World Stock Markets Plummet into Correction Zone … Is a Market Crash Looming?

Captain Rick : Stock markets around the world plummeted into correction territory on Monday, August 24. China’s Shanghai composite plummeted 8.5% followed with an additional 7.6% plunge on Tuesday, accumulating a 16% loss in two days. The Dow took an unprecedented 1,089 point dive at Monday’s opening bell, causing investors to wonder if this was the beginning of a market crash. The Dow has now lost 13% from recent highs. Most major stock markets around the world are down over 10%, considered to be the threshold that signals an official market correction.

This market correction is significant in magnitude. It is almost as big as the 2011 correction, which was the biggest correction since the global market crash of 2008, when the Dow bottomed at a 54% loss. This market correction has caused the average 401K retirement account to loose $10,000 in the past few weeks. It has erased billions of dollars of value from the world’s major corporations. 

What is triggering this stock market correction?

Primarily, concerns about global economic growth — especially in the world’s No. 2 economy, China, after it unexpectedly devalued its currency. China’s Shanghai Composite suffered its worst loss in more than 8 years, which takes us back in time prior to the 2008 global market crash. This concerns investors because China is one of the biggest financiers of U.S. debt. If China stops funding Americas debt spending, where will Uncle Sam get its money to fund the countless federal grants it dishes out to keep the economy chugging along? Additionally, oil prices are down under $40 a barrel, hitting a 6 1/2-year low. While this is great news for drivers needing to buy fuel, it is taking a heavy toll on profits for the big oil corporations.

What is the long term stock market prognosis?

Perhaps the biggest concern of all is the extremely fragile financial structure of the United States. Intelligent investors realize that the U.S. is teetering at the edge of the real ‘fiscal cliff’ with lots of serious fiscal challenges that lie ahead … like uncontrolled spending far beyond its means, causing the U.S. national debt to soar past $18 trillion, dwarfing all other countries debt. And then there are the giant fiscal time bombs that continue to tick … Medicaid via Obamacare, Medicare and Social Security. Who knows what could spook the market to take the big plunge? The only things we can all be sure of is that ‘what goes up, eventually comes down’ and ‘time is of the essence’ because of the extremely ‘shaky fiscal ground’ that the entire world stands on … especially the United States of America.

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Captain Rick

Dow + S&P reach new highs as Fed continues bottle feeding American economy with … $85 billion debt dollars each month to make a sick economy look OK … for now

Captain Rick: The Dow Jones and S&P hit new highs on September 18, 2013, as the U.S. Federal Reserve announced it will continue bottle feeding the U.S. economy with $85 billion debt dollars each month…for at least another month…to cast the impression that the American economy is doing well.

The fact is that the American economy is not doing well at all. GDP is limping along at a very anemic rate, not even keeping up with population growth. Real unemployment is near record levels. The Fed’s ‘Quantitative Easing’ program is doing nothing more than covering up a very sick economy that would all but die without the nursing bottle, while significantly increasing the U.S. national debt. The Fed’s continued ‘economic bottle feeding’ is not improving the American economy. It is only prolonging and amplifying America’s monumental financial downfall in the future…one that is shaping up to reduce America to a third world country.

401K’s are posting temporary inflated values.  Intelligent investors will reap what ever ‘phony’ profits have accumulated by switching them to a cash or prime fund before the Fed’s money feeding bottle dries up.

America’s representatives in DC are setting stage to again focus on the staggering $17 trillion U.S. national debt and find a way to prevent yet another pending government shutdown on October 1, 2013. America can not continue spending nearly twice what it receives in revenue for much longer. Those that think that it can…or that these days of phony economic well being will last forever…are simply living in a dream world.

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Dow Jones plummets as Cisco cuts 4000 jobs + Wal-Mart sales disappoint + Unrest in Egypt grows … World markets follow

Captain Rick: The Dow Jones plummeted 2.4% during the past month, attributed in part by the news of Cisco cutting 4000 jobs and Wal-Mart sales falling short of expectation. This combined with the growing violence in Egypt caused major world markets to follow the Dow’s decline.

