Taking stock….

Wednesday, 31st October 2018

Taking stock….

Stocks are down across the month of October. Not just in Britain – but everywhere. Significantly so….

The British FTSE 100 index is down 4.81% on the month….

The S&P 500 has fallen 8.6%….

The German Dax is down 7.21%. The French CAC 40 is down 7.5%. In Japan, the NIKKEI 225 has lost 9.6%….

It’s down, down, down – across the board – and investors are worried….

  • Fear levels on the rise….

The VIX measures how fearful S&P 500 investors are feeling about the future….

The current VIX reading is not at the heights of mid-October’s 25.97. But yesterday’s closing mark of 24.70 says investors are still plenty scared….

Here in Britain, the Hargreaves Lansdown Investor Confidence Index says investor sentiment has fallen to a record low. The index fell five points to 53 this month….

That’s the lowest measure of sentiment towards the UK stock market since the Investor Confidence index was launched back in 1995….

And it’s not just man-on-the-street investors feeling fearful. US fund managers also have a stomach knot….

The latest Bank of America Merrill Lynch Fund Managers Survey says optimism among institutional investors about the outlook for economic growth and corporate profits has reached its lowest level since the aftermath of the last financial crisis….

85% of investors surveyed said the global economy is in the late stage of the current cycle. They believe a global downturn is just around the corner….

  • Correction or confidence blip?

So, is what we are witnessing an overdue and healthy correction? Or a blip in investor confidence?

Can spooked markets bounce back? Or is this the start of something bigger, longer and deeper?

Is it time to buy the dip and bank more profits? Or time to run for the hills?

Nobody knows. Not for sure….

But that doesn’t stop countless commentators, pundits, columnists and clairvoyants worldwide trying to explain why prices are falling and where they will go next….

My best advice is to have a cup of tea and don’t get sucked into that vortex. Study enough of that output and you’ll end up hopelessly confused. You’ll certainly be none the wiser. And, likely, less so….

Of course, we must bring you the Money Truths take. But, we’ll keep it short and sweet….

  • The Money Truths take….

Stocks have been in a bubble at all-time high prices….

They’ve been marching up that hill for a decade – on a vitamin-rich diet of cheap credit and freshly-printed money….

Stimulus has been reduced recently. But a return to it is always an option. Donald Trump is certainly agitating for the Fed to retrace its steps….

But markets cannot live on hot air alone forever. The longer-term trend for stocks is down….

Perhaps it will be a steady descent. But don’t discount the possibility of a crash….

There are two ways excess air comes out of a balloon. It can come out slowly in a controlled manner. Or it just goes POP without warning! Stock markets bubbles can go pop too….

A trade war between the US and China might cause that to happen. Or Italian withdrawal from the Euro. Or emerging economies defaulting on dollar denominated debt….

But it will probably be none of these things – things we are all already aware of….

Instead, at Money Truths, we think the big stock market bang will come about on the back of some ‘black swan’ event that nobody sees coming – something nobody is talking about right now….

Just like nobody saw the sub-prime mortgage crisis coming ahead of the 2008 financial crisis….

Like everybody else, we don’t know what that black swan event might be. But keep in mind what the boxer would tell you – it’s the punch you don’t see coming that puts you on the canvas….

  • Cryptos brought low….

Like the stock markets, cryptocurrencies were flying high this time last year. But not this year….

If 2017 was the year of hope and opportunity for crypto-enthusiasts, 2018 has been the year of doubt and despondency….

This morning, Bitcoin trades at $6338.97 – 67% off the high-water mark recorded in mid-December last year….

Bitcoin isn’t the only struggler in the sector. Ethereum is down. Ripple is down. Bitcoin Cash is down. So too the other major players in the sector – Stellar, EOS and Litecoin….

It’s been a heady fall from grace. The sector that was going to change the world beyond recognition has taken a tumble….

Of course, such was the scale of last season’s gains, crypto investors who got into the game early-doors – the first-movers – are still sitting on big gains even at today’s skinnier prices….

But many speculators who got in later – based on the belief that profits were somehow guaranteed– got what is known in the trade as a good old-fashioned ass-whooping….

Wounds are being licked. Soothing cream applied to burnt fingers. Investors who got bit are wary of coming back and getting bit again….

The cryptocurrency sector is having a bad year. This is not something from which it cannot bounce back. But for now, investors are wary. It’s a little crisis….

And you know a crisis is underway when the financial publishing world’s guns fall silent….

  • The industry guns fall silent….

This time last year almost every financial publisher on the block was sprinting to market with a crypto-currency product or service to peddle to the masses….

Goodness only knows where so many crypto ‘experts’ suddenly appeared from but appear they did – producing no end of special reports, books, courses, manuals, seminars, one-to-one coaching sessions, trading services and a whole host of additional high-priced goodies custom-designed for a captive and wide-eyed market to swallow whole….

But these days we don’t hear from those experts. They’ve drawn back into the shadows and gone quiet….

Wherever these experts and crypto-authorities mysteriously appeared from, we can only assume it is the same place to which they have returned. Ashes to ashes. Dust to dust….

Now, when perhaps we need them more than ever, these experts and their services are nowhere to be found….

  • Questions that need answers….

Is it too late for cryptos? Have I missed the boat? Or is it still early days?

Are there profits still to be made in the future? If so, how best to make them?

What should I be doing? How should I be doing it? Where should I be looking? And why?

Never have these questions been more in need of answers than they are at this current time….

We look around for the many experts who were hawking their talents this time last year and we cannot locate any of them….

It is as if they have given up on cryptocurrencies. It is as if they were only experts so long as the market was heading up….

Once it turned south, it was as though all their years of experience and hard-won front-line expertise evaporated….

Perhaps they were never really experts to begin with. Perhaps they were mere opportunists – hustlers leaping onto a careering bandwagon and mustering all the hype, bluster and bull-shine they could manage in place of genuine and authentic credibility….

We don’t know. It’s just a theory….

But the questions we raise still need answers. And, in the absence of the experts, we have had to rely on our own endeavors to answer them – or at least to move closer to answers….

  • Piquing our interest….

Here at Money Truths, we do not believe this is a good time to be in stocks….

But the depressed cryptocurrency sector is piquing our interest….

Next week, I’ll get started telling you why….

That’s how it looks from here….

All the best,

Money Truths