After the neckline of the double top and the 200 day moving average of the Dow Jones are broken a few days ago, it really starts to look like a free fall now. In THIS and THIS and THIS article I described the double top since 12 days ago, supported with bearish arguments. Is the biggest bubble in human history that is caused by flawed Keynesian economics finally bursting?
The futures are already deep in the red, China announced another serie of tariffs, the free fall has started…….
Today the stock market takes another hit
After the recovery of yesterday, it looks like the markets will take another hit today. The futures are very negative again, and predicting an opening of 1.5 to 2 percent lower today. It might become a bloody day……
The drop in the futures was a direct result of an announcement from China of another 106 tariffs on cars, whiskey, aerospace and defense and soybeans from the USA. American goods that count for a value of around 50 billion dollars will be taxed up to 25%.
The hit today will make the technicals look even more ugly, and since the markets are heavily overvalued and more black swans are on the horizon, I think this will not end well.
Downward pressure
There are multiple reasons to expect a further drop, be aware that these black swans can trigger and reinforce each other, so they could happen as a chain reaction:
This was the 2nd longest bull market ever. Even if the sky was clear and blue it would be overdue for a drop.
The P/E ratio is extremely high at 27, normally it is around 15
Many technical points are broken, traders will get signals to sell or open short positions
The previous ‘Trump extase’ was extremely overdone.
The entire ten year long bull run was mostly driven by QE and low interest rates, non of the problems that caused the 2008 crash is really solved.
The trade war with China is worsening.
Interest rates and oil prices are rising (threat of inflation).
End of petro dollar is nearing, USD is more often excluded from international trade.
Central banks are out of munition because the interest rates are near zero already and many governments are already bankrupt or deep in dept.
This could be the end of the American empire
When the USD collapses because of one of the above described reasons, hyper inflation is very likely. When the rest of the world stops using the USD, the pool of dollars to print from will be way smaller and the result on the devaluation of the dollar way bigger. When hyper inflation in the USD occurs, all fiat currencies will probably be affected.
In the previous recessions the dow dropped all the way down to around 7000 points. As you can see the previous two tops reached an almost even level, but the most recent top is way higher. I really think it is only higher because it is full of ‘air’ blown up by QE and dept. I think when this bubble pops the crash could go as low as the previous lows, this is a staggering 70%!
How to prepare?
- Educate yourself, learn about Austrian Economics and understand what is happening.
- Convert your assets to Bitcoin, gold and silver.
- Take your money out of the bank (in case of a bank run) and avoid paper assets.
- Assets like land, real estate or your own house are only assets when you own it without dept, otherwise it is a liability. When you bought it with a loan the bank will confiscate it when you lose your job in the recession (while if the bank lose your money, you can’t do anything!)
Disclaimer
This is no financial advice, just my view on the market.
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