Ho ho ho, scary Xmas!

Yesterday was a half day or a shortened day of the stock market. And this day is going to go down in history as they're going to call it something like.... "Black Monday Christmas Eve" pretty much, when everyone finally realized and capitulated that the top is probably in.

Yesterday was an insane day with all of the news coming out. The top is in and it's because of all the fundamentals and all the cracks across the entire global economy. We've had the longest bull market in history and everything's overvalued, overpriced, everything's inflated. It's a bubble. It's a credit driven bubble.

What happened yesterday, is just ....crazy. Steve Mnuchin - the Treasury secretary (the guy who manages the finances and the debt). He calls the top six banks like JP Morgan, Citigroup Bank of America, Goldman Sachs... all of them. And also calls the so called plunge Protection Team. Now if that doesn't cause a panic, I don't know what will.

Let me see if I understand what happened here...

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Mnuchin: “Hey, you guys have enough cash for a run on the banks, right? Ok. Cool.”

“Hey everybody, everything’s fine. The banks say they have enough cash in case of catastrophic market crash.”

Everyone: “uh...what?”

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In 2008 we were hours away for the major banks (mostly) in the United States becoming a insolvent because of the run on the money market funds - which would have been a pretty much a.... run on the banks!

"A run on the banks" means that everyone wants their money out of the banks

The problem is, they can't give you the money (or better said -currency) because the bank has lost it on the stock market.

When you deposit money into the bank - what they do with that money is they either invest it in the stock market or they loan it out. And when the stock market starts crashing, people can't pay their loans back and then the banks go bankrupt (That's where the word "bankrupt" comes from ....bank robbed! ). And then people can't get their money back. There's even no fund out there that ensures every citizen's money in the bank.

This was the worst Christmas eve, at least in US stock market history. But also, this is now the worst December in the history of the S&P 500, which just slipped into official bear market territory, joining the Dow30, NASDAQ and Russell2000.

The entire economy was a bubble and it wasn't due to real economic growth. It was due to all of the monetary policy from the past 10 years. It was just a bubble. There wasn't real productivity, things weren't really being built and done because the economy was strong. It was because of the cheap money and what it does is.... it creates malinvestments! So all the growth that we had in the past ten years, was miss allocation, was not real growth - it was growth but it was fueled by money printing and artificially low interest rates. What that means is, there's a bunch of companies out there operating, and creating businesses and hiring people, that shouldn't be there. Shouldn't even exist because the market would have financially crashed them long time ago.

Free market only works if the strongest survive. If the weak companies survive, what it does is, it creates a bigger crash down the road...

Happy Xmass and New Year's eve to you all ;)