It’s time to GET OUT!
That is, get out, if you’re in … the stock market.
If you have ANY investments at all in stocks or corporate bonds, you should seriously consider selling them, and do it NOW.
The date, as I write this is about two-thirds through March, 2016. I’m putting the date here so we can come back later and see if I was right.
Time to Pay Up
The simple reason is that the big economic recession I have been certain was coming is beginning now. The government’s print-and-spend policies and near-zero-interest rate policies that have been going on for years now cannot be sustained, and they WILL have an economic price to pay. I fear that price is coming due now, within the next few months.
I believe we are about to see an economic recession that will at least equal what we went through in 2008 with the mortgage fiasco.
What is looming now is not a housing/mortgage collapse – it is a credit collapse.
Credit Collapse Looming
With the Federal prime rate at or near zero percent, financial institutions – even huge ones – have been borrowing all the money they can, and lending it out at ridiculously low rates
to people and companies who just don’t have the ability to repay it. This means we will – very soon now – be seeing literally BILLIONS of dollars in loan defaults. I.e., people and companies declaring bankruptcy, meaning they will never pay off that debt.
The overall result, without going into the underlying economic factors that make me certain this result is inevitable, will be a stock and bond market collapse among the most massive we have seen.
And that is why I say to you: Get Out Now.
Throwing out the Baby with the Bath Water
It doesn’t really matter if any particular company is supremely healthy, it doesn’t matter if the company provides a product or service that people simply will not do without, regardless of the state of the economy.
Companies such as Wal-Mart, Coca-Cola, Altria, CVS, and Apple are companies that will continue to make sales regardless of what the economy does. People will purchase their wants and needs from them even when those people have been stricken by poverty.
It doesn’t matter.
When the market collapses, EVERY stock and bond will plummet with the rest.
Invest in Cash
What this means is if you GET OUT NOW and put all your assets in cash (or Money Market funds), so later when the also-inevitable recovery begins, you can at that time get back into whatever positions you are comfortable with, at a huge bargain.
Stocks for world-dominating companies, such as those I mention above, will be screaming bargains. Don’t believe me? Go to an online charting service (such as BigCharts.com) and look at what happened to any company’s stock price in 2008. They all fell.
Corporate bonds will also be selling at distressed levels.
Investing in bonds is much trickier than investing in stocks. To understand a bit more about corporate bonds, see my previous post, here. However, in keeping with the overall market “panic,” excellent corporate bond babies will be thrown out with the rest of the market bath water, and you will be able to pick up screaming bargains in this distressed corporate debt.
It’s Global, Folks
I’m not talking about only U.S. assets, you know. This will affect the entire world.
The global economy.
Some might feel safe because they’re invested in overseas companies. Well, before you go feeling all self-satisfied about this, you’d better do some research into which other governments around the world have also been printing money (quantitative easing? Ha!) and forcing interest rates to be artificially low.
You’re not as safe as you think.
Yes, I’m Sure.
I feel as certain about this as I have ever felt about any impending economic trend.
So there you have it. My unsolicited advice for today.
I’d be interested to hear your thoughts on this. But any thoughts you have might carry more weight if we give this a year to play out, then we’ll see for sure.