In less than one year, 46 trillion dollars in financial wealth has been wiped out. If that isn’t a “crash”, how would you define one? Since last November, stocks and bonds have been plunging all over the globe. When there is a good day like we saw on Monday, sometimes that can fool us into thinking that everything is going to be okay. But in order to understand what is really going on we need to step back and look at the bigger picture. And when we look at the bigger picture, it becomes exceedingly clear that we are in the midst of a historic worldwide market crash. According to Bank of America, a whopping 46.1 trillion dollars in financial wealth has already been wiped out since last November…
It’s been a tough year for investors, with global stock and bond markets erasing $46.1 trillion in market value since November 2021, according to Bank of America.
The massive drawdown has led to forced liquidations on Wall Street, the bank’s chief investment strategist Michael Hartnett said in a Friday note, highlighting the recent break below 2018 support in the NYSE Composite Index.
When I first came across that number I could hardly believe it.
But it is accurate.
Stocks have been falling and falling and falling, and Bank of America is warning that this is one of the worst global bond market crashes that we have ever seen…
Analysts at BofA liken it to going “Cold Turkey” and blame it for causing the third “Great Bond Bear Market.”
They calculate the 20% plus losses suffered by government debt investors over the last year are now a par with the post World War I and II years of 1920 and 1949, and the Great Depression rout of 1931.
The combined collapse in global stock and bond markets means global market capitalisation has been slashed by over $46 trillion.
That is an amount of money that is difficult to comprehend.
The total value of all goods and services produced in the United States last year was approximately 23 trillion dollars.
So we are talking about an amount of money that is roughly twice as large as our GDP for an entire year.
When the Federal Reserve and other central banks around the world took the punch bowl away, it was obvious that something like this would happen.
Central bank intervention pushed global financial markets to absolutely absurd levels, and there was no way that they could remain there once the artificial support was removed.
Here in the United States, all of the major stock indexes have fallen for three quarters in a row, and tech stocks have been leading the way down…
The S&P 500 Index closed on Friday at 3,586, down 25.6% from its intraday high on January 3, and where it had first been in November 2020.
The Russell 2000, which tracks small-cap stocks, is down 31.8% from its high on November 5, having thereby maintained its function as early warning signal.
The Nasdaq closed at 10,576, down 34.8% from its intraday high on November 22, the very day Microsoft CEO Satya Nadella dumped 50.2% of his Microsoft stock in a bunch of frenzied trades, totaling $285 million. On the list of best-timed insider trades ever, he must be at the very top. Since then, Microsoft shares have plunged 33.4%, to $232.90, the lowest closing price since March 2021.
The Federal Reserve giveth and the Federal Reserve taketh away.
The same thing is true for the housing market. Fed policies created the largest housing bubble in our history, but now that bubble is bursting.
In fact, it is being reported that we just witnessed “the largest single-month price declines” since the last financial crisis…
… today Black Knight confirmed that the US housing market has turned decidedly ugly with the two biggest monthly declines since the global financial crisis.
According to a Monday report from mortgage-data provider, median home prices fell 0.98% in August from a month earlier, following a 1.05% drop in July.
The two periods marked the largest monthly declines since January 2009. In fact, at the current pace of declines, we may soon see a record drop in home prices, surpassing the largest historical slide hit during the global financial crisis.
The report noted that July and August 2022 mark the largest single-month price declines seen since January 2009 and rank among the eight largest on record.
If the Federal Reserve does not reduce rates, things will soon get really, really ugly for the housing market.
Unfortunately, the Fed is actually going to keep raising rates because Fed officials are scared to death of the raging inflation crisis that they originally helped to create.
Thanks to the Fed, grocery prices were up 13.5 percent in August…
We’ve seen the higher prices at the grocery store, and it looks like they won’t be coming down anytime soon.
New government data shows grocery prices climbed 13.5% in August from the year before. That’s the highest annual increase since March 1979.
Food producers say the surge is a result of paying higher prices for labor and packaging materials. They also point to extreme weather, disease and supply issues.
As long as we keep seeing numbers like that, the Fed is going to keep raising rates.
And the price of gasoline just hit another all-time record high in Los Angeles…
Gas prices hit a record high in Los Angeles County of $6.466 per gallon on Monday morning, soaring past the previous record set during the nationwide price surge this past spring.
If you think that is bad, just wait until California residents are paying 10 dollars a gallon for gasoline.
The cost of living has become incredibly oppressive, and one recent survey found that 73 percent of Americans believe that their incomes are “falling behind inflation”…
Scott Rasmussen’s Number of the Day survey results on Ballotpedia also found that 73% of Americans say that over the past year, their income has been falling behind inflation. The survey’s sample size was 1,200 registered voters, and it was conducted online by pollster Scott Rasmussen on Sept. 15-17. The margin of error for the full sample is +/- 2.8 percentage points.
Until inflation is under control, the Fed is going to keep raising rates.
And inflation is not likely to be under control any time soon, because the vast majority of U.S. manufacturers are planning more price increases in 2023…
In a new Forbes/Xometry/John Zogby Strategies survey shared with Secrets about the impact of inflation and the continued supply chain crisis under President Biden, 87% of manufacturing CEOs said they planned to increase prices in 2023.
Many cited the ongoing supply chain crisis, problems getting materials from China, and sellers taking advantage of the economic mess to jack up prices.
“Our margins are under pressure as costs creep up throughout the supply-chain network,” one CEO told the poll conducted by Jeremy Zogby, the managing partner of John Zogby Strategies.
So the Federal Reserve will not be riding to the rescue of the financial markets this time around.
Fed officials are absolutely petrified of high inflation, and so rates will continue to go up.
And that means that this financial bubble will continue to implode. As Eric Peters has aptly noted, market crashes can take a long time to fully play out…
“It’s important to remember that the bursting of a bubble takes a long time to play out. It may feel fast and chaotic at various points in the process, but it isn’t really. Look at 2008. Everyone thinks of Lehman’s Bankruptcy on September 15, 2008, as the big catalyst for that crisis, but the S&P 500 had peaked the previous November. Bear Sterns failed on March 13th, 2008. From the Friday before Lehman’s bankruptcy to the end of that month, the S&P was only down 7%. The real weakness was in October with a local low in November.”
The final bottom wasn’t until March of the next year. “The bubble was bursting before Lehman Brothers.” That was just the large cathartic event that caught our attention, ignited our imagination. “And even after that it took months for the market to bottom. Markets don’t clear imbalances instantaneously. So we should be preparing ourselves for a marathon, not a sprint.”
We are still only in the very early chapters of this story.
As I have been relentlessly warning my readers, things are going to eventually get really, really bad.
The Federal Reserve and other central banks flooded the global financial system with money, and so now we are facing a horrific worldwide inflation crisis.
They are attempting to fix things by rapidly raising rates, but that is causing absolutely enormous problems for global financial markets.
This isn’t going to end well, and we have finally gotten to a point where this should be exceedingly obvious to everyone.
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