“A strange game. The only winning move is not to play.” — Joshua, “WarGames,” 1983.
Market Roundup
Do you remember the movie “WarGames”? I sure do, even though the Cold War thriller was released more than three decades ago. The plot centers around a powerful computer system that’s designed to simulate global thermonuclear war — but that doesn’t realize the difference between a fake war and a real one.
A series of events almost triggers the launch of U.S. ICBMs, one that would be met by an equally devastating strike from the Soviet Union. But at the last minute, the computer system, nicknamed Joshua, “learns” the difference between simulation and reality. It decides it has to stand down and stop playing because there is no way to win otherwise.
So what does this have to do with the markets? A lot, according to this fascinating Wall Street Journal story.
The article chronicles how the millionaires, billionaires, corporate executives and other elites holed up in Davos, Switzerland, for the last week’s World Economic Forum, are taking the WarGames approach. They’re selling assets, raising cash and deciding not to “play” in the markets.
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| Are some investors deciding not to play? |
Why? Relentless, ongoing, over-aggressive central bank activism and policies have created incredibly fake markets and wildly inflated asset prices — but that façade is now starting to collapse around us. So the only solution to preserve wealth is to stop playing along and get the heck out of the way.
One CIO for a European insurance giant said: “The trade now is to hold as much cash as possible.” The chairman of Swiss banking giant UBS said: “There may be no limit to what the ECB is willing to do but there is a very clear limit to what QE can and will achieve.” And still another financial CEO said: “The sickness is not inflation, it’s the mispricing of assets.”
What I find most interesting about this line of thinking is that these are the very same people who feasted off the booms/bubbles those policies helped create.
How was the auction house Christie’s able to sell a record $853 million in art in a single day in November 2014?
Just a few months earlier, why did a 1962 Ferrari GTO Berlinetta sell for $38 million at a California auction, the highest price for any car in history?
Why did we see record M&A, record stock buyback activity, and record high-end real estate pricing and sales in 2014 and early 2015?
Because easy, nearly free money was pouring out of almost every central bank vault around the world, that’s why. Now the profiteers are packing their bags and going home.
| “If the rich and powerful are now selling into rallies, that’s a potentially very powerful ‘sell’ signal.” |
So sure, oversold bounces like we saw last week are nice. We may see this one carry a bit further depending on what kind of happy talk we get out of the Federal Reserve and Bank of Japan meetings later this week.
But if the richest and most powerful people on the planet are now selling into rallies, that’s a potentially very powerful “sell” signal. If you don’t want your portfolio to get nuked, maybe it’s high time you take additional protective steps.
Now, the floor is yours. Do you think this new line of thinking is a solid one? Or are the elites overlooking something? Have we reached a point where central bank action is ineffectual, not even able to spur a rally for more than a couple hours or days? Or can fresh action from the Fed, ECB, and BOJ get the party going again? Let me know.
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I hope you had a good weekend. I certainly enjoyed mine (as disappointing as Sunday’s football action might have been for this New England fan!), and I’m glad that several of you took the time to weigh in on my “Bear Market Playbook” column.
Reader Frank T. responded by saying he is raising and lowering his stock exposure along with the ebb and flow of the market. His advice: “Buy into the blips going up; for me, that’s being as much as 90% invested. Sell after two to three weeks of up blips; for me that’s going down to 75% invested. Use some skim for R&R.
“Do the same drill until the market comes out of correction to let the bear have some rest. When the bull appears, get on the bull and ride until the bull needs some rest.”
Reader Peter takes a different approach, saying: “I don’t try to time the markets. My strategy is a long-term one that started around 1990. I buy bullion gold on a regular basis. To date, I have sold only one coin — at a 500% profit. Just recently I bought back the same type of coin and will continue to buy.”
Reader MP suggested another way to approach this market: “My strategy is to short all rallies as long as there is a debate in the media about whether this is a bear market or not.”
