Dont Let Your Retirement Account Be Fooled By 20000 DOW
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When it happened, you could almost hear the deafening roars of Wall Street investors cheering as the Dow Jones Industrial Average (DJIA) surpassed 20,000 for the first time ever. After over 120 years of turbulent stock market history, it has never before managed to come close to this level. Do not be fooled by Mr. Market at 20,000+ levels.
Now…let’s look back at the not-so-distant history of March 30, 1999. On this day, the Wall Street Journal heralded the dawn of a new era as the Dow blew past 10,000 for the first time in history with its “Dow Industrials Top 10,000” headline. At the time, this was a record high which occurred on March 29, 1999. It lasted for 8 and a half months.
By January 14, 2000, the Dow and other market indices had reached their inevitable peak. From this point on, a bloodbath ensued during the period from 2000-2002. An eye watering $5 trillion of wealth vanished from the pockets of investors around the world.
The same thing also happened in the Bitcoin and crypto asset markets. From the low point in Bitcoin prices, set in December of 2015, Bitcoin then went on a stunning run to nearly $20,000 by January 2018, and has all but fell off a cliff since then and still awaiting recovery.
These new lofty prices levels of the Dow and Bitcoin should give plenty of pause for thought and concern. Whether or not you believe a severe market correction is long overdue or not, you should at least consider that buying stocks or crypto assets when they are overpriced is the single worst mistake you can possibly make in investing. Regardless of how amazing the investment may appear, when you pay too much, you are asking for trouble.
How do you know that stocks are so overpriced now? It is more than the recent record of 20,000, which only 10 years ago sounded more like science fiction than actually possible. It’s the fact that the price to sales (PS) ratio is the highest it has been in 15 years at least. Some scary food for thought is that this ratio is actually massively higher now than it was before the last devastating crash in 2008.
Consider the Price to Earnings (PE) ratio as well. This cyclically-adjusted level today stands at its highest amount since the “Dot Com” crash after 2000, which is also higher than before the 2008 market crash. The same goes for Enterprise Values to Earnings Before Interest, Tax, Depreciation, and Amortization (EBITDA) which measure the operating cashflow of a company’s main business.
It would be pure folly to believe that U.S. stocks, or anything else for that matter, will simply continue to rise forever. History teaches us what happens when investors start to believe that. Remember when real estate “just couldn’t go down” in the year 2006? A better choice would be to invest in markets where there is opportunity remaining. Many overseas markets are now far more attractively priced.
Goldman Sachs recently announced that European stock markets have twice as much potential and room to rise as do American equities markets. Their Price-to-Book ratios are significantly more attractive than their American counterparts.
Even Japanese corporations are flush with cash (more than any exchange-listed companies in any rival nation) and starting to pay higher dividends and do more share buybacks. This is true while their stocks are at comparatively cheap prices when measured against American stocks.
As for the debt levels of Japanese companies, they boast the strongest balance sheets on earth. Compare this to American companies which are overburdened with years of built-up corporate debt. Value investing remains among the most successful strategies in the markets over the past 50 years.
Are Your Retirement Assets Ready for the Inevitable American Stock Market Crash?
Stocks never rise in a straight line. History has proven over and over that when stock prices irrationally get ahead of themselves, they come crashing back down. Remember Alan Greenspan’s “irrational exuberance” speech around 1996? These words were put into his speech to spook the markets.
At first, it seemed to have the intended affect and the market fell off just over 1%. But the following 3 years, the market climbed way past rationality and Greenspan’s words were ignored by 1999. The market then had a catastrophic crash in the second half of the year 2000.
This “irrational exuberance” leading to market crashes was the case in 1987, 2000, and 2008. In the US, we are long overdue for a severe pullback, especially given the new all-time highs which are based only on speculation and hope. When the markets do inevitably fall back down, gold will once again prove to be the smartest asset class in which to have moved at least some of your retirement assets.
Since 1971, gold has consistently outperformed the stock market, real estate, and currencies. The yellow metal will protect you again in the next stock market retrenchment. You can safely rely on its hedging power for your portfolio. Request your free and no-obligation gold IRA rollover kit now from Regal Assets by clicking here to learn everything you need in order to protect your assets by a partial allocation to physical gold.
