The Hugest Bubble in History Set to Explode
Motley Fool Staff
ALEXANDRIA, Va. -- 12:02 a.m. EDT. -- Yesterday we met with a successful analyst at a leading European bank who shared with us some of his latest market research. Our source -- who specializes in financial bubbles of all kinds -- told us he's never seen such a rapid deterioration in macro technicals and fundamentals.
"I envision precisely three global banks going down by April 17," he said in his barely noticeable Swiss accent. "Kaput."
"It could all be over by April 17"
At first we were skeptical about his thesis. But after learning more about this analyst, we have become more confident in his bold call.
Our source has asked to remain anonymous, but his track record is beyond reproach. By day, he provides guidance to traders, policymakers, and thought leaders in Davos. As an analyst specializing in bubbles, some of his past market calls have been nothing short of astounding.
For example, he called the tech bubble and the real-estate bubble back in 1995 -- well before anyone else was even aware of the potential for bubbles in those markets. More recently, he's been warning about the China bubble, the bond bubble, and the euro-shelter island bubble. Our insider likes to make predictions decades in advance so he and his clients have plenty of time to prepare.
This time, however, things are moving more rapidly than ever before. That's why we felt it necessary to share this information with our readers so quickly. Sometimes, Mr. Market requires us to think fast, not slow.
"The only thing worse than doing nothing before April 17
would be acting too soon"
One thing our anonymous analyst repeatedly advised, however, was not to trade on his tip just yet, as a late-stage "bubble crash reversal" is not uncommon in a situation like this. Timing is everything when dealing with bubbles, so it's important to think about the best way to play it.
Fortunately, we still have time to make money by plotting the right course while nimbly avoiding the snares of the occasional reversal or pullback.
Our solemn promise to you
When facing a financial and human disaster of such epic magnitude, our sole aim is to figure out how to profit from the carnage. And we intend to share our strategy with you.
During the next 24 to 48 hours we will be digging into the numbers in order to devise the most effective trading strategy possible for playing the gathering financial storm. Just hours ago, Motley Fool CEO Tom Gardner hand-picked a rapid-response team of our top analysts, and town cars are racing them back to the office at this moment so they can put together a bubble-trading plan for our community members.
If you have any suggestions for how best to squeeze profits
from this unfolding financial and human tragedy,
send your feedback to our team
Again, it is very important that you do not act on this information until you hear the word from us to do so. Once we make our trading recommendation available, there may be fewer than 10 minutes to act. So pay close attention to every one of our updates, which we will compile on this page as events unfold. We suggest you bookmark it right now and return frequently.
Yes, it's extremely scary out there, but rest assured: We have your back. Fool on!
UPDATE 1: "Extremely Worse Than Expected." Analysts Liken It to the Indonesian Rupiah Crisis of '58
1:12 a.m. EDT -- Our handpicked team of top Motley Fool analysts has been poring over the latest GDP, CPI, and securities-market figures since we got news of the impending market crash. Their findings have so far been troubling. Senior banking analyst Matt Koppenheffer says the situation is "extremely worse than expected."
Matt was pretty sure he'd see a market top after examining all of the data. He wasn't prepared, however, for the dreaded "triple market top."
Most of us are too young to have ever seen a triple top. Yet as we dig further into the data, we are now forced to contemplate a quadruple top or -- what was unfathomable just 45 minutes ago -- an actual double "Z" top.
This could turn out to be one of the most painful market downturns ever. And our giddy analysts are going to show you precisely how to profit from this once-in-a-lifetime opportunity. Rest assured that our confident team literally will not rest until they have all the answers.
Remember: Millions of people could be impoverished by this disaster, and others will try to rescue friends and family. Meanwhile, the savviest investors will pocket a tidy bundle.
If you've seen any rumors, news, or numbers that could help us confirm that a crisis is coming, please send your tip to us at BUBBLE@fool.com.
UPDATE 2: Initial Stock Ideas for Playing the Crisis
2:18 a.m. EDT -- Feeling the crunch, some of the analysts have shifted gears in order to consider some investing ideas for playing the crisis. Matt Koppenheffer says the team likes Berkshire Hathaway, silver bars, and Hormel. Berkshire and silver are surefire bets for a catastrophe.
And we like that Hormel's 10-K filings identify it as a leading producer, packager, and marketer of quality processed meats. Packaged meat is great in times of crisis, though it's pretty tasty in other market conditions as well. "Plus, Hormel offers a nice 2% yield," Koppenheffer points out.
