The Dow plunged nearly 832 points on Wednesday, the third-worst point decline in history
Bursa plunges at opening in face of global weakness
Bursa Malaysia extended its losses at the opening today in line with Wall Street’s weaker performance overnight on concerns over global growth prospects.
At 9.20am, the benchmark FTSE Bursa Malaysia KLCI (FBM KLCI) reduced 41.45 points to 1,693.73 from 1,735.18 yesterday. The key index opened 35.42 points weaker at 1,699.76.
The US market plunged overnight following a sharp decline in technology counters amid concerns over rising interest rates. Similarly, European stocks suffered huge losses led by technology and mining counters.
Dow falls 832 points in third-worst day by points ever
The Dow plunged nearly 832 points on Wednesday, the third-worst point decline in history.
All 30 Dow stocks were in the red, sending the index below 26,000 points for the first time in a month. The index fell by more than 3%.
The S&P 500 posted its fifth straight decline, plummeting nearly 3.3%. And tech stocks got hit particularly hard. The Nasdaq dropped more than 4% in the worst percentage decline since June 2016.
International markets followed the downward trend. The Nikkei was down more than 3% in morning trading Thursday.
Stocks are in the midst of a scary October slump, sliding sharply because investors are worried about rising interest rates.
October has often been a nerve-racking month for investors, and this month is living up to that reputation. All three indexes are in the red this month. But the Nasdaq has really taken it on the chin: It has plunged nearly 8% already in October.
The Dow’s point decline was the worst since February, when the index fell by more than 1,000 — twice. The Dow’s percentage decline doesn’t crack the top percentage declines. The index fell 23% in 1914 and on “Black Monday” in 1987.
The Technology Select Sector SPDR Fund, a proxy for the tech sector, plunged 4.85%. That hadn’t happened since August 2011.
The beginnings of another financial crisis are already in motion – and it will be worse than the global meltdown of 2008.
That’s the opinion of one of the select band of economists who predicted the 2008 economic collapse, which started with the bankruptcy of Lehman Brothers bank a decade ago and ended up affecting every country in the world.
Ann Pettifor predicted that crisis in 2006, more than two years before it actually struck.
Now she thinks the global economy is in danger once more thanks to huge corporate debt, and the prospect of rising interest rates in the United States.
She told Sky News that global debt was now more than three times the level of global GDP.
“So naturally it is not going to be repaid, and naturally there is going to come a point when that debt triggers the next crisis. And, for me, that trigger is going to be high rates of interest,” she said.
“We’re seeing that companies who borrowed too much money at very low rates of interest are now finding the value of their collateral falling. Their debt is rising and the interest on that debt is rising too.”
What’s more, she thinks the process has already started.
She said: “I think it will be worse than the last crisis because we don’t have the tools. It will be really difficult to start pumping out quantitative easing, buying back all those assets.
“Already the new crisis has begun to roll.”
Her warning is echoed by others.
In an exclusive interview, Tom Russo, former managing director of Lehman Brothers, told Sky News “the seeds of the next crisis are probably already being watered right now”.
He puts the focus on the process of leverage – a measure of corporate debt.
“I think it’s probably going to be the same fundamental issue of leverage that we had 10 years ago,” he said.
“We have a national GDP of $20tn, but debt of $21tn. Our national debt is growing by $1tn per year.
“We keep on promising things to people without the means to pay for it. It will just become harder and harder to deal with it.”
Next Global Financial Crisis Will Strike In 2020, Warns Investment Bank JPMorgan
The next global financial crisis will begin in 2020, according to experts at investment bank JPMorgan.
Analysts say the recession in two years’ time will be less damaging than the 2008 crash, which saw markets plunge worldwide and has been described as the worst in history.
It is predicted that US shares could drop by 20 per cent, well below the 54 per cent tumble in the S&P 500 index a decade ago.
Bigger falls would be seen in energy prices, the value of base metals and shares in emerging markets, such as Brazil, Russia, India and China.
JPMorgan strategists John Normand and Federico Manicardi described this scenario as “probably unalarming” relative to the average of past crises, according to a Bloomberg report of the analysis.
Their analysis is based on a model that takes into account the length of the economic expansion, the potential duration of the next recession, the degree of leverage, asset-price valuations and the level of deregulation and financial innovation before the crisis.
Another analyst at the bank, Marko Kolanovic, predicted that the next financial crisis could be sparked by “flash crashes” – sudden stock sell-offs by computerised trading systems.
“Basically, right now, you have large groups of investors who are purely mechanical,” Mr Kolanovic said. “They sell on certain signals and not necessarily on fundamental developments. Meaning if the market goes down two per cent, then they need to sell.”
