I found a lot of similarity's between this crash and the 2008 financial crisis stock market crash.
Quick TA summary:
1. We have the same kind of downwards parallel channel
2. The chart of the 2022 crash so far fits pretty well into the 2008 crash, the chart of the 2008 crash fits pretty well into today's chart.
Quick Fundamental summary:
There are so many reasons why the economy could have a meltdown. I wrote about it last year in November in my previous post, but there are other things to talk about now:
1. The FED changing the definition of a recession. The US GDP came in at -0.9% for Q2, which is the second consecutive quarter in a row that the FED published negative GDP growth. Here is how we actually define a recession, like we have always done: "Experts declare a recession when a nation’s economy experiences negative gross domestic product (GDP), rising levels of unemployment, falling retail sales, and contracting measures of income and manufacturing for an extended period of time. Recessions are considered an unavoidable part of the business cycle—or the regular cadence of expansion and contraction that occurs in a nation’s economy". I mean come on guys, these terms/indicators exists so that governments and central banks can change their policy's on time. But instead of actually changing their policy to a recession policy, they simply deny the recession and even try to change the definition of it. We have heard the "this time is different" enough times and it has so far always lead to real problems. This has to do with the fact that there are going to be new elections soon, so denying the recession is a convenient thing for them to do.
2. The biggest drop in Average and Median New US Home prices since 2008.
April Median: $457,000 and June Median: $402,400 this is a decline of 11.95% in the past 2 months.
April Average: $569,300 and June Average: $456,800 this is a decline of 19,76% in the past 2 months.
3. 40% of Americans Are Struggling to Pay Their Bills Right Now.
"More Americans are struggling to pay their bills now more than any other time in 2022 — and possibly even since the pandemic began.For more than 91 million U.S. adults, affording typical household expenses is “somewhat difficult” or “very difficult,” according to data released this week by the Census Bureau.
That accounts for 40% of the Americans who responded to the bureau's survey between June 29 and July 11. (If you include folks who took the survey but did not respond to that particular question, the portion is 36%.)"
4. Unfortunately inflation is not coming down, even though the FED is raising it's interest rates pretty aggressively. They told us that inflation was going to be temporary, but it wasn't. They have clearly underestimated the situation.
5. 80% of all US dollars in existence were printed in the last 22 months (from $4 trillion in January 2020 to $20 trillion in October 2021 (honestly what were they thinking, this isn't monopoly guys...)
6. US OIL en UK OIL have both dropped below $100. Every time this has happened we have gone into a recession, and most of the time the stock market had pretty significant losses.
Gasoline prices are still abnormally high, as you noticed when you are refilling your car with fuel.
7. A lot of company's have been beating their EPS lately. However the expectations for EPS are like half of what the company's had been reporting from 6 to 9 months ago.
8. We are heading into September next month, which is statistically the worst month for stocks. The biggest crashes have happened in November. PE ratio's are still high so they have to come down.
As of 4:00pm EDT Fri Aug 5, The current Shiller PE Ratio is 31.10.
Mean: 16.96
Median: 15.88
As you can see we still have a long way down to go...
9. Food shortages for the following products:
(1). Chickpeas
2. Wheat
3. Sugar
4. Avocados
5. Paper Goods
6. Canned Goods
7. Eggs and Meat
8. Pet Food
9. Baby Formula
10. Liquor
Why Are These Items in Short Supply?
"It’s because of labor shortages and supply-chain issues, from food manufacturers to grocery stores. There simply aren’t enough people to “make the goods, move the goods and sell the goods,” says Jim Dudlicek, a representative for the National Grocers Association. According to Parade, the recent invasion of Ukraine by Russia plays a role, with supply chains from Europe heavily disrupted. Labor shortages also continue, with people still out due to COVID-19 or resigning due to low wages and poor work conditions.
In addition, supply is affected by more people cooking and eating at home, a trend that started at the onset of the pandemic. “Demand has been very, very high,” Denis says. Still, she doesn’t think there’s a reason for people to stockpile. She pointed to lumber as an example of a product that was extremely hard to get for a while, but has become more plentiful in recent months, and the food supply chain likely will rebound in a similar fashion, although it may take time."
10. Micheal Burry wrote: "Dead cat bounces are the most epic.
12 of the top 20 nasdaq 1-day rallies have happened during the 78% drop from 2000's top.
9 of the top 20 S&P500 1-day rallies happened during the 86% drop from the 1929 top.
Micheal Burry also wrote:
RE: paradigm shifts/speculative peaks, the SP500 bottomed 13% lower than 2002's bottom in 2009,
17% lower than 1998's LTCM crisis low in 2002, and 10% lower than 1970's low in 1975.
15% lower than the COVID low is SPX at $1862. - Shiller PE of 16, nominal PE of 9. In historic range.
