Dow down 2,000 points since peak

NEW YORK – The Dow closed Friday up more than 113 points, at 16,314.67, but the index has now lost almost exactly 2,000 points since peaking at 18,312.39 in May.

Mark Snyder, author of the widely followed blog TheEconomicCollapseBlog.com, pointed out in an article posted Friday that over the last 60 days, the eighth largest and the tenth largest single-day stock declines in U.S. history on a point basis have occurred.

Snyder says “stock market wealth is being wiped out all over the planet, and none of the largest global economies have been exempt from this,” with stock markets in the 10 largest economies all declining.

Since China devalued the yuan by 3 percent Aug. 11, the Shanghai Composite Index in China has plummeted nearly 40 percent since hitting a peak earlier this year; the Nikkei in Japan is down 3,000 points from its peak, also this year; one-fourth of the value of German stocks have been wiped out; British stocks are down 16 percent from the peak of the market; French stocks down nearly 18 percent; with large losses in Brazil (down 12,000 points since peak), Italy (down 15 percent), India (off 4,000 points) and Russia (off 10 percent).

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“What we are witnessing is the continuation of a cycle of financial downturns that has happened every seven years over the past 50 years, dating back to 1966,” Snyder writes.

To document this, he lists the following 50-year cycle:

• It started in 1966 with a 20 percent stock market crash.
• Seven years later, the market lost another 45 percent (1973-74).
• Seven years later was the beginning of the “hard recession” (1980).
• Seven years later was the Black Monday crash of 1987.
• Seven years later was the bond market crash of 1994.
• Seven years later was 9/11 and the 2001 tech bubble collapse.
• Seven years later was the 2008 global financial collapse.

Snyder asks of 2015, “What’s next?”

Fed still promising rate rise

One week ago, the Dow suffered a triple-digit loss, closing Sept. 18 under 16,400 over disappointment that the Fed surprisingly refused to raise rates. Sept. 17 marked the 55th consecutive Federal Open Market Committee meeting in which the Fed was unwilling to risk even a modest 25 basis point (0.25 percent) increase in interest rates.

Investors were given another reason to worry this past week when Federal Reserve Chairman Janet Yellen experienced a health scare during a speech, pausing to cough several times before saying she had to stop speaking.

The point of Yellen’s speech was to communicate that the Federal Reserve believes the U.S. economy is strong enough that inflation will return to 2 percent over the next few years, justifying an increase in interest rates before the end of the year.

Increasingly, investors are realizing the Federal Reserve cannot permanently raise stocks either by a Quantitative Easing policy of printing money to purchase U.S. Treasury debt or by the outcome of that policy, keeping interest rates at or near zero to stimulate the economy.

In an analysis published last week, Guy Haselmann, the director of Capital Markets Strategy for Scotiabank, openly acknowledged the double-digit average returns of 15 percent or more experienced in the S&P index from 2009-2014 were not driven by economic activity but rather by “massive global central bank actions” centered on printing money to pump liquidity into bank reserves.

John Williams, author of the widely read economic blog ShadowStats.com, said in his current subscription newsletter that business activity “has continued to falter since late 2014, with the stagnant, non-recovering U.S. economy increasingly turning anew to the downside.”

“ShadowStats continues to contend, however, that the current weakness in broad activity remains nothing more than a renewed down-leg in the broad economic collapse and downturn into 2008 and 2009,” he said. “There never was an actual recovery from that downturn.”