Oh dear. Is it 2008 all over again?

I'm sure you've all heard today about what happened with the stock market. I guess it was the 9th largest drop ever. It's been a rough summer, between China and Greece. I can't help but think that we are in for more of a rough ride. I hope the next rough ride is better than the one in 2008!

 

CNBC is airing a live show on Sunday at 7 pm EDT, to discuss the currency moves and indicators of the futures opening in Asia, Europe and NA. If you don't have CNBC on your cable or satellite, you can listen to the audio stream on SiriusXM. No indication of the show's length but I assume it will be at least an hour. It is very for a live Sunday night show, much less with the people of Closing Bell and Fast Money.I'll just up a 3-hour recording block to make sure I capture it.

The Friday evening Fast Money show had a lot of discussion on Indicies and support levels to watch. I habitually record FM to watch later in the evening; I'll rewatch it before Sunday evening. Concensus was the money markets moves will be a significant leading indicator of a probable volatile week, and one should not rush in Monday morning and sell everything. A lot of traders will be out on their usual summertime vacation this last week of August, and volume may be light.

You may find video clips on the show's web page; I haven't looked.

An interesting aside, Dennis Gartman (40 years' experience in commodities) tells FM he us calling a bottom in energy, suggesting a slow climb out of the current level. And he believes we passed a bottom in gold in dollar terms about 4 weeks ago.

FWIW I almost pulled the trigger on buying more $AAPL at its low of ~$106 today, but I resisted tempting to buy. I think we'll have an opportunity to do so around ~$100. Keep your powder dry as there will be bargains on good stocks now unreasonably oversold. There was no reason for Boeing, Intel and Micron to take ~8% haircuts on Friday.

HTH. YMMV.

 

There is a couple things. Look at this chart to see what happened last August

http://finance.yahoo.com/echarts?s=%5EDJI+Interactive#{"range":"2y","allowChartStacking":true}

This is a yearly thing, The first few weeks of august are always terrible. Sometimes the pain starts in late July.

The second thing is that China is hurting themselves short term. Hurting us short-term. Hurting themselves long-term. Helping us long-term. If anyone ever doubted that the US dollar is going to be the dominant currency for at least the next 100 years, you now have your proof. Nobody is every going to trust China again.. people hold and trade currencies mainly as hedges or as a safe place to keep wealth. Central banks around the world us the US Dollar because it is extremely stable. People want stability and pay a premium for stability. As much as people cry about Obama printing money, the US dollar is a pillar of strength that the world flocks to. China hates this and has tried a few times to supplant us at this role, but their willinglness to extremely devalue their own currency.. nobody is going to look at their currency as ´stable´ again.. at least not for a very long time, which again just gives the US dollar longer to become the de facto currency of the world.

 

The yield curve was inverted prior to that crash, I don't see the same data now.
Also resources were crazy expensive just prior to the 08 drop. To the point many places were having riots because things were too expensive.
Also there was a bubble caused by the ineptitude of the then American government and regulators who had no idea there was a massively inflated housing market, which was caused by a number of factors most prominently predatory lending and sub prime mortgages.
I am not saying things are all well and rosy, but we don't have the same environment as we did in 2007.

 

It isn´t just China and Greece, Brazil and Chile are having huge problems also. Many people don´t realize how big the Brazil economy is and it´s growing importance as the central player in central and south America.

I am surprised the US economy has done so well despite basically everyone except Japan and Germany falling apart around us. I´ve been posting here for a long time about China not being a real threat against the US economy. They have a huge population and a fast growing economy, but most of the important stuff is manipulated. This past year, the gov´t there completely manipulated the stock market with forced low margin rates and requirements, allowing people to go to 90% margin. Their economy is very young and does not yet include the costs of having a middle class, things such as environmental protection and education are not demanded by the middle class because the middle class is not big enough yet. When that happens, China will need to have the same costs as the rest of the first world which will eliminate their #1 commodity, cheap labor.

 

Definitely, 2007 was all about ´us´ doing it to ourselves, there were many internal reasons why it had to happen. In some ways what happened to us in the housing market in 2007 is exactly what is happening to China now with their stock market. In both cases, the gov´t reduced regulations and requirements that allowed a lot of people to speculate ( us in housing, them in the stock market).. that speculation built a bubble, that had to pop at some point. We were allowing people to buy houses with ´no money down´ and all that crazy stuff, which drove up the prices of houses. China basically did the same thing with margins last year, and just allowed people to invest in the stock market without having the money to back it up.

Also remember, volume has been very low this month, a lot of people are on vacations and so the low volume is making things more scary than it actually is. Not yet, but there will be major buying opportunities in the coming weeks. Look for companies without a lot of exposure to china.

 

The very tepid recovery is the reason we have no inflation, and thus why we haven´t needed to raise interest rates. Slow and steady growth wins the race.. much better than the boom-bust we are seeing in China which requires currency manipulation.

Agreed though, a big part of 2007 problem went back 10 years when they removed regulations and restriction on home-buying, and then over the course of the those 10 years they had to keep easing the standards even further. It wasn´t that they opened the faucets in 1998, it is that they opened the faucets, and then just kept turning the knob each year until there were television shows about how easy it was to ´flip houses´.. That is the insanity that tells you there is a problem.

I am one of those people who thinks the global economy is more a net-zero game then a group hug. China crashing is going to hurt us short-term, but it is a big win for us long term. There are a lot of manipulative advantages we gain because we are ´the´ superpower and have the safest currency. One of those is the ability to print money without it devaluing the currency as much as other countries would if they tried to print.

 

I wouldn't mind 2008 over again. Great buying opportunities. I'm running a bit short on my normal "for investments" cash but I always have a pretty sizeable stack stored away for bigger drops... might have to dig into that one soon if we get a couple more days like this.