Has The U.S. Economy Plunged Into A Depression?

Has The U.S. Economy Plunged Into A Depression?

“Face reality, and that means admitting that “the U.S. economy has plunged into a depression.”

This is already the worst economic downturn that America has experienced since the Great Depression of the 1930s, and we are right in the middle of the largest spike in unemployment in all of U.S. history by a very wide margin.

Of course, it was fear of COVID-19 that burst our economic bubble, and fear of this virus is going to be with us for a very long time to come.  So we need to brace ourselves for an extended economic crisis, and at this point, even Time Magazine is openly referring to this new downturn as an “economic depression”.

Needless to say, there will be a tremendous amount of debate about how deep it will eventually become, but everyone should be able to agree that our nation hasn’t seen anything like this since before World War II.

In order to prove my point, let me share the following 10 numbers with you…

#1 According to a study that was just released by the National Bureau of Economic Research, more than 100,000 U.S. businesses have already permanently shut down during this pandemic, and that represents millions of jobs that are never coming back.

#2 The Federal Reserve Bank of Atlanta is now projecting that U.S. GDP will shrink by 42.8 percent during the second quarter…

“A new GDP forecast from the Federal Reserve Bank of Atlanta for the three months through June estimates an unprecedented drop of 42.8 percent. The bank describes the data as a “nowcast” or real-time, compared with the official government report of GDP, which is dated. The first-quarter preliminary data, which showed a 4.8 percent dip, included a limited period of impact from COVID-19.”

#3 On Friday we learned that U.S. retail sales were down 16.4 percent during the month of April, and that is a new all-time record.

#4 U.S. factory output was down 13.7 percent last month, and that was the worst number ever recorded for that category.

#5 U.S. industrial production fell 11.2 percent last month, and that represented the worst number in 101 years.

#6 On Thursday, we learned that the number of Americans that have filed initial claims for unemployment benefits during this pandemic has risen by another 2.9 million, and that brings the grand total for this entire crisis to 36.5 million.  To put that number in perspective, at the lowest point of the Great Depression of the 1930s only about 15 million Americans were unemployed.

#7 According to the Federal Reserve Bank of Chicago, the real rate of unemployment in the U.S. is now 30.7 percent.

#8 According to a survey Fed officials just conducted, almost 40 percent of Americans with a household income of less than $40,000 a year say that they have lost a job during this crisis.

#9 One study has concluded that 42 percent of the job losses during this pandemic will end up being permanent.

#10 According to a professor of economics at Columbia University, the U.S. homeless population could rise by up to 45 percent by the end of this calendar year.

We have never seen economic numbers this horrifying, and more awful economic numbers are coming in the months ahead.

At this point, things are so bad that even Fed Chair Jerome Powell is openly admitting that he doesn’t really know how long this new economic downturn will last…

“This economy will recover…We’ll get through this. It may take a while. It may take a period of time. It could stretch through the end of next year,” Powell said during a rare televised interview that aired on “60 Minutes” Sunday night. “We really don’t know. We hope that it will be shorter than that, but no one really knows.”

In the months ahead, there are a few sectors that you will want to keep a particularly close eye on, and one of them is the commercial real estate market.  The following comes from Zero Hedge

“Fast forward to today, coronavirus outbreak, and the ensuing lockdown, has essentially frozen the commercial real estate market. Buildings that were once used for restaurants, offices, hotels, spas, and or anything else that is classified non-essential have seen soaring vacancies.

This is single handily sending the commercial property market into chaos. As vacancies soar, tremendous downward pressure is being put on almost every asset class tied to commercial real estate.

The latest TREPP remittance data compiled by Morgan Stanley showed a quarter of all commercial mortgage-backed securities (CMBS) could be on the verge of default.”

I am personally convinced that we are on the precipice of the greatest commercial real estate implosion in American history.

As the dominoes tumble, it is going to send wave after wave of devastation through the financial industry, and it is going to make the subprime mortgage meltdown of 2008 look like child’s play.

But at least bankruptcy lawyers will have plenty of work.  Last week we learned that J.C. Penney filed for Chapter 11 bankruptcy protection, and of course the bankruptcies that we have seen so far will just be the tip of the iceberg.

I think that politicians all over America are going to deeply regret overreacting to COVID-19, because nobody is going to be able to put the pieces back together now that our economic bubble has burst.

Sadly, very few people understood how shaky our debt-fueled economic “boom” was, and ultimately it didn’t take that much to push us into a new economic depression.

And now every additional crisis that comes along is just going to escalate our economic troubles.  This is going to be one very long nightmare, and there will be no waking up from it any time soon.

Even before COVID-19 came along, homelessness had become a massive problem in many of our major cities, and now tent cities are rapidly multiplying in size.

