Are we having FUN yet?

Markets were shellacked today, with the Dow suffering its 6th worst daily collapse.

What does this mean for the next week, month and quarter? Are we heading into a slowdown or is it a full blown recession?

How much will the market give up?


What say ye?

Category: Markets

Please use the comments to demonstrate your own ignorance, unfamiliarity with empirical data and lack of respect for scientific knowledge. Be sure to create straw men and argue against things I have neither said nor implied. If you could repeat previously discredited memes or steer the conversation into irrelevant, off topic discussions, it would be appreciated. Lastly, kindly forgo all civility in your discourse . . . you are, after all, anonymous.

105 Responses to “Open Thread: Correction, Bounce or Crash?”

  1. bonddad says:

    My own thoughts at this point is this is overdone. The economy is slowing with a possibility of recession, but the selling seems to be panicky.

  2. ironman says:

    It’s a noise event. Or rather, in a post that will go live at 4:50 AM PDT tomorrow morning (9 August 2011) here, it’s “The Noise Event of 2011″, which is being caused the the sudden return of deflationary expectations.

    The alternative theory, of course, is that it’s all Barry’s fault At some point, some guy behind a desk at the TSA who’s near retirement will finally put 2 and 2 together and end the market volatility by putting BR on the “No Fly List”….

  3. machinehead says:

    Brazil is off about 30% from its highs. As of this evening, Shanghai has just kissed the 20% bear market threshold.

    Russia is down almost 25% from its high. India’s Sensex index is down 18.5%, still eluding bear market territory. On a composite basis, we’re in a BRIC bear market.

    It’s a warning shot across the bow for commodity currencies and emerging markets (both equities and debt).

  4. ShadowInventory says:

    I’m a buyer at 850 on the SP500, and all in at 685…

  5. dsimmons says:

    Ratings agencies give probabilities that there will be another ratings cut. In this case, S&P said ~30% chance of another cut. Fitch and Moody, being the other two stooges, will feel they will have to answer with their ratings cuts announcement or announcements of not cuts. This “kabuki theater” will continue to grind any good news into the ground.

    S&P bounce at 1070.

    The Economist cartoon says it all…

  6. Machiavelli999 says:

    Deflationary expectations are totally set in. What’s scary is how unalarmed the world is right now. As bad as 2008 was, at least we knew the politicians would pull out all the stops to stem the tide.

    The market sees an expectation that nothing will be done. In fact, it was an expectations of world wide fiscal and monetary austerity that has brought us to this tipping point. Eventually, the Fed and the world central banks will again turn on the spigots and put a floor underneath this crash. The question is how much more of a beating will it take to change their mind.

    We get out first glimpse tomorrow. Is Helicopter Ben ready for QE3, QE4, QE5 and QE6? If not, I expect to see another 2,000 points down.

  7. ShadowInventory says:

    The real question is – what can any standing government do to help resolve this mess? How can jobs be created here? Trade barriers? I think not… Cutting dependency on transfer payments is a step in the right direction, but there has to be a job opening somewhere… I would establish a city or county office of immediate employment, something like Labor Ready… cant find a job, come to the Labor office and work today and get paid for working. There is a lot of cleaning and road repair to do…

  8. jaymaster says:

    My vote is for a slowdown, NOT a recession (this year, at least).

    Go ahead and try to catch a few falling knives.

    The only caveat is Europe. If it implodes, we’re doomed for a couple years.

    The US downgrade is just noise.

  9. Captain Jack says:

    The government is embracing a 1937 style mentality via obstructionist veto, even as it becomes painfully clear the Federal Reserve has run out of bullets. What are they going to do, buy more bonds? To what end?

    The problem is neither emergency liquidity nor facilitating access to credit (two things the Fed can help with). It is the dawning realization that they can’t solve the jobs problem in the United States and they can’t solve the sovereign debt problem in Europe.

    The vertical sell-off feels like an absence of bears (fewer market participants to cover shorts) and an outbreak of portfolio contagion and forced margin selling as hedge funds puke up a lung. There will be great values on the other side of the bloodbath but the question is who will have the dry powder and the chutzpah to buy.

    Seems like the voices of the hour now are Bernanke and Merkel — one will be looked to save the stock market, the other Europe. Most bullish scenario, a combination of super-QE3 (hinting at squillions) and a fiscal union embrace of Eurobonds (Germany going full unification. Most bearish scenario, some squeaky nothingness from Ben and continued German “nein” in the face of tottering Italy / Spain, in which case S&P goes triple digits and we get a Dow 10,000 party in reverse.