The team is busy writing up their best investment ideas for playing the crisis. The report, tentatively titled "How to Reap Obscene Profits from the Hugest Bubble Set to Explode," will be available shortly.
To reserve a copy of this special report, just send an email to BUBBLE@fool.com with the name of a stock you think might outperform when the bubble does (or doesn't) pop.
We're excited by the possibilities here. Sometimes the greatest opportunities emerge from financial catastrophes.
UPDATE 3: CORRECTION
2:35 a.m. EDT -- Earlier this evening, we stated that our secret Swiss source called the tech and real-estate bubbles back in 1995. We just learned that it was "more like late 1996" when he made those two calls. The Motley Fool regrets the error.
UPDATE 4: Dow 3,600.
2:45 a.m. EDT -- We just got word from our analysts that the Dow could plummet to 3,600 points on April 17. Right now, they see a 25% to 52% probability of that scenario.
Dow 3,600 is a revision from our previous target of Dow 3,605, necessitated by a recalculation of the equity risk premium.
However, don't do anything just yet. There could possibly be a rapid 5% to 6% increase in the Dow if the crisis doesn't materialize (a real, though unlikely, possibility at this point).
In fact, over the next two months, there's a very slim 6% probability of massive forward gains in the Dow. Statistically, the probability of such a low probability is really low, though it's still statistically significant (a point that is in itself significant, we should add).
Investors are advised to stay tuned for future updates. This is the most accurate forecast we have at the moment, though the situation remains fluid.
UPDATE 5: Dow 3,650 (and good night)
3 a.m. EDT -- The analysts have just provided upward guidance on their Dow forecast. "It's still dire," says Koppenheffer. "And people shouldn't get complacent, though our take on the deteriorating technicals is now slightly less discouraging than it was 15 minutes ago."
Our analysts all agree that everything points to a classic excessive-liquidity situation that is putting downward pressure on yields across various asset classes. Once these yields hit certain levels, then an institutional arbitrage situation occurs where levels enter black-hole territory. That's where we are now, though we haven't quite entered the full black-hole scenario. It's sort of "semi-black-hole," which isn't great by any means.
Given the magnitude of it all, we felt it would be wise for the analysts to get some sleep so they'll be well-rested for tomorrow. Updates will resume tomorrow around 9 a.m. or so EST.
UPDATE 6: CORRECTION
3:01 a.m. EDT -- Alexandria, Va., is now in Eastern Daylight Time, not Eastern Standard Time, as was indicated above. Update 5 should have read, "around 9 a.m. or so EDT." The Motley Fool regrets the error.
UPDATE 7: The Hugest Secret Wall Street DOESN'T Want You to Know
9:06 a.m. EDT – After a solid night’s rest, our analysts have been discussing a surprising technical anomaly: Wall Street’s fear index – the so-called VIX – is trading around its five-year low, even as the market lumbers toward an inevitable collapse.
See for yourself:
At first glance, it looks like fear is declining. But sadly, this chart isn’t telling you the real truth.
You'd better take a seat...
A quick Google search confirmed that the VIX is calculated by the Chicago Board Options Exchange, a subsidiary of CBOE Holdings,
And who owns CBOE Holdings? You guessed it: Wall Street.
CBOE's largest shareholders are big names like T. Rowe Price, Blackrock, Vanguard, State Street Global Advisors, Fidelity, and the infamous quantitative hedge fund Renaissance Technologies. A member of CBOE's board of directors even held senior management roles at Morgan Stanley for more than three decades!
In short, the so-called "Wall Street fear index" is just that -- a fear index of, by, and for Wall Street.
And Wall Street has billions of dollars in profits at stake. Do you really think they wouldn't hide an impending catastrophe from Main Street? These guys manipulate the VIX numbers for fun and profit every day -- just like LIBOR and the CPI.
Whom can we trust?
If the VIX can't protect us from the Sumo Bubble (as some of our analysts are calling the gathering storm), what good is it?
We need a credible, independent way to measure investor sentiment if we're going to have any shot at knowing which way the market's fickle winds are really blowing.
Say hello to the ShadowFear Index™
This morning, our analysts began poring over terabytes of historical market data. We back-tested tens of thousands of Main Street variables to produce the ShadowFear Index™, an independent tracker that reveals the "hidden" level of market fear.
Here's what we found when we plotted the numbers against Wall Street's puppet VIX Index:
You see, Wall Street's VIX index glaringly omits food and energy costs, among a multitude of other critical Main Street variables. Once you cross-reference these down-to-earth data points with historical market data, you discover hidden correlations.
