Skip to main content

The Next Bear Market Could be Worse than 2008

No one knows when the next bear market will occur, but as you may know, the yield curve recently inverted. Historically, every single bear market over the last 50 years has been preceded by an inverted yield curve, so it's a very strong indicator. When the curve does come before a bear market, the market usually drops a year later on average. Though every bear market has been preceded by an inverted yield curve, every inverted yield curve has not signaled a bear market.

Why do I believe this bear market could be a bad one? According to a May 2019 report by the Federal Reserve, tens of millions of American families are on the edge of economic oblivion based on the following:
  • Many families struggle to save for retirement and unexpected expenses. In fact, 39% of the 11,000 adults surveyed would have to either borrow or sell something to cover a $400 emergency.
  • Three in ten adults experience financial strain due to family income that varies from month to month, and one in ten struggled to pay their bills at some point in the prior year because of those changes in income.
  • Many survey respondents—particularly young adults—need financial support from family or friends to make ends meet.
  • One in four adults have no retirement savings or pension.
  • In the years since the Great Recession, student debt has exploded from $500 billion to $1.6 trillion.
  • Non-housing related debt has climbed from $2.65 trillion in 2008 to more than $4 trillion by the second quarter of this year.
  • A record number of Americans (7 million) are or have been at least 90 days late for their car payments.
I’m also concerned by a Pew Center report that says that more Americans are living month-to-month in rental housing than at any time in the last fifty years. Why is this an issue? In times of trouble, people often rely upon home ownership to help them out, by borrowing against home equity loans, etc. That assistance won’t be there for renters.

And it’s not just individuals who have massed mountains of debt—it’s countries, including ours. If incomes drop, and people (and/or countries) default on their debts, we could be in for big economic trouble.

Are you prepared for an event like that? Do you have a plan that addresses the potential for a bear market? I strongly believe you should.

Have a strategy to get out of the market, especially if your close to retirement, or currently retired. One such strategy, while not perfect, is to sell when the market index (such as the S&P 500) moves 2 or 3 percent below it's 200-day moving average. The chart below uses this strategy. It is not perfect -- no system is -- but it can help you avoid large losses to your portfolio.


What's more important is to design a strategy now. Protect your principle and do not suffer huge losses.

Note: I learned of this strategy from Ken Moraif, from Retirement Planners of America. Much of this article was written by Ken.

Comments

Popular posts from this blog

What happened when a Trump Supporter Challenged Me About the Wall

Vicky Alvear Schecter wrote in Medium | Poltics on Dec. 27, 2018 using her headline above. I thought it was pretty well written -- at least she made an attempt to keep her liberal bias out of it -- regardless of a few illogical fallacies

But she does make an attempt, in an effort to avoid her liberal bias, as she ponders  "...in order not to be accused by bias, I explained that I would only use conservative sources to prove my point."

To me, that's bias to start out with that premise. And I believe her premise is that she is against the wall. That's her stance. But she makes some good points, but some are skewed, even though she attempt to take a "conservative" approach, even by citing some "conservative" sources in her footnotes.

Here's the first problem: if she wanted to avoid bias, why not just stick to the the historical facts as written (when you can find them without bias), and not concern oneself with bias. "I must reject that becau…

Weekly wrap for Nov 9

After Thursday and Friday, it might seem the markets are down, but the weekly numbers tell a different story, with the three major indices up for the week. The Nasdaq, with its tech exposure, had the smallest increase. The tech sector is obviously under recent pressure. 

IndexNov 2Nov 9+/-%S&P 5002,723.062,781.01+ 57.95+ 2.12%Nasdaq7,356.997,406.90+ 49.91+ 0.67%DOW 3025,270.8325,989.30+ 718.47+ 2.84%
Over the last 12 months, the Dow is up 10.77 percent, the SP 500 up 7.6 percent, and the Nasdaq up 9.7 percent.  

The weekly chart of the SPY still indicates a long position in the broader market. (The blue line is the 34-week moving average; the red is the 13-week moving average).

















While the U.S. economy still seems to be just fine from most reports, investors seemed to worry about a couple of things on Thursday and Friday: 1) The Eurozone, 2) trade with China, and 3) the Fed and interest rates. Another topic of interest has been oil. 

First, it seems that the Fed has really not indicated …

U.S. Top Oil Producer, Thanks to Obama

\ You read that right.

The U.S. is now the largest oil producer in the world, according to the EIA, producing some 15 million BOE per day, surpassing Russia and Saudi Arabia. (Remember back when Jimmy Carter said in 1979 the answer to our energy problems was to wear a warmer sweater...but you probably don't. He actually said this on national TV).

The United States is the top oil-producing country in the world, with an average of 14.86 million b/d, which accounts for 15.3% of the world's production. This is down from 15.12 million b/d in 2015, but it was enough to land the United States in the No. 1 spot, which it has held for the past four years running. (Source: Investopedia.)

Guess who takes credit for it? Granted, this increase in production began in 2012, but only because of private industry and the fact that the price of oil was at nearly all-time highs. And it dipped in 2016 because of Obama's anti-oil policies! 

But here he is again


Former President Barack Obama sure l…