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Monday, 13 Oct 2014

Stock market bubble is a fact proped up by QE in the past 5 year since 2008 bail out. The excess monies goes mostly to stock market to put market confident. The US economy still in tatter, productivity is low since most manufacturer invested abroad. People income is still low and housing market is not recover. It is only a matter of time before the stock market plunges again by 50% or more, according to several reputable experts.

It is not to be surprised of a severe and imminent stock market crash, explains “Mark Spitznagel, a hedge fund manager who is notorious for his hugely profitable billion-dollar bet on the 2008 crisis”. In fact, it must be absolutely expected with the current situation

What is predicted by Spitznagel isn’t a lone by the fact that a gigantic financial asset bubble in the past 5 years as warns by Swiss adviser and fund manager Marc Faber and be expected that “It could burst any day.”

Faber doesn’t hesitate to put the blame squarely on President Obama’s big-government policies and the Federal Reserve’s risky low-rate policies, which “penalize the income earners, the savers who save, your parents — why should your parents be forced to speculate in high risk stocks and in real estate and everything under the sun?”

Billion-dollar investor such as Warren Buffett is rumored to be preparing for a crash as well. The “Warren Buffett Indicator,” also known as the “Total Market Cap to GDP Ratio,” is breaching sell-alert status and a collapse may happen at any moment.

So with an inevitable crash looming that would affect the global market and confident in the US economy, what are Main Street investors to do? One option as last resort by those heavily invest in stock is to sell all your stocks and stuff your money under the mattress, and another option is to risk everything and ride out the storm.

But according to Michael Carr, director of Absolute Profits, there is a third option. “There are specific sectors of the market that are all but guaranteed to perform well during the next few months,” Carr explains. “Getting out of stocks now could be costly.”

“You would have been able to completely avoid the 2000 and 2008 collapses if you were using a combination of real gold and long term bond “Imagine how much more money you would have if you had avoided those horrific sell-offs.”

Global developed equities as represented by the MSCI World Index have risen 72 percent of the time during periods of dollar strength since 1980, according to Credit Suisse, 10 percentage points more than periods of dollar weakness. The story is not so bright in emerging markets, which only outperformed 33 percent of the time during strong-dollar periods.

In Europe, companies booking a large percentage of earnings in dollars have not performed as well as would be expected during the recent dollar rally, according to Credit Suisse. They highlight, for example, Airbus Group NV (AIR), which books 75 percent of revenue in U.S. dollars and only 28 percent of costs. Another example is Swatch Group AG, which has 45 percent of sales in the U.S. currency and only 10 percent of costs.

In the U.S., food retailers, pharmaceutical companies, makers of construction materials, banks and insurance companies have performed the best in times of dollar strength, the strategists wrote. Metal and mining stocks are by far the worst performing group, followed by pulp and paper, automobile, technology hardware, chemical and energy companies.

Some of these trends have already played out in the U.S. market over the last few months as the Bloomberg Dollar Spot Index jumped more than 6 percent since the end of June. There could be more where that came from, if Credit Suisse’s dollar call is right.


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