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What Will Be Worse This Time Around?

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Dear Marty,
I’ve attended several of your conferences, and thank you very much for all you do.
You’ve said that the next decline is going to be far worse than the last one.  Intensity and volatility is building.  By that statement, do you mean both the US economy and the US stock markets may decline more than in 2009?  I understand your comments about the US economy declining, but are you also saying that the US stock markets may decline to new lows below those of 2009, or do you anticipate the US stock market remaining fairly stable/flat relative to the US economy, given the anticipated problems in the debt markets?  Following next year’s melt-up, what is your downside target bottom for the US stock markets between 2016 and 2020?
Best regards,
ANSWER: No, this is in reference to the economy globally. Unless we can get that Phase Transition sooner than later in equities, there will be no dramatic crash. The last time wiped out so many retail investors, they have not returned and liquidity is at 50% of 2007 levels. This trend has impacted gold as well. The gold promoters have wiped out so many people there also the numbers interested in gold are down. Then we have FATCA preventing international capital investment flows with the hunt for taxes. Then we have the whole problem of reserves. The dollar is the only game in town and this has forced central banks to buy equities. They will not liquidate on a panic move easily. Without the real Phase Transition, there cannot be a huge swing down. The higher you move the wilder the move down.
You need that point of inflection to reverse a market. Take gold. Until you really break the back of the gold promoters, the low will not firm up. It is like Japan, The low in the Nikkei kept moving lower because everyone was long looking to sell the rally. You need extreme bearishness to create the low for they cover and mark the rally. Then the fight the rally as we have seen in the stock market – the perpetual non believers. We we flip that sentiment in gold you will reverse the trend/ Nothing ever moves just in one direction forever.
We expect the banking collapse in Europe to be the worst this time and then we have pension crisis. This will be ugly in selected sectors that are typically different with each cycle. The 1998.55 Wave gave us the collapse of Emerging Markets (Russia) and then the Dot.COM Bubble. The Next wave 2007.15 gave us the real estate & derivatives. There is always a different sector with each wave. Capital just wants to invest, it care not what the investment might be if there is money to be made.
We should experience tremendous DEFLATION in the USA as global capital pushes the dollar higher during to the Sovereign Debt Crisis with Moodys even looking to downgrade France now and War in Europe. All of that pushes capital to the USA. If China also looks like war with Japan, the yen will collapse and capital will come here like never before. That would also be the final straw for the Gold promoters who never have Plan B – only buy.