Bull Market RIP
And just like that – after a magnificent 11 year run – the bull market in U.S. stocks is dead. From its peak close of 29,551 on February 12 through yesterday’s [Thursday] close of 21,200, the Dow Jones Industrial Average (DJIA) has dropped over 28 percent – in just 30 days! RIP.
Death may mark the end. The completion of the circle of life. But it also marks the beginning of something new.
The death of the bull market, for example, marks the birth of a new bear market. By our estimation, the DJIA must fall an additional 30 percent – approximately – before the bear market dies and a new bull market is born.
Between now and then, the central planners in command at the Federal Reserve and the U.S. Treasury will do anything and everything to jumpstart the old bull market back to life. On Thursday, Fed Chair Powell grabbed Hank Paulson’s bazooka and fired off a cumulative $4 trillion repo bailout. But, alas, Powell’s bazooka was loaded with blanks.
After a brief paring back of losses, the DJIA resumed its downward trajectory, closing the day down 2,353 – or nearly 10 percent. The stock market, you see, knows something that Powell doesn’t know. That is, the damage being done to businesses, in an effort to control the spread of coronavirus, is destroying the economy.
Layoffs. Shuttered doors. Empty ports. Quiet railroads. Suspended sports and entertainment venues. No Disneyland. Oil price collapse. No March Madness. More layoffs. Tom Hanks. Bankruptcies. Empty shelves. Panic. Sovereign debt crisis. And soon to be empty bellies…
The ultimate impact, in terms of GDP contraction, will tailspin the economy into a depression…perhaps, The Great Depression II. The stock market, regardless of what Powell wants, is pricing this reality accordingly.
There’s no escaping it…
Can’t Run, Can’t Hide
You can’t run. You can’t hide. Remember, no one here gets out alive. Though you aren’t totally helpless…
You can tempt fate. You can rage against the forces of destiny. By this, you can place bets that are at odds with the madness of crowds. Of course, this must be done before the inflection point; before the herd runs off the cliff…not after.
For example, during periods of economic chaos, physical gold and silver and arable land are proven vehicles for wealth preservation. No doubt, those with the means and fortitude to do so have already diversified some of their savings into these established crisis hedges.
Those who haven’t can only blame themselves. There have been ample warning signs over the last year – or more – that financial markets were ripe for a crisis. It didn’t take half a brain to clue in on this.
And it didn’t take much in the way of resources to place a bet or two that something ‘might could’ go wrong. Even the lowly working stiff, with a small inkling of what was coming, could have taken a pass on shares of Apple and traded a small wad of paper bucks for a junk silver bag or two.
With a little luck, these proven wealth preservation vehicles will safely traverse the valley of the shadow of death to whatever economic order emerges when the crisis abates. At that point, we suspect paper dollars will trade at par with fire kindling, whereas silver and gold will retain their stored value.
Indeed, gold and silver have gotten shellacked this week. But, as night follows day, once this panic liquidation episode subsides, and the implications of fiscal and monetary currency debasement are realized, gold and silver will take off. You can count on it.
In the interim, escaping to a country house or a mountain cabin is an appealing option to ride out the depression – assuming you have one to escape to. If not, the months ahead may validate the wisdom of having freeze dried food storage and a productive vegetable garden. Assuming you’re prepared with a little food storage and gold, you can calmly hunker down and avoid large crowds.
Other than that, the best thing to do is to try and stay out of the way as the traveling circus blows through town. Hence, what follows are several proven, practical ideas, including a 12-Point Great Depression II Survival Guide, that anyone can follow to avoid taking this crisis square on the chin…
Your 12-Point Great Depression II Survival Guide
On November 21, 2008, when the sky was falling, and following many reader inquiries, we attempted to offer – from the heart – practical, discretionary advice on what to do to survive the economic crisis. At the time, it served our readers well.
For your benefit today, and by reader request, we’ll revisit it…with some minor touch ups. We recommend printing this out, and tacking it to your office corkboard, so you can refer to it during the darkest of days, which are headed our way.
Your 12-Point Great Depression II Survival Guide:
Always take what’s yours…plus a little bit more. You’ll undoubtedly need it with Donald J. Trump running riot during an election year.
Never shake hands with your right hand, without first crossing the fingers of your left hand securely behind your back. You never know when you’ll need a do-over.
Always look out for No. 1, save stepping in No. 2.
Never give a beggar your pocket change, except when to do so is to buy them a drink.
Know the difference between honesty with yourself and honesty with others. The former must be rigorous; the later must be flexible…especially when applying for insurance.
Never kick a man when he is down; so too, never hasten to help him up.
Never stiff your barber. He’ll be your last resort for relief via bloodletting and fire cupping, should things get bad enough.
Never con widows and orphans; all others are fair game.
Do not worry about money; what you don’t have should be of little concern.
Never forget that there’s a fool on every corner and a sucker born every minute. Avoid being one of them when at all possible; for it is both demoralizing and expensive.
Do not take it personal when you lose your job. This economy’s circling the toilet bowl; before this is over a lot of other good people will lose their job too.
Remember, always, that this too shall pass; though never fast enough. So keep your head up. For even during a depression the birds still sing, the flowers still bloom, and those of sound mind and body get through it a little wiser…if not a lot slimmer.