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Warning Sign: The Last Time This Happened In Stock Markets An Epic Crash Followed

Mac Slavo
February 24th, 2017
SHTFplan.com
Comments (55)
Read by 9,801 people

bubblepop1

The Dow Jones continues to hit record highs and yesterday it reached a milestone not seen since January of 1987.

Back then, the band Starship was at the top of the charts with their hit song Nothing’s Gonna Stop Us Now, which appears to also be the rallying cry of Wall Street, Main Street and 1600 Pennsylvania Avenue today.

Of course, for those who are familiar with their history, that year didn’t end up so well for investors. On ‘Black Monday’, October 19th, 1987, the U.S. stock market suffered the largest crash in history with the Dow Jones losing 22.6% in value, amounting to roughly $500 billion in losses by the end of the trading day.

And if the exuberance of 1987 is any guide, we may be looking at a similar set of events over the course of 2017:

The Dow finished with a more than 30 point gain Thursday and hit its tenth record closing high in a row.

But what makes this rally truly historic is the fact that the market is also continuing to hit new highs during this epic run. That hasn’t happened since Ronald Reagan’s second term.

The Dow wound up hitting 12 consecutive records in January of 1987, and it went up 13 straight days overall.

Of course, market historians might ominously note that 1987 was also the year that the stock market suffered its worst one-day drop ever. (CNN Money)

The records in and of themselves aren’t necessarily an indicator of a coming crash, but they should certainly be raising warnings signs, especially considering that many experts, including traditional bulls and bears, are noting that markets have gone up too high, too fast.

“We’re due for at least a rest, if not a correction. We’re way overbought,” said Steve Massocca, managing director with Wedbush Securities. Massocca said the market will continue to focus on data, with a truck load of reports next week on everything from fourth-quarter GDP to inflation and auto sales. The other focus, of course will be on Washington. (CNBC)

But don’t take our word for it. Here is what the Federal Reserve had to say about stocks just a few months ago, before we started breaking historical records like we did on Thursday:

Finally, the chart below shows the median price/revenue ratio of S&P 500 component stocks, which recently pushed to the highest level in history, exceeding both the 2000 and 2007 market peaks. In recent quarters, the broad market has deteriorated, even in the most reasonably valued decile of stocks, but the most richly valued decile has held up for a last hurrah, as it did near the peaks of previous bubbles. This dispersion has created a headwind for hedged-equity strategies in U.S. stocks, particularly value-conscious strategies, but investors should understand that beneath the surface of this short-term outcome is singularly the most extreme point of overvaluation for the median stock in history.

As the analysts at Zero Hedge highlight, we are literally at a point where major banks and analysis firms are justifying corporate valuations at 20+ price/earnings ratios with “animal spirits” as a driving force.

No, seriously, we’re not kidding:

Carbon-based traders of a certain vintage – which excludes today’s 20-year-old hedge fund managers – may recall a time when a 15x P/E was considered “fair.” Not any more. In fact, according to a new analysis by Barclays’ equity strategist Keith Parker, which tries to factor in so-called “animal spirits” as a driver of valuation has found that 20x P/E is perfectly normal and fair for the current market, further demonstrating just how deep into the goalseeking rabbit hole US capital markets have fallen.

First, to prove we are not joking, here is Barclays explaining why it is important to quantify animal spirits as a input factor of “permanently high plateaued” P/E multiples:

Core drivers of the P/E multiple and animal spirit indicators

In order to estimate the effects of “animal spirits”, or the potential effects of some of President Trump’s agenda, we first model the S&P 500 P/E using the core fundamental drivers of equity valuations. We then compare the residual from the model (actual minus fitted P/E) to various indicators of “animal spirits” or potential policy changes, including: tax policy, credit spreads, inflation, macro volatility, long-term growth expectations and corporate/consumer sentiment data.

The punchline: “Based on our findings we incrementally add other variables to build a more comprehensive P/E model, to better evaluate the potential effects of “animal spirits” on equity valuations”

At this point Barclays provides numerous pages of tortured, goalseek “empirical evidence” to extract the result it is after. What it “finds” is that what was once a “fair” 15x P/E is now really 20x P/E thanks to, drumroll, animal spirits

Full report: How A Major Bank “Calculated” That 20x P/E Is Now “Fair Value”

We’re not going to attempt to predict what happens next, but history suggests that extreme valuations, consecutive all-time record highs, and media exuberance often lead to the same end result.

