DUBLIN – Dow down 252 yesterday – or 1.5%.
Chevron, Apple, and Goldman Sachs leading the retreat…
The press blamed China, North Korea, oil, and “geopolitical concerns.”
So far this year, the Dow has lost 3% of its value.
Let’s see… We believe it is headed for a 50% loss. So, at this rate… we’ll be there by June!
Readers frequently accuse us of being “negative” or “depressing.”
Yesterday, one even charged us with fanning the fires of fear and fright to sell newsletter services. We deny it. Fear doesn’t sell financial services.
Ask Goldman. Wall Street sells greed, not fear. It promises profits, not losses. It offers dreams of wealth, not nightmares of poverty.
Besides, when you see prices falling, you just go to cash. You don’t need expensive trading advice.
At the Diary, we monger neither fear nor greed. Our only mission is to try – feebly… humbly… uncertainly – to connect the dots.
Of course, the dots are many… and they are everywhere. Like a Rorschach test, we risk seeing only what we want to see.
But you can’t see anything if you don’t look. So, we squint… we strain our eyes. And what do we see?
And then what?
A secular downturn, when stocks will go down – or nowhere – for the next 10 years. If we’re right, a lot of fortunes, jobs, reputations, and mojos will be lost. Defaults, depressions, disruptions, deflation – we’ll probably see a little of them (or a lot!).
Many dear readers find this unappealing; and they mistrust our motives. They seem to think that because we see clouds on the horizon, we must want it to rain!
But wait… They are right. That is the pattern we’ve been looking for!
This parched earth needs a good soaking… and a healthy wash. But if readers think this is “negative,” they should blame themselves, not us.
They are looking at the glass as half empty; we only see the part that is full of St. Emilion Grand Cru 2006.
Look on the bright side…
If we’re right, you’ll get a lot more for your money in the stock market 10 years from now. Not only that, but also much of the debt and claptrap that now strangles the system will have been purged.
Greenspan, Bernanke, and Yellen will finally be regarded as the rascals and flimflam artists they really are. Businesses that should have gone bust in 2008 will finally hit the wall. And the speculators, bankers, and bamboozlers who should have been bankrupted in the last crisis will finally get what’s coming to them in the next one.
Yes, some investors will feel the pain. The economy will suffer. It will be bent by bitter fate and outrageous fortune…
…but into a better shape!
A stock market correction is not something to be feared. It is something to look forward to… something to be embraced, like a plumber who has come to unclog your bathroom drains.
It may get messy; but what a relief it will be to have the toilet working again.
We saw a headline from our colleagues at Casey Research yesterday (our old friend Doug Casey’s outfit). It recommended that investors short – that is, bet against – U.S. stocks.
That will probably turn out to be good advice. But it suggests a level of confidence we don’t have. Getting out is good enough for us.
But get out of stocks and into what?
Cash, dear reader… cash. No financial services needed. Cash is king now. And it will be until we come to the next major pivot point.
Study those dots…
The Fed has favored easy credit for at least the last 20 years – quickly cutting rates in the face of even the smallest signs of adversity and dragging its feet when it was time to raise them.
Each time a contraction of credit begins, the Fed reacts with even lower short-term interest rates. And each time it drops the price of credit… it creates another bubble.
The Nasdaq bubble in the late 1990s… the housing bubble that followed… and now the nascent bubble in student debt, corporate debt, sovereign debt… and a small group of tech stocks that has raised U.S. stock market indexes to rare and dangerous highs.
And now, the Fed imagines that it is going to return to “normal”!
That was the way the dots looked when 2015 adjourned. In 2016, there are new dots appearing… and old patterns are coming into sharper focus.
What do we see now?
Uh-oh… As we reported yesterday, Nobel prize winner Robert Shiller’s cyclically adjusted price-to-earnings ratio – or CAPE ratio – tries to get a truer picture of value by looking at the average of the past 10 years of earnings and adjusting for inflation.
And by this measure, only three times in the last 135 years has the S&P 500 been more expensive – in 1929, 2000, and 2007.
All three times were followed by major market crashes.
Some excitement is coming… Stay tuned.
Further Reading: Bill created a special presentation to explain exactly how the coming depression will unfold… and how a highly unusual monetary event will affect your bank account and the credit cards in your wallet.
To get full details on what Bill calls the Great American Credit Collapse, read on here.
Chinese investors have plenty of excitement on their hands.
Today, the government’s emergency “circuit breaker” system halted trading on Chinese stock exchanges for the second time this week.
Markets were open for just 15 minutes before the government stopped all trading. This made it the shortest trading day in China’s 25-year stock market history.
But don’t let the mainstream press’s short-sighted commentary frighten you too much.
Over the past two years, the CSI 300 is up 35% versus an 8% gain for the S&P 500.
And over the past three years, the CSI 300 is up 23% versus a 36% gain for its U.S. counterpart.
The Real Threat from China Has Nothing to Do with Stocks…
According to a top currency expert, an impending devaluation of the Chinese renminbi – combined with the Fed’s recent rate hike – will soon cause chaos in global markets.
George Soros: “China Reminds Me of the Crisis We Had in 2008”
Global markets are facing a crisis and investors need to be very cautious, according to billionaire George Soros. “China has a major adjustment problem,” Soros said. “I would say it amounts to a crisis.”
2016 Should Be Another Good Year for Dividend Investors
It’s not all doom and gloom. For the year, dividend payments on S&P 500 stocks rose by 10%. This was the fifth year in a row of double-digit dividend growth. And 2016 should be another good year for dividend payouts…
We recently shared with Bonner & Partners Inner Circle members a candid and eye-opening interview with Bill about his upbringing… his education… and his path to the newsletter business. (Inner Circle members can catch up here.)
And the feedback so far has been very positive…
I don’t want to believe you, yet I know you are right. So, I look forward to the “depression” so we can get on to a productive life. Thank you for your quirky non-scientific writing.
From a retired physician who had a heart transplant at the age of 76. Talk about restoring old buildings!– Allen U.
I really enjoyed getting some insight into what makes Bill Bonner tick. The overall impression, though, is that he writes letters… and he has become very rich doing just that.
His down to earth approach is very refreshing and I look forward to becoming a regular reader of his thought-provoking writings – even though I’m somewhat envious of his being able to make a living from such an enjoyable occupation.– Mary A.
Still refreshing and entertaining as ever. Please do not stop!– James P.
Very interesting how [Bill’s] life has evolved. He is much more self deprecatory than I would have thought; he has made a great success of his life both personally and professionally. His reticence is very attractive.– Margaret A.
Bill is sure humble but very entertaining. I look forward to reading everyday. Keep up the good work.– Farrel C.
I enjoy Bill’s thoughts on the economy and agree with his thought process. I am running for Congress, the 19th district. Ronald Reagan was my favorite president. And of what I remember he had a backbone which I respected.– Greg G.
Editor’s note: Right now, we’re offering a special, 100% risk-free invitation to join Bill’s Inner Circle. This opportunity to receive the best strategic recommendations, investment ideas, and big-picture thinking from Bill’s global team of independent analysts is available only to Bill Bonner Letter subscribers.
If you’re already a subscriber… and you want to find out how you can get access to the best deal in the investment research world… go here now.
Currencies expert Jim Rickards has an urgent update on what he calls the “double-whammy” of a Fed interest rate hike combined with a further Chinese currency devaluation.
To find out why there’s never been a more important time to start using Jim’s proprietary IMPACT system to profit from the wild gyrations in world financial markets, watch his warning now.