  10. JB7456 says:

    We’ll get rigged inflation #’s from China here shortly and their rally will cause us to start a strong squeeze rally for the rest of the week. Throw in some of the Bernankenator’s Bonus Bucks at tomorrow’s Fed meeting and we’ll have this behind us. We have short memories and oh what memories if you’re short…It will hold the 1120 level which will be the launchpad tomorrow morning.

  11. Pointfinder says:

    This is a real meltdown, not a correction.

    Debt moved from the consumer to the financial system to the government(s). The downgrade is a wakeup call that there’s no where else for the debt to go. No more pretending.

    The entire developed world is now a bankrupt “consumer” economy. The developing nations will suffer with us.

    The markets won’t revive until we figure out what a post-consumer world looks like, in terms of players and valuations.

    I’m 70% cash/gold and plan to stay that way.

  12. BR,

    w. this

    and this..

    was good to hear DT J. Brown asking the ~same Question(s) ..

    needless to say, there are, as ever was, 3 Kinds of Animal in any Market…

  13. ora1403 says:

    Correction, and quite severe one.
    I could be mistaken, but S&P 1050 could be support level. It will translate to 23% decline for S&P500 from the peak. That is a bear market. Overall, situation is quite similar to 1967-1980 bear market. Bernanke will print. Gold could go to $2200-2400 per 1 oz. We will see 5 oz Gold for DJ that probably will be the bottom.
    Some people are calling for 2-3 oz ratio, but they are ignoring that DJ index is in fact modified: financials were kicked out and CSCO and KFT are in.

  14. choral says:

    I actually view the downgrade event as longer term bullish for a few reasons:

    It gives Bernanke cover for QE pi. Look at what all assets have done since the other inflationary QE programs. The Fed’s balance sheet is unlimited and they are not afraid to extend it. Bernanke will err in too much monetization before he falls short per his own analysis of the Fed during the Depression. TIPS spreads are still low, inflation expectations are not a concern.

    It provides China a disincentive to purchase US debt. This will reflect in a higher Yuan and ultimately help our trade deficit with them. It will be interesting to see if China has the gall to buy significantly less UST considering they have effectively painted themselves into a corner with their FX reserve levels as is.

    The $4T that S&P wanted versus roughly half that delivered can be viewed as quasi-stimulative by $2T. Austerity is simply not the right prescription for this slow growth environment. We should be stimulating further, regardless of debt levels. Shiller had a great piece on the irrelevance of debt-to-GDP levels

    I think the Greece “skata” has provided a valuable lesson to the ECB that you cannot get to prosperity via solely austerity.

  15. Rouleur says:

    …probably setting up for a good bounce in the MSMarket …near term…

    …PM’s are going to do the opposite…in the near term…

    …in the long term…is it not obvious?

  16. Jack Damn says:

    The selling is an overreaction, but in the right direction. Waterfall, run-away market. Once in a lifetime event at this magnitude.

    The market was fake and enriching QE-2 sycophants at the expense of Main Street and real America so a market correction was bound to happen once the QE-2 starvation diet kicked in, but this is too much too fast. The markets are still getting gutted After Hours/Globex. SPX is 1092.t5.

    Relentless selling. Probably more in the works as many market participants only thrived while QE-1 & 2 were juicing the markets. Sustained selling is probably a novelty to many now. Certainly too me by surprise.

    I think a recession is baked in here. No way around it. Won’t be deep, but it already feels like we never left the last recession to 90% of America anyway.

  17. Rouleur says:

    …Mark, for sure…bears, bulls and pigs…

  18. Rouleur says:

    ~1050 is the turn?…we’ll see…

  19. Concerned Neighbour says:

    I believe a double-dip is a near certainty at this point. The only question is how severe it will be. Unfortunately my sense is it will be quite severe. There is little room for fiscal stimulus, diminishing returns to monetary stimulus, and sheer gridlock politically. Also, people are angry. And often anger is misplaced, which has and could continue to lead with compounding errors.

    What I believe we’re seeing is the abrupt realization by the market that problems have not been solved over the last year. Rather, their consequences have just been postponed. The can has been kicked; nothing more. The economic data can not be sugarcoated anymore. The policy approach was a hail mary; kick the can and hope things get better before we spend our ammunition. It looks to have failed.

    I believe the speed of the fall is a direct consequence of the QE-induced asset run-up. There was no real conviction in this melt-up. The money had to go somewhere, and it sure didn’t go into productive investment in the real economy. Others went along with this run-up due to complacency; not because they were very optimistic, but because they didn’t want to fight reckless monetary stimulus. When you turn off the taps because the wells have run dry, this is what happens.

