6/30/2015 – A positive day with the Dow Jones up 21 points (+0.12%) and the Nasdaq up 28 points (+0.57%)
Well, that was fast. Just as predicted here yesterday, any small bounce would surely bring out perma bulls with the “this market is bulletproof and buy the dip” mentality. Mr. Cramer delivers.
Cramer: Amazing world chaos-resistant stocks
“I say you buy some very special biotechs that have refused to come down until now. That’s right, I think you use this marketwide selloff as an opportunity to pick up the speculative development stage biotech names that haven’t had a price break in ages,” the “Mad Money” host said.
Seriously….Biotech??? Biotech is the most speculative sector within the stock market. It is equivalent to where the Internet stocks were right before the 2000 crash. And while the market will bounce to at least close Monday’s gap, I wouldn’t necessarily be loading up on Biotech here.
Anyway, we are all free to make our own decision. With that in mind, I would rather listen to Bill Gross. Make sure you read his recently published statement in full.
Current concerns in the financial markets center around the absence of liquidity and the effect it might have on future market prices. In 2008/2009, markets experienced not only a Minsky moment but a liquidity implosion, as levered investors were forced to delever. Ultimately the purge threatened even the safest and most liquid of investments. Several money market funds appeared to ‘break the buck’ which in turn threatened the $4 trillion overnight repo market – the center core of our current finance-based economy.”
But shadow banking structures — unlike cash securities — require counterparty relationships that require more and more margin if prices should decline. That is why PIMCO’s safe haven claim of their use of derivatives is so counterintuitive. While private equity and hedge funds have built-in “gates” to prevent an overnight exit, mutual funds and ETFs do not. That an ETF can satisfy redemption with underlying bonds or shares, only raises the nightmare possibility of a disillusioned and uninformed public throwing in the towel once again after they receive thousands of individual odd lot pieces under such circumstances. But even in milder “left tail scenarios” it is price that makes the difference to mutual fund and ETF holders alike, and when liquidity is scarce, prices usually go down not up, given a Minsky moment. Long used to the inevitability of capital gains, investors and markets have not been tested during a stretch of time when prices go down and policymakers’ hands are tied to perform their historical function of buyer of last resort. It’s then that liquidity will be tested.
In other words and as I tend to visualize it, we are sitting on top of a 40ft containter full of TNT, with a lit fuse disappearing inside of it. We have talked about disappearing liquidity before. Plus, given today’s overvaluation levels, there is just way too much risk in our financial system.
We have faced a similar environment pre 1987 crash. That is to say, should the market correct 10-15% in a rather rapid fashion, we might have a subsequent flash crash scenario that will take us down another 25-40%. Carl Icahn, Jim Rogers and now Bill Gross are warning about this. Who else do you need?
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 30th 2015 InvestWithAlex.com
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