Is this the Sign of the Stock Market Collapse?
The present scenario is that of a slowing down of the global economy. Consider last month, wherein, third quarter earnings of many a company declined and subsequently, their fiscal 2013 forecasts proved to be dampeners. An example of such a situation was faced by FedEx Corporation (NYSE/FDX). This global delivery bellwether company had to stare at a 31% drop in its third-quarter earnings following which fiscal 2013 forecasts too were cut.
What could have prompted the above announcement? Well, as per Edgar Online, Frederick W. Smith, who is the company’s President and CEO, sold 202,000 shares of FedEx. In addition to this insider selling, there were about eight more insider sales, in the past six months, compared with only two insider buys. (Source: Thomson Financial). Also, there has been selling by institutions. As a result, if we consider the quarter -to -quarter results, there has been a drop in the ownership by 6.1%. When there are such observations about a company that reflects the state of the global economy, it does send out a message that conditions going forward may prove to be tough.
According to a report from the World Trade Organization (WTO), there could be a meager rise in the global trade by about 3.3% this year. As compared to the rise last year; i.e., only 2%, this is not much of an improvement. And the guidance calling for growth this year was 4.5%, according to Associated Press, April 10, 2013 in “Global Trade to Be Weaker than Expected.” With the recent two decades having witnessed average growth of about 5.3%, the situation could possibly affect the recovery of the economy.
The Baltic Dry Index, which is a measure of the shipping demand, is negative and has remained so since some time. The stock market today is abuzz with talks of a near-looming market correction. Technical analysis by gurus suggests that this correction could further deteriorate. This has led to a growing demand for blue chip stocks and S&P 500 stocks. Small cap stocks and also technology stocks seem to be the less favored ones.
The scenario at the beginning of 2013 painted a bullish picture as far as investment was concerned. But investor sentiment seems to have paused, especially with stock readings being indeterminate in four straight sessions on the NYSE as well as on the NASDAQ. It would be advisable to wait before putting money into stocks at present as the stock market is susceptible to risk.
First there was the weak growth in the growth of the American economy in the last quarter of last year. It looks like in this first quarter of 2013, the results will be no different. Consumers have become cautious about their spending habits. The month of March this year saw orders for new durable goods in America suffer a drop by 5.7%. It is the second time that this has happened so far in the year, according to the United States Census Bureau, April 24, 2013.
Economy is slowing down in China, Germany, France and Italy as well, with manufacturing sectors of the first two nations suffering setbacks. France is ridden with a grave unemployment problem and could soon fall prey to recession, as Japan has. Italy too is riddled with the need for growth. Revenue growth has been troubling the U.S. multinational corporations and all these factors will be bound to affect the stock market.
On one hand, the American economy is being made to look robust through the money-printing strategies by the Federal Reserve. But in the event that this ploy had not been employed, would the U.S. not have been technically “bankrupt”? Where does that leave the U.S. economy and the stock market today?
Posted by MichaelL at April 25, 2013 8:45 AM
I applaud your willingness to inquire about actual economics on this blog, but unfortunately, no one who writes for this column is even willing to read between the lines or even posit the idea that Keynesian economics might not be the best solution. Because we are way past the point of turning the ship. We’ve hit the iceberg and the USS America is flooding its compartments with debt, while slowly but surely we sink into the financial abyss listening to the fiddler’s like Stephen laud the accomplishments and successes of the most expansive and corrupt presidency in US history.
On every financial site that I visit (which is far more frequently than WB anymore) it is always some version of the same. Get while the getting’s good, because the world economy is going down in flames. It is finally becoming a mainstream agreement that our debt, and the debt of the EU, will never be repaid. Literally Cannot be repaid.
