Gold is still low, and the gold miners are incredibly undervalued at the moment, while most equities are extremely overvalued. On Tuesday, the Dow lost 800 points. Will it continue to fall or will it rebound again? Here are three things to watch…
1) Market Cap to GDP Ratio, otherwise known as the Buffet Indicator
Just divide the total market capitalization of all U.S. stocks by the latest gross domestic product (GDP). Here’s what it means according to Warren Buffet.
|70% to 80%||Safe to put money in stocks|
As of today (December 5, 2018), the total market index is at $ 28769.7 billion, which is about 139.3% of the last reported GDP. It seems we are entering the “Extremely Dangerous” territory on what is probably the single most important indicator in predicting a stock market crash. For updates, visit gurufocus.
2) Inverted Yield Curve
The yield curve is a graph of interest rates on government bonds organized by the months or years until the principal must be repaid. On December 3, the yield curve inverted. In a nutshell this means that short-term interest rates are higher than longer-term. What’s more, it’s the first time an inversion has occurred since the 2008 recession. Another good indicator of what’s to come.
3) A Thought-Provoking Fact about Debt
I deducted this fascinating piece of information from a book called Gold Is A Better Way: And Other Wealth Building Secrets Wall Street Doesn’t Want You To Know. Anyway, if you handed out a one dollar bill every second without stopping, you would reach 1 trillion dollars in 32,000 years. No joke, it would take you 688,000 years to hand out 21.5 trillion dollars (the US debt load) without taking breaks. Can you wrap your head around the fact that the US is currently adding a trillion dollars (or 32,000 years) every 6 months? Ugh, I sure can’t, but I do know that debt isn’t eternal like God. The law of supply and demand says the more dollars we print, the less value they have. When the whole U.S. system is built on an ever-growing monster of credit that depends on the world to use its currency….gulp…look out below!