A Big Global Market Event Happened Yesterday, Not Tariffs – Mike Swanson (09/18/2018)

I did an interview with Ike Iossif in which I got his take on what is happening with gold and the XAU gold stock index.  To listen go here:

Stock Market Update With Ike Iossif (XAU Gold Stocks Chart & Egypt EGPT) – Mike Swanson (09/17/2018)

Now yesterday Trump did it and announced that he was going to put the tariffs on China.  He said they will start at a 10% tax for all Americans on $200 billion worth of China imports that will jump to 25% by year end.  That’s all they are talking about this morning on CNBC.

But something bigger actually happened yesterday in the global markets that the US media is ignoring.

And that is that the Egyptian stock market had a meltdown.

Take a look at EGPT, the ETF for Egypt.

This ETF has been in a decline now since April, but was trying to hold support at $32.00.

Yesterday it simply gapped down in a tear drop price drop.

That happens when something gaps down so hard that all the people in it suffer.

EGPT fell over 4.57%

But in Egypt there was a big problem, because on the Egyptian stock exchange there was a buying gap that created zero liquidity to create its biggest daily loss in six years.  Simply put an incredible 70% of orders on the exchange were sell orders.

This loss is part of what is an emerging markets debt crisis.

It started in Turkey.

Then it spread to Argentina.

And it’s hurting the currency of South Africa.

And now on Monday it smashed Egypt, where it is only starting.

Why?

Well like Turkey, Egypt has a debt crisis situation with a current account deficit over 5%, which historically is the level in which a crisis eventually hits a nation.  It began the year at -6.49% in Egypt.

Like what happened with Turkey in Egypt corrupt authoritarian rulers busted the government budget borrowing countless billions to funnel money into corporations in which they have a personal ownership in or their cronies do.

And now the people of Egypt are going to go through economic hell.

I know this isn’t being talked about in the US financial news (because they think Americans don’t care about these places), but it is what is happening.

This is important for you, because what it shows is that the emerging markets debt crisis that began in June is simply going to continue and spread to other nations.  It isn’t over.  This is hurting commodities, because it means a global slow down.  The global yield curve already inverted in June.  Tariffs are only a small part of this story.

The real big event is the debt crisis in emerging markets and such periods typically end with a quick bout of global market panic.

I did talk with this a bit with Ike along with gold.  To listen go here:

Stock Market Update With Ike Iossif (XAU Gold Stocks Chart & Egypt EGPT) – Mike Swanson (09/17/2018)

-Mike

 

 

 

 



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