    As to where it bottoms short term, no one can know. I would say the system is extremely fragile at the moment, which is why you’re seeing banks selling off (BAC just 20% today). I think another banking crisis is likely. My sincere hope this time around is that we actually do something about TBTF, and not reward the incompetents/criminals. These banks should be taken over by the government and spun off as smaller entities to the private sector when things settle down. This recipe may be unpalatable, but it has precedence and it works. And of course, Glass-Steagal v. 2.0 needs to be instated.

  20. brianinla says:

    The market has been dependent on currency dilution for 2 years now (TARP, QEn, etc). Now that there’s a hint spending will be reigned in the tiniest of bits, the whining is getting louder. For all those complaining about the Tea Party, exactly how much is Congress cutting back over the next 3 years? I mean really, show me a number that says anything substantial is being cut at all. Is it >2% than the 2010 budget?

    How long until Cramer reenacts his famous meltdown so the pigs can get more money. Remember Wall Street had record bonuses in 2010. Who believed him the first time and how many would believe him now? The world will survive just fine with SPX<1000.

  21. DebbieSmith says:

    One of the frightening side effects of a major and long-term drop in the world’s equity markets is its impact on our pension plans. As interest rates remain at generational lows, pension plan managers are increasingly desperate to “stay ahead of the curve” and keep the future liabilities of pension plans funded as shown here:

    Both private and public pension plans are, on average, only 80 percent funded on a forward looking basis in the United States. This shortfall must ultimately be covered by taxpayers.

  22. Unmitigated Audacity says:

    Meltdown, if not tomorrow, then soon thereafter. The monetarist empire is at an end. Will it pull civilization down with it in its death spasm? Or can we force through Glass-Steagall reforms, along with massive new investments in infrastructure in this country and globally, to start digging out of the grave we’ve dug for ourselves?

  23. zither says:

    I am looking for the $INDU to fall to 7900 area as a minimum and eventually to test the march 2009 low and support. The question is how fast will it take to get there.

  24. Winston Munn says:

    Please, please, please! I beg of you. On your kids’ grave, please promise you will never mention to any Tea Party member or Tea Party associate these two words: Smoot-Hawley.

    I am pretty sure no tea partier is smart enough to research it on his own or educated enough to have any knowledge of its history, so whatever you do….please….mum’s the word. Shhhh.

  25. helb says:

    I wonder if people who think this is just a correction admit that there’s a structural problem. However, as Jack Damn says Monday selling was an overreaction but in the right direction.

    I’m 50% TWM, 10% VXX, rest in cash

  26. Jack Damn says:

    Markets continue to sell off into the over-night session. Bottomless…

    - (hourly chart)

  27. constantnormal says:

    How much of the margin debt overhang has been washed out? When that is completed, we will get a bounce.

  28. I know this much: I don’t know how far we will move, and neither does anyone else.

  29. MayorQuimby says:

    Well, futes are down a good 20 – 30 handles below the close. Dow futes pretty much lost 900 or more points the past 24 hours

    I really don’t care about these day to day swings any longer. I worry about my country, my friends, family etc. Things are getting BAD and we are making things WORSE by piling debt on to debt on to debt. We’re fixing heroin addictions with more and more heroine. We’re going to die if we don’t KNOCK IT OFF ASAP. Like TOMORROW.

  30. Petey Wheatstraw says:

    We will extend and pretend until the bitter freekin’ end. Other than that, there’s nothing other than serial crisis management on the horizon, politically and economically. Whack-A-Mole as the status quo. Many will disagree, but I don’t think we ever left the last recession (although I could torture the numbers to make the case that, technically, we had).

    It doesn’t help that we have lost any semblance of sanity in government and an our electorate is apparently too stupid to come in out of the rain, much less understand the basics of self-government or the rule of law.

  31. carleric says:

    I am not sure we ever left the recession….this seems all part of the same movie….market rally was artificially supported and driven higher by QE2 which only delayed the days of reckoning we are now experiencing. During this artifical boom, bad news was good news, good news was good news, any old news was good news. Now when folks have a chance to reflect of their own past idiocy, perhaps sanity is returning to the market. Does that ever happen? I think there is more downside, interrupted perhaps by a mild rally. Wonder how the program traders are doing? Can you program algorithms to go short?

  32. wally says:

    These once-in-a-generation Armageddons are becoming as common as 100-year weather events.

    I think we go down more… 25%, total, from the top, so maybe S&P 1010 or so. I’m always wrong, by the way.

  33. bocon007 says:

    I’ve been in all cash since last Tuesday, selling my accounts at a 10% loss when I hit my mental stop. I felt defeated at the time, but now I’m just nervous as hell, worried I’ll blow the next move in this crazy market.

