On Tuesday junk bonds continued to crash, the price of oil briefly dipped below 28 dollars a barrel, Deutsche Bank was forced to deny that it is on the verge of collapse, but the biggest news was what happened in Japan. The Nikkei was down a staggering 918 points, but that stock crash made very few headlines in the western world. If the Dow had crashed 918 points today, that would have been the largest single day point crash in all of U.S. history. So what just happened in Japan is a really big deal. The Nikkei is now down 23.1 percent from the peak of the market, and that places it solidly in bear market territory. Overall, a total of 16.5 trillion dollars of global stock market wealth has been wiped out since the middle of 2015. As I stated yesterday, this is what a global financial crisis looks like.
Just as we saw during the last financial crisis, the big banks are playing a starring role, and this is definitely true in Japan. Right now, Japanese banking stocks are absolutely imploding, and this is what drove much of the panic last night. The following numbers come from Wolf Richter…
– Global Risk-On Euphoria: Japan’s Nikkei Soars 7.7%, Biggest One Day Move In Seven Years; Futures Surge (ZeroHedge, Sep 9, 2015)
– An Inside Look At The Shocking Role Of Gold In The “New Normal” (ZeroHedge, Dec 5, 2014):
You thought gold was “only” for wealth preservation? You ain’t seen nothing yet.
– BoJ Invisible Hand (Briefly) Rescues Nikkei From Sub-15,000 Plunge (Again) (ZeroHedge, Oct 12, 2014):
UPDATE: That didn’t last long… NKY back under 15k as JPY collapses
Heavy volume selling in Nikkei futures at the open sent the index down over 200 points and broke the oh-so-crucial 15,000 line. It appears – just as in August that 15,000 is the BoJ’s line in the sand as a miracle buyer turned up and lifted the index all the way back to 15,000 (whiule JPY remained lower and US futures saw no bounce). Of course, for those who prefer to ignore the fact that the BoJ is almost the biggest holder of Japanese stocks in the world and bought more stock ETFs than ever before in August, this is a clear signal of BTFD’ers back to save the world. For the rest of the sane rational fact-checking market participants, that ‘know’ the BoJ’s trigger to buy is a weak morning session, we wonder how much of this futures ramp is front-running… that will fade as JPY is not supportive at all.
– Japocalypse Wow – Foreigners Dump Most Japanese Stocks Since 2010 (ZeroHedge, Feb 6, 2014):
It would seem, in the case of momo-chasing levered fast-money flows, that Propertius was correct – “fickleness has always befriended the beautiful…” and Japanese stocks are no longer the once beautiful trend that Abe had promised them to be. A tapering of the US flow; a ripple across the bow of emerging markets; and suddenly Kyle Bass’ sarcastically-named “macro tourists” are running for exits as Shakespeare himself once wrote, “was ever feather so lightly blown to and fro as this multitude.” Historical quotations aside, the last time flow swung so violently negative, the Nikkei ended up losing 55% in the next 18 months. We love the smell of nay-sayers in the morning…
– The Stock Market In Japan Is COLLAPSING (Economic Collapse, Feb 4, 2014):
Did you see what just happened in Japan? The stock market of the 3rd largest economy on the planet is imploding. On Tuesday, the Nikkei fell by more than 610 points. If that sounds like a lot, that is because it is. The largest one day stock market decline in U.S. history is only 777 points. So far, the Dow is only down about 1000 points during this “correction”, but the Nikkei is down more than 2,300 points. The Nikkei has dropped more than 14 percent since the peak of the market, and many analysts believe that this is only just the beginning. Those that have been waiting for a full-blown stock market collapse may be about to get their wish. Japan is absolutely drowning in debt, their central bank is printing money like crazy and the Japanese population is aging rapidly. As far as economic fundamentals go, there is very little good news as far as Japan is concerned. So will an Asian financial collapse precede the next great financial crisis in the United States? That is what some have been predicting, and it starting to look increasingly likely.
What happened to the Nikkei early on Tuesday was absolutely breathtaking. The following is how Bloomberg described the carnage:
– Japan Is Re-Crisis-ing; Nikkei Plunges 300 Points From US Close; S&P’s Dead-Cat-Bounce Dead (ZeroHedge, Feb 4, 2014):
US and Japanese stocks began to fall the moment the bell rang in NYC on the end of the US day-session. By the times futures closed 15mins later, the S&P had already lost 6 points and the exuberance in the Nikkei had snapped back to USDJPY reality (100 points off its highs). As the evening progressed the dead-cat-bounce died with US and Japanese stocks tumbling to day-session lows. Dow futures are down 110 from the highs; S&P futures are down 16 points from the US session highs; and Nikkei futures – not helped by the 19th month in a row of falling YoY base wages – are testing 14,050, having dropped 300 points from the highs and removed all day-session gains. Stocks are re-crisis-ing as USDJPY tests back towards 101.
– Japanese Stocks In Freefall – TOPIX Plunges Almost 5% To 4-Month Lows; Nikkei Down 15% In 2014 (ZeroHedge, Feb 3, 2014):
UPDATE: USDJPY has re-tumbled back below 101.00, recoupling with S&P 500 futures from the tried-and-failed attempt to ramp stocks overnight. It seems the short-JPY-driven carry traders have backed away from risk for now, no matter how much the BoJ primes the pump.
Nikkei futures are under 14,000 and down 15% from Dec 31st highs.
Despite the hope-driven exuberance exhibited immediately post the Abe/Kuroda show, the USDJPY-pumping stock-momentum fest has ended – abruptly. Japan’s Nikkei 225 has lost all its gains and is now trading below US day-session lows (3-month lows) but it is the broader TOPIX index (more akin to the S&P 500) that is collapsing. Down almost 5% on the day (its biggest drop since the May collapse), the TOPIX is at 4-month lows. The TOPIX Real Estate index just hit a bear-market – down 20% from Dec 31st highs. Japanese sell-side shops are in full panic desparation mode as “suggestions” that a sub-14,000 Nikkei will prompt an acceleration of Japan’s QQE money-printing idiocy. This is getting ugly fast.
– USA: Uncle Sam is Dead (ToTheTick on Oct 8, 2013):
Isn’t it wonderful how the US believes (whether that be the citizens or the politicians) that the state will never default on its debt repayments? It’s the unfailing belief that your country will pull through and anyone that says otherwise is always either shouted down or told to go elsewhere. It’s all well and good having the belief that you will come out tops. But, the times of the US being at the top of the roost are well and truly over today. We should be playing the funeral march as Obama leaves office for all the debt that has been piled onto the country rather than the Star Spangled tune. The Stars just aren’t that spangled anymore, are they? Unprecedented debt, a budget that isn’t going to get passed, two sides that are playing a stand-off, a country that is held hostage, a debt rating that will be reduced and the Chinese and the Japanese that are now pointing the reprimanding finger.
When the US defaulted on their payments for their mortgages, they got called into the banks and had their houses repossessed back at the start of the financial crises. They were living on credit then and they still are. Obama should get the first plane to Tokyo and then fly on to Beijing. He will be needing to sign a few papers before he hands over the Good Old US of A to the Asians. Uncle Sam is dying a slow and painful death. A death by debt that has shot through the roof of the White House.
Uncle Sam is dead!
– FOMC Impact So Far: Nikkei -725 Points, Dow -570 Points (ZeroHedge, June 20, 2013):
But, but, but… the rally was all about earnings and fundamentals… not the Fed, right?