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The Speculative “V”
January 2021
The speculative “V” is one of the most interesting and challenging features of the market cycle. For passive investors, it can be a period of exhilaration followed by panic.
For historically-informed, value-conscious investors, it’s typically a period of annoyance, bordering on contempt, for what Galbraith called “the extreme brevity of the financial memory” – often followed by opportunity and even vindication.
Still, the collapse of a speculative bubble can be curiously unsatisfying (as it was for me during the 2000-2002 and 2007-2009 collapses) if one happens to care about the well-being of others.
The full-cycle and long-term market outlook remains dismal
I continue to expect a loss in the S&P 500 on the order of 65-70% over the completion of the current market cycle. As I noted about my 83% loss projection for tech stocks in March 2000, “if you understand values and market history, you know we’re not joking.” A loss on the order of 65-70% would merely bring the S&P 500 to historical norms that have been followed by historically run-of-the-mill returns.
DYI: My estimation is for a 70% to 85% collapse based on the Dow Jones Industrial average. Hussmann in this regard is the optimist with me being the pessimist. Be as that may be now is NOT the time for whole sale purchases – [S&P 500 index fund or general stock fund] – for long term purchases. It goes without saying that we live in crazy times and in my judgement 2021 will make 2020 look tame.
Basic family economics comes into play. If you are in debt get out of debt even if it requires asset sales to achieve and of course if you are already out of debt stay that way. Purchase gold and silver eagle coins; checking account savings for 3 to 6 months and a corresponding amount in U.S. government debt using a mutual fund – [my favorite is Vanguard Funds]. Once achieved as long as stocks, bonds, and real estate remain MASSIVELY overvalued continue to build addition coins and Treasury debt.
DYI
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