Updated: Jittery Markets - Is a Crash Imminent?

Allegations of fraud at an Internet company in Japan, followed by a raid on its offices, sent the Nikkei plunging over 6% over the last two days. Markets worldwide, already jittery over Iran and the high price of oil reacted with losses of their own.



Solid?

Japan imports 100% of their oil.

Oil prices have been hovering around $67 USD a barrel, levels not seen since Katrina, and that oil shock is still working its way into the system. A large portion of GOM production is still shut-in. Emergency reserve deliveries have ended and now we have the Iranian situation.

Why should allegations of fraud at an Internet company in Japan affect markets worldwide? Did the likes of Enron and Worldcom crash the markets? Nope.

However, this time we have an oil shock working through the system and whose effects have been masked by a massive injection of cash liquidity by central banks. The US alone added over $300 billion in newly created money over the last four months! All that liquidity has raised the markets; the end-of-year/new year's "rallies" are artificial. The meagre earnings reports now coming in for the fourth quarter (and the holiday season) will reveal this. A correction is imminent IMO.

What else happened today to explain some of the jitters?

Oh yeah... A special emergency meeting of the IAEA was called for February 2nd to discuss whether to refer Iran to the UN Security Council. The imminent establishment of the Iranian Euro Oil Bourse at the end of March is driving the urgency. February 2nd leaves almost two months (plenty of time) to call an emergency meeting of the Security Council, pass a tough resolution and issue an ultimatum.

What the economic world is now facing is one of two choices:

1) the end of US petrodollar hegemony; or

2) a second much larger oil shock.

Is it any wonder the markets are jittery?
.

Related AboveTopSecret.com Discussion Threads:
Petrodollar Warfare
The Plunge Protection Team

edit: title tweak

[edit on 1/21/2006 by Gools]

BBC News

Wall Street shares have suffered their worst single-day points fall since 24 March 2003, wiping out the gains made so far this year.

The main Dow Jones industrial average slumped amid disappointing earnings from industrials General Electric and Citigroup.

The wider Standard & Poor's 500 and technology-heavy Nasdaq were also rocked by a stock-selling spree.

A jump in crude oil prices in New York added to market pressures.

Stocks had rallied on Thursday after a fall on Wednesday - caused by an early close of the Tokyo stock market in the wake of fraud allegations surrounding internet firm Livedoor.

Despite the rally ... traders were hit by the jitters after disappointing earnings

They are trying to explain it away as profit taking at the end of the article.

As mentioned, the end of year/new year's rallies are liquidity bubbles caused by the central banks and will be revealed as such by poor earnings.

This could get rough.
.

[edit on 1/21/2006 by Gools]

We will see, monday, if not this week.

There are many dynamics at play and on the move as we speak.
The wrong combination, and next week may not be fun for some people.


Be wary of a 'suckers rally'.







[edit on 21-1-2006 by smirkley]

Of course a crash is imminent.

As many of you probably know, the Fed recently announced back in November that it would stop reporting statistics on the M3 monetary aggregate, the measure of money supply that is so broad it includes just about everything that could possibly be considered "money". Now why would they want to do that? In their words:

Federal Reserve:
The decision to discontinue publication of the M3 monetary aggregate was based, in part, on a determination that the M3 does not appear to convey any additional information about economic activity that is not already embodied in the M2 aggregate. In addition, the role of M3 in the policy process has diminished greatly over time. Consequently, the costs of collecting the data and publishing M3 now seem to outweigh the benefits.

But seriously, do they think we're stupid? M3 grew almost $690 billion, or 7.8%, last year. Through last september it grew $176 billion in 8 weeks. That stinks, so it's no wonder why they wish to discontinue reporting this statistic, as it's proof we're buying up our own debt. No matter how powerful the Fed is, they can't revoke the law of supply and demand, and as the supply of dollars goes up, demand will inevitable go down.

Hedgeco:
According to published reports, about 80 percent of the global hedge funds are registered with the Cayman Islands Monetary Authority. During the first half of 2005, the number of Cayman Island’s registered hedge fund operators rose from 5,932 to 6,527.

Now what do we know the Cayman Islands are good for? Money Laundering! I'll admit there's no proof of this, but there never will be as long as Hedge Funds are as loosely regulated as they are, so one is forced to read between the lines. It's no coincidence, I think, that China, Japan, and many foreign investors were deciding that they would no longer buy up our debt that there was a surge in traders. This way they can tell you "Foreign investors are just lining up to buy our debt!" Who would be so stupid? Five-year government yields fell five basis points to 4.43%, and bellwether 10-year yields declined seven basis points for the week to 4.49%. Long-bond yields dropped six basis points to 4.68%. Those crappy yields is at the inflation rate.

