The selling begins

After months of denial, investors awake to the reality of slower growth, lower earnings and unresolved problems.

By Anthony Mirhaydari Apr 17, 2013 1:40PM

Stock market Traders copyright Photodisc, SuperStockThe logjam has been broken.

 

No longer can the market cheerleaders, drunk on cheap money from central bankers, deny the reality on the ground. Monday's disappointing economic news out of China, mixed with the shock of the bombing attack in Boston, stunned many. On Wednesday, a relentless assault of negative hard data delivered a knockdown blow and unleashed long-delayed selling pressure onto Wall Street.

 

You can see this in the dramatic pullbacks under way in key cyclical sectors, such as semiconductors, energy, materials and financials. You can see this in the surge in the iPath S&P 500 VIX Futures (VXX), which just posted its largest three-day surge since the fiscal cliff panic in December. By all indications, this is just the start.

 

It's just the start because the decline is being driven by real fundamentals, not a squishy concept like "The Federal Reserve's cheap money will force investors into risky assets" or "The Bank of Japan's efforts to push down the yen will save Japan's structural damaged economy."

 

 

None of that is true, of course, since the price of money isn't what's holding back the global economy. It's excess debt. It's unreformed and confidence-sapping tax systems. It's fiscal policy uncertainty. It's a lack of business investment. And it's a lack of high-quality labor.

 

Just look at the headlines crossing on Wednesday.

 

Earnings disappointed, with financial issues getting hit particularly hard in the wake of earnings misses by both Bank of America (BAC) and BNY Mellon (BK). Semiconductors were hit after Intel (INTC) missed estimates by a penny. Yahoo (YHOO) fell short on revenue and guided current-quarter revenue lower. Procter & Gamble (PG) is delaying repayments to suppliers. Caterpillar (CAT) was downgraded.

 

Globally, the Financial Times quoted a senior auditor in China warning that the buildup of massive local government debt -- used to finance an investment boom in infrastructure -- was "out of control" and could spark a larger financial crisis than the subprime bubble.

 

Accelerating the move were hints that the European Central Bank could cut interest rates, which slammed the euro and pushed the dollar and yen higher -- which is pinching hedge fund types using a weaker dollar and yen to fund "carry trades" in stocks.

 

Not even the trudging out of a Fed official saying the central bank's $85 billion-a-month bond-buying stimulus could be ramped up if needed could stem the slide. People are beginning to realize that central banks are not the deus ex machina many believe they are.

 

 

In response, I'm extending my short positioning in my Edge Letter Sample Portfolio with new shorts against Bank of America, STMicroelectronics (STM), and Goldman Sachs (GS).


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Disclosure: Anthony has recommended VXX to his clients.

 

Be sure to check out Anthony's new investment newsletter, the Edge, and his money management service, Mirhaydari Capital Management. A two-week free trial has been extended to MSN Money readers. Click the link above to sign up. Mirhaydari can be contacted at anthony@edgeletter.c​​​​​om and followed on Twitter at @EdgeLetter. You can view his current stock picks here. Feel free to comment below.

 

136Comments
Apr 17, 2013 2:20PM
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Don't worry those in control of the market have already begun " damage control" to prevent a big sell off today and minimize any losses.  Wall Street is a rigged casino and legalized ponzI scheme supported and controlled by our government.
Apr 17, 2013 2:25PM
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What a perfect summary:

1-excess debt.

2-unreformed & confidence snapping tax systems.

3-Fiscal policy uncertainty.

4-lack of business investment.

5-lack of high quality labor.

 

Does anyone still hate gold ? Not for long I'm betting !

 

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Yep the western economic systems are on the brink of a total collapse

 

a) Japan has already collapsed and it's central bank is pumping out money faster than thr USA

 

b) USA has gone beyond the point of no return. Bernanke is having to pump trillions of dollars into the US economy as the percent of workers making minimum wage goes above 50 percent and 10,000,000 workers retire each year most of which are going to be taking $30,000 to $120,000 a year out of the stock markets as the collect pensions and cash out their 401K pension plans not to say anything about the damage doen by their S.S. checks and medicare checks along with Obama care's $14,000 plus per family hit to the economy next year. Yep the USA is doomed with 50,000,000 on food stamps instead of 50,000,000 new hires at a livable wage of $120,000 a year. Add in our local and state debts to our natonal debt and the collapse of pension funds -- wonder why governments are still running pension plans when companies gave that up years ago?? We will be in worse shape than Japan soon.

 

c) Europe is just one more crisis away from Depression style runs on European banks.

 

China's conomy not so much after all they are a command economy and their leaders can ramp up to full employment easy and take in enough tax revenue to save the day. So what if their central banks print money like crazy the Chinese leadership will use it to make jobs for the poor and thus be able to tax their way back into the black.

Apr 17, 2013 2:41PM
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Stock prices can drop now because the federal income tax filing deadline has passed.  They got their precious IRA contributions for what appeared to be a booming market, so now they can screw us.
Apr 17, 2013 2:36PM
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Is it possible for anybody to comment on this guy's column without resorting to name calling, inflamatory language,  and hyperbole?  Any thoughtful well considered opinions to share with the likes of me? 
Apr 17, 2013 2:39PM
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Start the printing presses. When the fed is done, North Korea will look prosperous.
Apr 17, 2013 2:23PM
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Today, we are on pace for much higher volume on the Dow.  If these price levels hold and we get 250 million shares trade hands, we'll actually have ourselves a strong indication of things to come.  If the rallies continue to show weakness while the slumps show strength, it could be an interesting summer.  But up until now, a 1% drop or 1% rally hasn't meant much with volume in the toilet.
Apr 17, 2013 3:02PM
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People of all walks of life and RACES commit crimes. It's not strictly a left or right issue.

