Stocks Are Falling - I Am Afraid This Crash Will Be Devastating - Too Many Back Swans
After the neckline of the double top and the 200 day moving average of the Dow Jones are broken a few days ago, it really starts to look like a free fall now. In THIS and THIS and THIS article I described the double top since 12 days ago, supported with bearish arguments. Is the biggest bubble in human history that is caused by flawed Keynesian economics finally bursting?
The futures are already deep in the red, China announced another serie of tariffs, the free fall has started…….
Today the stock market takes another hit
After the recovery of yesterday, it looks like the markets will take another hit today. The futures are very negative again, and predicting an opening of 1.5 to 2 percent lower today. It might become a bloody day……
The drop in the futures was a direct result of an announcement from China of another 106 tariffs on cars, whiskey, aerospace and defense and soybeans from the USA. American goods that count for a value of around 50 billion dollars will be taxed up to 25%.
The hit today will make the technicals look even more ugly, and since the markets are heavily overvalued and more black swans are on the horizon, I think this will not end well.
Downward pressure
There are multiple reasons to expect a further drop, be aware that these black swans can trigger and reinforce each other, so they could happen as a chain reaction:
This was the 2nd longest bull market ever. Even if the sky was clear and blue it would be overdue for a drop.
The P/E ratio is extremely high at 27, normally it is around 15
Many technical points are broken, traders will get signals to sell or open short positions
The previous ‘Trump extase’ was extremely overdone.
The entire ten year long bull run was mostly driven by QE and low interest rates, non of the problems that caused the 2008 crash is really solved.
The trade war with China is worsening.
Interest rates and oil prices are rising (threat of inflation).
End of petro dollar is nearing, USD is more often excluded from international trade.
Central banks are out of munition because the interest rates are near zero already and many governments are already bankrupt or deep in dept.
This could be the end of the American empire
When the USD collapses because of one of the above described reasons, hyper inflation is very likely. When the rest of the world stops using the USD, the pool of dollars to print from will be way smaller and the result on the devaluation of the dollar way bigger. When hyper inflation in the USD occurs, all fiat currencies will probably be affected.
In the previous recessions the dow dropped all the way down to around 7000 points. As you can see the previous two tops reached an almost even level, but the most recent top is way higher. I really think it is only higher because it is full of ‘air’ blown up by QE and dept. I think when this bubble pops the crash could go as low as the previous lows, this is a staggering 70%!
How to prepare?
- Educate yourself, learn about Austrian Economics and understand what is happening.
- Convert your assets to Bitcoin, gold and silver.
- Take your money out of the bank (in case of a bank run) and avoid paper assets.
- Assets like land, real estate or your own house are only assets when you own it without dept, otherwise it is a liability. When you bought it with a loan the bank will confiscate it when you lose your job in the recession (while if the bank lose your money, you can’t do anything!)
Disclaimer
This is no financial advice, just my view on the market.
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Thank you for a very interesting and informative article.
At this stage in the economic cycle a recession is overdue but has been avoided by the gigantic money printing of central banks across the globe.
Of course, the money printing by the Fed, BOJ,ECB, BOE and BOC has grown debt to astronomical proportions but it has not solved the underlying stagnation tendency of modern day capitalism.
In its latest economic newsletter the San Francisco Fed is stating
"the U.S. is facing a future of slow growth, a “new normal.”
Last year the head of the San Francisco Fed, John Williams, pointed to the
''global growth slump'' as a long term trend caused by demographics etc.
Last July Williams was warning:
"monetary policymakers will need to prepare for the next storm by taking appropriate actions in advance ...''
Have central banks initiated any fundamental reforms of the global economy. Of course not. The global ponzi scheme that passes for the world economy managed by world central banks is caught in a terrible dilemma. Debt levels have risen dangerously high. They are trying to ease this problem by gently rise rates and cutting back their money printing programes. Sadly, for them global consumers, especially U.S. consumers in debt to over $13 trillion, are drowning in debt that they cannot ever afford to pay back.
The markets are responding to this rise in rates, especially short term rates like Libor, with increasing volatility.
The next global recession will be much worse than 2008 as central banks have only compounded the problems that caused the crash then.
What happens when the global derivatives market goes down for the count?
When the stock and bond markets tank we are liable to see QE4 by the Fed and more money printing by other central banks. I would be surprised if this did not lead to hyperinflation after a nasty bout of deflation caused by the collapse of global markets.
As little people all we can do is to prepare for the coming financial storm as best we can. Knowledge is power.
I strongly recommend reading about the the causes and consequences of the 2008 economic crisis. A great short book for this is:
The Great Financial Crisis:Causes and Consequences by John Bellamy Foster and Fred Magdoff.
I agree with most of your suggestions for prepping for the next global depression. Get ready for huge social, economic and political turmoil.
As much as I beleive in bitcoin do you really think it follows the same correlative pattern as precious metals at this stage? Not that I have looked at any data but I think the market still hasn't matured enough for that to be the case.
I think in the beginning of a stock market crash it could sell off a bit too because of general panic. However, when it comes to more QE or a currency crisis, BTC will benefit, is proven already in the Greece, Cyprus and Brexit crisis (BTC spiked). Also in Venezuela, India and Zimbabwe the demand for BTC is huge. Furthermore, when bankruns happen or the recession gets deep and long BTC will benefit I suspect. Anyway, BTC just had a heavy crash, so is heavily undervalued now, so the downside is limited. The Stockmarket has risen for 10 years and is heavily overvalued.
Interesting.
For sure, I'm buying right now. Keen for a crisis.
I do hope it won't come this far! But I do like the advice about the investment in BTC.
The problem the USA is facing now is partly the history by building up depts. By not only the people but also the government. The other problem is the president. He created his empire with the idea that if somebody (he) wins business wise, another has to loose!
The marshal pact, which was offered by the States to Europe had a win-win idea. Europe could rebuild their economie and the states would profit cause the people in Europe could buy more USA goods.
Now with the business war against China, both parties are trying to protect their economy by making the economy of the villain suffer. This not a win-win war but a win-loose philosophy!
Exactly, a win-lose philosophy, but a lose-lose result for the world population. However I don't think that Trump is the reason. I think the underlying reasons that is build up over decennia and went out of he hand in the last ten year are way more important. I think this created an unavoidable outcome that no single president can resolve.
I think we can agree on that!
I agree, if it happens many will suffer. On the other side, billions are suffering now daily because of the current corrupted financial system and a reset might be good for humanity in the long run. Hope a better system will arise and BTC gives me hope.......
Do not worry dear..May God help..its a routine down i think so and will recover soon
I do agree....however not before a rip back to highs here....called it yesterday...and the gap down explosion up today confirms the LOW
https://steemit.com/money/@heyimsnuffles/newsflash-btfd-markets-are-holding-where-they-need-to-bullish
I think you can guard in bitcoin or eth because the prices of now are too low and when the bull run comes the prices will go moon. Regards
I only believe on bitcoin and cryoto. I invest my money on the platform.
all hopes on bitcoin
I agree with you and think a lot of the economic rise can be attributed to quantitative easing and low interest rates. It will be interesting to watch. Hopefully more investors with try to seek shelter in bitcoin and crypto currencies which will help bring stability to the overall crypto market
obviously ,Gold is the most well-known safe-haven asset due to its stability during times of economic turmoil.
and bitcoin is the latest adition
thank you very good information, this will support btc nex
Point 2: The PE is higher than before is because the Republicans is in power. If you look at history, every time the Democrats are in power the PE number compress, and when Republican is in power the number expands