Experts Bet On Stock Market Collapse Gold prices fall below $1,300 as traders look ahead to what Yellen might say at the end of the week. U.S. stocks end sharply higher on positive economic news and a rally in European shares. Gold last traded at $1,299 an ounce. Silver at $19.64 an ounce. The U.S. stock market has been flying high for over 5 years now; longer than the average bull market in stocks has lasted since World War II. However its heyday may soon be over. As we reported last week, billionaire investor and Leftist political activist George Soros has recently upped the ante in his bet that the US stock market will suffer a massive stock market collapse in coming months. This is important because Soros has a history of engineering machinations to insure his bets always win. With billions of dollars in personal capital, billions more of other peoples money under his influence and massive political clout; his ability to impact the financial markets cannot be discounted. With or without Soros, investors would be wise to keep a close eye on US markets for a number of reasons. The Fed stimulus activity, which has largely failed Main Street while artificially boosting Wall Street, is going to end. Its not a matter of if, but when. Former Treasury Secretary Robert Rubin and Harvard Professor Martin Feldstein, a former chairman of the Council of Economic Advisers, both sounded warnings over the weekend that the removal of five straight years of Fed stimulus could create renewed financial instability. The market has grown accustomed to negative real interest rates and the creation of money out of thin air. When this starts to change, where will the liquidity needed for a rising market come from? No one has a good answer. Adding to worries over what the Fed might do is how greatly this stock market is overvalued. There are a number of ways to measure stock market valuations. Yale economist Robert J. Shiller has devised the cyclically adjusted price-to-earnings multiple, or CAPE, which is based on a ten-year moving average of earnings. This is designed to help give a less volatile, more reliable indicator of whether stocks are overvalued or undervalued. Right now, his measure (nearly 26x) is at levels only exceeded in the run up to the market peaks in 1929, 2000 and 2007. History suggests when prices get this high relative to earnings, the danger to investors rises precipitously. The stock market is trading beyond whats justified by the fundamentals. When the market gets this expensive, emotions play a large role in how high stock prices can ultimately go. This isnt exactly the most stable of foundations with which to build an investment strategy. Thats why investors need to protect themselves through diversification. Gold is an excellent portfolio diversifier as it has historically responded independently to the factors that negatively impact stocks. One entire state has acknowledged golds role as the ultimate form of real money: Oklahoma. Republican Mary Fallin, the governor of the Sooner State, signed legislation that recognizes gold and silver as money and removes state sales tax from metals purchases. This is a growing trend nationally. Oklahoma is the second state to institute such a policy; Utah being the first. Similar legislation will be introduced in other states in 2015. swissamerica/article.php?art=10-2013/201310070835mn.txt
Posted on: Tue, 19 Aug 2014 02:17:10 +0000
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