John Fogerty (Credence Clearwater Revival) wrote “Bad Moon Rising” in 1969. The lyrics are relevant today.
“I see a bad moon a-rising (market correction/crash)
I see trouble on the way (inflation and war)
I see earthquakes and lightnin’ (defaults and bankruptcies)
I see bad times today” (polarized angry voters)
Jim Cramer of CNBC fame likes stocks. On Tuesday, October 23, before the DOW collapse of 608 on Wednesday, October 24, CNBC reported:
“Cramer advises patience, not panic, saying don’t dump stocks in this sell-off.” [Dow 10/23/18 – 25,191. Dow 12/10/18 – 24,423.]
“He added Tuesday’s session appears to be a ‘garden variety’ sell-off.”
Other Wall Street promoters have proclaimed:
We should hold stocks for the long-haul.
Stocks always go up.
Corrections occur but stocks rise long-term.
And more platitudes that keep people invested in over-valued markets.
History DOES show that stocks go up long-term, if you wait long enough.
WHY? The banking cartel, Federal Reserve policies, and government deficit spending devalue the dollar so each dollar buys a smaller piece of the stock market. Yes, stocks always go up, if you wait long enough.
Very few will benefit from a market crash. The powers-that-be want to avoid a crash. They want an orderly market so they can continue to extract their skim from the market casino.
But the real issue is not “hold on” or “buy the dips” or “wait it out.” The important question is, “What about risk and reward?”
- The DOW took over two decades to recover from the 1929 crash when measured in devaluing dollars. Purchasing power took longer to return to 1929 levels.
- The DOW reached its 1966 high in 1972 and again in 1982. It took sixteen years for the DOW to blow past the 1966 high, measured in nominal dollars, not purchasing power.
- The DOW took only two years to recover from the 1987 crash, but over 5 years to recover from the 2008 financial crisis thanks to a massive increase in debt.
- Yes, stocks go up as dollars buy less, but can you afford to wait? Will you panic and sell out near the bottom? You could lose years of paper profits, or sell at a loss.
- Risk versus reward? Why remain in an over-valued market?
By dozens of measures the stock market, particularly the NASDAQ, is over-valued. Based on a century of experience, over-valued markets fall, sometimes hard. They take years or decades to recover.
Over-valued markets represent high risk!
You have heard it before. “Those are good companies with great earnings…” Nothing in that statement means the stock price can’t rise to high risk levels or that the price can’t fall 30—80% from its highs. Machines and debt largely run the markets in 2018, and they can push markets too high and then excessively low.
Consider Amazon stock:
Date Price (H&L) Decline from high
09/2001 $5.67 95%
11/2008 $34.68 64%
? ? ?
Other Market Examples:
- NASDAQ 100 Index: Down over 80% after the 2000 crash
- Crude Oil: Down over 74% in a few months after the crash in 2008
- Sugar: Down over 95% after the crash in 1974
- Silver: Down over 90% after the 1980 bubble
- Nikkei 225 Index: Down over 80% after the late 1989 high
Consider this analogue of the S&P 500 Index.
One important reason stock markets are so high: DEBT!
The Fed lowered interest rates to nearly zero, which reduced borrowing costs for large corporations. Corporations bought back stock with borrowed dollars and boosted share prices and CEO bonuses. But the debt remains when the stock prices fall.
Much of current fiscal and monetary nonsense would disappear if the U.S. used honest money (such as gold) that can’t be created from nothing by the banking cartel. The fractional reserve banking scam won’t change easily or soon.
- Stocks rise over time, but corrections and crashes will occur. Examine risk versus reward before succumbing to the siren song that “stocks always come back.”
- Crashes occur in all markets, even controlled and manipulated markets. Greed usually overpowers good sense.
- The 2018 stock markets have risen too much and are high risk markets. They might rise further (doubtful) but the crash risk is excessive.
- Markets can take a long time before they correct. When they correct, they often fall deeper and faster than anyone expects.
- Look away from high risk markets like the NASDAQ and toward under-priced markets. Find low risk and high reward opportunities. Example – silver!
- Silver crashed from a high over $48 in April 2011 to a recent low of about $14 in September 2018. The $48 high was excessive and the $14 low is cheap. Silver has low risk and high reward potential.
What Others Say:
For perspective on Washington D.C. and Wall Street, we listen to wisdom and wit from Bill Bonner:
“We look at the passing parade in Washington through a cynical lens…
No situation is so hopeless… so absurd… or so disastrous that the feds can’t make it worse. No policy is too stupid… too counterproductive… or too corrupt that it can’t become the law of the land.
And no man is too craven… too degenerate… or too much of an imbecile to be disqualified from public office.”
From Gains Pains and Capital:
“… stocks are going lower. It’s no longer a question of IF stocks will continue to drop, but a question of how far they will drop.”
“Will we get bounces in the markets such as the one starting today [Tuesday, October 23]? Absolutely, but the BULL MARKET is OVER.”
From ZeroHedge: 70% of S&P 500 Stocks Are Already In A Correction”
“More concerning, and a testament to the tech-heavy leadership of the market concentrated amid just a handful of stocks, is that while the broader S&P 500 index has yet to enter a correction, more than three quarters of all S&P stocks – or 353 – have already fallen more than 10% from their highs. Worse, of those, more than half – 179 – have already fallen by 20% or more from their highs, entering a bear market.”
From Mike Shedlock (Mish): “Eight Reasons a Financial Crisis Is Coming”
- Junk Bond Bubble Bursting
- Equity bubble Bursting
Another potential disaster is a derivative implosion. Consider the implications of the collapse in Deutsche Bank stock prices.
- Markets rise too far and then crash. As it was in the beginning, is now, and will be…
- The significant investment questions are NOT: Has this market peaked or has that market bottomed? Leave those questions to the day traders and high-frequency-traders.
- The important consideration for most people is risk versus reward. Avoid high risk and embrace low risk markets.
Silver bullion and coins are insurance against financial cartel created inflation, government stupidity, Wall Street greed, stock and bond market crashes, black swans, politicians and central bankers.
Recycle dollars out of over-valued stocks and into silver.
Miles Franklin sells silver. Call them at 1-800-822-8080 and tell them you agree with the Deviant Investor about silver. Your price will not change, but I might receive a benefit if you give my name as your reference.
If you have questions or comments, email me: deviantinvestor “at” gmail.com.