After a massive upswing in US stocks over the last six months, the recent rally may finally be coming to an end. It seems that the trend of rising stocks on bad or better than expected news may be in a reversal, as evidenced by market participants’ caution over the last couple of weeks. For those that follow contrarian investors like Marc Faber, Jim Rogers, Gerald Celente and Harry Dent, this should come as no surprise.
Marc Faber, publisher of the Gloom Boom & Doom Report, advised his subscribers and followers to take positions in US tech stocks, the banking sector and hard assets at the bottom of the markets in early March of 2006. However, he did provide a word of caution on March 16, 2009, making it known that while he was a short-term bull on stocks, that eventually, the economic fundamentals would catch up:
“probably a total collapse in the second half of the year when it becomes clear that the economy is a total disaster.”
As recently as September 3rd, on Delhi TV, he made another call, essentially telling investors to get out:
“I believe in the next 10 days to two weeks we’ll get big moves in markets. And I wouldn’t be surprised if the Dollar would for a change strengthen and equity markets would correct and possibly quite meaningfully so.”
Gerald Celente, Trends Research forecaster and contrarian thinker, advised listeners of the Jeff Rense show on September 23rd to look out below, calling it the Christmas Crash. He believes that the next collapse will come quickly, sometime this Fall, but as late as January or February of 2010:
“It’s going to really be an ugly scene. We are really encouraging people now to take pro-active measures and prepare for the worst. Don’t spend an extra dime.”
Jim Rogers, who is well known for making millions during the recession and commodities boom of the 1970’s, is also hesitant about acquiring more equities. He is an avid US Dollar bear, but in an interview on September 30th, he turned bullish on the dollar in the short term. His advice?
“I am not buying shares anywhere in the world as we speak.”
Finally, we have economist and cyclical analyst Harry Dent Jr., who some may know for having called the real estate Bubble-Boom, and subsequent crash, years before it happened in his book The Next Great Bubble Boom. Dent was also bullish on the Dow, calling for it to reach between 9450 and 10,500 after the March lows of 2009. Like Faber, Dent also cautioned investors to stay vigilant once the 9000 mark was breached. In a recent Economic Forecast Alert to subscribers, Dent indicated that the tide was changing:
“The markets are very overstretched here and we think it is very likely that we are seeing a top just above 9,800 on the Dow today.
This is the best intermediate term play we have seen in a long time. Shorting the stock market (for example, ETF symbol SH) could yield 50% to 60%+ gains over the next year with a 5% to 15% downside if the markets keep edging up for awhile, even to extremes.”
Though we continue to see most mainstream analysts talk the bull market talk, it looks as if the bull may be in trouble, especially if individual investors realize what all of the big boys talking their books already know – that the economic fundamentals are simply horrific and the markets are already pricing in GDP growth of over 5% for the next 4 quarters. Considering that GDP grew at 0.7% in the 2nd quarter, that seems highly unlikely. Some estimates also suggest the the P/E of the S&P 500 right now is at unprecedented levels of over 100!
As of today, it looks as if investor focus is shifting from stocks and commodities into what some consider to be short-term safehaven assets, such as US Treasury Bills/Notes/Bonds. The yield on the 10 yr is at 3.15% as of October 2nd, significantly down since August 7th’s 3.85%, suggesting that safety, not risk, is now the name of the game. Interestingly, and unlike November of 2008, gold seems to be holding strong at around $1000, though this may change if the US Dollar rises, as Jim Rogers, Faber and Dent have suggested it may.
For those still in equities, we believe Tyler Durden at Zero Hedge said it best, “Go long here at your peril.”
