By: Daryl Montgomery
Between 3:30 and 4:00PM Central European time the DAX, the major German market index, lost around 250 points. This is roughly equivalent to a 500 point drop in the Dow Industrials in half an hour. Prior to that, the DAX had been slowly drifting lower. Then suddenly it dropped like a rock.
The pundits were quick to come up with possible explanations. A fat finger error was cited as a possibility (this is ...
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By: Daryl Montgomery
A just released survey of 43 mainstream economists polled this month by the AP pegs the chances of the U.S. falling into recession in the next year at only 26% (one in four). As a group, the economists predict the economy will expand by over 2% in the second half of the year. Other news that appeared with the survey results included an article about how food stamp use in the U.S. is skyrocketing – a highly unlikely occurrence during an ...
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By: Daryl Montgomery
The tech heavy Nasdaq and small cap Russell 2000 crashed again yesterday, August 18th. Nasdaq was down 131 points or 5.22% and the Russell 2000 was down 42 points or 5.90%. This is the third crash for both of them since the beginning of the month.
Repeating crashes (drops of 5% or more in one day) were common during the Credit Crisis in the fall of 2008 and indicate severe stress in the ...
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By: Daryl Montgomery
Something is seriously bothering the stock market and the news that’s out there isn’t enough to justify what is going on. Such was the case in August 1998 as well. What caused the sudden bear market to appear out of nowhere in 1998 became fully evident only after the fact. The same could be the case in August 2011.
Perhaps the flash crash in October 1997 was a warning of things to come, ...
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By: Daryl Montgomery
In September 2008, the markets were in sharp decline because of a bank-centered financial crisis. The authorities took action with bailouts and by buying bonds to prop up the market. Short selling of financial stocks was banned in order to stabilize the markets. Things are certainly different in 2011. It’s not that all of these events aren’t happening again, they certainly are. This big difference is that now they are happening in August instead of September.
The geographic epicenter of ...
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By: Daryl Montgomery
Monday August 8th, the first trading day after S&P downgraded U.S. debt, was a crash day in the American stock market. Asia held up much better and so did much of Europe, except for Germany.
The Dow Industrials were down 635 points (5.55%), the S&P 500 was down 80 points (6.66%), Nasdaq was down 175 points (6.90%) and the Russell 2000 64 points (8.89%). The DAX in Germany was down slightly more than 5%, whereas ...
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By: Daryl Montgomery
As everyone knows by now, S&P downgraded the U.S. sovereign debt rating from AAA to AA+ on Friday. While the extent of the downgrade is minor, the implications are major. As the recent debt ceiling negotiations revealed, the U.S. cannot run its day-to-day operations without borrowing money. It lives on credit (as do most countries in the world today) and anything that impacts its ability to borrow money has serious consequences.
It takes a lot for a credit rating ...
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National Debt: $14,45 trillion (implied)
State and Local Debt: $2,9 trillion
Unfunded Liabilities: $114 trillion
Total National Assets: $76 trillion
U.S. Household Debt: $16,2 trillion
Debt to GDP ratio 98% (USING OFFICIAL Gross Domestic Product)
GDP $14,8 trillion (overstated by trillions)
Rating Agencies have threatened to downgrade U.S. Debt
Read On →Investors should not be fooled by comparisons of current U.S. bank failures with the number of failures in the past. In the early 1900′s, there were a very large number of small banks in the country. Over the last 80 years, U.S. banks have become much larger and far fewer in number so only a percentage comparison makes any sense. During the Great Depression, 9146 banks failed. That would represent over 100% of the 7932 banks that now exist. ...
Read On →What led to the tragedy of the Great Depression in the 1930s were major missteps from the Federal Reserve and the federal government. The Fed put the interests of the banking community over those of the American public and this is what turned a bad recession into a bad depression. This was combined with an ongoing campaign of denial of the problem on Washington’s part. Herbert Hoover gave a press conference in June 1930 announcing the Depression was over ...
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