Thursday, October 18, 2018
By Paul Martin

by Egon von Greyerz
October 18, 2018

“What a difference a day makes”! Well we didn’t get the sun and the flowers like in Dinah Washington’s song but more like storm and showers. For the ones who don’t remember Dinah, Amy Winehouse made a more recent version of the song. Last week I warned investors again, in the strongest tone possible, of the risks in markets. So what triggered it? Was it the Fed’s interest rise? Or was it the trade war with China? Or maybe it was Kavanaugh?

We mustn’t believe that we can predict the exact time something will happen. Nor do we know what will cause a turn in markets. But what we have known for quite some time is that markets have been extremely vulnerable to a turn.

Last week I said in my newsletter:

“With 19 Hindenburg Omens since August (a very bearish technical signal), the US market looks extremely vulnerable. So do most major markets around the globe after one of the longest and steepest bull markets in history. Whether or not we will see a final exhaustive up move or not is irrelevant. Risk is at a maximum and we are very near the start of one of the biggest secular bear markets in history. Now is the time to be safe rather than sorry.”

And so it happened. The Dow fell 1540 points in two days before it closed at a two day fall of 1100 points. After the December – January high, the Dow has spent 10 months to just reach a new high. But that was it!


With 79 market indices down last week, my warning was certainly timely. 12 markets were down more than 5%, led by Shanghai, Egypt, Taiwan and Stockholm. As I have been stating many times, market timing is a mug’s game and very few have got the gift of Nostradamus. So the key isn’t to pick the tops or the bottoms but to understand risk. With global risk at historical extremes, anyone trying to chase these markets higher is playing a very dangerous game with the risk of losing it all. You can argue that a 4-5% fall in markets that have gone up by multiples since 2009 is totally insignificant. But most investors are driven by greed and not by prudence. For almost 10 years this bull trend has had no severe, sustained correction so being a perma-bull has been the right thing.


The Rest…HERE

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