There is going to be so much economic pain in the months ahead, and it could have all been avoided if we had made much different choices as a nation.

But we didn’t, and so now we all get to pay the price.

Mr. Snyder wrote this article and I respect his opinion. I am not taking issue with his story, but he is a respected conservative voice in a world of noise.

So, I ask you, what if he is correct in his judgment and collapse is coming sooner than later?

Are you prepared for what is going to happen to your retirement and investment account values?

Are you sheltered from those accounts declining 40%? 50%, 60%, or more.

The Wealth Preserver Membership can protect your account from any stock market collapse. Please know that until it does collapse, your investments continue to grow as usual. 

P/E Ratio: The Over/Under Value Market Indicator

P/E Ratio: The Over/Under Value Market Indicator

In section 5 of yesterday’s post I quickly introduced an investment topic called the Shiller P/E (CAPE).

This is the most significant, proven, long-term directional indicator that has ever existed for long-term stock market direction.

It is not a daily or weekly trading system but can certainly help you know which direction the market is moving as it reaches a top or bottom.

The Shiller (CAPE) P/E Ratio is now famous, yet forgotten because most Financial Advisors either keep it under wraps or have never been taught its true power. Essentially, a high P/E means Over Priced stocks.

The chart below is the Shiller P/E Ratio dating back to 1880.

As you can see, the median P/E since 1880 is 15.77 and that is enough data to understand that historically investors over the last 140 years have recognized that a share of company stock should be roughly 16 times its earnings.

In clearer terms, if a company made $1, its share price should be $15.77.

Horrible Investor Value

Now, take a look at the chart above to view the Over Valued and Under Valued P/E Levels.

When the Shiller (CAPE) is 20 and above, stock prices are too high for a long-term buy and hold strategy. Performance will likely remain poor for up to 20 years.

Most importantly, any time the P/E rose above 20, it eventually and ALWAYS back down below 10, typically below 7, before it bottomed.

As you can see in the image below, when the Shiller P/E Ratio rises above 20, it can take many years for values to get back down. The year of the great depression brought the P/E back in line within 4 years. However, outside of great depression, it takes up to 20 years or longer to get stocks back to a fair price.

Our current period dating back to the 1999 top is still declining back to fair prices. Here’s the point: Buying the stock market when the CAPE P/E Ratio if the S&P500 index is above 20 is an immense risk of little to no return on your money.

Great Investor Value

Now, when the Shiller (CAPE) hits 10 or below, then it is an amazing time to Buy and Hold the market indexes or any stock of value. Historically, a P/E of 4 – 7 will allow you to to perform extremely well over the next 7 – 20 years. In fact, you will perform 10,000% – 30,000% or better. That is what buying at the right P/E price point will do for you.

For a little clarification, had you invested $10 in the S&P500 on January 1, 1985 (P/E ratio of 10.36), today you would have over $3,500! Not bad for timing with the Shiller P/E!

So lets look to see if this is a great time to be a Buy and Hold Investor like in 1985?

Reviewing the same chart (below) modified to include colors indicating when to invest for optimum Buy and Hold performance.

Avoid Buy & Hold investing if the Shiller P/E value is within the Red area.  This area has proven to deliver returns similar to bank accounts if you deduct inflation from the return. Not good.

However, if the Shiller P/E ratio value is within the Green area, you can buy the S&P 500 Index and make significant long term returns.

Great Investor Value

Now, when the Shiller (CAPE) hits 10 or below, then it is an amazing time to Buy and Hold the market indexes or any stock of value. Historically, a P/E of 4-7 will allow you to to perform extremely well over the next 7 – 20 years. In fact, you will perform 10,000% – 30,000% or better. That is what buying at the right P/E price point will do for you.

For a little clarification, had you invested $10 in the S&P500 on January 1, 1985 (P/E ratio of 10.36), today you would have over $3,500! Not bad for timing with the Shiller P/E!

So lets look to see if this is a great time to be a Buy and Hold Investor like in 1985?

Reviewing the same chart (below) modified to include colors indicating when to invest for optimum Buy and Hold performance.

Avoid Buy & Hold investing if the Shiller P/E value is within the Red area.  This area has proven to deliver returns similar to bank accounts if you deduct inflation from the return. Not good.

However, if the Shiller P/E ratio value is within the Green area, you can buy the S&P 500 Index and make significant long term returns.

The point of this entire article is to let compare where we are today relative to 140 years of real data. 

Significantly, every single time there “was a significant crash or two” associated with the decline back to value. Here is reality:

At a Shiller P/E Ratio of 26.97, we are not nearly as high as 44 in 1999. But, just to get back to a normal Shiller P/E bottoming area below 10, the stock market will have to drop by 62% from here!

