Stock Market Dropped

Heard the stock market was taking a big drop today. The dow was around -900 last I heard. What caused that?

big real estate outfit from China in major financial trouble..heard they do 300 billion a year

Biden?

Good day to buy.

eventually the whole thing will go belly up...it is not/has not been a reflection of the countries economics.

The Chinese government basically allowed or even subsidized the property or real estate sector in China so that lower income and middle income families could own their own homes and now one of those firms is probably hopelessly in debt. Will the Chinese government bail them out or will the let them fall and show other real estate firms to get there houses in order? If the government shifts significant funds into property and then has to lower import purchases that will shake the world economy a bit and the US economy as well. With China purchasing a lot of commodities that could really impact our rural economies for grains, pork, beef, dairy and poultry. We will wait to see. Not enough that we have our own financial issues let alone now having to check the financial status of major world economies. We sure don't like debt for the most part but compared to most economies around the world we can handle a lot more debt then almost any can. Private sector assets and wealth in the USA is well into the 100s of trillions and yes debt is high but no where near that amount. How our debt is structured is a bigger deal then the amount.

Bryce

"Allowing for global interdependences and spillover effects, we do not find a tipping point in the relationship between public debt and growth. Since global factors (including interest rates in the United States, cross-country capital flows, global business cycles and world commodity prices) play an important role in precipitating sovereign debt crises with long-lasting adverse effects on economic growth, it is not surprising that neglecting these leads to false detection of threshold effects.

Nevertheless, we do find that countries that have substantial government debt loads (varying across developing and advanced countries) and rising debt-to-GDP ratios grow substantially slower. These results suggest that the debt trajectory has more important consequences for economic growth than the level of debt-to-GDP itself. In other words, provided that debt is on a downward path, a country with a high level of debt can grow just as fast as its peers.

Finally, regardless of debt thresholds, we find a significant negative long-run association between rising debt-to-GDP ratios and economic growth. This suggests that a temporary increase in the debt-to-GDP ratio (for example, to help smooth business cycle fluctuations), does not play a role in the long-run relationship between economic growth and public debt. On the other hand, countries that experience persistent increases in their debt-to-GDP ratios also experience lower output growth in the long run."

"A large majority of studies on the debt-growth relationship find a threshold somewhere between 75 and 100 percent of GDP. More importantly, every study except two finds a negative relationship between high levels of government debt and economic growth. This is true even for studies that find no common threshold. The empirical evidence overwhelmingly supports the view that a large amount of government debt has a negative impact on economic growth potential, and in many cases that impact gets more pronounced as debt increases. The current fiscal trajectory of the United States means that in the coming 30-year period, the effects of a large and growing public debt ratio on economic growth could amount to a loss of $4 trillion or $5 trillion in real GDP, or as much as $13,000 per capita, by 2049."


"With a current debt-to-GDP ratio of 127%, which is expected to rise to 277% by 2029, future economic growth will not be as robust as it has been ..."

China problem today. US problem in 2008. Very little holdings in the US on the China trouble.

"With home prices surging, some Federal Reserve officials have made the case for the central bank to back out of the mortgage securities market.

Why it matters: The Fed has been purchasing $40 billion worth of mortgage-backed securities (MBS) each month in an effort to keep interest rates steady and bond markets very liquid."

"What they’re saying: The Boston Fed’s Eric Rosengren warned to the FT that “boom and bust cycles” in housing threaten the rest of the economy, reiterating his earlier statements that the mortgage market didn’t need the Fed. "

" Did the implied government backing of Fannie and Freddie actually benefit U.S. homeowners? Or was the government just helping the companies and their investors while creating a moral hazard?

Fannie Mae and Freddie Mac were given a government-sponsored monopoly in a large segment of the U.S. secondary mortgage market. This monopoly—combined with the government's implicit guarantee to keep these firms afloat—would later contribute to the mortgage market's collapse.14

In 2007, Fannie Mae and Freddie Mac began to experience large losses on their retained portfolios, especially on their Alt-A and subprime investments. In 2008, the sheer size of their retained portfolios and mortgage guarantees led the FHFA to conclude that they would soon be insolvent.18

On March 19 of that year, federal regulators allowed the two firms to take on another $200 billion in debt in the hopes of stabilizing the economy.19 However, by Sept. 6, 2008, it was clear that the market believed the firms were in financial trouble, and the FHFA put the companies into conservatorship. They received $190 billion in bailout funding and have since paid it back but are still in conservatorship.2011

Of course, a long list of missteps led to the Great Recession. However, critics say Fannie and Freddie created an enormous amount of debt and credit guarantees in the years leading up to 2007, and that Congress should have recognized the systematic risks to the global financial system that these firms posed.

History. US housing market in 2008 was problem that China ElGrande problem is today. It is not a persons right to own a house. You have to have a job and a means to pay the loan thru its entire life of loan. That is what lead to our 2008 problem. Chinas problem today. If you own Chinese stock it is a problem

Fannie benefitted me. I bought a repo from them and flipped it. Years back.

" Savings and Loan Crisis: Aftermath

The S&L crisis was arguably the most catastrophic collapse of the banking industry since the Great Depression. Across the United States, more than 1,000 S&Ls had failed by 1989, essentially ending what had been one of the most secure sources of home mortgages.

