Sunday, August 23, 2015

Sunday Globe Special: Waiting For the Market to Open


The Dow Jones industrial average fell more than 1,000 points in early trading and the Standard Poor’s 500 index fell into correction territory


It's $winging all over the place so we are anxiously awaiting the morning bell (despite the reassurances of the New York Times!)

"Investors race to escape risk in global bonds" by Landon Thomas Jr. New York Times  August 22, 2015

NEW YORK — Large mutual funds that helped fuel rapid growth in developing countries have begun hastily retreating from those investments, contributing to the recent sharp decline in global markets.

In the past week alone, investors pulled $2.5 billion from emerging-market bond funds, the largest withdrawal since January 2014.

The world’s fastest-growing economies — led by China — have been propelled by soaring commodity prices, robust currencies, and access to cheap loans, primarily through the sale of high-yield, high-risk bonds.

But China’s decision to devalue its currency has set off a chain reaction of panicked selling around the world that contributed to the biggest one-week loss on Wall Street since 2011, sending the Dow Jones industrial average into correction territory (10 percent below its recent peak). The index was down 531 points Friday and nearly 6 percent for the week.

That wasn't the only chain reaction in China.

The currency devaluation increased concerns that growth in China was slowing and that other countries might follow with their own devaluations. The notion unnerved bond investors, who began to retreat out of fear they would not be repaid. General uneasiness about a global economic slowdown spread to stocks, which many have believed to be overvalued and due for a decline.

“The growth rates for many of these countries were vastly overstated,” said Dani Rodrik, a professor at Harvard’s Kennedy School of Government who has studied developing economies. “It was all very unsustainable.”


The selling spree has raised concerns among regulators and economists about a broader contagion that could make it difficult for individuals to take money from mutual funds.

While these funds do not use borrowed money, as did the banks that failed during the mortgage crisis, they have invested large sums in an array of high-yielding bonds and bank loans that are not easy to sell — especially in a bear market.

If investors ask to be repaid all at once — as happened in 2008 — a run-on-the-bank scenario could unfold because funds would have difficulty meeting the demands of people wanting their cash back.

Is this the week the market crashes, as many alternative economists are predicting?

Because large commercial banks suffered significant losses during the global financial crisis and were forced to rein in their lending, more nimble — and fickle — bond investors stepped in.

In January, economists at the Bank for International Settlements published a study that highlighted how fast dollar-based lending to companies and countries outside the United States had increased since the financial crisis — doubling to more than $9 trillion.

Yes, they just warned about a meltdown coming. 

What struck the authors most was that this growth was coming not from global banks but from US mutual funds — such as BlackRock, Franklin Templeton and Pimco — buying bonds in emerging markets.

What do you mean you lost all my money?


Also see:

Foreign stocks’ drop creating a world of worry

Not according to the New York Times.

World markets take a beating

At this point I'm of the opinion that it is a good idea to get some supper.


This 2 Day Stock Market Crash Was Larger Than Any 1 Day Stock Market Crash In U.S. History 

Just ruined my appetite.


"Most-traded stocks behind turmoil on S&P 500" by Lu Wang Bloomberg News  August 24, 2015

NEW YORK —“These are names that people look at — if they can run their business well, then the economy is doing well,” said Larry Weiss, the head of US trading at Instinet in New York. “So when Apple misses and sells off hard, it’s bolstering that fact that we don’t have an equity market to trust.”

He means Apple, Alcoa, General Electric, I never did trust equity markets (or any market, for that matter), and all of a sudden anxiety is sweeping the bu$ine$$ pre$$ -- although I read that Apple was on the move again.

About $94 billion has been pulled out of equity mutual and exchange-traded funds in 2015, poised for the biggest year of withdrawals ever, according to data compiled by Bloomberg and the Investment Company Institute.

Losses in the most popular shares suggest that euphoria, a condition that really kills the bull market, has not arrived yet, said Tim Courtney, the chief investment officer at Exencial Wealth Advisors.

The risk is that as more and more stocks are collapsing, the S&P 500 will find it harder to stay afloat....

And there are $marter people than I to analy$e it.


That wasn't in the web section of today's Globe (they put it in the nation?). 

It was replaced by this: 

Inside the high-stakes quest to design a computer program that ‘gets’ sarcasm online

This site specializes in sarcasm, and rightly so.

And just in case you missed it:

China stocks plunge again

Yeah, but the yen is up $o.... never you mind those new fires in Tainjin as the AmeriKan wolf pack advances (Japanese are too old to fight; talk about taking money from the elderly and plowing money into war. Not much has changed at all)!