27 – 10 = 17

17 / 27 = -62% 

If you are a Buy & Hold Investor, you should know that based on history dating back to 1880, you are NOT  positioned for strong buy and hold returns. In fact, you are dreadfully positioned right now though 2032. 

Can you afford a 45%-60% decline back to value. Its progressing to that as you read this historical lesson.

You must find a strong, well proven, historically accurate system that allows you to invest when the markets are moving up, on the sideline when the markets head down, and back in when they head up again.

You will do vastly better that Buy & Hold if own a Monthly, Weekly, or Daily professional trade signal platform that will help guide you through the next 20 years. Your membership will put you light years ahead of everyone else who is Buying and Holding at precisely the wrong time as history has proven.

We will help get you to where you want starting today following simple Green and Red lights.

The P/E Ratio Is Screaming At You

The P/E Ratio Is Screaming At You

The P/E Ratio Is Screaming At You so today I am laying the groundwork for tomorrows post. So lets get started and learn about the P/E Ratio.

The price-to-earnings ratio (P/E ratio) is the ratio for valuing a company that measures its current share price relative to its per-share earnings. P/E ratios are used by investors and analysts to help determine the relative value of a company’s shares in an apples-to-apples comparison.

It can also be used to compare a company against its own historical record or to compare aggregate markets against one another or over time. The ubiquitous P/E ratio is typically the first metric investors learn on their journey towards financial freedom.

One of the biggest mistakes I see new investors make is their use of the P/E ratio because the P/E ratio has some significant drawbacks that you should be aware of before we teach you the profitable and proven benefits of this indicator.

Today, lets cover 5 points the ratio will not teach us and tomorrow we will learn precisely how it can tell us which direction the markets are going shortly. 

What the P/E Ratio Teaches us is vitally important so first we have to quickly learn what it does not teach us. 

1. Price is not a good measure for what a company is worth

The first issue with the P/E ratio is the ‘P’ part of the formula. Typically, the ‘P’ stands for the share PRICE which corresponds to the market capitalization of the company. But there’s a problem with using only market capitalization. Market cap only represents the contribution of equity shareholders. Which means it doesn’t include any debt or cash on the balance sheet.

If you want to know the true worth of a company surely you need to include debt and cash? To do so, it’s better to use an alternative such as enterprise value which is the market cap, plus total debt, minus cash. Often, the market cap of a company will be similar to the enterprise value but sometimes it can be vastly different. GE, for example, has a market cap of over $52 billion but it’s enterprise value is more than double that at $111 billion. If you use market cap you get a lower P/E ratio than if you used the enterprise value. So by substituting market cap with enterprise value the formula immediately becomes more useful.

2. EPS is not a good measure of company earnings

Just like the ‘P’ in ‘P/E’ is inadequate, the ‘E’ part of the formula is also misleading. Typically, the ‘E’ represents earnings per share which is usually reported as the trailing twelve month EPS or in other words the net profit over the last 12 months.

The problem here is that EPS or net profit contains many different components and is therefore not necessarily a good indication of the real profitability of a company. For example, net profit is reported after accounting procedures such as depreciation and amortization.

These techniques are often used to massage the books, by inflating profits and pushing out losses. On top of that, net profit may include interest and tax payments, both of which are individual to the company and not necessarily useful for observing what profit a business is actually making.

So instead of using EPS or net profit, a better option is to use EBITDA which stands for earnings before interest, taxes, depreciation and amortisation. In other words, it is the true earnings before all those components have made their mark. And so, instead of using the trusted P/E, which is market cap divided by EPS you can see it’s better to use a more comprehensive formula such as enterprise value divided by EBITDA.

3. P/E ratios are lagging metrics

Now we’ve looked at the limitations of the formula, you should understand that P/E ratios (like most financial metrics) are inherently misleading because they are lagging metrics. To put it plainly, when you plug in the earnings part of the formula you are typically using past data, typically the trailing 12 month EPS (or EBITDA).

Clearly, the problem with this is that the last 12 months of earnings are not necessarily predictive of the next 12 months. For example, consider a company that has a market cap of $1 billion and in the last twelve months reported net profit of $100 million. That would give it a P/E ratio of 10 which historically would make it cheap and an attractive buy.

But consider that the last 12 months were, in fact, a stand out year for the company based on a series of unusual economic events unlikely to occur again. And in fact, the company usually makes only $20 million a year, not $100 million. With a net profit of only $20 million, the P/E ratio would be 50 which is historically a high and unattractive multiple.

In other words, the stock is priced at 10 times last year’s earnings but 50 times next year’s earnings. The stock either needs to decline in price to bring the P/E back to a more realistic level or it needs to grow its earnings in line with last year’s stand-out numbers.

Either way, you can see that buying the stock based on last year’s earnings is a flawed strategy because it doesn’t consider future earnings or the historical earnings average.