And Reader Kevin A. offered this take: “I closed out many of my positions last week and did okay on most. As I watch the market and many individual stocks move, I feel they are erratic and tense. We truly are seeing bear market rallies. Thanks for your steady hand on the tiller preventing me from being drawn in before the final plunge.”
What about the outlook for stocks down the road? Reader Chuck B. said: “The markets peaked in May of last year, found a low in August, rose to a lower high in November, then a lower low in January of this year. The chart forms a slowly descending channel, which seems likely to break to one side or the other fairly soon.
“If there aren’t fundamentals that would put it higher, it can only go lower. I don’t see those positive fundamentals.”
Lastly, Reader Jbizzle said: “This market will soon nosedive. I look at the order books and all the fake bids. The black boxes are trying to pump up the market and when they give up, there will be no bids.
“They all have similar algorithms and this will happen all at the same time. Look for ginormous blocks being sold in the order books. They won’t be able to disguise it.”
Again, I appreciate the feedback — and I know your fellow investors are thankful for the strategy suggestions. These are clearly some of the most volatile markets we’ve seen in several years, and that creates both significant risks and significant opportunities.
Didn’t share your ideas yet? Then feel free to head to the comment section below and add them now.
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Remember how I told you the IPO bubble was turning to an IPO bust? Well, so far in 2016 there hasn’t been a single initial public share sale in the U.S.
That makes January the slowest month going all the way back to December 2008, when the Great Recession was raging. Nineteen companies went public in January 2015 by comparison.
Two industrial products makers — Johnson Controls (JCI) and Tyco International (TYC) — are merging in a deal that would create a company with annual revenue of around $32 billion. The two firms manufacture everything from car seats and batteries to fire safety and video surveillance products. One motivation behind the deal: Lower taxes, as the company will adopt Tyco’s Irish “only on paper” headquarters to reduce Uncle Sam’s tax take.
Now that sanctions have been lifted, Iran is looking to modernize its air fleet with the purchase of more than 100 planes of various sizes. It’s turning to Europe’s Airbus, and reportedly planning to buy everything from smaller A320s on up to the gigantic A380 superjumbo plane.
The Super Bowl 50 matchup is now set as a result of yesterday’s conference championships. The Carolina Panthers will face off against the Denver Broncos in Santa Clara, Calif., two Sundays from now. The Broncos-Patriots game was a thriller that went down to the wire. Panthers-Cardinals? An absolute blow out for Carolina, courtesy of what seemed like 20 turnovers by Arizona.
Is the collapse of the IPO market a significant worry for stocks overall? Or does this large industrial deal signal there are still signs of life and liquidity on Wall Street? What do you think about Iran’s latest purchase plan, or on a lighter note, the upcoming Super Bowl? Share any thoughts you might have on our website.
Until next time,
Mike Larson
Recommended Articles by Mike Larson:
Mike Larson graduated from Boston University with a B.S. degree in Journalism and a B.A. degree in English in 1998, and went to work for Bankrate.com. There, he learned the mortgage and interest rates markets inside and out. Mike then joined Weiss Research in 2001. He is the editor of Safe Money Report. He is often quoted by the Washington Post, Reuters, Dow Jones Newswires, Orlando Sentinel, Palm Beach Post and Sun-Sentinel, and he has appeared on CNN, Bloomberg Television and CNBC.
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I’m beginning to think that a great many people have no concept of what money is and what things should really be worth. Tens of millions for a car, can anything really be that rare or “collectable”? Can you imagine the cost to insure that thing? Wouldn’t you too scared to drive it? What would someone do with it? Park it in their living room? Does somebody want to be buried in it? It has happened. And artwork? All kinds of things have been “collectable” in the past. Barbie Dolls, model and toy trains, other toys, bathtubs, birdbaths, beer cans, vintage wine (which by the way will eventually turn into very expensive vinegar). Anybody want to buy a three million dollar used stamp?
Tens of millions for a car. Hundred million for a painting and/or a yacht. When something only costs you a days pay, or less than 1/100th of 1 percent of your net worth, it makes more sense.