The following are just a few of the more than 10,000 Main Street variables our ShadowFear Index™ tracks:
To begin profiting today from the first-ever independent fear index marketed to a retail audience, shoot an email to BUBBLE@fool.com for live ShadowFear™ updates.
In your email, feel free suggest other variables you think we should consider when calculating the ShadowFear Index™.
UPDATE 8: ShadowFear Index™ CORRECTION
9:14 a.m. EDT -- A nitpicking reader emailed us at BUBBLE@fool.com to complain about in error in our ShadowFear Index™ chart. It appears that in our haste to get this vital information to you, we may have accidentally copied some of the data points incorrectly.
We regret the error. The corrected chart looks like this:
A few quick words about the change.
Even though, in this case, the reader's details are technically correct, an appreciation of the overall strategy was lacking. A soaring ShadowFear™ score is indeed suggestive of hidden market fear. But a plunging ShadowFear Index™ signals investor complacency, which is even more troubling. (That this is self-evident can of course be confirmed by a cursory look at the MACD on any S&P 500-tracking ETF.)
It goes without saying that both scenarios are highly inflationary.
We truly appreciate any and all feedback. Please continue sending your feedback to BUBBLE@fool.com.
UPDATE 9: The Simplest Way to Start Boosting YOUR Returns Today
10:08 a.m. EDT -- In just the past hour, we've received hundreds of emails thanking us for helping you to play the coming economic storm with our "MegaBubble: What's Hot and What's Not" special free report. (If you haven't grabbed one yet, simply shoot an email with the name of your favorite BUBBLE play to BUBBLE@fool.com, and we'll send you a free copy.)
We feel humbled and gratified by your overwhelmingly positive response.
But in addition to ideas on how to play the impending disaster, lots of readers wanted personal guidance with their current portfolios.
Obviously, we couldn't create a Web tool solution. The market upheaval our Swiss expert forecasts entails a not-insignificant (12% to 13%) probability that we could see significant Internet disruptions.
If only there were a way to lock eyes with your brokerage statement and know instantly what you have to do...
We have a thrilling announcement to make
Our stock analysts and programmers have been hard at work to bring you a product whose time has come.
You've probably heard all about the exciting "3-D printing" revolution that's allowing individuals and small businesses to manufacture parts and products from scratch. Well, we're combining cutting-edge stock analysis with the latest in 3-D printing technology to help you make the most out of the looming market-crash profit opportunity.
We've created the first batch of Market Goggles™ to help you "see" through the fog of market noise to discover what your next trade should be. Creating this device was truly a no-brainer for us.
Wall Street HATES these goggles
Our one-size-fits-all Market Goggles™ come equipped with a 4-megapixel camera that scans a list of stock holdings on your brokerage statement.
We've preprogrammed each pair of Market Goggles™ with our three-month Dow Jones Industrial Average outlook and price projections for more than 4,000 publicly traded American companies. No wobbly Internet connection necessary.
When you look at your stock holdings, the goggles will display each stock's rating with a dollar sign ($) or a red flag (▲).
It's that simple.
We're still in the early stages of our agile development process, so there may be a few more kinks to work out. That's where you come in!
We're offering FREE pairs of Market Goggles™ to the first 150 people to email a request to BUBBLE@fool.com. If you think you might be interested, email us right away! We expect supplies to be limited, as we only have one 3-D printer so far, and it sometimes runs a bit slow.
In your email, simply let us know:
- How many pairs you want.
- What color(s) you want. Be as specific as you want; our printer can produce a palette of 20,000 colors or any combination thereof.
- One stock you're interested in to play the bubble.
To protect your identity, we won't ask for your name and shipping address until we've finished printing your order. (Please allow one to two business days for your shipment to arrive.)
Hit play on the video below to discover more.
UPDATE 10: Thank You for All the Thank Yous!
10:20 a.m. EDT -- It sounds like the first shipments of our Market Goggles™ have already made it to some of the nearest doorsteps safe and sound. We're delighted to hear how much fun you're having with them!
I've already made my first trade. Its sure gonna be a busy day... thank you, thank you, thanks. :-)
These things are invaluable for futures trading. THANK YOU Tom and David!!
If we haven't heard from you yet, let us know what you think of your Market Goggles™ by emailing us at BUBBLE@fool.com.
And if you still haven't ordered yours yet, there's still time to request a few pairs! In your email, simply let us know:
- How many pairs you want.
- What color(s) you want. Be as specific as you want: our printer can produce a palette of 20,000 colors or any combination thereof.
