The deflation monster was evident across the global markets today, and the possibility of a market crash remains as high as ever.
During the overnight futures session on Monday night and into Tuesday morning, Dow futures were up as much as +276 points from the close on Friday, while the S&P 500 futures were up as much as +32.50. Both indexes closed well down from those levels, slightly in the green but essentially flat.
And that level of flatness was only because of a pronounced (and all-too typical) push from deeply red territory towards green during the last hour of trading. You know my feelings on those last hour pushes towards green….that’s when the market spin-doctors show up in force to paint a rosier picture.
In the overnight session on Tuesday, everything fell apart. As of this writing at 8:30 a.m. on Wednesday morning things are looking decidedly ugly:
- Dow futures down -268
- S&P futures down -30.25
- Oil futures (March) down -0.83 at $28.75
- Ruble at record lows
- Mexican peso at record lows and biggest loser in Latin America
- South African Rand near record lows
- FTSE index (UK) -3.03%
- DAX (Germany) -2.49%
- CAC 40 (France) -3.14%
- Nikkei (Japan) -3.71%
- Hang Sen (Hong Kong) -3.82%
- SSE Comp (China) -1.03% (and that’s with heavy lifting by government)
That right there is the tracks of the deflation monster stomping across the world stage. While a retreat into bonds (safety) has happened, that’s just the normal first reaction to such a terrible financial situation. However, those bonds will prove to be roach motels as the next stage of this monster will be massive bond defaults of all varieties. More on that later…
Worrying Financials
In 2008, the worry spot was the financial sector. If you were tracking those compnaies, especially the money center banks and insurance companies, you got an excellent warning of what was coming. This time the press is stuffed full of articles about how this downturn is nothing like 2008 because the banks are all so much less leveraged and with far better capital positions.
Like this one:
The biggest financial firms aren’t supposed to trade like penny stocks.
by nigel 