4. P/E cannot be used for unprofitable companies

Divide any number by a negative and you end up with another negative. And so is the problem when using the P/E ratio for any company that reports negative earnings (of which there are many!). Consider, for example, the market cap for Uber which is currently $56 billion. And consider the latest 12-month EBITDA which was -$8.2 billion. 56 divided by -8.2 results in a P/E ratio of -6.8. So if low P/E ratios are good then Uber must be outrageously cheap.

But of course, we know it isn’t because the negative P/E doesn’t tell us anything. All it tells us is this company hasn’t reported any profit in the last 12 months. In other words, the P/E ratio for any unprofitable company is meaningless, except perhaps to say that this is a stock that may not provide any return unless it can soon get itself profitable. In a similar vein, the P/E ratio has limited ability when used to compare across industries.

Low growth industries such as conglomerates or utilities typically command lower P/Es which cannot be compared to other industries such as tech stocks which often have high P/Es or negative P/Es. Essentially, the P/E ratio is limited in its ability whenever the main consideration is growth or profitability.  

5. The Shiller P/E Ratio

The cyclically-adjusted price-to-earnings (CAPE) ratio of a stock market is one of the standard metrics used to evaluate whether a market is overvalued, undervalued, or fairly-valued.

This metric was developed by Robert Shiller and popularized during the Dotcom Bubble when he proved (correctly) that equities were highly overvalued. For that reason, it’s also casually referred to as the “Shiller PE”, meaning the Shiller variant of the typical price-to-earnings (P/E) ratio of stock.

It’s most commonly applied to the S&P 500, but can be and is applied to any stock index. The main benefit is that it is one of several broad valuation metrics that can help you determine how much of your portfolio should reasonably be invested into equities based on the current relationship between the price you pay for them and the value you get in return in the form of earnings.

Robert Shiller demonstrated using 130 years of backtested data that the returns of the S&P 500 over the next 20 years are strongly inversely correlated with the CAPE ratio at any given time.

In other words, whenever the CAPE ratio of the market is high, it means stocks are overvalued, and returns over the next 20 years will likely be poor. In contrast, whenever the ratio is low, it means the stocks are undervalued, and returns over the next 20 years will likely be good.

Are we under, over, of fairly valued in May 2020?

In tomorrows post we will analyze precisely where we are valued as a market and how InterAnalyst can help you maximize your portfolio growth now.

 

Is The Dead Cat Bounce Over?

Is The Dead Cat Bounce Over?

March 2020 saw one of the quickest bear markets in history as coronavirus shook the world and the S&P 500 dropped 34% in about five weeks.

Since then, the market has reversed and rallied about 24% from its low meaning it’s now down only 19% from the February peak.

The market is now trading at the same level it did in June 2019 despite all the carnage surrounding COVID-19. It’s also approaching a key resistance area around $2800.

Although there are some positive signals for bulls we think the market could move back towards its recent lows short-term. A bear put spread gives a good opportunity to play this view.

Relief Rallies Are Common In Bear Markets

The recent rally is encouraging for bulls but if we look back at previous market crashes it’s obvious to see that relief rallies are a common occurrence in bear markets. They have been called Dead Cat Bounces.

During the 2008 crash, there were two relief rallies of over 15% before the March 2009 low.

During the dotcom crash, stocks rallied more than 15% three times before the market finally bottomed. 

And during the 1973-74 bear market there were three relief rallies of over 10% which preceded a long period of choppy trading.

Meanwhile, during the Great Depression, there were numerous relief rallies and it took the market 26 years to regain it’s all-time high.

It’s worth noting that the 1987 and 2011 bear markets saw no relief rallies but remember that neither of these bear markets actually coincided with an economic recession.

At this point, not only is a recession nailed on but it’s likely to be a severe recession with some saying it could be on a par with the Great Depression. 

Given this, it seems appropriate that there is more pain to come and that the stock market is not going to simply rebound in a straight line over the next few weeks and months.

How Much Should The Market Fall?

Historically, the average bear market has lasted around 22 months and the average drawdown has been -39%. 

If we are to believe that this current crisis is worse than average (which it appears to be) then the current drawdown of -19% (albeit a pullback from -34%) seems mild.

If that’s true, then the question becomes how much damage is enough?

Answers come in many different forms. None are perfect but they can all be taken into account. 

Citigroup analysts say that a good rule of thumb is for stocks to fall roughly the same as corporate earnings. They are forecasting falls in US earnings of around 50%, therefore the stock market is capable of falling by that amount as well. (FT)

Another answer is to look at the cost of the virus in terms of lost GDP. Unsurprisingly there is a wide range and a lot of uncertainty here too.

Estimates from Bloomberg put the cost at $2.7 trillion while the UN predicted only $1 trillion in a report from early March.

