In less than a year, $46 trillion in financial wealth has been wiped out. If this is not an “accident”, how would you define one? Since last November, stocks and bonds have been falling all over the world. When there’s a good day like the one we saw on Monday, sometimes that can make us think that everything is going to be okay. But to understand what’s really going on we need to step back and look at the big picture. And when we look at the big picture, it is very clear that we are in the midst of a historic market crash worldwide. According to Bank of America, a whopping $46.1 trillion in financial wealth has already been wiped out since last November…
It’s been a tough year for investors, with global stock and bond markets reeling wiping out $46.1 trillion in market value from November 2021, according to Bank of America.
The massive withdrawal has led to forced liquidations on Wall Street, the bank’s chief investment strategist Michael Hartnett said in a note on Friday, highlighting the recent break below 2018 support in the NYSE Composite Index .
When I came across this number, I could hardly believe it.
But it is accurate.
Stocks have been falling and falling and falling, and Bank of America is warning that this is one of the worst global bond market crashes we’ve ever seen…
BofA analysts liken it to going “Cold Turkey” and blame it for causing the third “Great Bond Bear Market.”
They calculate that the 20% plus losses suffered by government debt investors over the past year are now on par with the post-World War I and II years of 1920 and 1949, and the Great Depression rout of 1931.
The combined collapse of the global stock and bond markets means that global market capitalization has shrunk for more than 46 billion dollars.
It is a difficult amount of money to understand.
The total value of all goods and services produced in the United States last year was approximately $23 trillion.
So we’re talking about an amount of money that’s roughly twice our GDP for an entire year.
When the Federal Reserve and other central banks around the world took the plunge, it was obvious that something like this would happen.
Central bank intervention pushed global financial markets to absolutely absurd levels, and there was no way they could stay there once the artificial support was removed.
Here in the U.S., every major stock index has fallen for three straight quarters, and tech stocks have been leading the way down…
The S&P 500 index closed Friday at 3,586, down 25.6% from its intraday high on Jan. 3, and where it had been for the first time since November 2020.
The Russell 2000, which tracks small-cap stocks, is down 31.8% from its Nov. 5 high, maintaining its role as an early warning signal.
The Nasdaq closed at 10,576, down 34.8% from its intraday high of Nov. 22, the same day Microsoft CEO Satya Nadella dumped 50.2% of his Microsoft shares in a bunch of frantic operations, totaling $285 million. On the list of best-time trades in history, it has to be at the top. Since then, Microsoft shares have fallen 33.4% to $232.90, the lowest closing price since March 2021.
As I mentioned a few days ago, the richest tech moguls have collectively lost $315 billion over the past year.
The Federal Reserve gives and the Federal Reserve takes away.
The same goes for the housing market. The Fed’s policies created the biggest housing bubble in our history, but now that bubble is bursting.
In fact, it is being reported that we have just witnessed “the biggest price drops in a single month” since the last financial crisis…
… today Black Knight confirmed that the US housing market has turned decidedly ugly with the two biggest monthly declines since the global financial crisis.
Median home prices fell 0.98% in August from the previous month, following a 1.05% drop in July, according to a report Monday from the mortgage data provider. .
Both periods marked the largest monthly declines since January 2009. In fact, at the current pace of declines, we could soon see a record decline in home prices, surpassing the largest hit on record during the global financial crisis.
The report noted that July and August 2022 mark the largest single-month price declines seen since January 2009 and are among the eight largest on record.
If the Federal Reserve doesn’t cut rates, things are going to get very, very ugly for the housing market soon.
Unfortunately, the Fed will actually continue to raise rates because Fed officials are afraid of dying the hyperinflation crisis they helped create originally.
Thanks to the Fed, grocery prices rose 13.5 percent in August…
We’ve seen higher prices at the grocery store and they don’t seem to be going down anytime soon.
New government data shows grocery prices rose 13.5% in August from a year earlier. This is the highest annual increase since March 1979.
Food producers say the increase is the result of paying higher prices for labor and packaging materials. They also point to extreme weather, disease and supply issues.
As long as we continue to see numbers like this, the Fed will continue to raise rates.
And gas prices just hit another all-time high in Los Angeles…
Gasoline prices hit an all-time high in Los Angeles County of $6.466 a gallon Monday morning, surpassing the previous record set during the nationwide price spike last spring.
If you think that’s bad, wait until California residents pay $10 a gallon for gas.
The cost of living has become incredibly oppressive, and a recent poll found that 73 percent of Americans believe their incomes are “lagging behind inflation”…
The results of Scott Rasmussen’s Number of the Day poll at Ballotpedia also found that 73% of Americans say that in the past year, their income has fallen behind inflation. The poll’s sample size was 1,200 registered voters, and it was conducted online by pollster Scott Rasmussen from September 15-17. The margin of error for the full sample is +/- 2.8 percentage points.
Until inflation is under control, the Fed will continue to raise rates.
And inflation is unlikely to be under control anytime soon, with the vast majority of US manufacturers planning further price increases in 2023…
In a new Forbes/Xometry/John Zogby Strategies survey shared with Secrets on the impact of inflation and the ongoing supply chain crisis under President Biden, 87% of manufacturing CEOs said they planned to increase prices in 2023.
Many cited the ongoing supply chain crisis, problems getting materials from China and sellers taking advantage of the economic turmoil to drive up prices.
“Our margins are under pressure as costs rise across the supply chain network,” said one CEO in the survey conducted by Jeremy Zogby, the managing partner of John Zogby Strategies.
So the Federal Reserve will not come to the rescue of the financial markets this time.
Fed officials are absolutely petrified of high inflation and so rates will continue to rise.
And that means this financial bubble will continue to implode. As Eric Peters has rightly pointed out, market declines can take a long time to fully develop…
“It’s important to remember that the bursting of a bubble takes a long time to unfold. It may seem fast and chaotic at various points in the process, but it really isn’t. Look at 2008. Everyone is thinking about the bankruptcy of Lehman on September 15, 2008 as the major catalyst for this crisis, but the S&P 500 had peaked the previous November.Bear Sterns failed on March 13, 2008. From the Friday before Lehman’s failure to the end this month, the S&P was only down 7%. The real weakness was in October with a local low in November.”
The final fund was not until March of the following year. “The bubble was bursting before Lehman Brothers.” This was just the big cathartic event that caught our attention, ignited our imagination. “And even after that it took months for the market to bottom out. Markets don’t eliminate imbalances instantly. So we should be preparing for a marathon, not a sprint.” .
We are still only in the early chapters of this story.
As I have been warning my readers over and over, things will end up getting very, very wrong.
The Federal Reserve and other central banks flooded the world financial system with money, so we are now facing a horrible global inflationary crisis.
They are trying to fix things by rapidly raising rates, but this is causing absolutely huge problems in the global financial markets.
This is not going to end well, and we’ve finally reached a point where that should be very obvious to everyone.