The “all-is-well” crowd is out in full force.
They say that the big rout we’ve seen in tech stocks is still just a garden-variety correction.
They insist nothing has changed “fundamentally.”
They want you to believe that everything will work out fine if you just buy, hold and buy some more.
What do you think?
Are tech stocks undervalued right now?
Is there still more juice in the Energizer Bunny bull market that’s been going, going, going since March of 2009?
Or is this the beginning of the end?
Some hints to consider:
First, don’t expect the bulls to give up without a fight. There will be powerful rallies. The market will not turn on a dime. In fact, it could take quite a while before it rolls over.
But the longer it stalls near the top, the harder it will fall.
Second, don’t search for a laundry list of hidden, nefarious forces or news that will explain the turn. It’s just time. The bull market clock is close to running out.
Third, if you do insist on a short list of “causes,” be sure to put money at the top.
We’re talking about the global money system. It’s broken.
In fact, it broke back in 2008 and no one bothered to fix it.
Instead, the world’s largest governments are trapped in a seemingly endless cycle of big deficits and big money-printing to finance them.
Fourth, all cycles, especially of the monetary variety, always come to an end. They never go on and on without eventually running into a brick wall.
Fifth, if any central bankers want to see who will drive the markets into the wall, all they have to do is look in the mirror.
Do they honestly think they can shove interest rates to the mat, hold them down there for nine long years and, then, nonchalantly walk away without any consequences?
Do they really believe that raising interest rates will not sink the bond market ... that the sinking bond market will not drive up the government’s interest costs ... and that everyone else in the economy won’t give a damn?
Geez! What kind of a fantasyland do they think this is?
The Everything Bust
In 2000, it was the Great Tech Wreck.
In 2008, it was the Great Housing Bust.
What about the next time around? We call it the “Everything Bust.”
It starts in the bond market. Bond investors are the first to get smacked by interest-rate hikes.
So in its early stages, they’ll call it a bond-market crisis.
Later, they’ll call it a sovereign debt crisis.
And after it’s in a mature stage — that’s when we figure folks will finally recognize it’s the Everything Bust.
Look. Virtually every asset under the sun has benefited from the extreme, unprecedented, near-zero interest rates of the past nine years. Corporate profits. Stocks. Real estate. Even the government itself.
So it stands to reason that virtually everything suffers when the party ends; when the free money is taken away.
“Oh! Don’t worry about that!” say the Fed and friends. “We’re not going to snatch all the free money away all at once. We’re just going take it a wee bit at a time.”
The irony is they actually think investors like that idea. We think we know why. It’s because even some investors themselves think they like it.
Historic experience shows otherwise. It shows that investors soon learn to hate rate hikes, especially the kind that keep coming over and over again. It wears them down. The pain piles up.
The latest victim of this creeping torture:
Overvalued, overowned, overloved tech stocks.
As we said, they got crushed last week. Then they rallied. But the crush was bigger.
Again, stock analysts tried digging around looking for “causes.” And again, they found something to blame it on.
This time it was the news of privacy abuses at Facebook and the death of a pedestrian hit by a driverless Uber.
Then analysts connected the dots to social media boycotts, advertiser defections, waning demand for chips used in self-driving cars, increased regulatory scrutiny, and on and on.
Here’s what they’re missing:
All of this is the natural side effect of the easy-money bubble letting out air. Of the central banks trying to gingerly sneak out through the nearest exit doors.
Bottom line: We urge you to look at this market from a broader perspective. Don’t be like the myopic Wall Street crowd and ask the wrong questions — because you’ll get the wrong answers about what’s behind this action.
Remember that the tech stock plunge we’re seeing is NOT tech-specific. It’s just part and parcel of a broader unraveling of the enormous “Everything Bubble” of the past nine years.
The unwinding process will create tremendous risks for your wealth, as well as tremendous opportunities to grow it.
So stand by. And pay close attention to our updates and our specific recommendations in your services.
Best wishes,
Martin Weiss and Mike Larson
