Ron Paul has issued a grim warning for stock investors.
“There is a greater distortion and financial danger sitting out there and it’s bigger than ever before…it’s going to be a calamity.”
The former U.S Representative predicts the next stock market crash could lead to a 50% percent drop in the stock market..
Stock market investors aren’t waiting around to see if he is right. In February, they were stampeding out of stocks:
1.TrimTabs Investment Research reports $41.1 billion was withdrawn from stock funds this past month, the third-highest monthly outflows on record.
2. A widely-followed market valuation metric called the Shiller PE ratio stands today at 34. This is well above levels seen before the famous 1929 stock market crash.
Volatility has returned with a vengeance to stocks.
Investors just reacted negatively to a recent report that showed economic growth at multi-year high, a sign that inflation is creeping back and the Fed could well become more aggressive in raising rates. The swift selloff of stocks in February put an end to what has seemed like a sweetheart market for years.
Who does Paul blame for this looming stock market drop?
He cites the Federal Reserve and what he calls the “rigged economy.” Paul also identifies our nation’s massive, uncontrolled debt as one of the key reasons why a major stock market sell-off is inevitable.
“Everything is just very burdened with debt, and there’s no stopping it,” added Paul.
Proving Paul right, the U.S. Treasury Department just reported a $215 billion budget shortfall in February as revenues into the government’s greedy pockets fell while spending increased.
As you know, Congress has just passed generous tax cuts as well that could well increase the deficit by $1.2 trillion+ over the next 10 years. We’ve already picked up an extra $1 trillion in just the last six months alone!
WHAT RETIREMENT INVESTORS CAN DO NOW
After celebrating the ninth birthday of the bull market in stocks last week, investors might need to lower their expectations for stock gains going forward.
High Tech Strategist editor Fred Hickey says this is one of the top three most expensive stock markets in history.
Based on some valuation measures we may be at may be the highest ever.
As Hickey notes, the only other two comparable periods (i.e., 1929 and 2000) ended in heart-rending market crashes.
Hickey says investors need to get defensive now because the Fed is raising rates and selling off bonds. Massive levels of U.S. and global debt continue to pile up at an alarming rate.
Hickey recommends investors hold cash and own gold to survive any market turmoil.
DON’T WAIT FOR THE RETURN OF INFLATION
Positive economic conditions are unnerving to many Fed watchers.
Why? Strong economic growth and a healthy labor market increases the likelihood of rising inflation, which in turn will force the Fed to raise rates faster than expected.
The tight labor market has put pressure on compensation, with wages up 2.6% compared to a year earlier. If the Fed accelerates its rate hikes, long-term bond yields will go up, causing mortgage rates to rise and a reduction in house-buying power.
In the 40 years before the Great Recession, mortgage rates were never as low as they are today. The fate of house-buying power depends on the tug-of-war between rising household income and inflation-driven pressure on mortgage rates.
Did you know? In some real estate markets after the 2008 crash, prices declined seriously for years. In Los Angeles, for example, housing prices took four years to tumble almost 50% from their lofty 2008 highs. That’s a long time to suffer a painful decline.
Gold has had a good start since the year began. World Gold Trust Services CEO Will Rhind says that governments tend to weaken their currencies to remain competitive when facing deflationary pressures in the global economy. This has traditionally been good for gold. Rhind recommends that investors have a portion of their portfolio in gold to enjoy the full benefits of diversification and sees a 2% to 10% weighting as prudent.
RICKARDS PREDICTS PROTRACTED TRADE WARS ARE AHEAD
Jim Rickards thinks Trump’s escalating trade war could benefit gold.
Rickards writes, “Trump is serious about the tariffs he has announced so far and has many more tariffs and fines waiting to be announced in the weeks ahead. As markets realize the trade war is real, stocks will draw down and gold will rally in a flight-to-quality move.”
According to Rickards, investors should have some assets allocated to physical gold before the next bull run in gold begins in earnest.
TURN THE PENDING CRISIS INTO OPPORTUNITY NOW
Everywhere you turn, the news seems bleak.
1.Inflation signs are appearing, trade wars and economic nationalism are on the rise and the value of your fiat-based assets has never been at greater risk.
2. A tight labor market is good for average Americans, but full employment invariably leads to higher prices for everyone.
3. A trade war could cost more than 9 million jobs, and could be the first salvo in a protracted conflict that will cause economic dislocations and job losses around the world.
Many investment professionals have been recommending that every investor consider some physical gold as a much-needed diversifier in troubled times. Not acting now means you are putting your financial future at risk when the stock market crashes or if a full-blown trade war erupts.
Don’t make the mistake of leaving your hard-earned wealth vulnerable to what is coming!