How Watergate Affected #StockMarket

Sometimes you just gotta look at history.  Watergate affected the Dow Jones.

djia_1970s

This chart shows the 1974 recession started months before Nixon resigned.  In fact, about 18 months after the Watergate break in.

Here is more information.

http://time.com/money/4783032/nixon-watergate-stocks-trump-comey/

You have a connection.

1.  Is impeachment gonna hurt?

2.  How often does the DJIA go down?

3.  Was bitcoin a fluke?

4.  Can you say rollercoaster?

Everyone needs the human connection.

 

To get new posts, click on the Follow button.  You will NOT get spam email.

 

Advertisements

A Wild And Crazy Year So Far

I am talking about the stock market year-to-date.

wild_crazy_guys

Every day since the year started, the Dow Jones Industrial Average, the most widely watched American index, has swung up or down in the triple digits i.e. over 100 points.

2015_djia_daily

In fact, the average swing each day since Jan 1, 2015 has been 268 points for the Dow.

2015_djia_volatility

What does this mean to the average Joe?

In a nutshell, volatility means worry for the future. And investors hate volatility.

The good news is there were four large changes of the DOW of more than 300 plus or minus points before a recession happened in 2008.  So we can predict the next recession.

Here is an excellent detailed look at the current volatility by Forbes.

http://www.forbes.com/sites/billgreiner/2015/01/23/stock-market-volatility-and-what-its-return-means-for-the-global-financial-system/

Now that is wild and crazy.

Leveraged Loans Predict 2015 Crash

Multiple charts exist which predict another recession soon!

us_overleveraged_201501

 

Normally I am a very positive person.   But recently I found not one but two charts which show we could have a repeat of the recent Great Recession.

The first chart above shows how the Federal Reserve and Quantitative Easing have allowed financial institutions to run wild again.  In summary, leveraged lending is out of control.   For two years, leveraged loans have risen as fast and to a greater level than 2007, the year before the Great Recession.

The New York Times reports that leveraged lending is greater and the associated rules more lax than in 2007.  Here is a portion of a news report.

What can’t be denied, however, is that standards in the leveraged loan market have become much looser in recent years. The companies that have taken out the loans are on average much more indebted than in recent years. Companies that have done deals this year have debt that is 4.9 times as large as their annual cash flows, measured using earnings before subtracting expenses like interest, taxes and depreciation, according to data from Standard & Poor’s Capital IQ. That multiple is up from 3.9 times in 2011 — and it is the same as the number for 2007, when the last boom in leveraged loans peaked.

This time around, however, one aspect of leveraged lending is much more aggressive. The special provisions within loan agreements that were once thought crucial for protecting creditors are fast disappearing. So far this year, 63 percent of leveraged loan deals lack such provisions, far higher than 25 percent in 2007, according to data from S.&P. Capital IQ. “Contractually, things are really at their weakest,” said Christina Padgett of Moody’s Investors Service.

You can read more details at one of these websites:

http://dealbook.nytimes.com/2014/11/04/a-recent-surge-of-leveraged-loans-rattles-regulators/?_r=0

http://www.zerohedge.com/news/2015-04-09/oil-hedges#comment-5977321

http://www.bloomberg.com/news/2015-01-06/private-equity-deals-spur-leveraged-loan-surge.html

~~~~o~~~~

A second chart shows that recent Dow Jones record increases also occurred in 2008.

http://en.wikipedia.org/wiki/List_of_largest_daily_changes_in_the_Dow_Jones_Industrial_Average

Unfortunately 10 out of 20 increases of 400 or more of the Dow occurred in 2008, the year of the last recession

~~~~o~~~~

Can another Great Recession be stopped?  No.  Apparently the Federal Reserve did not act fast enough nor aggressive enough in 2014 to stop the out of control leveraged loans.

To protect yourself, read this website:

https://michaelekelley.com/2014/10/16/8-things-to-do-when-recession-happens/

Thanks for reading this.

Wall Street Goes Frothy – No Not Starbucks

I am talking about huge swings in the market.

swing

No, not that type of swing.  I am talking about the huge daily changes in market value.  See the chart below courtesy of bigcharts.marketwatch.com.

djia_frothy

Specifically, this chart shows huge daily changes in the Dow Jones Industrial Average (DJIA) during the week of Sept 22-26.

Monday 9/22 down 105

Tuesday 9/23  down 100

Wednesday 9/24 up 150

Thursday 9/25 down 250

Friday 9/26 up 167

The summary is the market is frothy.  Why?  Because the QE3 is winding down, the economy is still struggling and the financial sector has been over stimulated.  Thus there is a lot of nervousness.

The conclusion: we are overdue for a big correction.