Will the Stock Market Crash in September?
The stock market is set to crash in September - at least that's what a recent round of reports claim. And, by the way, September's just about here.
Worried?
Well, there have always been various stock market indicators that supposedly tip us off as to a coming crash - or even a coming boom. They're too numerous to mention. Suffice it to say that some of them have predicted events from time to time. They actually seem to work.
But when they catch on with the wider public, specifically with the investment community, they lose all their "magical" predictive power. When everyone starts trading around them, then they just kind of fade into oblivion.
Let's take the so-called "Hindenburg Omen." It's supposedly saying "Crash!" in September for stocks. It's not even worth going through what exactly this indicator consists of. It's been right sometimes, wrong others. Why pay attention?
For one thing, I think there are folks out there who really do like this "gloom" or even "end of the world" type stuff. So I'm guessing this plays into their emotions and gets people reading stories in publications like the Wall Street Journal.
It's too bad, because there are indicators that have stood the test of time and can help you invest better. But the good indicators usually don't make these bold kinds of predictions - especially bold predictions that tell you not only that disaster is coming, but exactly when to expect it.
For example, my firm uses some technical analysis and we find it useful in helping us decide how much of this or that item to put new money into, or when to scale back and get more defensive by let's say, raising cash, or considering some other hedging mechanism.
But the thing with that is, there's no drama in it. It's more of a kind of plodding thing that you do to make sure you do a good job making decisions.
Now calling for a crash - that's something else! There's something exciting about that, now, isn't there?
One thing about crashes to remember is this: it's usually not crashes that really get you. That's not how really bad bear markets work.
No, really bad bear markets just sort of slowly strangle you. The bear squeezes you until you look a bit red in the face - then he eases off. You stick with your stocks, or other investments. You figure the worst is over. The bear plays along by allowing a bit of a rally - or maybe even a big rally like we just had.
Then the squeezing starts again. You lose even more than you did last time. Then the same process repeats itself.
This goes on until maybe you realize you're screwed. And then you don't sell because you figure it's going to "come back" and you don't want to sell out at the bottom.
And that's when the final blow comes. Everything just kind of grinds to a halt. Nothing happens - for a long time. And soon everyone just sort of gets depressed and gives up. You included. The world's pretty much changed forever. You think, "This stuff will never come back." So you sell.
So while getting stuck in a crash is no fun - and it's best to avoid it if you can - the real killer is the really bad bear market. That's the thing you've got to watch for.
And I think we may very well be in one right now.
Of course, if you believe in "stocks for the long run" or "buy and hold" investing, none of this matters to you. You'll just hang in there no matter what. And eventually you'll be vindicated - even if it's 20, 30 or 40 years from now.
If you think that way, I'm guessing you've never really been through a really bad bear market. But good luck anyway.
Worried?
Well, there have always been various stock market indicators that supposedly tip us off as to a coming crash - or even a coming boom. They're too numerous to mention. Suffice it to say that some of them have predicted events from time to time. They actually seem to work.
But when they catch on with the wider public, specifically with the investment community, they lose all their "magical" predictive power. When everyone starts trading around them, then they just kind of fade into oblivion.
Let's take the so-called "Hindenburg Omen." It's supposedly saying "Crash!" in September for stocks. It's not even worth going through what exactly this indicator consists of. It's been right sometimes, wrong others. Why pay attention?
For one thing, I think there are folks out there who really do like this "gloom" or even "end of the world" type stuff. So I'm guessing this plays into their emotions and gets people reading stories in publications like the Wall Street Journal.
It's too bad, because there are indicators that have stood the test of time and can help you invest better. But the good indicators usually don't make these bold kinds of predictions - especially bold predictions that tell you not only that disaster is coming, but exactly when to expect it.
For example, my firm uses some technical analysis and we find it useful in helping us decide how much of this or that item to put new money into, or when to scale back and get more defensive by let's say, raising cash, or considering some other hedging mechanism.
But the thing with that is, there's no drama in it. It's more of a kind of plodding thing that you do to make sure you do a good job making decisions.
Now calling for a crash - that's something else! There's something exciting about that, now, isn't there?
One thing about crashes to remember is this: it's usually not crashes that really get you. That's not how really bad bear markets work.
No, really bad bear markets just sort of slowly strangle you. The bear squeezes you until you look a bit red in the face - then he eases off. You stick with your stocks, or other investments. You figure the worst is over. The bear plays along by allowing a bit of a rally - or maybe even a big rally like we just had.
Then the squeezing starts again. You lose even more than you did last time. Then the same process repeats itself.
This goes on until maybe you realize you're screwed. And then you don't sell because you figure it's going to "come back" and you don't want to sell out at the bottom.
And that's when the final blow comes. Everything just kind of grinds to a halt. Nothing happens - for a long time. And soon everyone just sort of gets depressed and gives up. You included. The world's pretty much changed forever. You think, "This stuff will never come back." So you sell.
So while getting stuck in a crash is no fun - and it's best to avoid it if you can - the real killer is the really bad bear market. That's the thing you've got to watch for.
And I think we may very well be in one right now.
Of course, if you believe in "stocks for the long run" or "buy and hold" investing, none of this matters to you. You'll just hang in there no matter what. And eventually you'll be vindicated - even if it's 20, 30 or 40 years from now.
If you think that way, I'm guessing you've never really been through a really bad bear market. But good luck anyway.
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