A Warning Shot Across Our Collective Bow
The following is commentary that originally appeared at Treasure Chests for the benefit of subscribers on Friday, May 7th, 2010.
That's the way you should view yesterday's historic crash, witnessing the largest single day point swings in history. You should view it as a warning shot across your bow, because most market participants will stay in the stock market until it's too late. Then, when the real panic starts, a lasting panic with no recovery like yesterday, they will freeze like deer in the headlights, and it will be all over but the crying as stocks crash like never before in a Grand Super-Cycle event. Yesterday was a signal it's coming, as it only marked the first wave of a larger sequence, with the really scary part being it was only seven days in duration. This of course means that after a bounce that could last several days (or not) with a good Employment Report, next week should see more selling, especially if open interest put / call ratio trends (lower) remain favorable in this regard.
Here are a few things associated with the above you should realize, and take action on now just in case this thing spirals out of control. First, you should believe it's coming, as again, yesterday was the signal. It was not a one-day wonder, only being the selling climax of the first wave lower. As you know we have been appropriately bearish on stocks since sentiment turned, however usually the first wave is tamer than what we saw yesterday, possibly foreshadowing something even nastier as the larger degree move matures. In this respect, the last Grand Super-Cycle event saw 90% plus losses in equities, and there is no reason this will not be the case this time as well. Everybody is now in the pool, and must come out. The problem is there is only one small ladder (precious metals and other select tangibles), where most people will drown financially (losing the majority of their wealth via bureaucratic confiscation and blunder), the lesson being - be early.
This brings us to our next point, which is banks and brokerages across the gambit, and internationally, will close, so it's imperative you exit the fiat currency system with a good portion of your savings if you wish to preserve them. Whether it be by closure or inflation, the bureaucracy will screw things up, rest assured of that, so again, exiting the system via diversification into physical and allocated precious metals accounts is imperative at this time given the speed at which events could unfold. Many will come to this realization soon and make this move, so don't hesitate, as like those in the pool, only the early one will make it. And I am talking to those of you playing the short side of the market as well. Don't be greedy, as sooner or later, if not the institution you are dealing with, the very viability of exchanges could and likely will come into question, possibly freezing your investments for a very long time, if not worse.
This, along with the likely advent of a deflation scare / system failure / economic collapse now underway, is why governments will print money to infinity starting anytime now as budget deficits go parabolic. And all this added together is why gold can go to $3,000 in fairly short order, as again, increasing numbers escape our faulty and fraudulent markets, and more so, simply escape a fundamentally corrupt fiat currency economy being managed by the morally incomprehensible. And because this is a global phenomenon, this is why gold is becoming the world's reserve currency despite continued efforts to discredit it (and silver) by the bureaucracy.
Buy all the dips folks.