Dear Reader, It may be soon, or a while off yet. But there are several key things you can do with your finances, savings, portfolio, and speculative investments NOW to prepare them for a historic crash in the markets. I outline those strategies for you here. This report assumes a big reversion to the mean is coming. As you’ll see in a second, we’re not alone now in this assumption… Some in the mainstream are moving towards the same realisation. But what is it going to look like? A rapid descent soon, perhaps before Christmas? Another up phase, followed by a fall from a higher perch sometime in 2022? A zigzagging over time to a lower level? Perhaps we saw the first down zig in mid-August? Or a slow, gradual decline — interspersed with occasional recoveries caused by central bank interventions? There’s a myriad of ways the market can work its way to a much lower level. The important point to remember is that sooner or later, the cycle always turns from positive to negative. A 96% probability of huge losses One model — with a 96% probability — is predicting it’s likely to be sooner. Citi’s (formerly known as Citigroup) ‘Panic/Euphoria’ model. It involves nine different trackers, all weighted equally. When the model enters either zone (Panic or Euphoria), there’s a 96% probability of gain or loss on the US market over the next 12 months. Here’s the latest chart from Citi: The Panic and Euphoria zones are above and below the thicker, light blue horizontal lines. The inverse relationship between investor mood (blue line) and subsequent 12-month return (grey shaded areas) is quite evident. In 1987, the market internals signalled a mood of euphoria. The result 12 months later? Close to MINUS 30%. The Euphoria reading at the peak of the dotcom boom resulted in a near MINUS 40% return 12 months later. In 2007/08, investor mood again wandered into the Euphoria zone. 12 months later, the US market delivered an almost MINUS 50%. Look where the current reading is…the market is deep into Euphoria territory. What possibly awaits us in 12 months’ time? According to Citi (emphasis added): ‘“Our panic/euphoria model remains very elevated and is warning of coming losses,” the analysts said in a Citi research note… ‘This is the longest period of ebullient readings without a market correction since 1999/2000 and we anticipate that something will give.’ The longest period of ebullient readings since 1999/2000… If that’s not a Code Red, I don’t know what is. No market ever stays on a permanent high. Yet, investors act as if they do. The time to make your defensive moves is when the herd is still acting this way. Click here to read ‘Four Code Red Investments to Sell Now’. Regards, Vern Gowdie, Editor, The Rum Rebellion |