What happens when more Wall St meltdown causes KiwiSaver stampede?

ByMartyn Bradbury

 

The next great collapse of Capitalism is kinda due now. The desperate attempts to stave off another Depression in 2007-2008 embarked upon by Central Banks printing trillions of dollars has artificially  created the lowest interest rates for 5000 years!…

Wall Street on track for biggest December decline since the Great Depression
Stock markets in the US are heading for a dismal end to the year, with the Dow Jones Industrial Average and S&P 500 currently on track for their biggest December loss since 1931 during the Great Depression.

With just six trading days to go, both the Dow and the broader S&P 500 index are each down more than 10 per cent this month, according to the Daily Mail.

Wall Street suffered its second straight rout Thursday (US time), with the Dow ending trading 2 per cent lower at 22,859.60, a loss of 460 points, and the S&P 500 dropped 1.6 per cent to 2,467.42.

The Dow and S&P 500 are both in the red for the year, putting stocks on track to have their worst annual loss since the 2008 Great Recession — and first annual loss since 2015, according to CNN.

…now I’m no PHD in economics…

…I’m more buffet than Buffett, but most NZers see wealth in 2 places. Their property speculative bubble and their Kiwisaver account and with every market meltdown Kiwis are seeing their Savers evaporate…

All but four KiwiSaver growth funds lost money in past six months
If you’ve checked your KiwiSaver balance lately, you might have had a nasty surprise.

Volatility on share markets around the world has hit KiwiSaver investments.

Research from MoneyHub shows that, in the past six months, only four of 27 KiwiSaver growth funds had a positive return.

…most NZers have no idea that they can pull their Kiwisaver out of the share market and just keep it in a basic cash account in the bank, and as the market annihilation continues, once this fact gets known by more NZers, there will be one huge run on our market as NZers desperately pull their Kiwisaver out of Shares and put in in the basic cash option and buy back in once the market crash has passed.

I’ve already heard some banks have moved from just allowing you to do this online to needing to go in and meet a bank staff member in an attempt to slow this momentum. The thinking is you are less likely to do it if you have to go through a staff member first.

The enormous debt the printed trillions created also inflated assets and equities so as interest rates go up, paying that debt becomes more expensive while gutting stock and asset values.

It’s a perfect storm.

What will be the trigger for the meltdown? Take your pick, Trump’s trade war, China’s shadow banking bubble and economic slowdown, Italy’s political chicken, Brexit or emerging market currency collapse.

The issue is what does NZ do when the meltdown hits,  because that is the moment when real reform of neoliberalism is finally possible.

 

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19 Comments

    1. DCA is no panacea….and the panic is already underway, nothing said here will have an impact….do you take as much exception to those that constantly talk up the market in the face of the facts?

      Confidence is a great trick

  2. My take is that the fed will not allow this to go too far. They have the power now and the precedent of the expansion of QE to ” Open market operations” which is a euphemism for stepping into the share market with fiat money to prevent a collapse , and selling again when the market stabilises which they have been doing with QT (quantitative tightening) ie. selling off the bonds and shares they have accumulated during the QE run. At the moment they are letting it go further than they would to foil Trump. He has been calling for a halt to interest rate rises because they are bound to destroy the improvement in US economic stats that have been gaining him support. The rise in Interest rates kills those stats and kills that source of vindication for his “management” .
    They won’t let it go much further in the new year .
    With his withdrawl of troops from Syria and Afghanistan , though he has the approval of 86% of American public he has the approval of about 2% of US politicians and 0% of the MSM. My pick is he will be impeached for the move early next year though some other pretext will be put up. But just as many Republicans are up in arms about the withdrawal as Democrats. So they are likely to support a Democrat impeachment on any pretext if they can’t thwart the rollback of warmongering any other way.
    Some observers think it means a pivot to more aggression against Russia via Ukraine, and they might well try to railroad him into provocations in the Aral / Crimea area , but I think he’s had enough and is returning to the belief’s he has voiced in the past long before running for election. He doesn’t believe in endless pointless unwinnable wars and he is not wanting to go down in history as the cause of the final solution.
    How come this event (withdrawal of troops from Syria etc. ) is not the subject of any blog here or from Chris? It is by far the most significant news event this year. Is everyone scared to take a position on it?
    D J S

    1. Significant point David.

      The likelihood of trumps announcement being followed up by actual withdrawal, is a chicken yet to hatch.

      Words from the US and the head mouthpieces, are an indication of something, but not usually to be taken literally as a prelude to the said action.

  4. Your last sentence says it all. Do you really want a depression Martyn? Clearly not a student history because it didn’t end well last time.

    1. Depressions are a time when uber wealthy increase their material assets at fire sale bargain prices.

      So after the recovery they end up owning a much bigger slice of the collective cake.

      Depressions are not without advantage for those who are ready and contribute deliberately to them happening.

  5. You’re right, Martyn, that most NZers don’t know they can switch to a cash fund. And an FMA survey in 2014 found that 49 per cent of Kiwisavers thought their accounts were govt guaranteed. (75 per cent of people with term deposits believed they were guaranteed too.) If KiwiSaver accounts drop by 10 or 20 per cent or more there will be a lot of very angry people who feel they have been duped (even though the fact there is no govt guarantee has hardly been hidden).

    2. digital analytics has a great channel on Australia NZ property crash with special report on Auckland its worth watching .
      well thhttps://www.youtube.com/channel/UCKWDscRjYFTD1KHsmow4-bQ/videos

      martin north has done a great job with the facts
      look at the malls the public are shopping themselves to death spending fictional money we are in bubble everything credit property stocks bonds and its popping the public are oblivious and media are totally useless

    3. come off it record credit record money printing bubbles all over the place banking fraud and misconduct
      greedy people have borrowed more money than they can ever pay back

  6. there another theory as the baby boomers off load there over inflated assets gen x and y don’t have the money to buy them a lot of these boomers are going to hit retirement with debt because we will not take on the debt to buy there assets at bubble prices the boomers are not going to get the retirement they thought they were entitled to .
    justice for fucking our generation over

    1. “we will not take on the debt to buy there assets at bubble prices”

      Really?

      Truly?

      Or is that simply a wish?

      Because a lot of younger people ARE buying houses at those prices and a helluva lot of ‘baby boomers’ have been no part at all of this bubble blowing. More like taking out equity as the ‘Bank of Mum and Dad’ to help their offspring onto the property ladder.

      Any selfish, greedy, more-power-than-the banks boomer would do the same…while helping out with childcare and other family-support measures.

      Still – nothing like a spot of divide and conquer to end the year with.

      1. its happening already property bubble has popped even if they unload there property there will be a short fall

      2. its simple demographics the boomers need to cash up in increaseing numbers there is a lot more of them than gen x and y prices will fall across the western world

  8. Well, the last couple of days have proven ‘interesting’, haven’t they?

    Dow now down nearly 12% for the year.

    Nikkei now down just over 16% for the year.

    Shanghai now down well over 25% for the year.

    FTSE now down nearly 12% for the year.

    Buy the dip because what goes down goes up? Or stay away because this is the start of a 2007-2008-style collapse?

    https://www.bloomberg.com/markets/stocks

    1. depends on your compulsion with Casinos and the confidence in your ability to pick the bottom

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