Why Stocks Are Falling

As the eight year old bull on Wall Street is slaughtered for its meat, several questions come to mind. Is the fall likely to continue? Where will it stop? And, for those on the sidelines looking to score political points, who is to blame?

The answers to these questions are easy and a little terrifying. Yes, this is going to go on for a while. It may not stop until a lot of money is lost. And while you can’t blame anyone for actions which are cyclical, you can blame those who make things worse. The US economy is a large engine, and any good mechanic knows that while you can do a few small, smart things to make it run better it is much easier to really screw it up.

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Forcing Investment

The dust is settling. After the various panics that rocked the early part of the year, mainly due to a slow-down in China and the developing world as a whole, Brexit put another shock to the system. Markets panicked and everyone became even more risk averse. But with just a little bit of time we can see that even more than we predicted at the start of the 2016 one thing has become obvious by mid-year – the United States is the only solid place for any kind of investment in the world.

It’s still a tough fight to get the money to where it does the most good, at the risky start-up end of the economy. And there are plenty of signs of fear running amok more generally, expressed in the price of gold. But there is little doubt that the US is the place to be – all the moreso with Brexit.

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Risk Aversion

The economic news out of most of the world points to a continued, if not new, slowdown. Japan is going nowhere, Europe may be shrinking, China is bleeding capital, and the rest of the world is hanging on. The only place there is good news is here in the US where … there was a net slowdown in the number of jobs gained in May. None of this looks good.

For everyone outside the US, it doesn’t. But most of that money from China is coming to the US – or, more accurately, coming back. Why aren’t things looking up?

Global instability doesn’t help anyone, which is why the Fed stopped raising rates. We can’t go it alone anymore, not in this inter-connected world. It spooks everyone to see this much risk. Yet there is still reason to believe that the US, alone, will see a period of higher growth by the end of the year. It’s all about that money coming back – and when it gets put to use.

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Spatters of Dragon Blood

The “Panama Papers” were a delight for conspiracy theorists, who have long contended that the global monetary system is fundamentally corrupt and that world leaders are skimming huge amounts of money off the top of it. They are, of course, correct.

But lost in the salacious details of the story has been the real business of Mossack Fonseca, which is moving money out of China. We’ve covered this story before when the official estimates were that half a trillion left China last year alone. That number, it turns out, was off by at least as much again – and possibly much more.

At least a trillion dollars left China last year through a wide variety of creative means. Mossack Fonseca’s offices in Hong Kong handle a third of their total business, moving money around the globe through over 60k shell companies at an incredible pace. How much? That’s the multi-trillion dollar question.

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No More Games

With the Superbowl done, the nation settles in to the depths of Winter. This has been a hard time of year for many reason, not just the sudden end of football. The last few years have been harder to take than what the Panther fans are feeling about now.

This year? It may yet be worse, according to prognosticators. Then again, the worst may be over. Let’s update last year’s big stories to see how this year is coming along to see if there’s reason to hope.

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