    Football season can’t get here fast enough.

  34. Robespierre says:

    The market will continue its downward trip until either Obama announces that he will not run in 2012 or ge loses in 2012. At this time he has become Carter.

  35. longwave says:

    This is just the beginning. The next ten years (2010s) will make us yearn for the halcyon days of the 2000s. I don’t know or care about technical analysis. What I do know is that the economic foundations of American capitalism are unsustainable and we are finally entering a phase where we will reap what we have sown. The stock market is still not cheap and still does not reflect the reality of our situation. You cannot have an economy whose primary growth driver is the extraction of value. We used to have an economy where prosperity was derived by the creation of value. That is no longer the case. Funding will get more expensive, people’s psyches will be depressed by the ongoing market turmoil, jobs (or the lack thereof) will remain the critical impediment to any meaningful recovery. Housing will continue to drag down the economy. A completely emasculated regulatory system that fails to protect individual investors and the absolute breakdown of rational political discourse will only serve to fuel the fire.

    We’re not experiencing a double-dip. The recovery was a mirage. We are in for a major structural shift in our economic reality. It will be disruptive and it will be pervasive. What emerges is anybody’s guess. But you can kiss goodbye the American dream of the 20th century.

  36. AHodge says:

    no one knows
    i will likely get back in some within a week its option expiry next week
    early trades are TIP and VIX puts trying to hit the fear peaks
    have orders and did a little
    i am actually starting to think value
    which feels bizarre in these third world mkts
    but where you can find solid 6-8 P/E s i may do some actual investin…
    for a little while

  37. Niskyboy says:

    I’m with Wolfie (@9:51 p.m.)

  38. Anthony says:

    this is very scary.

    QE3, QE4, etc. The problem is that monetary policy has limited power to increase economic growth. The only effect monetary policy has on economic growth is through the wealth effect and that’s small and comes at the cost of distorting asset prices.

    What do you think happens with consumer spending? Real earnings are declining as they’re eroded by inflation (I do track this stuff). Throw in a 15% drop in asset prices. Consumer spending was already slowing down. I expect that to continue .. I struggle to see confidence remaining stable.

    Government spending will contract as well. There’s no appetite for fiscal stimulus. At least until it gets a lot worse.

  39. ora1403 says:

    Obama is toasted. Downgrade by S&P and market sell off is vote on Obama future presidency.
    Interesting thing: Gold move to $1742.40 (record high) is not followed by Silver or Platinum.
    Gold is overbought, stocks are oversold. Tomorrow day will be down: today day closed at low levels.
    At some point it will be reversal move: S&P500 up, Gold down.

  40. Moss says:

    Looks like a World Wide fiat currency devaluation to me as more printing is imminent.

  41. willid3 says:

    maybe this is the Wiley E Coyote moment for Mr Market? the one where the coyote has run out over the chasm. and is looking down ? the one where Mr Market finally noticed that the economy isn’t like he though it was? recovering? that there isn’t any demand (thank the great crash. aka the great recession has destroyed that) and while some may gripe about that, its what create all of our jobs unless you work for the government. and now they noticed that the one of the drivers of the government bus has no business driving it. any where (those Tea partiers, who must be happy now, that the AAA is gone). their big accomplishment. crash the economy and hope and pray it recovers. which may never ever happen, and the new econ0my that gets created has nothing like what we have today. as today’s capitalism gets replaced by some thing else when folks patience has run out waiting for recovery.
    talking about the deficit without new revenue is not solving it. its creating more deficit, not less.
    and not addressing the jobs situation will end up with a whole new slate of Congressional critters, the next election will make the blood bath of the last one look like a cake walk.

  42. MayorQuimby says:

    I looked at a bunch of solid companies with divvies and low PEs and I have to say – things are still not cheap. Not at all. The best companies are way up there (ie IBM, AAPL). Many stocks tied to gvmt spending got shallacked and rightfully so. I think we’re in much deeper doody than people realize.

    But after such selling – one has to be looking for a hell of a bounce – like 700 points or more. Nothing moves in a straight line. Still…this is pretty bad.

    Anyways – the only thing that mattered today is BAC. And if they go – well get out your hard hats.

  43. whskyjack says:

    You don’t often get an opportunity to buy into a blind panic, So I bought a little just before the market closed.

    Then we’ll see what the morning brings.
    But I’m happy


  44. Winston Munn says:

    This headlong rush for the exit is about Europe, not U.S. debt.

