A Market Collapse Is On The Horizon

Two years of expenses in cash is way too much. Six months is enough.
I am generally bullish but am far from certain the Dow hits 20K in the next few years, especially with the current crop of candidates. My portfolio is mostly blue chip dividend paying stocks.ATT is by far the largest portion. It's also the only one I no longer reinvest the dividends in. Until social security kicks in in four years, those dividends are my largest source of income.

I think equities are over priced and are due for further correction. I doubt the DOW will be > 20,000 in the next 3 years. I think we'll be in the throes of a global recession for a while.

We're due for an inventory correction in some areas - autos perhaps at the top of the list. Otherwise there's too many tail winds for US economic growth: dirt cheap oil and gas, dirt cheap commodities, zero interest rates, growing incomes, greater housing demand. You almost never see a recession begin with all of those variables in place.

DonDiego wishes jphelan and others in the market Good Luck !
Poor old DonDiego is not a soothsayer. He does not know the future; he is lucky to remember some of the past.

The DJIA history suggests the possibility of significant rises and significant drops are possible.





DonDiego has been in the stock market to some extent since the late 1960's, even before he graduated college.

He had never tried to time the markets until the late Fall of 2006 when his research suggested economic problems on the horizon. He'd sold about a third of his holdings by mid-2007 and pr'bly over two-thirds by the end of September when things broke loose; he was 90% out-of-stocks by mid-November.
He started buying back in slowly over the Summer of 2008. He pretty much stuck to large-cap, safe stocks like Exxon and Budweiser and some agricultural-related companies. He was fully invested by the end of 2009.

Sometime in late-2014 to early-2015 poor old DonDiego again became concerned about the economy and interest-rates and the future. He started exiting the markets again, . . . little-by-little. By August 2015 he was over 75% out, and on 24 August within the first hour of trading he was again out-of-the-market.

[There was one exception to being out-of-the-market both times, as indicated above; he retained and occasionally increased holdings in a Canadian mining stock as "insurance" against possible rising inflation and/or a real calamity. And in 2015 he just neglected to sell a few shares of his agriculture stocks and a small security-firm as well, just to keep an eye on them.]

Presently DonDiego is not buying.

What DonDiego does know is that the US Economy, . . . and the World Economy for that matter, . . . are in unchartered territory.
This is a chart of 10-year-bond rates in 5 Countries from 1900 until 2012; the dark-red line is the USA. The rate in 2012 was about 3.5%; today is 1.75%:




Central banks, including the Fed, are holding interest rates down to stimulate investment and to intentionally raise the inflation-rate. Unfortunately investment in capital, that is in productive physical assets, is not growing; what has been growing in "faux-investment" in companies' own shares to raise share prices; this has kept stock prices relatively high. But prices in the economy generally are not rising. This aint' how things are "supposed" to work in a central-planned-economy.

DonDiego opines this cannot go on very long. In mid-December a tiny rise in the Federal Funds rate from 0.0% to 0.25% stalled the markets.
Worldwide, banks are in a dilemma. If they raise rates the economy stalls; if they lower rates those dependent on higher-rates, like pension funds and those seeking "safe income", are, . . . umm, . . . "troubled". It's a puzzlement.

DonDiego is content to be on the sidelines. He is more concerned with "return of capital" than "return on capital".

Which brings up questions:
__Why have the United States and Europe suddenly raised the issue of getting rid of paper currency to the extent practicable - i.e. $100-bills and $500-Euro bills. There is likely a reason beyond the wish of Big-Government generally to track everything their citizens do.
__Why have the United States and Europe suddenly shown interest in "negative-interest rates"; some European banks already have negative interest on savings accounts - the saver must pay the bank to keep his money.

hint: These two questions are related, . . . but that is a story for another time, . . .

Now who can argue with that? I think we are all in debt to Donny James for clearly stating what needed to be said. Not only was it authentic frontier gibberish, it expressed a courage little seen in this day and age.

Coincidence I read this, go click on CNBC to check in and the lead story is Philly's massive pension shortfall. I thought Chi. had the biggest problems with pension troubles? Anyhoo, I know there are many, many pensions in trouble.

"..The numbers for the city's municipal pension fund are so troubling that there seems to be no point in adopting a softly-softly approach. This is a scheme with a funding hole of $5.7bn; it owes far more money to present and future pensioners that it has in its coffers. The fund has less than half what it needs, with assets of $4.8bn in mid-2014.

The scheme, which manages the retirement funds of 64,000 current and former employees for the Pennsylvanian city, has been branded one of the worst-funded pension funds in the US. Its financial position has long been labelled the "quiet crisis" of Philadelphia.

Although gently spoken, Mr Dubow does not mince his words when asked about the funding gap. "The unfunded liability is one of the biggest financial challenges we face [in Philadelphia] and we have to figure out how to manage that," says the 57-year-old..."

https://www.cnbc.com/2016/02/19/philadelphias-57-billion-quiet-crisis.html

I have been hoping that the impact of low energy prices would revive the economy and put us into a higher growth pattern. The crushing impact of those same low energy prices on our highly leveraged shale oil and clean energy industries has offset some of the normally beneficial effects of low energy costs on energy consumers....at least for now.

I am concerned about the global economy. That's why I noted that I think we are headed toward a global recession. Certainly the US is better positioned than many countries to weather such a storm, but I don't think we're immune to it either. Oh....and low interest rates and low commodities prices are not always signs of a recovery. They can in fact be symptoms of very bad economic times. I'm seeing across the board reductions in estimates of GDP for most countries...but of course those are only estimates.

I'd have to say the signals are mixed rather than tail winds for economic growth. Yet still, lower energy costs have traditionally been powerfully positive for the US economy. We're still not feeling it yet. I've got a new theory that many of the big users of oil hedged on they way down to protect themselves against higher oil prices and haven't fully felt the cost reductions at the pump...yet.

DATA:



The year 2015 data appears weak compared to the years 2010-through-2014 to poor old DonDiego. The first month of 2016 suggests persistent weakness.

please try and take a look at a few of the things mentioned.

Low oil prices, Iran is already ignoring lowering output to raise prices as they want some of that quick cash and sell their oil. More supply and the lower prices will go.

negative interest rates - banks charging depositors for making deposits in order to make money cheaper? Japan went through this crap 10 years ago and it kept their economy down all that time. We are around 7 years of 0% interest and its all artificial. Once the rates go back up the interest on that additional 6 trillion Obama racked up will be roughly $500billion...(out of a $3trillion budget)

Y'all talk about "the worst recession since the great depression" you may wish to look at a real recession and see what the interest rates were back in the late 1970's and early 1980's.

FYI in order to keep those interest payments on the debt from getting out of hand, our interest rates will zero or below for a lonnnnnnngggg, loooooonnnnggggggg time.

Soros agrees with DD. He's shorting the S+P 500, He's a smart investor!