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Trigger Already Hit for Next Stock Market Crash?

The primary indicator for a stock market crash is investor sentiment, particularly when investors feel safer than they really should be.

Consumer credit scores do not currently reflect just how unhealthy consumer debt really is…

Bonds in all sectors are generally not as safe as the credit ratings are indicating.

Making this probably a good time now to avoid long-term bonds and securitized debt. A time also to look for investments less exposed to high levels of debt.

What ingredients make a stock market crash occur? Why can’t we prevent them, and why can they not be effectively predicted?

Maybe just thinking that is what is causing this to happen.

The stock market crash of 1929, 1987 and 2008 have all followed the same formula…

The Formula:

  • Investors over-invest, creating a bubble that bursts.
  • A new financial contraption creates a false sense of security.
  • Events cause investors to realize they were wrong and exit the market quickly.

One or two pieces of this formula, on their own, are not enough to create a stock market crash. It is necessary for all three parts of the formula to happen for a crash to manifest.

When a stock market crash occurs, the entire U.S. economy is affected and unemployment rates rise, which invariably takes years for recovery.

When is the next market crash going to happen? Given the way the economy is, it is too complex to predict it accurately. Even if we can’t predict it, we can identify vulnerabilities in it.

Currently, the state of consumer debt and bond debt shows that people believe their risky behaviour is safe. Not good.

Is this wise? Only time will tell. Few people, other than in hindsight, have correctly calculated when a major crash will occur. Even Warren Buffet is mystified.

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