I have been telling everyone for weeks “Markets do not crash from overbought. Markets crash from oversold. It’s a low probability event but one guaranteed to eventually happen.” This could be the start of one. Here is a recap of global markets.

US Markets are closed but S&P; futures are down 4.5% and Nasdaq futures are down 4.0%. We are looking at a possible lock limit down open on Tuesday unless Bernanke pulls a magic rabbit out of his hat. Don’t count on it.

Bloodbath Americas

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Bloodbath Asia/Pacific

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Bloodbath Europe

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Stock Markets Plunge Worldwide

Stocks Plunge Worldwide Amid Pessimism Over US Stimulus Plan

Stocks fell sharply worldwide Monday following declines on Wall Street last week amid investor pessimism over the U.S. government’s stimulus plan to prevent a recession.

Investors dumped shares because they were skeptical that an economic stimulus plan President Bush announced Friday would shore up the economy that has been battered by problems in its housing and credit markets. The plan, which requires approval by Congress, calls for about $145 billion worth of tax relief to encourage consumer spending.

“We’ve taken our lead from the Asian markets who have not been impressed by the U.S. There’s debate if there’s going to be a recession in the U.S. I don’t think there’s much chance of that though,” said Richard Hunter an analyst at Hargreaves Lansdown Stockbrokers Ltd. in London.

“People are certainly nervous about a potential recession in the U.S. spilling over to the rest of the world,” said David Cohen, Director of Asian Economic Forecasting at Action Economics in Singapore.

Some analysts predict that Asia won’t suffer dramatically from a U.S. recession because increased trade and investment within Asia has made the region less reliant on the United States than in the past. Excluding Japan, 43 percent of Asia’s exports go to other nations in the region, Lehman Brothers calculates, up from 37 percent in 1995.

The Great Recoupling

On Friday I said Fiscal “Stimulus” Doomed To Fail. Today anyway, the market seems to agree. Indeed the Asymmetrical Unwind of the Credit Bubble continues. Those misguided souls who thought Asia or Europe would decouple from the US were badly mistaken. Internal demand in China cannot possibly make up for falling demand in the US, UK, and now Europe. I am still struggling to see how anyone could have thought that.

Things That “Can’t” Happen are happening right in front of our eyes as Deflation American Style kicks in. Investors who could do no wrong anywhere are going to find out what it’s like to do no right anywhere.

Forced Unwind Of the Credit Bubble

  • A forced unwind of hedge fund leverage is coming.
  • A forced unwind of the carry trade is coming.
  • A forced unwind of anti-dollar bets is coming.
  • Bankruptcies will soar.
  • Some small banks will fail.
  • Massive layoffs are coming.

Look closely at that list. There is not an inflationary thing in it. Think the Fed can stop this? Think again.

Mike “Mish” Shedlock
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