Argentina default imminent; Dow drops 300+ points, wipes out entire year's gains

[thisnumbersdisconnected]

Is Argentina about to trigger a world wide monetary collapse?

In a word, no. At least, we hope not. But things aren't good.

The Dow just closed a few minutes before this post at -317.08.

Fox Business: Dow Plunges 300 Points, Wipes Out 2014 Gainshttp://www.foxbusiness.com/markets/2014/07/31/dow-plunges-300-points-wipes-out-2014-gains/http://www.foxbusiness.com/markets/2014/07/31/dow-plunges-300-points-wipes-out-2014-gains/

U.S. stocks sustained heavy losses on Thursday as traders ditched a wide swath of assets, leading the blue-chip average to hit the flat-line for 2014.

According to preliminary calculations, the Dow Jones Industrial Average fell 315 points, or 1.9%, to 16565, the S&P 500 tumbled 39.3 points, or 2%, to 1931 and the Nasdaq Composite dropped 93.1 points, or 2.1%, to 4370.

In a sign of the breadth of the selloff, every major sector was down by at least 1%. The biggest losers could be found in telecommunications, technology, energy and health care. Volume on the New York Stock Exchange was running about 40% higher than the one-month average. The VIX, a measure of implied volatility in U.S. stocks, surged 26%.

Most analysts are pointing to the collapse of talks between Wall Street hedge funds and the Argentine government earlier today.

Fox News: Argentina misses default deadline after talks with creditors collapsehttp://www.foxnews.com/world/2014/0...deadline-after-talks-with-creditors-collapse/http://www.foxnews.com/world/2014/0...deadline-after-talks-with-creditors-collapse/

NEW YORK – The collapse of talks with U.S. creditors sent Argentina into its second debt default in 13 years and raised questions about what comes next for financial markets and the South American nation's staggering economy.

A midnight Wednesday deadline to reach a deal with holdout bondholders came and went with Argentine Economy Minister Axel Kicillof holding firm to his government's position that it could not accept a deal with U.S. hedge fund creditors it dismisses as "vultures." Kicillof said the funds refused a compromise offer in talks that ended several hours earlier, although he gave no details of that proposal.

"We're not going to sign an agreement that jeopardizes the future of all Argentines," Kicillof said after he emerged from the meeting with creditors and a mediator in New York City. "Argentines can remain calm because tomorrow will just be another day and the world will keep on spinning."

Argentinian government bonds held by the U.S. Treasury were worth $29 billion. By tomorrow, they may be worthless. Mexican and Brazilian stock exchanges closed down 1.5% and 1.8%, respectively, following last night's missed deadline. If Argentina defaults -- and it is virtually unavoidable -- it will be the second time in 13 years and the third time in 40 years. The latter event triggered defaults by almost every South and Central American nation, but the U.S. economy was much stronger and more resilient then. It absorbed the losses with the onset of a minor recession.

With housing and the markets themselves subsisting on a monetary balloon, a domino collapse of the economies of the Southern Hemisphere Americas would likely trigger severe recession here in the U.S., as our Treasury holds large blocks of bonds from every nation except Venezuela.

The question asked at the beginning of the thread title is still a "No." But for how long?

 

[InTheLight]

You have to love the spin.

"DOW DROPS--WIPES OUT ENTIRE YEAR'S GAIN!!
As if it was a huge amount to lose--3.2%

Yet whenever I point out the markets are up, I'm told they're not really up, they're fake gains, etc.

 

[thisnumbersdisconnected]

You have to love the spin.

"DOW DROPS--WIPES OUT ENTIRE YEAR'S GAIN!!
As if it was a huge amount to lose--3.2%

Yet whenever I point out the markets are up, I'm told they're not really up, they're fake gains, etc.

My iinvestments are just fine -- two spec houses that will net about $40,000 each, with pending contracts on both.

My Kansas City based mutuals, Ivy and American Century, are up 9% and 11.2%, respectively, this year, against the market trend.

How's your stock doing, ITL? Better yet, how do you think it will be doing if the U.S. government gets left holding $110 billion in worthless bonds from bankrupt South and Central American countries?

 

[InTheLight]

My iinvestments are just fine -- two spec houses that will net about $40,000 each, with pending contracts on both.

My Kansas City based mutuals, Ivy and American Century, are up 9% and 11.2%, respectively, this year, against the market trend.

How's your stock doing, ITL? Better yet, how do you think it will be doing if the U.S. government gets left holding $110 billion in worthless bonds from bankrupt South and Central American countries?

I don't think Argentina's junk bonds will affect the U.S. stock market in the least.

I'm into American Funds (all over the place), Franklin Templeton (FBDIX, FKUTX, FKINX), T. Rowe Price (PRHSX rocks!), and yes American Century. I started out with American Century back in 1994. Over the years I had built up several positions with them but recently dumped them all except for the Heritage Fund.

