I Bet My Blog on a Stock Market Crash and Won
I’m going to declare that I’ve won my bet, and the blog is still here! I bet my blog last year that the global economy would collapse by last fall and that the US stock market would crash in the fall. When fall came, I doubled down on the bet by also betting the exact date for the stock market crash to begin would be December 16. I predicted the Fed would raise rates on that date, but I also predicted something I think many would have found counterintuitive, which was that the market would begin by crashing up.
I made this bet in order to try to draw attention to just how predictable failure of the Fed’s plan has always been and because we are now at the point that is the very reason I began this blog four+ years ago, which was to constantly point out the corruption and the error of the Fed’s ways and their partner, the US government. Their plans are now failing, not just with the exact timing that I laid out but in the exact manner — first bouncing up euphorically, then rounding down and then falling off a cliff.
Because we were coming out of Wonderland where down was up (as in bad news always brought an up response in the stock market), the way to go down in that crazy world would be by exiting upward. That I said would happen because the bulls would want to celebrate and gloat that the big, bad day was behind us … and nothing happened, just as they said it wouldn’t.
If I was wrong about the stock market crashing after the Fed’s decision, I said I would stop writing this blog and publish that I was wrong right here.
Here’s a snapshot of how that bet played out:
The market soared euphorically for the remainder of the day after the Fed’s announcement, and then it fell over on its face in the street the next morning and remained in a hangover for a couple after the street party on Wall and Broad ended. That must have been the shortest burst of bull euphoria in the history of the market. Given the pent-up fear over the Fed’s rate increase, I expected a longer release. The brevity of the euphoria, I said, indicated how severe and quick the fall-off would likely be.
The bulls tried to rally and party again as soon as the hangover wore off, but their rally didn’t even make it up to the last high before it stumbled over the bluff. Bad news started to happen in China (one of the areas I had indicated it was likely to come from). As I had said, bad news is just bad news once the Fed makes its change. So, the things that used to give hope of Fed stimulus to an otherwise dead stock market would not just stomp on its head. I also said for months the Fed’s change would happen at a time in which there is a lot of bad news in the pipeline ready to come. And, so, the US stock market — the one that the experts said was immune to problems in China (as they also said China had corrected its troubles with aggressive action) — has taken a free fall to its lowest point in three months in just one week’s time.
The bull is so sick he can’t even seem to hold ground on a good-news day like today. It’s one thing when the US stock market nose-dived because of bad news in the Chinese stock market; but it was entirely another thing today when the market got some big relief in the form of good news and still went down, down, down. It opened briefly up because things appear to have stabilized in the Chinese stock market (which, of course, they haven’t really). If that was REALLY why it was falling, that should have been a huge weight off its shoulders. It also went up because of a stellar jobs report (which, of course, is only skin deep). The report was far better than economists expected. So, the market should have sighed in huge relief, but it decided to fall anyway.
In spite of the superficial aspects of today’s good news, it was still a day of relief from the onslaught of recent bad news. When the stock market goes down this far this fast, then bounces up on good news, but then returns right back to falling that same day as soon as it is done reading the good news, it’s a market that wants to fall.
