The markets are collapsing again. A 300 point down day on the Dow Jones Industrial Average is almost common place. The NASDAQ is down 1,000 points from its highs just recently. This is almost a 20% correction. What is the cause? Most investors would say it is oil, however, that is not the only problem striking fear into institutional investors and traders. The main problem is a derivative of oil. Ultimately, what is freaking so many intelligent investors out is the exposure many banks have to tons of debt in the energy sector. Remember how in 2006-7 the housing market would never collapse? Well many big players felt the same way about oil, allowing energy companies like Chesapeake Energy Corporation (NYSE:CHK) to borrow billions of Dollars. Oil has collapsed and financial stocks are not in a good place.
The biggest worry for the market is European bank stocks. Names like Deutsche Bank AG (NYSE:DB) are down over 50% in the last six months. Even names like Goldman Sachs Group Inc (NYSE:GS) and JPMorgan Chase & Co. (NYSE:JPM) are tanking in sympathy. Oil needs to head up quickly or this market will be in more trouble with a potential financial crisis 2.0 on its hands.
Chief Market Strategist