Lawrence T
It shows a trend where the moneyed people are running scared afraid their paper wealth will evaporate. They are trying to be first out of the starting gate or out the door of a burning house before it collapses. They gained their wealth by being smart not stupid.
But if there is a meltdown, who are they going to sell that Ferrari or painting to (i.e., the next greater fool theory)? I get collectibles as a form of asset diversification, but if things crater, there won’t be something waiting in the wings to pay $45M for that GTO. Remember 1989-1991, when Ferrari Daytonas dropped from $1m to $100K in a couple of years. It doesn’t seem that these prices for houses, cars, paintings, etc. will be sustainable. But I remember when GTOs were worth $250K to $1M, so what do I know?
But if there is a meltdown, who are they going to sell that Ferrari or painting to (i.e., the next greater fool theory)? I get collectibles as a form of asset diversification, but if things crater, there won’t be something waiting in the wings to pay $45M for that GTO. Remember 1989-1991, when Ferrari Daytonas dropped from $1m to $100K in a couple of years. It doesn’t seem that these prices for houses, cars, paintings, etc. will be sustainable. But I remember when GTOs were worth $250K to $1M, so what do I know?
Only good thing to come out of the GOP and the 3% having more and more power and wealth is that they ALWAYS blow up the economy….. 1929, 2007 and now….. If this goes their way, then hold on to your drawers because it out to be a doozy!….. :)
And rampant speculation, lax investment regulations; plus Federal Reserve money printing and buying of bad assets have nothing to do with the bubbles? Deluded much?
And now??? Eagle, you seem to have forgotten who the current president is…the guy that just borrowed and spent $9 Trillion….and has nothing to show for it. “Herbert” Obama gets all the credit for THIS fiasco.
But this couldn’t happen during the term of a Democratic Presidency Eagle495, surely not. You must have this wrong, maybe.
You continually link the GOP and the wealthy. There are plenty of very rich Democrats pulling the strings as well. Warren Buffet, Bill Gates, Ted Turner, and Mark Zuckerberg are Democrats. I don’t mind you picking on the GOP. They are fair game, but so are the Dems. We are in desparate need of a third choice. Jim
Your right Eagle 495
Look at the Ford Motor Company they are shutting down ALL operations in Indonesia and Japan. The Japanese are notorious for brand loyalty which sadly the West is not. I live in Thailand and your lucky to see a Ford once a week if your lucky and the same with GM. The streets are flooded with NEW Toyota’s and IZUZU’s (The red truck taxi’s love these) You can sign all the free trade agreements you want with Asia but in the end the citizenry here are brand loyal.
Eagle, you have read and memorized very well the Democratic talking points! It’s ALWAYS the Dems who come in, usher in huge new social programs and all the spending that comes with them. When they fail, the Reps are elected and the media places the blame on them. Look at the mess Reagan inherited from Carter!! He rolled up his sleeves and put our country back to work. Carter began a program to put poor people in home they couldn’t afford. Clinton put the program on steroids! Then, when G.W. told Congress 5 times they need to look at the program, America was reassure by Barney Frank that “all is well’!! When it finally came crashing down, even though G.W. had a great economy up to that point, the media then, as well as today, continue to blame G.W.!!! So, go back into your closet and reassure yourself you are right by re-reading those talking points, living in fairy tale land.
more b/s from eagle495
Mike, you are right on target with your reading of the market. These guys you see on CNBC have their head in the clouds.
Do you really expect CNBC guys and their ilk to tell you the truth and make you run for the hills. These people are similar to the snake oil salesman of old. They are flogging a product and they need their customers attentive focused ready to participate in the market not sitting on the fence. They look for positives and hide the negatives. Its like covering wilted lettuce with salad dressing. The problem is this game cannot last forever and the jig is almost up.
Mike: We are in for a deflationary period. As you said, there is a total disconnect from the stock market and the real economy. I believe that this so called recovery was fake. The way to grow an economy is by creating real wealth by increasing productivity. This comes from the creation of new businesses, low taxes and regulation. Our economic problems are structural not cyclical. We and the rest of the world are floating with too much debt. It is time to audit the Fed! Regards, Robert Calabro.
