Everyone is Ignoring this Bull Market. Are you?
by Editorial Staff
Updated: April 14, 2020
This market is showing signs of an early bull market. Yet most investors are completely ignoring it.
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Investors today are at a very risky juncture. In Chapter 15 of Conquer the Crash 2020, Robert Prechter calls it "Today's Precarious Condition":
"Today, we're in a situation far more precarious than that of 1929. People have gorged on investments. They own debt in the forms of junk bonds, muni bonds, corporates and mortgages. They are invested in real estate and expecting a boom. They own stocks at record prices under the belief that a 'Trump bull market' is just getting going. They own precious metals, which are stagnant. And they've got bank accounts, which are IOUs backed by IOUs. There is a widespread, unstated conviction that you have to own something, that whatever you do, don't hold cash, because cash is trash.
"Tell that to the people who live in Cyprus. When access to credit was curtailed in 2013, there was a soaring demand for cash -- the one thing nobody had. A March 26, 2013 article in The Financial Times reported, 'The most immediate problem confronting businesses was a scarcity of cash.' A businessman in Cyprus said, 'The market is operating on a cash basis -- everybody wants cash.' That was the immediate result of deflation in Cyprus.
"When you look at the sea of large mortgages on which most bank deposits depend, it is not hard to imagine something similar happening in the United States and around the world."
How is this unfolding in the U.S.? For the answer to that question, we turn to this month's Global Market Perspective. This excerpt comes from the "Investor Psychology" section. It lays the foundation for subscribers for the following section, which gives market forecasts and price projections.
Here's the excerpt from the April GMP:
"Back in January, we opened the year with a forecast titled, '2020 Foresight: Financial Assets and the Coming Return to Planet Earth.' The centerpiece was a dissertation on the renewed value of cash. We said, 'In the 2020s, a public passion for cash will grab hold.'
"Conquer the Crash anticipated this development by showing two charts of inverted stock averages in bear market periods. The point is that equities are the opposite of cash; stocks are risk-assets that require the surrender of cash. When stocks plunge, the relative value of cash will necessarily zoom.
"The chart below inverts the Dow's recent plunge to show the liftoff for a new bull market in cash. Turning the averages upside down should be a comforting exercise in the months ahead. In a section on 'The Wonder of Cash,' CTC explained, 'Owning an array of investments is financial suicide during deflation. They all go down, and the logistics of getting out of them can be a nightmare.' It's not too late, but it's getting close. CTC stated that the time to move into cash is before a sustained deflation emerges: 'Then when the stock market reaches bottom, you can buy incredibly cheap shares that almost no one else can afford because they lost it all when their stocks collapsed.'
"Also, be sure and check with CTC when it comes to the right forms of cash and cash equivalents. Not all of them will do. Chapter 15 covers the waterfront on that topic."
We hope you found this excerpt helpful. If you'd like more information on getting and staying safe in the current financial environment, take a look at both Conquer the Crash and Global Market Perspective. Should you decide you'd like to purchase them both, we have a deal that we can offer for you to receive the book free with a 3-month subscription to GMP.
Best wishes and stay safe.