All that’s missing now is a galvanizing atrocity that can convince the American people, and the world at large, that we all need to abandon the dollar (us) and the petro-dollar (them) and go to a one world currency backed by Gold. I believe (after much reading on the matter) this is why Governments are stockpiling physical Gold as fast as they can, to better position themselves when the great fleecing reset button is pushed. All of you fools with your money in fiat will get in line to blame the other side of whatever aisle you identify with, but you were warned, and you have no one to blame but yourself for ignoring reality.
You believe the CBO numbers, but ignore history. Look at the way unemployment was once calculated, then count the number of times the formula has been changed in the last 20 years. You believe growth earnings reported on the news, but ignore what you see every day. You are lemmings.
The current dip in Gold and Silver is mana from heaven to anyone who understands the forces at work and don’t have to be sold why they should BTFD.
Just wait for it.
Stephen has already invested a couple hundred thousand words to set-up the argument that it was conservatives who didn’t allow taxes to go up enough to offset the spending that Obama simply HAD to do, and THAT is why everything collapsed. Corrupt Republicans.
Did you think Libor was bad? I did. I thought it was very, very bad. But it’s worse folks. It’s far, far worse than we knew.
The world economy is rigged against us, and there is no predicting it. We will always lose, and that’s how the bankers want it, and no government, or “court of law” is willing to stop them.
We the People need to grasp that. And we also need to start hanging bank CEO’s and other officials from the lamp-posts on Wall Street. I wish I was joking when I say that, but I’m not. They’re such despicable thieves and thugs, and no one but us can help our World set things to rights. It’s horrible and it’s absolutely terrifying, but it really does appear that in a collective fashion the people of this world really are going to have to take things into our own hands and do what the cowardly powers-that-be have demonstrated they aren’t willing to do.
Btw, I’m not a violent person. I’m a pacifist. And I’ve always loathed the mob mentality — but after reading this today and thinking long and hard, I honestly don’t see another way forward when the courts won’t punish these people.
Everything Is Rigged: The Biggest Price-Fixing Scandal Ever
The Illuminati were amateurs. The second huge financial scandal of the year reveals the real international conspiracy: There’s no price the big banks can’t fix
So, the question is, which banker should we hang first?
GDP was 2.5% on the first-quarter advance estimate. That could be better but is a lot better than 0.4% last quarter. That may be our best quarter this year though given the sequester.
Consumer sentiment is down a little but it’s up and down lately due to several factors. What’s interesting is GDP showed continued good contribution from residential investment and personal consumption expenditures but more bad contribution from state and federal government spending that is dragging down the economy.
This is where the failure of our leaders to hammer out useful solutions to spending and debt hurt us the most. But when we vote in a subpar Congress we will typically get subpar results. Unfortunately I doubt this Congress will change any time soon and 2014 probably won’t be the change election we need in Congress.
I’m not that pessimistic about the economy though. I think the US economy will exceed expectations more times than not and I don’t hold with those who, like Yukon, believe we are doomed. I think the sequester will slow our growth a little this year but I think the investment in housing is ultimately going to get us over this soft patch and we won’t suffer in the same way other countries that are slowing now will suffer.
But I’ll admit that my positive view might just be my lack of real knowledge on this subject. I read what I can but I’m obviously not an economist or a financial expert. I just don’t hold with the folks at places like ShadowStats and the army of conservatives who spin every economic number to look bad for the president.
I’m much more in line with folks like Bill McBridge at Calculated Risk. Bill isn’t overly pessimistic. He can admit to existing economic weaknesses without rolling that into a tirade about how we’re headed to a massive economic meltdown.
We’ve had group of people predicting a looming recession every month pretty much for the last three years. Over that time we’ve exceeded expectations and we’ve proven them wrong over and over. Yukon says just wait for it. We have been though, and so far all I can see is an economy still growing.
I never thought Adrienne and I could find common ground, alas, wrong again!
