before loss limits kicked in to stop investors selling any more. The main Athens stock index .ATG ended down 16.2 percent, recovering slightly after plunging nearly 23 percent at the open.
Things also continue to unravel for “America’s Greece”. On Monday, a U.S. commonwealth territory defaulted on debt for the first time ever…
As I noted the other day, the Shanghai Composite Index declined 13.4 percentduring the month of July. It was the worst month for stocks in China since October 2009.
On Monday, Chinese stocks were down another 1.11 percent. Since closing at 5,166.35 on June 12th, the Shanghai Composite Index has fallen precipitously. As I write this, it is sitting at just 3622.86.
In the months prior to the financial crisis of 2008, the price of oil crashed hard.
Now it is happening again.
In July, the price of oil plunged 21 percent. That was the worst monthly decline that we have seen since October 2008.
And on Monday, the oil crash continued. The following comes from Business Insider…
In recent weeks, I have been writing over and over about industrial commodities. This is yet another striking similarity to the last financial crisis. In 2008, they started crashing before stocks did, and now it is happening again…
This is a giant red flag that indicates that we are plunging into a deflationary cycle. When global economic activity slows down, so does demand for industrial commodities. I don’t understand why more people can’t see this.
I have been warning that a deflationary downturn was coming for a very long time, and so have others. For instance, just consider the following excerpt from a recent article by Nicole Foss…
We have lived through a credit hyper-expansion for the record books, with an unprecedented generation of excess claims to underlying real wealth. In doing so we have created the largest financial departure from reality in human history.
If you want a cogent metaphor for the central bank enabled crack-up boom now underway on a global basis, look no further than today’s scheduled chapter 11 filling of met coal supplier Alpha Natural Resources (ANRZ). After becoming a public company in 2005, its market cap soared from practically nothing to $11 billion exactly four years ago. Now it’s back at the zero bound.
Yes, bankruptcies happen, and this is most surely a case of horrendous mismanagement. But the mismanagement at issue is that of the world’s central bank cartel.
The latter have insured that there will be thousands of such filings in the years ahead because since the mid-1990s the central banks has engulfed the global economy in an unsustainable credit based spending boom, while utterly disabling and falsifying the financial system that is supposed to price assets honestly, allocate capital efficiently and keep risk and greed in check.
What was actually happening is that the central banks were feeding the world economy with so much phony liquidity and dirt cheap capital that for a time the physical economy seemed to be doing a veritable jack-and-the-beanstalk number.
From that inflection point onward, the global central banks were off to the races and what can only be described as a credit supernova exploded throughout the warp and woof of the world’s economy. To wit, there was about $40 trillion of debt outstanding in the worldwide economy during 1994, but this figure reached $85 trillion by the year 2000, and then erupted to $200 trillion by 2014. That is, in hardly two decades the world debt increased by 5X.
Here is what sound money men have known for decades, if not centuries. Namely, that this kind of runaway credit growth feeds on itself by creating bloated, artificial demand for materials and industrial commodities that, in turn, generate shortages of capital assets like mines, ships, smelters, factories, ports and warehouses that require even more materials to construct. In a word, massive artificial credit sets the world digging, building, constructing, investing and gambling like there is no tomorrow.
So when we insist that markets are broken and the equities have been consigned to the gambling casinos, look no farther than today’s filing by Alpha Natural Resources.
Markets which were this wrong on a prominent name like ANRZ at the center of the global credit boom did not make a one-time mistake; they are the mistake.
As it now happens, the global credit boom is over; DM consumers are stranded at peak debt; and the China/EM investment frenzy is winding down rapidly.
Now comes the tidal wave of global deflation. The $11 billion of bottled air that disappeared from the Wall Street casino this morning is just the poster boy—–the foreshock of the thundering collapse of inflated asset values the lies ahead.
Americans who were undecided about the Iran nuclear deal last month are increasingly opposing the agreement, a WSJ/NBC poll published Monday found.
Support for the deal remains consistent with survey results from June, at roughly one-third.
According to the poll, 33 percent of respondents oppose the deal, up from 17% in June. The number of those who felt they didn’t know enough to form an opinion on the accord dropped from 46% in June to 32% in the recent poll.
Backing for the deal still topped outright opposition to it at 35%, compared to 36% in June, with higher support among Democrats (58%) than Republicans (15%).
Senate Democrats on Monday blocked an effort to revoke federal funding for Planned Parenthood, following hours of debate and commentary from members of the Senate and 2016 candidates about women's health care.
The Senate bill, sponsored by Sen. Joni Ernst, R-Iowa, was blocked by a vote of 53 to 46. At least 60 votes were needed to overcome a filibuster. The legislation was a response to a series of undercover videos produced by anti-abortion activists who claim the organization is selling fetal tissue to researchers. (Planned Parenthood says the costs are only related to handling of the tissue donations, and it has done nothing wrong.)
"This is the beginning of the fight to regain America's conscience," Sen. John Cornyn, R-Texas, said on the Senate floor.
Democratic Sen. Elizabeth Warren of Massachusetts charged on the Senate floor that Monday's vote was "not some sort of surprised response to a highly-edited video," but "just one more piece of a deliberate methodical, orchestrated right-wing attack" on women's health care.
"I'm sick and tired of it," she said. "The American people are sick and tired of it."
Had the legislation advanced, it would violate existing federal law and almost certainly face a challenge in court, Susan Fogel, the Director of Reproductive Health for the National Health Law Program, told CBS News.
As the Senate debated the issue, the 2016 candidates jumped into the conversation as well. Former Secretary of State Hillary Clinton, the frontrunner for the Democratic nomination, released a two-minute video slamming Republicans for waging a "full-on assault on women's health."
Meanwhile, Louisiana's Republican Gov. Bobby Jindal, also a 2016 candidate, announced Monday that his state would terminate its Medicaid provider contract with Planned Parenthood. There are only two Planned Parenthood facilities in Louisiana, and neither performs abortions.
"Planned Parenthood does not represent the values of the people of Louisiana and shows a fundamental disrespect for human life," Jindal said in a statement. "It has become clear that this is not an organization that is worthy of receiving public assistance from the state."
A handful of other states have tried to cut off funding for Planned Parenthood, only to have those efforts cut short in court. Texas managed to fully shut off the flow of Medicaid dollars to Planned Parenthood but also gave up all federal funding for it Women's Health Program.
Workers in Cuba have begun building the altar where Pope Francis will deliver mass during a landmark visit next month, placing it just to the left of a giant image of Che Guevara.
Francis, who hails from Argentina like the famous revolutionary, will visit Cuba September 19 to 22 as part of a tour that will later take him to the United States.
He will give a mass on September 20 in Havana's Plaza de la Revolucion. The sprawling central square is bordered on one side by the interior ministry; its facade sports a giant sculpted outline of Guevara's face.
The 36-meter (118-foot) work is based on an iconic 1960 photo of Guevara by Alberto Korda that has also been reproduced on T-shirts and posters worldwide.
Guevara, who fought alongside Fidel Castro to overthrow dictator Fulgencio Batista in the 1959 Cuban Revolution, has been a symbol of Marxist revolution since his capture and execution in Bolivia in 1967 at age 39.
Popes John Paul II and Benedict XVI also gave masses near the giant Guevara image during trips to Cuba in 1998 and 2012, respectively.
Pope Francis played a role in the secret negotiations that led the United States and Cuba to restore diplomatic relations last month after more than half a century of animosity rooted in the Cold War.
Cuba is the only one-party Communist-ruled nation in the Americas.
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