But this time it’s different, right?

Perhaps. But we suggest preparing for the worst just in case the experts are wrong. That may include re-balancing your existing portfolio with precious metals assets, moving some of your holdings into cash, and positioning yourself with essential supplies in anticipation of a widespread credit event like the one witnessed during the crash of 2008.

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Author: Mac Slavo
Views: Read by 9,801 people
Date: February 24th, 2017
Website: www.SHTFplan.com

Copyright Information: Copyright SHTFplan and Mac Slavo. This content may be freely reproduced in full or in part in digital form with full attribution to the author and a link to www.shtfplan.com. Please contact us for permission to reproduce this content in other media formats.

55 Comments...

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  1. Anonymous says:

    No no no. The TV said the stock market will never go down again. Why would it? Everything is so awesome.

  2. KY Mom says:

    Prepper tip

    Preparedness Items to get in End of Winter Sales
    Begin keeping your eye out on all the things on clearance and heavy mark down – and ask yourself … can they help me be better prepared or become more self-reliant?

    CLOTHING
    Winter Clothes
    Coats, hats, gloves,
    Winter shoes, boots, winter socks
    Hunting gear

    FOOD
    Food Storage Items – marketed towards winter storage, food clearance items,

    EQUIPMENT
    Heaters
    Hand Warmers
    Snow Gear
    Winter Car Gear
    Gear Bags

    HOME
    Winter bedding
    Window Treatments
    Home Items – paper plates, napkins, dishes, serving equipment

    CAMPING
    Sleeping bags

    GENERAL
    Keep an eye out for anything that might be marketed as a winter item – stores don’t like to keep anything out of season around, so are willing to let it all go at incredibly cheap prices!
    What will you be looking out for in your stores (or what have you already found?)

    http://momwithaprep.com/preparedness-items-get-end-winter-sales/

    • Sgt. Dale says:

      KY MOM
      Very good point. Went into Wally World and picked up 10 or 12 count hand & toe warmers for $2.50. Two pack of heavy winter socks for $5.00.

      Had Mountain House foods on sale for $4.00 a meal for two people.

      Sgt.

    • buttcrackofdoom says:

      good one, mom, let me add that good quality longjohns should be available on sale any day now, and for MY money, they are one of the MOST essential things to survive winter….also scarfs. and since i buy/sell military gear, and use/test it, i know it’s very good stuff. another way to get good gear is if you live near a military base this stuff can be found often for almost nothing on bookoo dot com. google….no….wait….duck duck go dot com and type in ECWCS to educate yourself on the seven different layers of military clothing available….one more place is the military surplus store, keeping in mind the one in my town is NEGOTIABLE on his prices(also a good place to find that bulletproof vest)..and don’t forget the DRY firewood…

    • KY Mom:

      You are right on the money. I like to walk for exercise. Stores provide an opportunity to walk and are more interesting than a treadmill. In the meantime, I pick up useful items on sale.

      __

    • KY Mom,

      Agreed 100%. I’ve been hitting the stores with the same attitude. Also hitting garage sales, and moving sales.

    • Tarheelbilly says:

      The local Goodwill had 50% off of kids clothes and 75% off of coats and boots. I bought a brand new wool coat for myself and next year’s winter coat (Columbia) for my kiddo. Also bought next year’s jeans and several sweaters for her. We hit the local Walmart last week and bought wool socks, thick Dickies flannel shirts, and insulated jeans on clearance.

    • lori says:

      Thank you for the information. I copied the list.

  3. Sgt. Dale says:

    I’m staying POSSITIVE!!!!!!

    That’s Right nothing going to stop up US NOW.

    If we stand together there isn’t anything that can stop US (United States)NOW!!!!!! There is a shit storm coming, but like the song said “If we stand together nothing can stop us now”.

    The major difference is we didn’t have Trump in the White house.

    I’m still prepping, because some Bastard my do something to Trump and the whole thing can go into the Shitter!!!!

    Sgt.