To put that in perspective, the 2008 crisis (which saw markets dive by 57% from their peak) is said to have cost the US about $2 trillion in lost economic output according to Moody’s Analytics. (WP).

In terms of dollar value, the coronavirus crisis could end up as costly as the 2008 crisis and some of the recent data has been right up there with the Great Depression. 

US jobless claims, for example, have been truly abysmal.

Some economists think unemployment could surge to 20% which would be much higher than in the 2008 crisis when unemployment peaked at around 10%.

Several economists are forecasting an economic contraction of between 6-8 per cent which would make it worse than the 4 per cent contraction seen in 2008/9.

However, a lot of the forecasting depends on the impact of social distancing and there is still a great deal of uncertainty.

Furthermore, putting a dollar value on the cost of a crisis is difficult when any cost necessarily depends on the reaction of the stock market resulting in a vicious cycle.

The financial crisis lingered for a long time but the coronavirus crisis could be short-lived if social distancing proves effective.

If the virus is contained effectively then it could end up costing only a fraction of the GDP that was lost in the 2008 crash.

On the other hand, if estimates do not account for second and third waves of the virus (or numerous knock-on effects caused by financial stress) then they could miss the mark.

The only data we have really seen so far are the jobs numbers. We are yet to see companies report earnings and the truth is that we are about to see a tidal wave of terrible earnings reports.

Central Banks Have Our Backs Faster This Time

That said there is still the case that central banks have moved quickly to inject stimulus into the market to avoid financial contagion. Much more quickly than they did in 2008.

This stimulus has been large and so far been effective at keeping the financial system ticking over and helping to reduce volatility in the stock market.

Health-wise, testing has been ramped up and new virus cases have definitely been flattening.

So there is definitely a case to be made for bulls that the -34% drop represents the bottom and that investors are now looking ahead towards a recovery in 2021.

However, even if the market did hit a bottom last month there are bound to be some big bumps along the way to a recovery and there is simply too much uncertainty right now to say that the damage is done.

What’s A Fair Price?

Howard Marks said in his recent memo that the market is probably fairly priced for an optimistic view of the crisis and I think that sounds about right.

In other words, if you believe that cases are coming down, the virus is on the way out and the economy can reopen in a few weeks time, then stocks are probably fairly priced.

But if you believe that the virus is not under control and the lockdown will go on longer than expected (or that there will be future waves with more lockdowns) then stocks are expensive and have some room to fall.

At this point, it’s worth remembering that the last serious pandemic we had was the Spanish Flu which lasted about 18 months from March 1918 to the summer of 1919. In that period the virus came in three waves with the second wave being the deadliest. (TIME).

It seems unlikely that this current virus is going to just blow over and things are going to go back to normal any time soon. Especially considering the poor handling that governments have shown so far. This thing could drag on for months with second and third waves.

With that being the case, I think there is a strong argument that the market will at least move back towards it’s recent low even if it doesn’t lurch too far below it.

Where Is The Risk?

In times like these I find it helps to think simply and consider ‘where is the risk’?

Is it riskier now to buy, after a 20% rally off the low, or is it riskier to short, with the possibility of a V-shaped recovery?

For me, the risk here is clearly to the downside.

With so much uncertainty about the staying power of the virus and so much bad news yet to come, it would be risky to dive into the market when it is only 19% from it’s all-time high.

Given the gravity of the current crisis and the fact sharp rallies often occur in bear markets, I’d say the chance of us moving back to the recent low is perhaps 30% to 50%.

Final Thoughts

The bottom line is that this is a nasty environment for investors with unprecedented economic shutdowns.

This rally has the hallmarks of a dead cat bounce. It is likely to be a complicated mix of short covering, mechanical buying and optimism that the Fed has everything under control.

We will recover from this crisis eventually but I think it will be a while before the Slingshot will be ready. 

A Sharp Reflex Rally

A Sharp Reflex Rally

While it is indeed a sharp “reflex rally,”  With follow through today, please remember this: “Bear Markets” are not resolved in a single Day, Week, or a Month. Most importantly, “bear markets” do not end with “consumer confidence” still very elevated. 

 

Notice that during each of the previous two bear market cycles, confidence dropped by an average of 58 points.

This past week, we saw early indications of the unemployment that is coming to America as jobless claims surged to 10 million, and unemployment in April will surge to 15-20%.

Confidence, and ultimately consumption, Which comprises 70% of GDP, will plummet as job losses mount. It is incredibly difficult to remain optimistic when you are unemployed.

No Light At The End Of The Tunnel Yet

Most importantly, as shown below, the majority of businesses will run out of money long before SBA loans, or financial assistance can be provided. This will lead to higher, and a longer-duration of unemployment.

