Is A Stock Market Crash In the Cards?
Over the last year, I have quietly liquidated my stock and mutual fund portfolios, banking a HUGE amount of profits in the process.
Why? Because I believe there is overwhelming evidence the stock market is on the verge of crashing, you heard that right, a stock market crash, and it may even occur any day now.
Here are just six of the red flags I see:
- The last two times the S&P climbed this high, a severe correction (of about 50%) took place. Many experts now believe that the next crash could result in a 90% drop in the stock market.
- Current stock prices are extremely expensive compared to their ten-year average. Currently, the price-to-earnings ratio of stocks is about 23.1 compared to the typical ratio of 15.1. That means that current stock prices are 53% higher than average!
- Market Sentiment shows that investors are extremely bullish right now. In fact, this measure is currently nearing a 10-year high. Most experienced traders know that when market sentiment it too high or too low, a snap-back often occurs.
- The Volatility Index (VIX) is also near a historic low, down 28% year-to-date. Many investors have forgotten about risk, and I believe it will only take a single event to send volatility higher, and this will cause them to flee from the markets.
- NYSE Margin Debt is at record highs and is tracking the highs of the S&P500. That means investors are increasingly betting with borrowed money.
In short, I am convinced there is overwhelming evidence that we are in a bubble that is about to pop, and I’m not the only one.
For example, Bob Janjuah of Nomura warns: “I still see end Q4 2013, through to end Q1 2014, as the window in which we see a significant risk-on top before giving way . . . to what could be a 25% to 50% sell-off in global stock markets.”
Also, just a few months ago, Marc Faber was on CNBC’s Futures Now with an ominous warning about a financial crash near the end of 2013. He compared the current market conditions to that of the late summer of 1987, just prior to the major crash. Mr. Faber feels we are imminently facing a 1987-style market crash any day now.
So, what should you do? Is there anything you can do to protect yourself? It’s hard to say when this will actually happen however if you would like to know what I am doing to shift risk away from stock market you should attend my upcoming webinar where I will explain the strategy I have been using to consistently outperform the S&P by over 8 times, without the risk of the stock market bubble we are in.