Dear Reader,

It’s time to make your move, says Vern Gowdie.

Enough’s enough. Sell now and bank the cash, he says here. Even if you’re a few months early, it’s better than being even a day late. It could be the best decision you ever make. Especially if you’re 55 or older and thinking of retiring in the next 10 years.

It’s a big call. And Vern is making it loud and clear in his latest research, released today.

Go here to see the research now.

Why sell now?

According to the research, stocks have only ever been this expensive on two occasions in the past. In 1929 just before the Wall Street Crash — when the Dow fell by 86%. And in 2000, just before the dotcom crash, when the NASDAQ fell by 77%. 

Looking at the historical P/E and multiples applied to the US S&P 500, stocks are way more expensive now than they were even before the 2007/08 crisis.

That fall wasn’t even a reversion to the mean...but the Aussie market still dropped by 54%, peak to trough, wiping billions of dollars off the value of equities and super funds — money most of us are relying on to pay for our retirements.

That was bad enough — and, of course, is in living memory for most of us.

This time — as Vern will show you — stocks look like they’ve got even further to fall.

Which raises the question: What are you really risking here, by being in the market?

Say Vern’s right. Could you stand a potential 65% fall?

Put it this way: If you’re in your 20s or 30s, and you lose half your retirement savings or stock gains, it’s going to hurt...but not massively in the scheme of things. You are (typically) holding a relatively small capital base and time is on your side.

But if you’re in your 50s or 60s...that’s a completely different story.

You have more at stake. And less time to make up the ground. If you lose 50% of your retirement savings, you have to double your money just to get back to breakeven.

The ASX has made just 3% since just before the last major crisis of 2007/08. That’s 12 years...to barely scrape back into the positive.

So here’s another big question: What if it took the same amount of time, or even longer, to make back any losses sustained in a new, potentially bigger, crash?

Can you see yourself wanting to stay in the market that long?

Probably not.

So what would that mean?

Vern sets out a stark choice between the lesser of three evils:

• Retire poor — maybe have to work part-time
• Massively scale back your retirement plans (cruise/travel/new car/home improvement)
• Maybe never retire

Or if you want to avoid having to make this choice, do what Vern himself has done: Sell now. Bank the cash. In his words, ‘have 100 cents in the dollar ready to capitalise on assets selling at 30 cents in the dollar after the crash...’

Be ready to buy when stocks are cheap...and Vern will show you how you may find you need LESS money to retire on than you do now.

Worth thinking about...but don’t take too long.

What’s going to cause the crash?

Could be anything, says Vern in his report:

The trade war escalates again. Unemployment rises. House prices fall. GDP slides further. Interest rate cuts yield no positive effect. Maybe there’s another high-profile corporate default…maybe an Uber or Tesla or SoftBank in Japan. Maybe Iran kicks off again, causing an oil price spike. Maybe the coronavirus breaks out in New York...or London...or Sydney.

Point is, with markets this stretched...stocks this overvalued...and tension this high...it only takes a slight change in sentiment at the margins...to turn investors bearish.

If this translates into a fall in earnings...or the multiple investors apply to those earnings...you could EASILY see a fall of 80% on the US market, which could — says Vern — translate into a 50–65% fall here.

Don’t think it could happen?

Check your history.

Outrageous falls in stock prices are a fact of market history. 1929...1987...2000...2007/08...Can you really file these under ‘hardly ever happen’?

The last three are in living memory for most of us. I’d say a large proportion of Rum Rebellion readers were active investors at the time Lehman Brothers took a bath.

Also, ask yourself: What can governments and central banks do to inject more liquidity into markets with interest rates already at generational lows?

What tools do they have left and what’s going to work for longer than a month or two? What is the likely effect of piling even more debt on already indebted economies? How long can that go on?

Bottom line, concludes Vern: Why wait? Cash out now. Put it in the bank.

Says Vern: ‘It’s better to have 100% of your cash earning something than risk losing up to 65% of it in a market rort.’

If this is striking a chord with you...

...go here to read Vern’s latest research now.

Regards,

Greg Canavan, Editor, The Rum Rebellion