Yesterday, on March 22, 2019, the yield curve inverted for the first time since 2007. Specifically, the spread between the 3-month Treasury and the 10-year Treasury has flattened and then flipped: short-term yields are now higher than long-term yields, the reverse of what is normally the case. It is a leading indicator of a coming recession, since it basically means that investors are becoming so bearish that they would rather lock in current interest rates as they expect rates to drop significantly in the near future rather than continue rising further. And since it typically precedes the onset of a recession by 6 to 18 months on average, it means that the odds of a 2019 or 2020 recession are looking very, very likely.
And while the stock market seemed to be rebounding from the December mini-crash of 2018, it now seems to be once again teetering on the edge of the Big One, the coming Crash of 2019. And with Trump's tariffs and resulting trade war really starting to bite hard recently, leading to GM and Ford both announcing layoffs, and American soybean farmers getting creamed, things really don't look so hot right now.
In Bernie we TRUST, in Trump we RUST. Tired of "winning" yet? Hey, American Brexit, now do you finally Regrexit?
Showing posts with label Crash of 2019. Show all posts
Showing posts with label Crash of 2019. Show all posts
Saturday, March 23, 2019
Sunday, December 30, 2018
What Will Cause The Next Big Crash of 2018-2019? (Updated)
There is a recent article by Matt Taibbi in both Rolling Stone and Common Dreams that predicts a looming economic disaster due to three colliding problems. And those three problems are as follows: 1) FERAL Reserve monetary tightening, both in terms of raising interest rates as well as the more subtle but significant Quantitative Tightening (QT), 2) Trump's tax cuts depending on unrealistically high economic growth to "pay for themselves", and 3) Trump's tariffs and the resulting trade war. And the collision of all three together will not end well, according to Taibbi, and he is probably right for the most part.
But even these are mere sideshows compared to the very biggest underlying root cause of the next looming crash, even if one or more of these problems are in fact the proverbial spark that sets off the financial powder keg. So what is this underlying powder keg, exactly? Well, it is the mother of all stock market bubbles, artificially inflated by corporations buying back their own stock to manipulate share prices. And famous economist Ted Bauman predicts that when it finally bursts, any day now in fact, the market will quickly plummet by 70% or more, causing a crisis that makes 2008 and perhaps even 1929 look like a walk in the park by comparison.
Recently, it looks like the stock market crash of 2018-2019 has already begun in earnest, with Trump's off-the-rails Twitter tirades and his chaos-manufacture in Washington including his stupid government shutdown being the primary catalysts. Also, the FERAL Reserve raised interest rates yet again. And it looks like the market has quite a way to fall still, after the worst Christmas Eve ever in history and the worst December since 1931. The proverbial boil has now effectively been lanced, but the pus is still oozing out at a rapid pace, with much more to follow.
So how did we get here in the first place? The story begins in the 1920s, when corporate stock buybacks were all the rage, and in fact caused the 1929 Wall Street crash. The Great Depression soon followed. In 1934, this highly manipulative practice was rightly outlawed, and the ban remained in effect for nearly half a century until the Reagan administration lifted this ban in 1982 as part of Reagan's deregulation platform. And since 2010, stock buybacks have accelerated dramatically, artificially inflating the stock market numbers and lulling hapless investors into a false sense of security. And the recent Republican tax cuts have only accelerated this trend even further (since corporations now have even more money with which to buy back their stocks). That's right--"trickle down" theory is a myth.
And what goes up, must come down, and the bigger they are, the harder they fall.
Don't say you weren't warned.
But even these are mere sideshows compared to the very biggest underlying root cause of the next looming crash, even if one or more of these problems are in fact the proverbial spark that sets off the financial powder keg. So what is this underlying powder keg, exactly? Well, it is the mother of all stock market bubbles, artificially inflated by corporations buying back their own stock to manipulate share prices. And famous economist Ted Bauman predicts that when it finally bursts, any day now in fact, the market will quickly plummet by 70% or more, causing a crisis that makes 2008 and perhaps even 1929 look like a walk in the park by comparison.
Recently, it looks like the stock market crash of 2018-2019 has already begun in earnest, with Trump's off-the-rails Twitter tirades and his chaos-manufacture in Washington including his stupid government shutdown being the primary catalysts. Also, the FERAL Reserve raised interest rates yet again. And it looks like the market has quite a way to fall still, after the worst Christmas Eve ever in history and the worst December since 1931. The proverbial boil has now effectively been lanced, but the pus is still oozing out at a rapid pace, with much more to follow.
So how did we get here in the first place? The story begins in the 1920s, when corporate stock buybacks were all the rage, and in fact caused the 1929 Wall Street crash. The Great Depression soon followed. In 1934, this highly manipulative practice was rightly outlawed, and the ban remained in effect for nearly half a century until the Reagan administration lifted this ban in 1982 as part of Reagan's deregulation platform. And since 2010, stock buybacks have accelerated dramatically, artificially inflating the stock market numbers and lulling hapless investors into a false sense of security. And the recent Republican tax cuts have only accelerated this trend even further (since corporations now have even more money with which to buy back their stocks). That's right--"trickle down" theory is a myth.
And what goes up, must come down, and the bigger they are, the harder they fall.
Don't say you weren't warned.
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