Some of the biggest Crimes have been committed by the Big Banks injunction with Uncle Ben.

Yet who went to Jail. Instead of going to jail, these crooks are embolden to commit more crimes, not less.

It's also criminal that Seniors are being punished with low interest rates on retirement savings.

Apr 17, 2013 2:58PM
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Hey Max, The poster is correct.  Occupy Wall Street, ie the left, are the ones raping woman, smashing windows, using drugs, and robbing people.  The Tea Party picks up not only their litter but others.  Now the media uses the words "violent" and "Conservative" in the same sentences not because there is one documented linkage, but because by using the words together the uninformed walk away thinking exactly what the left wishes them to think.  In fact minutes after the Boston Bombing, with zero evidence, the media was talking about conservative groups which might be responsible.  Totally irresponsible, but predictable of the slanderous, lying, left.  After the Newtown shooting, within minutes the media had a name, they googled it and found the name matched a Tea Party member.  That was enough for them to start a story.  Totally irresponsible.    At the Democrat convention (I believe 8 years ago) they announced the death that day of a Republican, the DEMOCRAT crowd cheered!  This is the left.

 

If yesterdays bomber had bombed a conversative campaign office or such, the left would be cheering and there would be no memorial or positive sentiments expressed on this board by one leftist thinker.  Of this I can be sure.

 

If there is a riot, it is a leftist organization.  Think Green Peace, think Coppenhagen (Gobal Warming Crowd).  The list is endless.  If the state ever starts rounding people up, it will be the left rounding up the right.  Who vilifies who?  who is it that calls "people" brown shirts, Nazis, tells people to get to the back of the bus (OBAMA), who says "we must punish our enemies?  Who?

Think about it, and then admit it.

Apr 17, 2013 3:26PM
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this is all normal profit taking, the market was up because nieve investors were lulled into thinking "normal" was returning, but then the big money swings out and crash, small money gets eaten by big money.  How is this different than poker?

Apr 17, 2013 2:32PM
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I'm pretty sure this was the guy back in Sept - November.. Saying what a recovery we were in and to go long when the market was around 13K full of printed money.

Am I wrong?
Apr 17, 2013 2:32PM
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This guy is always full of doom and gloom.....at the old saying goes...even a broken clock is right twice a day.
Apr 17, 2013 2:57PM
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Everyone's an expert.  Every expert has a different prediction, and rarely is any of them held accountable.  Yes, the market is down today and so it's the end of the world.  The market goes back up tomorrow and everything is rosy.  About all you can say is the market goes up and down.  Nobody can reliably predict the long term.  There is absolutely no science to this.  It is all just pissing in the wind!
Apr 17, 2013 2:15PM
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wait!! wait!! that's not the issue right now!!! the 'selling begins' is on the backburner of importance now!

 

right now the left is scrambling to HOPE and PRAY the Boston bombers or bomber are white and not muslim or liberal filthy vermin, just chk out salon.com for the insanity the left is and represents,

 imagine a news publication hoping the bomber is white??!!! because if it's anything other than white, conservative the liberal agenda is done, finished, kaput!

 

meanwhile when was the last time a white conservative bombed anything? timothy McVeigh was a leftist loonie, ted kaczyinski was a liberal loony down with technology lefty loony, Times Square Bomber, Faisal Shahzad is a registered Democrat. aka liberal scum, the rest were muslim especially Saudi muslim, what's happened to this nation people? news publications praying and hoping that the bombers and maniacs are WHITE????

 

and I'm talking to the normal Americans among us not you scumbag liberal guilt ridden self-loathers, if we don't turn this boat around we're definitely going over the falls so to speak, and every NORMAL person knows it! aren't' you glad you live in post racial America with osama in the oval office?? the entire obama regime depends on whether or not the Boston bomber is white, how frightening is this crew of maniacs in office, seriously, how insane are the liberal whacko's in power, off the chart!!!

Apr 17, 2013 3:15PM
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the stock market should be renamed, call it what it is, a bottomless pit of investors who think they are going to get rich by buying something worthless, thinking it will be worth more when they sell it, what a bunch of losers, meanwhile CEO's have taken their money and put it in their pockets.......sucker...
Apr 17, 2013 2:38PM
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Tony is doing a little victory dance.
Apr 17, 2013 3:12PM
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Why would someone want to poison a senator and the president?Not happy with the direction we are headed?

Apr 17, 2013 3:01PM
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I think to say the logjam is broken is a bit too early to say.  Come on, all markets have ups and downs.  It could be broken, but maybe not.  Plenty of markets have had three four or eigh down days and then roared right back.  Now, I must say I have been saying that I don't see a lot of reason for this market to have been going up and that it is largely a momentum move.  As such it is weak and ripe for a down move and that that move would be fast as people bail out on the mopmentum play.  But two down day s is a bit early to be definitive.  But people can be safe and sell.  I used trailing stops and hav exited several positions.
Apr 17, 2013 2:42PM
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I'd say the only people who are wrong are the ones owning aapl.
Apr 17, 2013 2:44PM
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This guy is nothing but doom & gloom: He's been saying this for four years and sooner or later he might be right...But as I said sooner or later....I can make a prediction every day and sooner or later I am going to be right...I know the world is comming to an end...But I don't think it is sooner..It's very very later.
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