Only last week, our research writer highlighted the increased evidence that the Stock Markets could be on the verge of a large financial collapse, later in the Autumn.
Well, China’s stock market crashed TWICE during this last month. This is the first clear international signs that the dominoes are beginning to fall.
We will talk about what you can do to quickly position yourself against what is an inevitable stock market crash in the near future, later in this article. But first, let’s look at the dramatic events of the last few days:
“After Quick 8.5% Crash, Confusion Reigns in Chinese Stocks: Foreign investors have unloaded about $7.6 billion of Shanghai shares through the city’s Hong Kong exchange link since July 6. Monday’s plunge was all the more surprising because it followed a government rescue package that had helped drive a 16 percent rally since July 8. That support appeared to vanish without warning, leaving analysts guessing whether authorities shifted their policy stance or just got overwhelmed by a flood of sell orders. After the close of trading, the securities regulator denied speculation that the government has exited the stock market. Investors “are concerned and lost,” said Alex Wong, a Hong Kong-based asset-management director at Ample Capital Ltd., which oversees about $155 million. “China’s market is distorted, so you can’t sell short very confidently and you can’t buy up very confidently either.”
It’s sad to think sudden crashes in the stock market can still leave people feeling “lost” and “confused.” It’s like a drug of denial. If you think logically, and add up the effects of Quantatitive Easing, National Government Debt, and increased global geo-political instability, it is a certainty that a financial collapse of a global scale will happen. Not if, but when. It is just logic. How can logic then be “confusing”? Illusions are confusing, but not logic. It is because human nature has a selective vision and memory. We forget the stock market crashes of 2001 and 2008. Only seven short years ago, trillions of American dollars were wiped out in the beginning of the “Great Recession” of 2008. That domino begun to trigger the Euro Debt Crisis, which we now are witnessing with increased ferocity, regardless of the E.C.B. bail outs. Seven years before that, the dot.com crash of 2001, interjected with the tragedy of 9/11, wiped out more than 37% of the stock market by it’s end.
Some, however, are not surprised and have their eyes wide open. Jesse Colombo, contributor to Forbes, writes, “Despite the unprecedented government intervention in the past month, China’s stock market plunged 8.5 percent on Monday – the country’s second worst one-day crash in over eight years. I’m not at all surprised by this turn of events.”
So, seven years on from the last Stock Market crash, we are again facing the potential of a larger collapse in the financial markets. We said it last week and that was before China’s stock market crashed for an unprecedented second time.
As one commentator poignantly puts it, “The immutable cyclic nature of investment markets – exacerbated by the IRRATIONAL EXUBERANCE demonstrated in the current market mania – force a prudent person to conclude that there will be a secular money change from financial assets to real assets (probably soon).” (Vronsky)
What is poignant is this was written in 1997. I have quoted it on purpose to show that if history doesn’t exactly repeat itself, then it surely rhymes, as Joseph Anthony Wittreich is attributed as saying. “Vronsky has over 40 years’ experience in the international investment world, having cut his financial teeth in Wall Street as a Financial Analyst with White Weld. He believes gold and silver will soon be recognized as legal tender in all 50 US states (Utah and Arizona having already passed laws to that effect).” Again, he was stating this ahead of his time in 1997, when an ounce of gold was selling at just £354. His article linked above is worth a read, as he looks back at several of the larger stock market crashes of history and specifically where the smart money went i.e.: into Gold. He concluded by saying, “The over-riding guideline of my precious metals’ research was aptly described by one of Wall Street’s legendary wizards, Bernard Baruch – unfortunately, unknown to most of today’s investment Pollyannas. His observation still rings with logic and clarity, as he concludes that “current outlook for stocks is grim” and ends with the quote:
“Gold has worked down from Alexander’s time…..
When something holds good for two thousand years,
I do not believe it can be so because of
prejudice or mistaken theory.”
So, is there anything we can do? We can decide to research the information available and wake ourselves up. Here is a stunning chart, in that it tracks the stock market journey before the crash of 1929 and then overlays the stock market’s recent few years journey on top. It’s as if we are looking at almost the same lines!
