Worst Sell-Off of the Year Sets Dismal Tone for 2015

Santa's Rally Isn't Coming: Market Crashes for All!

Written by Brittany Stepniak
Posted December 11, 2014

It's beginning to look a lot like crashes, everywhere you go. Take a look at the DOW and oil, plummeting once again. With debt crises leaving silver all aglow!

It's beginning to look a lot like 2008. Slumps in every sector. But the prettiest sight to see, is the gold-surge that will be, on your own computer monitor!

A pair of commodities that are actually rising is the wish of Bonny and Ben. Copper above $3 and invigorated industrial demand is the hope of Janice and Jenn. And investors can hardly wait for a rebound to start again!

But real life isn't a Christmas carol and the only silver bells to be heard are echoing dissonant tones of alarm instead of melodious tunes of celebration.

It sounds like the famous “Santa Claus” December stock rally won't be making its traditional appearance this holiday season. Monday was an ugly day for the stock market, but many had hope that it was of transient insignificance.

The notion that a rally would follow one of the worst sell-offs of 2014 proved very short-lived. The Dow was down 280 points late yesterday afternoon. The Dow has creeped back up since then, but investors are obviously spooked.

The VIX jumped more than 20%, indicating a great deal of fear.

Global economic woes appear to be a major contributing culprit — Greece and China, specifically. As Jason told you yesterday, “We may be about to relive the sovereign debt crisis we narrowly escaped just a few years ago.”

Consequently, the FTSE 100 suffered one of the year's biggest falls and the Greek market saw its bleakest plunge since 1987, falling 12.78pc. European markets at large got crushed. The Shanghai Composite Index crashed by an alarming 5.4%.

Additionally, there's been a distressing commodities crash due to stagnant growth in BRIC countries and Japan's deepening recession. Without the sustained industrial demand for basic materials like copper, nickel, and iron ore we're seeing major weakening of economies in cities the world over.

Granted, while this particular crash has been a good bit quieter than others like the epic ongoing energy calamity, it should not be overlooked while we're in such a fragile state. The old adage that “investors are always hurt by what they pay attention to the least” certainly applies here. CNBC reports:

The crash in commodities, and its distressing effect, is also reflected in ultra-low interest rates in both developed, and developing nations.

The message of the commodity, and global interest-rate markets, should be met with some alarm in policy centers around the world.

"Fortress America" is still standing, despite the commodity crash, largely because the U.S. is a major consumer of commodities and, thus, benefits disproportionately from lower prices.

However, as recent published reports suggest, the U.S. faces some risk as well. Energy producers, staring down the barrel of $62 oil, are already curtailing billions of dollars in exploration and production plans for 2015, a factor which could inhibit job growth in the booming energy sector and in the resurgent manufacturing sector, as well.

Highly leveraged energy companies, hammered by the crumbling price of crude, could cause a mini-financial crisis as they default on high-yield debt that financed their speculative, wild-catting adventures.

A collapse in global growth could affect the U.S. economy by trimming exports and reducing the earnings power of U.S. multi-national corporations. Corporate profits have been a steady source of support for stock prices over the last 5 years, but that could change if the global economy enters a renewed, and deepening, recession.

On the bright side, we warned you pretty early about this situation. And we told you gold and silver rallies were, indeed, imminent.

As promised, gold soared to a six-week high and silver picked up 5.3% gains in the aftermath of the crashes all around us.

Investors are seeking safe havens. Understandably so. Oil is driving everything down. And analysts anticipate more bad news.

More oil companies could cut their dividends. “Investors have not priced in the worst-case scenario with oil just yet,” according to Mark Spellman, portfolio manager with Alpine Equity Income Fund.

Crude has tumbled below $61, marking Chevron (NYSE:CVX) and Exxon Mobil (NYSE:XOM) among the biggest losers yesterday.

In fact, nearly all of the worst-performing stocks in the S&P 500 were energy companies. A handful of gas utility, drillers, and oil exploration firms were down at least 5%. Among these losers are ONEOK (OKE), Nabors Industries (NYSE:NBR), Noble (NYSE:NE), Denbury Resources (NYSE:DNR) and Newfield (NYSE:NFX).

The Dow, S&P 500, and Nasdaq are all down about 1% this month.

Bloomberg quoted James Steel, an analyst at HSBC Securities (USA) Inc. in New York, voicing his observations on this phenomenon: "There are equity market concerns and an increase in the flight away from risky assets to quality... Gold seems to be benefiting from that more than anything else."

We've been telling you for quite some time, but now that mainstream analysts are urging investors to run towards precious metals for safe havens, you know you don't have much time before a full-fledged bull is awakened...

Godspeed.

Farewell for now,

Brittany Stepniak Signature

Brittany Stepniak

Brittany Stepniak is the Project Manager and Editor for the Outsider Club. Her “big picture” insights have helped guide thousands of investors towards achieving and maintaining personal and financial liberties while pursuing their individual dreams in lieu of all the modern-day chaos.

*Follow Outsider Club on Facebook and Twitter.

Comments

Investing in Marijuana Without Getting Burned