According to Goldman Sachs (via a ZeroHedge.com report), the “growth” phase is behind us, we are now in [ending] the “optimism” phase, and it is only a matter of time before “despair” sets in.
For Goldman to sound the alarm is actually quite interesting. Are they actually warning us?
Most of us who have been paying attention have known for quite some time that it’s only ‘a matter of time’ before ‘real’ valuations become reality while a massive ‘correction’ ensues – potentially tripping a chain-reaction as the house-of-cards comes tumbling down.
A report from Goldman reads that “one large drawdown can quickly erase returns that were accumulated over several years.”
Translation: They’re warning of a singular event to wipe out a sizeable portion of the stock market – in a very short period of time…
They go on to say that large equity drawdowns coincide with a financial market/geopolitical shock, which tend to result in a sharp equity correction (the ‘Despair’- phase).
Translation: They’re warning of major war and/or the current election cycle.
Current evaluations are arguably quite (very) highly over-evaluated, and have led to stock market highs.
Why? Goldman says “We think the market has extrapolated the view of low rates into the future. Declining bond yields and the ensuing search for yield that has moved to equities have likely supported equity valuations.”
Note: The FED is entirely backed into a corner with ZIRP while world central banks actively engage NIRP – which has subsequently boosted stock equities as investors look for yields.
ZIRP (zero interest rate policies)
NIRP (negative interest rate polices) (Yes, negative…)
Translation: This massive (bubble) equity influx for the most part is NOT based on ‘real’ fundamental valuation, but instead false notions and ‘optimism’ – while the underlying value is not actually worth what it pretends to be worth… It’s money looking for a return on the money while bond yields are near all-time lows. Investors have been fooling themselves as they drink the central-bank Kool-Aid, and the biggest bubble in world history is one day going to blow up…big time.
So what’s a person to do?
Well, most who regularly read this blog already ‘get it’. With that said, here’s a consideration:
First, examine your preparedness. While the preparedness-minded person may never feel entirely ‘prepared’ (there’s always something more that one wishes to do…), if you actually are reasonably prepared and if you’re wondering what to do with ‘some’ of your so called ‘excess’ fiat currency, here’s a suggestion:
Invest some of it in precious metals.
There is no couter-party risk with psychical precious metals. Silver and Gold have been considered ‘real’ money for thousands of years, and will into the future.
Just like you might regularly purchase some extra food, ammo, or other such supply, you might also regularly purchase some physical silver (or gold). They will always hold their value as such, and will survive through any currency devaluation or other economic trauma.
With that said,
APMEX.com is an excellent trusted resource (whom I have used).
Disclaimer: They are an advertiser here, and for good reason. Trust.
So what do you think about the recent ‘warnings’ from Goldman?
Can the (false) equity growth continue on and on on, or will it ‘correct’?
If there is to be a ‘major’ correction, what do you see happening?