Stock market begins long fall as jobs vanish say astrologers
Posted on 07 August 2010 with 1 comment from readers
It is very easy to dismiss astrologers warning of a crash on Friday as totally wrong but this very probably is the critical turning point in the long rally in global stock markets.
Pimco’s very non-astrological CEO gives the market a 25 per cent chance of correction into a double dip recession and has asked investors whether they would take a trip in a car knowing that there was a one-in-four chance of having an accident?
T-bond yields crash
Yields on two-year treasury bonds dropped below 0.5 per cent for the first time on Friday, indicating a retreat to safe haven assets by investors. The S&P 500 dipped as much as 1.7 per cent before closing down 0.4 per cent off its two-month high.
Unemployment held steady at 9.5 per cent but Goldman Sachs now expects 10 per cent by 2011. For July private payrolls that exclude government agencies rose by 71,000, rather less than forecast, after a gain of 31,000 in June that was revised lower.
This is another confirmation of the US non-recovery. No recovery in US housing, US auto sales are still well depressed and the US consumer is saving rather than spending. The US money supply is falling at an annualized 10 per cent, something that has never failed to deliver a recession in the past.
You don’t need to be an astrologer or genius to see where this is heading. The disappointing jobs data will eventually be confirmed by other disappointing data and the stock market will react.
Turning point?
After such a long up phase it is perfectly possible that this Friday will be the start of a rethink by investors and that the thin volumes of summer markets will trade to the downside, giving way to a more solid rout in the autumn. Markets do not carry on going up forever, especially when a double dip recession is on the horizon.
There are times indeed when markets may anticipate a recession that does not happen. There are also times when a market anticipates a recovery while not realizing for a protracted period that it is not actually happening.
So astrologers are probably right in calling this market turn but the reasons for that are probably far more down to Earth than they would concede!
1 Comment posted by readers:
Gold, silver, and platinum went up on the bad job creation news. It makes sense, when you consider that the chance of getting another stimulus through the US Congress, in order to lessen the probability of a double dip, is remote because of the November election. That means the Federal Reserve might go on a money creation binge, since they can’t lower interest rates any more. That could send gold up a bit more. Investors see it coming, and are probably buying gold, just in case.
Deflation scares the Fed far more than inflation. I hope they can control inflation, if it gets going. My guess would be yes, but who knows. And what might all those trillions of dollars of derivatives do, if interest rates have to go up fast? Are they a time bomb under those conditions? I’m not smart enough to figure that one out. I hope someone is. Sub-prime doesn’t give me a lot of confidence, because only a handful of folks saw that one coming. And that was a lot simpler, and smaller, than the derivatives market.