As we witness the current “melt-up” in the markets, it is crucial to remain vigilant and consider the potential for a “meltdown” on the horizon. While many experts argue about the likelihood of a recession in the US, the metals arena is showing signs of concern. The question arises: Could we be facing an over 80% market drop in the near future?
History serves as a stark reminder of past market downturns, such as the infamous 90% drop in the late 1920s. Although I speculate that the meltdown might commence in 2024, its full impact may not be evident until 2025. As the Dow Jones index exhibits a bullish trend and seems poised to break all-time highs this year, it becomes essential to look at the volatility contraction pattern unfolding.
Predicting the exact catalyst for this potential meltdown is complex. It could be triggered by various factors, including geopolitical tensions, credit card delinquencies, the student loan crisis, or the collapse of insolvent banks. Regardless of the cause, it is vital to recognize that mainstream media narratives may present opportunities during temporary pullbacks, leading to a “buy the dip” mindset.
Yet, there are three major clues that may indicate the end of this prolonged bull run. Firstly, gold prices are projected to surge to $1500 to $1600 an ounce. Secondly, the value of the US Dollar Index (Dixie) could revert to its September and October 2022 forecast of $97. Lastly, watch for small-cap stocks collapsing, as they tend to be the first indicators of market distress.
However, predicting a market collapse is not meant to incite panic but rather to serve as a call for caution. Understanding the role of hidden leverage and fake money within the market helps to shed light on potential vulnerabilities. Recent collapses of entities like FTX, Silvergate, and First Republic underscore the need for careful consideration of market risks.
While we cannot fully predict the future, we can learn from history’s lessons and remain vigilant to potential signs of instability. As investors, policymakers, and individuals alike, let us not be blinded by short-term gains but rather focus on creating a resilient and sustainable economic foundation that can weather the storms of uncertainty. Being mindful of potential risks and being prepared for various outcomes will serve us well in navigating the unpredictable waters of the financial landscape.