From 2001 through 2005, consumer spending and residential construction had together accounted for 90 percent of the total growth in GDP, while over two-fifths of all private sector jobs created since 2001 were in housing-related sectors, such as construction, real estate and mortgage brokering. The decay in standards started with the Federal Reserve, and moved down to every lowly loan officer until lending stardards ceased to exist. These unqualified buyers were able to create a false sense of growth every time another one bought a house, and CNN Money was able to report this fabulous news to you.

But alas, it was only a temporary solution since all the suburbs and their strip malls were built on the assumption that cheap oil and methane was going to stick around. Of course this is crazy, since cheap oil and energy were the things we should have been least expecting in the years to come. So what's ugly monster is just now beginning to rear its ugly head?

NATIONAL FORECLOSURES INCREASE MORE THAN 13 PERCENT IN DECEMBER ACCORDING TO REALTYTRAC™ U.S. FORECLOSURE MARKET REPORT

People are beginning to realize that heating a home, and travelling longer distances to work in their big, stupid SUVs is beginning to cost a lot more. This isn't going to get any better, and in fact, there is one factor that really could speed up foreclosures.

Jobs

HP To Cut 14,000 Jobs In Restructuring
MeadWestco To Cut 850 Jobs
Computer Associates To Cut 800 Jobs
Carlson Companies To Cut 525 Jobs
Lear To Shed 7,700 Jobs
Symbol Tech Cutting 700 Jobs
Sara Lee Apparel To Cut 775 Jobs
Kodak Shedding 10,000 Jobs
Homeywell to Cut 2,000 Jobs
And I don't need to mention the airline industry, GM or Ford.

You can expect Fannie Mae and Freddie Mac to collapse under a tsunami of mortgage defaults if the massive de-industrialization of America continues. Free trade agreements were never a great way to build an economy, but they were an excellent way to tear one down. Should either of these companies collapse, they will take many of our largest banks with them. Derivatives failures could be a reason why so many banks are merging. They're spooked, and they want to be "too big to fail" so they can get a government bailout. Unfortunately, the US is over 8 trillion dollars in debt and has to make money out of thin air to pay for it current account deficit.

There are more indicators to the state of our economy than just the stock market, which is inflated anyways. The USDA says that hunger in America has risen by 43% since Bush took office.

Hunger in American households has risen by 43 percent over the last five years, according to an analysis of US Department of Agriculture (USDA) data released today. The analysis, completed by the Center on Hunger and Poverty at Brandeis University, shows that more than 7 million people have joined the ranks of the hungry since 1999.

38.2 million Americans live in households that go hungry, with 14 million of these being children. 11.4% of American households run the risk of hunger. How is the GOP responding to this growing national crisis? It's going to cut the food stamp program by $840 Million.

Man these guys suck

2006 will be a very interesting year, indeed. We were barely two weeks into it when we saw:

Death Of Emir Dubai
Death Of Emir Of Kuwait
Removal of Sharon due to a stroke

Whatever bodes ill for the Middle East bodes ill for the energy-hungry nations of the world. The delicate balance has been established, there are no more "swing producers", and even a butterfly's flapping wings over there could create landslides over here. We will see many more deaths, riots and protests in these nations.

Anyone interested in the state of the economy should check out the Mogambo Guru's recent update. His lax and funny style of writing will put a smile on your face, even though your finding out how crappy our economy is.

According to this guy a collapse will not happen till late 2010. Why should we believe him? Apparently he predicted the last deflation with uncanny accuracy.

www.wired.com...

If we don't see a pretty substantial breakout in the next few months, we may reduce our targets. But so far we're following almost exactly the scenario of the Roaring '20s and very closely to what happened in the '90s -- right before we broke into a bubble that no one expected. Obviously, it's hard for stocks to take off with oil going straight up to $71 a barrel. It's hard for stocks to take off when the Fed keeps saying, "We're going to raise interest rates higher and higher, and we don't care what the bond markets say about inflation." And every day, people putting more money into housing speculation is more money not going into the stock market. Now that housing is deflating, there's no place for money to go. The money has to go back into stocks. We see the Dow at 32,000 to 40,000, and probably on the higher side. The Nasdaq around 13,000.

My money is on a housing/gold market crash.

[edit on 21-1-2006 by sardion2000]

Agreed, but that'd crash everything else. According to the numbers, there's 78 times more gold sold than in existence. I think the people who have it on paper ought to get the gold delivered and bury it out back, if they can. Silver's not any better.

