6/10/2015 – A positive day with the Dow Jones up 234 points (1.32%) and the Nasdaq up 63 points (1.25%)
This is anecdotal at best, but I do find the following fascinating. Over the last few days I have noticed a significant increase in “bear hate e-mails”. They typically contain one or more profanities, tell me how wrong I am and then proceed to challenge my sanity or intelligence.
As accurate as their point of view might be, here is what I find interesting. A miserly 600 point drop on the Dow is bringing out the bulls in droves. This is important and here is why. A lot of people are on margin and super bullish. Yet, they are nervous and not convinced in this market. Imagine what happens when a sell-off turns into a typical 10-20% correction. Do I smell a panic?
Now, Jeffrey Gundlach brings up an excellent point. Borrow Infinite Amount At Negative Interest Rates
In theory, you can borrow massive amounts of money today and then use that leverage to juice up your returns. While nice in theory, it much more difficult to implement. Here is why…..
What are you going to invest in?
- The US Equity Markets? With the S&P Shiller P/E ratio being at the 3rd highest level in history (right behind 1929 and 2000 tops), any 10-20% decline can very quickly wipe you out.
- The Bond Market? At 0-2% interest rates? No, thank you. Even in arbitrage, with hedges and foreign exchange risks, it is a no win situation.
- Business Capacity? Interest rates have been low enough and for long enough for most businesses to increase their capacity to the max. That is the primary reason as to why we didn’t see an expansion in capital investment this business cycle.
- China’s bubble stock market? Yeah, good luck with that.
Just thinking out loud here. Even if I am able to borrow a Billion dollars today, I wouldn’t know what to do with it. Even if I take a massive short position at an opportune time, that carries a significant risk when borrowed money is involved.
In other words, we are at the end of this business cycle of capital expansion. There is nothing to invest in, even with FREE capital. Sure, you can speculate with above mentioned capital, but that is a totally different conversation. There is no scenario where this ends well.
This conclusion is further supported by my mathematical and timing work. It clearly shows a severe bear market between 2015-2017. In fact, when it starts it will very quickly retrace most of the gains accrued over the last few years. If you would be interested in learning when the bear market of 2015-2017 will start (to the day) and its internal composition, please CLICK HERE.
(***Please Note: A bear market might have started already, I am simply not disclosing this information. Due to my obligations to my Subscribers I am unable to provide you with more exact forecasts. In fact, I am being “Wishy Washy” at best with my FREE daily updates here. If you would be interested in exact forecasts, dates, times and precise daily coverage, please Click Here). Daily Stock Market Update. June 10th, 2015 InvestWithAlex.com
Did you enjoy this article? If so, please share our blog with your friends as we try to get traction. Gratitude!!!
Bear Hate Mail, Low Interest Rates & Infinite Valuations Google