Global Trade Grinds to a Halt
We’re hearing a lot about a credit thaw, but according to this Bloomberg story, global trade is still slowing down because of credit problems. Here is a quote from a shipping broker:
“We only see this kind of shock when we have outbreaks of war, or maybe the oil shocks of the 1970s…”
Cargo is still piling up on docks, and jobs are being lost above and beyond would we get if this were a plain-vanilla recession.
Pension Funding to Cut Dividends and Jobs
Pension plans own stocks, and since stock prices are down, companies are legally required to put more money into their pension plans. They are getting the money by cutting dividends and laying off workers. See the Bloomberg story here.
Put/Call Ratio Signals Danger
The last time that the put/call ratio was this low was right before the October plunge. Not bullish…
The Immelt Meltdown
GE CEO Jeff Immelt, got the blame for pulling the rug out from under the market before the close on Wednesday, but was it all really just a mistake? Maybe, but last I heard, GE was “participating” in the Fed’s commercial paper program (translation: begging for money.) If GE is so shaky that it is having trouble selling its CP on the open market, then why would the stock market even bother paying attention to anything Immelt is saying?
The truth is that what we saw in the last 8 minutes of trading was just more of the same: redemptions. There simply isn’t anything else short of a major disaster that could cause such selling.
The “Finite De-Leveraging” Meme
This meme says that hedge-fund de-leveraging is a “finite event.” At some point it will be over and the market will go back to the land of rainbows, lollipops, and puppy dogs. While it is true that it certainly will end at some point, where will the market be at that time? I’m guessing that we will be under the 2002 lows. And how will we be able to get back above without any leveraged-up hedge funds to gun stocks higher again?
A few days ago I posted a link to a story stating that hedge funds had $1.6 trillion dollars under “management”. It is estimated that they have barfed up about 10% of that, and may go as high as 30%. And I don’t know if that includes European hedge funds. Of course, the mutual fund industry is much larger, and they appear to still be getting redemptions too. And gargantuan pension funds like Calpers also have to sell.
The dramatic whoosh down that we had Wednesday afternoon almost certainly was not the last.
Bearish Doji Star
SPY, QQQ, and IWM all have patterns very close to the bearish doji star. XLF couldn’t quite muster enough of a rally for the doji, and it’s 4.9% drop on Wednesday is a bit of a red flag.