The Ultimate Mind Game – To Crash or just Correct

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QUESTION: Hi Martin,

Thanks for your great work, it is a pleasure to read your articles and your explanations about gold, government debt and the stock market. Your last article has me confused, however. I have learned from your articles that a crash in the stock market can only occur when the retail investors are in. The masses are always wrong and when they buy the last 12 months, the crash is near. In your last article you mention the possibility of a cycle inversion. So my question is: how can we have a crash in 2014, when the retail investors are still out of this market?

 

Thanks, H

UBLST-25

ANSWER: If we get a high in 2014 and a decline into 2015, it would be only a correction and not a CRASH in that sense. This would invert the cycle and then stock would be the flight to quality not bonds. This is only a possibility and not yet confirmed. It become possible ONLY because we have a sovereign debt crisis and capital will flee to private assets. There is no safe haven in government bonds. Even during the Great Depression, Andrew Mellon first said about the crash in stocks that this was why “Gentlemen prefer bonds.” He was then proved wrong in 1931 when the bonds collapsed.

Corp-Treas%

We are dealing with a complete inversion in thinking process. This is the essence of the shift from Public to Private debt. After the Sovereign Debt Crisis on 1931, people then turned to AAA corporate debt rather than government. They even assumed the USA would be next to default and that is why the dollar then crashed in anticipation of a default that never took place.

1900$X-M 1931 Sovereign Debt

This is the ultimate mind twisting game that we now face. This is why the report I am preparing is so important simply to comprehend this complex subject historically how capital actually moves. There is no room here for personal opinions. Just the raw facts – thanks you. Capital moves in ANTICIPATION of events, and they do not even have to happen. That is the ultimate mind game.

Already you have people claiming the market will crash just like 1929. They have no idea of what they speak. You cannot even compare the charts of a single market. This is way beyond simplistic analysis. This is stuff that will carve new pathways for thinking in your brain.