The above chart shows the significant, recent decline of the Down Jones, down 2.4% in the past month. It is the largest dive in values in 2 months and one of the top 5 declines since the market crash of 2008. I break down the issues affecting this loss…

Cisco, the worlds largest network company providing services to most of the largest companies and government entities announced it is cutting 4000 jobs.  Cisco touches all parts of the networking process, and the company’s success is largely tied to sentiment about the world’s economy. Many large businesses and government agencies are Cisco customers, and they’re unlikely to buy up networking equipment when they’re worried about the economic situation. I see this as a major signal that the world economy is in much more dire shape than what we are being led to believe from the typical ‘show business hype’ on the evening news. World markets are echoing the concern.

Wal-Mart, the world’s largest retailer, reported lower than expected sales for the second quarter. When the world cuts back on purchases at Wal-Mart, it raises a red flag for me.  It makes me wonder how healthy the recovery from the Great Recession really is.

Disturbance in Egypt has caused over 400 deaths and 3500 injured. While most of financial market ‘gurus’ did not mention this as one of the causes of the recent market plummet, I believe it played a role.

The major economies of the world continue to tread on very shaky ground. There has been lots of news about our ‘improving economy’. I suggest that much of this is based on unfounded news ‘hype’. Our world’s economy is like a train riding on fragile rail, heading for the edge of the ‘Global Fiscal Cliff’.

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Captain Ricks INVESTMENT 101 Course

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Bond Giant PIMCO’s Bill Gross tells the Fed: ‘Quantitative Easing’ is not working … it’s like a “leukemia patient on New Age Chemo”

Captain Rick: PIMCO’s Bill Gross says that ultra low interest rate policies and ongoing bond buying programs like ‘Quantitative Easing’ around the world aren’t working. Bill refers to it as a global financial system that is "beginning to resemble a leukemia patient with New Age chemotherapy, desperately attempting to cure an economy that requires structural as opposed monetary solutions." He is challenging the Federal Reserve and other central banks to become part of the solution rather than part of the problem.

Bill Gross, founder and co-chief investment officer of bond giant PIMCO. He is often called the world’s ‘bond king’.

I recognize Bill as one of the worlds most intelligent minds concerning everything related to bonds. Bonds help make our world grow. Bonds are the life blood of our cities, states and countries of our world. 

Bill writes a monthly ‘Investment Outlook’ news letter. His June report is entitled “Wounded Heart”, a nod to Bonnie Raitt’s 2002 tune. It is one of his finest. I will do my best to sum up his eloquent words of wisdom for the U.S. and other countries including Japan, England and Europe who are practicing ‘Quantitative Easing’ fiscal programs that are not working.

Excerpts from Bills “Wounded Heart” report:

“While the global central banks’ policies have stabilized economies, they haven’t succeeded in returning them to old normal growth rates”

"There comes a point when no matter how much blood is being pumped through the system as it is now, with zero-based policy rates and global quantitative easing programs, that the blood itself may become anemic, oxygen-starved, or even leukemic, with white blood cells destroying more productive red cell counterparts"

And to Fed chief Ben Bernanke’s claims that once economic growth has been restored to normal levels, financial markets can also return to normal interest rates and returns, Gross has a few stern words:
"Well it’s been five years Mr. Chairman and the real economy has not once over a 12-month period of time grown faster than 2.5%"
"Perhaps, in addition to a fiscally confused Washington, it’s your policies that may be now part of the problem rather than the solution."

To investors, Gross advises to reduce risk as the Fed continues to try to mend a wounded heart with blood that lacks the necessary oxygen. "Investors should look for a pacemaker to follow a less risky, lower returning, but more life sustaining path."

Read the entire Investment Outlook: “Wounded Heart”  by William H. Gross:  http://www.pimco.com/EN/Insights/Pages/Wounded-Heart.aspx

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Japan: Nikkei stock market plummets 7% Global stock market rally abruptly halted How do world markets compare for gains?

