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  1. #1

    Default Warning Stock Market Crash Coming 2013-2014

    Why I believe a Crash in the US stock Market is Coming in 2013-14

    There have been many articles warning about an impending US stock market crash, see Critical Warning No. 17: Dow 5,000, crash of 65% Commentary: Sucker’s bull market of 1928 now repeating and its references for a selection, but in the last week I came across two articles that, for me, tipped the balance.

    The first one Bernank’s Bluff and the Coming Stock Market Crash highlights the similarities between the US market today and just before the last crash. The second one Baked In The Cake is an investment fund manager's detailed discussion of why he thinks a crash is inevitable.

    Here are two quotes from Baked In The Cake:-
    "The U.S. equity market is now in the third, mature, late-stage, overvalued, overbought, overbullish, Fed-enabled equity bubble in just over a decade. Like the 2000-2002 plunge of 50%, and the 2007-2009 plunge of 55%, the current episode is likely to end tragically. This expectation is not a statement about whether the market will or will not register a marginal new high over the next few weeks or months. It is not predicated on the question of whether or when the Fed will or will not taper its program of quantitative easing. It is predicated instead on the fact that the deepest market losses in history have/always/emerged from an identical set of conditions (also evident at the pre-crash peaks of 1929, 1972, and 1987) -- namely, an extreme syndrome of overvalued, overbought, overbullish conditions, generally in the context of rising long-term interest rates."
    . . . . . .
    "In short, we have one of the most overvalued, overbought, overbullish equity markets in history, but one where investors are under the illusion that stocks are appropriately priced, because they are being sold a valuation benchmark (forward operating earnings) that reflects profit margins 70% above historical norms -- a direct result of unsustainably large deficits in combined government and household savings. As government deficits recede from the historic extremes that marked the post-crisis response to the worst economic downturn since the Depression, and household savings rebound from among the lowest levels in history, corporate profit margins cannot and should not be expected to persist at anywhere near recent record levels. A century of economic data provides evidence on both corporate profit margins and broader valuation measures."

    What would a US stock market crash mean for Australia.

    The following chart (from Yahoo Finance) shows Australian AllOrd (blue) versus US SP500 (red) since Dec 1996. As you can see, a crash in the US results in a downturn in Australia.


    However the depth of the downturn in Australia appears to be related to size of the rise since the previous crash. On that basis you would expect impact on Australia of the the next US crash to be less then the last one in 2008, but you would still expect the Australian stock market to fall.

    What am I doing about this Impending Crash.

    Firstly, I am not at all worried if it turns out I am completely wrong about a crash in 2013-14, because I am 100% sure there will be another crash some time in the future. What I am doing now is planning how I will handle the crash when it comes. History has shown that leaving your super in the hands of the 'professionals' does not protect your capital.

    As the bushfire advertisements point out “Planning to make a plan is not making a plan.”

    I have been thinking carefully about two points:-
    How will I know when a crash is happening?
    What action will I take?

    I am using ProtectYourSuper to answer these questions.

    You should make your own plan based on your own circumstances.
    Attached Images Attached Images

  2. #2

    Default Re: Warning Stock Market Crash Coming 2013-2014

    Another article today One way to prep for a market crash by Thomas H. Kee Jr.

    It starts out
    "I (Mr Kee) have been conducting extensive evaluations of all fundamental and technical aspects of this market, and almost everything points to an eventual crash. They key word here is eventual, but I think that sentiment resides with almost everyone I talk to as well."

  3. #3

    Default Re: Warning Stock Market Crash Coming 2013-2014

    Here are a selection of articles from the last week from MarketWatch

    First an alternative view which suggests that stories of a crash are popular to sell stock newsletters. Certainly I have seen a few of those.

    http://www.marketwatch.com/story/qui..._story_popular
    Quit worrying about a 1987-style crash
    L.A. Little
    "Fear sells, and it is always a hot topic as a result. As you know, I am no fan of the methods that the central bankers have taken to force asset prices higher despite a plethora of continuing issues, but that's a subject for another day." ...
    "For now though, talk of a "crash" is quite premature. In fact, it borders on ludicrous. There's a lot more work left to do technically for a "crash possibility" to have any chance of playing out and that will take time."

