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It’s More Than a Correction, Nothing Can Stop a Major Stock Market Crash in 2018
The recent stock market events have been described as an overdue correction. But evidently, the reporting and analysis has not been sharp enough. Investors appear to gradually be getting back in. The market sent them a clear signal that a massive stock market crash is coming in 2018. Yet, they decided to stay or pick up some bargains. The scenario is a lot like the joke of the stranded man, praying for help but refusing to take advantage of all the tools that God sent to save him. Until, of course, he died.
The stocks are sending many signals. They’re simply too highly priced. The world’s most successful investors are complaining that they will have to take up bigger cash positions because there are simply no reasonably priced (from the earnings perspective) stocks left. (Source: “Warren Buffett badly wants to make ‘huge’ acquisitions, but most companies are too expensive,” Business Insider, February 24, 2018.)
Tax Cuts Work…Sometimes
Those same uber-successful masters of finance are also claiming that they made huge profits from their Trump tax cuts. Thus, they have accumulated vast sums, which they can afford to invest. Yet, they choose not to do so. Interest rates have been low for years, which has prompted many to make the understandable but ultimately bad idea to borrow to speculate on the stock market. So we have a situation where those who could invest have decided conditions are too volatile.
Although many expect interest rates to go up soon, cheap debt abounds. It doesn’t take much imagination to see that the stock market rebounds have largely been fueled by the cheap debt. Too many investors interpreted the late January/early February dip on Wall Street as an open invitation to take out more debt and get back in.
More Las Vegas and Less Manhattan
“There are bargains to be had and big bucks to be made” could be the slogan of the present market. But neither one of the last two things is necessarily true. In fact, such interpretations are dangerous; they are signs of an incoming storm, which will likely have disastrous consequences for the American and other stock exchanges. Investors had their chance to get out.
