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A Bold Prediction

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We’ve been talking about the stock market this week, so why not end it with a bold prediction: Once the federal debt ceiling is raised, look for the stock market to utterly tank within two weeks, certainly within a month.

While there are many reasons why the market is taking at least a pause if not slouching towards a correction, the most important is the appetite for government debt. A time like this requires careful management and attention to consequences. We’re not getting it. What we have instead is mismanagement on an epic scale that will certainly spook the market and ultimately kill it.

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Where Do Stocks Go Now?

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Stocks appear to have stabilized after a rough week. But several questions remain. Was this a one-time shock event, or is it a correction? And if it’s a correction, how low can things go?

We can be sure that what has happened so far is not an isolated event, but part of a major change in the regime from loose, cheap money to a more normal economy. Corporate profits are high, and America is taking care of business, so there’s no apparent reason to be terribly afraid.

Yet the change is significant, and precisely how significant will not be clear for some time. Here is what to watch for as stocks and other markets absorb the change and make a transition into a new economy.

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Why Stocks Are Falling

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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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Twitter Must Die! (and it will)

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Twitter is dying. Or perhaps it is already dead, it’s hard to say. The stock has rallied lately, anticipating a buyout by …. someone. Google just said they aren’t interested, and who can blame them? The company has never been profitable and has never found its niche.

It is still handy if you want to know what Trump is thinking around 3AM, if you are into that kind of thing. CNN still relies on twitter for feeds from ordinary people for some reason. But for all of this, there was never anything resembling an actual revenue model and never any attempt to find a way to organize the firehose of information that blasts at you once you reach a certain number of users.

I have no use for it, and I don’t know anyone who does. Will it go away?

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Risk Aversion

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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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