Mike, thanks for giving an honest interpretation of all the mixed signals in the market.
If you liked War Games, check out “Colossus – The Forbin Project”. It was made in 1970, so it’s a little slow by today’s standards, but the ending is very thought stimulating, as was War Games.
Michael
I think going to Vegas is a better bet than the stock market. I still say sell sell sell if you have any profits left. I bought the SPXU today at 39 sold the February 19th call at $2.10 at a $42 strike price. 13% in one month isn’t bad and I have hedged a rally if it happens..
Mike,
I think your intuition is right. There is nothing now that the Fed bankers can do. Interest rate manipulation and more cash, while we hover just above zero……will not influence anyone for more than a day or two. The bottom line problem for the Fed is…..everyone is getting jaded to their machinations. Their supposed power is now being seen as nothing but empty rhetoric. The problems are just too big.
I expected something of a rally, after seeing the S&P500 plunge about 360 points since the first of the year. If that was it, last week, things are in worse shape than I believed. It remains to be seen if that is so, but the rounding tops in the S&P and Dow are looking strong for a sizeable fall. Makes me wish I’d bought even more SPXS.
Seems like technical analysis is out the window. Stockscreeners ?, forget about it. This is a rollercoaster of fear and greed.There is a different opinion from every person that tries to get a real grasp on what the market will do. I agree with those of you who say get in & out at a much faster pace than we used to. My thoughts are to play on the volatility.
Tony
I agree with you one hundred percent.
Dear Mike,
Deflation and poor growth globally mixed with the transition of China to a consumer economy, added with a good dose of fragmentation in the EU with almost all EU Countries drowned in debt, together with the winds of war in Syria, Iran and Saudi Arabia with proxy wars, ISIS scattered as refugees all over Europe, oil prices on its knees and an election year in America, YOU HAVE THE PERFECT RECIPE OF WHAT??
Short the markets, go long in gold, and dump all bonds!
To top this up, drink a nice cold beer on a warm day and trade currencies with options!
I have felt this way for well over a year and felt the same way about the Real Estate bubble in 2006. Better to be early than late!!! It’s been a good ride so far for me as I’m 75% in cash!!!
I find here is Australia your info so important to know we are so far away from the world’s intrigue with what is really happening so many snouts in the trough! it is amazing how anything works!!! thank God most people are good hard working looking after their families as best as they can, I hope info gets to most thinking people to make this a better world to live in keep your info following!!!!!
The rich shall trade currencys to maintain equity on the cross rate and on the inflation/deflation effect on world assetts includeing johny cash frank
Oil is the main catalyst at the moment. As long as there is excess supply there is no stability in both oil and stock market. It may go down to lower 20’s and take everything down. So keep eye on supply and demand.
of all the problems we have in the economy-world problems & ETC
WHY WOULD YOU VOTE THE SAME PEOPLE IN THAT CAUSED THE
PROBLEMS & THEN EXPECT THESE SAME PEOPLE TO FIX
THE PROBLEMS
Tom
Here is the way elections play out vote in party A years later vote out A and vote in B and then vote out B and vote A back in and so on and so forth. Governments/Big Business have kept you to a small option of their choosing. Its damned if you do and damned if you don’t. I am now 77 and for 5 decades or more I have been through many election “cycles” and trust me its always the same BS sugar coated crap.
Judging by the comments and the observations, I am now convinced we will have a massive rally. I was in cash last year, and am buying cautiously. When the blood runs and the fear is everywhere, I will be ready.
Good Luck to you Steve N. I am sorry to say the only massive rally I see is all the “voters” lining up to get some nugget of hope from the GOP rallies which of course is useless but the sheeple gather in never ending hope. Does history repeat itself? hm maybe. Listen to the economists their like the bible there shall be so many years of pain and then so many years of prosperity. Somedays I really think we are in for a real breakdown. We have built out such a large IT structure full of weak spots in fact we have foresaken the humanity that exists in all of us for greed and fornication not necessarily of the physical kind.
