Predicting Stock Market Doom, Again!!

The board here at mewetree.blogspot.com has been predicting a stock market crash and recession for years, and starting in 2019. 

https://mewetree.blogspot.com/2019/04/the-curve-invertedrecession-coming.html

https://mewetree.blogspot.com/2019/08/bubble-ii-deeper-dive.html

https://mewetree.blogspot.com/2019/10/best-recession-analysis.html

https://mewetree.blogspot.com/2020/01/bubble-trouble.html

https://mewetree.blogspot.com/2024/10/stock-market-time-to-sell.html

Of course, 2020 saw the COVID-19 pandemic begin, and with that, a government-sponsored depression as economies were shut down, then we saw a massive recovery after the pandemic subsided.

During the pandemic, governments and central banks poured cash into the world's economies to keep them afloat. This stimulus followed a decade of massive stimulus that itself followed the financial crisis in 2008-09 which prompted a massive asset bubble that was about to burst when COVID-19 hit.

Well, it is 2019 again, albeit with even more stimulus and even bigger asset bubbles this time. A recession and stock market crash are coming, the only question is when.

The indictors that matter are as follows.

Yield Curve: The Yield Curve in the USA was inverted from July of 2022 to August of 2024; for 25 straight months. It has never been inverted for this long. It has been back to normal for the last year.

Yield curves invert when the interest rates paid on short-term government debt is higher than the interest rates paid on long-term government debt. The yield inverts when the smart money starts to buy long-term government debt as a safe haven from an expected stock market pull-back and recession, thereby driving yields down as the price of long-term debt rises.  A recession and stock market decline ALWAYS follows an inversion, specifically after the inversion ends and the yields go back to normal.

The world has been due for a recession for over a year now. It will happen, but no one knows when.

Shiller PE: This is a measure of the ten year trailing price to earnings ration, usually measured against the S&P 500 index. It's historic and normal level should be about 16. Today it is at 39.86, which is the second-highest level ever, outside of the dot.com bubble in the early 2000's. This is literally screaming that the stock market is massively overvalued. Going back to normal would see the S&P 500 drop from about 6,650 today to about 3,200. 

https://www.multpl.com/shiller-pe

Elevated stock prices made sense when interest rates were at historically low levels. They don't make sense now. The market will tank, but no one knows when.

Buffet Indicator: This is Warren Buffet's market indicator, and it measures the total value of the stock market divided by total GDP.  The historic trend line for this indictor suggest that this should equate to about 125%. Today it is at 217%, which is more than two standard deviations from the norm. This suggests that the market is strongly overvalued.

https://www.currentmarketvaluation.com/models/buffett-indicator.php

Warren Buffet is holding over $348 Billion in cash right now. This is the largest cash position (really mostly T-bills) that he has ever taken. He is the most successful investor in history. His cash position is screaming that the market will tank, but no one knows when.

It will happen - but no one knows when.

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