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The most convincing arguement Faber makes for a sell signal is that whenever 70% or more of the stocks listed in the S&P 500 are above their 50-day moving average there is ALWAYS (yes, I am using the term ALWAYS) a correction. Right now, about 79% of the S&P is above that mark. How severe the correction will be is the real question, though. For example, the last time the 50-day moving average was this high was the middle of June this year; we then had a very short correction followed by the market heading back up even higher. Even though the market is poised to fall, it takes balls to short it because the Fed may very well come in with stimuli to try and keep it on the upswing – even if it is losing value in real terms (that is, measured in gold) through money printing. Most people are too stupid to measure their investments in anything but nominal terms anyway, so therefore Obama’s popularity (the most important aspect of his agenda) will be in tact. Am I shorting the market now? Yes. But not with 100% of my portfolio. I have some long hedges in there in case I am wrong. Also, I bought some TBT recently as well (which I believe has almost nowhere to go up no matter what the market does). I believe that we will see a pretty big correction, but I will probably cover my shorts somewhere between DOW 8,000 and DOW 8,500. If it keeps sinking below that I will probably move into cash and just wait for a while.
My investment strategy is to keep a year of liquidity in a foreign currency in a foreign bank. A boat at the ready capable of leaving the country without official permission. In the US I have long positions in canned food, gold and ammunition. Other than that things are just fine.
Nice, Fred. If I may ask, what currency? And how does one open up an account outside of the US without being a citizen in that country? I have tried and failed a few times.
AS, you can just open up a corporation in that country and transfer the money into the corporate account. That’s how it’s done in Panama, easy to do. You just have the initial expense of setting up the corporation.
The current financial system is already dead. Governments and central banks try to reanimate it. How bad the economy really is, you can read here:
http://www.naturalmoney.org/howbad.htmlÂ
The fundamental problem is interest on money. If someone brought a 1/10 oz gold coin to the bank in the year 1 AD, and the money remained there until the year 2000 AD, collecting a yearly interest of 4%, the amount of gold in the account would have been 3.6 * 10^31 kilograms of gold. This is 1.9 * 10^27 cubic metres of gold weighing 317 times the complete mass of the Earth.
It is possible to have a financial system with constant economic growth at maximum potential without crisis, unemployment, government intervention and central banks. An introduction to this financial system is given below with links to additional information about the concepts of natural money and the design of a new financial system:
http://www.naturalmoney.org/introduction.html
“CAUTION: Crash/Collapse Dead Ahead Say Faber, Rogers, Dent and Celente†Dead right.It is high time the world woke up to the economic scam that has been and is still being perpertrated on it.We are doomed as Marc points out.Listen to Celente he right in his forecasts
These men each got it right. As a a working class American of relatively modest means I was still able to sell my real estate in 2006 at 400 percent of what I paid 3 yrs earlier making 6 figure profit. Moving to the country, my wife and I then invested heavily in physical gold and silver, stockpiled necessities and prepared for this collapse. We warned everyone, especially our children, no one listened.Â
Living in an unincorporated area, we only pay county property taxes, in Tennessee where there is no income tax, we have our own well and septic, we reduced our overhead before it was fashionable and we enjoy great surplus. Life is very good. We have been greatly blessed.
– Fear sells.
– Always has.
– Always will.
– Are the ‘doomers’ wrong? Who knows.
– How about the opposite end of this ‘trade’? If a group of individuals tells you there is an imminent ‘lift-off’ in the markets, do you pay him the same mind – or caution…?
To quote: “The markets can stay irrational longer than you can stay solvent…”
That phrase should be updated, because when it was uttered in the last century, Politics and Politicians did not Rule the markets. It should now read like this:
“Politicians and their Wall Street handmaidens (or vice/versa), can distort Market physics longer than you thought was possible…”
QUOTE C.C.
“If a group of individuals tells you there is an imminent ‘lift-off’ in the markets, do you pay him the same mind – or caution…?”
Indeed, very good point C.C.
CC,
I don’t listen or follow any blindly, I listen and study all the data I can find and then act. I recommnd this course when positioning yourself for your future rather than just listening and believeing or reacting. A good comment to consider about manipulation when you don’t fully know your opponent.
There is no need to ‘estimate’ the P/E of the stock market. Â this data is published by Standard and Poors. Â the p/e of the S&P 500, for “as reported” trailing 12 months earnings, now stands at 140. Â According to Standard & Poors themselves.
I am long gold, silver, nat gas. I also bought SRS ETF. I have 2 small homes, paid in full. No debt. I’m good to go.