There’s a real war games called Jade Helm 15 that have the Texans worried. They think all those federal troops in their state is a prelude to martial law and a permanent Obama dictatorship. They worry about such agencies as the IRS, the Homeland Security and even Social Security receiving 1 billion rounds of hollow point bullet ammunition.
We in TX have many at the ready—-Camp FEMA region 6—-FEMA coffins, trains and round up trucks with shackles. These camps have turn styles and razor wire facing inwards—FUN and GAMES at camp FEMA.
2nd amendment under full assault and the attempted closure of ammo manufactures.
Old guard Generals concerned about EMP—the grid. NOT GOOD 1776 will commence again if they the elite push this GUN GRAB.
In regards to the piece on “Two industrial products makers — Johnson Controls (JCI) and Tyco International (TYC) – are merging in a deal that would create a company with annual revenue of around $32 billion”. … The kicker is “One motivation behind the deal: Lower taxes, as the company will adopt Tyco’s Irish “only on paper†headquarters to reduce Uncle Sam’s tax take”. … Perhaps it is time for the USA to pass policy that only if a corporation obtains greater than 50% of it’s revenue outside of the USA, would the corporation be “allowed” to incorporate overseas and perhaps other stipulations as well. The “only on paper” types will be required to pay taxes here in the USA.
Why should government have the right to tell anyone (large company or mom and pop shop) where they can incorporate? That is a dictatorship you are talking about, Al, and means you and I lose all rights to do as we choose with our money, and live our lives as we see fit. I wouldn’t want to live in such a nation, and I doubt if you would either.
Al
Capital flight is a well understood concept. If your local shop doubles its prices customers will go some where else. No one and I mean no one at all can tell you what to do with your money. Whether corporate or private, we need policies where we work together. Most of us want to get this country going again and create meaningful employment. We need inspirational leadership and there’s not much around.
Al,
This kind of activity has been forced by the very policy makers that have raised the corporate tax rates to the highest in the world. There is not a one of us here that likes to work hard, assume risk, risk failure and finally get rewarded by making money and then hand over 35% to a government that will line their pockets with that money and make very poor spending choices. This 35% is after you have paid all other taxes and fees associated with doing business, Suta, futa, ssa, healthcare, endless regulations with open ended cost, property tax, business license, and all other governmental fees associated with the privilege of conducting business in these United States. No American should condone this practice! It violates the very principles that this country was founded on. And then when a company says enough is enough, they are branded as Un-American. Why are so many companies moving away from here? The reason is obvious! The solution is equally obvious, but the solution violates the “punish, take and enslave” credo they operate under. And your solution to the problem is more regulation and laws? What happened to the simple “common sense” approach? To keep the money and JOBS here, keep the company here by taking away the incentive to move. How? Equalize the playing field! Meet the lower rates overseas. Too simple! This is but one of a thousand things that need to be done to turn this country around. But you have to start somewhere!
Why would you pass legislation against the people that you get your political donations from and also your marching orders. Yes there will be a political hew and cry but in the end nothing will be done and the deficit will climb even higher. Obama is trying to cement his legacy with one eye peeled on the exit door in January 2017. He no doubt is already eyeing lucrative offers from his monetary base in payback for all that has come their way. The Presidency is just another stepping stone in life. Books, tours and speeches is where all the gravy lies. We the unwashed masses can now go back to the toils and tribulations of life.
What ever happened to FREEDOM OF CHOICE?
How often do you find the rich or anyone in the know for that matter telegraphing their punches?? Cash in an inflated currency that is unbacked, is only a means of exchange to find hard assets. Someone in all of this is going to get creamed. Believe little of what you hear and only half of what you read. Whether it’s the Yen, the Euro or the Dollar, at some point having cash is going to be seen as a wrong place to be, as some traders will have it right on the money. Good luck.