Michael Berry of Morning Notes spoke with Streetwise Reports. His view is that, “An overinflated equities market could be good news for metals I have been watching bubbles since 1987. In September of that year I correctly predicted the 25% crash of October 19. The solution to our macroeconomic issues has been to inflate new bubbles, to inflate asset values to soften the blow from the last bubble, all the while creating the conditions for the next one. That is how we ended up with the current equity market bubble. It is driven solely by the Federal Reserve’s liquidity. Always remember that liquidity begets liquidity. I also see a debt market that I consider to be a bubble. These markets are just not sustainable. I can’t say when, but we have an equity market decline coming, maybe a severe decline.”
And he, like many others, sees Gold (and Silver), i.e.: hard precious metal assets as being the safe haven.
So, is there anything we can do to prepare, financially speaking? In my research, I found a great article by Darren Perkins, entitled “How to Prepare for a Stock Market Crash.” Here is an extract:
“I’m guessing that you, the reader, are here because of an uneasiness over the future of your financial assets. Or possibly you have anxiety over the future of society in general. Your concern probably stems from your interest in the Stock Market, and it’s role in gauging the health of the economic organ to the body of civilized society. You are not alone in your concern, in the climate of the ongoing world financial crisis many others have been asking: why is the crisis growing, what is the cause, where is it taking us, who caused it and who will end it, how do I survive or even succeed during the upcoming events?” He then goes on to list nine points, with point five being, “Invest in enduring hard assets. With your investment money buy gold and silver bullion and coins, preferably a variety of widely recogonizable units for trade. These are the best investments to carry your wealth safely to the other side of the stock market crash.” His other points are definitely worth a read also.
Once, again, I have chosen his article because he wrote it in 1999! The 2001 crash came in under 24 months. In many of his points, he could be describing how to prepare for the current very difficult continuing situation of cash liquidity in Greece, it’s uncanny.
In it’s article entitled, “Avoid the next financial crisis by investing in Gold,” the Sovereign Investor lists the news items to look out for over the coming weeks and months, which we highly recommend. The piece concludes that, “We are on the precipice of a new global financial crisis, one that once again will be caused by America’s actions, as was the crisis of 2007/08. And, as with the last go ‘round, a crack in the system will see assets of all stripes struggle in unity, save for the U.S. dollar. Gold, too, will struggle temporarily, if only because of the shock factor. But just as it did in the last crisis, gold will gather its bearings and prove to be a safe haven for shell-shocked investors and savers. Then again, we could very well avoid the precipice all together if politicians and central bankers take certain actions. And if so, gold rallies hard as the dollar retreats.” Darren Perkins continues, “Something is amiss. And it’s amiss at a moment when the world in is political and financial turmoil, for several reasons:
- Russia is on the brink of a crisis that, if the U.S. allows it to happen, will spin through the global economy like a tornado ripping through a trailer park. (And at this point, Russia’s direction is entirely a function of U.S. policy; even German leaders are worried about the unintended implications in Europe of the White House pushing too hard to bring an old foe to its knees economically.) The contagion will weaken European economies and rip apart emerging economies, which will haunt the U.S. economy and global stock markets.
- Japan has reached its end game and is printing more money than God as it tries to (futilely) save itself from the deadly effects of having put its faith in Keynesian monetary beliefs over these last few decades. That excessive liquidity (along with Japan’s asinine cultural beliefs about immigration) is fueling a national crisis that, given Japan’s role as the world’s third-largest economy, will reverberate globally — and nastily.
- The European Central Bank is about to launch a round of quantitative easing that will pour even more currency into a global system bloated with money. Bad bad bad.
- The strong dollar is hurting emerging nations and their companies that have lots of dollar-denominated debt, and could cause a huge — huge! — currency crisis somewhere.
- The Federal Reserve finds itself in an impossible situation as it looks to normalize interest rates: Raising rates even 0.25% would strengthen the dollar even more, hurting U.S. exports/the U.S. economy even more and risking that currency crisis somewhere else. Don’t raise rates, and the markets remain confused about Fed policy, while the easy-money stance expands the global asset bubble even more.
The list goes on — Greece is causing fears in European gains, China is (also) printing money like mad, oil has disconnected from reality…
In conclusion, he sums up where we began, that the dominoes are about to fall. “If any one of those goes pear-shaped, it will knock over a string of dominoes globally. Investments around the world tumble as money rushes into the dollar … and gold. It’s the fear trade, potentially on steroids, depending on what event causes which dominoes to fall.”
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