Comments….The trick I believe is to be out of Fiat paper money and in assets which behave good when expressed in Real Money or Gold and Silver: apart from gold and silver, we think of oil (energy), gold and silver shares, oil shares and special situations. Whatever is going to happen to the Dollar, the stock markets and other fiat currencies will have a smaller impact on your savings.
Comments…..Dangerous is not only Fiat Money (we don’t know of any currency backed by Gold or any other tangible asset today, but of course also Bonds because the latter are an option to buy fiat currencies.
Hmmm… let’s see, unemployment at 25 year highs and still rising, home foreclosures picking up steam again as ARMs reset, increasing vacancies in Shopping Malls, a falling dollar while the FED’s printing presses are running overtime, China buying mountains of gold while STILL financing our debt (for now, that is…), slowing auto sales, and a cash-strapped, debt laden consumer. And we are supposed to believe that the rally off of the embarrassingly oversold lows last March is the start of a new “bull market” eh? As recently as thursday of last week, technicians agree that the broader indicies have rolled over, the S&P in particular. A mere 50% fibonacci retracement of the S&P’s gains off of the MArch lows of 666.7 to the peak on Sept 23rd would bring us down to S&P 873 to be exact; a 61.8 fib retrace would mean S&P 825… and still the clowns on Bubblevision, or CNBC, want us to believe that DOW 10,000 is still right around the corner.
Fool me once, shame on you. Fool me twice, shame on me.
Short this market with both barrels boys, the top is in for now, and wouldn’t you know it? RIGHT before earnings season, where the “news”, good OR bad, will get sold like there’s no tomorrow this time around—because there is no tomorrow for the perma-bulls who believe their own rhetoric.
Buy gold and ammo, those predictions by that Russian futurist of civil unrest in the US may not be too far off the mark…
Comments…..It is good to be prepared if one deterimines that the situation may be changing for the worse. I wouldn’t blindly follow what anyone tells me to do without looking at the evidence and then making a determination. Just wondering, what would be a good currency to invest in? Japanese Yen? Or siomething else?
The timing and degree of the corrective reaction coming to both the stock and bond markets globally, not just the U.S., is almost impossible to determine even after 35 years of investing experience. Will bond yields decline with continued inordinate supply in corporates, municipals, and Treasuries or will the rush to “False Safety” be the overwhelming influence on bond yields as equities continue their just commenced decline. Common sense says yields should increase in an inflated monetary environment, but Quantative Easing by the Fed, Argentina style, has artifically, for now, kept yields low. Hard to project “normal” market behavior into markets that are anything but “normal” in 2009 with so much Government and para-Government Goldman and Morgan intervention. But there is that old fallback of herd mentality. Once badly bruised investors from the 2001 and 2008 calamities see rallies in the morning turn into declines in the afternoon for a few weeks, it will be panic to the exits. If you have regained maybe 40% of your 2008 losses, you may decide if you want to retire before age 90 to get out of Wall and Broad’s VEGAS. Something bad cometh, like a game changing Black Swan event. Just simple probabilities provide support for a substantial U.S. stock market correction, bond market totally upside down in behavior, but stocks without earnings and revenue growth at an S&P 500 P/E of around 100 times are poised for a Fall. The Fall in the Fall. Bonds paying below the real inflation rate of 6% to 7% with increasing risks of outright default in a depressionary economy are not a financial solution for any investor fleeing stocks.
watch goldman sachs    they are the ones running the economy now.
Jim rodgers is always wrong anyone listens to him what he predicts usually happens but before that its always the opposite, he is an illumnist disinfo agent. he said short the dollar and it went up last year, he said get rid of pounds( after a huge plunge before he said that) in feb the pound went up about 20%. the guy is a cretin.
faber was right about buying gold stocks last december. and celente has been spot on but he does not time markets dont know dent. But a one eyed one legged lunatic could tell the markets are going to fall soon. BUT and that a big but, the majority have been wrong 99% of the time. stocks will climb for a while yet, before the crash. i wouldnt short or go long. buy gold and silver and the gold silver shares. these have recovered over 200% from the lows. unlike everything else. if you are going to do anything. remember the longs and the shorts both got slaughtered last year.
