What's going on?

Last week was not good! The week hit its low-point on Friday when European and US stocks were down almost 4% on the week. The oil price also got slammed: it was down 10%. Perhaps most importantly, there are increasingly concerning signs emanating from the �junk bond� market (that we first reported on last week).

What does this mean?

On Friday, a �junk bond� fund (which some people would own as part of their personal investment portfolio) said that it couldn�t sell its bonds (see our previous article to understand what junk bonds are) at anything near market prices and that it would therefore (temporarily) suspend investors� right to pull their money out. It�s a sign that �liquidity� (the ability to buy and, crucially, sell junk bonds) has broken down. Confidence is really hurt when the market fails to function effectively and that leads, usually, to an accelerating sell-off. That�s exactly what happened � and the weakness spread into stocks as well.

Why should I care?

For your personally: Remember Carl Icahn�s warning? Back in September, the famous investor said that �junk bonds� would lead to a broader market sell-off. He also specifically said, in reference to junk bonds, �people are buying these not really understanding what they are buying.� The problem is that investors have been told that they can sell their fund at anytime and get back cash. But that is not how junk bonds operate in times of stress! That inherent contradiction is causing concern right now. For the markets: Uncertainty is instilling fear. Markets love to overreact and financial news loves dire headlines. And this might end up being much-ado-about-nothing. But the breakdown in junk bonds is now significantly impacting stocks. The fact that oil and other commodities are getting decimated is not helping. There might be more of a shake out before traders break for their eggnog and holiday cheer. You can watch the original Carl Icahn video here.