Great Stock Market Crash of 2018?

gleeful

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All gains for the year were wiped off the Dow jones and the UK markets today in a huge sell off. In the US trading closed down 4.6%, with losses continuing to Asia and sweeping around the globe. Its the worst day since 2011 on the markets.

Companies in the UK seem to be falling. First Carrillion. Then Capita suffered massive falls.

Is this the start of something? The Trump Crash?
 


HarshBuzz

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It's the start of re- normalisation.

QE being withdrawn and interest rates coming off ZIRP. It's actually good news in the long run. This is just blowing off some speculative froth.

Watch for a bounce tomorrow. :cool:
 

gerhard dengler

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All gains for the year were wiped off the Dow jones and the UK markets today in a huge sell off. In the US trading closed down 4.6%, with losses continuing to Asia and sweeping around the globe. Its the worst day since 2011 on the markets.

Companies in the UK seem to be falling. First Carrillion. Then Capita suffered massive falls.

Is this the start of something? The Trump Crash?
I hope it's not a crash. How do we measure a crash? 5% fall? 10% fall?

1987 saw a 22% fall in one day.
 

HarshBuzz

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I hope it's not a crash. How do we measure a crash? 5% fall? 10% fall?

1987 saw a 22% fall in one day.
I don't see a crash. All the economic winds are firmly at our backs.

The markets probably overdid the tax cut exuberance though. I have a personal theory a lot of this might be down to margin calls on Bitcoin!
 

Analyzer

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For 30 years, Bond rates have been declining, and public borrowing has been increasing.

It has gone beyond the point of sustainability.

Many countries are now at Debt to Income levels that suggests that default will be inevitable. [ Particularly in the EU].

There is also a possibility of municipal default - certain regional governments have extremely over loaded debt levels. Ontario, Canada is the worst.

WE HAVE A DEBT CRISIS. A DEBT IS TOO LARGE FOR THE INCOME AVAILABLE TO REPAY IT CRISIS.

Last week the bond market started to take a hit.

US Hedge Fund Manager, Ray Dalio is betting big that Italy will not be able to make it's debt commitments and will opt for default.

Belgium is beyond it's ability to sustain debt.

Japan is addicted to public sector borrowing.

And Ireland is addicted to public funded largesse. In fact IRL "punches above it's weight" with respect to wasteful, pointless expenditure. And the insiders of this racket are often on the weekend radio shows talking about the "problems of the world" and the urgent solution being "more resources".

The markets have realised this. And it is affecting everything. Borrowing cannot continue.

Very little actually got fixed after the 2008 crisis. Borrowing was moved to the public sector. Leverage increased. The taxpayer was sucked in to maintain the PONZI racket.
 

HarshBuzz

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For 30 years, Bond rates have been declining, and public borrowing has been increasing.

It has gone beyond the point of sustainability.

Many countries are now at Debt to Income levels that suggests that default will be inevitable. [ Particularly in the EU].

There is also a possibility of municipal default - certain regional governments have extremely over loaded debt levels. Ontario, Canada is the worst.

WE HAVE A DEBT CRISIS.

Last week the bond market started to take a hit.

US Hedge Fund Manager, Ray Dalio is betting big that Italy will not be able to make it's debt commitments and will opt for default.

Belgium is beyond it's ability to sustain debt.

Japan is addicted to public sector borrowing.

And Ireland is addicted to public funded largesse.

The markets have realised this. And it is affecting everything.
It's the cost of debt servicing you need to look at....
 

irish_bob

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the u.s market had gotten way ahead of itself , its up over 20% since trump won the election even after todays close

by contrast the european market is more than 10% below its april 2015 high , being in euroland is a terrible frustrating experience , the weak dollar renders s + p gains often useless to us and the european market itself always without fails sh1ts itself whenever wall st has a fall , doesnt matter how cheap europe is compared to the u.s , it always follows the u.s market down
 

gerhard dengler

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I don't see a crash. All the economic winds are firmly at our backs.