    Look at facts. U.S. 10-year yield 2.40, hardly an expression of concern over U.S. debt. However, profits of U.S. companies have been primarily the result of a weak dollar, hence multinationals have increased overseas sales and investments. If Europe hiccups and then tosses its cookies, U.S. companies are screwed.

    How well the ECB can forestall a European collapse will be the trigger for U.S. markets.

  45. pensionpartners says:

    For those interested, back in February Marc Faber published some of my work in which I argued for a Deflation Pulse to return. Since June 8th, I have also written a number of articles calling for a Summer Crash of 2011. Please feel free to Google our analysis for additional insights.

    Michael A. Gayed, CFA
    Chief Investment Strategist
    Pension Partners, LLC

  46. philipat says:

    Why do people think that Bernanke will be the saviour by announcing QE3 etc? Correct me if I’m wrong but IMHO, liquidity is NOT the problem. Perhpas the markets might even see through this now? In which case, there is no “Support”left and markets will, well, be markets and do what markets do.

    Warning: Past performance is no guarantee of future performance and markets can go down as well as up.

  47. MaxThrax says:

    Bush Tax Cuts, Iraq War, Commodity Futures Modernization Act…..the roosters.

  48. DiggidyDan says:

    Well I wrote a long screed on this. . . But it got ate (sic). . . Now puling S&P target numbers out of my ass. 1027. . . 1078. . . 959. . . Below that buy on 5 day continuous uptrend.

    This is neither a slowdown, correction, nor crash, but rather the manifestation of the long delayed “double dip” now that the charade is over and the bailouts/QE let all of “God’s children” exit gracefully. This isn’t about the downgrade. Witness record low interest rates and a “flight to safety” into the very instruments that were downgraded. Rather this is about politics, and the erosion of power and confidence to continually prop up the markets with a straight face and continue to hold political sway, credibility and reelectability, both domestically and to our global creditors.

  49. louis says:

    Did they fix housing yet? Bad things happen when you leave soilders behind.

  50. Ron1 says:

    We are living through a political problem with economic consequences.
    Selling stocks or buying gold wont fix it.
    Political leadership will.

  51. Michael says:

    I stand by my previous prediction… FLAT for the year…. the world is not ending because of the opinion of a few folks at S&P, but neither are things getting better in the economy

  52. DW auto says:

    Additional QE won’t do anything. As Bernanke says, there is already enough liquidity in the system. I think they are going to let it play out until the politicians return from vacation in Sept. I think they are going to let the pain happen this time.

  53. Petey Wheatstraw says:

    We can’t grow until much of our existing public and private debt is retired (debt that already purchased assets with distorted/inflated prices). That won’t happen if the unemployed are forced to borrow or beg to sustain themselves (right now, the debt economy is only set up for them to borrow or beg — as their access to gainful employment has been cut off).

    We need to invert the flow of money from top down to bottom up. Create enough money to settle the debt and distribute it, by equal share, to the indebted. They will pay down/off their debts, the banks will be made whole, and the economy will be hotter than a $2 pistol. Let the goddamned banks borrow from the people. Anyone who thinks this won’t work should ask themselves why the status quo of letting the bankers lend to us is any more legitimate or sensible, even though that scheme is obviously rife with corruption and criminality, not to mention that it has driven us to the brink of national bankruptcy.

  54. David in D says:

    It seems I am in the minority here. We may see continued sell-offs in the next few days but I do think that post Labor day you will see a major rally and the S&P will be up 5% for the year by the end of October. So, in the near term I have no idea where things will go, but I do think that this event is a buying opportunity. I’ve put my money where my mouth is on this and have taken a long options SPY position today. It might not be the bottom, but my bet (at a R value of 4.0 mind you) is that we will bottom sometime in the next nine trading days and then back upwards. The Fed and the ECB will make some adjustments in the next few days.

  55. chris says:

    Need to hit bottom on a intraday trade perhaps s&p down 200 in day then a recovery from new low.

  56. MayorQuimby says:

    I just want to know what in holy hell is going on with BAC before I buy a share of anything.

  57. jdillonnyc says:

    Fake market-Real crash

  58. Petey Wheatstraw says:

    DW auto Says:

    “Additional QE won’t do anything. As Bernanke says, there is already enough liquidity in the system.”

    Enough liquidity for what? Why isn’t it circulating? We put trillions in and the minute we stopped, the entire economy locked its wheels.

    “The System” is broken beyond repair.

  59. MayorQuimby says:

    This is just sheer panic. I wish I had a funded /es account to go long with.

