U.S. Stock Market Correction Not Made In China – Ep.104

U.S. Stock Market Correction Not Made In China – Ep.104


* What a week for global stock markets, but in particular, the U.S. stock market, which had its worst week in 4 years
* The Dow Jones down better than 1,000 points - over 10% from its peak puts it in official correction territory
* One-third of the stocks in the S&P 500 are already down 20% from their highs
* The Dow lost more than half of the 1,000 points today - 530 points, which is the 9th biggest point decline ever
* This is on top of the 350 points dropped on Thursday
* Thursday we broke below some key technical levels so Friday's drop was inevitable
* There could be a bigger one looming for Monday
* This is reminiscent of the weekend before Black Monday back in 1987
* We are only about 300 points above the lows from October last year when St. Louis Fed President James Bullard saved the market and sent the Dow up 2,000 points
* This time he is throwing the market an anchor
* He still indicates the Fed is undecided
* What data over the next couple of weeks could be that significant?
* The Fed does not want to admit that they can't raise rates
* When is the Fed going to blink?
* Valuations are extremely high, and the Fed is about to go from supporting the market to leaning against it
* The economy is decelerating
* I think the market is going to surrender all the gains it has made since March of 2009
* None of those gains have been real - they did not come from increased production or a genuine increase in corporate earnings, it was all Fed engineering
* The market has gained no ground since QE was suspended
* If the market goes down on Monday, what is the Fed going to do?
* The Fed needs an excuse not to raise rates
* The drop is not because of China
* The problem in China and in the emerging markets is caused by the perception that U.S. Fed is going to raise rates
* The markets want to blame the market correction on China but that is not why our market had a correction
* Emerging market currencies are taking the brunt of the selling by those who are expecting a Fed rate hike
* The euro is very strong today, and the dollar index is declining
* The euro is going to go on a big move, especially if the Fed caves
* Gold is up $80 in the last 2 weeks
* What happened to the theory that gold will collapse below 1000?
* Two weeks ago hedge funds were for the first time net short gold
* How is that trade working out for them now?
* A lot of people are trapped short the euro and short gold
* Now pro-dollar bets are pressing smaller currencies
* This is the last throes of the dollar bull, based on the rate hikes that aren't going to happen
* At the end of the 6 or 7 year journey, there can't be a rate hike
* If the Fed actually raises rates, they lose credibility because they will have to immediately reverse course
* If they do not raise rates, they can say caution is needed because of another dip in the recession
* This way they don't have to admit that the policy was a failure
* The only economic data that came out today was the August Manufacturing PMI number - expected to improve over last month
* It dropped again to 52.9 - the lowest level since October 2013, and the biggest miss in 2 years
* If the Fed is truly data dependent it would have already admitted that it can't raise rates
* At the end of 2014, I predicted that 2015 would be a much weaker economy than forecasted
* I was right about that
* I thought by now the Fed would have admitted that the economy is too weak for a rate hike
* But the Fed just keeps talking about a potential rate hike as though it were a real possibility
* This is a very dangerous game
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