MARKETS: DAY OF RECKONING

In my previous article, “THE MARKETS, THE GOVERNMENT & THE FED: A CRIME IN PROGRESS,” I detailed how the middle class is being financially destroyed via the mechanism of suppressed rates and literally robbed, in broad daylight, of trillions of dollars in realized wealth.
This scheme has caused the stock market to massively balloon along with real estate, both existing today in epic, distorted bubbles.
The fraud is simple. Politicians proudly exclaim, “Look at the stock market – it’s at near all-time record highs!” and “Look at housing prices that continue to move higher!”
Many people equate the stock market with the economy. Yet, nothing could be farther from the truth.
THE STOCK MARKET IS NOT THE ECONOMY!
The middle class is the real economy, and that real economy is in a terrible meltdown, an extermination, which is completely detached from the stock and real estate markets. Moreover, the middle class is being set up to lose again, even bigger.
In previous articles for the Trends Journal, I have covered the topic of “paper wealth,” which is unrealized gains via stock market portfolios and real estate.
Investors with holdings in stocks and real estate are very happy watching their “investments” gain value. But, I will tell you this: only a fraction of these investors has the understanding, or even the ability, to liquidate their stock portfolios and/or real estate holdings quickly enough to make those “unrealized” (paper gains) real. Sadly, most will lose the vast majority of their paper gains when the bubbles burst.
Cold, Hard Truth
The fact is most people today with unrealized gains in the markets and real estate will suffer devastating losses, by design, when all this becomes real… and it will get very real at one point.
The current stock market and real estate valuations are not sustainable. But that doesn’t mean the current price action of these “assets” are not going to inflate further.
Quite the contrary, I believe the value of the market will inflate along with the Federal Reserve’s balance sheet(s) and a falling dollar.
Regarding the dollar, which has gained strength as of late, I forecast it will continue a downward spiral in regard to its purchasing power, again, by design. A weak dollar is very stock market positive, in that it takes more weaker dollars to buy anything, even shares of stock. This mechanism is manifested in higher market prices; the same goes for real estate.
The bottom line is pretty straightforward: as I look at where the markets are headed, I estimate some 90 percent of people holding paper/unrealized wealth in both the stock market and real estate will never see those gains realized. Instead, as I wrote about in last week’s article, at some point soon, they will watch those paper gains evaporate when the markets attain fair value.
What is fair value for the stock market and real estate?
Much lower than the current valuations. The distortions existing today across the entire spectrum of asset classes are enormous. Since the financial crisis of 2008, the mechanism of artificially suppressed rates has created a false reality regarding the value of the stock market and real estate especially, and the devastation which will be left in the bursting of this mega-bubble’s wake will be beyond anything ever seen before.
It will be… the Day of Reckoning. Are you prepared?
In my articles for the Trends Journal and in my blog, TradersChoice.net, I will do all I can to give you fair warning.
by Gregory Mannarino