How High Will the Market Fly Before Its Wings Melt?

26.06.2017 • Switzerland

Download PDF
 

Olivier Perrin – The Brave Little Economist (Switzerland) –

Here in Ireland … back in Dublin … we leave in a few days …

What are we doing…? What do we want to do …?

We try to understand better … how to improve what we do …

Still no movement in the stock market …

No evolution since early May … a “great calm …” silence …

How could the market be so calm?

Well, the market is waiting to see the results of the companies, and these results, for the second quarter, will be published in mid-July …

From here, we have no reason to see the market climb …

Some believe that this “calm” presages the storm that comes …

CNBC asks Marc Faber, a well-known investor, based in Thailand …

Faber became famous in the 1980s, when he correctly predicted the arrival of the 1987 crisis …

CNBC:

“Marc Faber … continues to predict that equities will fall by 40% or more …

“‘We have been in the market for eight years. The NASDAQ is pushed up by a very small number of shares, ‘Faber said last Thursday on the show’ Trading Nation. ‘ This up market is ‘not a very good sign for the health of the market, and stock valuations are very high,’ he adds.

“He adds that ‘as stocks begin to fall, volatility will rise, and equities will start falling even faster.'”

Faber predicts that the banks will need the support of the state … and that governments will start taxing the citizens on an unprecedented scale …

As for the “crypto-currencies,” a group of assets that have exploded on the rise since January, the market begins to change direction …

In mid-June, crypto-currencies had a peak of buyers … the Bitcoin, the best-known asset in this category, reached more than $ 2,990 a piece … more than three times its January 2017 price.

Since that peak, the Bitcoin has dropped … falling to $ 2,540 today …

Since Sunday, all these “currencies” are declining sharply:

  • Ethereum, which had climbed from less than $ 10 to over $ 370 per “piece” since January, lost 14% in 24 hours …
  • Ripple has lost 6% since yesterday …
  • Litecoin has lost 11% …

Despite this decline, these assets remain well above the levels at which they began the year … but the fury of purchases in these assets could be subsiding.

What to do…?

Will the market go up again when companies report their results in July?

At current valuations, markets expect to see strong growth in results …

As a reminder, in the S & P 500, share prices are 40 times the profits of companies …

Over the past 140 years, stock prices have averaged 16 times the profits … which shows that stocks are “expensive” at the moment …

Of course, stocks can go even higher … especially in the short term …

On the other hand, sooner or later, companies will eventually produce income that will disappoint expectations …

When this happens, we will see the stock fall …

Could the market fall by 40%, as Marc Faber predicted?

Well, we have seen a decrease of this order, in the space of 18 months, during the crisis of 2008 …

So we could easily experience a decline of this kind–

On the other hand, the ECB, the Fed, and the Bank of Japan, were widely involved in 2008 and 2009 …

Could they perform the same rescue again?

We will elaborate on this in the future …

-Read more at www.le-vaillant-petit-economiste.com (French)-

Download PDF
 

Related Posts

Comments are closed.

« »