Stock Market Crash 2014 and the Blindness of the Bulls
While I bet my blog on my economic predictions for this fall, it looks like I’ll be continuing to write the Great Recession Blog. What I’ve started calling Stock Market Crash 2014 uncloaked this past week in the market news. It suddenly became visible to many for the reasons I’ll list, and yet the biggest bulls still cannot see it.
With a purpose, I’m calling out their obvious blindness as the 2014 stock market crash unfolds in order to show that their blindness can be seen and that my pointing out their blindness is not just hindsight, as it would be if I pointed it out after there is no doubt that a crash has happened. The market, after all, may just be in a minor correction (as the most stalwart bulls still claim). It may all rebound on Monday morning. (Actually, I wouldn’t be surprised at a Monday morning rebound but only as part of the increasing volatility before an even larger slide.)
Larry Kudlow fails to see Stock Market Crash 2014
Sad little man in a pretty bow tie. Almost overnight, even the perennial bulls like Larry Kudlow are complaining that all the flees are fleeing the dying bull market. Kudlow can see that plainly enough and even sounds like he feels he’s the lone guard willing to breathe a little oxygen into the dying bull. As a fool, he barely stops short of believing his own lie — that all of this economic downfall comes from a bad speech Obama gave last week. (Seriously, he almost believes the whole world fell on its head over a slightly pessimistic (in his view) speech.) Kudlow cannot stop himself from implicating Obama’s speech as a way to avoid seeing and acknowledging and weighing the many forces that really are the cause of this economic downturn.
Usually, they say bears have bad eyesight, but this past week it has been the bulls that are blind. That’s because people like Larry cannot wrap their minds around the idea that any glint of “economic recovery” was an illusion created by 80 billion dollars a month being pumped into the veins of the stock market. Money was created out of thin air by the Fed each month to keep the market expanding. The funny part is that Larry actually seems to believe a little optimism would talk the market back up. Says Kudlow, buy stocks because “there’s no recession in sight.”
Yeah, that yawning black chasm of debt right beneath you that is boiling during a resurgence of U.S. wars in the mideast, a return to Soviet expansionism in Eastern Europe, recession in Europe, the largest outbreak yet of Ebola, and the end of government life support for the stock market, is not even a hint of a recession.
Ah well. There is no hope for some fools. While Larry sees only roses, I see an economy that is pushing up roses. If by optimism one means hope during times of despair, that is good, but no good is optimism that is just blind hope. In other words, optimism that is simply a refusal to see the dark forces around you or to see the brick wall you’re about to hit could bring the end of you. Those who follow Larry’s advice are about to get a brutal reality check.
Kudlow, the canary in the coal mine, is still singing, but that’s because he cannot see the methane that is rising around his perch. Larry is blind to those things that don’t square with his economic religion. I’d rather know the reality that is coming and still feel optimistic about my own future because of real faith than live in the kind of blind optimism that simply refuses to see the waves around me. Kudlow is standing on a railroad track and cannot hear the locomotive that is right behind him because he’s singing his heart out with earphones on and has his favorite elevator music turned all the way up to drown out the roar of catastrophe that is right on his heels. It’s a choice.
Signs of Stock Market Crash 2014 that materialized this week in spite of what stubborn bulls believe:
- The U.S. stock market’s volatility rose sharply in just one week. Since the market’s peak, volatility has increased 56%.
- The U.S. stock market took its biggest weekly slide in two years with Thursday being the market’s largest daily drop this year.
- The Ebola scare started shaking the market. (A sturdy bull is not shaken by threats of plague that we’ve faced many times before, but this threat looks worse and comes at a time when the bull is already on shaky legs. The market paid attention like a herd of alpacas all turning to stare at a single threatening dog.)
- News came out that the bulwark of Europe — Germany — is sliding into recession. During the last dip of the recession, Germany was last to slide and was thought to be the lifeguard that kept everyone’s head above water. This time, the lifeguard needs a lifeguard.
- France’s credit rating was downgraded to negative. France’s economy is edging into the twilight.