  60. John R says:

    chaos in the morning. rally on qe3 in the afternoon. next week test S&P 10K

  61. DW auto says:

    Since we were heading to a recession before the sell off per Rosenberg, I can’t think this is going to help much for the wealth effect. sarc. I never thought there was a greater power than US gov’t until the rating agency S&P pointed the emperor has no clothes. I think this is a coyote over the cliff/ emperor has no clothes moment. The economy has been running on faith and credit/ thin air.

  62. MayorQuimby says:

    Eervyone and their grandma is looking for a dead cat bounce and test of 10K. Which means we might just go right there. Who knows. I’m just gonna watch.

  63. G3 says:

    I say we head for a crash tomorrow.

    There is a vacuum of leadership. Obama’s speech today perfectly demonstrated that. The same for the Europe, same mumbo jumbo.

    The market now begs for something, which sets itself up for a crash tomorrow: QE3.

    Look, QE3 is possible, but not a done deal. The bar for QE3 is high. The challenge to convince everyone to increase the balance sheet by another trillion dollar is daunting.

    So there is a high probability that there won’t any mention of QE. Without it, we head for a crash because the markets have already panicked and mindless.

  64. G3 says:

    China down 1%, rebounded strongly from like -3.5%
    Hong Kong down 6%, but better than -7% earlier
    Japan down 4.4%, not sure if there is any bounce

    Futures down 40 points from cash close level, at 1080, though bounced a bit. We are not far from 1000, another 120 point flash crash.

  65. Mr.Sparkle says:

    The possibility of BAC going under oddly doesn’t frighten me at this point. In the depths of the last crisis there was real concern that even GS could go down. Now… I don’t get that feeling.

    It might be hopelessly naive of me to think that the FDIC & Friends have learned how to unwind a large bank after the events that have transpired. WaMu, Wachovia, BSC and LEH are no longer with us. Is it totally ridiculous to hope that Sheila put together a shelf plan for the orderly disposal of assets of an institution like BAC?

    Politically, I assume that if BAC is mortally wounded there is no stomach to rescue it. And arguably, there are a fair number of politicians that would probably LOVE to get their faces on TV as they started sifting through the books of CFC, MER and BAC if they got seized. It could be the trial that the crisis has always been wanting but never got. Ken & The Tan Man would make for such engaging television. Not that I advocate show/example trials but clearly they *do* happen.

  66. DW auto says:

    QE is more psychological boost than anything else. But the market will go for it for a while, then per John R, “next week test S&P 10K”

  67. Thor says:

    futures are down well over 200

  68. DW auto says:

    Selling will beget more selling as redemptions will compel mutual/Hedge funds to sell to raise cash. This would producing a vicious downward spiral, causing an overshoot to the downside. Is this 2008 again?

  69. DW auto says:

    I think Barry called it, March 2009, bear market rally, now ending. Resume bear market.

  70. lalaland says:

    Mr. Market – welcome to Main Street. For all the bitching about extend and pretend via the government the biggest extenders and pretenders were the corporations. All that cash on hand and they spent it on short-term crap like stock buybacks and dividends when they should have been increasing r & d, competing for market share and growth. Now we’ve got roughly the same workforce as we had 2 years ago but the government tap has run dry so back down the hole we go. Heckuvajob.

    Ma and Pa left the stock market to the ‘pros’ and machines in 2009. They’ve been redeeming their IRA’s and 401k’s to pay for the mortgage and groceries; this time around I think the damage will be far more limited to the investor class. Maybe this will spur the powers that be to take the problem seriously (after all, it’s one thing for the poor to get fucked and another entirely for the “job creators” to take it in the bum).

  71. skipaway says:

    Buy stocks weekly over the next 12 weeks and pray. Also bring the troops home today.

  72. Bruman says:

    Personally, I think the QE has to be dumped out of a Helicopter… a Helicopter that is far away from the banks.

    Giving it to the banks turned QE into pushing on a string.

    We need to inflate until the housing market can clear and large numbers of homes are no longer underwater. Then labor can be freed up to move and consumption can happen and businesses can start to hire.

    Yes, people bought homes that they couldn’t afford. But people who knew they couldn’t afford them convinced them to borrow the money. And people who were too lazy to do due diligence but were afraid to be the only ones not reaching for yield bought them. Somehow, people who put money at risk to get an extra 10 bps of yield are not being held accountable.

    Or maybe the Fed just buys the mortgages and writes them all down. Blame is so widely dispersed that a devalued USD and higher interest rates are punishments that will circulate through the entire economy and come down on more or less everyone. And that may be a lot more equally dispersed than any arrangement that is negotiated directly by parties in Congress.

  73. eliz says:

    I can’t predict the markets, but I can say more QE will only exacerbate an already weak economy.

