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Market Lab Report - Will The U.S. Stock Market Crash Soon?

Published : March 19 2017 at 12:05 ET

Summary

If 8000 years of human history is any guide, when central banks print as much money as they have, a massive global market crash has been the result.

There have been no soft landings when debt gets to these extreme levels.

Do not panic. There are always solutions.

If 8,000 years of human history is any guide, when central banks print as much money as they have, a massive global market crash has been the result. One of the best known examples is the rise and fall of Rome 2 millennia ago. But there have been numerous other examples of money printing gone wrong. Often, it is contained to a specific country but when the money printing becomes a global phenomenon as it has over the last several years, the result is always a major market catastrophe.

There are no examples in history where such a degree of money printing ended up as a "soft landing." Countries are mired in massive debt burdens including China. Debt-to-GDP is at all-time highs. Meanwhile, interest rates are at all-time lows. So unlike in 2008 after the great crash, central banks have no more "ammo" to further reduce rates to spark the global economy. Instead, they have painted themselves into a nasty little corner with no choice but to continue to print money to keep things afloat at best. Bond king Bill Gross who ran the world's largest bond fund writes about it here: Bill Gross Investment Outlook March 2017

While the US has ended its QE programs, the European Central Bank and Bank of Japan continue to print as they have no choice. If they were to materially reduce QE levels, it would be the start of a serious bear market. Gross writes about it here: Bill Gross: Happiness Runs.

Indeed, for the first time in our lives, the number of luminaries from legendary futures trader Ed Seykota to market historian and billionaire Jim Rogers to Bill Gross to Martin Armstrong, all of whom have top investment track records, have recently said there is a massive price to pay for all the money printing that has taken place globally starting with the US quantitative easing campaign in late 2008 after the great crash. Even the former head of the Federal Reserve, Alan Greenspan, has said that this will not end well in his classic understated manner.

What Should Investors Do?

We always advise watching your stocks and stock watch lists closely in real-time. Always have your stops in place. You should always know the exit point in any trade you make. This form of risk control are the number 1, number 2, and number 3 rules when it comes to investing. Risk management is essential.

And don't try to predict a market top. More money has been lost trying to pick tops and bottoms as legendary trader Jesse Livermore once said. Your stocks and watch list will show you when the time comes. This Zen approach to the markets of remaining in the NOW greatly helps maintain one's focus without letting fear, greed, or hope rule one's emotions.

The Focus List on our website tends to expand and contract based on the strength or weakness of the general market. It therefore serves as an excellent market barometer of sorts.

And if you prefer market timing using ETFs, my answer to the highly manipulated QE-markets of the last several years has been to create a self-learning algorithm that has shown itself to be profitable whether the market trends or not. It capitalizes on volatility. My VIX Volatility Model is up over +50% this year in real-time trading and we are only in March: Results.

Its best performing year was in 2015, a year that was largely trendless during the first 8 months of the year. That said, had it existed in 2008 or 2000-2002 during major market corrections, backtests show these years would have outperformed even its stellar year in 2015.

VVM capitalizes on volatility, so I say, bring on the corrections! But it also has the ability to capture profits that well outperform the major averages when they are in an uptrend.


This information is provided by MoKa Investors, LLC DBA Virtue of Selfish Investing (VoSI) is issued solely for informational purposes and does not constitute an offer to sell or a solicitation of an offer to buy securities. Information contained herein is based on sources which we believe to be reliable but is not guaranteed by us as being accurate and does not purport to be a complete statement or summary of available data. VoSI reports are intended to alert VoSI members to technical developments in certain securities that may or may not be actionable, only, and are not intended as recommendations. Past performance is not a guarantee, nor is it necessarily indicative, of future results. Opinions expressed herein are statements of our judgment as of the publication date and are subject to change without notice. Entities including but not limited to VoSI, its members, officers, directors, employees, customers, agents, and affiliates may have a position, long or short, in the securities referred to herein, and/or other related securities, and may increase or decrease such position or take a contra position. Additional information is available upon written request. This publication is for clients of Virtue of Selfish Investing. Reproduction without written permission is strictly prohibited and will be prosecuted to the full extent of the law. ©2017 MoKa Investors, LLC DBA Virtue of Selfish Investing. All rights reserved.