We have subscribers to this newsletter from many different countries in the Americas, Europe, Africa and Asia. So today, we will discuss critical developing market situations all around the world.
As our offices are located in Singapore, consequently, sometimes people ask us, “When you discuss global stock markets, why do you concentrate on US stock markets in your commentary?” The simple answer is because by market cap, the US stock market dwarfs all other major global markets. For example, as of May, earlier this year, the NYSE and NASDAQ market cap was still more than 2.5 times the combined market cap of the Chinese Shanghai Stock Exchange and Shenzen Stock Exchange, though with the recent collapse of Chinese stock markets and the incessant US Central Banker artificial support of the US stock market, this margin has just grown a lot larger than 250%. The next largest stock exchange after this, in Tokyo, is absolutely dwarfed by the US exchanges, at less than 1/5th the market capitalization. In fact, as absurd as this may sound, the US stock market is so inflated right now that single US company stocks have larger market caps than the entire market cap of other country’s stock exchanges. For example, Intel has a market cap equivalent to 100% of Russia’s entire stock market, Wells Fargo bank’s market cap is larger than the entire market cap of India’s stock market, General Electric’s market cap towers over the entire market cap of Brazil’s stock market, and Johnson & Johnson’s market cap falls just short of equaling South Africa’s entire market cap.
USA
So what happens in the US stock market can cause contagion in the entire world and vice versa as we just witnessed the PBOC’s decision to severely devalue the Yuan introduce turmoil into global markets.
As I stated, I still firmly believe that shutting down the NYSE for nearly four hours on 20 July 2015 was a hockey save of the US stock markets that day. We saw the same intervention and save this past Wednesday in US markets when, upon the second consecutive day of PBOC Yuan devaluation, US markets started to significantly sell-off and the S&P 500 index fell below a critical 200-day SMA support level, when miraculously, “someone” started buying again to affect the largest turnaround in the S&P 500 index in over 4 years. And who was this “someone”? According to ZeroHedge, it was Goldman Sachs bankers, working on behalf of their corporate clients that furiously bought back corporate shares to stop any developing threat of a rapid decline in US stock markets since 20 July 2015. Again, this is the same share buyback policy that huge US corporations have been using to levitate their share prices by shrinking the denominator in the earnings per share equation to magically create “growth” in EPS when no real organic growth has occurred at all and revenues are really dropping.
However, the US stock markets, because of these endless shenanigans to prop them up, will have their day of reckoning, when the saying “everything is fine until it isn’t” will suddenly and rapidly become very relevant after being irrelevant for months. The saying “everything is fine until it isn’t” definitely reared its head in the Chinese stock markets in the month of June as for months prior to the 35% to 40% collapse in their major market indexes, the same narrative was told by politicians and bankers in China as is being told in the US in the media – “Everything is okay, so don’t worry and keep your money in the US stock markets.” The truth of the matter is that the retail investor is entirely irrelevant in the US stock market while only institutional and Wall Street money move markets in the US while the retail investor executed the lion’s share of trading in Chinese markets. This is why a retail investor panic resulted in a stock market crash in China in June while a retail investor panic in US stock markets wouldn’t even register a blip. However, eventually these market manipulations will fail in the US based on sheer exhaustion from fighting constant downward tendencies as the tremendous up and down volatility evident in US stock markets this year is an obvious sign of structural weakness that I believe will break down within the next 45 to 90 days.
ASIA
With the PBOC deliberately weakening the Yuan after stating on the first day of currency devaluation that it was a “one-time” event that has now evolved into a “three-time” event that has now devalued the Yuan to the lowest valuation against the USD in four years in a matter of just three days, expect further devaluation of other Asian currencies including the Thai baht, the Indonesian rupiah, the Vietnamese dong, the Indian rupee, the Korean won, and even in the currencies of more stable nations like the Japenese yen, Hong Kong dollar and the Singapore dollar. In fact, I expect the Thai baht to devalue to the 40 baht to USD exchange rate over the next 6 to 12 months, a rate not seen since 2005, over a decade ago. So plan accordingly if you live in any SE Asian nation.
GREECE
Below, we provided a three step program for Greece to exit the current disastrous path on which Syriza has placed the entire nation by accepting a third bailout from draconian troika bankers (unless of course, Syriza is holding another plan close to their chest and not revealing it at this time). Already reports have been emanating from Greece of many Greek citizens rejecting the Euro for alternative currencies. However, there should only be one currency they revert to, and that is either physical silver and/or physical gold.
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