Trader Scott – “The massive debt overhang will destroy everything in its path” – November 4, 2015
A few comments and then we’ll take a look at markets.
Everything from here going forward is about debt. The massive debt overhang will destroy everything in its path.
Unless you’ve proven that you’re a great trader, do not even think about buying any level of government bonds.
Bond yields bottomed several years and they are very slowly creeping higher and that increase in yields is about to accelerate up.
Janet and the other rocket scientists on the Federal Reserve will raise rates – the market will force them. They don’t ever want to raise rates, but this time around,the weakening economy will have the reverse effect on yields as the huge capital flees government paper. Slowly at first, but it will accelerate. We’re already seeingthe inflation leave high end real estate, art and even stocks to a certain extent and that is very slowly seeping in to the general economy. Higher yields will quicken that.
Long time listeners might know that I have been consistently bullish on US stocks since 2009, except for a few months in 2011. I still expect stocks to go way higher overthe next 15 years, but with several big or very big selloffs along the way. I’m getting quite concerned presently.
I believed the rally higher after the selloff into the August 24 lows would end soon, and then the Dow would go down again below the August lows. That would have been a great buying opportunity, because it would have set up a very solid base where it could move higher. That did not happen. Now we’re back around the all time highs. I’m pondering selling short stocks for the first time in over 4 years.
And I want to explain these last 6 + years, I have not been bullish on stocks, because of a strong economy. Far from it. The bullishness was because of my confidence of a continuing underperforming economy. Also, there is a consensus belief that earnings are what propel the market higher. That’s false – it’s the liquidity, the capital that pushes any market around, including gold.
As to gold. When I said on this program 50 months ago that gold was at a major top and that it would not likely hit a major investable bottom until September 2015 and with a price below $1000 – no one believed me. Well maybe I was wrong because as of now the bottom was July 24 and the low was $1070. The question now is was it close enough. I don’t believe we have yet seen the lows, but this time there are caveats:
1) As of Sept., it’s my belief we are now in a time frame where a major low is possible.
2) I had no bears on the boat with me 4 years ago, now the boat is about to capsize with all the new and clueless bears.
3) When I was a floor trader many years ago, my mentor would sometimes say to me “Kid, I’m so bearish, I can’t see straight.” His point – has he been correctly bearish for so long that he’s lost his perspective and maybe it’s time to change. That’s what I’m asking myself now with all the newbie bears along for the ride.
4) Gold is now under accumulation by major capital. It doesn’t mean it can’t go lower, but what it means is that it’s a market just waiting for a spark to ignite it.
So now the technical market action is what is THE KEY. Timing is everything to me – that’s how I control risk, but for most of the listeners, we are no longer talking about years until the major low, but months.
Submitted by Trader Scott, a longtime listener of The Real world of Money and stock trader