I realize this is being posted here a day too late, but it was sent out to my friends and family just prior to todays market disaster and I promise to do better in this space from now on.
I know I haven't written in a while but I've been really busy. I'm still busy but needed to take the time out to warn you that the market may take a dump very shortly that will bring us back to 2009 levels or worse. Why? Because of the following fundamental facts:
- Our debt
- Our governments inability to deal with our debt
- Unacceptable unemployment levels
- Stalling GDP (below 2% now and we need 3%)
- Housing market still dropping and abysmal forecasts
- Foreclosures and 25% of all homes under water
- 41% of Americans on some sort of government assistance
- Brazil and China slowing
- Emerging markets slowing
- Germany, the powerhouse of Europe stalling
- European banks ready to crash and burn
- European governments close to default on debt they can't pay back
- Fractured European approach to solving serious fundamental Eurozone problems
- More items than I can possibly enumerate in this email
These are the 'fundamentals' in stock parlance that will keep this market from recovering.
Now for the technicals. We are ready to enter a bear market. A bear market is defined as a 20% drop from the market top. Do the math yourself. Look at the Dow, S&P500, NASDAQ, Russell 2000 index, the German DAX, Brazil Bovespa, Hang Sang China index, I could go on and on. Worse news yet, I heard a piece on Bloomberg Radio today with Louise Yamada (look her up and you'll understand why I'm so concerned) that the German DAX, The Chinese Hang Sang and the S&P500 all experienced what is known in the technicals of the market as a 'death cross' in the last 2 weeks, which is where the 50 day moving average, moves below the 200 day moving average. This is a very bad thing to happen. Yes, there have been a few times where the market has recovered after this occurring, but the fundamentals were much better than we have now, many times over. If you don't believe me, look it up on Google. You won't like what you see. Basically it is a warning sign that the market will dump in the next few days to weeks, and it won't be pretty. For us, it may mean returning to the 2009 lows or worse. For Japan, it may mean catastrophic results as they are already at the bottom of their support level.
What to do? The following things can be done NOW even in your IRA or 401K:
- Move to cash or money market funds
- Move to Gold (NYSEARCA:GLD)
- Short the indexes (SH, SDS)
- Short the financials (SEF, SKF)
Protect what you have. Be careful. Stay alert. Read the financial section of the newspapers. Listen to Bloomberg in the morning on 1130AM or on the internet if you're not in the NY area. Read bloomberg.com or finance.yahoo.com each day. Don't let what you've worked so hard to accumulate get lost. If I'm wrong, you haven't lost anything really. If I'm right, you will thank me.