ANOTHER CRASH IS COMING

Another US stock crash round the corner, says market guru


July 30, 2014

Reuters / Brendan McDermid

​The US stock market will suffer a 20 percent or greater pullback within 12 months says Mark Cook, a legendary investor who predicted the last three major crashes including the 2007 world financial crisis.

The trader didn’t specify the exact time when the market will fall. His index, called Cumulative Tick, only predicts the approximate moment of a turnover of a trend. But even after the strongest of signals the market can still continue to grow and break records, Market Watch reports.

Cook’s Cumulative Tick, the primary indicator that he invented in 1986, is based on the short-term trading indicator the NYSE Tick in conjunction with stock prices. Then the indicator alerted him to the 1987 crash.

Stock prices and the NYSE Tick should go in the same direction. Their divergence is an extremely negative signal, which is why Cook believes the market is losing steam.

There have been only two instances when the NYSE Tick and stock prices diverged radically, and that was in the first quarter of 2000 and the third quarter of 2007. The third time was April of 2014,” Market Watch quotes Cook as saying.

Cook compares the market to a dam which had small imperceptible cracks. Eventually the dam will give way. The same will happen to the market which will see prices drop and the Tick numbers will be horrific, said the investor.

The indicator points that there is a bear market, however it is not, as stocks prices continue to rise.

It’s like being in the Twilight Zone,” he says citing the market is acting abnormally. “Imagine going outside when it’s raining and getting sunburned. That’s the environment we’re in right now.

Mark Cook was included in Jack Schwager’s best-selling book, “Stock Market Wizards,” and he won the 1992 US Investing Championship with a 563 percent return.

 

(Ben’s Comment: Not many economists will tell you this, but here is my take based on a Biblical and common-sense evaluation of economics. Sheldon Emry, who had perhaps the most keen insight into economics of anyone I’ve known, taught me this years ago.

In an economic crash [a depression] the main thing that disappears is liquid assets [currency: paper, gold, silver, etc.]. The disappearance of liquidity at hand is caused by banks cutting off the flow of money to the public by raising interest and by foreclosing on loans that become impossible to service. Thus, ownership of almost everything gets funneled up to a small number of rich folks, and away from common folks. Small banks go out of business too, taking deposits with them, while large banks swallow up businesses, smaller banks, and the majority of properties.

This process of centralization of ownership and control is well underway … especially noticeable when one sees who owns news organizations, banking corporations, insurance companies, private munitions and war technology companies. intelligence contract agencies, oil producers, electric utilities, automobile manufacturers, etc.

When this happens, property ownership as well as business ownership for the common man [if not free and clear of debt] becomes a liability rather than an asset. Debt is the worst thing.

In this environment anyone who has managed to save some liquid asset (paper money, gold, silver, etc.) will have great advantage. Those who haven’t any liquid assets will lose everything. Jobs become hard to find because employers cannot afford to hire. Production dips to very low levels, and people who were living pay check to pay check begin sleeping in their cars … if they are lucky enough to still have cars.

Thus, my advice is to acquire as much liquid asset as you can, hold on to it, get out of debt, and learn to live frugally. This is surely not the time to be getting loans for investing and hoping for future returns.)

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