Why did markets fall so hard last week?
Most folks assumed that it had something to do with fears of a Eurolehman, but it also seems possible that the market is reacting to what it normally reacts to: expectations of a slowing economy.
This was the essence of Richard Russell’s big “sell everything” call, that the market was telling him that a bad economy was around the corner.
Credit expert David Goldman at Asia Times is thinking along the same lines, that the weakening US economy is the next shoe to drop.
And the bad news is already coming:
1) Unemployment claims rose to 471,000 vs expectations of 439,000 in the week ended May 15;
2) One in seven American mortgages is behind in payments;
3) Foreclosures reached a record as the banks work through their backlog;
4) Mortgage applications last week fell to the lowest level since the survey was conducted;
5) Commercial real estate prices continue to fall.
Along these lines, this week we get Case-Shiller and the first revision to Q1 GDP, so, this idea might have more to go on very soon.
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