Welcome to the crash of 2011. With stunning speed, global markets have sold off to a degree not seen since the worst days of late 2008 and early 2009. In fact, only three times in the past 40 years have stocks sold this hard this quickly, with a 16 percent decline in the S&P 500 in a 10-day period surpassed only by drops in the Octobers of 1987 and 2008.
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No one can say precisely when or why this will end. Its triggers we know: a flawed debt deal in the United States, renewed sclerosis in the European Union about peripheral debt issues in Greece and Italy, a downgrade by Standard & Poor’s of U.S. sovereign debt (oh, the irony of S&P downgrading debt leading to a precipitous decline in the S&P index), and then a wave of global selling. No market has been immune; not one.
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These moments create ripples of fear that build like tsunami waves until they crash with destructive force against the shoals of investor confidence, institutional balance sheets, and collective investing psyche. And more than ever, they race around the world unimpeded by national boundaries and uncontainable by central banks. This is a fact of our global system, the downside of the upside of ample liquidity and the ease of getting it from one place to another. And no matter how much we’ve said this over the past three years, when it happens, it is visceral, breathtaking, alarming, and in its own way awe-inspiring.
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But it’s imperative not to get utterly sucked into that alternate reality of high-frequency machines driving prices down everywhere, with a logic strictly of flow and numbers. The internal language and logic of the markets is related to what is going on in the real world, but right now only tangentially. Stocks aren’t selling because of the Washington debt deal or now even because of yields in Italy. They are selling because they are selling. Apple this week is not a company with 12 percent less business than last week; Caterpillar is not about to sell 30 percent fewer earthmovers in China or Brazil. China is not about to purchase 25 percent less iron ore.
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The crash of 2011 is already a bad one by any historical standard, not Great Depression bad, not crash of October 1987 bad, and not the continual collapse of 2008–09 bad, but bad enough. In 1987, the market rebounded very quickly; in March 2009 it did as well. If we are October 1987, it’s time to buy; if it is December 2008, watch out. We will only know the answer to this in retrospect, but this feels more like a crash than a new trend, and like any flash fire, these burn quickly, intensely, and then they stop. You don’t want to be in these markets when this is happening, but you also don’t want to be out of these markets when they reverse.
-http://news.yahoo.com/why-markets-melting-015300351.html
...what are you guys doing? Time to buy some Apple, Cat, Iron? Sell? Panic and do nothing? Buy that cabin I was telling you about in CO and sit in my bomb shelter?
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