Is A Stock Market Crash In the Cards?
Over the last year, I have quietly liquidated my stock and mutual fund portfolios, banking a HUGE amount of profits in the process.
Why? Because I believe there is overwhelming evidence the stock market is on the verge of crashing, you heard that right, a stock market crash, and it may even occur any day now.
Here are just six of the red flags I see:
S&P 500
- The last two times the S&P climbed this high, a severe correction (of about 50%) took place. Many experts now believe that the next crash could result in a 90% drop in the stock market.
- Current stock prices are extremely expensive compared to their ten-year average. Currently, the price-to-earnings ratio of stocks is about 23.1 compared to the typical ratio of 15.1. That means that current stock prices are 53% higher than average!
- Market Sentiment shows that investors are extremely bullish right now. In fact, this measure is currently nearing a 10-year high. Most experienced traders know that when market sentiment it too high or too low, a snap-back often occurs.
- The Volatility Index (VIX) is also near a historic low, down 28% year-to-date. Many investors have forgotten about risk, and I believe it will only take a single event to send volatility higher, and this will cause them to flee from the markets.
- NYSE Margin Debt is at record highs and is tracking the highs of the S&P500. That means investors are increasingly betting with borrowed money.
In short, I am convinced there is overwhelming evidence that we are in a bubble that is about to pop, and I’m not the only one.
For example, Bob Janjuah of Nomura warns: “I still see end Q4 2013, through to end Q1 2014, as the window in which we see a significant risk-on top before giving way . . . to what could be a 25% to 50% sell-off in global stock markets.”
Also, just a few months ago, Marc Faber was on CNBC’s Futures Now with an ominous warning about a financial crash near the end of 2013. He compared the current market conditions to that of the late summer of 1987, just prior to the major crash. Mr. Faber feels we are imminently facing a 1987-style market crash any day now.
So, what should you do? Is there anything you can do to protect yourself? It’s hard to say when this will actually happen however if you would like to know what I am doing to shift risk away from stock market you should attend my upcoming webinar where I will explain the strategy I have been using to consistently outperform the S&P by over 8 times, without the risk of the stock market bubble we are in.
Register for this 100% FREE webinar here:
Kudos,when is money coming to Ghana for me?
FYI, I have seen several respected economist saying similar things.
I don’t do Forex….I barely even do stocks at all as I turned it all over to my bank financial advisors group.
They predict a 2.46% or 2.something % for my growth div stock portfolio for 2014.
Who knows?
Libby
You have omitted any discussion of why volatility is low and that is primarily because most of the investors are institutional traders and fund managers. There may be more active lone traders now than a few months but overall the numbers are fewer than during past downturns.
Also the P/E ratio is not 23%, it’s 23:1.
It’s hard to predict when it will all unravel but we’ve know for some time already that the entire thing is artificial and controlled and that traditional market forces (buyers vs. sellers) are often superceeded by intervening “agents of the Fed”)
You might be a year + to early on the crash, according to Conquer the crash.
Its hard to know exactly when it will happen but when it does happen it will be swift and there will be blood in the streets so to speak. The key is to be prepared for it when it does happen. Being somewhat liquid will be helpful and will allow people to take full advantage. This article is in no way meant to be advise. The idea is to add some perspective for people and share what I have done.
Sorry, for a moment I thought you were serious!!
Ha Ha
I hear the sabres rattling and it makes you think about what the future will bring. I am waiting for gold and silver to pop and i’m in that game again and maybe some bit coins. What do you think?
I want to share this comment from Bryan Rich… and I think he is rigth…
The Big Picture … Chart Review
By Bryan Rich |
December 13, 2013, 8:00pm EST
We have a couple of weeks remaining in the year. This week, we get the Fed’s final meeting for 2013, and the final post-meetingpress conference for Bernanke.
I expect they will start a campaign of scaling back their QE. They have given the markets plenty of lead time to digest the impact of tapering. They don’t want to be in the QE business anymore.
They have found, as the ECB has taught them, that words can do the trick.In this case, telling us that rates will be low for a long time, and that they
stand ready to act if needed. This is the new “Forward Guidance” tool and itcomes without bloating the balance sheet.So they gave us a threshold of 7% unemployment to start their tapering endeavor, and they have now reached that level.
What’s important to observe: While many feared several months ago thatscaling back QE would pull the rug out from under the stock market and lead to runaway yields, those fears should now be well curbed. Even as the Fed entered their September meeting, when it was fully expected that they would taper, yields had already settled, and stocks had already fully recovered back
to record highs.
Remember, the global economy remains in a highly fragile state – still in a crisis environment. And in this environment, global central banks are incontrol. They are telling us what they want. We just have to listen.What is their main message? What is the intent behind zero interest rates
for a long, long time?
The message is this: Don’t sit on cash. We won’t pay you anything for it.Take risk and you will get rewarded.
In this environment, when you take more risk, it promotes growth and wealth. In this case, that translates into investing in housing, where the Fed
is incentivizing us by keeping mortgage rates at/near record low levels. And buying stocks, where the Fed is incentivizing us by promising that they will use all tools to quell shocks, and by giving us no yield to speak of in bonds
(which provides no other alternatives than stocks or real estate to capture yield).
As I’ve said many times in the past, global central banks have committed trillions of dollars in backstops and bailouts surrounding the global economic crisis. This recovery has been manufactured by policy makers. Policy makers
are in a fight they can’t lose and they won’t lose.
They have told us that they will bridge us to a robust, sustainable recovery. That means stocks should do very well while the Fed (and other
central banks) are providing that bridge. And they will do well when robust, sustainable recovery returns.
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Having read this I thought it was very informative.
I appreciate you spending some time and energy to put this short article together.
I once again find myself spending a lot of time both reading
and leaving comments. But so what, it was still worth it!
Today is July 2 and the market is hitting new all time highs. Bad timing.