This “great liquidity crisis”, as described by Mr Kolanovic, would require central banks to take action to prevent a spiral into a depression.
“The next crisis is also likely to result in social tensions similar to those witnessed 50 years ago in 1968,” added Mr Kolanovic.
Historian Who Predicted the 2008 Financial Crisis Warns the Next Recession Is Near
Niall Ferguson, a famed historian and a frequent guest of the world’s most elite events, is one of the prophets credited with accurately predicting the 2008 Financial Crisis.
Back in June 2006, he warned that “over the next two years, the monthly payments on about $600 billion of mortgages taken out by borrowers in the so-called subprime market… will increase by as much as 50 percent.”
A decade has passed since the music stopped on Wall Street.
With economic growth steady and the unemployment rate low, however, Ferguson warns that another financial crisis is closer than optimists would like to believe.
“The post-crisis period is over. What we’re moving into now, perhaps, is a new pre-crisis period,” he said during a recent interview in The Wealth Report published annually by property firms Douglas Elliman and Knight Frank.
One curious reason a new recession may be imminent is that the previous crisis ended too fast.
“I underestimated the ability of the central banks, particularly the Federal Reserve, to counter what was potentially a catastrophic chain reaction, which they did first by cutting interest rates to zero, and then by engaging in quantitative easing,” Ferguson said. “One of the direct consequences was that all kinds of financial assets recovered in price, and we didn’t go into a depression. People who held on to their stocks as well as their bonds, not to mention their real estate, were made whole remarkably quickly. It was almost like a bad dream, and now it’s over and we’re all cheerful again,” he said.
Since 2008, the percentage of corporate debt in total GDP has skyrocketed. Reuters analysts estimate that two-thirds of the borrowers are China’s state-owned enterprises, many of which are unprofitable (and have no incentives to be profitable). Thats means that many of these overly-leveraged companies will likely not be able to repay the debt.
Bill Gates Says Another Financial Crisis ‘A Certainty’
BILLIONAIRE Bill Gates has issued a chilling warning, claiming another financial crisis like the disaster in 2008 is a “certainty”
BILL Gates believes another financial crisis is coming.
In an “Ask Me Anything” Q&A on Reddit this week, one user asked the Microsoft co-founder, “Do you think in the near future, we will have another financial crisis similar to the one in 2008?”
Mr Gates, whose net worth is currently around $US91.7 billion, replied, “Yes. It is hard to say when but this is a certainty. Fortunately we got through that one reasonably well.”
The 2008 financial crisis, which began in the United States mortgage market and quickly spread across the globe, was the worst economic downturn since the Great Depression, resulting in 8.7 million jobs being lost in the US and about 250,000 in Australia.
Mr Gates said his friend, Berkshire Hathaway founder Warren Buffett, had “talked about this and he understands this area far better than I do”.
“Despite this prediction of bumps ahead, I am quite optimistic about how innovation and capitalism will improve the situation for humans everywhere,” Mr Gates said.
A growing number of experts have sounded alarm bells for the global economy, including former Coalition adviser John Adams, who last month identified 10 signs of a looming “economic armageddon”, and controversial demographer Harry Dent.
Next Financial Crisis Could Be the Mother of All Crises – George Soros
Well-Known Investors Are Warning of a Financial Crisis
Even financial mavens are now warning of a looming financial crisis.
Just recently, at the European Council on Foreign Relations, well-known investor George Soros said that, “We may be heading for another major financial crisis.” (Source: “George Soros is worried about another financial crisis,” CNN, May 29, 2018.)
A surging dollar and a capital flight from emerging markets may lead to another “major” financial crisis, investor George Soros said, warning the European Union that it’s facing an imminent existential threat.
The “termination” of the nuclear deal with Iran and the “destruction” of the transatlantic alliance between the EU and the U.S. are “bound to have a negative effect on the European economy and cause other dislocations,” including a devaluing of emerging-market currencies, Soros said in a speech in Paris on Tuesday. “We may be heading for another major financial crisis.”
The stark warning from the billionaire money manager comes as Italian bond yields have jumped to multi-year highs and major emerging economies including Turkey and Argentina are struggling to contain the fallout from runaway inflation. Soros, who has been the object of ire by the government of his native Hungary, saved his gloomiest outlook for the EU.
“Everything that could go wrong has gone wrong,” he said, citing the refugee crisis and austerity policies that catapulted populists into power, as well as “territorial disintegration” exemplified by Brexit. “It is no longer a figure of speech to say that Europe is in existential danger; it is the harsh reality,” he said.