Best of the Week
Most Popular
1.Dow Stock Market Trend Forecast 2015 by Nadeem Walayat - Nadeem_Walayat
2.Gold And Silver – Forget The News. Silver $12 – 14? Gold $1,000 – 1,100? 5 - Michael_Noonan
3.A TOP Formation In Apple Inc. - Crash Condition Signal Recorded - David Harris
4.Gold Gets Safe Haven Bids But COMEX Has Stopping Power - GoldSilverWorlds
5.The Swiss 10-Year Bond Illustrates Central Banks` Flawed Monetary Policy - EconMatters
6.Exponential Explosions in Debt, the S&P, Crude Oil, Silver and Consumer Prices - DeviantInvestor
7.“Forgive Us Our Debts” – Only Way To Prevent Economic Meltdown - GoldCore
8.Is Russia Planning a Gold-Based Currency? - Marcia Christoff-Kurapovna
9.Stock Market Trend Forecast 2015 Video - Nadeem_Walayat
10.Gold GDX ETF Technical Analysis - Austin_Galt
Last 5 days
"Audit the Fed"? We've Already Done That (Well, Kind of) - 26th Feb 15
Forget Peak Oil; Worry About Peak Demand - 26th Feb 15
Currency Wars, Again - 26th Feb 15
The Fed Waited Too Long: Here Comes Inflation - 26th Feb 15
Investing Inertia Won’t Keep Your Cash Safe - 26th Feb 15
The Net Neutrality Scam - 26th Feb 15
Will Conservatives Out of Control Immigration Crisis Boost UKIP Election 2015 Prospects? - 26th Feb 15
EU Warns Ireland and Euro Zone of Debt Dangers - 26th Feb 15
Commodity Prices Set To Plunge Below 2008 Lows - 26th Feb 15
Ukraine Hyperinflation as Currency Plunges 44% in One Week! - 26th Feb 15
The State of the Global Markets 2015 - 53 Page Report - 26th Feb 15
NASDAQ New 15 Year High - Stock Market Death By Overdose - 25th Feb 15
12 Reasons Why Barry Ritholtz and Many UK Experts Are Mistaken On Gold - 25th Feb 15
Sugar Commodity Price To Sweeten Up - 25th Feb 15
Investor Profits from China 2,000-Year Unstoppable Trends - 25th Feb 15
How to Borrow Cheaply from a Government-Owned Bank - 25th Feb 15
Debt Be Not Proud - 25th Feb 15
Liberal Democrat Election Blood Bath - Could Nick Clegg Lose Sheffield Hallam? - 25th Feb 15
Wheat Commodity Price Technical Trend Forecast - 24th Feb 15
Bitcoin Price Might Stay below $250 - 24th Feb 15
Another Important Stock Market Inflection Point Approaching - 24th Feb 15
Gold: The Good, Bad, and Truly Ugly - 24th Feb 15
Eurozone Gold Holdings Increase to 10,792 Tonnes As “Reserve of Safety” Amidst Crisis - 24th Feb 15
Bird Doo; Yellen Goes to Congress - 24th Feb 15
Is Gold Investing Risk Free? - 24th Feb 15
The Bull Case For Gold Price 2015, and the Bear - 24th Feb 15
Europe - The Intersection of Three Crises - 24th Feb 15
Gold Price Just Needs More Time - 24th Feb 15
Gold Price Downtrend Looks Set to Continue - 23rd Feb
Silver Price Depressing Downtrend Will Eventually End - 23rd Feb 15
5 Reasons Why You Should Sell Amazon Stock - 23rd Feb 15
Global System Catastrophe Is Key Threat To Human Civilisation - 23rd Feb 15
Greece Crisis Yields Ideal Market Opportunities - 23rd Feb 15
Gold and Silver Stocks or General Stock Market Indices? - 23rd Feb 15
Swimming With Sharks: Goldman Sachs, Schools and Capital Appreciation Bonds - 23rd Feb 15
Stock Market - The Fed Still Has Your Back - 23rd Feb 15
Soybean Commodity Price Technical Outlook - 23rd Feb 15
Gold Weekly COTs and More - 23rd Feb 15
Stock Market New Highs With Weak Breadth - 23rd Feb 15
Greece Surrenders to Troika - 22nd Feb 15
This Greek Tragedy is a Global Farce - 22nd Feb 15
Copper Commodity Price Technical Outlook - 22nd Feb 15
U.S. Dollar and Investing in Gold Stocks - 22nd Feb 15
Is Putin's Russia Ready For Total Economic War With the West? - 22nd Feb 15
Stock Market New All Time Highs - 22nd Feb 15
Dow New Stock Market All time High as Greece Surrenders to Germany - 21st Feb 15
Gold And Silver – Banker’s Grip On Precious Metals Not Over! - 21st Feb 15
What Uber Could Teach the American Economy - 21st Feb 15
The Morris Massey Stock Market - 21st Feb 15
Are Conditions Setting The Market Up For A Summer Washout? - 21st Feb 15
The Seven Financial Indicators of Highly Successful Biotech Stocks Investing - 21st Feb 15
Varoufakis’s Revolutionary Plan for Europe - Don't Tell Anyone in Berlin - 20th Feb 15
South Korea’s Keynesian Experiment Goes Global - 20th Feb 15
How Germany Can Save Greece and the EU - 20th Feb 15
Beware the Stocks Bear Market! - 20th Feb 15
Gold Bides Time – Massive Complacency Regarding Ukraine, Greece and Debt Crisis - 20th Feb 15
The Simplest Long-Term Investment Strategy You'll Ever See - 20th Feb 15
Greece Crisis - Germany Rejects Greek Trojan Horse Bridge Financing Loan Con - 20th Feb 15
UK Political Party Funding Suggests Another ConLib General Election Outcome 2015 - 20th Feb 15