Captain Rick: A global rally in stocks came to an abrupt halt Thursday with a 7% plunge on Japan’s Nikkei index … the biggest one-day drop since the 2011 earthquake and nuclear disaster.
European markets fell by 2% with Germany’s DAX down 2.4% and France’s CAC 40 down 2.1%. This was preceded yesterday by U.S. markets dropping about 0.8%.

What caused this? Investors were rattled for three big reasons:

Japan: The Japanese rally had gone too far too fast. The Nikkei has surged by more than 70% over the last 12 months, far outpacing other markets.
‘Abenomics’, Japan’s version of ‘Quantitative Easing,’ has pumped massive amounts of money printed with red ink into the economy to create an image that the economy is doing good, when it is not.
The Bank of Japan’s policies can’t sustain the rally indefinitely, and Japanese companies will have to start reporting better earnings to bolster investment confidence.

U.S.: The Federal Reserve released minutes from its latest policy meeting revealing that some members of the monetary policy committee were looking to taper off the ‘Quantitative Easing’ bond-buying program as early as June. That is bad news for investors who have been energized by the Fed’s $85 billion of phony red money being pumped into the American economy each month to make it look like the economy is healthy, when it really is not.

China: Weak economic data. The latest numbers from China showed the country’s manufacturing sector contracted in May, contrary to expectations for expansion, reinforcing concerns about slowing growth in the world’s second biggest economy. This is a reality that is beginning to come to light because America, Europe and most of the world have economies that are actually in decline once we strip away the façade of programs like ‘Abenomics’ and ‘Quantitative Easing’.

World Stock Market gains in past 12 months
Japan: 69% (after todays huge loss)
Eurozone: 33%
England: 27%
Australia: 23%
Hong Kong: 21%
U.S.: 18%
Canada: 10%.
Mexico: 8%
Brazil: 3%
China: – 4%

Captain Ricks Analysis: Which markets are likely to go up … or down?
The stock markets in the countries at the bottom of the list (less than 15% gain) are on the strongest footing and are more likely to go up than down.
The stock markets in the countries at the top of the list (more than 40% gain) are significantly over invested with highly inflated values and face significant potential for decline.
The stock markets in the countries in the middle (15% – 40% gain) are in uncertain territory with over investment and inflated values, especially those in the upper half of this range. These markets are more likely to decline than rise, especially those in the upper half of this range.

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China: https://atridim.wordpress.com/category/china/

Stock & Bond Market: https://atridim.wordpress.com/category/stock-bond-market/

Fiscal Cliff 101: https://atridim.wordpress.com/category/fiscal-cliff-course-101/

U.S Debt Crisis: https://atridim.wordpress.com/category/u-s-debt-crisis/

European Debt Crisis: https://atridim.wordpress.com/category/european-debt-crisis/

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Dow closes at record high … time to buy? … or time to sell? + Captain Rick’s Investment 101

Captain Rick: The Dow Jones closed today at 14253.77, a new record…topping the previous high close of 14164.53 on October 9, 2007…just prior to the market crash, followed by the Great Recession.

Captain Rick’s Investment 101

As a successful investor, I can not stress enough the importance of the old investment cliché: “buy low, sell high”. It has worked with excellence for me. Intelligent investors bought during the steep dive you see at the left of the chart, while most sold out of fear (it was scary, but smart)…and then began to sell and reap excellent rewards during the uphill recovery on the right (it was a ‘chicken move’, but smart).

If you have a significant amount of money invested in a 401K, other program or directly in stocks and bonds, I highly recommend you begin to transfer some of those funds to a safe prime money market fund. Your investment won’t make money, but it will be safe from loss when the market crashes again…and it will. Its just a matter of time. With the U.S. economy stalled with zero real job growth and the U.S. GDP approaching negative “recession” territory, this is time to sell…not buy!

