Bubble

Trouble

438 Stocks on the NYSE Have Already Plunged 40%-94% from 52-Week Highs

It’s barely a correction, technically speaking, with the S&P 500 down 9.9% from its all-time closing high, the Dow down 9.2%, the Nasdaq down 14%, and the Russell 2000 small-caps index down 15%. But beneath the surface, there has been some serious bloodletting for many stocks. 

For example, 438 stocks among the 2,051 [21%] or so stocks traded on the New York Stock Exchange (NYSE) have plunged between 40% and 94% from their 52-week highs. 

No one knows what the total leverage in the stock market is. But we know comes in many forms and has surged over the years. The only form of stock market leverage that is reported monthly is the amount individual and institutional investors borrow from their brokers against their portfolios. This “margin debt” is subject to well-rehearsed margin calls. And apparently, they have kicked off.

DYI:  Trouble in paradise on the big board [NYSE]??  Appears so; with 21% of New York Stock Exchange’s stocks off 40% plus from their all time highs.  This is reminiscent of so many other market tops as stocks perceived as back water companies begin dropping in price substantially and yet is shrugged off by investors/speculators as a non event.  Back water companies don’t list on the big board they reside on the NASDAQ or with Over the Counter [pink sheets].  So…This decline, with this many companies share prices dropping far greater than 40% is a big deal.  This very well could be the canary in the coal signaling the long awaited bear market.   

Crash alert: China’s resource crisis could be the trigger

Preface.  Way to go Nafeez Ahmed, your second home run of reality based reporting on the energy crisis this week.  There are countless economists within the mainstream media predicting an economic crisis worse than in 2008, but they totally ignore energy. How refreshing to see an article where energy is front and center in explaining why there may be an economic crash in the future. 

China’s economic slowdown could be a key trigger of the coming global financial crisis, but one of its core drivers — China’s dwindling supplies of cheap domestic energy — is little understood by mainstream economists. 

Since 2007, China’s debts have quadrupled. According to the IMF, its total debt is now about 234 percent of gross GDP, which could rise to 300 percent by 2022. British financial journalist Harvey Jones catalogues a range of observations from several economists essentially warning that official data might not reflect how bad China’s economy is actually decelerating. 

China’s economic slowdown, moreover, coincides with brewing expectations that Wall Street’s longest running stock market bull run could be about to end soon. 

The study applies the measure of Energy Return On Investment (EROI), a simple but powerful ratio to calculate how much energy is being invested to extract a particular quantity of energy. 

Using this approach to EROI, the study finds that over a period of around three decades (between 1987 and 2012), the value of the energy extracted from China’s domestic fossil fuel base declined by more than half from 11:1 to 5:1.

DYI:  When it comes to China I’ve been predicting an economic calamity similar to our 1930’s over the past 5 years.  How long they can continue these enormous imbalances is admittedly beyond my scope of comprehension.  However, when the collapse does occur a world wide recession will occur.

DYI