Today’s stock market is setting up for a huge tumble…a collapse that will make the stock market crashes of 2008 and 1929 look like a cake-walk.
Yes, it’s a dire prediction. But the makings for this collapse have already been put into place.
As the greatest financial crisis since the Great Depression hit America in 2008, the U.S. government and the Federal Reserve pulled out all the stops to save the economy from the abyss.
The government put money into private “too big to fail” corporations and borrowed trillions of dollars to help jump-start the economy. The Federal Reserve did its share by taking four major steps to “save the economy at all costs.”
The Fed: Brought interest rates to historic lows, made money available to big banks that were in trouble, bought U.S. Treasury bonds for the first time in history and created trillions of dollars in new money out of thin air.
While the Federal Reserve has stopped printing new paper money each month, the damage has already been done. By keeping the money “flood gates” open for so long, by printing trillions of dollar in new money and keeping interest rates artificially low for years, we believe the Fed has inadvertently created a stock market bubble.
The Dow Jones Industrial Average moved from 6,440 in March of 2009 to over 17,000. That’s the biggest uninterrupted point gain for the Dow Jones in history—a whopping gain of more than 10,000 points.
But take the rising stock market out of the picture, and all the sudden, the economy doesn’t look that great. In fact, current economic statistics are outright pathetic.
Take out stock buy backs and corporate earnings growth has fallen back to the lowest pace since 2009. In fact, revenue at the S&P 500 companies is expected to rise only 1.4% this year!
Last year, China’s economy grew at the slowest pace in 13 years. Japan in back in recession and many eurozone countries are in depression.
People dependent on U.S. government handouts now outnumber people with private-sector jobs in 11 states. And the number of Americans on welfare is now higher than the number of Americans who have full-time jobs.
Take Social Security out of the picture and one out of every four Americans, 25% of the population, now lives below the poverty line, according to U.S. Census Bureau statistics. Yes, poverty in the U.S. has reached a 50-year high.
The bottom line: this is the biggest disconnect between the economy and the stock market in history…and it all has to do with the stock market being artificially inflated by the Federal Reserve’s prolonged massive monetary stimulus.
Understanding the Three Phases of a Bear Market
The great majority of investors can’t fathom what’s about to happen to the stock market, because they don’t understand the historic three phases of a secular bear market.
Phase One of a bear market brings stock prices down sharply. That’s what happened when the Dow Jones Industrial Average fell from 14,164 in October 2007 to 6,440 on March 9, 2009—a tumble of 54%.
Phase Two of a bear market is when the bear lures investors back into stocks. The bear gives investors and analysts the false sense that the economy is improving and that it’s okay to own stocks again. The bear has done just that—a masterful job at convincing investors it’s a great time to own stocks again.
Once the vast majority of analysts and investors believe the stock market is safe again (that’s exactly where we are today), the final phase of a bear market, Phase Three, gets underway and ultimately brings stock prices back down again.
Our research and analysis has led us to six proven and time-tested stock market indicators that are all signaling the stock market rally that started in 2009 is about to end abruptly. You can see them here now.
You could protect yourself from the stock market collapse headed our way. And if you position your portfolio properly, you could actually make money during the next devastating down leg of the market while others struggle like never before.
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