What the cycle tells us is that jobless claims, unemployment, and economic growth are going to worsen materially over the next couple of quarters.

The problem with the current economic backdrop, and mounting job losses, is the vast majority of American’s were woefully unprepared for any disruption to their income going into recession.

Two important points:

  1. The economy will eventually recover, and life will return to normal. 
  2. The damage will take much longer to heal, and future growth will run at a lower long-term rate due to the escalation of debts and deficits. 

For investors, this means a greater range of stock market volatility and near-zero rates of return over the next decade.

The Bear Still Rules

History tells the story covering the last 8 full fledged bear markets: The should be sold into!

In other words, if you have taken the decline thus far, When you see the rally explode up, sell it and preserve as much as you can before the next dip.

On Friday, our colleague, Jeffery Marcus of TP Analytics, penned the following:

  1. When the 11-year bull market trend ended, other shorter trends were also violated.  In late February, the S&P 500 fell below its 14-month uptrend line, and in early March the 13-month uptrend line was violated.  Those breaks set in place the steep declines seen in the 2nd and 3rd weeks of March.
  2. While it may seem like an epic battle is going on around S&P 500 2500, the real problem is the downtrend forming from the 2/19 high.
  3. TPA still continues to see real long term support in the 3% range between 2110 and 2180A less likely move below that support, would leave long term support levels of the lows of 2014 and 2015.

S&P 500 – Long Term

His analysis agrees with our own:

“While the technical picture of the market also suggests the recent “bear market” rally will likely fade sooner than later. Such an advance will ‘lure’ investors back into the market, thinking the ‘bear market’ is over. Importantly, despite the sizable rally, participation has remained extraordinarily weak. If the market was seeing strong buying, as suggested by the media, then we should see sizable upticks in the percent measures of advancing issues, issues at new highs, and a rising number of stocks above their 200-dma.”

On a daily basis, these measures all have room to improve in the short-term. However, the market has now confirmed longer-term technical signals suggesting the “bear market” has only just started.

There are reasons to be optimistic about the markets in the very short-term. We will get through this crisis. People will return to work. The economy will start moving forward again.

However, it won’t immediately go right back to where we were previously. We are continuing to extend the amount of time the economy will be “shut down,” which exacerbates the decline in the employment, and personal consumption data. The feedback loop from that data into corporate profits, and earnings, is going to make valuations more problematic even with low interest rates currently. 

This is NOT the time to try and “speculate” on a bottom of the market. You might get lucky, but there is very high risk you could wind up losing even more capital.

For long-term investors like our Wealth Preserver Members, just remain patient and let the market dictate when the bottom has been formed. As you can see in the image below, the InterAnalyst Green Buy signal will come as it has every other time. But it only signals when the market is on solid footing.

 
Bear markets never end with optimism, but in despair. So remain patient, it the bear will end and you will capture the slingshot move back up once the markets are on solid footing.

Although we continue to author opinion and analysis, please remember that our writings do not replace the green buy and red sell signals derived from over 140 years of market analytics. Use the Wealth Maximizer Pro to help give you daily charts and signals to help with daily market direction. Apply those to the Wealth Maximizer Weekly charts and signals to give you more confidence in the direction.

When the Wealth Preserver Monthly signal confirms both the Wealth Maximizer and Wealth Maximizer Pro memberships, you are prepared for the slingshot.

 

Members Version of A Sharp Reflex Rally

Members please login to view your market signals and read the balance of this post for entry and exit points.

 

Another Leg Down?

Another Leg Down?

We have seen a hefty relief rally but does Another Leg Down loom? For those who are Wealth Maximizer Pro members, you have caught the nice profitable rally, contratulations.

I am seeing some “disturbing” signs that the market is very close to re-testing the lows that we previously have made, or, will it form another leg down loom?.

At the very least, it is 98% certain we will come to test the lows around 2250 at any moment in time. It is possible that we have another final leg down, and I believe that we likely will.

It is important for you to remain patient instead of panic buying and falling into bull trap.

During this last leg down, simultaneously, Gold and Silver will likely sell-off for liquidity reasons. People are now and will continue to liquidate their hidden savings.

Here’s why we know that the last leg down is coming:

The VIX remains incredibly elevated (60+) despite big pops in the markets and has not subsided. This tells you another sell-off is looming. Whats more, it’s supported by many other technical and fundamental factors.

For the market to continue up and ignore these factors would be unprecedented.

Prepare for another drop to the eventual bottom.

Crono-Crash & The Slingshot

Crono-Crash & The Slingshot

Livio,

I exited with the Wealth Preserver on the on March 2nd.  The last couple of bullish days brought to mind the Slingshot, are we there and have we missed the first 2 days. In your recent Celente video post you mentioned we’re entering into a global depression which may be even worse than the Great Depression.

