“Bull markets climb a wall of worry.” — “Maxims of Wall Street” (p. 66)
“Bull markets never die of old age — they are killed.” — David Ranson (p. 109)
Whenever the stock market hits new highs, the perma-bears and gold bugs come out of the woodwork and call for a crash or bear market.
Today is no exception. Recently, a whole slew of billionaire money managers and Wall Street gurus are warning of the “mother of all crashes” and the collapse of an “epic bubble.”
The billionaire investors Leon Cooperman and Stanley Druckenmiller have sounded the alarm. So has “Shark Tank” star Kevin O’Leary, the market forecaster Gary Shilling and the “Rich Dad Poor Dad” author Robert Kiyosaki.
Hedge fund manager Stanley Druckenmiller said today’s market reminds him of the dot-com boom that ended badly in 2000-01.
“I have no doubt that we are in a raging mania in all assets,” the billionaire investor said. “I also have no doubt that I don’t have a clue when that’s going to end.”
He said he expects to pull his cash out of equities in a matter of months.
“I will be surprised if we’re not out of the stock market by the end of the year, just because the bubbles can’t last that long,” he said.
Should You be a Contrarian?
Perhaps a crash is coming, but I am skeptical. The stock market is selling for around 20 times estimated earnings for 2021-22, which is a reasonable valuation, given the low-interest-rate environment we are living in.
We are also recovering from a fearful virus and a situation where governments everywhere over-reacted and shut down small businesses, universities, entertainment, cruise ships, travel and trade.
Fortunately, private enterprise stepped up and saved the day — Amazon, Zoom, Netflix and Pfizer, among others, provided ways to save, and even prosper, during the temporary lockdown.
Major corporations are in much better shape since the financial crisis of 2008. They have cut costs and are sitting on billions in cash… Berkshire Hathaway has $145 billion in cash… Google $135 billion… Microsoft $125 billion… Amazon $73 billion… Apple $70 billion… and Facebook $64 billion.
Lousy Track Records
I’d pay attention if these soothsayers all had good track records. But many have a checkered past when it comes to timing the market.
For example, hedge fund manager Michael Burry is famous for successfully betting against the United States housing market in 2008, but he’s been notoriously alarmist since then.
Robert Kiyosaki, author of “Rich Dad Poor Dad,” has been predicting “the biggest crash in world history” since 2002, when he came out with a book entitled, “Rich Dad Prophecy.” He has repeated this same forecast in 2015 and 2021, only to be proven wrong time and time again.
Kiyosaki has rightly warned that the Federal Reserve has overstimulated markets and devalued the dollar. He’s advised investors to prepare for the downturn by stocking up on precious metals and cryptocurrencies. Cash and Treasury note bills might be better.
Gary Shilling, the long-time columnist for Forbes magazine, is famous for being a perma-bear. He is the only economist I know who has been right about the downward direction of interest rates since 1980. But his forecast on stocks has been decidedly bearish even as stocks have outperformed most other assets in the past 40 years.
Admittedly, there are bubbles and speculative fever in the markets, as reflected in the price of Tesla, GameStop, Bitcoin, Dogecoin, Robinhood and the red-hot U.S. housing market.
When Will the Market Top Out?
But it is difficult to predict the top of the markets. As Humphrey Neill, the author of “The Art of Contrary Thinking,” concludes, “The public is right during the trends but wrong at both ends.”
My view is that when the Fed starts raising rates to “fight inflation” instead of “fighting recession,” look out below. That’s when a bear market is coming.
FreedomFest Update: Keynote Speaker Larry Elder to Run for Governor
Larry Elder (left) will speak at FreedomFest this year.
Good news! Larry Elder, the long-time popular host of the “Larry Elder Show,” is expected to announce his decision to run for governor in the recall election for Governor Newsom in California.
He will take time out of his grueling schedule to address us on July 22 at the Rushmore Civic Center in Rapid City, South Dakota.
Going the Extra Mile: Speaker Flies 9,000 Miles and Endures 14-day Quarantine to Come to FreedomFest!
Jose Cordeiro will join us at FreedomFest this year. Photo credit to H+Pedia.org.
Kudos to our speaker Jose Cordeiro, who refused to take “no” for an answer in traveling from Spain to the United States due to COVID-19 restrictions.
So, he flew 5,000 miles from Madrid to Panama, where he has been under quarantine for 14 days. Then, he will fly another 4,000 miles from Panama to Rapid City, South Dakota. Now that’s a commitment to liberty!
Jose will be speaking on the most recent technological breakthroughs that allow us to live longer (based on his new book, “The Death of Death: The Scientific Possibility of Physical Immortality”).
He will also give us an update on the communist takeover of Venezuela.
Be sure to say hello and congratulate him for going the extra mile (actually 9,000 miles) to come to the land of the free and the home of the brave.
Coming to FreedomFest? Rates Went Up Today, but if You Call Hayley…
We are adding new registrations every day (yesterday, we added 34 new attendees and just went over 2,230 registrations). There’s still time to join us. Note: Our final discount ended last night, and the registration fee is now $549. Guests continue to pay $399.
To join us, go to www.freedomfest.com.
But, if you call Hayley TODAY at 1-855-850-3733, ext. 202, she can give you the lower rate. Plus, use the EAGLE50 code to get $50 off.
We’ve added a new room block, but it’s filling up. To reserve a hotel room, call Nancy at Black Hills Vacations. The telephone number is 1-800-400-6194. You’ll be glad you did.
FreedomFest is two weeks away. Act now. Fly there, drive there, bike there, RV there, be there!
P.S. My presentation on The Great Crypto Trade has been picked up by the Global Financial Wealth Network. To watch this free presentation, click here now.
Good investing, AEIOU
You Blew It!
The G7 Countries Make a Typo!
“Little else is required to carry a state to the highest degree of opulence but peace, easy taxes, and a tolerable administration of justice.” — Adam Smith
Last week, the Washington Post reported that the finance ministers for seven of the most powerful nations in the world (G7) announced plans to impose a 15% minimum income tax, in “what is expected to be a long and arduous process toward changing international tax laws.”
I swear their announcement was a typo. Didn’t they mean to say a MAXIMUM tax rate of 15%?
Hong Kong has had a maximum income tax of 16.5% for decades, and NO tax on investment income or capital gains. As a result, it was one of the wealthiest places in the world (until China’s crackdown).
Yale professor Gregory M. Collins has written a remarkable tome on “Commerce and Manners in Edmund Burke’s Political Economy” (Cambridge University Press, 2020).
I am especially taken with his summary of Burke’s opinion on public financing:
“We must not forget the pillars of Burke’s conception of public finance: a government that enacts low and moderate taxes occasions a far healthier stream for posterity than an arbitrary system of high taxation; a powerful and effective state is a trim and selective one; government should not be run by a large administrative bureaucracy and public accounting practices should be implemented with consistency and transparency.” (p. 528)
Amen.
Surely the government can achieve its goals by adopting a maximum income tax of 15%.
If major governments adopt a minimum 15% tax rate, there is no telling what folly they may commit in the name of progressive taxation.
British economist John Ramsey McCulloch said it best: “The moment you abandon the cardinal principle of exacting from all individuals the same proportion of their income or their property, you are at sea without rudder or compass, and there is no amount of injustice or folly you may not commit.” (emphasis added).