    More QE is bad for Main St., but Benny may pull the lever because that is all he knows how to do.

    I hope he doesn’t.

    May we ultimately follow in Iceland’s footsteps, rather than Greece’s.

  74. constantnormal says:

    I sure hope that BAC implodes. Any fool that believes ANY company is TBTF needs that as a counter-example. It’s only a bank, and a pretty crappy one at that. We have lots of banks that can step into its shoes.

  75. rootless says:

    The sky is falling. Armageddon. No doubt. I’ve already stocked up the popcorn.

  76. MooPoint says:

    The world economic situation reminds me of the oft quoted woody allen line:

    “Today we are at a crossroads. One road leads to hopelessness and despair; the other to total extinction. Let us pray we choose correctly.”

    With all the panic and concern we must all still remember that at the end of the meltdown, the super rich will still be super rich and the super poor will still be super poor.

  77. MayorQuimby says:

    Bruman- That’s just silly. All you do is take savers and renters (future buyers) out of the market for a year or two then prices just come right back down. It really isn’t that easy. The best thing gvmt can do is just step aside and let nature fix itself which it always does.

  78. Stuart says:

    AND when do the gold cos start reflecting $1700 gold…. They are minting coin at these prices….. talk about a steal. Jrs are being given away. Amazing.

  79. constantnormal says:

    I’d like my share of QE3 delivered via FedEx, as I am afraid that a bale of Madisons might get damaged if tossed from a helicopter. Just leave it on my front steps, if I happen to not be there to receive it.

  80. constantnormal says:

    … then again, fuggedabout the bale of Madisons … I want a Fed credit card, just like a bankster, with a zero percent interest charge and an unlimited credit line.

  81. number2son says:

    What next? Who knows. What I do know is the last time we were in this panic there were those Pollyannas among us who expected financial reform, the return of Glass-Steagall, a new sense of responsibility to return to policy making.

    None of that happened.

    So while I’m getting my retirement savings chewed up yet again there is a morbid satisfaction in seeing the consequences of the intractable dysfunction in our political system brought to bear. Even if, as always, it’s people whose only sin is trying to keep their heads above water suffer the most for it.

  82. bulfinch says:

    Mr. Wheatstraw posits: “Many will disagree, but I don’t think we ever left the last recession (although I could torture the numbers to make the case that, technically, we had).”

    Well, considering the National Bureau of Economic Research is funded in part by some of the biggest names in rightwing propaganda funding, one could certainly be forgiven for wondering or even second-guessing their metrics and conclusions.

  83. DiggidyDan says:

    As an aside, I thought about cashing in my giant stash of aluminum beer cans in my garage from the past 3 years of hell. . . But i was too hungover saturday at 9:30 am to finish the deed. . . If that isn’t a sign of deflation and ennui. . . I don’t know what is. . . BuuuuuUUURP!

  84. Chief Tomahawk says:

    Congrats to BR on the lifeboat call. Anyone who heeded the advice and sold in the first hour today saved themselves a Brazilian bikini waxing, not to mention the futures thus far don’t look too hospitable …

  85. DiggidyDan says:

    Marcus Arelius: “Many will disagree, but I don’t think we ever left the last recession (although I could torture the numbers to make the case that, technically, we had).”

    Real unemployment numbers including those underemployed and those who just damn quit looking would agree. . . This economy is the 80′s yankees. . . Old, tired, expensive. . . And way too many pinstripes. . . Not enough pennants!

  86. yuan says:

    “…we are making things WORSE by piling debt on to debt on to debt….We’re going to die if we don’t KNOCK IT OFF ASAP.”

    the beatings will continue until moral improves.

  87. brianj997 says:

    Here is old Big Picture articles that I have bookmarked:

    Current Dow PE = 13

  88. LostinATX says:

    still long on SQQQ. this may have to change if Big B sez something of import later in the day.

  89. mbelardes says:

    Where are the overlay charts? Those are usually helpful and I can picture exactly where we are on some of the ones you’ve posted in the past.

    We are seeing the convulsions of a building crash. I keep hearing absurd statements that are supposed to make you feel all warm and fuzzy inside like “there is no lehman moment here” … “we aren’t dealing with mortgage backed junk” …

    Yeah, uh, not yet. Keep in mind all the mortgage backed junk was rated AAA as late as 2007 (2008?) and it wasn’t until BSC went boom and LEH started to tank then pop that shit really started getting wild.

    I think the question to start asking is, “What is the needle that really pricks which bubble?”