Before all that happens is it possible we see DOW tumble another 5K-10K?

There seems to be an incredible amount of liquidating-at-all-costs mentality at the moment. I worked on an equity desk during the 2008 crisis, and currently at a very small non-bank FX dealing desk and have never seen anything like this. Your feedback is always appreciated.

Thanks,
Victor

“Great Question Victor.

The simple answer is NO.

The worst-case scenario appears to be testing the reversal technical line in the 15,000 level and do not see a drop to 5-10K. That is way too far for a slingshot. 

I see the slingshot build and breakout to new highs by 2023.

However, let’s tale a look at history to guide us on recovery times with similar drops to our current CronoCrash. 

Look at the two charts below.

What you see is that it took 65 months from the 2007-2009 Crash to get back to even.

The 1987 Crash appears to be a likely type of pattern from a timing perspective to our current Crono-Crash. That was a 53% decline and took 24 months to break even.

The 2000 -2003 Bear Market was a 3 year 54% decline and took 81 months to break even. 

If we were to fall on par with those declines, we would be looking at a drop to the mid-15000 level.

Because InterAnalyst members s stepped aside (red signals)  for most of the Corona-Crash, they will miss all those months of recovery just to get back to even.

More importantly, while everyone else is back to even, those who stepped aside will be 100% – 400% ahead of those buy and hold investors who did not step aside of the Corona-Crash.

As for the future, when we get back in (green signal) we could reach the test of just below the 40,000 level happening in 2024.

Destructive Coronavirus Truth

Destructive Coronavirus Truth

The Destructive Coronavirus Truth is much more dangerous than the virus itself.

No one has stated it more clearly that Mr. Celente in this video. We appreciate and value his Wealth Preserver Membership.

You absolutely must watch every minute of this video as he is as animated as ever.

He explains the who, what, why, where, and when of this whole mess. More importantly, he does not mince words of how its effecting the economy.

Fortunately our members have been protected from this crash and are preparing the coming slingshot up. Holding the right investment will be vital and once this crash and slingshot back up is over, the real depression and 90% crash is coming.

The Wealth Preserver will guide our members step by step through the future like a GPS system for your Investments and retirement accounts.

Use the following promo code: Wealth25

Marxism, Buffett, Dalio, Stalin & The Bottom

Marxism, Buffett, Dalio, Stalin & The Bottom

As always, the Democrats just can’t stand the fact that Trump might take credit for helping people and have blocked and relief package. Democrats claimed in true Marxist fashion in the Senate that the GOP’s push to set aside $425 billion for loans to help select companies and industries, dubbing it a “slush fund” for the Treasury to direct as it sees fit. They said the bill is tilted toward corporations instead of working people. What they fail to even address is that those working people rely upon small businesses the Democrats hate so much which provides 70% of their employment.

Small businesses have been ordered to close down. They cannot pay employees and nobody has suspended their rents. The destruction of small businesses will be devastating to the economy and this is all about playing politics. I am saddened.

The closing for March, if down from last Friday may spark more serious liquidation as Hedge Funds dump everything and some may more to suspend withdrawals as is taking place in European bond funds. The Solus Alternative Asset Management LP, Hedge Fund, known for its investment in retail chain Toys “R” Us, informed its investors that it is shutting its flagship fund and will restrict redemption’s as it works to sell off holdings.

Even Warren Buffett’s Berkshire Hathaway may have lost more than $70 billion on its 10 biggest investments. This type of decline shows that the buy-and-hold strategy fails in a serious market correction. Ray Dalio, who will go down in history for his proclamation that “cash is trash” on January 21, 2020, has lost probably more than $4 trillion in Bridgewater.

Where the 2007-2009 Crash took out Lehman Brothers and Bear Stearns, this time we will see Hedge Funds go down in flames. This undermines liquidity and makes the market vulnerable because market-makers pull back just to survive. 

We are headed into a Global Recession which could become even worse than the Great Depression. Here’s why?

This time we have politicians taking advice from the medical industry. The medical people who do not understand that you cannot shut down the economy on this grand scale because of the devastation is insurmountable to people, their jobs, and wiping out their pensions. This economic shut down on such a massive scale is far worse than if the Corona death toll was even 8%.

Never before has the economy been crashing with such speed for this is orchestrated by people who only look at how diseases spread and not how the economy contracts.

See the source image

Yes, it is true that if we all stayed home we can even beat the common cold. But the post-coronavirus world is going to be far more damaging to the future than any of these people understand.

To have the Democrats playing politics in the middle of the is just insane.

Liquidity is collapsing everywhere. Bank failures rose after the 1929 crash because liquidity failure with a declining velocity = less money with even less money moving around the economy = recession and potential depression.