    But that article appears to be the exception. Here are a selection of 'crash' articles.

    http://www.marketwatch.com/story/whe...ink=MW_popular
    Will Mom and Pop investors blow it again?
    Commentary: The average investor is terrible at timing the market

    ByBrett Arends
    "The last time the investing public jumped into the Wall Street pool with both feet like this was in 2007. And they are investing even more this time around." ...
    concludes
    "I can’t read the future, any more than anyone else can. But I know that Mom and Pop have a terrible track record. Over the years, you could have made a fortune just by buying stocks when Mom and Pop sold them and selling when they were buying. And they are buying, heavily, right now."


    http://www.marketwatch.com/story/9-r...k=MW_TD_latest
    8 red flags to be aware of in this market
    John Nyaradi
    "Red flags fly everywhere as global financial markets travel through the dog days of summer. As always, danger arrives hand in hand with opportunity, and the current environment will generate both peril and the potential for profits. Wall Street Sector Selector stands in red-flag status, expecting rough water ahead."

    http://blogs.marketwatch.com/thetell...rt-the-market/
    Doug Kass gives you 3 or more reasons to short the market
    Actually he gives 10.


    http://www.marketwatch.com/story/fed...now-2013-08-15
    Fed tapering: The math investors need to know
    Commentary: What ‘normal’ interest rates would do to stock valuations

    Brett Arends
    "The Federal Reserve has been suppressing interest-rates to boost the economy. That suppression artificially hiked the value of the stock market ... Now that suppression is coming to an end, interest rates can be expected to rise. That rise ought .. to reduce the value of the stock market. Dramatically."


    Finally for this week two articles from Mark Hulbert who appears to be balanced in his approach and relies on historical statistical analysis.

    http://www.marketwatch.com/story/sto...igh-2013-08-14
    Stocks as overvalued now as at 2007 high
    Commentary: Valuation model with good record flashing sell

    MARK HULBERT
    "Here’s yet another reason to be worried about the stock market: A valuation model with an impressive record says that stocks are as overvalued today as they were at the 2007 stock market peak."
    "Seiver’s model is not a short-term market-timing tool. ... the stock market can continue to rise for months, if not years, after a sell reading."


    http://www.marketwatch.com/story/pri...vestinginsight
    Price-to-earnings ratios can be misleading
    Commentary: Bulls and bears are they both right?

    MARK HULBERT
    The current SP500 " P/E ratio of 18.2, which is higher than 79% of comparable readings since 1871" ..
    "Many bulls try to wriggle out from this bearish sign by focusing on estimated earnings." ..
    "The investment implication is that one might focus on ways to gradually reduce equity exposure rather than increase it."

  4. #4

    Default Re: Warning Stock Market Crash Coming 2013-2014

    Here is this weeks selection of warnings

    http://www.marketwatch.com/story/slo...k=MW_TD_latest
    Slowing earnings means a weaker Dow
    Thomas H. Kee Jr.
    "Given the future growth expectations that our macroeconomic analysis provides (or lack of it), current valuation vs. fair valuation analysis put the level of this market in serious doubt"

    http://www.marketwatch.com/story/is-...now-2013-08-19
    Is the S&P 500 'crashing' now?
    By Avi Gilburt
    "I have suggested for the last several weeks, we have been building a top, and our primary target for this correction is still in the low 1500 region."


    http://www.marketwatch.com/story/fed...st=tbeforebell
    Fed tapering: The math investors need to know
    Commentary: What ‘normal’ interest rates would do to stock valuations
    by Brett Arends
    the article concludes
    "The bond market has already started waking up to the new math. But the stock market just parties on. Farce."


    http://www.marketwatch.com/story/dan...nk=tbeforebell
    Dangerous divergences unseen since 2007
    Commentary: Message of A/D line and High Low Logic Index
    by Mark Hulbert
    "You can’t say that the stock market isn’t giving us plenty of warning that downside risk is both high and rising."
    ".. the index’s latest reading is even higher than its highest level from late 2007, the previous sell signal.
    "To be sure, neither the A/D line nor the High Low Logic Index is a short-term indicator, typically issuing signals months before eventual market carnage,if not years."


