September 16, 2015
Gents,
First a few comments and then an update on markets.
I encourage folks to check the archives for what I’ve said and see for yourself if I’m clueless or if I have a decent idea where markets will be headed.
With the grotesque anticipation of what will the Fed do tomorrow, let’s understand a few things. Markets are about only 2 things – risk and probabilities.
When you enter a market, you want the risk to be as low as possible and the probability for substantial profit to be as high as possible. And you ALWAYS have to invest WITH the TREND.
So, then with this mind, I will briefly explain my approach to markets. There are three parts – sentiment, cycles, and by far the most important – the technical action of the market itself.
From this I develop a scenario as to which direction that a market likely is headed, how high it may go, and when it will likely top and reverse direction.
And folks that have heard me before know that I have long targeted this fall as a major turning point. Ouch!
So lets talk specifics.
The only market that is a bubble and possibly the biggest bubble of all time is the global government bond market. It’s by far the biggest market. It’s going to blow sky high, and
that’s going to affect everyone on the planet, because it will destroy numerous governments and institutions, etc. And to the collapsatarians out there, this is what could bring on Mad Max –
a Bond Market implosion, but you guys are 100% wrong about stocks. We will see double digit interest rates next decade. Bond market cycles are very long – the recent bond bull market lasted from Oct. of 1981, with a peak yield of 15.2% to July of 2012 (so far) with a low of 2.5%. 31 years. I expect the bear market to last almost as long. It’s going to destroy everything, which is the main reason that I am so bearish on the economy long-term. As to the Fed, will they/won’t they.-yes, they are raising soon. As to why. Surprising how little is understood about this, but rates bottomed over 3 years ago. And right now the 6 month and also the 1 year T-Bills are at 5 1/2 year highs and the 2 year Notes are at 4 1/2 year highs. So the market is already raising rates and the Fed will follow. Also, to repeat for the umpteenth time, it’s the INCREASING rates which will finally bring on the inflation and that inflation starts next year.
As for stocks, my scenario for the last 6 1/2 years remains intact. The March, 2009 lows in stocks were a generational low and we’re in a major bull market that will last for at least 20 years and reach 100,000 on the Dow. That Dow high will not be in today’s dollars, though. Although I’m extremely bullish on US stocks, over the next many years, there will be a couple of substantial 30% plus selloffs and several 20% selloffs like we just saw into the Aug. 24th low. I expect to see a retest of those intraday lows and possibly lower, but that would be a fantastic buying opportunity. Only buy into extreme weakness.And no there is zero % chance of a major US stock market crash as of now.
When I told people 48 months ago, with gold above $1900, that we would not see a major bottom in gold for many years, no one believed me. And that would accompany a low below $1000 and a likely Sept. 2015 time frame. Now lots of Johnny Come Latelies are claiming that gold is never going up again. So sentiment wise we’re getting close, time frame wise we’re potentially there. Now we need the market action to turn me super bullish on gold like I was in late 1999. However, I do not believe that we have seen the lows in gold yet and I still expect lows below $1000 over the next 5 months. Second quarter of next year we should be in a new bull market in gold and we’ll talk about upside projections when I believe that we’ve seen the lows.
As for the US Dollar, we’re likely to see 120 on the Dollar Index. That’s where we’ll finally see the long term destruction of the Dollar and loss of reserve status. But we need to see the market rally first. That’s how markets work to force the change.
Lastly oil – my long term projection for oil was $35. Oil got down to $38 and we’ve had a good rally, but I still expect to see oil below $35 before a high probability of a major low for oil and commodities in general – likely later next year.
So the take away from all of this is that the previous 8 years of 0% rates has allowed many companies, industries, institutions and governments to thrive and survive, but that is about to change in a huge way. The upcoming volatility over the next 18 months will be like nothing any of us have seen recently. Buckle up!
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