The markets probably overdid the tax cut exuberance though. I have a personal theory a lot of this might be down to margin calls on Bitcoin!
My two cents is that a correction in the price of stocks generally is overdue, and a repricing of bonds prices is long overdue.
 

Analyzer

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It's the cost of debt servicing you need to look at....
The cost is NOT fixed. It is dependent on the interest rates that are being demanded by the lenders. And the lenders are looking for more than central bank defined rates.

In the Eurozone, the ECB is lending money into the system to drive down the cost of borrowing in the public sector. Effectively subsidising the system. This has the effect in the longer term of driving up the cost of living.

Look, this is a bigger mess than 2008. Much bigger.

Also there is an Auto debt bubble in the US, thanks to the programs introduced in 2008. There is a student debt bubble in the US thanks to ridiculous policies introduced over the past 20 years.

They whole thing is structurally unsound.
 

puffin

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A correction is 10per cent oi the DOW, Wall Street is terrified of Inceased interest rates, anything over 3.5 % should be enough to do it, watch carefully,
 

Analyzer

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the u.s market had gotten way ahead of itself , its up over 20% since trump won the election even after todays close

by contrast the european market is more than 10% below its april 2015 high , being in euroland is a terrible frustrating experience , the weak dollar renders s + p gains often useless to us and the european market itself always without fails sh1ts itself whenever wall st has a fall , doesnt matter how cheap europe is compared to the u.s , it always follows the u.s market down
Indeed the US Stock Market has gone too far.

But, Eurozone banks are being propped up by the ECB, and they are still doing lots of very stupid things. The Eurozone stock markets are NOT cheap.

The idea that the Eurozone represents moderation makes as little sense now as it did in 2007.

Italy and Belgium are both public deficit disasters. Sweden, and Germany have had real estate booms that are excessive - facilitated by low ECB and Swedish Riksbank lending rates.

The bond markets are faltering, and that is what is driving the problem. The US Fed are promising to increase interest rates. And that affects the Auto debt bubble, and the Student debt bubble. It also affects ECB interest rates, which are far TOO low.

Currently Italian government bond rates are below those of the US. Belgium is even lower. This is complete nonsense, and fails to account for the serious structural problems in both Italy and Belgium.
 

Analyzer

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Any links on this? I looked at The FT there but you have to have a subscription to read articles on it.
https://www.zerohedge.com/news/2018-02-05/it-traders-panic-xiv-disintegrates-after-close

https://www.zerohedge.com/news/2018-02-05/sp-nikkei-futures-crash-after-hours-vix-volumes-hit-all-time-high

Things to bear in mind - currently, central banks act in concert, to tackle market events like this.

There will be a response. It may well drive up the market.

But....it will not do anything to reverese about the massive build up of public debt in recent years, and the impact that it is having on the Bond Markets.

Trump's tax cuts may be a problem for the US T-Bond market as they threaten to result in higher US Federal Deficits. However, US public debt levels are still way below those of Japan, Italy, Belgium.


Also, Turkey is living on a lifeline of Qatari money, that is only as secure as Qatar's need for a military ally.
 
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SPN

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It's the cost of debt servicing you need to look at....
Not really. That's only part of the equation.

Look at Ireland. We have +/-€60 Billion as needs to be rolled over in the next 5 years.

Currently the debt servicing cost on this debt is quite reasonable. If we can roll it over at current rates, especially if we can turn it into very long term debt at current rates, we are quids in - especially in the latter case as then we kick the problem out beyond most of our lifetimes.

But we have no way of knowing what the interest rate payable on the new €60 Billion, used to repay the maturing €60 Billion, is going to be.

The Draghi Put has lasted much longer than I thought it could, and we we have no idea when it will blow up.

But it will.

And when it does .....

 

puffin

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Waiting to see what the BOJ, do now, they are not a bit shy about propping up equities, to the extent of putting money in ETFs.
 

DJP

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Analyzer

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Spanner Island

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No doubt we're due a tweet from the orange moron about how Obama is to blame for this... particularly if it continues...
 


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