I love being right…Does that make me a bad person?
I have been warning for months that the market is overvalued, that the global economy is sick, and that stocks are headed for a fall. While CNBC and the rest of the clueless bulls break out the arm-bands, readers at Money Morning – who have been paying attention – should not have been surprised by what happened last week.
The collapse in commodity prices that began a year ago was a raging canary in the coal mine, screaming that something was wrong in the global economy. And that was the faltering of Chinese growth, which all along had been built on a fragile foundation of debt.
Just as I forecast two weeks ago, U.S. stocks saw their biggest weekly losses in four years. The Dow Jones Industrial Average plunged -5.8% or more than 1000 points to close at 16,459.75 and is now officially in correction territory, down more than 10% from its recent sugar high. The S&P 500 was not far behind, falling -5.77% to 1970.89. The S&P 500 is now down 4% on the year and has generated a negative return over the last 12 months. The high-flying Nasdaq Composite Index lost even more last week, collapsing by -6.78% to 4706.04. The small cap Russell 2000 fell -4.6% to 1156.79.
But these numbers don’t convey the hard, cold reality of the losses. Let’s put some meat on the bones. The U.S. stock market lost $1.4 trillion in value last week according to Wilshire Associates, with more than half the loss coming in Friday’s rout.
The world’s favorite company and investors’ favorite stock, Apple (Nasdaq: AAPL), has lost $72 billion in market cap from its recent high while Facebook, (Nasdaq: FB), Amazon.com (Nasdaq: AMZN), Netflix (Nasdaq: NFLX) and Google (Nasdaq: GOOG) lost a combined $100 billion.
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