- Finland’s credit rating was downgraded.
- Things are looking so bad in Europe that the European Central Bank president , Mario Draghi, announced the central bank would begin a new stimulus effort. At the same time, he warned the effort would have little effect unless European governments managed to make fundamental changes in their economies, which they have not managed to do in six years of the Great Recession, so why would they do it now? This is re-stimulus on top of re-stimulus. I don’t think the patient can be stimulated any more.
- The NASDAQ took the worst pounding, which is where I said a stock market crash like the dot-com crash of the last decade was starting to look “likely.”
- The U.S. government taps for all the free money that fueled the U.S. stock market (known as quantitative easing) have been shut off.
The basis for my certainty in past months that considerable economic volatility was going to raise its head this fall was because so many serious headwinds would hit, and I believe the stock market will not survive the shutting off of its artificial life support during such times.
While I promised economic volatility, I haven’t gone quite as far as to predict the stock market would crash this fall. I said,
No one can be certain the market is going to crash in any given period of time. It’s a matter of probabilities, but the probabilities are growing rapidly…. I’ve bet my blog that the pressures for economic collapse will become very apparent this fall. In the very least, it will be clear that we have entered a decline toward that collapse…. In spring I said the inevitable fall of this false economy would become apparent enough in the fall that I’d bet my blog on it. I would quit writing about the economy altogether if fall did not turn into a serious decline and, most likely, a crash worse than we saw in 2008
At the beginning of the year, I stated that I was not predicting a stock market crash, just economic volatility. On October 5, however, I said a stock market crash in 2014 was looking likely.
With the end of quantitative easing this fall, 80 billion dollars worth of money printed out of thin air has stopped going into the economy. When 80 billion pounds of hot air a month stops going into the balloon, the leaky balloon will start to deflate; and that has now begun.
Other market bulls see Stock Market Crash 2014 right in front of them but fail to recognize it:
Another market bull, who believes we are not in any crisis, revealed this week that the Federal Reserve displayed a highly unusual concern about the global economy and its potential impact on the U.S. economy. El-Erian admits, “The Fed usually worries about foreign developments only if it thinks they pose a major risk of financial disruption.” Yet, he says we’re not entering a crisis because that is his usual mantra. Even, so, he is forced to admit, “the U.S. can ill afford additional headwinds.”
Last spring, it was the headwinds I saw building toward this fall that gave me the confidence to bet my blog that the economy would start to deteriorate in the fall. It would enter a perilous time. Here is a summary of the headwinds I predicted:
- Russia would not back down to sanctions, would complete it annexation of crimea and would continue its aggression against Ukraine, resulting in a growing battle of sanctions among nations that would weaken the already fragile Euroopean economy when it could least afford it.
- Russia and China would continue to back out of buying U.S. debt as the untied themselves from a government and a currency they hope to weaken for their own political and economic reasons.
- Conflict between China and Japan in the South China Sea would continue to build, creating market tensions. (While it has continued, it has not yet built to where it is increasing market tensions.)
- The Chinese economy would not crash but would, nevertheless, settle slowly as a dead weight on the global economy.’
- Japan’s economy would look even worse (which it does) as Abenomics has run its course.
- Iran would get a short-term deal in the sumer that would extend its bargaining, at least, through the end of summer, and Russia would cooperate less with the U.S. against Iran. I stopped short of saying the Iranium Reaction would blow up, but left it simply as a problem that would be continuing into the fall.
- Hot air in the Middle East would meet cold blasts out of the West causing, brining a serious escalation of tensions in the Middle East.
- I predicted that, by fall, job statistics and corporate profits would have little sway over what is happening in the stock market.
- I stopped short of predicting economic collapse, saying it would only crash if some larger unseen and unknown force at the time I was writing last spring rose up among all of this other chaos; but I bet my blog that the whole global economy would look a lot worse in the fall, making it clear there has been no recovery.
