Stock Market Crash 2018 ?!? Let's look at the facts.... // recession coming collapse imminent 2019 2017 usa UVXY TVIX VXX VIX XIV SVXY VIXY SPY QQQ DIA DJIA TLT IWM david moadel
welcome to looking at the markets with David Modell market crashed 2018 will it
happen will it not happen well I'm not in the business of predicting and so I'm
not gonna give you a definitive answer but I can give you my best guess based
on the facts so let's start with a quote this is attributed to John Maynard
Keynes in English economist the markets can stay irrational longer than you can
stay solvent think about the people who've been shorting the market since
2009 how have they been doing so far well not too well all right yes
the market is expensive but it can stay expensive month after month year after
year and if you're shorting the market it can stay too high or irrationally
high continuously until you run out of money and go broke and we don't want
that all right and so I'm gonna make a case that
shorting a market that is expensive is just a recipe for disaster all right so
let's look at some facts here all right this is from The Wall Street Journal
dot-com and we've got the p/e ratio of the major indexes and I'm gonna focus on
the S&P 500 as a proxy for the US markets as a whole all right so
according to The Wall Street Journal on this page the current P ratio of the S&P
500 is about twenty four and a half all right and then we'll take a look at
another source this is multiple com they've got the current sp500 p/e ratio
as you know between 25 and 26 and then Barron's calm this page here has the S&P
500 p/e ratio currently at almost 25 so you know 20 whatever 24 25 26 yeah
they're all I don't know which ones exactly right but they're all a little
bit higher than I'd like it to be but it's not exactly bubble territory
necessarily either it's not like it was in the year 2000 or 2008
when p/e ratios were out of control valuations were way too high the markets
were very expensive and you know it's okay for stocks to be expensive as long
as the earnings or profits are also very robust all right but you know right
before these market crashes you tend to see not only very expensive stock prices
but also earnings that just aren't that great all right and so you get very very
high p/e ratios high prices for stocks and low or you know just not not very
high earnings not high enough to justify the high stock prices so the p/e ratios
right now in the sp500 generally are yeah a little on the high side but you
know I don't remember this doesn't feel like I remember it it felt like back in
the year 2000 and 2008 and if you were investing back then I think you know
what I'm talking about I think you know what what kind of euphoria people felt
back then right now the the market is going up yeah but it's not parabolic
it's not going up like a rocket ship it's just kind of going up gently over
time it's not like it's going up 20 percent every year or even 15 percent
every year it might end up going up 15 percent in the year 2017 but it has not
been doing that every single year in fact in the year 2015 the market was
pretty much flat in fact I think it was actually negative a little bit if I
recall correctly all right so it took a breather a couple of years ago let's
take a look at market breadth all right is there broad participation in these
new all-time highs that we're seeing in the markets in other words is it just a
small handful of stocks carrying the sp500 to new all-time highs or are there
a large number of stocks participating across multiple sectors well this is
from stock charts calm this is a chart show this is a weekly chart each
candlestick represents one week showing the S&P 500 percent of stocks in the S&P
fell 500 above their 200-day moving average
and as you can see look at that there has an interesting double bottom here
but you know it's chopping around but it's you know it's not really really
really low like it was back in let's say October November December 2016 January
February 2017 you know it's not low like it was here it's actually you know
pretty close to the top at least from the past couple years so that means
there is reasonably broad participation not super bored not super broad
participation but you know enough and there are enough stocks above their
200-day moving average in the S&P 500 to make me feel at least right now that
there is reasonable participation among stocks in the S&P 500's notches and not
it's not just a handful of Amazon's and Google's or whatever carrying the entire
markets all right and besides even if we do feel that the
market is too expansive what are you gonna do about it what are you gonna do
about it you're gonna buy what are you gonna buy you vxy here's you vxy okay
here it is here's how you vxy has performed for people who held on to it
all right look at that start it up here down down down down
down just continuously down all right so what what are you gonna buy and hold
this this thing really this thing that's lost 99.99 percent of its value in the
last few years here's another one T VIX there it is
T VIX similar chart look at that people who bought it and held it have
pretty much gone broke they've lost ninety nine point seventy nine percent
of the value of their investments it just goes down and down and down so even
if you did think that market crash is going to happen in 2018 whoo
what do you really what are you gonna do about it what can you do about it what's
a reasonable investment to make you gonna short the market you're gonna buy
you VX Y T VIX you're gonna short the sp500 again how has that worked out for
people who've been doing that not too well all right so my answer to the
question of the market going to crash in 2018 I
doubt it I really doubt I don't know but I'm not
into making predictions but I doubt it I don't see any serious red flags I see an
expensive market but again let's go back to the quote the market can remain
irrationally expensive longer than you can stay solvent okay an irrational
market can outlast your brokerage account believe me if you plan on going
short the market all right and even more importantly even if there were a reason
to believe that the market is likely to crash in the year 2018 what do you gonna
do about it there's no product out there that you can use to really safely short
the market for any length of time more than a few days or maybe a few weeks but
to hold a product like that for months and months is in my opinion not a great
idea so even if you did believe that the markets going to crash in 2018 I don't
think there's much you can do about that except maybe hold cash that's about the
best you can do and I don't necessarily recommend that either I think it's best
to be you know invested in something better than nothing because due to the
forces of inflation holding cash is for holding cash for months and months and
years it's not a great investment either because the dollar is being devalued
your dollars are losing about three percent per year of their value due to
inflation so look into other ideas besides shorting the market that's my
opinion and I'm sticking with it at least for now all right if you have
questions if you'd like some help putting together a trading or investing
plan you can contact me at any time my name is David Modell my email address is
David Modell at gmail.com I hope you I hope it gave you things to think about
with this and you know I really appreciate if you would leave a thumbs
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