Yep, the futures are down very hard. A crash is not unthinkable from here. What do I mean by “crash”?
I’m not talking about some -5% decline in the headline US equity indexes. I am referring to an “out of parameter” event that causes the computer algos to pack up and go away leaving markets without a bid.
As in any bid at all.
This is already very nearly the case for huge segments of the bond market, especially the corporate side. Liquidity is already super thin. It wouldn’t take much to push some bond arenas into the “no bid” territory.
Couple that with the hardball being played out in Europe over Italy, where egos and petty power plays by the EU technocrats may well ignite a truly significant banking crisis, and you’ve got the potential for said “crash” to include portions of the banking system also going “out of parameter.”
That simply means the banks shut down and in Europe that means getting bailed-in.
I think this begins to explain gold’s rise, but it’s barely a start. If the funds currently in the Italian banking system saw things the way I do, there would be an immediate flight of many hundreds of billions out of the banking system and into physical gold. Like right freaking now.
And because the hip bone is connected to the thigh bone, the same would be true of Portuguese and Spanish banks. And then the French, and so on right to the very core.
At any rate, big damage in the futures markets right now.
Time to pack the Dow 25k hats away.
This is what I call a GUDD day – Gold Up Dow Down.
With enough financial panic and misery perhaps people will come around to the idea that we face serious predicaments that will require serious decisions, rather than continuing with the embarrassing deceit that maybe we can grow forever with the right combination of QE and Elon.