Your 12-Point ‘Great Depression II’ Survival Guide
Bull Market RIP
And just like that – after a magnificent 11 year run – the bull market in U.S. stocks is dead. From its peak close of 29,551 on February 12 through yesterday’s [Thursday] close of 21,200, the Dow Jones Industrial Average (DJIA) has dropped over 28 percent – in just 30 days! RIP.
Death may mark the end. The completion of the circle of life. But it also marks the beginning of something new.
The death of the bull market, for example, marks the birth of a new bear market. By our estimation, the DJIA must fall an additional 30 percent – approximately – before the bear market dies and a new bull market is born.
Between now and then, the central planners in command at the Federal Reserve and the U.S. Treasury will do anything and everything to jumpstart the old bull market back to life. On Thursday, Fed Chair Powell grabbed Hank Paulson’s bazooka and fired off a cumulative $4 trillion repo bailout. But, alas, Powell’s bazooka was loaded with blanks.
After a brief paring back of losses, the DJIA resumed its downward trajectory, closing the day down 2,353 – or nearly 10 percent. The stock market, you see, knows something that Powell doesn’t know. That is, the damage being done to businesses, in an effort to control the spread of coronavirus, is destroying the economy.
Layoffs. Shuttered doors. Empty ports. Quiet railroads. Suspended sports and entertainment venues. No Disneyland. Oil price collapse. No March Madness. More layoffs. Tom Hanks. Bankruptcies. Empty shelves. Panic. Sovereign debt crisis. And soon to be empty bellies…
The ultimate impact, in terms of GDP contraction, will tailspin the economy into a depression…perhaps, The Great Depression II. The stock market, regardless of what Powell wants, is pricing this reality accordingly.
There’s no escaping it…