The financial system is a total fraud.
Central and investment banks, in some way or another, have been rigging the investment game against you for years.
LIBOR, foreign exchange, and mortgage backed securities — all manipulated. Unfortunately, this is just the start.
The truth is that investment banks aren’t your friend. Not only will they trade against you, they’ll sit on the fence. If you think they’ll stick their necks out and tell you about the next Global Financial Crisis, think again.
They totally missed the last one back in 2008/09.
At the time, Lehmann Brothers, once the third largest investment banking firm in the world, went belly up. Merrill Lynch got taken over by Bank of America at a 99% discount to its 2007 share price high. Citi Group got bailed out by the US Federal Reserve. Even Goldman Sachs had to be saved by Warren Buffett. And these are just the American firms…
It actually makes me wonder why people still listen to and deal with these guys.
I’ll put it this way. Investment banks are paid to be bullish. If they don’t publish bullish stock reports, they’ll potentially lose multimillion dollar merger or acquisitions deals — of course, this means lower or no bonuses. The companies will run off and find someone who is bullish on them.
Now before you think, ‘that’s not fair, I’ve seen them bearish before’.
I guess, that’s true. Albeit, a rose-coloured glasses opinion.
Investment banks will turn bearish on stocks. But only after their stock prices have collapsed. And even then, once down-graded, they’ll still publish unrealistic and ultra-bullish target prices, far above the market price. This is why I take their analysis with a grain of salt. And so should you.
With this in mind, let’s talk about honest and useful advice…
Listening to investment banks will lose you money
To start. If you haven’t read Vern Gowdie’s free book The End of Australia click here.
By now you’ve probably heard a lot about Vern’s book. So I won’t get into the nuts and bolts of it again today.
Vern’s advice is refreshing. It’s intended to help you see the world from a totally different angle. In this way, you can begin thinking for yourself.
Indeed, his analysis is as bearish as you’ll get. With absolutely zero investment banking spin designed to make you feel good and then go out and lose your money. This is what makes it useful for you as an investor.
You’ll get the other side of the story.
The side of the story which investment banks will never tell you. Vern’s book, in its own right, will empower you to think for yourself. And if anything, it will make you a smarter and more cautious investor going forward. So if you haven’t read it, check it out here.
Is a major stock market crash on the cards?
Now you may find the different opinions on offer here confusing. But it’s important to understand Port Phillip Publishing’s goal — empowering you as an investor. We give you our best ideas, based on our research, and let you decide for yourself whether to believe us and take our advice.
And while we have different opinions on how the next financial crisis will play out, most of us believe that the current financial system is overleveraged, unsustainable and will collapse.
When will it happen?
That’s up for debate.
Kris Sayce, Editor of Tactical Wealth, believes that the market could crash as soon as October this year. Vern’s analysis, which shows that the stock market could crash by more than 80%, aligns closely with Kris’.
Both are telling you to be cautious.
But, I think they’re a little too bearish…
Over the past weeks, Resource Speculator readers received two lengthy analyses on this topic. I explained to them that a correction of 30% on the Dow Jones from the May high is more likely than a crash.
In the meantime, you should know that Vern, Kris and I all agree that the market could go sharply lower in the short term. Just the magnitude on offer is up for debate.
For this reason, I suggest reading Vern’s book from top to bottom. Because if he’s right about this stock market crash, he’ll not only save your investment and retirement portfolios. But possibly, even your marriage! Check it out here.
Worry about a bond market crash, not a stock market crash
With a crash in mind, your attention should be redirected…
While the stock market could correct sharply lower in the short term, the next global financial crash will stem from government bonds. Unlike the stock market correction, the bond crisis won’t hit this year. But it will ripple through the world in the next couple of years.
You don’t need to be a genius to work this out…
The majority are far too bullish on bonds — at a time when economic growth has come to a halt and the financial system is severely overleveraged. Historically, these conditions typically spell the end of bond bubbles. Yet most people dismiss that there could ever be a crisis in bonds which could wipe out wealth world-wide.
Government defaulting on their bonds is, indeed, the crisis you should be worried about. And when the US fed raises rates next week, it will — officially — spell the end to this 30 year bond bull market.
Again, this may panic the stock market in the short term. But when the smart money — sovereign wealth funds, pension funds, and mutual funds — wakes up to the risk in the bond markets, they will buy US equities at a rapid rate.
Keep in mind, this is about surviving the future. This means that quality US stocks will become the safe haven during the next big crash in debt. I’ve provided some strategies for Resource Speculator readers in the past weeks on this topic. If you’re interested, become a reader here.
If you’re smart, you’ll buy commodities
More importantly, (many) commodities — and especially precious metals — should go through the roof when this happens. This is because, among other things, you can expect geopolitical risk to rise when the global economy deteriorates. And historically, rising international tensions correlate with higher commodity prices.
Now everything that you’ve read today isn’t a surprise to my readers. Unlike investment banks, I’ve warned them that resources are about to enter the final phase of the bear market — this is where the most share price destruction take place. In this case, the smartest move you can do is buying quality resource stocks during this next phase — dirt cheap stocks will only get a lot cheaper.
If you don’t buy during this final bear phase, when the crash in the bond market takes place, you’ll surely be sorry.
If you want more information on how to best play these markets, and the sectors set to shine the most, check out Resource Speculator. You can start here.
Resources Analyst, Resource Speculator
Ed Note: This article was first published in Money Morning.