Well, look at the introduction to an investment letter I just received.
If he is right, it will happen on Biden’s watch, even if he won’t be the cause.
Dear Reader,
Your last and final issue of The Bonner-Denning Letter is ready for your review. In it, I’ll tell you about the time Bill and I met your new editor (Nomi Prins). You’ll also find my final review of The Crisis Portfolio, including a change to where we think you should have your money in 2022 (you may be surprised).
Since the letter went to press, we’ve learned that insiders have sold $69 billion worth of stock year-to-date (a new record). We’ve also learned that company buybacks of their own stock hit $234.5 billion in the third quarter this year. That’s a new record too (the old one was $223 billion in the fourth quarter of 2018). So what?
Buybacks and insider selling are two sides of the same coin. That coin is insiders maximizing the market value of their shares through financial engineering to maximize the value of their stock-based compensation. It’s classic late-cycle behavior that leaves the public holding the bag when the crash comes.
All the metrics we look at tell us the coming crash will be bigger and last longer than anything you’ve seen in recent memory. And it’s long overdue. That’s why now is the time to make sure you avoid the “Big Loss” and have your money in the right place for what comes next. Read on for details.
Not really my prediction. While I am a good investor, I can’t predict the stock market truly crashing. It is the experts saying it will crash. I am baffled why it hasn’t crashed yet. Everything is very overvalued right now. The only reason I can think of it being so overvalued is people expect inflation to drive the market up.
To put this in perspective, margin debt is estimated to be 2.4% of the S&P market cap. It was 2% before covid, but 3.5% in 2008. That’s not horrible, but it is a risk to the market. I think a lot of day traders and other short term buyers are going to get a rude surprise when they get their 1099s and calculate the income taxes that are due next spring.
No, but any capital gains on stocks held less than a year are taxed as ordinary income. A lot of Robinhood and other meme traders newish to the market were buying and selling after holding only days or hours. I suspect many of those folks didn’t set aside funds to pay taxes (especially if you’re making trades with borrowed money).
Also, I suspect many of those folks are going to find that their tax calculations are going to be hellish, involving hundreds of trades and some wash sales.
A couple years ago this happened to a buddy. He made 100k day trading in 2019 but didn’t save enough to pay 30k in taxes in 2020. He had to borrow against his 401k to pay it.
As I said I am good with the market but I am not an expert in every aspect. That is why I don’t day trade. I don’t get all the gotcha’s with it. You can lose your ass very quickly with it.
Last 3 days the market was up, for the week before that you’d be up 300, down 400, up 250. My buddies who day trade love those swings, seems like that’s when they make the most money. They make money trading huge amounts and selling a few percent up or down….too volatile for me. I tell them I like to get rich slow and they laugh back.
I think everybody knows cash is no place to hide, not with this inflation and no end in sight. Got to keep your savings in investments just to mark time.
In this regard nominal investment values could stay flat for years, but be steadily losing true value (purchasing power) amid 5% inflation.
That is one scenario in which we have a significant reduction in value without a dramatic or sudden crash.
My 401k is up 25% from Dec 20 to Dec 21. Even if 5% is the new normal inflation, think I can handle it.
I think that’s a significant blame for inflation, especially concerning houses and large toys. If I made 200k in the stock market last year, am I really concerned about paying 50k more for a house than I had planned to?
It’s up roughly 25% over last 12 months, a few stocks I bought are up 50% for the year. I’m not saying this is a typical year, just showing that people have a lot of cash on hand if they’ve sold stocks.
Your investments will not keep going up by that kind of margin. They’ll taper off and the inflation in your consumer costs will create a different situation in a few years.
It takes less than 5 years at 5% inflation to reach 25% cumulative. Anyone can handle 5% in the short term. It is over several years that the pain accumulates.
