‘Sell now and bank the cash,’ The Rum Rebellion editor Vern Gowdie says about stocks. ‘Even if you’re a few months early, it’s better than being a day late.’
Vern’s warning goes out to all Aussie investors. But he’s especially concerned about folks over 50. Or anyone planning to retire inside the next 10 years.
He has one eye on the record high valuations posted in US and Aussie stock markets. His other eye remains fixed on the ballooning mountains of debt keeping share prices aloft.
First, the valuations.
‘Looking at the historical P/E and multiples applied to the US S&P 500, stocks are way more expensive now than they were even before the 2007/08 crisis,’ Vern says.
If the S&P 500 is overpriced, how about the ASX 200?
Well, according to JP Morgan’s recent report on stock valuations, the ASX 200 (excluding the financials and materials sectors) is trading at a 37.9% premium to the global MSCI developing markets index.
JP Morgan also reports the ASX 200 is trading at a hefty premium to the S&P 500.
Just have a look at the chart below:
Source: Australian Financial Review
At these valuations the ASX — and most global indices — have the potential to fall a very long way during the next financial meltdown.
You likely remember, with an uneasy flutter, the fallout from the 2007/08 crisis. From peak to trough the ASX 200 plummeted 54%.
Just eight years earlier, in 2000, the NASDAQ suffered even more when the dotcom bubble popped. It fell by 77%.
Those numbers are enough to keep even the steadiest–nerved investors up at night. But Vern believes the next crash could be worse, with the ASX losing as much as 65%.
That’s because global governments opted to address the last debt fuelled crisis with…more debt. And their plan for the future?
Full steam ahead.
From the AFR:
‘The United States will spend most of the 21st century mired in ballooning government debt as a new spending surge and the Trump administration’s tax cuts push this year’s deficit above $US1 trillion ($1.48 trillion).
‘The independent Congressional Budget Office has painted a bleak outlook over the relative short term, as well as for the next three decades, as increasing social security and medicare entitlements overwhelm the budget.’
Of course, it’s not just the US mired in debt.
Australia, the EU, China, Japan…most every developed nation has eagerly dipped into the easy money bowl. As have businesses and households.
That’s caused what Vern labels ‘phantom growth’ in stock prices. Growth not based on superior company performance. But on an unsustainable appetite for ever more debt.
While Vern recommends selling all stock holdings there are five specific stocks he thinks you should unload immediately. He details why in this free special report.
You can click here to access the report…for free…now.