You may have read the book, Rich Dad, Poor Dad - by Robert Kiyosaki. Reading that book literally changed my life, but that’s another post. He is an extremely knowledgeable man about the “rules” that wealthy people choose to play by, and the rules that poor people play by. That notion was offensive to me when I was in my twenties, voted for Clinton, considered myself liberal, and believed people are basically good. After some thought, I changed my financial paradigm, became an entrepreneur, and make an amazing living. I forget how far down a random video spree I was on YouTube when I saw it, but he ended up laughing at the reporter who said:
“So would you say Obama is running the country as a Rich Dad or a Poor Dad?”
Kiyosaki laughed at him and said “Obama doesn’t run the country, he does what he is told by the banking cartel.”
Getting to the point where Adrienne and I actually agree on something. The bankers do need a lynching, quite literally. If you steal gas money or loose change from a convenience store you can get 3 to 10 years depending on whether you use a gun or not. The banking cartel is literally destroying the value of every asset you have, and again Adrienne is correct, the Libor manipulation was awful and the emails from the manager asking for the manipulation were so carelessly worded it demonstrates how “above the law” the financial sector believes itself to be… but that is NOTHING compared to what Bernanke and the Fed have already done to your savings account, and what the COMEX is doing right now to most commodities, but especially Gold and Silver. I say COMEX when it’s really JP Morgan, and the COMEX refuses to investigate Morgan’s thousands of puts the last fifteen minutes of the trading day, which makes it impossible to trade options on the shiny stuff unless you have obscene resources behind you. So they shake down the weak holds, the fiat traders, and the price gets supressed.
This is where the Rules of the Rich and the Rules of the Poor (Kiyosaki style) go out the window.
To rudely paraphrase: Rich People (or those who want to get that way) don’t bitch about other rich people, or what they don’t have. They disavow the consumer whore mentality that drives Keynesian economics, that’s what stupid poor people do. Self-made rich people work like dogs until they save enough to buy something that will pay them and then they use the income from that “whatever” to buy the bullshit consumer item… or repeat step one a few times until your normal income no longer really matters.
The situation NOW is that the market cannot be trusted because the SYSTEM itself is unaccountable to its own (CARTEL) forces. Financial news addicts like myself refer to this as “The Great De-Coupling.” Throughout US history, several indicators have been inextricably linked to each other. Some directly, and some inversely proportional. There is nothing left that can be predictably depended on. Nothing. The entire market is a fantasy. There is not one brick in the foundation of our economy that should support all this warm fuzzy news that the media is reporting about our economy. Not one. And everyone in finance knows it. Everything is manipulated - as Adrienne correctly says - “price fixed” and because of that, no one knows when the shoe is gonna drop. They just know it HAS TO.
It’s like a great breath hold.
What is alarming (to me) is that you see unemployment VASTLY under-reported. Inflation VASTLY under-reported. The middle class continuing to vanish as record numbers of people move into the welfare class of society. And while the news media toots it flute of “slowly but surely we’re turning the economy around,” homeland security is acquiring hundreds of millions of man-killing rounds of ammunition and tanks.
When the people realize that they need to, as Adrienne said, “get a rope” it will be too late, because they will be staring down the wrong end of the barrel of a gun that is controlled by a privatized military (DHS aka SS) run by Obama, whose strings are largely pulled by the Banking Cartel.
Or… people will be so drugged out on Prozac or Zoloft or Levitra or whatever, that there won’t be any righteous indignation left, and the SS Amerika will step quietly back into bondage - which is the inevitable last stage of any Democracy that chooses to vote itself payments out of the public treasury.
Rant, rant, rant - Adrienne - nice to agree with you on something for a change.
Adrienne, I read the article you linked to and will comment on this quote;
“Two of America’s top law-enforcement officials, Attorney General Eric Holder and former Justice Department Criminal Division chief Lanny Breuer, confessed that it’s dangerous to prosecute offending banks because they are simply too big. Making arrests, they say, might lead to “collateral consequences” in the economy.
The relatively small sums of money extracted in these settlements did not go toward reparations for the cities, towns and other victims who lost money due to Libor manipulation. Instead, it flowed mindlessly into government coffers.”
