Miles Franklin sponsored this article by Gary Christenson, the Deviant Investor.
From Bill Holter “Crash Alert.”
“For the last 6 months we have responded ‘it is happening right before your very eyes!’”
“The coming crash is a mathematical certainty and one that historians will ask in the future, ‘what were they thinking.’ While CNBC parades clown after clown to tell you this is a buying opportunity, I would simply advise DON’T BE STUPID and use your own common sense! We lived through the biggest super cycle of credit the world has ever seen… how do you think this ends?”
Bill Holter understands the financial dangers confronting the world, particularly in Europe and the U.S. As for timing he said, “it is happening right before your eyes.”
The global economies must service about $250 trillion in debt, which is too much debt! The multi-decade central bank and government response to crises has been throwing dollars at the crisis and “fixing” excess debt problems with more debt. Like ten pounds of hamburger sitting in hot sun, the debt problem may not be rotten yet, but it will spoil soon.
The markets agree—they breached multiple danger zones. Nonsense touted by Wall Street cheerleaders and politicians will help as much as treating stage four pancreatic cancer with aspirin.
WHAT DO CHARTS AND DATA TELL US?
Global central banks “printed” about $20 trillion in “funny money” that bailed out banks, levitated stock and bond markets, lowered interest rates to near zero or below, and allowed politicians to spend, spend and spend. But the flow of created dollars, euros, yen and francs is slowing, and projected to go negative in early 2019.
Central bank printed “funny money” and fractional reserve banking boosted stock and bond markets and increased debt to unsustainable levels. Withdrawing that “funny money” will weaken bond and stock markets. The process is accelerating.
The NASDAQ 100 Index includes the FAANG stocks and other high-flying tech stocks:
The uptrends broke following the 2000 bubble and the 2007 market peak. The NASDAQ 100 Index peaked in September of this year and turned down. Prices have fallen below the uptrend line, the danger zone. Perhaps tech stocks will rally again and make new highs. Perhaps Santa will deliver gifts from an anti-gravity powered sleigh to every boy, girl, politician and fund manager in the world… but don’t bet on those possibilities. The risk is high.
The NASDAQ 100 to S&P 500 Index Ratio:
This ratio is one measure of excessive valuation in tech stocks. Note the bubble highs for the ratio in 2000, and the excessive highs in 2018. The ratio rolled over in August of this year before the peak in the NASDAQ 100 Index.
Amazon P/E: 87 (Yahoo – Dec. 17 – has been much higher.)
Netflix P/E: 96 (Yahoo – Dec. 17 – has been much higher.)
The Russell 2000 Index to DOW ratio:
This ratio shows the broader market peaked earlier this decade and has recorded progressively lower ratios. The most recent rollover in the ratio was July 2018. Expect lower prices for the Russell 2000, broader market, DOW and NASDAQ.
Apple stock has rewarded investors. The ratio of Apple to the S&P 500 Index shows the rapid rise of Apple stock prices. The ratio rolled over in October of this year, about when the NASDAQ 100 peaked.
Another high-flyer is Netflix stock. It peaked at $423 in June 2018 and has fallen 37% as of December 14th. It’s P/E is still high, the company puts out good products, carries huge debt, and burns cash like there will be no tomorrow. Hmmmmm.
The Netflix to NASDAQ ratio rolled over in June 2018. Netflix and Facebook stocks gave early warnings of a stock market peak and correction.
The broader market turns lower before the high-flyers, which attract considerable attention plus extra dollars from investors and central banks. (The Swiss Central Bank invested in FAANG stocks.)
One measure of broader market internals is weekly NYSE new highs minus NYSE new lows. An excess of new highs shows strength while many new lows should worry the bulls. The graph of new highs minus new lows shows weakness during most of 2018. The rollover occurred in January at the momentum peak in the stock markets. New lows exceeded new highs since September of this year.
- Bill Holter says the crash is happening now. Ignore at your own risk.
- Global debt is about $250 trillion. Markets might crash, but the debt remains. Expect defaults and hyper-inflation within several years.
- Global central banks are withdrawing liquidity from economies. The stock markets know and respond by falling.
- The NASDAQ 100 and FAANG stocks—the strongest—have rolled over and broken long-term upward trend lines. This parallels what happened in 2000 and 2007. Oops!
- The ratio of the NASDAQ 100 to the S&P 500 Index has rolled over.
- P/E ratios for FAANG stocks are high and have been much higher. Their stocks are correcting. More downside lies ahead.
- The ratio of the broader Russell 2000 to the DOW rolled over long ago. Most stocks are weaker than the indices suggest.
- NYSE new highs minus new lows peaked in January and have been negative since September.
- The risk of a crash or extended correction is large. The potential reward from additional stock market gains looks tiny or long gone.
- Prices, charts, P/E ratios and other ratios support this analysis. Most stocks, indices and ratios have rolled over.
- One of the best markets to buy NOW is silver. It has been weak since 2011 and is due for a rally. Cost of production is near current prices. Investor demand could rocket higher. Consider this chart showing the (weekly data) ratio of silver prices to the NASDAQ 100 Index.
Silver prices are too low compared to the NASDAQ. Now (several months ago) is the time to recycle dollars out of over-priced stocks and into silver.
Silver prices are too low by most measures. Stock prices are too high. Housing and auto sales are weak. It is late in the credit cycle—think 2000 and 2008 again. Assess risk versus reward and buy silver with currency units recycled from other assets.
Miles Franklin sells silver. Call them at 1-800-822-8080 and tell them you agree with the Deviant Investor about silver. Your price will not change, but I might receive a benefit if you give my name as your reference.
If you have questions or comments, email me: deviantinvestor “at” gmail.com.