I am not predicting a 1929 style crash. That doesn’t mean it won’t happen. In 1929, investors were on their own. Today we have constant government intervention in the financial markets. Circuit breakers may smooth out the decline. I am guessing there will be a lot of two to five percent down days. It doesn’t matter how fast the decline occurs, just know that it will continue. Expect government inspired game changing news that could blow traders out of any short positions. The bear market will last at least two years. Damage from Quantitative Easing and other political initiatives will be so sever, it will take decades to recover. We may not recover completely and the entire political system we live under may collapse.
The situation is very bad and it behoves all to be forewarned. The reasons cannot be reduced to numbers. More than anything the nation’s resources are allocated so inefficiently, real growth is not possible. Quantative easing and other other market rigging schemes replace price as the main resource rationing mechanism. There are no numbers that can be attached to to this problem. We just have to know the damage is there and there will be consequences. Free market principles cannot be replaced with central economic planning in ways where everything comes out o.k.
There are stocks trading at around $500 per share that are not worth $5.00. Amazon.com (AMZN) is one of them. There are many. Apple (APPL) is a highly profitable company but it is vulnerable to at least two external threats. Tastes and preferences can change in such a way that owning Apple products no longer makes a person the coolest dude on the planet. There is another principle called, “The second rat gets the Cheese.” Apple has developed a lot of technology others can copy and then offer similar products cheaper. There are many companies in Apples circumstances. Corporations which have had by back programs are going to start taking steep losses on these positions.
Count on government initiatives aimed at “saving the market”. Don’t expect short positions to go straight down. News will be constantly created in efforts to turn the market.
I don’t give direct investment advice. Why? I feel too guilty when it doesn’t work out. I do explain what I am doing. As stated earlier, I am mostly in cash with the rest in bear etfs and just a few short positions. Mainly I want to go long at once in a life time low prices. The strategy is simple. Here is a chart of Exxon Mobil (XOM). With patience is will be possible to buy stocks as they touch long term trend lines. With Exxon Mobil, I expect to be able to buy the stock at around the red trend line. The idea is to start buying the largest and most stable corporations in the world. These kinds of stocks will survive. Many of today’s most popular stocks will not survive.