It seems that the obama administration is in on the swindle wouldn’t you agree?
I argued for letting the big banks fail rather than give them a government bailout…do you now understand why I advocated that?
Both political parties are guilty of collusion with big money and big government gives them cover and sanctuary.
A few things, first: one, welcome to the site. Two, Most of your article needs to be put in the extended entry section of the Movable Type Write Entry tab. I say that as constructive criticism.
As for the rest?
I think far too many conservatives here rant and rave about how value and basic economic realities have been ‘de-coupled’, but when the time comes to crackdown on the very financial instruments that allow that de-coupling, the very derivatives that helped create this mess, they turn the attack on those who would regulated and constrain it.
I mean, folks talk about letting the big banks die. Well, what happened in 2008 is just because we let one relatively small big bank die. When so much wealth and so many sources of financing are suddenly canceled out of the economy, the effect isn’t just to teach the banks a lesson in financial virtue, it’s to teach us a lesson in the law of unintended consequences!
By all means, break these banks up, phase out the too big to fail model of banking. But don’t the mistake of thinking that you can get along without most of your capital institutions in a capitalist system.
We’ve let these guys build castles in the air, in the name of economic growth, for too long. We’ve moved away from a model of productive economic growth, towards one that would help impatient traders on Wall Street get rich faster.
We just have to realize that the free market capitalism you might be able to describe in a textbook according to basic rules and such is something of an illusion. There’s that, and there’s the economy that works in the real world, regardless of our expectations. Only when we realize that some theoretical abstraction’s not going to suffice to run this country’s economy, will we be able to approach it in a mature manner, and stop dancing on the edge of our own ruin.
Like I’ve been saying, when it comes to governing a nation, if you want it done right, do it yourself. The market is not going to represent your interests 100%. And the government is only going to represent your interests to the extent you make it do so. If you really want control, it’s yours, but you got to be willing to put the fear of God into those people out there who think they’re the real rulers of this country.
Well, what happened in 2008 is just because we let one relatively small big bank die.
The reason we won’t actually fix the issues that led to 2008 is because of comments like this displaying the lack of understanding as to what actually happened in 2008… I’ve tried over and over to explain the facts to you Stephen and then to see you say this mess just shows that it was all in vain.
You incorrectly state that those conservatives, like myself, who speak of decoupling, would protest rules meant to keep derivatives and rehypothecation from being allowed. When have I or Royal or any other conservative on WB ever stated that financial markets should have no rules? That’s a bogus statement and you know it. Perhaps less retarded rules, but no rules = anarchy = bad. That statement is more of the garbage that keeps people from reading more than the first and last paragraph of your usual novellas.
The best thing about reading history is the chuckle I get every time I hear “progressive” points made in the same timbre and thread, but realize they are from the 20’s or the late 1800’s. Many readers on WB likely have no idea about the economic woes of France in the 1800’s. Interestingly, below is a small piece I read recently by Andrew Dickson, Inflation in France written in the year 1896, about the printing of money.
Read this and tell me it is not one of the best indictments for our country’s ways. (The world overall for that matter)
Those who do not learn from history…
The government now began, and continued by spasms to grind out still more paper; commerce was at first stimulated by the difference in exchange; but this cause soon ceased to operate, and commerce, having been stimulated unhealthfully, wasted away.
Manufactures at first received a great impulse; but, ere long, this overproduction and overstimulus proved as fatal to them as to commerce. From time to time there was a revival of hope caused by an apparent revival of business; but this revival of business was at last seen to be caused more and more by the desire of far-seeing and cunning men of affairs to exchange paper money for objects of permanent value. As to the people at large, the classes living on fixed incomes and small salaries felt the pressure first, as soon as the purchasing power of their fixed incomes was reduced. Soon the great class living on wages felt it even more sadly.
