What’s Not To Like About the Current Stock Market?

What’s not to like about the current stock market?

Some food for thought for readers as you be the judge on whether taking profit soon is advisable. Worst case I would think an investor should use trailing stops with their current trades.

I can still defend reasoning for long term investors to be somewhat cautious versus bullish at present no matter what price does. For some this may mean locking in profit if they see some writing on the wall. For traders, they don’t care if they are trading both sides.

I am in the deflation camp overall and the unwinding of years of excess credit. That’s on the horizon, but for now inflation is tame by historical standards. The Fed can’t even get 2% inflation. But there can be a deflationary crash. https://www.youtube.com/watch?v=XuELup6F5Q0

Lower rates typically spur the ability for businesses to borrow and fund expansion/growth. Too much debt accumulated however is a red flag, so that’s one area that is a growing bubble. Of course as the movie The Big Short illustrated, the issue can be extended longer than the insolvency of the one betting against it. But it is there. https://www.mauldineconomics.com/the-weekly-profit/the-corporate-debt-bubble-is-strikingly-similar-to-the-subprime-mortgage-bu

The Crestmont P/E of 29.9 is 112% above its average (arithmetic mean) and at the 99th percentile of this fourteen-plus-decade series. https://www.theinvestorspodcast.com/blog/using-crestmont-pe-to-value-the-stock-market/

An interesting one is Google searches for the word “recession” has shown to be a leading indicator. https://www.washingtonpost.com/business/2019/09/06/is-another-recession-horizon-google-search-data-has-some-clues/

We had the inverted yield curve which also is a leading indicator of subsequent recession (but we don’t know exactly when).

A recession occurs every 8 or 9 years or so (post departure of gold standard): 73-75, 80-81, 90, 2001, 2007-2009. We’re overdue in 2019.

Consumer debt at higher levels than beginning of last recession. If the Consumer makes up the majority of GDP equation, then a tapped out consumer doesn’t equate to more growth, only government spending is left as a catalyst (more debt, which is a separate but related issue).

The DJ Select REIT Index is at a higher high than preceding the last election, just as banks loosen lending requirements as we are at the highest risk since 2009.

https://www.investing.com/indices/dj-select-reit

https://magazine.realtor/daily-news/2019/05/06/are-lenders-loosening-mortgage-requirements-too-much

For me, this concludes…as Paul Harvey used to say, the rest of the story. Trump is the wild card in an election year though. He has shown a willingness to pull rabbits out of hats and I think has a few more coming on any sign of a sell off the closer we get to November 2020.

Will they be enough is the question?

About Doug Eberhardt

Doug Eberhardt is a 28 year financial services veteran and precious metals broker selling gold and silver at 1% over wholesale cost. Doug has written a book to help investors understand how gold and silver fit into a diversified portfolio, how to buy gold and silver, and what metals to buy. The book; “Buy Gold and Silver Safely” is available by clicking here Contact phone number for Buy Gold and Silver Safely is 888-604-6534