In October, Markit’s Composite Purchasing Managers’ Index (PMI) fell to 45.8 from a September reading of 46.1. That is, businesses in the eurozone saw their worst month since the 17-nation bloc emerged from recession more than three years ago.
The business expectations index fell sharply to 47.8, its lowest reading since February 2009. And the output index for the sector sank to 44.8 from last month’s 45.9.
In addition, the composite employment index rose to 47.1 from last month’s 46.4, as businesses cut their workforces for the 10th straight month.
“There is nothing specific that is making businesses gloomier — it is a much more general widespread gloom,” said Chris Williamson, chief economist at Markit. “Businesses are very much in cost-cutting, retrenchment mode, battening down the hatches because they don’t know what the outlook is.”
John Taylor: Is Our Version Of The 1987 “Can’t Lose” Paradigm Melting Down?
The price action over the past few weeks in the wake of the markets getting more from the Fed than they could have ever expected heading into an election is a clue that the times indeed could be a changing. The 1987 paradigm underwent a similar period of choppy trade before melting down. Of course, crashes by their nature are a rare breed and the probability of one occurring is astronomically low. That said, should the S&P 500 fail to hold the 1400 level over the next few days (especially on a closing basis) we wouldn’t wait around too long in anticipation that the modern day version of LOR will save the day. The chart makes it clear that quantitative easing has diminishing returns. Soon they could be negative.
The first thing you should know is that European banks, taken as a whole, have far more leverage than their US counterparts. According to the IMF, US banks are leveraged at 13 to 1.
European banks are leveraged at 26 to 1. Put another way, they have $26 in assets for every $1 in equity.
Think of it this way, imagine if had $100K in the bank and you borrowed $2.6 million to buy homes and other items. Do you think you would be in a stable financial condition?
That’s Europe’s banks on the whole.
This entire financial system is based on the assumption that European sovereign bonds are still are risk free.
So you have bankrupt nations, selling bonds to insolvent banks, which then use these bonds to leverage up to over 26 to 1 (by the way, Lehman was 30 to 1 when it blew up).
And that’s the ENTIRE European financial system.
I hope this clarifies why Europe is doomed. It is absolutely 100% impossible for Europe to get out of this mess unless the entire union suddenly started growing its GDP at over 10% for a decade.
That will never happen.
The Russell opinion is that Bernanke realizes that he is losing his war against the primary trend, & that he has had enough
“Back in late 1974, I stood alone as probably the only bullish analyst in the business. What I mean to say is that I call it the way I see it, based on my own reading of the market, and regardless of what the popular opinion is at the time. Frankly, I would love to be bullish today, for the sake of my business and for the sake of my five children and for the sake of the United States, the land that I love.
I’ve stated that a primary bear market started in October 2007, with the Dow at 14,164, and that the same primary bear market is still in force. The period of 2009 to its recent high was an upward correction, a ‘breather’ that came within the confines of the continuing bear market.
From Gold Scents:
Asset markets should now be in the final 3-5 days of this intermediate degree profit-taking event. We are moving into the “belly of the beast,” so to speak. This is that period of time during an intermediate decline where things start to look really bad.
The media always confirms the decline with multiple stories of gloom and doom. Don’t be fooled, though. This is just a normal profit-taking event and it happens like clockwork about every 20-22 weeks (although sometimes QE can stretch the cycle to over 30 weeks).
The stock market is now…
Commodities guru Jim Rogers explains why he is bullish on agricultural commodities. He also tells us why gold and silver prices are headed down:
According to a recent survey by State Street Global Advisors, there’s still plenty to worry about-especially in the sordid world of finance.
In fact, the world’s 3rd biggest money manager said 71% of investors worldwide are afraid the next Lehman could strike within the next twelve months.
Keep in mind, we’re not talking about small retail investors here. Not at all.
We’re talking about some of the largest and best-informed, most sophisticated pension funds, private banks, and asset managers in the world and the wide majority of them think a ” black-swan” type event could strike before this time next year.
A Black Swan Rerun
What do they think could be the trigger for this event?
Their biggest fears revolve around the next global recession, a potential euro break-up, or another episode of bank insolvency.
Other concerns cited were a slowing Chinese economy, an oil price shock, or the risks of asset bubbles from unending stimulus. Thanks to ongoing debasement wars, the asset class they feel holds the biggest risk at the moment is the currency markets.
These elite asset managers are not alone their fears either .
Friday was the 25th anniversary of Black Monday. On October 19, 1987 the Dow Jones Industrial Average fell 508 points, or a mind-numbing 22.6%.
How bad was it?…
Let’s put it this way, if it happened today the Dow would drop 2,965 points on the session to finish at roughly 10,158. You can imagine the depression.
There are very few human traders, and about 80% of trading volume in U.S. stocks is produced by computers trading with each other, within a time span of milliseconds.
Today, computers act as piranhas around large orders, front-running them and making it more difficult to trade in large size than it was 15 years ago. More dangerous, these high-frequency traders are able to place orders that disappear when they are hit, thus depriving the market of liquidity altogether.
In 1987, machines pushed the frontier of crash size from 13.6% to 22.6%. This time, they are much more capable – and could push the size of the crash frontier much, much further.
Nevertheless, here is the Forecast Array for the weeks ahead. The top line provides the key targets for turning points.
When the host questioned such wild claims, Wiedemer unapologetically displayed shocking charts backing up his allegations, and then ended his argument with, “You see, the medicine will become the poison.”
The interview has become a wake-up call for those unprepared (or unwilling) to acknowledge an ugly truth: The country’s financial “rescue” devised in Washington has failed miserably.