Prices of the necessities of life increased: merchants were obliged to increase them, not only to cover depreciation of their merchandise, but also to cover their risk of loss from fluctuation; and, while the prices of products thus rose, wages, which had at first gone up, under the general stimulus, lagged behind. Under the universal doubt and discouragement, commerce and manufactures were checked or destroyed. As a consequence the demand for labor was diminished; laboring men were thrown out of employment, and, under the operation of the simplest law of supply and demand, the price of labor—the daily wages of the laboring class—went down until, at a time when prices of food, clothing and various articles of consumption were enormous, wages were nearly as low as at the time preceding the first issue of irredeemable currency.
The mercantile classes at first thought themselves exempt from the general misfortune. They were delighted at the apparent advance in the value of the goods upon their shelves. But they soon found that, as they increased prices to cover the inflation of currency and the risk from fluctuation and uncertainty, purchases became less in amount and payments less sure; a feeling of insecurity spread throughout
the country; enterprise was deadened and stagnation followed.
New issues of paper were then clamored for as more drams are demanded by a drunkard. New issues only increased the evil; capitalists were all the more reluctant to embark their money on such a sea of doubt. Workmen of all sorts were more and more thrown out of employment. Issue after issue of currency came; but no relief resulted save a momentary stimulus, which aggravated the disease. The most ingenious evasions of natural laws in finance which the most subtle theorists could contrive were tried—all in vain; the most brilliant substitutes for those laws were tried; “self-regulating” schemes, “interconverting” schemes—all equally vain. All thoughtful men had lost confidence. All men were waiting; stagnation became worse and worse. At last came the collapse and then a return, by a fearful shock, to a state of things which presented something like certainty of remuneration to capital and labor. Then,and not till then, came the beginning of a new era of prosperity.
Just as dependent on the law of cause and effect was the moral development. Out of the inflation of prices grew a speculating class; and, in the complete uncertainty as to the future, all business became a game of chance, and all business men, gamblers. In city centers came a quick growth of stock-jobbers and speculators; and these set a debasing fashion in business which spread to the remotest parts of the country. Instead of satisfaction with legitimate profits, came a passion for inordinate gains. Then, too, as values became more and more uncertain, there was no longer any motive for care or economy, but every motive for immediate expenditure and present enjoyment. So came upon the nation the obliteration of thrift. In this mania for yielding to present enjoyment rather than providing for future comfort were the seeds of new growths of wretchedness: luxury, senseless and extravagant, set in: this, too, spread as a fashion. To feed it, there came cheatery in the nation at large and corruption among officials and persons holding trusts. While men set such fashions in private and official business, women set fashions of extravagance in dress and living that added to the incentives to corruption. Faith in moral considerations, or even in good impulses, yielded to general distrust. National honor was thought a fiction cherished only by hypocrites. Patriotism was eaten out by cynicism.
Thus was the history of France logically developed in obedience to natural laws; such has, to a greater or less degree, always been the result of irredeemable paper, created according to the whim or interest of legislative assemblies rather than based upon standards of value permanent in their nature and agreed upon throughout the entire world. Such, we may fairly expect, will always be the result of them until the will of the Almighty shall evolve laws in the universe radically different from those which at present obtain.
And, finally, as to the general development of the theory and practice which all this history records: my subject has been Fiat Money in France; How it came; What it brought; and How it ended.
It came by seeking a remedy for a comparatively small evil in an evil infinitely more dangerous. To cure a disease temporary in its character, a corrosive poison was administered, which ate out the vitals of French prosperity.
It progressed according to a law in social physics which we may call the “law of accelerating issue and depreciation.” It was comparatively easy to refrain from the first issue; it was exceedingly difficult to refrain from the second; to refrain from the third and those following was practically impossible.
It brought, as we have seen, commerce and manufactures, the mercantile interest, the agricultural interest, to ruin. It brought on these the same destruction which would come to a Hollander opening the dykes of the sea to irrigate his garden in a dry summer. It ended in the complete financial, moral and political prostration of France—a prostration from which only a Napoleon could raise it.
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