Originally posted by bigpappadiaz
Agreed, but that'd crash everything else. According to the numbers, there's 78 times more gold sold than in existence. I think the people who have it on paper ought to get the gold delivered and bury it out back, if they can. Silver's not any better.

Perhaps "crash" was too strong a statement as I do know that it would crash everything else. Maybe a slower deflation leading up to an eventual collapse(which is far worse then a crash) in 2010(assuming the interview I quoted is correct that is)

According to the numbers, there's 78 times more gold sold than in existence. I think the people who have it on paper ought to get the gold delivered and bury it out back, if they can. Silver's not any better. Although the government can do what they did during the last depression, which is outlaw the private ownership of Gold. You'd have a hard time spending it in that case, not that it would be completely impossible to find someone to barter with. Something parents told their children in the days of the last depression, while handing them a small gold piece, is "This will keep you free." And I don't doubt that.

The crash is coming sooner than 2010. With the housing market rapidly deflating, jobs being cut left and right, oil prices on the rise, the political turmoil abound, the unpredictability of the middle east, it's too obvious that it's going down live in 2006. I don't things will be stable enough for the system to exist another 4 years. We're eliminating the reporting of M3 in march, which is when we're set to fire up the printing presses and monetize our very own debt. The world won't allow that to go on for very long while holding on to their treasury holdings and selling us their goods for soon-to-be worthless dollars.

[edit on 21-1-2006 by bigpappadiaz]

The crash is coming sooner than 2010.

Maybe, maybe not. People said the same thing of 2003,2004 and 2005, why should 2006 be any different. Also if you're old enough to remember in the early 90s people including reputable investment analysts were convinced that the 90s were the start of a new depression, well that didn't happen so I'll take a wait and see attitude. I do believe a full collapse is emminent, I just don't think it will happen as fast as some people believe. Remember the markets are driven by a perception of reality not reality itself

True, but the ignorant masses are starting to wake up and those perceptions are changing, as evident in the slump of new home sales, the fact that they're staying on the markets longer, the 40% increase in energy costs in 2005. Also, the destruction of a major US city and the need to repair it, THE ELIMINATION OF M3 and the very real hidden agenda of monetizing our current account deficit. The increased friction between all the countries of the world over all these problems. The very notion that another country (China) would want to sell their treasury holdings has greatly rattled the markets, and how they will accomplish this is yet to be determined. What might be good for one country to do isn't good when everyone does it, and if everyone tries to dump their holdings you'll have a dollar-dive. These are some of the differences between then and now. The situation is very different, and much, much much more delicate. You can only introduce so much perversity into the system before the dangerous imbalances take it down. These are those times.

The market's might be partly driven by the perception of reality, but they can't break past that reality barrier and conjure up oil all by themselves, nor can the perception-based-markets reverse the laws of supply and demand and make the world want our useless masses of dollars we created to prop up our economy a little longer. The world is not stupid, and knows what we are up to.

"there's 78 times more gold sold than in existence"

kind of run like the stock market is with their short stocks...or whatever, huh??

I didn't know about this one......



"Remember the markets are driven by a perception of reality not reality itself"



economy, what economy, it's all an illusion.

there's houses in the paper here, that well, back a few years ago or so, would have sold for around $30-$40 thousand....now they're up over a hundred thousand. Is this how they "increase wealth"? they sell nonexistant stocks, sell nonexistant gold, and overvalue everything to the extreme?


I think I'm gonna get myself a sewing machine, and get myself a bunch of denim and start sewing up a whole mess of jeans....sometime in the very near future, once china and the rest of them figure out just how worthless most of our assetts are and quite importing to us, they just may be worth their weight in real gold!!!

Sorry for attempting to have an intellectual discussion. I shall remember that in the future ATS is not the place for these types of "debates".

Collapse of U.S. Economy Imminent

Did I mention we're about to reach our debt ceiling? This guy didn't, though. Time's just a-running out.

I like point #3:

Point #3 Bank Of America and Compass Bank managers (probably all other U.S. banks too) have been instructing their employees in the last few weeks on how to respond to customer demands in the event of a collapse of the U.S. economy - specifically telling the employees that only agents from the Department Of Homeland Security will have authority to decide what belongings customers may have from their safe deposit boxes - and that precious metals and other valuables will not be released to U.S. citizens. The bank employees have been strictly prohibited from revealing the banks’ new "guidelines" to anyone. (however, employees have been talking to friends and family)

The next time you visit your bank, ask them about it - then ask yourself, why is this information being kept secret from customers and the public - what’s really going on?

