5/29/2015 – A down day with the Dow Jones down 115 points (-0.64%) and the Nasdaq down 28 points (-0.55%).
A massive and rather rapid stock market decline is coming later this year. And while we won’t have a crash, considering the amount of margin debt out there, quite a few people will get wiped out. If you would like to find out exactly when this move will develop, to the day, please Click Here.
A few interesting things to discuss before the weekend hits
The United States warned on Friday of a possible accident for the world economy if Greece and its creditors miss their June deadlines to avert a debt default.
That’s an interesting twist. There is no question that Greece will default, one way or another. Well, unless someone is stupid enough to offer them another line of credit and Greek politicians are stupid enough to make IMF/ECB payments with that money.
Yet, that is not my primary concern as I always read between the lines. Are the US Officials (fed, treasury, etc…) staring to positions themselves for an eventual market tantrum later on this year? Most likely in conjunction with interest rate increases. Are they planning to blame Greece for their shortcomings and failures (today’s bubble, QE, speculation, zero interest rates)?
We shall see, but that does sounds awfully suspicious to me.
A fascinating look at what has transpired over the last 6 years and how much the FED juiced the stock market.
It took the Fed 95 years to build up a balance sheet of $1 trillion and only six years to go from there to the present level. The Federal Reserve was providing this stimulus to improve the growth of the economy, but it is my view that three quarters of the money injected into the system through the purchase of bonds went into financial assets pushing stock prices up and keeping yields low. If I am right, the Fed contributed almost $3 trillion (some may have gone into bonds) to the $13 trillion rise in the stock market appreciation from the 2009 low to the current level, earnings increases explained $9 trillion (1.5 x $6 trillion) and other factors accounted for $1 trillion. You could argue that the monetary stimulus financed the multiple expansion in this cycle.
I would have to agree with Mr. Wein, but with one slight adjustment. He did not account for how much impact the velocity of capital had on today’s valuations. Here is what I mean. This $3 Trillion then created a self perpetuating loop in terms of earnings, stock buybacks, speculation, etc….
While impossible to calculate, I would say that the real number is closer to $6 Trillion. In other words, the FED has artificially added $6 Trillion to today’s stock market. A number that will have to vanish. And sooner rather than later.
That would put S&P’s fair value at about 1,400. Meaning, it would have to decline 30-40% from today’s levels. Hmm, that sounds about right to me.
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. May 29th, 2015 InvestWithAlex.com
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