Thursday, January 07, 2016

China Triggers US Stock Avalanche

Any stock market watchers who peeked out of their caves this week noticed that the economic slowdown in China is triggering a stock market selloff there, which in turn triggered a market selloff here in the US. Collapsing world commodity prices indicated that stock markets had overestimated basic industrial demand. The Baltic Dry Index's massive decline in 2015 should have told people what was coming.

I read through some financial news headlines this week. Wall Street's court stenographers quoted the usual mutual fund managers' nonsense about how this is expected, and how it's a buying opportunity, and of course how US stocks are poised for success. What a pile of baloney. The sociopaths and trust fund kids running those active management strategies are privately kicking themselves. A slew of hedge funds, distressed debt funds, and multi-strategy fund shops are doomed to close. Leverage is going to bite these idiots hard.

The only sane voice this week was George Soros, who repeated an oft-heard warning that central bank policies have endangered the world's financial systems. No one listened to me when I gave this warning many times in the past few years. Hardly anyone listened to the few other financial experts who gave the same warning. Someone may listen to George Soros now. Everyone who doesn't listen will be on the wrong side of some seriously winning market trades.

I would very much like this stock market avalanche to continue until the DJIA is under 3000. Many stupid investment professionals deserve to buried under their losses. The bloom coming off Wall Street's rose will be gone for a decade after the dust settles. Watch out below.