SELL EVERYTHING! RUN FOR THE HILLS!!
Oh…and Jesus might be coming, too.
Excellent article . I follow Farber and Celente they have been an reasonable good track record. I am suprised they are still on financial TV. I wanted to point out that Bob Hoye also has a good track record. He is a market historian and has been in the markets for 50 years. He is an honest Canuck. He can be found doing a weekly radio interview at howestreet.com. There is a new interview almost every Friday and it is worth listening to.
Thank you.
PS. I would like to thank Greenspan and Bernake for destroying the world. Yes, I know there are others. It is really sad that Greenspan left the teaching of Ayn Rand behind for accolades instead of following a more moral path. Â
Pass the amunition.
SmittyÂ
There is no question that the economy is in shambles, we are being told lies that the “book – cooking” media and governmental agencies feed us while the insiders are selling off their positions quietly. Do they know something most do not?  I believe too that we need to go long on canned goods, ammo, and gold / silver (note: the ETF’s GLD and SLV have some derivative exposure– maybe a good reason to own bullion instead), I am looking to two mutual funds MERKX AND MEAFX for shorting the dollar.. also considering Everbank and the foreign CD’s they offer.. this bank is FDIC insured (not that this means much in light of the almost daily bank closings happening around the country.. the FDIC is broke.. the FED and the Treasury will probably just print more money to bail them out too!)..  I am  x2 shorting the MSCI EAFE index with UXPIX to add to my positions as I see the storm clouds build on the horizon.
The housing market is on thin ice. The recovery that we are all witnessing is only temporary. What will happen when interest rates come back up – if they come back up? Oh me, oh my! We are going to watch a further erosion of real-estate prices on a massive scale as homeowners are forced to pay even more than they already can’t afford. If and when this happens, then real-estate prices will take a further hit as yet more foreclosured properties get pumped into the already saturated market with even less able-buyers available to pay for these low quality, exhorbinately overpriced, wasteful, energy in-efficient properties. We are heading straight into a tornado, in terms of real-estate re-sets, which will continue to build massively again from 2010, March and peak at the end of 2011.  If you thought thast subprime was bad, I strongly suggest that you take a look at the Suisse bank chart on the impending re-sets. If interest rates stay low and more borrowing and more money gets created out of thin air then inflation will kick in sending commodity prices higher – and probably to the moon. Either way, in the mid term, I think we are looking at much lower real-estate prices going forward and much higher commodity prices. And, in addition, General McCrystal of the US Army came out saying that the war effort in Afghanistan is probably un-winnable for the coalition forces under current conditions. Obama must already know this and frankly, there is little or nothing this puppet president can do to make a difference in the eventual outcome there either. This means that oil prices will likely rise. When oil prices get high again as they certainly will over time, the picture looks even grimmer. It basically guarantees that there will be more people opting to pay for gas and food instead of their outlandish real-estate prices. This equals lower real-estate prices. When the US is forced to concede in the middle east, then it is game over for America. It is a lose-lose scenario for the over-extended middle class. Starry-eyed and with hope, they’re looking off into the distance and can see a light that seems to be getting brighter and brighter. Don’t they know who they are? Credit junkies and they’re looking for another quick fix. Don’t they know where they are? They’re stranded on a train track. Unbeknownst to them, the light they see as their saviour is only that of an oncomming locomotive that is fast headed their way. It isn’t going to stop either. A lot of people are going to get wiped out by the upcoming collision. The homeowners are going to get wiped out. And the banks are going to get wiped out too. There seem to be several options available to the masses, to those who are not faint of heart. The options are, wait it out and face the music and deal with the calamity as it evolves. Or, sell now, pay off debts and convert some cash into silver and gold and rent or buy somebody else’s devalued real-estate, cash down and/or leave the USA altogether. If the war efforts are not successful and it gets dragged out longer and longer and the government goes into further debt, there comes a time when the interest on the government debts are greater than the assets. This is when our friendly loaners dump their dollar, demand their money back and buy