    • GunnyHiway 1960 says:

      C’mon Sarg,
      There is absolutely NOTHING to be positive about.
      Period.
      The only ones making money off the “stock market” are the ELITES.
      When they are done with raping our country, it will crash out.
      MILLIONS of serfs and peasants are still homeless, hungry and VETS are freezing to death on park benches across the country.
      TRUMP is a CHARLATAN and a FRAUD.
      He has NOT “Drained the SINK” let alone the “SWAMP”.
      WHY is John McCain still in office, Paul Ryan, Mitch McConnell and ALL the rest?
      The “BLACK LEADERS” in Congress have all gone batshit crazy and their #1 is a FKN MUZLIM TRAITOR!
      Yet they all fawn over Keith Ellison like he was JESUS CHRIST!
      Speaking of “Jesus”… Where the FUCK IS “GOD” in all this?
      NOWHERE TO BE FOUND because GOD does not exist as a deity.
      GOD EXISTS as a CONTROL MECHANISM for brain dead SERFS and PEASANT and has since at least the EXODUS.

      I am DONE “prepping”.. I have more than enough “beans and bullets” to last me and the one or two people I care about for the WEEK or TWO that we will actually LIVE after the Criminal Elite bring the house down in flames.

      I have no idea where you live, but here in Puget Sound(Seattle Metro) there are over 5 MILLION stupid, vacuous, lazy, LIBRATS, TWINKS, MESSICANS and BLACKS..
      ALL looking to kill any “white person” they encounter.

      I would wish you all “good luck”, but that would be gratuitous and insincere.
      Carry On,
      Gunny

      • TRUMP2016 says:

        Wow! You really are surrounded by all kinds of $hit, aren’t you my friend… WTF has happened to this land? I am almost ashamed of this country anymore. Nothing but fruits, liberals, muslims, gibbons and the white man is treated like a warm pile of cat-$hit.

      • Gunny, I don’t think Trump has done to bad for the first 30 days. I’m looking forward to seeing what he’s going to implement in the next 30 days.

        • I agree WED. Gunny is just disillusioned by the constant shitstorm and can see a way forward. Its OK. I still have faith in the Trump Train. Its full steam ahead! We’ve hit a couple bumps on the rail but nothing serious. I’m still paranoid about him being a charlatan, but, I still have faith. I said from the start I’d support him until I can’t and, so far, its A+++.

          The next 30 days will be interesting, to say the least! Trump does not intend to back down! In fact, I can see it in his eyes: this opposition the encountering of the traitor in the intelligence community is like a shot in the arm to him. He thrives on it!

          Go Donny, go go go! Donny be good. …and Make America Great Again!

          • GunnyHiway 1960 says:

            @NET..
            You know nothing about me.
            My vision is crystal clear and 20/20..
            And I am NOT a “HOPIUM ADDICT” nor believe that “god” will somehow interfere when he never has..
            Not when 2 MILLION white men died in the Civil War.. Not when 20 million died of the FLU in 1918-1920.. Not in the German death camps..
            Never.
            I am a realist and the reality is that the USA is D.O.A. and so is the entire world thanks to FUKUSHIMA and 500 other nuke plants worldwide.
            As You Were,
            Gunny

      • joeybagofdonutsandbagels says:

        – Gunny Hwy-

        The man upstairs runs on his own schedule. Things will not change until about 10 million of
        us march on Washington with our squirrel guns and pitchforks. Only problem is, you would
        probably see the biggest drone strike in history. Predator drones have nullified the 2nd
        amendment as it was meant to be. You cannot defend against them with AR’s and AK’s.
        They fire that Hellfire missile from miles away and you won’t even hear it whistling at you
        until maybe 2 seconds before your shits in the wind. Ain’t life just grand?

      • Trey MacGowan says:

        Gunny,

        Leave that Marxist sewey hole and come on down to the hills of Eastern Kentucky! People here know how to survive, and do not take kindly to loudmouthed leftists (they get shot here).

