A Catalyst of the Stock Market Bubble Bust
Stock-Markets / Stock Market 2017 Oct 21, 2017 - 12:39 PM GMTBy: Harry_Dent
Brexit. Markets up.
Shock election of President Trump. Markets up.
Drum beats of war with North Korea. Markets up.
Hurricanes Irma and Maria. Markets up.
Wild fire incinerating Northern California. Markets up.
There is nothing – nothing – rational about the Dow breaching 23,000 yesterday. Yet it did. (And in short order it’ll come up against a resistance level, which I’ll tell you about in a few moments.)
But then that’s the nature of bubbles.
And that’s what makes them so hard to predict.
They go up, and up, and up, and up, and up… until one day they reverse. It takes just one spark to ignite the gas. One thorn to pierce the flimsy exterior of irrational exuberance. Just one grain of sand to trigger the avalanche.
But identifying that one grain of sand before time is impossible.
That doesn’t mean the bubble won’t burst. It will implode – not gently correct – and all those holdouts for that extra 2% or 5% will have their asses handed to them because when it all goes belly up, there’s no getting out in time to avoid significant damage. Closing the barn door after the horses have bolted is useless!
That’s why we hold our Irrational Economic Summit every year. To highlight the extreme irrationalities of our investing world right now. To provide updates on forecasts, mine in particular, and to help attendees find the best opportunities that don’t put them in harm’s way for a couple of percent gains (and there are dozens of these opportunities).
This year’s conference in Nashville, Tennessee was incredible, and we lived up to our promises. We had a diverse range of speakers that kept attendees and experts engaged. For me though, two things stood out the most…
The first was Michael Terpin, who talked to us about Bitcoin and blockchain technologies. He’s been involved in cryptocurrencies since the beginning, when Bitcoin was 1/10 of a cent. Now it’s near $6,000. It went up $400 on the day he spoke. It was up another $600 the next day. Crazy stuff.
The second was a conversation I had with another of our guest speakers who was a Marine for a while. In the lobby of the Nashville Airport Marriott conference center, he asked: “Did you guys know that three stealth bombers just took off from the Nashville airport, heading west?”
Of course we didn’t! It wasn’t reported in any media we follow (and we haven’t seen or heard anything about it from the ever trustworthy, impartial media – note the sarcasm).
Turns out, The Donald might just do what he says and strike North Korea (not a nuke, but still a strike)! And that might well trigger the crash that’s coming.
Hearing Andrew’s news made me glad I’d re-issued the warning I had on the first day of the conference. During my presentation, I talked about the greatest political and economic revolution since democracy itself… a revolution we’re currently living the early years of.
I also reviewed my four fundamentals, which still all point down together into early 2020.
That’s the danger period for the market, between now and early 2020.
That’s when there’s the highest chance of the major stock crash that I’ve been predicting… where we could see the Dow sink to 5,500.
All it takes is a missile strike on North Korea… or a real-estate crash in China… or a major default in Italy…
Any one grain of sand!
As I mentioned earlier, the Dow broke through 23,000 yesterday, despite seemingly endless bad news. The question now is: how much higher can it go? The answer? The market’s irrational. There’s no telling. But I do have a guide…
I shared this chart with attendees at the Summit last week. It shows a rising bearish wedge. The top of that wedge is currently 23,200.
If stocks can’t break through that resistance level, we could see them drop back to 22,000. If they break below that, it would suggest we’re breaking down out of that wedge and that increases the chances that we’re seeing a top here. If, however, the Dow breaks above the top trend line, that’s a bullish sign.
The other thing I warned about in my presentation last Thursday is the problem I alluded to earlier: once the bubble bursts, we’re likely to see a 41% crash in 2.6 months. Here’s a chart of all major bubble crashes over the last century. See for yourself…
Naturally, with markets at all-time highs (and breaking records daily), there were a lot of questions after my presentation about why my forecast hasn’t come to fruition yet.
Am I just plain wrong?
What’s the hold up?
My answer to that is, part of the problem is that bubbly markets are irrational (as I elaborated on above). They’ll go up until they’ve suckered every last person in and then, when no one expects it, the wheels come off the bus.
The other problem is that central banks the world over have engineered things so that there is literally nowhere else for investors to go but into the stock markets. Interest rates are near zero, bond yields are near zero. Desperate, soon-to-retire Baby Boomers need to do something to survive their golden years. Corporations need somewhere better to put their cash.
And so the markets go up.
Yet I remain firm on my prediction that we’ll see a massive – historical – market crash ahead.
Fundamentals haven’t changed.
Nothing substantial has changed.
And bubbles go until they blow.
Sadly, the media is sick of hearing this story from me – even if it remains true. So, they’ve blackballed me. I don’t get calls for interviews nearly as often. People just don’t want to hear it. They’re in heaven, and that’s where they want to stay. They don’t want to see the hell that’s steadily creeping up on them.
That’s why I’ve decided to circumvent the mainstream media and give you the opportunity to hear for yourself why I’m standing by my forecast for a major market downturn.
I’m finalizing a special video presentation that’ll broadcast next Wednesday, October 25th at 4 p.m. EST. It’s available exclusively to Dent Research readers and it’s free to attend. All I ask is that you register here to watch it and that you don’t miss it!
Like I said: I don’t know what grain of sand will cause the avalanche, or when that grain will fall. But I remain adamant that the avalanche is inevitable.
Now, more than ever, be careful in the markets.
Harry
Follow me on Twitter @HarryDentjr
Harry studied economics in college in the ’70s, but found it vague and inconclusive. He became so disillusioned by the state of the profession that he turned his back on it. Instead, he threw himself into the burgeoning New Science of Finance, which married economic research and market research and encompassed identifying and studying demographic trends, business cycles, consumers’ purchasing power and many, many other trends that empowered him to forecast economic and market changes.
Copyright © 2017 Harry Dent- All Rights Reserved Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors.
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