    and this one from a month ago. It does not predict a 'crash'. Rather a decline.
    http://www.marketwatch.com/story/sel...tor-2013-07-17
    Sell signal from key market indicator
    Commentary: Famous ‘High Low Logic Index’ is no longer bullish
    by Mark Hulbert
    "Spoiler alert: A market timing indicator with a stellar long-term record is now in sell mode.
    The last time this indicator generated a sell signal was in late 2007, just before the Great Recession."


    http://www.marketwatch.com/story/how-the-fed-could-cause-another-crash-2013-08-22?pagenumber=1

    How the Fed could cause another 1987 crash
    Commentary: Rising interest rates and the gathering storm
    by Brett Arends
    It concludes
    "I asked my bond market guru over lunch what the risks were that the latest surge in interest rates could precipitate an ’87-style crash. 'Quite significant', he said."


    http://www.marketwatch.com/story/hig...vestinginsight
    High profit margins hint at pain to come
    Commentary: A reversion-to-the-mean could mean trouble
    by MARK HULBERT
    The article starts
    "Profit margins at near-record levels - watch out below!"
    It goes on to say
    "Investors therefore may want to begin building up a healthy cash position to take advantage of lower prices in coming years."
    He makes this calculation
    "To be generous, let’s assume there won’t be a recession. Sales-per-share will continue to rise at the same pace it has since the bull market began in 2009 which is 1.7% a year and the S&P 500’s P/E ratio (based on trailing earnings) stays constant at its current level of 16.7. If so, the S&P 500 in five years would be trading at 1183 nearly 30% lower than current levels."

  5. #5
    Junior Member
    Join Date
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    Default Re: Warning Stock Market Crash Coming 2013-2014

    Teddy Bear is waiting for his friend, a big country bear.

  6. #6

    Default Re: Warning Stock Market Crash Coming 2013-2014

    http://www.marketwatch.com/story/gho...vestinginsight

    Ghost of 1929 crash reappears Commentary: Pay attention to the signals by By Anthony MIrhaydari

    "
    So no, this time isn’t different. The specifics may have changed, but the themes remain the same.
    In fact, the stock market is right now tracing out a pattern eerily similar to the lead up to the infamous 1929 market crash." (see chart in this article)


  7. #7

    Default Re: Warning Stock Market Crash Coming 2013-2014

    http://www.marketwatch.com/story/the...eet-2013-12-06

    see MARK HULBERT response to the article above is


    "The chart that’s scaring Wall Street
    Opinion: It’s not the late 1920s redux. Don’t panic, the analysis is flawed"

  8. #8

    Default Re: Warning Stock Market Crash Coming 2013-2014

    7 signs we’re near a market top, and what to do now
    Opinion: Wall Street is reliving the 1960s — but the ‘Go-Go’ era is ending
    by Michael Sincere

    He lists 7 red flags and concludes with

    "Those who have studied market history have seen this story before,
    and the ending is always the same. No matter how many warnings you give,
    no many how you urge people to avoid buying the speculative Go-Go stocks and move to the sidelines,
    few listen until it is too late."

  9. #9

    Default Re: Warning Stock Market Crash Coming 2013-2014

    'Very painful': World heading for bust 'unlike any other', says Jeremy Grantham

    Reported in SMH 25th March 2014. in part he says

    ''Over the next seven years we think the market will have negative returns. The next bust will be unlike any other because the Fed and other central banks around the world have taken on all this leverage that was out there and put it on their balance sheets. We have never had this before.

    ''Assets are overpriced generally. They will become cheap again. That's how we will pay for this. It's going to be very painful for investors''.



  10. #10
    Junior Member
    Join Date
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    4

    Default Re: Warning Stock Market Crash Coming 2013-2014

    If history repeats itself then many investors should be wise enough to see the signs and act accordingly. Take profits before the market go down and invest after the correction, be wise to ride the bull.

 

 

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