I extend this word of investment caution to everyone around the world. We all live in a global economy. I hope all of my friends around the world are paying attention to my blog posts which keep all aware of the very serious elements unfolding upon our world.

U. S. Economy contracts: GDP dives 3% … Back in ‘Recession Zone’… First time since 2009 What’s ahead?

Captain Rick: Many economists were shocked by the magnitude of this drop in economic growth. I was surprised, but not shocked. Those following my reports know I have been forecasting a coming recession for some time. I caution that this is only the first of three GDP reports for the 4th quarter of 2012.  It won’t be until the end of March until the third and final GDP figure for the fourth quarter of 2012 is released. The final figure could be slightly higher or lower. Regardless of the final figure, the economic trend is not favorable. How Congress handles the very serious looming U.S. debt crisis, especially the portion of the Fiscal Cliff that was ‘kicked like a can down the road’ will play a roll in future economic growth. If Congress gets tough and addresses the debt crisis head on, I suspect it will present a deeper, temporary plunge into negative growth territory. If Congress continues to ‘kick the can down the road’, I suspect we will see less of a dive in GDP early on…but will set the stage for a much deeper dive in a year or two…possibly as deep or deeper than the ‘Great Recession’ of 2008-2009.

I see several troubling economic factors that parallel the times leading up to the ‘Great Recession’. The world stock markets are within 2% of the all time highs reached just prior to the stock market crash of 2008. Like then, I see no justifiable reason for the recent market rise. It looks to me like a bunch of gamblers in Vegas betting it all. The market is again inflating into a balloon ripe for explosion. Real estate prices have been climbing at a fast pace, as is real estate speculation…similar to that witnessed prior to the bursting of the real estate bubble, prior to the Great Recession. I can not predict how much farther things can go before a repeat of 2008 occurs…but I feel that a down slide is coming at some point soon. Much will have to do with congress’s handling of the debt crisis. The best thing they can do is ‘bite the bullet’ and suffer the consequences of balancing the budget early on. While that will most likely allow our GDP figures to become even worse than they are now, action soon might stave off an economic catastrophe a few years from now. I wish I could offer a more wholesome outlook for the American economy, but the fact remains…America is facing the most serious financial crisis in its history, one which has the potential to reduce America to a third world nation if not handled properly and soon.

DuPont to cut 1,500 jobs worldwide, 2% of its workforce … signaling another blow to the global economy

Captain Rick: DuPont, one of the world’s largest chemical companies that invented Nylon, Neoprene, Corian, Teflon, Mylar, Kevlar, Freon and much more issued a wake up call to the world today as it announced a cut of 1,500 jobs worldwide, about 2% of its global workforce. It also lowered earnings guidance for this year.

DuPont, headquartered in Wilmington, Delaware, had 70,000 employees worldwide at the end of last year. A component of the Dow Jones, DuPont’s stock fell 9% today, helping send the Dow into a nose dive today, loosing nearly 2% of its value.

Dow Dives 243 points, 1.82% … following slew of disappointing earnings … igniting fear that the global economy is on shakier ground than previously expected

Captain Rick: Big sell off on Wall Street as a result of three major U.S. industrial companies filing disappointing earnings reports, igniting fears that the global economy is on shakier ground than previously expected. DuPont, a Dow component fell 9% after reporting weaker-than-expected quarterly earnings and announced plans to cut 1500 jobs worldwide. United Technologies lowered its forecast and 3M missed revenue estimates. Continuing uncertainty about economic health in Europe and China contributed. This was the biggest Dow dive since June.

In September, 2012, the Dow came within 4% of the all time Dow high of 14164.53 reached before the 2008 market crash. This correction knocks it back to –7.5% from the all time high. The Dow is still up 7.24% for 2012.

I see lots of uncertainty lying ahead with the U.S. facing the “Fiscal Cliff” in January, the fiscal problems in Europe and the degrading effect that all of it is having on the economy of China, which are all working in unison as ingredients brewing a very volatile global fiscal and economic storm. I will do my best to report the important elements.