gold and silver and essentially make IT the new currency. This is a wise reason to have part of one’s assets in gold and silver as the present time is basically the beginning of the end, the beginning of hyper-inflation and the end of the dollar and the end of  “the American dream”. Who will pay most dearly? The middle class. They are the ones who are stuck, stuck on the tracks and addicted to cheap credit and phony materialism. They will be cut down. They will be the ones who start rebelling as they see that their only way to get out of debt enslavement and impoverishment will be to take matters into their own hands. A new nation will be born. And gold and silver will be the the only backing for ANY financial transaction. The US government cannot control this. The US government is theoretically bankrupt and now the FED’s days are numbered as well. The sinking of the FED will signal the end of the US dollar and the end of the US government and along with it the system of enslavement that the masses eroneously believed was helping them. Our founding fathers warned us! The masses in America and elsewhere who went into debt and who forgot to challenge its government’s policies and left it unchecked were all wrong. They forgot their history and they failed to learn their civics lessons. Wake up people, the barbarians are at the gate.        Â
If the dow and gold are at par at 3000, what would happen to gold stocks like auy for example. God bless all. Michael G. McDonald……
MM, I think it would depend on where in the cycle we are. If we assume that we are in a deflationary environment, like we were in Nov 2008, then gold stocks (and gold spot) might get hammered down, as well. If there is little expectation of inflation, there may not be a lot of movement in to gold.
That being said, the more likely scenario, IMHO is a rising gold price. The price of gold will decouple from equities, commodities and even Treasuries. The reason? A loss in confidence in the public sector. This is the main reason why gold goes into a ‘bull market’… When people lose confidence in their government’s stability, gold becomes the safehaven asset.
This flight to quality started in the early 2000’s… I suspect that over the next few years, no matter what the stock markets do globally, gold will continue to edge up as investors seek safety and preservation of wealth.
Here is some good reading from Martin Armstrong on that matter:
http://www.scribd.com/doc/19199220/Will-Gold-Reach-5000-809
The dollar is going to collapse. It is what the rockefellers and the rothschilds have been “banking” on. They are looking for a one world government run by them. A one world currency is key to their total control and domination of all.
The dollar is going to collapse. When you hear people talking about the “elite”? The “elite” are the rothschild who have taken over all of Europe with the European Union and the rockefellers who have taken over America and the vicinity with NAFTA, GATT, the WTO, the IMF, and the continued rockefeller call for more “free trade agreements”‘. Remember too, that the rothschilds also own a great deal of the federal reserve, along with the rockefellers. Didn’t think you did, did you? The federal reserve is PRIVATELY owned by a few families.
The dollar is going to collapse. The dollar is going to collapse because that is what the rockefellers and the rothschilds desire.
Thank you, Ovals for your reply and I will add Martin Armstrong to my list of websites I check daily. God bless you. Michael McDonald.
Comments…..In my opinion, the DOW has made its high for the year. I think the odds are in your favor if you bet on a correction right around here.
I have a load of puts and some short ETFs, because I always put my money where my mouth is……..WIN or LOSE.
Um…
You might want to go back and check the comments from these guys – like from a year ago…
I happen to agree with them, fundamentally that is. However, be extremely careful of following their advice, for anything but long-term preparation purposes.
As was said long ago: “The market can remain irrational longer than you can remain solvent”.
So it was then (with a much saner government/Wall St. conglomerate).
Imagine how geometrically more ‘irrational’ it is now.
Forget the stock market! There is a coming collapse based on an unexpected, for most, shocking event this month. Get ready for something you have never seen, and when it hits, shock and awe will stun even the strongest in America. It will lead to fear, chaos, collapse, and even a coming famine as the system breaks down. Get ready for what most do not want to think about. The strike is ready, and the clock is ticking.
I just pooped my pants.
Harm not the oil nor the wine.  Nuff said. It’s way later than you all think. No “investment” will mean #8@* in less than six months. Thank the media whores that picked a fight they would never win in 2004. Illinois- if you are interested. O how the mighty are about to fall.
