Chinese stocks fell hard yesterday.
The Shanghai Composite plunged more than 6% – the biggest fall in three weeks.
Our research team in Beijing is downcast.
“Nobody here wants to hear about stocks,” they tell us.
And the junkiest – and riskiest – part of the U.S. bond market has taken a dive too.
Here’s that chart of the big U.S. junk bond ETF that Chris highlighted in yesterday’s Market Insight. It has completely rolled over this year…
Meanwhile, U.S. corporate earnings have plateaued.
And according to Deutsche Bank’s David Bianco, earnings are actually falling when you exclude companies’ slick accounting adjustments to “smooth” their numbers.
The only thing left propping up Wall Street stocks, as we explained yesterday, is insider trading.
Retail Rot
Recent sales figures from America’s retailers show how deep the rot has become.
Sales have been rising at an alarmingly slow rate – just 0.5% since 2007.
*Between 2000 and 2007, they went up four times as fast. In the 1990s recovery, they went up six times as fast.
Especially rotten are sales at America’s four largest mall retailers – Macy’s, Kohl’s, Sears, and JCPenney. Together, their sales are falling at a 10% rate per year… or four times faster than the fall in department store sales generally.
What is interesting about these four companies is that they have been among the most aggressive of the stock market manipulators.
Between 2005 and 2014, they earned a combined total of $13 billion. But their top execs spent $34 billion deceiving investors about the true value of their firms, by way of share buybacks, pocketing billions for themselves in the process. (More on how this works below…)
If you’re counting on the markets to reveal the right price for a stock, you may have a long wait.
To paraphrase Lord Keynes, the cronies can falsify the data longer than you can remain solvent.
