Is the stock market crash going on? Make one chart to look, one call

The first lesson I learned about investing in the market was a tender age of ten. I have been investing money in Australian gold stocks since I was seven years old. I made a huge amount of $20 – and in 1971 $20 was a lot for kids.

The real lesson came a few years later when my dad explained that all I had to do was know how the market was going and investing accordingly. To my 10-year-old brain, it didn’t look like good advice. It certainly did not explain my father’s obvious success. Where was that magic of wisdom? Even as a child, I knew it wasn’t that simple.

But 30 years later, I realized that it was just that simple. After all, if you don’t know what direction the price of an asset is going, why do you invest in it?

So, what is the market direction?

The theory suggests that the chart does not contain information about trends, but it is difficult to not see any obvious trends in them, especially in long-term time series. Is it really true that general market trends are not shown on the long-term S&P 500 chart? Because there is a trend, and that trend is what we called “progress.”

Here is an obvious example:

Even fundamentalists like Warren Buffett say that in essence, the stock market can only rise in the long run. Most investors implicitly agree to this, believing that the market is rising, and are thinking of spending money accordingly. But in the long run, even the largest and safest stock and indicators can have nasty fixes and cause many medium-term pain.

You can become an investor in buying and holding, and historically, it has been a great strategy. Alternatively, you can buy, keep and avoid crashes. This is an approach I’ve taken over many years. For me, the market is rising for the long term, but it’s even better if you can avoid crashes and buy it at the bottom of a slump.

It’s hard to take completely time, but since the Dot-COM crash I managed to do it somehow. In the example, we can see that the fix didn’t change to a full-scale crash. I have been writing about large market crashes for 20 years and covering the points of entries and exits, so I should be able to trace some of these events in Forbes.

So, what about this current “fix”?

Let me be clear: I’m 100% out of US stocks and about 70% of my non-US portfolio. The remaining stocks are in sectors that should theoretically be more resilient in the current economic recession (agriculture, physical gold ETFs), but can earn 100% cash depending on what happens next.

I hate being in cash. I hated selling Intel, despite I believed it could go to the moon, but when I crashed, everything gets crushed. Only special circumstances may not be sucked into the general market. When an actual crash occurs, everything turns into dust, and the larger the crash, the wider the devastation. Health does not apply to crashes.

I think this fix will be a crash and that crash will turn into a persistent bear market. “Bear Market” is not a modern, ignorant definition of a post-crash market, but in the classic sense that is a long-term downward leaning market.

This bear market may be very dark. Because the prices are so high, even the long term average rating feels devastating.

This outcome is inevitable, but avoiding it requires almost miracle.

set up

Certainly, risk assets don’t like risk or chaos. Unfortunately, chaos is not bound.

Consider the compensation cuts of a $1 trillion cut in US government spending. That alone helped drive the United States into a recession. Even if some of those funds were scam and wasted. That money still flows into the economy and juices it. If these budget cuts are made, they put millions of people on the unemployment roll.

Trump’s tariffs need to cut prices, reduce our spending, worsen the recession, and cause a global recession. We see higher prices, but there is no increase in monetary supply – unless the Federal Reserve launches QE Bazooka. In any case, what will happen? Budget cuts and tariffs are double wamies at risk of leading to depression. Economic tanks, rising unemployment rates, and government tax revenues collapse.

If that’s not enough, escalating geopolitical tensions will only increase economic tensions.

Can all these overlapping factors not shatter the US and the global economy and create a negative feedback loop?

So now, ask yourself: How is the US stock market going?

There’s no need to even speculate on the direction of interest rates, the value of the dollar, or the global appetite for US debt. The answer is already clear.

It must go down unless the angels sing.

So let’s try to predict as a benchmark for what will happen next. It’s ugly, but it’s just a roadmap:

Unless there is a sudden outbreak of sanity, we are participating in the omnipotent crash. It’s very difficult to tell how deep that crash will be. Since the global financial crisis, market driving forces have evolved from free market dynamics to central banking policies and now into political turmoil. That chaos has no end in front of you.

At the very least, all investors need to organize their operations. Face it. When politicians say what they are doing causes “short-term pain,” history tells us that what comes next is grand and not in a good sense.