One of my buddies in our morning coffee group has been catching hell from me for the past year. He’s been predicting a spectacular market crash for over a year, and of course has been wrong. I tell him, in front of all the rest, that his bogus advice has cost me untold thousands in losses.
I say that he’s a perfect “contrary indicator.”
It’s all in fun of course, as he is retired, financially secure, and a local county commissioner who’s personal fiscal habits also translate to his votes on the commission.
But he never had the nerve to invest in equities, because they’re “too risky.” What he accumulated, he earned from pure thrift, interest on CD’s, and purchases of land. The land has some gas production on it, and timber harvests, so there is an income stream from it.
I’ve really enjoyed gigging him the past year about it all.
One day, when the market does correct, he’ll finally trumpet “I told you so!!”
The best performing markets in the world the last few years have been Zimbabwe and Argentina. Your friend whom you give hell sees something (even if he can’t articulate it) that you don’t.
There are two reasons for equities to go up. One is a sugar high rush from cheap money looking for a place to go, and creating a bubble in bonds and equities. The other is a fiscally healthy economy which produces jobs, inventive entrepreneurs, healthy profitable companies whose stock pay dividends based on EARNINGS.
There are two things about a bubble that are always shocking: 1) how long they go on before they pop, and 2) how deep the trough of despair and gloom and pessimism the resultant pop creates.
Both of these are exacerbated when central banks attempt to overrule basic investment/economic laws by creating cheap money.
I am not attempting to “call” the time of the correction. If I could do that, I would quit my job and just play the swings in the S&P (I used to be a commodities floor trader years ago..... back when there really was a “floor” -lol). What I can do is try to hedge myself against the lunacy of our fake economy, built on debt and cheap money, and dependent on the idea that ponzi schemes are extendable forever.
I am telling you that the refusal to deal with the underlying problems (debt fueled spending and debasing the currency) have built into such a problem that when it resets (no one knows when, maybe as far out as 5-10 years) it is going to resemble a complete collapse more than a correction. Naive simpletons who look at charts only —and I have been reading charts for over 30 years now — are going to be caught so flat footed they are going to be astounded at the devastation.