[The Inevitable Crisis] Michael Belkin - Market Crashes in the next 12-18 months
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The End Is Near
Jan 9, 2016, 8:32:22 PM1/9/16
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I have a forecast model that I developed. We used it in proprietary trading at Solomon Brothers when I was there, and for 20+ years I’ve been advising the top funds in the world. That was one of the first things I did (developed my own proprietary trading model) when Laszlo Byrini hired me at Solomon Brothers in the 1980s.
And markets will tend to revert to their long-term averages in bear markets. How far down is that? That’s the 200-month average. The 200-month average is where the Nasdaq went in 2009, and also in the tech crash in 2002.
The Carnage In Global Markets Will Get Worse
So how far down is that? Down 50 percent. The Nasdaq could be cut in half. For Apple, it’s down 65 percent — that’s where the 200-month average is. For the DAX, the German stock market, down 37 percent. For the FTSE Mid-Cap Index, which is the benchmark for the hedge funds over there in London, down over 43 percent. For the Nikkei, down 38 percent. For the S&P, down 32 percent.
So basically a 35 – 50 percent downside risk (in global markets) over 12 – 18 months. That would be a normal bear market collapse where things go back to a mean and you turn into a buyer. I am not a perma-bear. I was incredibly bullish at the 2009 bottom. At that bottom I was saying the exact opposite of what I’m saying now. I was saying, ‘Buy financials, buy techs.’ That was what I was telling institutional investors back then.
Now I’m saying the exact opposite, ‘Sell techs, sell rallies, sell stock indexes, be short, don’t be long. Own Treasuries, gold, and be as defensive as you can.’ There is very little safe ground here. It’s like you’re in the middle of quicksand and you are looking for something to stand on while everybody else is sinking around you. And unfortunately most institutions are not positioned correctly. The next 12 – 18 months are going to be a real shakeout.
Massive Deleveraging And The Opportunity In Gold
When people are overly-positioned in the wrong stuff, it’s their liquidation that drives prices into the ground. And what drives a bear market is deleveraging. We have a huge amount of margin debt at the moment. We still have $471 billion of NYSE margin debt. Someone gets a margin call and they are forced to sell. Somebody else then gets a margin call and they are forced to sell and it turns into this vortex of selling.
And markets will tend to revert to their long-term averages in bear markets. How far down is that? That’s the 200-month average. The 200-month average is where the Nasdaq went in 2009, and also in the tech crash in 2002.
The Carnage In Global Markets Will Get Worse
So how far down is that? Down 50 percent. The Nasdaq could be cut in half. For Apple, it’s down 65 percent — that’s where the 200-month average is. For the DAX, the German stock market, down 37 percent. For the FTSE Mid-Cap Index, which is the benchmark for the hedge funds over there in London, down over 43 percent. For the Nikkei, down 38 percent. For the S&P, down 32 percent.
So basically a 35 – 50 percent downside risk (in global markets) over 12 – 18 months. That would be a normal bear market collapse where things go back to a mean and you turn into a buyer. I am not a perma-bear. I was incredibly bullish at the 2009 bottom. At that bottom I was saying the exact opposite of what I’m saying now. I was saying, ‘Buy financials, buy techs.’ That was what I was telling institutional investors back then.
Now I’m saying the exact opposite, ‘Sell techs, sell rallies, sell stock indexes, be short, don’t be long. Own Treasuries, gold, and be as defensive as you can.’ There is very little safe ground here. It’s like you’re in the middle of quicksand and you are looking for something to stand on while everybody else is sinking around you. And unfortunately most institutions are not positioned correctly. The next 12 – 18 months are going to be a real shakeout.
Massive Deleveraging And The Opportunity In Gold
When people are overly-positioned in the wrong stuff, it’s their liquidation that drives prices into the ground. And what drives a bear market is deleveraging. We have a huge amount of margin debt at the moment. We still have $471 billion of NYSE margin debt. Someone gets a margin call and they are forced to sell. Somebody else then gets a margin call and they are forced to sell and it turns into this vortex of selling.
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Posted By The End Is Near to The Inevitable Crisis at 1/10/2016 12:32:00 PM
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