Best of the Week
Most Popular
1. US Housing Market House Prices Bull Market Trend Current State - Nadeem_Walayat
2.Gold and Silver End of Week Technical, CoT and Fundamental Status - Gary_Tanashian
3.Stock Market Dow Trend Forecast - April Update - Nadeem_Walayat
4.When Will the Stock Market’s Rally Stop? - Troy_Bombardia
5.Russia and China Intend to Drain the West of Its Gold - MoneyMetals
6.BAIDU (BIDU) - Top 10 Artificial Intelligence Stocks Investing To Profit from AI Mega-trend - Nadeem_Walayat
7.Stop Feeding the Chinese Empire - ‘Belt and Road’ Trojan Horse - Richard_Mills
8.Stock Market US China Trade War Panic! Trend Forecast May 2019 Update - Nadeem_Walayat
9.US China Trade Impasse Threatens US Lithium, Rare Earth Imports - Richard_Mills
10.How to Invest in AI Stocks to Profit from the Machine Intelligence Mega-trend - Nadeem_Walayat
Last 7 days
Silver Short-Term Trend Analysis - 26th June 19
Iran and the Dying Days Of the US Empire - 26th June 19
Why a Saturated Online Gaming Market Spells Good News for Gamblers - 26th June 19
Natural Gas Sets Up Bottom Pattern - 26th June 19
Has Gold Price Broken Out Or Not? Technicals And Fundamentals - 26th June 19
Stocks and XAU Gold Miners Next Bull and Bear Markets are Now Set Up - 26th June 19
Gold Price Trend Forcast to End September 2019 - Video - 25th June 19
Today’s Pets.com and NINJA Loan Economy - 25th June 19
Testing the Fed’s Narrative with the Fed’s Data: QT Edition - 25th June 19
What "Pro Traders" use to Find Profitable Trades - eBook - 25th June 19
GDX Gold Stocks ETF - 25th June 19
What Does Facebook’s LIBRA New Crytocurrency Really Offer? - 25th June 19
Why Bond Investors MUST Be Paying Attention to Puerto Rico - 25th June 19
The Next Great Depression in the Making - 25th June 19
The Bad News About Record-Low Unemployment - 24th June 19
Stock Market New High, but…! - 24th June 19
Formula for when the Great Stock Market Rally Ends - 24th June 19
How To Time Market Tops and Bottoms - 24th June 19
5 basic tips to help mitigate the vulnerability inherent in email communications - 24th June 19
Will Google AI Kill Us? Man vs Machine Intelligence - 24th June 19
Why are Central Banks Buying Gold and Dumping Dollars? - 23rd June 19
Financial Sector Paints A Clear Picture For Stock Market Trading Profits - 23rd June 19
What You Should Look While Choosing Online Casino - 23rd June 19
INTEL (INTC) Stock Investing to Profit From AI Machine Learning Boom - 22nd June 19
Here’s Why You Should Drive a Piece of Crap Car - 22nd June 19
How Do Stock Prices React to Fed Interest Rate Cuts? - 22nd June 19
Gold Bull Market Breaking Out! - 21st June 19
Post-FOMC Commentary: Delusions of Grandeur - 21st June 19
Gold Scores Gains as Draghi and Powel Grow Concerned - 21st June 19
Potential Upside Targets for Gold Stocks - 21st June 19
Gold Price Trend Forcast to End September 2019 - 21st June 19
The Gold (and Silver) Volcano Is Ready to Erupt - 21st June 19
Fed Leaves Rates Unchanged – Gold & Stocks Rally/Dollar Falls - 21st June 19
Silver Medium-Term Trend Analysis - 20th June 19
Gold Mining Stocks Waiting on This Chart - 20th June 19
A Key Gold Bull Market Signal - 20th June 19
Money Saving Kids Gardening Growing Giant Sunflowers Summer Fun - 20th June 19
Investing in APPLE (AAPL) to Profit From AI Machine Learning Stocks - 20th June 19
Small Cap Stocks May Lead A Market Rally - 20th June 19 -
Interest Rates Square Minus Zero - 20th June 19
Advice for Financing a Luxury Vehicle - 20th June 19
Stock Market Final Blow Off Top Just Hit… Next Week Comes the FIREWORKS - 20th June 19
US Dollar Rallies Off Support But Is This A Top Or Bottom? - 19th June 19
Most Income Investors Are Picking Up Nickels in Front of a Steamroller - 19th June 19
Is the Stock Market’s Volatility About to Spike? - 19th June 19
Facebook's Libra Crypto currency vs Bitcoin: Five Key Differences - 19th June 19
Fed May Trigger Wild Swing In Stock Index and Precious Metals - 19th June 19
How Long Do Land Rover Discovery Sport Brake Pads Last? - 19th June 19
Gold Golden 'Moment of Truth' Is Upon Us: $1,400-Plus or Not? - 18th June 19
Exceptional Times for Gold Warrant Special Attention - 18th June 19
The Stock Market Has Gone Nowhere and Volume is Low. What’s Next - 18th June 19
Silver Long-Term Trend Analysis - 18th June 19
IBM - Watson Deep Learning - AI Stocks Investing - Video - 18th June 19
Investors are Confident, Bullish and Buying Stocks, but… - 18th June 19
Gold and Silver Reversals – Impossible Not to Notice - 18th June 19