Listen, the stockmarket crash is just the half of it. Israel is going to nuke Iran, more bank failures, economic collapse. Sit back and watch the show the next twelve months.
Future Fails: Â What makes you so sure there’s an event coming THIS MONTH that will produce “shock and awe?”
Doom and gloom. Doom and gloom. Are you still eating your stored food from Y2K?
Markets go up.Markets go down.
Keep buying gold. The govt will only confiscate it at rock bottom prices. Then you will really have nothing left.
I have one question, the US government  passed a law precipitated by the Stock Market crash and Great Depression of the 1930’s that it was illegal to own gold. In fact everyone had to turn into the government all that was owned privately. What is to keep this from happening again? If I am not mistaken, I believe currently, under the Patriot Act, anyone selling a certain quantity of gold back to an established dealer must be reported to the government. Call your local coin dealer and ask them what they know about this… it is a little scary what I was told. Over 3 years ago all coin and bullion dealers had to specially register their business with the government for this reason.  This looks like the “system” has a plan for those of us depending on gold and silver to serve as a safe haven. Anyone have some input here?
Any suggestions on liquidity in a foreign currency in a foreign bank? Dominican Republic pesos ok?
Jim, here is an interesting approach:
http://www.sovereignman.com/finance/three-ways-to-diversify-out-of-the-dollar/
Mac
To AS & friends:Â Euro country, Netherlands is 5th on the list of best countries to live in: opening an account, including all fascilities for you, minimal amount Eu. 100.000,00, costs Eu. 2000,00 for the first year, following years about Eu. 1000.00.
Contact/info: [email protected]
To Alanismus and friends: If the sh** hits the fan: you won’t be needing a new car, a new house etc: you’ll need food, water, shelter, protection and a lot of good connections and friends. Bullion gold and silver will provide that. There will always be a black market where one -or more- silver eagles will get you a loaf of bread but I guess they won’t have change for a 1 kilo gold bar everywhere.
Government: fairytales!
Censorship around here is worse than by US government.
To AS and friends: [email protected]……..anything is possible!
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Yes, I will admit, that the monetary and capital markets have been fashioned into somewhat of a ponzi scheme rather than a more efficient replacement for barter. Having said that, overlay ever accelerating efficiencies being introduced as a result computer processing power doubling every 18 months, accelerating technological breakthroughs in solar energy, nanotechnology, electric cars, global economic cooperation and trade…  which lead me to believe we are entering an era of unprecidented prosperity and an enlightened age of knowledge. Unfortunately, this doesn’t mean the ponzi scheme tables wont be upset. Get rid of debt and don’t hold equities!
We are relocating to Northern Virginia. Housing costs are still outrageous there. What would be best for us…rent or buy? Rental rates seems outrageous, too. We project being there for 2-3 years…any advice?
The more things change, the more they stay the same. From a July 30, 1979 People article on survivalist Howard Ruff:
1. Keep your money out of savings accounts, insurance policies and investments with fixed return.
2. If possible, pay off your residence completely if it’s in a secure place.
3. Cut your standard of living or get a second job to settle all outstanding consumer obligations.
4. Borrow if necessary only to finance income-producing investments like real estate.
5. Store up a year’s supply of food.
a. Don’t rely on frozen or canned.
b. Dehydrated foods are better, because they are generally less expensive and occupy less space.
c. Freeze-dried are a good supplement because they’re easier to reconstitute, tastier and offer elegant “reward” dishes like beef stroganoff.
6. Buy one bag of silver coins for every member of the family “in case of a total collapse of a paper money economy.”
Brilliant predictions WRT market timing everyone!!!! Brilliant!!! … never take action based on doom-sayer market timing predictions. That being said: the dollar is in trouble, but will likely gain strength. Debt is and will be particularly bad as rates increase and RE asset prices fall. Physical gold and silver hedges are good (dumb-asses don’t diversify).  Love looking back at these crazy comments from time to time just to keep it real.