Once The Crash Happens, It May Take Up to 2 Decades to Recover
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I've been talking about a longer term bear market for equities for three years now, yet markets continue up. Everyone calling for a big crash keeps getting mocked. This actually happened prior to 1929 - many people kept on warning of a crash, but things just kept going up up up.
Anyway, on the top, you can see the Dow Jones divided by M2 (cash). On the bottom, is the value of the DJI itself. As DJI/M2 remains between the two green horizontal levels, it seems likely smart money is accumulating cash. You can see this reflected in the "surprising" bullishness of DXY. Meanwhile, this has all happened before.
There's a lot more to talk about here, but these are just a couple of simple charts. Between 1965 and 1985, DJI did not make a new high. During the same time, the amount of cash in existence increased by a fair amount. You can see that in the decline in DJI/M2, versus sideways movement for DJI/USD. This means that we could be near a pretty disastrous period - a breakdown from the green horizontal level would have (previously) resulted in more money printing. But at this point, more money printing would be even worse for inflation. So all they can really do is just let it crash and unwind.
If no more money is printed, we can see DJI/M2 return to one of the lower horizontal levels (between 0.4-0.7). That means a substantial bear market for stock indexes. DJI can decline by 50-80%, while the more bubbly indexes like SPX and NASDAQ can decline by 90% (great depression levels).
If money continues to be printed, the US is likely to see hyperinflation for the first time. We're really at the point where fiscal policy determines the future of the US economy, and the global economy by extension. It's no wonder that cryptocurrencies are gaining popularity, even though those valuations would probably deflate in a market meltdown as well. Exciting times! Let's see what the future holds. Perhaps the developments will be surprisingly positive, but things don't seem to be aligning that way yet.
This is meant for speculation and entertainment only, and is not meant as financial advice.
-Victor Cobra
Anyway, on the top, you can see the Dow Jones divided by M2 (cash). On the bottom, is the value of the DJI itself. As DJI/M2 remains between the two green horizontal levels, it seems likely smart money is accumulating cash. You can see this reflected in the "surprising" bullishness of DXY. Meanwhile, this has all happened before.
There's a lot more to talk about here, but these are just a couple of simple charts. Between 1965 and 1985, DJI did not make a new high. During the same time, the amount of cash in existence increased by a fair amount. You can see that in the decline in DJI/M2, versus sideways movement for DJI/USD. This means that we could be near a pretty disastrous period - a breakdown from the green horizontal level would have (previously) resulted in more money printing. But at this point, more money printing would be even worse for inflation. So all they can really do is just let it crash and unwind.
If no more money is printed, we can see DJI/M2 return to one of the lower horizontal levels (between 0.4-0.7). That means a substantial bear market for stock indexes. DJI can decline by 50-80%, while the more bubbly indexes like SPX and NASDAQ can decline by 90% (great depression levels).
If money continues to be printed, the US is likely to see hyperinflation for the first time. We're really at the point where fiscal policy determines the future of the US economy, and the global economy by extension. It's no wonder that cryptocurrencies are gaining popularity, even though those valuations would probably deflate in a market meltdown as well. Exciting times! Let's see what the future holds. Perhaps the developments will be surprisingly positive, but things don't seem to be aligning that way yet.
This is meant for speculation and entertainment only, and is not meant as financial advice.
-Victor Cobra
Nota
I will also add - I don't see a long bear market/consolidation period for markets as bad. During those periods, I think we can see substantial investment into what matters - infrastructure, education, social programs, and the environment.Nota
Look at the period after the last Great Depression as an example. I just hope the cycle of war doesn’t repeat along with the 100 year debt cycle….Nota
Looks like the cycle of war is indeed aligning with the debt cycle.
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