;

Are You Prepared for These Four Horsemen of the Coming Market Crash?

The Street  ( Original )
MAY 21, 2018

You can add to the below list so many other factors: extreme overvaluation, corporate zombie debt, the inevitable failure of the dollar, the tapped-out consumer.

But beyond that, it’s important to remember to see the forest for the trees. Calling the specific detonator of the next market crash, or its timing, is not the important part. Knowing that it will happen, and positioning your portfolio accordingly beforehand, is all that will ultimately matter.

Gold and silver won’t demand that you accurately predicted the reasons that their prices rose. You will simply have to own them when it happens.

Markets Will Crash Again.

When? Tough question. One thing we do know though, is that highs and lows do happen, and the further down the road we go, there seems to be greater reliance upon speed, and less upon sentient price discovery at a centralized point of sale. You and I, and every honest person who watches the marketplace know that this is dangerous. If we are unable to ascertain the when, are we able to determine the why? Why will markets crash next time?

Four obvious reasons are:

  • Policy Error - Tighter monetary conditions equal even more expensive US dollars. There is no way around that. That will eventually be a headwind for US large caps, as will the fact that the rest of the planet just does not seem to be sticking to the whole synchronized global growth script.
  • The Complexity Of It All -  Leveraged and inverse strategies based on using instruments that can barely be described without referring to a quant. Central banks holding assets (such as stocks and ETFs) that they have no proper business ever holding, and of course... artificially impacting the price of credit across time. Does that pervert the legitimacy of price discovery? Well, no kidding, Sherlock. Does this blow up on somebody? Yes.
  • 3) Fiscal Irresponsibility - There is a date when society in general will have to pay the piper. There is also a pretty good chance that both society and the piper will be angry on that day. This, unfortunately, is a problem many decades in the making, and this kind of deficit spending is now habit. Politicians cannot get elected by promising to be responsible. They have to offer to give without taking.
  • 4) Current Conditions - Chaos in Washington? Instability in the Middle East? Trade concerns? China, NAFTA.

ORIGINAL SOURCE: 4 Reasons Why Markets Will Crash Next Time: Market Recon by Stephen Guilfoyle at The Street on 5/17/18