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"David Rosenberg’s Last Warning:
The Largest Market Crash Will Burst This Year"
by Epic Economist
"Investors are becoming increasingly scared. Over the past few weeks, they have been rushing to sell off risky assets, which is causing some major stock indexes to record a significant drop. As the tech bubble burst continues, the Dow Jones has fallen by 434 points, while the Nasdaq plunged by nearly 3 percent and the S&P 500 fell by almost 5 percent. The decline in share price has been triggered by high bond yields, which have pushed overvalued stocks to correction territory. According to Bloomberg, the rush to sell off risky assets, especially in the tech sector, has removed $1.5 trillion from the market in the first two weeks of the year. In the first five days, some of the most expensive stocks have fallen by roughly 50 percent. And many market veterans and insiders are warning that the stock market crash is far from over. This is just the beginning and things are only going to get bumpier from here.
Amongst them, the veteran strategist David Rosenberg is sounding the alarm about the burst of this historic "Everything Bubble" in asset prices and predicting a sizable stock market crash for 2022. "We have nutty, crazy, massive bubbles everywhere. In my professional lifetime, and probably going back further, I don't remember there being so many asset bubbles taking place at the same time," Rosemberg stressed. "We've come off three years with an average 20% increase in the S&P 500. Normally, the stock market goes up in price by 7% per year. We have tripled what is normal three years in a row. It's caused people's brains to get all fuzzy, and the greed is egregious," he explained.
When asked whether he could see a massive crash happening this year, Rosemberg said that "the odds are high we're going to see a bear market sooner," and that he wouldn't be surprised if it occurred over the next few weeks or months, given that tightening fiscal and monetary policies at a time of extremely expensive valuations are very likely to result in a sharp correction in every corner of the market. According to Morgan Stanley’s Michael J. Wilson, the crash isn't over and valuations will continue to fall. With the S&P 500 and NASDAQ indices both down this month and with some stocks losing more than 50% of their value in less than a week, it seems that Wilson is right again. Wealth manager RIA Advisors pointed that nearly 40% of stocks are now down more than 50% from their 52-week highs.
The current sell-off is having a disproportionate impact on expensive stocks, as it should, but the real determinant of how long and deep this correction lasts will be growth, said Wilson, adding that "investors are now entering a tighter monetary policy environment and this is going to mean more uncertainty at the index level." Moreover, the billionaire investor Paul Tudor Jones is also concerned about the future of the market, warning that the Fed will tank the economy and forecasting that today's leading stocks will start to struggle in the days ahead. He highlighted that 'winning stocks' - a group that includes meme stocks and cryptocurrencies - would be hit the hardest by tighter monetary policies. "US equities are really extraordinarily valued relative to GDP," Jones emphasized, noting that the current Buffett indicator reading of more than 200% indicates the stock market is hugely overpriced relative to the size of the economy.
It seems like everyone in the market right now is really frightened about the coming change in monetary policy. This will be the first time in over a decade that the market will have to say goodbye to all that excess liquidity that made indexes skyrocket to one record high after the other. And don't be mistaken: this loss of liquidity in the market caused by a hawkish Fed will hit more than just winning tech stocks. They aren't the only one leveraged by excess liquidity - the entire market is. You don't need to be a rocket scientist to understand the consequences. The market is likely to crash by up to 90% when the Fed finally removes all of that easy money from the market. Right now, bubbles are already popping everywhere, showing that intrinsic value matters after all. All signs are there for people to see, and we must start acting before it's too late."
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A market crash of far less than 90% will trigger a tsunami of margin calls of
the $2.4 QUADRILLION derivatives, absolutely bankrupting everyone.
Everyone...
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