As many investors will likely continue to make money this week on 'meme' stocks, I wanted to share my thoughts on the looming macro market environment. This writeup shall be considered entirely on its merits. Although not FINRA-certified advice, I do hold these truths to be self-evident…
The 11 Reasons to Run from this Market, perhaps by the end of August.
- As I punctually predicted here, here, and here, major indices did rebound sharply this summer. Anyone who tracked my timing here made out like a bandit. Good job. However, the summer rally is nearing its end because we are about to rebound off the 50 week Simple Moving Average (SMA) on the major indices. This implies that, although the NASDAQ should touch 13,500 at its peak [perhaps even this week], the major bear market downtrend of 2022 will then resume downward. This bounce will happen quickly and it will shock many investors.
- Fibonacci levels for the indices tell the same story. Taking the NASDAQ for example, the recent move down was 16,212.23 down to 10,565.14, where the short term fibonacci retracement then began. The 50% retracement of that range brings us to NASDAQ 13,388, which is close to 13,500. Thus, the hard resistance by the 50 week SMA will serve as a catalyst of market-wide rejection.
- We can, therefore, reasonably expect the NASDAQ to reach 13,444 +/- 56 points before turning scarily-downward again. We are getting close, as that is only 3% away. It could peak this week [hence our discussion of this now].
- Analyzing market indices of 2008, the same fibonacci rebound [and as bounced off the 200 week SMA and then rejected by the 50 week SMA] happened in the middle portion of the stock market crash that led to the Great Recession. Many people don't realize that the NASDAQ went up 20% in 2008 before getting ripped apart by the continued macro bear trend resumption.
- Graphing the FINRA margin data, we see that margin began to unwind significantly beginning this year, but has undertaken a major reprieve in deleveraging over the summer when we consider the new record jump in consumer credit. As everyone knows, this same scenario led to the eventual 1929 stock market crash. Yet, the situation now is far worse than 1929. The 1929 stock market crash contributed to the Great Depression.
- Stagflation: major corporations already began to lay off their workers in droves. This comes after corporate executives sold off many of their shares. Even Elon Musk sold off around the start of 2022. He promised investors he wouldn't sell more. But last week he just dumped another $7 Billion in shares combined with laying off droves of workers. Corporate executives are smart; they have a lot of data at their fingertips, and they are normally the first to act prior to a major downturn. The same things happened in 2008. Everyone is doing preparatory layoffs. Imagine the magnitude of the 'real' layoffs. This, then, should push unemployment rate to around 10% in 2023, leading to both a high unemployment (and by the way, 5.2% of the eligible labor force is not even participating anymore compared to the year 2000). That means that, relative to the year 2000, raw unemployment right now is technically at least 8.4%. Just because the fed has that ability to say, 'oh, they're no longer looking' does not mean we can look at the current unemployment [3.5%?] and be giddy about it. It's all a big propaganda scam. Follow the true data: it's troubling. And further, 16% of companies are still remote, and how many of these workers today are actually producing when 7.1% of workers are still remote? Elon Musk himself said that remote workers don't produce. And as Jeffrey 'Bond King' Gundlach properly put it, we are in an “I'll blow dry your hair if you blow dry my hair” unproductive economy.
- The U.S. Dollar is still inflating, right now, at an 8.5% annual rate. This rate of devaluing is not friendly to ANY currency, and when combined with the nominal inflation of years prior, results in a dollar that has no value. Do not be fooled by those who wish to remain in power beyond their already-incompetent 'boomerdom'. It would take years of negative inflation (aka Deflation) to undo the decimation of the world's primary currency. This will never happen. Instead, 'Project Hamilton' is in effect. This project, and the central bank currency that soon comes into fruition after the epic market collapse, is designed to replace the dollar as the world currency. Further, the Working Group (p.o.t.u.s., s.e.c. chair, treasurer, fed chair, and c.f.t.c.) is actively meeting about currency regulation while they are meeting regarding their 'plunge protection team' responsibilities. Never underestimate this group: they have power to do whatever they want right now. And even further, this group indeed contributed to the summer rally (November voting was on the horizon, so it makes sense that the jawboned stock market served as pre-November propaganda). Remember that 2022 began as the worst stock market start to a year in 52 years. That trend usually leads to further collapse after a small seasonal reprieve. They know that, and they did help to delay the continued downturn. Yet, even as strong as they are as a group, they do lack the power to reign in the entire global market. Therefore, The Working Group cannot save you from the coming market calamity.
- Housing: the rapid jump to 6.28% in the rate for 30 year mortgages is troubling. Combined with record home prices, (and combined with irresponsible consumer spending shown in paragraph 5 above), anybody participating/buying in this high rate AND high price environment is getting ripped off. When the downturn happens, there will be record foreclosures. Although the mortgage-backed securities can of 2008 was 'kicked forward' until now, Millennials and Generation Z will surely absorb the economic damage when this housing market collapses in a far-worse fashion than 2008.
- The geopolitical environment is not friendly to markets, as an alliance is already being built (even with currency) between the East and the West, and today the second largest economic war machine is conducting drills around another country that it claims as its own. This country is already shaking hands with war criminals, and it is clear the the global economy is splitting in half.
- Margin Calls. Recently we saw Susquehanna get hit with a $48 Billion margin alert. Meme stocks very well may be a lifeboat in this coming market downturn. Further. Failures to Deliver (FTD) in meme stocks like BBBY, GME, and AMC, among others, are at an all time high. Shorts never closed, and they kicked the can of destruction into retail's hands via the DTCC. Therefore, the BBBY, GME, and AMC short squeeze of 2022 could emulate Volkswagen of 2008, which was shown to be causal to the downturn because of margin liquidations that had ripple effects throughout the entire market.
- White collar criminal activity: like in 2007-2009, we are finally again seeing an uptick in wall street crime. We've seen Archegos, Three Arrows, Citron, and Melvin go down. We saw gold spoofing by JP Morgan. We are seeing a crime uptick like never before. We've seen exchanges go bankrupt, we've seen short-sellers become probed by the DOJ (still ongoing racketeering investigation). The Bernie Madoff arrest of our time is coming. But even then, the SEC will not save Mom and Pop investors from what's coming this fall…
TLDR: The bull market has come to an end. Consider an 'expeditious market exit strategy' at this point except for a controversial few tickers that could benefit from money flows due to overleveraging that leads to a unique transfer of wealth
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