This is pretty staggering.
|^AORD||All Ordinaries||5,222.00 12:11AM ET||408.90 (7.26%)|
|^SSEC||Shanghai Composite||4,596.67 1:15AM ET||317.77 (6.47%)|
|^HSI||Hang Seng||21,709.63 1:30AM ET||2,109.23 (8.86%)|
|^BSESN||BSE 30||15,344.40 1:30AM ET||2,260.95 (12.84%)|
|^JKSE||Jakarta Composite||2,236.55 1:45AM ET||249.33 (10.03%)|
|^KLSE||KLSE Composite||1,439.49 Jan 18||21.22 (1.45%)|
|^N225||Nikkei 225||12,573.05 1:00AM ET||752.89 (5.65%)|
|^NZ50||NZSE 50||3,607.13 Jan 21||39.77 (1.09%)|
|^STI||Straits Times||2,764.57 Jan 21||152.58 (5.23%)|
|^KS11||Seoul Composite||1,609.02 1:02AM ET||74.54 (4.43%)|
|^TWII||Taiwan Weighted||7,581.96 12:46AM ET||528.24 (6.51%)|
I have never recommended buying Asian stocks to anyone. That’s about all I can say. This is an epic rout, with India’s BSE down 12 percent and Hong Kong almost 9, but this forest fire has a very February/March 2007 feel to it. Are things really this bad? Compared to bonds, are stocks this unattractive? The markets had already priced in an extremely dovish rate cut schedule, and stocks had already punished forward P/E’s in anticipation of a moderate recession.
Now, there is the money-pumping issue. But the dollar has strengthened recently, not weakened. Fed pumping or not, the last several days have not been marked by capital flight from the dollar. The euro, yes; the dollar, no.
I have to sleep on this for a while. But the next four days will be crucial. If the US Congress and Federal Reserve succumb to the wider panic, the current plunge will be as fleeting as the plunge in February and March: there will be a quick bounce, followed by a longer run reflation, followed finally by another monster crash and another inflation-or-panic fork in the road.
If the market is allowed to finally bleed itself out, Ambac and/or MBIA will blow up, there will be a lot more blood, and the markets will have achieved some painful, but permanent, evolution.
As a gold bull, I have always bet on the former. If the S&P lock limits down tomorrow, the panic will be pretty extreme, and gold will blast through 1,000 before the quarter’s end.