It's funny how the same contrarians who said the stock market was going to crash because it was in a bubble back in 2011, 2012, 2013, 2014, 2015, and 2016, are still saying the same thing today.
Seriously, there are no contrarians still left today that trade. This 8 year bull market has killed them all off. Even the really rich ones who had millions of dollars to trade with back in 2009 are gone.
The only place today where contrarians can make money is through internet newsletters and selling their contrarian opinions to other traders and investors.
This week's show features commentary on Madison Square Garden stock and trading outside your comfort zone.
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You will not see this stock market correction logic from AMTV (link above) in the mainstream financial media.
Christopher Greene thinks that a stock market crash of a lifetime is coming soon.
We are in a bubble today that is far worse than the technology bubble in 1999 and the real estate bubble in 2007. We are in the mother of all bubbles because of the Fed buying trillions of dollars worth of collateralized debt and the US government's irresponsible spending of tax dollars during the Obama Administration that has taken the national debt to $20 trillion.
Every major asset class is in a bubble, including digital currencies now. Real estate is in a bubble. Automobiles are in a bubble. Oil is in a bubble (because Saudi Arabia is trying to control global production to prop it up). The stock market is in a bubble because of the Federal Reserve and QE and a $4.5 trillion balance sheet.
Stock Market Correction But Not Crash
I think Christopher Greene is overstating the magnitude of the coming stock market correction. Mr. Greene's logical fallacy is that he is not figuring in what the Federal Reserve will do if the stock market does indeed start to crash. Mr. Greene's logic assumes that the Fed will do nothing when markets begin crashing.
Remember, the Fed holds $4.5 trillion worth of collateralized debt. That gives the Fed major control over our economy and markets. For example, if the auto bubble pops and banks are stressed from a high level of defaulting car loans, the car loan debt will be collateralized and purchased by the Federal Reserve. Think about how much control the Fed has over our markets right now. We have a global holy war with radical Muslims murdering Americans and major terrorist attacks in the US and England but our markets keep going higher. We have the government Establishment trying to unseat a US President but markets keep going up. We have Qatar being financially attacked by Saudi Arabia and yet markets keep going up. We have President Trump bombing the sovereign country of Syria that is being protected by Russia and markets keep going up. We have North Korea testing nuclear bombs and long range missiles and markets keep going higher. We have China building man-made islands in the ocean and then claiming the area for miles around those islands in violation of international treaties and markets keep going higher. We have Mexico dumping criminals and drugs into our country and then threatening retaliation when we try and build a border wall yet markets keep going higher. We have a sitting President being sued for trying to restrict travel to this country from radical Muslim countries where people coming here are not properly vetted and markets keep going up. We have George Soros creating unrest using NGO's around the world, including here at home but markets keep going higher.
Markets keep going higher because they are not based on economics and supply and demand. When everything can be securitized and propped up by the central bank, there are no major stock market crashes because the government won't allow it. Christopher Greene is missing this logic by assuming that we still live and trade in a free market system. We have a government managed market much like the Chinese. If the market started to crash in a certain sector, the defaulting debt would be securitized, collateralized, and purchased by the central bank to prop up member banks. This is why I think we will see a deep stock market correction but not an actual stock market crash.
Here is the Christopher Greene video where he predicts the mother of all crashes:
Most investors and traders believe there is a stock market bubble right now but in a new Keiser Report (link above) Max Keiser makes a powerful argument that everything is in a bubble. The economics of supply and demand are not what's driving the market higher.
Stock Market Bubble
Central banks bought $15 trillion worth of bad assets from banks to keep the stock market bubble alive. Central banks could continue buying bad debt from banks and keep pushing the stock market higher. This is why we have real estate bubbles in countries around the world.
Too many auto loan defaults? The central bank will just come in and start buying up those bad auto loans.
What about the FANG stocks on Wall Street. Facebook, Apple, Netflix, and Google. These stocks can double again because there's no accountability. If you can collateralize a bubble and sell it to pension funds with the help of Goldman Sachs, and there's no law against it, then the economics of supply and demand is meaningless. There is no real price discovery. The entire market is based not on economics but on derivatives of derivative packages that are sold to pension funds.
Bring Insight makes the argument that anyone currently invested in the Stock Market is Dancing with the Devil.
Bright Insight said, “The Stock Market closed at its HIGHEST LEVELS EVER! This is actually not a good thing, as the bubble is going to pop sooner rather than later – and crash incredibly hard. It is a mathematical certainty that the stock market will crash. In fact, the stock market is literally rigged, and fraudulent.”
Folks this is one of the reasons why all new stock picks I'm releasing over GuerillaStockTrading.com have to be quality (rising EPS and revenue) that have excellent valuation (P/E and forward P/E under 15), that have already retraced. The idea is that if a big stock market correction takes place, you will lose less money and have more time to get out than if you buy risky growth small cap stocks without P/Es.
Below is the show from Bright Insight that makes some very important points about the dangers that lurk behind every trade you make in the stock market right now.
Both the Fed and Wall Street analysts are forecasting a 3% GDP growth rate for Q3. After yesterday's release of many economic reports, I would put the GDP growth rate for Q3 at 1.5% at most. Let's look at yesterday's economic releases on the charts.
The NY Empire manufacturing index came in at -2%. That number is -84.53% lower than a year ago.
All the major components of the Empire manufacturing index are contracting.
The Philly Fed survey beat, coming in at 12.8 which is an increase of 455.6% from a year ago.
However, employment is still contracting.
Industrial production fell by -1.1 percent for the 12th straight month of contraction.
The Daily Shot makes the observation that the improvement early this summer was in part helped by utilities cranking on all cylinders to keep the air conditioners around the country running. As that contribution subsidies, we are back to the downtrend from the Spring.
Here is the manufacturing component of the US industrial production (year-over-year).
US retail sales fell in August and are continuing to slow.
Inventory growth continues to slow just like retail sales.
Most of the charts above, I went back five years on the data. Let's look at what the S&P 500 has done over the last five years and compare performance.
The S&P 500 is up nearly +90% over the last five years while the U.S. economy fundamentals have deteriorated over that same time frame. Folks, that's the Federal Reserve's monetary policy propping up the stock market and creating a huge bubble in securities.