Free Instant Analysis

Free Instant Technical Analysis


Market Oracle FREE Newsletter

The State of the Global Markets 2015

China Trigger for Key American Stock Market Indices Collapse?

Stock-Markets / Financial Crash Aug 01, 2013 - 12:18 PM GMT

By: Profit_Confidential

Stock-Markets

Michael Lombardi writes: Why do only a few in the media and no politicians I can find seem to care about the warning bells being issued by the Chinese economy?

First, early this year, we heard the Chinese economy is going to grow at an embarrassingly slow pace in 2013 compared to its historical average. Forget a 10% economic growth rate and think seven percent or lower!


Now, we hear about more troubles…

Think the Detroit bankruptcy was bad news?

Local governments in the Chinese economy have piled up a huge sum of debt, and the central government is warning cities to manage their escalating debt.

China’s National Audit Office (NAO) announced this week it will be conducting a nationwide audit to assess the situation on local government debt. The reason for this? In 2010, the NAO found local governments in the Chinese economy owed 10.7 trillion yuan. Fast-forward to June of this year, and it turns out the number is about 12 trillion yuan. (Source: Xinhunet, July 28, 2013.)

Why does it matter to North American investors?

The Chinese economy is the second largest in the world; the U.S. is the largest. Economic issues in China will surely send “waves” towards us.

Still worried about the economy? Become a charter member of DAILY PROFITS

and you could...TRIPLE YOUR MONEY IN A MONTH! Learn how here!

Dear reader, after the financial crisis, the developed countries in the global economy never really showed robust growth. This caused companies in the key stock indices to focus on emerging markets—they showed demand, and the Chinese economy was one of their main destinations.

As the economic slowdown deepens in China, and with possible credit issues in the country, it’s very likely that American companies in key stock indices that are operating in China will see their corporate earnings negatively affected.

I consider problems in the Chinese economy a major risk to the rising North American key stock indices.

Michael’s Personal Notes:

As talk of the Federal Reserve pulling back on its quantitative easing program continues, the housing market is starting to show signs of stress, confirming my belief that the so-called housing market recovery was held up by the easy U.S. monetary policy.

