Japan: Now, Mr. Spock

Enterprise Explodes

“Raise toner cartridges!”

“ChairSatan, they’ve blasted the laser printers and the toner cartridge is destroyed!”

“Use the keyboard — the KEYBOARD!”

“ChairSatan, the margin is too great and the clerk is on line 1 with terms for your surrender….”

Last night Japan imploded, down over 1,100 points.

 by genesis

Helping accelerate the decline was the China PMI which was under 50 (negative, that is), throwing cold water on theChina will save the world crowd.  In point of fact, China has been losing their battle with credit games for over two years — but these sorts of shifts take time to come to fruition.

Let us remember that margin debt has risen to outrageously ridiculous levels.  This means that the clerk is going to be making some calls, if they haven’t already started being received.

As I have said over the last couple of months this has the nasty feel of still air just before a big tornado comes ripping through — or like 2007, or like early 2000.

Not only is margin debt ridiculously high, much of which is likely out to hedge funds (speaking of which, how many piled into that Japanese trade, turning the crank on their leverage as “profits” expanded) and now are looking at losses that are likely in the 5-7% range over one night?  I’ll bet the list contains a few names and well-known ones.

CNBC is pumping just like they were last time… and the time before that.  “The declines are not nearly as bad.

Who remembers that in 2007 the same pattern initiated, with the Asian markets leading.

Then the losses were “magically” recovered and the market roared higher, finally posting its apex in the fall.

Today the market moves much faster.  I would not be even slightly surprised if the instabilities that central banks haveintentionally put into the system go “prompt critical” this year.

I’m sure there will be many who will dismiss this as “Oh that Denninger, he’s just a perma-bear.

My riposte is simple:  While the extraordinary madness of crowds can take manias much further than anyone could ever believe, the math is never wrong.

Discussion (registration required to post)