        • GunnyHiway 1960 says:

          @ Trey – The best time of my life spent doing Hospice care for a retired USMC General in Sevierville,TN in summer 2012.
          (he was supposed to only have 1 week left, I got there, shaved and cleaned him up, dressed him in his “Service Uniform – (OD Green with full medal rack) and he lived almost 3 months!
          I was able to bring his grandkids(7) to visit him as well before he passed.
          A true hero.
          Tennessee/Kentucky is a great place, great people etc…
          Wish I could move there.
          Best,
          Gunny

    • jaxx says:

      I don’t think it matters much with Trump in there (though I’m glad he is). Whoever got in, I just can’t see a way to get out of the debt ocean we’re swimming in without a lot of people drowning. Trump may be able to delay SHTF, but I don’t think he’ll be able to fully avoid it. The time for that passed probably late in Clinton’s presidency or early in Bush’s. Even with the rise of the internet, we managed a single year of surplus (leaving SS aside since it’s supposed to be “inviolable”, lol).

      The ship will go down sooner or later. The bright spot is that those who make it through to the other side will live in a more sane, equitable world. But getting through is likely to be a bitch, and lots won’t make it.

    • DeplorableBitterClinger says:

      Sadly, many people think that since Trump is president, the threat to the 2nd A has been removed. Sure… Chuck U Schumer & the gang have given up.

      Remember, almost everyone in the HOR and Senate want you disarmed and helpless in the face of .gov enforcers, despite any lip service to the contrary.

  4. Before the elections, the stock market was overdue for a correction. The market has gone up since then. This would seem to mean that the market is really overdue for a correction. When the market finally goes down, you can expect to see the MSM go absolutely insane over blaming Trump. The market goes down, then the market goes back up. It’s a cycle. Buy low, sell high. Winning!

    • buttcrackofdoom says:

      the market has ALWAYS gone up and down…and then up…………THIS time i got a bad feelin’ things will be VERY different……when?…PFFT!….they’ve befuddled me for YEARS now….but it WILL come….the market prices will be cut in HALF, at least. america is BROKE, and broken…you can’t go against the laws of math forever….and this crash will probably be led by the housing crash….more than 50% off THOSE prices too..educate yourself on WHY interest rates MUST go back up to “normal” someday, and what happens to house prices when interest rates rise.

  5. Houston/Cypress/Katy/Shtf says:

    http://www.infowars.com/report-chinese-pla-making-preparations-for-war-with-u-s/

    CHI-COMS PREPARE TO ATTACK THE UNITED STATES

    HCKS.

  6. TEST says:

    WHICH animal spirits are they talking about? Vampire squids at Goldmun Suchs?

  7. lena says:

    LOOK OUT ITS GOING TO CRASH !

    we’ve been sold this for years now, no sale.

    yes, there will be a crash and the next time the fed will probably not be able to make it all better; but that is not now in the seasonally strong stock period with trump about to lower tax rates.

    for those looking for the next crash, wait until at least after the French elections. if the right wins france and then that spreads to the rest of Europe and a possible threat to the EU unoin starts, you’ll get your crash.

  8. Warning Sign: The Last Time This Happened In Stock Markets An Epic Crash Followed

    Best News I’ve heard or seen all day!

    Let ‘er Rip ツ

  9. GunnyHiway 1960 says:

    Dear SHTF family…
    There is absolutely NOTHING to be positive about.
    Period.
    The only ones making money off the “stock market” are the ELITES.
    When they are done with raping our country, it will crash out.
    MILLIONS of serfs and peasants are still homeless and hungry while VETS are freezing to death on park benches across the country.
    Meanwhile, our “government is allowing an outright INVASION of African MUZLIMS, Dirty and Drug Infected MESSICANS and GIVING THEM FOOD, HOUSING and MONEY from OUR TAX DOLLARS EVERY DAY!
    Yet “WE” do NOTHING ABOUT IT…

    FYI…TRUMP is a CHARLATAN and a FRAUD.
    He has NOT “Drained the SINK” let alone the “SWAMP”.
    And his “TRUE COLORS” show BRIGHT BLACK with his support of ILLEGAL “CIVIL ASSET FORFEITURE”!

    WHY is John McCain still in office, Paul Ryan, Mitch McConnell and ALL the rest OF THESE SWAMP RATS?