Howard,
I don’t know about the traders having it right, but I do agree with everything else you have said. Cash is not king once the faith in that unbacked piece of paper is lost. Who knew it was so easy to print them endlessly, without one shread of value to back that piece of inked paper. How disgusting that we work hard for that inked paper only to learn while we were toiling heavily for a few of them per day, they were printing them almost out of thin air. In the trillions. How fruitless our work is when it is valued by a inked paper that can be so easily produced at will. It is a SLAP in the face to every hard working American. This inked paper will be good for little more than toilet paper or fire starter as some point. Hard assets are King! What those hard assets are exactly is the nagging question. For each of us they are different. Take care Brother and keep your head down!
Your logic is impeccable. I am mystified how they can continue to issue mountains of fiat currency yet the dollar only strengthens. I really don’t get it. Jim
the money never leaves the fed. if the money ever hit the streets, we’d see the effect.
The party is definitely over and more QE worsens Europe’s outcome. Batten down the hatches!
We are not going to last for long. The muslim IS.is going kill us or we will kill them.
You can not destroy property, you can not kill people and have prosperity same time.
You can not borrow money and not pay back. If you don’t work and have no money to buy food, you are not gong to last for ever. Welfare system, it works as, long as, the taxpayers are paying the taxes.
Are you ok!!!
I see it in a different way:
1) Sooner or later interest rates will go up in the US and bonds will go down. Trillion Dollars will flow toward real assets and the stock market.
2) The US can in the mean time, continue to print way more money and as much as they want for a while, and surprisingly the very low actual inflation will continue. Why? The US Dollar is today the world currency and Dollars are still in short supply internationally, one of the most important factors in the present deflationary economy. The US Dollar will continue to flow into all international markets as still there are not enough Dollars around the world.
The price to pay by the US will however be high as a portion of those Dollars will return to the US as foreign manufactured products from China and many other countries. Call it “Dollar Globalization” in monetary terms.
Interesting train of thought Oliver. Right now I’m so unknowing that I don’t know my last name from my first? (<:
Mule
We are in the first stages of a Bear Market; the overall trend is down for the next 12 to 18 months. It’s difficult to monitor, since many key numbers are manipulated, prices of oil and commodities whip-saw,in zig-zag patterns. Since the US $ velocity of money is at record lows, printing more seems to only add to Bank reserves, never going to public coffers. Most consumers are fully satiated in goods and supplies, including corporate investment goods for mining, agriculture and transportation. Like 1932, we see every stimulus effort just pushing on strings that buckle but don’t deliver! These conditions offer little upside. All we can do is wait, hold our cash and seek out bargain stocks. It’s back to the future. Like 1934 to 1935; a new 1936 will come again; ’til then: Watch & Pray!
it’s been bugging me why the vix is so low, so i looked at the oil vix. the oil vix is at 80. the oil vix was at 100 during the height of the 2009 recession. so we’re seeing high volatility in oil only. that means the rest of the market is stable. something to think about.
India was and is growing at 7 plus percent and will grow at this rate for atleast another decade. I am 100 percent invested only in stocks and I hope to continue achieving the 27 % cagr that I achieved. The reason a lot of divident paying and profit making small and micro caps are quoting at single digit PE s even now. Invest in small cap funds from USA.
Hi Mike,
When the global banking elites control the the central banks of the world, it is absolutely no surprise that the elites have more money than they know what to do with. The middle class are simply the sheep and frogs that make all the money for them…Not much different than the kings and queens of yesterday. Speaking of central banks, Michael, you may want to do a deep dive on the creation of the US Federal Reserve it is a fascinating story as told by the book “The Creature from Jekyll Island” by G.Edward Griffin..
