It's Time to Sell!
The market is headed for a crash.
The same indicators that told us gold was an extreme buy this summer and that a breakout to the upside was imminent are now telling us to get out of major indexes.
9 of the 10 traditional sectors in the S&P 500 are now more expensive than their historical 10-year average.
What is coming for U.S. stocks is probably going to be worse than anything we've seen in our lifetime.
I'm holding the core companies we suggest, most of which are in the natural resource space, cannabis, physical precious metals, and cryptocurrencies.
However, for general large-cap stocks, anything inside of the S&P 500, I'm selling all of it – even what's held in my children's accounts for their future savings.
A crash was led by the tech sector in 2000, and it was the banks in 2008. This time, we have nearly all the sectors in bubbles. This is truly going to be an epic bursting of a bubble that covers all assets.
This bubble is nearing its end. Don't delay taking action.
Just 5 of the stocks in the S&P 500 have accounted for 1/3rd of the gains this year!
We are at a 70-year high for stocks purchased on margin.
This means that when the selling starts, it's going to be an avalanche like nothing we've ever seen before.
The 10-year P/E ratio based on 10 years of averaged earnings is now higher than at any time in the past 130 years, with the exception of 1929 and 1999. Both years were followed by crashes.
Stocks are extremely expensive in general.
Right now, we have 3 opportunities to invest where the sectors are cheap or at the beginning of bull markets.
Natural resource shares (gold, silver, zinc, copper, uranium)
Cryptocurrency (Bitcoin/blockchain technology)
Cannabis (the end of a prohibition)
Don't short the market unless you're a professional.
If you want to short the market, just hold cash. After a major pullback in the S&P 500, the cash will give you the courage to buy great businesses at fair or cheap prices.
FutureMoneyTrends.com is forecasting that a crash in the Dow Jones and S&P 500 will be like steroids for gold and Bitcoin. Both will be making all-time highs together.
As to when this crash will occur… We see significant risk now, but we can't time an event like this, nor will we try.
As value investors, we don't need to time anything – we just need to buy cheap assets and sell expensive ones.
It's that simple. Stocks in general are more expensive than ever, showing signs of an extreme bubble, so let's get out.
The stocks we've suggested to you in this letter are cheap, in bull markets, and have enormous upside, so let's own those assets.
Best Regards,
March of this year I moved mostly OUT of my long term bets on the overall markets performance. 1) Virtually ALL Large cap stocks have just gotten too expensive. 2) Leverage has extended to far 3) Animal Spirits are fickle and we are setting records for the length of the good times. 4) Nothing fundamental like general purpose low cost AI has entirely yet materialized to be so supremely disruptive to the economy that old valuation no longer applies 5) Even a small rumble in the economy could tip us with the high prices and high leverage.
I did not expect to see a collapse in valuations until at least this fall but things are getting to far along into this cycle and sometimes you need take some money off the table because there are some valuable buys out there and I strongly believe I'll be able to buy some really great deals within the next two years!!
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Hi, nice post - you are no doubt right that a crash will happen at some point.
One question though - you say that you don't need to time the market, but by selling everything you effectively are trying to do just that. What will you do if the S&P keeps going up, or just drifts sideways, for the next 2 / 3 years?
Cheers
Holbein81
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I'm sure at some point in time you've inflated a balloon, when it gets to the desired size, you tie a knot in it. Sure you could probably put a little more air in it and it will get a little bigger, might even be able to put a little more air in it and it get even bigger yet, but you know the more air you put in, the weaker it gets, and the easier it pops. So it's better to quit a little early than an instant to late. If the market moves sideways, it doesn't matter, you have your investment funds to do what you wish with now, instead of watching them sit there and do nothing. I completely agree with this posts take on the situation at hand, how much bigger can the bubble get, the time to get out could be debatable, now, in another month, another six months, but when it blows this time, there are going to be very few places that aren't effected. Sounds like now might be a good time to start looking for those places, Rothchild and Buffet definitely are.
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Thanks for the reply.
I am familiar with the balloon concept, it is valid.
I guess the best course of action depends on what you are trying to achieve with your investing.
The majority of people seem to me to be fixated on stockprices and are constantly trying to buy something for $x and then sell it a while later for $x+. Sometimes they win, but a lot of the time they lose - I believe there is evidence that the majority of people lose more than they win and fail with this approach - they consistently buy high and sell low
To your point about trying to emulate Rothschild and Buffett - this sounds great in theory, the problem is that they have far far better information than the average person on the street, and so following their actions with 2/3/4 months delay is no guarantee of success. In fact, same as a hyped ICO, you may just be the person buying when the smart money is selling.
My preference is to invest for income. Of course I follow stock prices, but I don't worry about getting in and out according to what may happen next week, next month or next year. As an amateur investor the advantage I have is time and patience, it is not the ability to stockpick or time the market. So I invest in large blue chip companies that pay me dividends to hold onto them, and I stick with them. I choose companies such as Nestle and Diageo - they may drop in a downturn but people will continue to eat chocolate, buy babyfood and drink alcohol whatever happens. And they will continue to pay me dividends through downturns, crashes, wars and so on.
For now, the dividends are used to buy more shares so a pullback is not the end of the World. In future, they will be pure income that I spend as I wish
Of course I invest in cryptocurrencies for diversification and to keep things interesting, and I sell options to boost my income - see my blog about that
Each to his own I guess - best of luck with your investing!
Cheers
Holbein81
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