…My predictions are based on the global trends that are currently in play…. Those mega forces by themselves will put the global economy under great stress. My only caveat is that every year brings unexpected disasters and difficulties. If only the forces that can now be seen and felt are the ones at work, then the economy will grow worse but not crash. If something unexpectedly bad — such as war with Iran — bursts into the picture, then the economy could easily crash.
What I am certain of and willing to bet this blog on is that the economy will not do better this year — so certain, that I will quit writing this blog if I’m wrong on that prediction.
We are definitely headed toward an economic collapse, and I would not be surprised to see it happen this fall or winter; but my bet was for economic deterioration in the fall and was made when most economic pundits were singing about recovery, and the bulls were climbing to ever higher summits.) That bet in my mind is clearly playing out now.
Though the current stock market drop doesn’t quite add up to a crash, the market is now showing exactly the kind of volatility it has shown in the past before major crashes with huge spikes up and down on a daily basis that the bulls are finding almost impossible to understand. When it starts to lurch like this and the bulls start mulling about, wondering why this is happening, given decent job reports and profit reports, it is highly likely that the market is going to fall because the people leading the market are lost. The market is clearly reeling.
One notorious bull, Alan Greenspan, father of the current bubble market (that is really a balloon, not just a bubble) perhaps sees the longterm writing on the wall:
Our productivity rate is slowing dramatically, causing slow growth in wages, and that’s causing a lot of the problems in the economy over the long run. What concerns me most is that unless and until we can rectify that problem, our economy’s long-term outlook is not good.
Alan’s had a harsh awakening.
Conclusion about the coming Stock Market Crash 2014
None of the above reasons that I gave for a downturn have anything to do with corporate earnings being behind the market crash, just as I said last spring that earnings and job reports would hardly matter under the influence of far greater global forces. This past week was almost a news-free work on corporate earnings. Rather, the week was all about external forces that I called “head winds” last spring and summer that would come bearing down on the stock market and the overall economyl
Bear this one simple fact in mind: The bulls have always missed seeing stock market crashes. That’s why the crashes happen. If they collectively saw it coming, they would get out of the market sooner. What makes it a crash is that so many bulls do not see it coming so there are a lot of investors standing on the cornice when it breaks off.
While the chief global strategist for JPMorgan Funds, said this past week,
A lot of investors are trying to come to grips with the pickup in volatility we’ve suddenly seen during this week,
this is volatility I came to grips with six months ago. It wasn’t hard to see it coming and should not be hard to come to grips with now that it has come. If someone can see it is going to be a problem half a year before it is and predict when that will come together, why can’t the experts see what is causing the problem when all of that does hit? You’d think they could, at least, figure it out once it was there; but they cannot because they are blind to ideas outside of what they want to hear.
Being certaint that this is exactly what this fall would look like, I started writing on my blog again, after taking almost a two-year hiatus. (During that year-and-a-half in which I wrote almost nothing, I expected the economy to do almost nothing, so there really wasn’t much to write about. I could have written about the continued growth of the stock market, claiming over and over that it was an illusion of recovery; but why? It seemed wiser to sit it out and wait until just before the time when I believed the stock market was likely to crash and then begin, again, to talk about the illusion. And, if I prove to be wrong, then I really should hang my blog up and stay out of other people’s business … and will.
When the stock market does crash and the economy does collapse, the blind bulls still will not see that it all fell down because its foundations were built out of the rust and rot of a bygone era. They’ll find reasons that don’t interfere with their economic religion — the religion that separates the one percent from the ninety-nine percent. There is a lot to be learned, and I don’t perceive that they will learn it. They will build an even bigger global monstrosity out of the rubble. I’d like to believe otherwise, but I keep seeing reality.
Instead, I find my hope in realizing that the mighty rise and fall and rise again, but I find my joy in my family and our little farm. I have neither gone up economically nor down with any of their manic rises and depressing falls. My life is stable in the turmoil around me … and, more importantly, enjoyable. So, I now go from musing on the markets to building a cedar rail fence along my mountain meadow to protect my little herd of alpacas on a glorious sunny day, and I do so without a care about what happens in the markets on Monday morning.