This bloated stock market seems ready to take a big dump after years of relentless pumping and money printing. Now it is time for redemption and the bear! Will the Goldman boys cliff dive head first or feet first? I say head first!
Emerging markets have borrowed over 6 trillion dollars over the past five years and as the dollar rises it become much more expensive to repay that debt! This is the big black swan that coould crash stocks and junk bonds. The Yellen FED and others will be caught flat footed and the stock market bubble will burst and decline a HUGE percentage very very quickly. Let the buyer beware the FED and other central bankers are setting a deadly trap!
Buying stocks here in expectation of further gains is like picking up pennies on the rail road track in front of a speeding train! Most of the gains have been realized already. The top is near! 750 possible sometime this summer..
This correction feels a lot different then all the others since year 2009 for several reasons: (1) the huge drop in oil prices, (2) the huge rise in the dollar index, (3) extremely over valued risk assets, (4) massive margin debt and leverage, (5) negative interest rates in Europe. Each one of these concerns alone would be very worrisome, but since they are all present at the same time it is time to be very very defensive and panic! I have NEVER seen such distortions so extreme and all present at the same time. Not only is this a bubble but it is like no other in history and very dangerous. This quite possibly really may be the worse time in history to buy stocks! We will have to wait and see, but it has NEVER been more nutty in the financial world than right now! I RESPECT HISTORY!
I read an article yesterday claiming that Apple has enough cash to buy 480 of the 500 S&P 500 companies. This is a fantasy because these same companies have well over 4 trillion in debt and enterprise value well over 18 trillion. If you think 178 billion can buy that you are punch drunk or worse!
I got a feeling the dip buyers who have been conditioned to buy the dips since 2009 and have been greatly rewarded for doing so will continue to buy all the way down the cliff and will suffer tremendous pain over the next 3 to 4 years. The Jig is up!
The saw tooth pattern that appears after a multi year rally and very large percentage gains are very worrisome. In the past they have appeared before major tops in year 2000, 2007. This pattern also appeared in year 1998 before a 20 percent correction. But this does not always signal trouble. In year 2004 a saw toothed pattern appeared before a continuation of the uptrend. Because stocks are up so much over the past three years though, it is time to pay attention to the warning signs.
Even if you bought stocks at the top in 2007 and held on you would have have a 6% return per year including dividends. That is way too high return for over 7 years considering how over valued stocks were in 2007.
That is not true! The small investor today has the highest allocation to stocks in history! Many of them are not managing their stock portfolio themselves though most of these accounts are managed by investment advisers who have been buying very dip.
The dollar is in raging bull market and will soar from here. 120 by this summer and 140 by the end of this year and 400 in three years.
It is not just any ordinary casino either, it is very dangerous and leveraged with trillions in derivatives, futures, and margin debt. In my opinion, this may be the worst time in history to buy stocks!
The fantastic rally risk assets is presenting a great opportunity for investors to lock in gains by selling off their stocks and junk bonds. You can never become poor selling over valued risk assets! The stock market is more than two standard deviations above the median valuation and most certainly headed for a decade of woe! For those who did not sell near tops in year 2000 and year 2007, now is your chance. Take it.
What concerns me about the strong dollar is the near parabolic rise of the dollar since only last summer. I think the dollar was near 78 last summer and now over 95. That is a HUGE move in such a short time. That is not healthy and is more evidence that the financial system has become like a dangerous rigged leveraged casino. Is that something you want to invest your retirement savings in? I would much prefer gold!