If I look at my total return YTD across the entire portfolio it's looking like about 6% (not counting today's numbers, ha!)

 

[Crabtownboy]

I don't think it was so much Argentina as the fear of rising interest rates here at home. Also, one day does not make a trend. We'll have to see what happens over the next few weeks before making such judgments.

 

[thisnumbersdisconnected]

I don't think Argentina's junk bonds will affect the U.S. stock market in the least.

So losing $29 billion, with the potential for another $81 billion if the rest of South & Central America defaults, which is quite likely the result of an Argentine collapse, won't affect the market, hm? Interesting optimism.

You should also be aware of the fact the wage cost monthly report came out today, indicating that wages dramatically increased, which is one sign the Fed is looking for in deciding to raise interest rates. Couple that with a potential for a better than average jobs report tomorrow -- a report that will ignore the fact that a large number of new job creations will be part time and entry level -- will feed the market frenzy that Argentina and the wage cost monthly triggered today. You'd best get out of direct market involvement and get into a strong conservative mutual. It's going to be the only way to survive the correction that is about two years overdue.

 

[InTheLight]

I don't think it was so much Argentina as the fear of rising interest rates here at home. Also, one day does not make a trend. We'll have to see what happens over the next few weeks before making such judgments.

I don't think it was fear of interest rates rising--everybody knows they will rise. I think it was old fashioned profit taking. Agree with your wait and see attitude.

 

[InTheLight]

So losing $29 billion, with the potential for another $81 billion if the rest of South & Central America defaults, which is quite likely the result of an Argentine collapse, won't affect the market, hm? Interesting optimism.

The U.S. burns through $29 Billion in about 16 hours. It's chump change for the U.S. Besides, they'll just print more money, right?

You should also be aware of the fact the wage cost monthly report came out today, indicating that wages dramatically increased, which is one sign the Fed is looking for in deciding to raise interest rates. Couple that with a potential for a better than average jobs report tomorrow -- a report that will ignore the fact that a large number of new job creations will be part time and entry level -- will feed the market frenzy that Argentina and the wage cost monthly triggered today.

I do admire your dogged insistence that all good news is bad news. There is no way you could know that the majority of the jobs created in July were entry level and part time.

You'd best get out of direct market involvement and get into a strong conservative mutual. It's going to be the only way to survive the correction that is about two years overdue.

I'm well diversified and I don't make panic moves based on news headlines. Been there, done that. But thanks for the advice.

 

[Crabtownboy]

[SIZE="4" You'd best get out of direct market involvement and get into a strong conservative mutual. It's going to be the only way to survive the correction that is about two years overdue.[/FONT][/SIZE][/QUOTE]

[SIZE="4"]I have always avoided mutual funds as I would avoid the plague. After studying them closely and talking to those who have invested in them I came to the conclusion that they are primarily for the benefit of the parent company. I will deal directly with the stock market or not at all. Of course dealing directly means I have to do a lot of research before investing in a company.

But each to his/her own. [/SIZE]

 

[InTheLight]

I have always avoided mutual funds as I would avoid the plague. After studying them closely and talking to those who have invested in them I came to the conclusion that they are primarily for the benefit of the parent company.

Yes, there are fees. The trick is to pick funds with a great track record (beats the S&P500) and has low annual fees. Don't make panic moves. Reallocate and rebalance. It works.

One philosophy that I can't stand is the "just buy the index funds and let your money sit there for 25 years. Don't give away your money to fund fees. You can't beat the market, so why try?" This is known as the John Bogle method of investing. Well, I did several spreadsheets looking at this and yes, if you pick the wrong funds you will get burned. But if you pick good funds you can beat the S&P, and by a lot. There was one decade 1981-1991 where the index funds beat 2 out of 3 of my American Funds. But otherwise American Funds won out. Yes, this included using the full front load 5.25% fee with American Funds.

I will deal directly with the stock market or not at all. Of course dealing directly means I have to do a lot of research before investing in a company.

But each to his/her own.

Picking individual stocks is a tough job. I used to do it back in the 1980's, early 1990's. It was a lot easier back then. Nowadays, I like mutual funds because there are professionals with tons of experience making the picks for you. I'm a sector investor, though I remain well diversified. I will shift money into different sectors as they heat up. Let's just say that my biotech funds have been berry, berry good to me in the last couple of years. Same thing with small caps (though they were beat down about 10% recently, but are recovering.)

I do have a TD Ameritrade account, not quite $10,000, where I dabble in individual stocks. I made money on JC Penney (24%), am currently up 41% with Wendy's (seems to have stalled, might sell), made a little bit on SIRI, just got into ASX (looks promising, check it out CTB), and am losing money on RNN (late play into pharmaceuticals, should have gone with MNKD.)

Yesterday was not a good day.

 

[thisnumbersdisconnected]

10:54 a.m. CDT: Dow down another 110 points, including a 40-point drop in the last 15 minutes.