The world’s financial markets are getting very challenging. Currently, there is a big debate whether the markets are destined for a 1929 type of crash or if the bull market will continue for several more years.
My firm and I have a very specific opinion, something no analyst in the media has mentioned. You see, I started my firm in January 1977. In 1978 I made the forecast that seemed ‘outlandish’ to Wall Street analysts. But they came true over the next 1-2 years.
Those correct forecasts were carried by the Wall Street Journal and other financial media. And that established my investment and economic research firm as a top ‘contrarian’, one that had no conflicts of interest and even dared to use the word “sell.”
Now we see many of the same converging factors in our indicators that enabled me to make the ‘outlandish,’ but correct, forecasts in March of 1978 and other times just ahead major market declines.
Most of the analysts you see in the media were still in diapers in 1978. Long-term experience and a good memory are very valuable for navigating the current market environment.
In 1978 I predicted:
- The prime lending rate to go from 7.5% to 20%
- The long term T-bonds would lose 40%-50% of their value over the next few years
- That inflation would go double-digits
- That the stock market would rise while the Fed continued to hike rates
It appeared improbable to the conventional analysts. BUT IT HAPPENED OVER THE NEXT TWO YEARS!
In 2007, I wrote the prescient book predicting the 2008 global crisis, “Prelude to Meltdown.” No one wanted to believe it at the time, yet it was right on target.
Currently, I see similar pre-conditions, but much more serious than in 2007.
My analysis and proprietary indicators show that the next global crisis will be much more severe than the one in 2008. The last one was primarily due to subprime mortgage problems in the USA, causing a domino effect in all the derivatives geared to those.
But now, the entire world has participated in similar financial engineering. The leverage is much higher, amounting to tens of trillions of dollars.
The best estimate of global financial derivatives is $1.3 QUADRILLION. Such a number staggers the imagination. There is no central bank large enough to bail this out once the debt pyramid starts collapsing.
The major central banks alone created over $21 TRILLION of artificial credit over the past eight years.
Furthermore, trillions of dollars of governmental bonds currently have negative yields, In other words the buyer of these bonds, in effect the lender, pays interest to the government.
Such an experiment has never been tried in the history of mankind…for good reason. The central banks have a great challenge in trying to extricate themselves from this boondoggle without extreme pain and possible a calamity.
However, we believe there is always a way out if handled intelligently. We saw this in China a few years ago.
About four years ago, before the 2015 China stock market crash, I wrote the prescient book: “The Coming China Crisis.” That was followed up with our special report: “The China Crisis is Here.”
The 2015 stock market crash in China erased an amazing 62% of the value of the “A” share index, and wiped out the equivalent of over $6 Trillion of stock market value, equal to well over half of China’s annual GDP. It looked like the end of prosperity for China. However, the country recovered.
That example demonstrates that even a severe market crash doesn’t have to stop the vitality of the economy, its people, and the betterment of society.
Only bad central bank and governmental policies can do that.
At Dohmen Capital Research, we look at what really drives the investment markets according to our “Theory of Liquidity & Credit.” It states that the major determinant of major stock market trends is not earnings, but the change in Liquidity & Credit.
Analysts always focus on earnings as if that were the key to stock market prices. THAT’S WRONG!
For example, during the 1973-1974, the worst bear market since 1929 up to that time, the S&P 500 had continuing earnings growth, quarter by quarter.
Another example: the biggest stock gains in the market are those with the highest P/E ratios. That’s totally contrary to what you hear from Wall Street in regard to picking stocks.
It’s not high valuations, such as very high P/E ratios, that predict a market top. In fact, the highest P/E ratios occur at great market bottoms, not the tops. Let’s look at the bottom in March 2009, when we gave a “buy” signal. At that time, the S&P 500 P/E ratio was an extreme of 124, the highest in US history.
In 2009, Wall Street was totally oblivious to the debt implosion that was materializing.
However, our subscribers were alerted and not only were safeguarded during the crash, but also had a chance to make immense profits with our recommendations while the markets crashed.
I am currently looking at factors not mentioned by Wall Street. We love to be in the minority. It’s logical that it is impossible for the majority to be right in their predictions, because then the prediction wouldn’t come true.
At my firm, we look below the surface, we question the validity of all the governmental statistics, and we look at investor sentiment statistics. When it comes to market timing, we look at our advanced technical indicators.
If something is ‘obvious,’ it is usually obviously wrong.
I always say, “What everyone knows, is usually not worth knowing.”
Wishing you successful trading,
Bert Dohmen, Founder
Dohmen Capital Research
Dohmen Strategies, LLC