All-time market highs can lead to all-time lows

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By John Grace

Contributing Columnist

Let me begin where I left off last month. 

This observer is among those who hold theory that stocks keep melting up thanks to a massive bubble that is being inflated by very inexpensive money and government stimulus. 

“Stocks haven’t been so expensive since 2000, while a bubble mentality is obvious in the wild overtrading of fashionable stocks,” according to the Wall Street Journal. “It is undeniable that stocks are far more expensive than usual. But bubbles usually involve lots of volatility as they inflate, not a calm exterior and turmoil within, because every little price drop is magnified by others fearful that the bubble is about to pop.”

Now is the time for savvy investors to put their exit strategies in place to potentially keep their assets from being handed to them.

Do not get lost in the weeds of how the market closes every day. Instead, look further under the hood. 

“As bull markets get into their late stages, more dumb money comes in, and it migrates to narrower leading stocks and indices,” said Harry Dent of Dent Research Oct. 5. “I’m not sure I’ve ever seen a trail of few and fewer indices making new highs like this one. The series of peaks thus far points to likely climax soon.”

If that doesn’t make sense, try this interesting fact on for size. Sales of “collectible” sneakers are up 100% from a year ago and the luxury auction house Sotheby’s recently sold a 2008 used pair of Kanye West’s Nike sneakers for a world-record $1.8 million. But wait, it gets even more crazy.  

The person who bought the sneakers is a former NFL football player who is turning the used sneakers into a “security,” regulated by the SEC. Soon, anyone who wants to be a part-owner can do so by paying $15 a share. 

CEO Gerome Sapp said the pair of sneakers will basically become its own “mini company,” according to Stanberry Research.

This could be another sign that we are closing in on both the greatest stock bubble peak in modern history and the second tech bubble after the March 2000 extreme top and crash. This next crash may be one that is more extreme and longer lasting. Harry Dent is expecting more like an 85% decline on the broader S&P 500.

Don’t be complacent looking for days where the market closes higher. Jon Wolfenbarger, founder and CEO of, declares U.S. stocks may be “on the verge of starting the biggest bear market since the Great Depression.” 

In an Oct. 4, MarketWatch interview, Wolfenbarger was asked, “Will a tight monetary policy change investor psychology to a more bearish mood?”

His answer: “We will see.” Indeed we will.

Excessive consumer, corporate and country debt levels, economic weakness, aging U.S. and global population, declining birth rates, over-bullish sentiment and limited policy tools are key components for a market rout worse than what we survived in 2008-09. Wolfenbarger added that a top for the S&P 500 reached a few weeks ago could have been the start of the sand castle on the beach abruptly being destroyed by the wind and the waves.

There is no need to predict the future about what might happen or when the melt up may turn south for a serious melt down. Since savvy investors tend to hate losses more than they love gains, now would be the time to establish your exit strategies. Before the grits hit the fan. 

It always comes back, you say? Please do not wear those rose colored glasses that discolor everything. From what I can tell, the Japanese stock market peaked in late 1989. Nearly 32 years later, the Nikkei 225 has yet to get back to even. 

Something like that could never happen again here. 

Or could it?

Now is the time for savvy investors to put their exit strategies in place to potentially keep their assets from being handed to them.

John L. Grace is president of Investor’s Advantage Corp, a Los Angeles-area financial planning firm that has been helping investors manage wealth and prepare for a more prosperous future since 1979. His On the Money column runs monthly in The Wave.

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