Quick TA summary:
1. We have the same kind of downwards parallel channel
2. The chart of the 2022 crash so far fits pretty well into the 2008 crash, the chart of the 2008 crash fits pretty well into today's chart.
Quick Fundamental summary:
There are so many reasons why the economy could have a meltdown. I wrote about it last year in November in my previous post, but there are other things to talk about now:
1. The FED changing the definition of a recession. The US GDP came in at -0.9% for Q2, which is the second consecutive quarter in a row that the FED published negative GDP growth. Here is how we actually define a recession, like we have always done: "Experts declare a recession when a nation’s economy experiences negative gross domestic product (GDP), rising levels of unemployment, falling retail sales, and contracting measures of income and manufacturing for an extended period of time. Recessions are considered an unavoidable part of the business cycle—or the regular cadence of expansion and contraction that occurs in a nation’s economy". I mean come on guys, these terms/indicators exists so that governments and central banks can change their policy's on time. But instead of actually changing their policy to a recession policy, they simply deny the recession and even try to change the definition of it. We have heard the "this time is different" enough times and it has so far always lead to real problems. This has to do with the fact that there are going to be new elections soon, so denying the recession is a convenient thing for them to do.
2. The biggest drop in Average and Median New US Home prices since 2008.
April Median: $457,000 and June Median: $402,400 this is a decline of 11.95% in the past 2 months.
April Average: $569,300 and June Average: $456,800 this is a decline of 19,76% in the past 2 months.
3. 40% of Americans Are Struggling to Pay Their Bills Right Now.
"More Americans are struggling to pay their bills now more than any other time in 2022 — and possibly even since the pandemic began.For more than 91 million U.S. adults, affording typical household expenses is “somewhat difficult” or “very difficult,” according to data released this week by the Census Bureau.
That accounts for 40% of the Americans who responded to the bureau's survey between June 29 and July 11. (If you include folks who took the survey but did not respond to that particular question, the portion is 36%.)"
4. Unfortunately inflation is not coming down, even though the FED is raising it's interest rates pretty aggressively. They told us that inflation was going to be temporary, but it wasn't. They have clearly underestimated the situation.
5. 80% of all US dollars in existence were printed in the last 22 months (from $4 trillion in January 2020 to $20 trillion in October 2021 (honestly what were they thinking, this isn't monopoly guys...)
6. US OIL en UK OIL have both dropped below $100. Every time this has happened we have gone into a recession, and most of the time the stock market had pretty significant losses.
Gasoline prices are still abnormally high, as you noticed when you are refilling your car with fuel.
7. A lot of company's have been beating their EPS lately. However the expectations for EPS are like half of what the company's had been reporting from 6 to 9 months ago.
8. We are heading into September next month, which is statistically the worst month for stocks. The biggest crashes have happened in November. PE ratio's are still high so they have to come down.
As of 4:00pm EDT Fri Aug 5, The current Shiller PE Ratio is 31.10.
Mean: 16.96
Median: 15.88
As you can see we still have a long way down to go...
9. Food shortages for the following products:
(1). Chickpeas
2. Wheat
3. Sugar
4. Avocados
5. Paper Goods
6. Canned Goods
7. Eggs and Meat
8. Pet Food
9. Baby Formula
10. Liquor
Why Are These Items in Short Supply?
"It’s because of labor shortages and supply-chain issues, from food manufacturers to grocery stores. There simply aren’t enough people to “make the goods, move the goods and sell the goods,” says Jim Dudlicek, a representative for the National Grocers Association. According to Parade, the recent invasion of Ukraine by Russia plays a role, with supply chains from Europe heavily disrupted. Labor shortages also continue, with people still out due to COVID-19 or resigning due to low wages and poor work conditions.
In addition, supply is affected by more people cooking and eating at home, a trend that started at the onset of the pandemic. “Demand has been very, very high,” Denis says. Still, she doesn’t think there’s a reason for people to stockpile. She pointed to lumber as an example of a product that was extremely hard to get for a while, but has become more plentiful in recent months, and the food supply chain likely will rebound in a similar fashion, although it may take time."
10. Micheal Burry wrote: "Dead cat bounces are the most epic.
12 of the top 20 nasdaq 1-day rallies have happened during the 78% drop from 2000's top.
9 of the top 20 S&P500 1-day rallies happened during the 86% drop from the 1929 top.
Micheal Burry also wrote:
RE: paradigm shifts/speculative peaks, the SP500 bottomed 13% lower than 2002's bottom in 2009,
17% lower than 1998's LTCM crisis low in 2002, and 10% lower than 1970's low in 1975.
15% lower than the COVID low is SPX at $1862. - Shiller PE of 16, nominal PE of 9. In historic range.