Rough Day On Wall Street As Second Phase Of Bear Market Gets Underway

Just back from a holiday weekend and the end of a long summer, traders went to work selling everything on Monday.

Not that stocks weren't deserving of lower valuations, they were and still are. This is just the beginning of a trend that began late last week. If this is the start of the second leg down for stocks, it promises to be slower, longer and more painful than the quick initial burst in March.

Stocks have been pumped higher throughout the fake COVID pandemic, despite an economy that has rotted from within. We are witnessing the destruction of the US economy and of what was - a mere 30 years ago - the greatest country on the face of the planet. Financialization, which began in the 80s and accelerated to its zenith in 2008, is now in the process of unwinding all of the malinvestments made through those years. Today's companies are barely profitable unless they are a niche tech company with no or limited competition such as Google, Apple, Facebook, Amazon, and Netflix, but they are all overvalued, the trade crowded, weak hands taking losses.






There may be day-to-day gains, but the trend is clearly to the downside. Stocks are being liquidated by large investors and funds. The smart money is getting out, leaving the dumb money as ultimate bag-holders. In this secondary bear market phase, buying dips will only provide returns for day-traders and some momentum chasers. Long term investors will get taken to the cleaners.

Expect this phase of the bear market to gradually undermine all investments. All major indices will exceed the lows made this March, though the entire process could take as long as two years. In the interim, the Wall Street casino is open for business, ready to scalp proceeds from unsuspecting people with money and no clue as to what's really happening.

Many of the Western states are on fire, literally, and the cites are being destroyed from within, a process that's been ongoing for many years. Older, Eastern "rust belt" cities are bankrupt, as are the states of New Jersey, Illinois, New York, and California. While the media wants everyone to focus on the presidential election and wear masks to somehow thwart an infectious pathogen that does little harm to 99.98% of the population, the pillars of industry are crumbling. Rats - brokers, bankers, CEOs - are jumping ship as the destruction accelerates.

Stocks may rebound here and maybe for more than a week or even two, but in the end they are mostly overvalued and will suffer losses just on that regard. Loss of confidence and lack of investible capital will bring stocks to more sensible levels and eliminate those who cannot make ends meet, i.e., zombie companies.

Fed intervention will not help in a condition that is turning from a liquidity crisis to a solvency crisis, two different animals.

Note well the decline in the price of oil on Tuesday. It was absolutely hammered and will continue to test lower lows over coming months. The economy is imploding and extra funny money from the government or from the Federal Reserve isn't going to fix what's broken. Crony capitalism, corruption, media collusion, and the end of globalization are all coming together to destroy what's left.

A great reset is coming, possibly before the end of the year, though the implications will reverberate throughout the global system for decades.

Thus far, stocks have seen only minor damage. When third quarter earnings begin to roll out in about a month, the handwriting will be there for everyone to see. Stocks should enter correction (-10%) within weeks and resume bear market posture (-20%) some time in October, or, at the latest, after the November 3 elections, which are certain to be a fiasco of mammoth proportion.

At the Close, Tuesday, September 8, 2020:
Dow: 27,500.89, -632.41 (-2.25%)
NASDAQ: 10,847.69, -465.41 (-4.11%)
S&P 500: 3,331.84, -95.12 (-2.78%)
NYSE: 12,688.07, -229.03 (-1.77%)