Market Oracle FREE Newsletter

Gold Price Trend Forecast Summer 2019

How to Calmly Weather This Stock Market Downturn

Stock-Markets / Stock Markets 2015 Aug 25, 2015 - 11:51 AM GMT

By: ...

Stock-Markets

MoneyMorning.com Shah Gilani writes: It’s no surprise that U.S. stocks have dropped into a free-fall mode.

I’ve been warning about the risks that stock, bond and other financial-asset prices face for some time.

Now that it’s happening, though, you need to understand these two things.


  • Exactly what’s happening…
  • And what you can do about it – both to blunt your losses… and to make money.

In fact, while other investors are panicking – and see gloom and doom – I see opportunity.

This morning’s market plunge underscores my long-held mantra: “There’s always a place to make money… always.”

Today I’m going to show you a couple ways to put that mantra to work – so you can cash in…

Forgetting About the Fed

The big, big picture that too many investors lost sight of was that the U.S. Federal Reserve‘s “zero-interest-rate policy” (ZIRP) and massive quantitative-easing (QE) moves didn’t stimulate economic growth.

And it didn’t work when the European Union (EU), Japan and China tried this strategy for themselves.

What all that easy liquidity did do was lift asset prices – which, in the case of the Fed, was also an articulated policy goal.

In the Fed’s “wealth-effect” scenario, consumers would feel better about the economy’s prospects (and their own) by watching stock prices rise.

Aided by the Fed’s cheap-money tailwind, U.S. companies over the last six years helped their own cause with $2.7 trillion of stock buybacks. That boosted Corporate America‘s all-important earnings-per-share (EPS) metric (since the same earnings total is apportioned across a lower number of shares).

That additional boost of corporations buying their shares at ever-increasing prices and better earnings metrics made stocks look better and better to the untrained eye. And that created a “virtuous momentum” market where stocks were pushed to increasingly higher “highs.”

While other countries were following the Fed’s lead, China not only lowered interest rates but embarked on a debt-fueled stimulus tear – including runaway infrastructure spending.

According to McKinsey Global Institute research, China’s total public-and-private debt burden skyrocketed from less than $7 trillion in 2007 to more than $28 trillion by mid-2014.

Despite this, China’s GDP growth rate has been slipping badly.

For a couple reasons …

First, there were low interest rates that have been diverting investment capital and savings into capital markets – chasing stocks and increasingly lower-yielding fixed-income securities. Then there was China’s stimulus efforts to boost infrastructure, manufacturing and exports.

These two factors led to overproduction and the stockpiling of commodities. And they brought us to the point we’re at today.

That’s a big, big picture I just painted, of course. But beneath that, mechanical realities were signaling trouble.

The price of oil has been sliding. When the price of the most important commodity in the world skids precipitously, it’s not just because America’s new record production of 10 million barrels a day is tipping the supply side of the equation.

And it’s not that other producer countries desperate for revenue (which is another indication of trouble) are pumping furiously.

The price of oil – that critical bellwether – is crashing because global demand hasn’t been rising as much as before… because global growth is slowing.

That’s been a flashing light.

A warning…

Debt Planet

Then there’s Greece. It’s been a great 28-century run, but the “Hellenic Republic” is probably on its last legs. That’s another warning sign – not just about Greece, but about the burden of debt in general.

