The credit markets of the world are signalling severe distress. The overnight LIBOR rate (off which all credit instruments are relatively priced) yesterday shot to an incredible 6.5%:
Today the yield on US T-bills plunged to the lowest levels since at least 1954 as global funds piled into US Treasuries for relative shelter from the global storm. (This means that those already holding US T-Bills made money today.)
People who are shocked at the run back to the US dollar are not apparently aware of the relative risk in other emerging economies around the world. Russia, with its stock market now down 65%, today closed its exchange, suspending trading indefinitely. Also see Meltdown in Moscow.
China's stock market is down more than 70%. And every other world market has done horribly too. So much for the new economy. So much for international “deworsification”. Terror has officially gone global. And so it should.
We live in a global economy which was happily coupled during the credit-juiced super-expansion from 2002-2007. Those who hoped the downturn could be “decoupled” have learned the truth about global markets the hard way. Having watched this train a' coming for many months now, my only surprise was how relatively well and long North American stock markets have held up to date. Yes I do mean they have held up relatively well. I know they are all down more than 20%, but as credit markets are suggesting, the extent of the down channel here is probably quite a but more. Presently we are watching to see if the 10,000 mark for the Dow and the TSX may prove some support. Time will tell.
Today the VIX spiked to a new high of 38. But it is likely to hit 45 at true capitulation, some point ahead. The recent “belief” that asset prices are wildly over-valued is finally taking its toll. Finally we are getting on with the long over due “adjustment.” This will be healthy in the end.
Remember that surviving to the end and having cash ready to go down the road for buys are the number one goals here. It is not too late to defend your capital.
None of this was unpredictable, or impossile to see. Don't believe the investment sales world when it tells you that everyone has been taken unaware. I am just very sorry for all the people who are losing big chunks of their savings again.
Cory’s Chart Corner
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