Yep, that's about how it'd go. Banks would have to close to avoid the angry mobs, and the few that would stay open would have extremely limited service.

of course, point #4 sounds familiar, too:

Point #4 FEMA has activated and is currently staffing its vast network of empty internment camps with armed military personnel - unknown to most Americans, these large federal facilities are strategically positioned across the U.S. landscape to "manage" the population in the event of a "terrorist" attack, a civilian uprising, large-scale dissent ,or an insurrection against the government. Some of these razor-wired facilities have the capacity of detaining a million people.

Another necessity, as everyone will be going crazy when they can't afford their mortgages to keep a roof over their heads, and food to feed their kids. People tend to get a little pissed off when they've just been pwned by life. This apocalypse is gonna suck. BIG TIME.

It will be no collapse, the only reason the market is getting shaky after the news of fraud, because people gets scare, this happen in Japan no in the US.

When Enron collapse we didn't got a market crash why should we get it now?

Now get ready for a ride of your lives if Iran gets attack either by US or Israel.

The picture of Iran targeting the gulf in retaliation will be enough for some real scare.

Oh man... come on dude... wake up... PLEASE! Someone!!!

The markets get shaky if someone even farts on the trading room floor. We've done some major de-industrialization here in America, some of our biggest companies are floundering, did you even read the article? We're about to reach our debt ceiling. We're eliminating M3. Does any of this make sense to you?




Does this picture make any sense to you? Basically, that blue line is how much of our debt Central Banks are buying up from us. That red line is from private hedge fund firms, and you don't know who is doing the buying. Note how back in March the central banks and the foreign nations they represent were selling, and the hedge funds are matching that. One good guess though, as to who is doing the buying, is our very own U.S. Treasury. That would mean they're just printing up, or computing up, useless dollars to pay people they owe money with. Google "Weimar Republic" and tell me what you learn about their mistakes.

God dude, our country is not all-powerful. The markets aren't crashing because of account 990N and all the liquidity it pumps into the market. Do a google on that, too. "Account 990N". This is the real scare - what will happen to everyone and how they'll act in the face of this disaster. People will freak, get violent, and get straight to killing if they have to, because everyone has kids to feed, and if they don't, they'll just be looking out for #1. Things will never be the same after this crash.

[edit on 23-1-2006 by bigpappadiaz]

Seems you won't be needing a draft.

This will be the heist of the century, mega wealth transfer.


Anyway, if the market crashes, how do you guys reckon this will affect Europe? More specifically the European housing market?

The crash will be worldwide. Any unsold homes will continue to sit on the market, foreclosures will be on the rise, and homes will seriously drop in price. Greater fools will snatch up this "bargains", only to realize later on that things just aren't gonna be the same. There are bigger problems coming than just the economy, I believe, that will affect how business is run for a quite a while, and investing money into making one self-sufficient would be the way to go. Get out of the system, it's coming down.

Originally posted by smirkley


There are many dynamics at play and on the move as we speak.

The wrong combination, and next week may not be fun for some people.

[edit on 21-1-2006 by smirkley]

i'd extend that "next week" to "next 52 weeks".....

Your right-on with the statement of many dynamics at play...

energy might be going on higher
housing might be getting more in balance, in varied areas & regions
health needs & pharmaceuticals have their own dynamics
etc etc etc

one other thing to consider....the S American backlash to the US domineering the economics & forcing 'Free Trade' agreements which favor the gringo from the north

another item to consider, the worlds largest democracy, India, and their popular mindset on Gold, add China to that GoldFever dynamic and one can project a up market in gold for a decade
~~~~~~~~~~~~

...having said the greater economy is way too large to 'manage' in totality....here's a goulish dynamic that i'm sure is bounced around in the back-rooms....
the now rather large, death benefits the families receive from the soldiers sent into the ever growing War-on-Terror & the War-for-the-Democratization of Iraq. ...

~~~~~~~~~~~~

there probably should have been crashes already, from the fraud scandals, the hedge fund bailouts, the banks & financial movers/shakers being overextended in all those leveraged hedges & derivitive markets.

the collapse of pension funds is another sprocket in the unicycle wheel...
which graphically symbolizes the de-industrialization of USofA

we've been fortunate, at least till now that many upward mobile workers
are intent on sustaining the 'dream'...
the only thing is....the rest of the world want's a piece of the pie too !

one by one, and in different vortices of economic interaction, highly over-paid individuals will awaken to their own jobs being outsourced or scrap heaped...with all those stock options used to fuel their campfires, as the fortunate ones, have once again eluded the national park police

A crash does not mean the end of the world. End even then it does not take down America's economy. Remember the 1987 crash. Nothing happened.

Oh sorry, Crash is too light a word for you then. Depression from which we'll never get out until after the world is very different and we're much, much older. Sucks to be us.