    In my opinion, the elections of these nations suffering austerity measures (or paying for the lack of austerity of other nations) is the ultimate wild card. You have no idea what might happen on any given election night, let alone one in Greece, or Italy, or Spain, or France, or Germany, or even America. So what exactly happens if an election takes place, or a primary, in one of these countries and they vote in a party that just wants to default on their debt and go back to their old currency?

    I wish I could remember his name, but this emerging market debt fund manager spoke in San Diego last year. They specialized in buying defaulting securities at steep discounts and recovering on them. He said straight out that he did not see any reason for these nations to default. Well, America came pretty close to “defaulting” and we have the ability to just print money if we want.

    So I would look for this to be the event no on is expecting. Not some middle of the night “Oh shit, Spain can’t pay and is out of cash!” but rather a “Oh my god, this block of candidates is intentionally defaulting and breaking from the Euro.”

    Then we get the nice replay of the “Oops! We [Name a Bank] sold credit default swaps on those bonds and we don’t have 50 billion euros to cover!” and THEN you get your Lehman moment and it is with sovereign debt. $600 trillion in notional derivatives so I’m guessing 50 billion could a small number.

    Then what?

    But I think this type of credit event is still a ways off.

  90. dr dre says:

    I not think this “the big one” yet. Not running for the hills.

    Friday looked to be a turnaround to a wild week. The market finding it’s footing. reacting to negative news and digesting a slowdown.

    Then the downgrade over the weekend – a shock. Naturally markets reacted with shock. But the good news – the downgrade did NOT create a financial Contagion like we saw un 2008 where interbank lending froze etc.

    This to me became fear based, forced selling etc. I grabbed my balls, trusted my tuition and re entered the market. U feel I may be early but the premise is correct – snap back rally awaits – and if it doesn’t fed will step in.

    Intuition says this panic is over soon and the market rebounds. Continued massive volatility but general upside. The fed enters with accommodative language that puts the floor in the markets prices.

  91. dr dre says:

    (damn. Autocorrect).

  92. rktbrkr says:

    DO THEY STILL HAVE THE SAME SHORT SELLING RESTRICTIONS they put in place the last selloff?

  93. cmstahl says:

    The market is expecting deflation again. In the end it will be inflation. The main reason for this change of mind might not be the downgrade, but a slowdown in China.

    Any way the perfect conditions at the end of the Clinton presidency will be turned into the opposite. The USD its not the right measure of value any more. In Gold terms the S&P 500 is back to 666. Monetary floodgates will be opened and at todays price some companies already are the best asset to own.

    Concerning the downgrade I admire S&P for their courage though I think AAA would still the right rating, as the US other then Greece can always prints its way out.

    The US political landscape looks very poor. The Tea party can’t turn back time with wishful thinking.

    The best way out would probably be a change of the way public money is spend. Less support for consumption and military and more for infrastructure, which would have a long term and multiplier effect.

  94. TLH says:

    Let’s see.
    They downgrade US debt, and it goes up.
    Stocks not downgraded, and they go down.
    M2 up 8.2% from 3/11 to 6/11.
    Oil down. ? $3 gas
    The problem is our political class. Bush was a failure. Bush, Jr, i.e. Obama, is a failure.

  95. ToNYC says:

    Angelo Mozilo built castles of the sand of liars loans in plain sight of S&P and Moody’s. Hope is a only a dream of the future, best realized by waking up and taking action or the binary, non-action. Optimism is left for those who don’t keep doing their homework. Capital gains built on Fed invented QE2 ersatz currency was not a real job. Ask the seniors waiting on the bench what happened to the rent on their stored value currency. That is the real robbery in plain sight undercutting confidence in the capital-raising process. Confidence like alcohol; it makes You look good rather than a predator.

  96. rktbrkr says:

    The Fed was hoping the wealth effect (“we want higher asset prices”) would prime the larger economy, unfortunately the poverty effect of higher oil and commodity prices (“transitory”) offset the wealth effect and the economy never turned over, zilch on jobs so no real world increase in consumer spending. But gas prices ARE coming down!

    Treasury and Fed have shot their wads, we’re all going to be pretty much on our own. No more Sunday night bailouts a la Paulson thats why BAC and CITI are tanking.

    A double dip is a slam dunk, a depression is better than 50/50 if Euro comes apart badly or if bad mortgages bring down BAC,WF or CITI as eventually they must. Sheila Bair was right on a lot of things esp retiring!

  97. rktbrkr says:

    The restrictions on short sales helped propel the upward movement of financial prices but pulled out a brake on downward movement in prices in situations like this.

  98. rootless says:

    It looks like we get some bounce today. At least in the morning. Popcorn back in the cabinet.