    The “BLACK LEADERS” in Congress have all gone batshit crazy and their #1 is a FKN MUZLIM TRAITOR!
    Yet they all fawn over Keith Ellison like he was JESUS CHRIST resurrected.
    Speaking of “Jesus”… Where the FUCK IS “GOD” in all this?
    NOWHERE TO BE FOUND (as usual) because GOD does not exist as a deity.
    GOD EXISTS as a CONTROL MECHANISM for brain dead SERFS and PEASANTS and has since at least the EXODUS.

    I am DONE “prepping”.. I am a 57 year old WHITE MALE (an endangered species), and I have more than enough “beans and bullets” to last me and the one or two people I care about for the WEEK or TWO that we will actually LIVE after the Criminal Elite bring the house down in flames.

    I have no idea where you live, but here in Puget Sound(Seattle Metro) there are over 5 MILLION stupid, vacuous, lazy, LIBRATS, TWINKS, MESSICANS and BLACKS, ALL looking to kill any “white person” they encounter.

    I would wish you all “good luck”, but that would be gratuitous and insincere.
    Carry On,
    Gunny

    • Pro USA says:

      Your wrong about trump look up his father his up bringing not taking a salery etc.
      I’m 55 and I have had 31 broken bones been shot on and on. But I can tell I’m more of a bmf than I was 30yrs ago,if your a God fearing man you should never worrie about death, if I catch a 50 cent solution,when they roll me over your going to see a smile from ear to fucking ear buddy,so you can roll up into a little ball and give up or you can get some and know guy’s like me will ALWAYS have your back,bullets and hide outs don’t make the man. Good luck bro live on your feet or die on your knees me I’ll be kicking ass till I’m 80 maybe 79 ok 75.

    • Gunny, I do believe that’s about anywhere we live now a days. Lucky I live in a small town.

    • rellik says:

      Gunny,
      You must be referring to Capitol hill, Beacon hill, White city, and Aurora parts of town. You don’t get out much. Go to the Washington Arms Collectors monthly shows in Monroe and Puyallup and you would see a significant amount of ammunition and arms.
      That may have changed some since I left the area, but there is a lot of well armed people in the area surrounding Seattle. Plus a significant amount of concealed carry. You miss the point that most areas outside Seattle areas I mentioned could care less if the Seattle nut cases burn the place down.

  10. Pro USA says:

    Wells fartgo has a sign up that said because of an emergency you can only take 1,000$ only out of the bank,when asked why the teller had to get the manager he said it was because the bank didn’t have enough money to pay all the tax returns!
    Bullshit……so there you go.
    You guy’s need to understand everything they are doing in schools,banks etc is old school (military probing) to see how much we will take,Soros and co have been doing this for a long time world wide remember he is a Nazi collaborator.
    How much are you “we” going to take?

  11. mr. m1a says:

    My simple advice, get out of the stock market now. Invest in gold and silver you can hold in your hands. Also food water shelter and clothing and a means of self defense.

  12. Anonymous says:

    Ther is a sale on dehydrated food at mypatriotsupply. Their 1-week food supply (40 servings) regularly $67.00 is on sale for $17.76. That’s a savings of $49.24. And free shipping.

    I have no affiliation with them whatsoever and gain nothing from them if you purchase. Just passing along what I thought was a great deal.

    Stay safe!

  13. 10mm says:

    I like your post. Lost me on God,but the rest was good. 51 yr old White dude.

  14. PO'd Patriot says:

    Funny, in the last year or two I’ve read articles that start out… “The last time the stock market had this happen we went tits up”. Well we’re still here and the market is probably going to crack 21K. But seriously all BS aside, I don’t really care. But I sure do like to listen to the calliope in the background and hear the huckster holler, “Step right up and a quarter will get you inside the tent to see the Hildabeast kill Bill.”

  15. Beaumont says:

    The legal guarantees, which assure successful trades, still stand, irrespective of the market maker’s religious beliefs, or the trader’s lack thereof. He could just a soon make claim about black cats, walking under ladders, the Farmer’s Almanac, or a nursery rhyme. A pattern can be nicknamed after anything. You don’t need to know the concrete, rational cause of a thing. And, it still be objectively true.

  16. Horace Kent says:

    Articles like this one keep the market going up.

 

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