Can you smell the fear? Right now world financial markets are visibly nervous and many are worried that Wall Street is about to go into panic mode. It really is eerie how 2011 is shaping up to be so similar to 2008. Major Wall Street banks are laying off workers in droves, oil prices are at very high levels, pessimism is permeating the financial markets, debt ratings are being downgraded all over the place and consumer confidence is stunningly low. Sadly, none of the fundamental things that were wrong with the financial markets back in 2008 have been fixed. In fact, many believe that Wall Street is even more vulnerable now. A ton of bad economic numbers have come pouring in lately and that has put investors in a really sour mood. All it would probably take is for one really significant “trigger event” to take place for Wall Street to go into full-fledged panic mode.
Let us hope and pray that we do not see another Wall Street disaster this year. But right now things do not look promising. Japan has been absolutely devastated, Europe is struggling with the Greek debt crisis and the U.S. economy resembles a dead horse at this point. Meanwhile, world financial markets are getting more bad news on an almost daily basis. Many investors are holding their breath and hoping that a worst case scenario does not play out.
The following are 10 signs that Wall Street is about to go into panic mode….
#1 According to The New York Post, nearly all of the major Wall Street banks are planning huge layoffs….
“Barclays Capital, Goldman Sachs, Bank of America, JPMorgan Chase and Morgan Stanley currently are among those financial institutions either weighing staff cuts or actually paring payroll”
#2 A new CNBC article claims that a “negative feedback loop” has “taken control” on Wall Street. Essentially what is happening is that bad economic news is creating an “environment of pessimism” which creates even more bad economic news, etc. etc.
#3 OPEC has announced that oil production levels will not be raised. This is likely to spook the financial markets and cause the price of oil to go up even higher in the coming weeks. The last time U.S. energy expenditures were over 9 percent of GDP was back in 2008 and at that point the economy rapidly plunged into a very deep recession. For the first time since 2008 we have reached the 9 percent figure again, and many on Wall Street fear that this could lead to bad things.
#4 QE2 will be wrapping up at the end of June, and many on Wall Street had been counting on yet another round of quantitative easing. Over the past couple of days, however, it has started to become clear that is just not going to happen – at least for now. In fact, Pimco’s co-chief investment officer, Bill Gross, is telling investors that for the Fed it will “be difficult to initiate a QE3“. But without artificial stimulation the U.S. economy may start really struggling again, and Wall Street knows this.
#5 Moody’s recently warned that it may downgrade the debt ratings of Bank of America, Citigroup and Wells Fargo. Bank stocks were on the cutting edge of the financial collapse of 2008, and it looks like that may happen again this time.
#6 Faith in the U.S. dollar continues to decline. Back on April 18th, Standard & Poor’s changed its outlook on U.S. government debt from “stable” to “negative” and warned that the U.S. could soon lose its AAA rating. China has been very busy dumping short-term U.S. government debt and there does not seem to be a lot of people (other than the Federal Reserve) that are eager to buy U.S. Treasuries right now.
#7 U.S. consumer confidence is already lower than it was back in September 2008 when Lehman Brothers collapsed. Consumer spending makes up approximately 70 percent of the U.S. economy and Wall Street is watching this number closely.
#8 A whole slew of bad economic news has been pouring in lately. Mike Riddell, a fund manager at M&G Investments in London, recently pointed out to CNBC some of the data points that have been particularly alarming….
“US house prices have fallen by more than 5 percent year on year, pending home sales have collapsed and existing home sales disappointed, the trend of improving jobless claims has arrested, first quarter GDP wasn’t revised upwards by the 0.4 percent forecast, durables goods orders shrank, manufacturing surveys from Philadelphia Fed, Richmond Fed and Chicago Fed were all very disappointing.”
“I think right now we’re on the tipping point of a market correction. Data from the U.S., from Europe, from Japan, from China are suggesting an economic slowdown.”
#10 According to a new CNN/Opinion Research Corporation poll, 48% of Americans believe that it is either “very likely” or “somewhat likely” that the United States will experience a “depression” within the next 12 months. Needless to say, Wall Street is highly influenced by the overall mood of the nation.
Once again, let’s hope that financial disaster can be averted for as long as possible. The last thing the United States needs right now is another major crisis.
America has been hit by a whole series of natural disasters in 2011. We have seen unprecedented tornadoes, historic flooding along the Mississippi River, and horrible wildfires in Texas and in Arizona.
Thousands upon thousands of American families are deeply suffering tonight.
Dave Daubenmire recently visited Joplin, Missouri and what he witnessed there was absolutely heartbreaking. Thousands of families there have lost absolutely everything.
But for most Americans, the impact of a particular tragedy fades after the 48-hour news cycle has passed. If the television doesn’t tell us that something is important then most of us are not likely to think about it much.
Most Americans think pretty much only of themselves. The vast majority of us are just so busy pursuing our own version of “the American Dream” that we don’t have much time for much else. The love of most Americans has grown cold and most of them are primarily interested in how they can make their own lives better.
But whoever “dies with the most toys” does not win the game of life. Rather, we should all be seeking to show as much love to others as we possibly can.
The next time the financial markets crash and Wall Street goes into panic mode, there will probably be another string of suicides as a lot of wealthy people watch their wealth evaporate.
Don’t let your life be defined by how much money is in your bank account or by how much stuff you own. Life is about so much more than that.
So what do all the rest of you think about all this? Is Wall Street about to go into panic mode? Feel free to leave a comment with your opinion below….