“October: This is one of the peculiarly dangerous months to speculate in stocks. The others are July, January, September, April, November, May, March, June, December, August and February.” – Mark Twain
Part 1 of a two-part series
October is a cursed month when it comes to equity markets. After each crash, Wall Street laments how impossible it was to predict. I certainly am not brazen enough to predict an October meltdown with a little more than a fortnight until November. But time draws near for a stock market blowout, especially when you consider that not a drop of excess has been squeezed out of the 2008-2009 global financial crises.
In the United States, President Barack Obama borrowed and wasted $10 trillion dollars. His principal aim during his first four years was his reelection. His singular goal during these past four years has been to protect what he feels is his unblemished legacy.
During his presidency, Obama has been clear on his disdain for the United States, primarily the white male establishment. An economic depression after he has left office would cement liberal beliefs that Obama has been an outstanding president who will someday share the path of greatness with Mahatma Gandhi and Nelson Mandela.
But I won’t rule out choppy markets before the end of October. Despite Democratic presidential nominee Hillary Clinton’s verbal attacks on Russian President Vladimir Putin, Clinton, once elected, will have to deal with billions of dollars in Treasury obligations.
On October 5, 2015, thebalance.com reported that U.S. debt to China is $1.24 trillion, as of June 2016 or about one third of the plus $4 trillion in Treasury bills, notes and bonds held by foreign countries.
This makes America like the empires of the past; Rome, Spain, France and Britain were superpowers only because of their military.
No one can predict how Republican presidential nominee Donald Trump’s millions of loyalists will react the night cable news announces Hillary Clinton as the president-elect.
Only a fool would believe they could predict a stock market crash over an 18-day period. But no other month has such a history of stock and bond market collapses.
- The Great Wall Street panic of 1907.
- The Crash of ’29, a precursor to the Great Depression.
- Black Monday October 19, 1987, the worst one day sell-off of more than 500 points on the Dow Industrials.
- Black Friday the 0ctober 13, 1989, mini crash. Stock prices slumped just before the market’s close. The Dow Jones Industrial Average fell almost 200 points losing 7 percent of its value, with the much broader NASDAQ Composite falling more than 15 points and more than 3 percent of its value.
- Just under the wire when on September 29, 2008, the Dow Industrials declined 774 (a 7 percent drop) setting a new record for the largest single day decline in history.
The school of hard knocks
I started investing on my own at 14 with the inheritance from my grandmothers. In six years, I had turned $10,000 to $35,000. It would have been great if I could say I was a wunderkind. But I was far from it. I made profits by mirroring my father’s recommendations. The 10 percent remaining under my control was a mixed bag.
So why in the world would you even be inclined to consider my warning? Because I have been paid to write my investment opinions for 30 years which proves I have been correct more often than I have been wrong. I’ve been watching markets, everything from bear markets to bull markets where there really were bulls.
In 1980 I was a university graduate and had a diploma in journalism from a trade school. Hardly Ivy League credentials, but they got me a job covering the purebred cattle industry.
I grew up on a 40-acre farm where my dad kept horses to ride and chickens and steers to slaughter. When I was driving with my editor to my first assignment of covering a purebred cattle sale I would have told you that if you had seen one bull you had seen them all. Not so. There where wide slick-coated cattle, short shaggy cattle and breeds that looked to be part giraffe, standing 6’5 at the shoulder. One thing was true; the purebred owners were in cahoots selling livestock for tens of thousands of dollars without a dime changing hands. In some ways the investment banks were doing this with fabricated numbers and to the tune of trillions of dollars.
I have seen so much corruption dating back to 1980 that I have become suspicious and even give a tiny amount of weight to the threat of an October 2016 Crash. And regardless of when it is, this month, next month or next year, I am convinced a bond and equity crash is approaching and there is no earthly way to stop it.
But the unvarnished truth remains. The Obama administration has driven interest rates to all-time lows (see 10-year Treasury note yield above).
Worse, the Federal Reserve has shot its wad. The Fed has no wiggle room to lower interest rates because the 10-year Treasury yields a fraction over 2 percent. That is the lowest return since they were first recorded in 1877.
Meanwhile, the United States is living off of borrowed money; $20 trillion dollars give or take. That pipeline of money could have serious cracks in it and nobody would even know.
Clinton must stop blaming the world’s problems on Putin. It is not productive when you consider that Moscow owns and could sell $88 billion in Treasuries.
Most of all, the U.S. should treat China with kid gloves.
In January 16, 2016, Investment World wrote:
As a result of quantitative easing (QE) more than a few nations, notably Iran, Russia, China and Brazil became increasingly concerned that the value of their T Bond holdings were being diluted by the Fed’s massive money printing campaign and have made efforts to reduce their need to hold dollars for settling their trade accounts. In October 2013, China called for the world to “de-Americanize” because “the destinies of others are in the hands of a hypocritical nation that have to be terminated.”
Such calls to “de-dollarize” have increased and been joined by Russia as the west battles Russia’s designs on Crimea and Ukraine with economic sanctions. In 2014, Russia and China signed a 30-year gas deal that supposedly does not involve dollars for payment.
The next president must take into consideration a possible currency war, a race war and an economic depression. Next week I will delve into America’s financial and economic crisis and a nation which is substantially weaker today than it was when Obama took office.
I doubt Clinton will make the tough decisions, the ones that would put the United States in a better position but would reduce her reelection chances in 2020. Clinton sold her soul for votes in African American communities and for Bernie Sander’s supporters.
Next Wednesday I will list the inevitable evidence of a stock market collapse no later than 2018. And, if you find yourself in agreement with my conclusions, I will urge you to liquidate all bonds and stocks. I will talk about the advantages of clean, cold, cash and why owning physical silver is a better investment than physical gold.
Until next week yours in good times and bad,
— John Myers