Posted on 09/20/2021 9:09:58 AM PDT by SeekAndFind
U.S. stock benchmarks were on track to post the worst daily drop in more than two months, with the skid being blamed on the potential collapse of Evergrande. The Chinese property giant is threatening to default on $300 billion in debt that could ripple through global markets.
However, the sharp downturn by the highly leveraged real-estate sector, which the Financial Times notes makes up more than 28% of China’s economy, isn’t the only problem for markets on Monday.
Here are a few others.
The U.S. is now averaging more than 2,000 deaths daily, according to a New York Times tracker, the most since March 1, and consist almost entirely of unvaccinated people. Florida, which has vaccinated 56% of its population, is averaging 353 deaths a day. Texas, where 50% of the population is inoculated, is seeing 286 deaths a day, according to the Times. The two states account for more than 30% of all COVID-19 deaths since March 1.
The Fed has been buying $80 billion of Treasurys and $40 billion of mortgage-backed securities each month since last June to keep long-term interest rates low and bolster demand. It said it would maintain the purchases until the economy hit a threshold of “substantial” progress on inflation and the labor market and the question the market is weighing is whether the time for tapering those asset purchases is now.
(Excerpt) Read more at marketwatch.com ...
The House of Card$ is getting ready to fall.
2009 part 2
“Fed taper talk”
That’s it.
The markets are making new highs on gov manipulation. It’s sick, destroying our currency to keep the markets making new highs. History won’t judge well.
If you are worried about inflation, can you complain about the Fed tapering?
A. -- It's way up. Simply put, every day there are forces to push the market up and forces to push the market down. If the S&P 500 has been way up for a while: the factors for pushing it down have a higher weight than the factors for pushing it up. What goes up must come down eventually.
B. -- People are starting to look at company revenues. Sure, some of the big boys have strong revenues. But not all 500 companies in the S&P 500.
C. -- Small-cap companies are running on fumes. So many small business closed for good this past year. Most small businesses still open are barely staying open.
D. -- The Fed is saying they're going to slack off on how much they spike the punch bowl. Less of what they a few years ago as "not QE" but was really more QE, means less make believe money going into the market. I know the Fed setting the tax rate gets most of the press. But this is more important.
The Fed is only part of the reason, we have a structural issue with how the S&P is calculated using a Market Capitalization formula.
A lot of new money comes in via 401K contributions, etc., and a lot of that is going to Index funds, mostly the S&P 500 since it is always included in retirement plan choices. Apple, Alphabet, Amazon, Microsoft and a few others are about 20% of the Index and money automatically gets allocated to those stocks via the Index providers, continuing to push up the most ludicrous valuations.
Those four stocks ALONE are over $7 TRILLION in Market Cap. The Fed mostly owns fixed income and mortgages so they have less influence on the stock market.
New York Times tracker, the most since March 1, and consist almost entirely of unvaccinated people.
The big lie... then they mention Florida and Texas.
Florida sees new COVID cases drop by 47% in the past two weeks (four days ago). Florida cases spike earlier because people were staying inside due to heat (our flu season). Soon, the north’s cases will be spiking. Also, the Anti-Body Treatment centers DeSantis setup are working great.
What they don’t mention is housing prices jumping by 30-40 percent in the last couple of months. This can not last, the housing bubble is going to burst.
“The House of Card$ is getting ready to fall”.
It’s likely to look like a Perfect Storm.
That is true only because other investors who are not index funds also want to own those stocks. Nobody wants dogs like IBM and GE.
Moreover, if the S&P went down significantly, it is entirely possible that all the 401K investors who swore they’d stay in the S&P until they’re 70 would start to sell some of their holdings anyway. Such selling would easily offset new money, and would accelerate the downturn. The index funds would have to dump huge amounts of Apple, Facebook, Google, Microsoft and Tesla.
Who owns Evergrande debt?
Ashmore is the biggest holder, but Blackrock, UBS, and HSBC have a lot. They do not themselves have the debt, but are holding them in high-yield funds they sell to investors. Probably a lot of widely-held high-yield bond funds have some Evergrande exposure - a lot of their debt is dollar-denominated.
Because these funds are diversified, the losses will not be great - assuming Evergrande does not cause the entire Chinese financial system to collapse. If it does, and you own the Super-Duper High Yield Asian Tiger Bond Fund, well, you might be in for a big loss. As the Chinese themselves say, it is easier to ride a tiger than to dismount when necessary.
Eventually, the god of the copybook headings returns.
http://www.kiplingsociety.co.uk/poems_copybook.htm
“The House of Card$ is getting ready to fall.”
Our CFP told my wife and I we had more than enough to retire.
We both feel another 2008 is coming but worse. One reason we keep on working. Don’t want to pull money out of our nest egg when it is at rock bottom.
They always raise a storm when the market indexes go down. Not a word when they creep back up again.
The numbers go up, the numbers go down. Sell when they are up, buy when they are down.
read ltr
it was a bad omen when their ship
got stuck in the Suez canal
Aren’t you confusing Taiwan’s EverGreen with China’s Evergrande?
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