But don’t take my word for how bad the US stock market is doing. If I’m going to win my bet, I’m going to let others do the declaration for me. So, here’s what the media has been saying about the stock-market carnage in what is just the first week of this year:
Dow average caps worst two-day selloff since summer swoon…. (Bloomberg)
“I would say it amounts to a crisis. When I look at the financial markets there is a serious challenge which reminds me of the crisis we had in 2008.” (–George Soros, Bloomberg)
Dow has worst four-day start to a year on record…. Both the Dow and Nasdaq officially closed on Thursday in a “correction,” signaling the first 10% drop from previous highs since last summer…. “This has all the earmarks of the beginning of a significant stock market correction. Many would argue it’s the beginning of a bear market.” (CNN)
The global market freakout of 2016 just got worse…. “Investors have started the new year in panic mode,” said Ed Yardeni, president of investment advisory Yardeni Research. (CNN)
The broad U.S. stock market, as measured by its Wilshire 5000 Total Market Index, has suffered a paper loss of $1.3 trillion in the first four days of 2016. (USA Today)
Stocks Off to Worst Start in 90 Years as China Rattles Investors. (NewsMax)
Famed investor Dennis Gartman said this week’s worldwide stock plunge is proof that a bear market has “begun in earnest globally.” (NewsMax)
Trader who made 6,400% since 1995 throws in the towel…. You might think that the career of a guy in his late 40s who’s delivered returns for his clients that are more than 20 times better than his benchmark was unassailable. You’d be wrong. Taylor decided this week to shut up shop…. “The decision to stop managing the fund, after just over 15 years, has been a very difficult one. This decision has been driven by a growing awareness that certain features of the current market environment, which we believe might persist for a considerable period of time, are inconsistent with the achievement of our goal of producing satisfactory risk-adjusted absolute returns.… It is therefore time to accept that what we have done has worked brilliantly for twenty years but does not work any more.” (Bloomberg)
We just know that the norm here would be a decent rally to work off some of the 1,250-point Dow drop we just saw in only six days.” But Kalbaum threw in a caveat: “It is very important to recognize the biggest up days markets experience occur during bear phases.” (USA Today)
But there was no up-day rally. Even on a day of good news, the Dow gave up on the good and dropped depressively another 168 points below its opening.
Now, let’s look at what a die-hard bull says about the past week’s market:
If you were to look at any multi-year chart this weekend … you would have no choice but to arrive at a bearish conclusion. If you were to look at any fundamental data point … you would also have no choice but to arrive at a bearish conclusion. In other words, the present market environment is painting as bearish a picture as it ever has during the entirety of this secular bull market. (Zenolytics)
I call the writer a die-hard bull because, as a stock advisor and broker, he still goes on to advise his clients to “buy the dip” in this article, using charts that show such bear markets have turned around in the past. So they have. And sometimes they haven’t. My point is that, even someone who wants to counsel his clients to buy, is forced to face the undeniable fact openly that this market is more bearish than any other period you can find along the previous bull run. Even those who don’t want to give up on the bull market have “no choice,” in their own words, but to conclude this looks as bearish as anything we’ve seen in years!
I also predicted that the last thing you’d hear is the bellering of the bulls as they cry over their lost market while descending into oblivion. That can come in the form of them saying, “Yeah, it’s a bear, but it’ll turn around” (the famous last words kind of cry) or “It’s all the fault of the gloom-and-doomers who killed the market with their pessimism!” That’s always the counter. It is NEVER possible in the mind of a die-hard bull that someone saw the crash coming. Its never possible that someone could accurately see something that they didn’t. Ego would never allow that. So, at best, someone got lucky in his call. At worst, he and those like him created a self-fulfilling prophecy. (That’s why I risked giving very specific timing and a trajectory for the fall. Makes it harder to say it was just luck.)
So, I’m going to call this a win in terms of my having bet my blog, since even the bulls are saying, “This is a bear market if we’ve ever seen one!” No need to wait longer. The bulls, themselves, are already conceding everywhere that things look as bearish as they’ve ever seen.
The total global stock market losses were $2.3 trillion in just one week. Said MarketWatch near the close of the day,
The market meltdown in China reverberated across the globe in a week that punished U.S. stocks with major benchmarks recording their worst weekly performances in years. Even after China’s Shanghai stock market recovered Friday to gain 2%, the U.S. market remained volatile with the S&P 500 posting its worst opening week ever.
“For the S&P 500—the first 5 trading day of the new year has predicted the direction of the full year 68% of the time,” according to the WSJ Market Data Group.
And this was the worst first five days ever!
It was also the worst opening week ever for the Dow.
Moreover, it was not just the usual stocks that were battered. The only ten stocks that have held the S&P 500 up throughout 2015 went down worse than most of the others. The hot air is bleeding out of the top ten.
Biotech shares underperformed the broader market significantly. The sector, which had been one of the best performers during the bull market, has come under pressure…. (MarketWatch)
So, the Federal reserve signaled its confidence in the recovery on December 16, and its infant recovery rewarded it by started down the next day. It closed the year down for the year, and then started going down faster as soon as the new year opened. Most experts, according to NewsWatch were predicting a seventh year for the bull run.
So, it was the worst week for the start of a year in market history. Even if the market stages a temporary rally next week, I think the worst first in history merits being called … a crash! It’s one sick bull.