The S&L market share for residential mortgages before the crisis was 45% (1980); after, it was 27% (1990).3

The one-two punch to the finance industry and the real estate market most likely contributed to the recession of 1990-1991, as new home starts fell to a low not seen since World War II. Some economists speculate that the regulatory and financial incentives that created a moral hazard that led to the 2007 subprime mortgage crisis are very similar to the conditions that led to the S&L crisis. "

I knew everything was going down the crapper when the bottom dropped out of the fur market and NAFA went belly up.

We will see if our markets can support itself. When the Federal Reserve starts tapering off stimulus. Start raising interest rates. The Federal meetings start tomorrow. Then you may see a down turn. That meeting will effect our US markets more then China issues IMO.

"even though the Fed and other central banks are a long way from slowing down their “Q.E.”-lite programs, the past might suggest it won’t be an easy process. When the Fed shrunk its balance sheet by about $1 trillion in the years after the Great Recession, investors grew apprehensive. Stocks in December 2018 had their worst month since the Great Depression when Powell described the process as on “autopilot.”"

"The Federal Reserve typically slashes interest rates in recessions to revive an ailing economy — but in more severe crises, it might not be enough."

Can't slash zero!

I don't see any way the FED can raise rates.

Dirt, you can slash zero. The Japanese have been negative for a few years now.

We are Defacto negative as well seeing as inflation is higher than most interest rates.

Intrest rates should be bumped up to 10% to get the ball rolling and foreign investment money rolling in.

I don't know what's going to happen long term. Every time I've gotten into or out of the market because I knew what was going to happen, I was wrong. I've even gotten lucky and got out at the right time and avoided some big losses - only to not get back in at the right time and I missed some big wins. I would have been better off doing nothing - so that's what I do now. Set it and forget it.

I'm down 0.96% today. Less than 1%. 1% loss sucks but I'm going to stick it out and see what tomorrow brings.

They are at what negative point 5? In the past a slash during a recession could be 4 to 6 percent. That's a slash ! No way we will go negative 4.

Funny thing is Steve, since Japan cut rates to near zero in 95 and started QE in 97 rates have never risen above 1%. Kind of a mirror of what is going to happen here.

"Japan is the most indebted country in the world as measured by debt-to-gross domestic product (GDP). As of 2018, the Japanese debt-to-GDP ratio was at an all-time high at 254%"

Same anemic economic growth pattern as the U.S. since 2008. Maybe a 2 percent growth rate, probably not that high.

About 1/3 of my investment is in a guaranteed fixed 3.5% retirement fund at Prudential. Hardly a month goes by that I don't regret that "inflationary loss", then we have a day like today and I know why I leave those funds alone. I'll be 75 next month.

Yep joe the fixer looking bad so the market prediction gurus released a statement this afternoon that businesses would have record profits this quarter! ON WHAT? Shelves are empty, car lots are bare. Every thing you try to order is unavailable or delayed . Can’t make profits if your not sell products. Don’t start with “ no overheads “ That narrative can be milked only so long. They are trying to get market to rebound because make believe money is only thing bobo has left He’s even getting bad mouthed by chuck todd yesterday!!!

How’s that Bitcoin thing looking this evening? If you bought some early you still ok. But how does it feel for 7000 bucks to evaporate

Futures are already in the green..but only about a quarter percent. Could go either way tomorrow.

I don't see a real comparison between the Evergrande situation and the Lehman Brothers collapse that triggered the Great Recession. The debt of Lehman Bros was spread around to multiple other large US banks. That was the contagion factor.

Evergrande's debt is mostly backed by the PBOC..People's Bank of China ......China's 'federal reserve'. Blackrock, in the US is the only major US player involved in Evergrande's debt.

I suspect China will at some point step in and stabilize Evergrande because they do not want a domino effect among Chinese banks...............BUT......they might let this go a while to send a message to other Chinese firms that have a capitalist leaning. Look what they did to Alibaba, and Ant Financial in the last 12 months. I think this may be part of Xi reasserting communist first principles. ( do communists have principles ? )

Today's market drop could be just using Evergrande as an excuse to take some profit. We have another fed meeting this week, debt ceiling battle in Congress, increasing inflation, the Delta variant, an additional 5 trillion in proposed spending......what could go wrong ?

The dollar also strengthened today. That will put additional pressure on China.

Seemed like some screaming buys out there today. I guess we'll find out in the future if that's true.

Good analysis White.

In my opinion, there is no reason to panic yet. Big drops happen.

And it can be rather refreshing when they do.....................in the long run.

Buffett once remarked that at times like this it is best to sit on your hands

I could have used that reminder about 3:00 this afternoon when I went shopping.

We'll see.....

LOL

I'll admit that I had to do a little buying today also.

September is usually a wacky month for stocks but have to say some items were on sale.

Thanks for your insight White 17. Always good to hear your insight on today’s market. Sitting on ones hands is a good idea. But I was a bargain hunter today.

It's hard to let a crisis go to waste

https://www.msn.com/en-us/news/worl...re-in-the-world/ar-AAODV65?ocid=msedgntp

just a buying opportunity, its not going to evaporate.

Glad I bought the dip made some good bucks but looking to more volatility.

Up 460 at 3:30 this afternoon.

Cautiously up about half the loss so far. September and early Oct. have historically been bearish months for the market.

Bryce

The fed won't do their job to curtail inflation and raise interest rates. BOBO couldn't survive the market crashing along with the ENTIRE NATION !!!!

Market is doing fine and over the long run will make money its a long term game for me. I remember the Regan era and buying a home at 14.9 % interest raising rate is not the answer now. It will happen over time and gradual is the way to do it.