The announcement several weeks back from the Federal Reserve that it may taper its $85.0-billion-a-month money printing project caused mortgage rates to jump—and the higher rates are starting to affect home buyers. The Pending Home Sales Index, which measures contracts to purchase homes by home buyers, declined 0.4% in June. (Source: National Association of Realtors, July 29, 2013.) If we had a true housing recovery, that number would be in the double digits.

But there is more…

The Mortgage Bankers Association (MBA) expects Freddie Mac mortgage rates to average 4.4% in the third quarter of this year and 4.7% in the fourth quarter. (Source: Mortgage Bankers Association, July 25, 2013.) This essentially means the housing market will become less affordable for those who are looking to enter it.

And the prices of homebuilder stocks have been collapsing since mid-May. Below is the chart of the Dow Jones U.S. Home Construction Index. Just look at the dive in the index since mid-May and how far down it is for the year. This suggests the housing market isn’t as strong as it seems.


Chart courtesy of www.StockCharts.com

The reality of the matter is that the typical home buyer who actually buys a house to live in is under scrutiny. The pages of Profit Confidential have been filled with the troubles these home buyers face…and recent third-party surveys are reaching the same conclusion.

In fact, a survey by the Associated Press found four out of five Americans are struggling with poverty and unemployment, and have had some form of reliance on welfare. (Source: Associated Press, July 28, 2013.) That means 80% of Americans are financially struggling.

Until the average American Joe starts to see his pocket grow, the housing market can’t go much further. There is only so much buying of empty houses that financial institutions can undertake. Millions of Americans live today in homes with negative equity.

I remain skeptical about the so-called housing market recovery. I won’t be surprised to see a further downtick in the number of home buyers entering the housing market as interest rates rise and the Federal Reserve moves towards normalizing the monetary policy.

Where the Market Stands; Where It’s Headed:

As the month of July comes to a close, both the Dow Jones Industrial Average and the S&P 500 are sitting at the same level they did in the third week of May. Hence, stock prices have gone nowhere over the past 11 to 12 weeks.

On a fundamental basis, stocks are overvalued.

The Dow Jones trades at 16.4-times earnings. Corporate profit growth is no longer what it used to be. The double-digit growth in quarterly profits that we saw almost every quarter starting in 2009 ended in the third quarter of 2012. We have now witnessed three quarters in a row where earnings growth has collapsed and revenue growth is marginal.

A phenomenon few are talking about: for the first time in years, the yield on a 10-year U.S. Treasury (2.6% as of this morning) is higher than the dividend yield on the Dow Jones Industrial Average (currently 2.3%). Why buy stocks when you can buy government-guaranteed T-bills that pay you more?

World economic growth is slowing. The chances of a “surprise” U.S. recession are high. All the money printing in the world cannot force consumers to spend more unless that newly printed money makes its way directly into the pockets of consumers—which isn’t happening.

I continue to believe that the stock market rally we’ve experienced since 2009 is a direct result of the biggest money printing program in U.S. history. But unlike others, I don’t think the Fed can pull back on its $85.0-billion-a-month printing program that easily. In the end, it will be rapid inflation, created by all this money printing, that pushes the value of the U.S. dollar down, pushes interest rates higher, and pushes the stock market much lower.

Source -http://www.profitconfidential.com/stock-market/china-the-trigger-to-collapse-key-american-stock-indices/

Michael Lombardi, MBA for Profit Confidential

http://www.profitconfidential.com

We publish Profit Confidential daily for our Lombardi Financial customers because we believe many of those reporting today’s financial news simply don’t know what they are telling you! Reporters are trained to tell you the news—not what it can mean for you! What you read in the popular news services, be it the daily newspapers, on the internet or TV, is the news from a “reporter’s opinion.” And there’s the big difference.

With Profit Confidential you are receiving the news with the opinions, commentaries and interpretations of seasoned financial analysts and economists. We analyze the actions of the stock market, precious metals, interest rates, real estate and other investments so we can tell you what we believe today’s financial news will mean for you tomorrow!

© 2013 Copyright Profit Confidential - All Rights Reserved
Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors.


© 2005-2015 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in

Free Report - Financial Markets 2014