3-month treasury notes are often seen as “risk free”. So why would any investor (who only cares about their dividends) still risk their money on the stock market, if the risk-free yield is higher?
In a
normal market, most stock are either making 52-week highs, or near 52 week
lows. But if both occur at the same time, a technical indicator called the
“Hindenburg omen” is triggered. There are a few more prerequisites to
triggering this indicator, but for the sake of clarity, i`ll stick to the above
description. This Hindenburg omen is normally triggered at the end of an
uptrend in the market, when many new 52-week highs are registered, but more and
more companies can`t keep up with the constant growth and start showing 52-week
lows. It is controversial, because often a single trigger of this indicator
does not warrant a bearish position for the investor. However, if the indicator
gets triggered many times in a certain period of time, a pattern starts
appearing:
Looking at this chart, it becomes clear that the
Hindenburg omen is triggered many times when a long-term peak starts forming in
the markets. Do take note that this chart only goes back about 20 years, and
that out of the 3 past spikes (2016, 2008, 2000) only two were correctly
predicted to turn a bear market.
“Why
did nobody see it coming?”
- Queen Elizabeth, 2008 -
- Queen Elizabeth, 2008 -
I often hear that bear markets are great buying
opportunities, because eventually we will come back to reaching all time highs.
But how long can this “eventually” take? It took the Nasdaq-100 16 years
(2000-2016) to come back to all time high levels. That`s half a generation! The
Japanese Nikkei reached an all time high in 1990, and still, after 28 years, it
has only reached a level that is 60% of what it used to be.
Hold on, I forgot to
adjust this for inflation...
30-year-old Japanese investors who jumped into the
stock market in 1990 and decided to “sit and wait”, are now 58 years old and
still have a loss of 75%. I`m not saying that it could happen to the current
stock markets in the U.S., but there is always the possibility. Are you
financially strong enough to “HODL”, as the poor crypto community would say?
Is it only the U.S. that are currently witnessing massive stock market
bubbles? On the contrary. It seems that the entire world is
going bonkers, despite the declines in certain emerging markets like Turkey.
The total global stock market capitalization compared to the global GDP is
close to the all-time highs from the dot com bubble and housing bubble.
"Celebrating
the longest bull market ever without mentioning 10 years of
artificial stimulus
and intervention is like celebrating Lance Armstrong's
Tour de France record
without mentioning doping."
- Sven Henrich -
- Sven Henrich -
The information contained in this publication is not intended to constitute individual investment advice and is not designed to meet your personal financial situation. The opinions expressed in this publication is that of the publisher and is subject to change without notice. The information in this publication may become outdated and there is no obligation to update any such information.