IMHO Warning: Stock Market MAJOR Correction Imminent

I went to the mall today.


This is a few weeks into reopening phase 2!


I expected people would have pent up demand and be swarming the stores even while keeping their social distance.


They weren’t at the mall! 


The stores were nearly void of people.


The shelves were virtually empty of goods.


Whatever merchandise there was seemed to marked “sale, sale, sale” even on the already deeply-discounted clearance items.


It was completely frightening–like the economy is dead or on severe life support!


Most stores had 3 or more associates standing around or sitting twiddling their thumbs.


This while the stock market keeps ticking up and the NASDAQ is reaching new highs almost daily.


Coronavirus is surging again across much of the U.S. and there is almost 140,000 dead in the U.S. after just 5 months even though much of the population was in self-quarantine.


The economy looks to me in sh*t shape, despite the U.S. pumping $3 trillion dollars more of debt to artificially prop up the economy and the fed lending out money at super low rates.


It makes NO sense for the market to be hitting all time highs as if everything is all roses when the economy is still a true mess!


The New Yorker magazine wrote back in May of a post coronavirus “decade of depression” with an L shaped recovery, yet we keep seeing a V-shaped one and no one seems to be able to offer any plausible explanation for it.


Two-months ago, even before the recent stock run-up to higher levels, Business Insider reported that “the Stock Market is trading at its highest valuation in 18-years.


Last month, Forbes reported that “the stock market appears to be reaching unsustainable highs.


Yesterday again, Bloomberg reported that the “economic recovery is faltering.”


Almost daily, I read that companies are laying off their workers (in Travel, Transportation, Entertainment, Retail, Energy, etc.) or declaring bankruptcy (e.g. Hertz, JC Penny, Neiman Marcus, Chesapeake Energy, and more).


This while we are still, in the best case scenario, maybe half a year away from the possibility of a tested, approved vaccine. And then it will then need to be mass produced and mass distributed to hundreds of millions of people in this country and billions globally.


In the meantime, we certainly could be up for a second wave of Coronavirus on top of the flu in the fall/winter. And then the Coronavirus may mutate and become more virulent requiring annual vaccines like the flu shot–more hit or miss.


All this while U.S.-China trade war is imperiling our economy further, and arch-enemies Iran and North Korea remain national security threats.


To me this all points to that we are nowhere near out of the woods and perhaps that there is a wildfire raging and no one seems to be paying any attention!


The stock market euphoria is a common trap and is the definition of “irrational exuberance” but comes after investors have been robotically indoctrinated to buy the dips!


IMHO, buyer beware, beware, beware. 😉


(Credit Photo: Andy Blumenthal)

Visiting The Sins of The Fathers

Everyone was waiting for the big news this week out of the EU on how they were going to bail out their troubled economies–way too many: Greece, Spain, Portugal, Italy, Ireland…and more.

Their debt is through the roof–Greece is at 164% of it GDP and Italy is saddled with 1.9 trillion euros with more than 200 billion of it coming due next year.

Unemployment is soaring…with Greek unemployment of 16.7%, topped by Spain’s at 21.5%.

Economies are grinding to a halt: “Euro-zone economic data point to gloomy year-end…0.2% latest quarterly growth” (Wall Street Journal, 29-30 October 2011)

So news this week of a yet bigger (much bigger 4x or 5x) bailout fund of $1.4 trillion to backstop the losses,while sending the stock market soaring, left the pundits a little more than skeptical.

Why? Because where did the losses go…did they just disappear or is this a thoroughly massive shell game where the losses are spinning faster and faster under the shells of economic protectionism until they disappear altogether under the slight of hand of ministry of finance magicians?

I thought to myself this week–am I missing something? I wrote a friend–this guy is a genius–top of the class type, CPA, MBA and asked what he thought of the bailout? He too was baffled and said somebody just took a “50% haircut” referring to massive number of Greek bondholders who just took a huge loss–how is that a good thing?

And I thought what about the rest of the losses yet to be realized in the $1.4 trillion European Financial Stability Fund (EFSF)…by naming it “stability,” does it actually make people feel more secure, better?

Then came the reports later this week–“Doubts rise about EU deal”–that the financial rescue plan is short on details, and as we all know “the devil is in the details.”

Moreover, it’s just a plan–that’s the easy part–words are cheap! The real test lies in whether the financial rescuers can actually execute this time or will we be back at the drawing board in 6 months time again?

Then I thought of the saying from the Torah (Bible)–Exodus 34:7 that G-d “visits the sins of the fathers on the children.” Not in a malevolent way, but in an almost natural way–our actions have consequences.

While not limited to any individual, country, or continent, when we live beyond our means–when greed and gluttony surpass our ability to control our appetites for more, then a bubble builds and down the road, it eventually bursts–whether real estate, the dot com boom, stocks, commodities, or even tulips in the 17th century!

As we all know deep down, no shell game can go on forever–the hands tire, the players become more astute, and most importantly, the excesses of the past must be paid up–so that the next generation can eventually go on to a more stable and brighter future.

Both sides of the spectrum, the Tea Party and the Occupy Wall Street protesters know the same economic reckoning is coming–and even though not everyone can articulate the rising doubt and fear, we go toward resolution, hand-in-hand together.

(Source Picture: here and here)