A monthly closing on Oil below $20.50 will warn of the economic recession ahead as people stay home and this command of quarantine and social distancing may undermine the very cooperation which is the foundation of civilization. 

If people are afraid to interact and suspect everyone, that is precisely the atmosphere created by Stalin during the Communist era.  We are voluntarily limiting and quickly losing all rights including the freedom of assembly. Even Twitter has shut down those who dissent against the coronavirus and this is calling into question our freedom of speech as well.

InterAnalyst will help guide everyone out of this time of insecurity and political misdirection via selfish ignorance.

Look at the chart below:

Finding The Bottom

As the markets find the bottom, it will be laced with volatility and insecurity with the media frightening you to the point of insecurity. this is not done for YOU as an InterAnalyst member. It is done for those Buy and Holders who never exited at the top and now have been scared into submission. 

However, as an InterAnalyst member,  you recognize that it likely will become the best entry point of your life! Yes, insecurity will be there but you know the stock market is going nowhere!

The stock market never lies and it always returns when there is “blood in the street” and the bottom arrives.

Thus, follow the guideline to a risky to safe entry back into the coming slingshot move.

Step One: Wealth Maximizer Pro (Daily Charts)

When the Daily chart delivers a green signal, jump for joy, then choose to enter a position or wait to see if the daily signal is holding for a few days for stability. If we are at or close to a bottom, volatility will be very high so prepare for it if you choose to trade it.

Step Two: Wealth Maximizer (Weekly Charts)

When the Daily is followed by a Weekly green signal you know that the economy is attempting to settle and gain strength.

You should begin to feel a bit more secure. Entering a bullish position here is a bit less risky because the weekly signal has some economic strength attached rather than pure daily volatility. You can even wait another week to see if it develops more strength.

Step Three: The Wealth Preserver (Monthly Charts)

Once the Green signal has elevated from the Daily to the Weekly and the Weekly has moved into a second or third week of a bullish trend, you may select to beat the green monthly Wealth Preserver signal by entering a bullish position before month end.

If you look at The Wealth Preserver chart above, ask yourself whether you remember the days or weeks Just prior to the bottom green signals in 2003 and 2008?  NOPE, right. You don’t remember them, but what you would have remembered is getting in after preserving your money at the prior top, before the full devastating decline those bear markets delivered.

The same is true now. 

So, the bottom is going to come. You must be patient, it will arrive, it always does!

Enter in when you feel most comfortable, but recognize that the Wealth Preserver has proven to be deadly accurate at economic turning points.

The phrase to be true: “Better Safe, than Sorry!” 

Obviously, entry at any point has its risks, but as you look closely at The Wealth Preserver chart above, making a move using the monthly charts is rarely a poor decision…ESPECIALLY OFF THE BOTTOM.

This time it is coming with a slingshot.

Our Corona-virus Trade Signals & Is There Blood In The Street Yet?

Our Corona-virus Trade Signals & Is There Blood In The Street Yet?

Baron RothschildBaron Rothschild, an 18th-century British nobleman and member of the Rothschild banking family, is credited with saying that “the time to buy is when there’s blood in the streets.”

The original quote is believed to be “Buy when there’s blood in the streets, even if the blood is your own.”

Here is an image of today’s Drudge Report…

Based on the Drudge report, it certainly looks like someone is bleeding right now.

Are we at the bottom though?

All my neighbors are out walking for exercise or stress relief.

What I do know is that I saw the same types of activities going on in late 2002 and 2008. Because this is early 2020, let’s hope to see it bottom soon and turn up.

We expect a “Slingshot” to the upside with the same ferocity as it had to the downside.

On February 18th, our daily trading charts issued a stock market exit signal. It was supported by our weekly sell signal that week, followed by our monthly Wealth Preserver that month.

(Click on any image to maximize)

Now that the Bear Market has come out of the woods to show itself, no one knew it would come with a unique flu called Caronavirus. This virus has certainly moved the bear into the psyche of our global economy. And by the looks of the Drudge Report, the bears flu it really bad.

When will this Bear fever break?

InterAnalyst will know within a few days of it bottoming and turning up.

As Baron Von Rothschild knows, more blood is coming before the bear will be ready to hibernate again. 

Fortunately, we give entry signals just as we have for almost 30 years.

These signals in the charts are real and have been followed by our member from further back than the chart illustrates. 

Each bar in the chart represents a month, all you need to do to visualize the power is to move the Green Signal up and over the prior Red Signal, and you can quickly realize how much farther ahead you would be. 

Here, let me do it for you:

FYI: The chart is consolidated for illustrative purposes and the ending values depend on when and which bear markets you would have avoided. Avoiding all of them would put you  between 400% – 1200% ahead of buy and hold. Because you are on the sideline while markets drop, you lower your risk.  

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