stock market crash
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Why You Can't Afford to Ignore the Hindenburg Omen
The Hindenburg Omen-a harbinger of stock market crashes-eerily appeared again last week...and the Dow Jones promptly dropped 205 points. But its appearance brought mostly scorn from the mainstream financial media.
Here are just a few of the headlines from the past week:
- "Hindenburg Omen is Just Hot Air"
- "Why 'Hindenburg Omen' Is Just a Superstition"
- "Hindenburg Omen is idiotic, and if you believe in it, you should lose your right to own stocks-or anything"
"Let's not mince words on this subject: This is an example of the worst kind of 'technical analysis' - a market signal essentially designated for media sound bites," Adam Grimes, chief investment officer at Waverly Advisors., told The Wall Street Journal. "The markets may well decline from this point, but they will not do so because of some cleverly named signal. The Hindenburg Omen, we have to say, is mostly hot air."
Nonbelievers in the Hindenburg Omen say it correctly predicts a stock market crash only 25% of the time, and point out the last time it appeared, in 2010, the markets just kept on rising.
"In 2010 the accuracy of the 'Hindenburg Omen' indicator went up in flames and the current situation suggests the same result in 2013," huffed Daryl Guppy on the CNBC Web site.
Yet an appearance by the Hindenburg Omen has preceded every stock market crash but one since 1985, and if you look closely at the numbers this indicator's track record is remarkably accurate.
Maybe the doubters don't know as much as they think they do.
"They call it bogus because they don't understand it," said Money Morning Chief Investment Strategist Keith Fitz-Gerald, who called the Hindenburg Omen one of his favorite indicators.
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Margin Buying Surpasses 2007 Danger Levels – Is Another Market Crash Coming?
There's nothing like buying securities with money you don't have - or, more precisely, with borrowed money from your broker, with your investments as collateral.
It's called buying on margin, and it's soaring as the market continues its tear and speculative investors seek a piece of the action. As your stocks appreciate you can borrow even more. A market rally lets you expand your portfolio by piling on more debt.
But it's potentially dangerous and could portend a stock market crash.
As the accompanying chart shows, historically there has been a direct link between a surge in margin loans and corresponding stock market peaks - followed by sharp declines in the markets.
So it's no small matter of concern that the Financial Industry Regulatory Authority reports the amount owed on loans secured by investments climbed to a record high $384 billion at the end of April.
That topped the previous high - $381 billion in 2007, not coincidentally, just before the financial meltdown and the Great Recession.
As a percentage of the economy, the latest margin borrowing totaled 2.71% of gross domestic product.
By comparison, margin borrowing hit 2.73% of GDP in July 2007, during the housing bubble, and 2.81% in March 2000 during the tech bubble, which was followed by a stock market crash.
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How to Find Stock Market Crash Protection for Your Portfolio
Thanks to billions of dollars in quantitative easing from the U.S. Federal Reserve, fears over a looming stock market crash have been put on hold lately.
The Standard & Poor's 500 Index is up 16% this year. The market's outstanding performance has shrugged off weak earnings reports, slowing growth in China, and continued weakness in Europe.
It seems that zero interest rates really do trump all. Even Warren Buffett is unsure how all this ends, telling shareholders at the Berkshire Hathaway (NYSE: BRK.A, BRK.B) annual meeting "it's really uncharted territory. It's a lot easier to buy things sometimes than it is to sell them."
And I recently heard legendary real estate investors who at a conference compared the market to a game of musical chairs where everyone keeps playing because the music - QE - is still going.
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Contrarian Alert: Is This "Investing Jinx" Signaling a Stock Market Crash?
If you're contrarian, then Barron's latest "Big Money" poll and its magazine cover just gave you reasons to be on the lookout for a stock market crash.
The semiannual poll of professional investors found that 74% of money managers are bullish or very bullish about the prospects for U.S. stocks - an all-time high for Big Money, going back more than 20 years.
Barron's drives the point home with its over-the-top cover titled "Dow 16,000!"
But not everyone feels as confident as these polled investors - especially since the issue follows 2013's worst weekly performance for stocks.
"Rule o' Thumb: When the cover of a major financial magazine features a cartoon of a bull leaping through the air on a pogo stick, it's probably about time to cash in the chips," mutual fund owner John Hussman wrote on his Hussman Funds website.
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Will the Year of the Snake Bring Another Stock Market Crash?
The Chinese New Year officially began Feb. 10, bringing us the year of the snake - which some investors consider a very bad omen.
Not only does the year of the snake have the worst stock market returns of all zodiac signs, but some of the darkest moments in U.S. history have come during that zodiac year.
Art Cashin, director of floor operations at UBS AG (NYSE: UBS), appeared on CNBC's "Squawk on the Street" Monday and even listed the year of the snake as one reason investors should be cautious about stocks.
And there's plenty of history to back up Cashin's statement.
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Is Harry Dent's Stock Market Crash Prediction as Crazy as it Seems?
Economic forecaster Harry Dent just made another dire prediction, and investors should hope he's wrong.
Dent, bestselling author and financial newsletter writer, told CNBC Tuesday that he sees a stock market crash in the United States starting in the third quarter of 2013 and continuing for a year and a half.
Dent said real estate prices and stocks would plummet more than 60% by the end of 2014, or sooner, meaning the Dow Jones Industrial Average would fall below 6,000. He also said the United States would be close to bankruptcy by then.
Dent cited U.S. demographic shifts and the nation's debt crisis as the main drivers of a crash. He said had it not been for the U.S. Federal Reserve's recent moves to stimulate the economy, the stock market would already have collapsed.
"We call this the economy in a coma," he said. "Basically, without these trillions of dollars of stimulus, we would be in a downturn, in a depression, because we also have $42 trillion in private debt, the greatest debt bubble in history, and that needs to unwind."
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Don't Ignore These Stock Market Crash Risks
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If You're Worried About Stock Market Crash 2013, Buy These
The market has surged in recent action, but these gains haven't eradicated the chances of a stock market crash in 2013.
Global markets are up on news that central banks will deliver more stimulus measures, such as QE3 in the United States.
Even though stimulus measures trigger market rallies, they're actually admissions that economies are so weak they need government assistance.
As Federal Reserve Chairman Ben Bernanke recently stated, the economic conditions in the United States, particularly high unemployment, should be of "grave concern" to all.
Legendary investor Jim Rogers declared in an interview that, "In America, we have had recessions every 4 to 6 years at the beginning of the republic. 2013 is going to be a mess. It always has been, there's no reason it won't be this time too. Be careful..."
In order to heed Rogers' warning, investors should consider adding the following stocks to their portfolios.
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