Excellent book. Fractional banking and allowing the creation of money out of thin air gave bankers the power to dominate. The ruling class used to use superstition and religion to control the masses. Now they use debt. Jim
Billy and Mike
You can get the short version by Glen Beck interviewing Edward Griffin its online. Anonymous is another good source of information. It was not just the nightime creation of the Fed but also the IRS was never approved by the majority of states. You can also trace back the history on Prescott Bush, Harriman relationship and also their involvement in WW2
Prescott was indeed a shady character, almost unknown to the public. Mighty friendly with German financiers! Jim
Well, I will stand with Martin Armstong’s view that we will see the Dow soar, catching many bears flat footed and out of position.. Not all issues will do well but if history is any guide, I look to the commodity sector that has been beating down more than all others which, relative to commodities, should underperform in the next few years.. While we are in a deflation, this will create supply destruction as the cost of extracting resources will shutter production for all but the most efficient players… Copper tends to lead the recovery.. so keep an eye on this commodity itself.. ditto silver which is a byproduct of base metals in particular as there are very few pure silver plays out there.. A balanced cautious approach that has a high allocation to cash just might be the winning move for 2016 ??!!
If the biggest and most powerful people realize that we are indeed in a bear market without higher highs since last August, then what is a poor sucker to do that has been brainwashed to believe that a bear market starts after a 20% drop? To me this is further evidence that people must think for themselves and not listen to the arm waving crowd on Wall Street. Good on you Mike for pointing this out so we do not have to wait for CNBC to tell us we need a 20% drop to ring in the close to happy hour. Actually, I have heard the bear roar for five months now; and have no sympathy for those who continue to not listen to the roar of the bear.
Right you are Will. The 20% drop has already been achieved in many stocks – Apple, Tesla, CMG, etc. So while the index may not be at 20% down, many holdings are well past that. The monthly sell signal was actually given in April 2015, so there was plenty of time to book profits and bail (or get short or hedge). Anyone still in the market after the August warning is more hopeful than rational, and have already blown their risk-to-reward out of the water by hanging on. At 18,000 and 2100, there was no reason to stay in, as the reward was less than 5% and the risk is 10-20% at least. And possibly much more. These people saying that the market is not in a bear mode sound exactly like those when oil was at $80, and gold at $1700, before continuing to plunge in a years-long sell mode that was easily shown by the monthly MACD chart. And that’s exactly what is MOST likely happen here. Nothing is ever 100%, yes, the market could turn around and get to that mythical 31,000 that Martin Armstrong keeps touting, but in the meantime (if ever), there will be much more pain for those stubborn enough to stay long. When a monthly signal of this type is given after such a long and large runup, the odds are 80-90% that the full sell signal will play out, until the MACD is oversold – and that’s a long ways away. Look how long and how far oil, gold, silver, copper, Natgas and the Euro have fallen since going into a monthly sell mode? Odds are 80% that the stock market will do the same. I’d rather go with the 80% odds, than to hope that the 20% turns out to be the exception, and that the market will resume a bull mode. You have to live with the percentages, and the risk-to-reward. Otherwise, you won’t profit.
I see it in a different way:
1) Sooner or later interest rates will go up in the US and bonds will go down. Trillion Dollars will flow toward real assets and the stock market.
2) The US can in the mean time, continue to print way more money and as much as they want for a while, and surprisingly the very low actual inflation will continue. Why? The US Dollar is today the world currency and Dollars are still in short supply internationally, one of the most important factors in the present deflationary economy. The US Dollar will continue to flow into all international markets as still there are not enough Dollars around the world.
The price to pay by the US will however be high as a portion of those Dollars will return to the US as foreign manufactured products from China and many other countries. Call it “Dollar Globalization†in monetary terms.
Reply
I just wanted to contribute the fact that in the 24 months, between October 2005 and October 2007 – the official start of the “Great Recession,” more capital left the U.S. than since WWII. It is the money elite and/or ‘connected’ money that gets out of the markets before the corrections or bubbles pop. Being that they are the same people directly or indirectly responsible for creating and profiting from the bubbles, rather than true bull markets based on sound U.S. economic fundamentals (production, job creation, savings and investments vs expansion of the money supply), the ‘real’ money is not only the first out, but usually is positioned to profit from the correction or when the bubbles burst.
So, when the rich and connected seek safety and invest in “real” assets, it might be a good idea to follow.