stock market crash
The warning signs of a stock market crash in 2014 are getting harder and harder to ignore...
Several prominent market watchers, including Ben Inker, head of the asset allocation group at GMO, and John Hussman of the Hussman Funds, say the markets are about 40% overvalued.
Last week, Yale Professor Robert Shiller, a Nobel-prize winning economist, expressed concern that stocks may have gotten ahead of themselves.you'll realize why you should start mapping out a defensive strategy now...
The Real "Pin" That Could Pop the Stock Bubble
Nothing goes up forever. Not the Federal Reserve's balance sheet, not global debt levels, and not stock markets... even when governments don't shut down.
Precisely because the Fed's balance sheet ballooned from $869 billion in August 2007 to over $3.6 trillion (and counting) today, and in spite of ballooning U.S. and global debt levels, U.S. equity benchmarks have been inflated to precarious heights.
"Houston, we have a bubble."
While the sky-high Fed balance sheet and rising global debt levels are their own bubbles, when they diverge - meaning, when the Fed starts to taper as global debt inflates - look out.
If the Fed-induced pump priming of financial assets isn't backstopped by strong and real global GDP growth, the increasing debt burden of the world's citizens will act as the ultimate pinprick that explodes the United States' inflated financial assets bubble... and other global bubbles.So here's what's really happening, how to prepare for the eventual correction (or possible crash), and - more importantly - how to make money from it...
Shah Gilani: We Are Sitting On A Stock Bubble
Money Morning Capital Wave Strategist Shah Gilani surprises Stuart Varney of FOX Business' "Varney & Co." today (Wednesday) when he states he believes the U.S. is sitting on a stock bubble right now.
Find out why Gilani sees the markets as "well over-cooked" - creating a stock bubble - from the Fed's strategy in the following video segment:To continue reading, please click here...
Stock Market Crash 2013: Four Factors Investors Need to Watch
Some call it a "perfect storm" and others a "financial apocalypse," but it doesn't matter what you call the fiscal headwinds facing the U.S. economy - just that you watch them, and the stock market "crash talk" they're stirring up.
With talk of the Hindenburg Omen, credit crunches, and struggling emerging markets, it's important to prepare for the potential impact of bumps ahead.
The Only "Crash Talk" Worth Trading
You've no doubt heard the "crash talk" intensifying after two triple-digit down days. But after reviewing more than 100 commentaries, there are exactly two and a half I take seriously.
The one we'll start with can not only help you now - as in today. It can also give you a permanent edge, because most people will never know how it works.
That's a shame.
The indicator you're about to see has predicted every major market inflection point since 1985.
And that's why I need to show you its current "readings" while there's something you can do about it all. We'll look at four moves, in fact. Taking an initial stake in the shares below - or adding to your position - is just one of them...
First, here's the indicator that can give you as much as a 30-day "heads up"...
Can the Fed Cause a Stock Market Crash?
A recent article by Paul B. Farrell of MarketWatch said that there is a 98% risk of a stock market crash before the end of 2014.
He said in the article "bubbles are everywhere. . .ready to blow."
That's quite a statement. One key reason Farrell expects a crash? Federal Reserve policies.
He believes that the three major bubbles that have blown up in the past two decades were caused in large part by the Fed's loose monetary policies.
The three bubbles are: the Asian financial bubble that resulted in the Asian Financial Crisis of 1997, the Dot-Com bubble of the late '90s and early '00s, and the credit/housing bubble that resulted in the 2008 financial crisis.
For readers unfamiliar with the term bubble, it simply means a financial asset whose price has been driven far beyond any rational analysis of its true worth. And although they look like they will rise forever, since there is little substantial basis for the valuation, these asset prices will eventually pop just like a soap bubble.
The pop results in a substantial drop in price - in other words, a crash.
Farrell quotes SocGen's global strategist Kit Juckes as saying all these bubbles were "fueled by the Fed keeping policy rates below the nominal growth rate of the economy far too long." Juckes went on to call current conditions the "bubble with no name."
He may be on to something. Even members of the Federal Reserve are worried.
In the mid-May meeting of the Fed's Advisory Council, some members expressed "strong concerns" over the Fed's low interest rate policies and its bond purchase program, which some members said could result in an "unsustainable bubble" in the stock and bond markets.
Thus, we've had the talk in recent weeks about 'tapering' the Fed's purchases of bonds.
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.
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.
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.