There’s no way Greece can pay the more than $350 billion it owes, and that’s just in bailout loans.

There’s no way Japan can repay its government’s $11 trillion in debt, which will be three times Japan’s GDP by 2030.

The United States is no slouch in the debt department either. Globally, debt burdens have been climbing higher.

And that takes us back for a moment to the big, big picture: By slashing interest rates, central banks are engaged in a scheme to cut the financing costs of the rising debt loads of each of their respective governments.

The only escape route out of everyone’s debilitating debt spiral is for economic growth to accelerate (that’s, of course, what everyone had hoped low interest rates would accomplish). Accelerating growth would boost the tax revenue needed to help pay down debt. And it would also fuel inflation, which reduces the cost of the debt.

That’s why central banks want inflation. But there is no inflation – which is another crystal-clear signal of trouble.

Then there’s China. The saying used to be, “When the United States sneezes, the world catches a cold.”

That’s now true of China. And China is sneezing, hacking, loading up on NyQuil and taking three days off work.

Beijing tried to push stock markets higher by cheerleading them on through party papers and TV shows.

Millions of new brokerages accounts have been opened since the end of 2014, and Chinese “speculators” have been lavished with margin to buy into the nation’s hot stocks.

The central planners had hoped to get China’s debt-ridden corporations – especially the state-owned and controlled entities – to be able to issue new equity to new stock investors. The goal: To offload balance-sheet debt onto stock-market “plungers” – a Wall Street euphemism for market players that make big-and-reckless bets.

Beijing’s plan didn’t work. When Chinese stocks crashed, that was another giant warning light signaling trouble ahead.

There’s just no good news left to lift stocks higher. There’s no market leadership from any industry, other than the brief momentum runs made by some tech darlings and a bunch of hot biotech companies that are promising next-century solutions to yesterday’s problems.

And there’s even another challenge looming: The Fed says it’s leaning toward raising interest rates.

How to Run the Table

All these signals were flashing yellow, then bright red in the past few weeks.

We caught them all in my Short-Side Fortunes trading service and are very short and very, very happy, because we are short China, oil, Europe and all the U.S. stock indices.

I’m looking for an oversold bounce at some point, but if we get one on thin volume, it will be a chance to just load up for the next downdraft.

There’s nothing holding markets up anymore. It’s truly frightening.

Central banks have shot their ammo. Their bazookas are smoking… and empty.

What the markets need now is a good, long flushing-out. Not that I want to see that, even though we are short, but that’s what they need to squeeze out excesses built into artificially inflated stock-and-bond prices.

It’s not too late to capitalize on this opportunity… to hedge against further downside moves, or to make money if stocks fall more – as I believe they will.

Because puts are now so expensive, the best way to hedge and the best way to profit from any further selling would be to buy “inverse” exchange-traded funds (ETFs) like ProShares Short Dow30 (NYSE Arca: DOG), or ProShares Short QQQ (NYSE Arca: PSQ).

We own both in my Short-Side Fortunes service, and they provide great short exposure to the big U.S. indices.

As sure as this sell-off was clearly signaled, there will be signals when we’re near the bottom.

We’ll continue to follow stocks down.

And we’ll be there for you when they’re ready to rebound.

As they always do…

Source http://www.wallstreetinsightsandindictments.com/2015/08/with-two-simple-moves-youll-calmly-weather-this-downturn/

Money Morning/The Money Map Report

©2015 Monument Street Publishing. All Rights Reserved. Protected by copyright laws of the United States and international treaties. Any reproduction, copying, or redistribution (electronic or otherwise, including on the world wide web), of content from this website, in whole or in part, is strictly prohibited without the express written permission of Monument Street Publishing. 105 West Monument Street, Baltimore MD 21201, Email: customerservice@moneymorning.com

Disclaimer: Nothing published by Money Morning should be considered personalized investment advice. Although our employees may answer your general customer service questions, they are not licensed under securities laws to address your particular investment situation. No communication by our employees to you should be deemed as personalized investent advice. We expressly forbid our writers from having a financial interest in any security recommended to our readers. All of our employees and agents must wait 24 hours after on-line publication, or after the mailing of printed-only publication prior to following an initial recommendation. Any investments recommended by Money Morning should be made only after consulting with your investment advisor and only after reviewing the prospectus or financial statements of the company.


© 2005-2019 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in

6 Critical Money Making Rules