- One stock you're interested in right now.
UPDATE 11: The 4 Scariest Charts in the World
10:24 a.m. EDT -- Technically, the world didn't come to an end on Dec. 21, 2012, as expert Mayan astronomers supposedly forecast.
For that we are thankful.
But we've received a large number of thoughtful emails from those of you who found it "interesting" that we're looking at a potential market apocalypse just months after top-talent ancient Mayans predicted the end of time.
Sumarian carvings PROVE that Rogue planet X -- Nibiru -- will pass within 0.1 AU of the Earth, contributing to a dramatic Magnetic Realignment on the Earth. This is confirmed by photographs on the Internet.
… coumpounded by Gravitational Effects from the alignment of the planets and THE SUN's alinement with the Milkey Way's Supermassive Black Hole …
Isn't it interesting that all this all WIL HAPPEN right when your Charts show a Sumo Bubble collapsing? What else aren't they telling us????
Let us take these claims one at a time:
- The hypothetical Earth-sized planet would already be visible from the Earth through any pair of common binoculars.
- The planets in our solar system line up from time to time with no ill effects.
- There is no special alignment with the black hole at the center of the galaxy, nor would an alignment affect us at a distance of 25,000 to 28,000 light years.
- There is no corroboration from Mayan sources that the 13th of b'at'tun marks the end of time.
Here we feel obliged to offer a brief public service announcement: Superstition has no place in trading.
Making money in the market requires us to be level-headed. That's why our elite team of advanced chartologists examines cold, hard, objective facts.
Now let's go to the charts.
Here's the Triple Top one more time. We're getting the sense that Bernanke isn't taking this thing seriously enough:
Market fear is off the charts...
...yet investors are more complacent than ever:
DON'T MISS: Delinquency rates are slumping, bitcoin values are rising, and the gold-dollar differential reflects a bullish pullback near the sustainable tail end of the post-Ford administration secular bear market's final wave:
We deeply appreciate all of the bubble theses our readers have been sending us. Share yours with us at BUBBLE@fool.com.
UPDATE 12: We Need Help
10:45 a.m. EDT -- The magnitude of this crisis is far bigger than anything we could have ever imagined. Fortunately, our CFO has given us the green light for a new hire that may be able to help us think through the problem.
The role is called “Deep Thinker” and the prospective hire will be part of The Motley Fool Research Team. For more details about the position, click here. We really need assistance with this crisis. Let us know if the new position sounds like you.
UPDATE 14: How to Profit Before the Hugest Bubble Ever Explodes
11:01 a.m. EDT -- So if the world isn't coming to an end on April 17, what can we expect?
Many think Ben Bernanke's money-printing is doomed to produce hyperinflation.
Let's get real. Hyperinflation isn't in the cards for the United States unless Congress nationalizes the Federal Reserve System.
It will reach mass inflation at some point of 20% to 30% per annum, but not 100% or more. Nor do we foresee a sale of the West Coast to China and parts of Alaska to Russia. Don't believe the alarmists' rhetoric.
On the other hand, significant power disruptions are not out of the question. Not even America is forever. In a worst-case scenario, we could see soaring crime, the confiscation of private property, and FEMA-administered martial law. Their black helicopters are already flying.
Yes, the "elites" have their advantages, but we can use our own "insider's code" to spot hidden market opportunities: You can help us launch our very own surveillance drone that can identify which precious metals to buy, when is the best time to buy them, and how to optimize their shipping route to our doorsteps.
But first, we need to know where you think our scout should focus its efforts. After all, the collapse of our fractional reserve system could be bullish for a number of metals.
Email YOUR PREDICTIONS to BUBBLE@fool.com to let us know which of the following metals will see the biggest run-up by April 17 and why:
The coming collapse could make the financial crisis of 2008 look like a Sunday school picnic. For a lucky few, fortunes will be made.
UPDATE 14: CORRECTION
11:32 a.m. EDT -- The previous update, "UPDATE 14: How to Profit Before the Hugest Bubble Ever Explodes" was actually our thirteenth (13th) update. It should have read, "UPDATE 13: How to Profit Before the Hugest Bubble Ever Explodes."
We regret the error.
UPDATE 15: Major Market-Posture Reversal
11:36 a.m. EDT -- So far, our analysis has been right on the money. Our secret source correctly pointed to this potentially fast-moving bubble explosion. And our developing forecasts have effectively incorporated a wide variety of shifting market factors. We feel pretty good about our response to the crisis so far.
We did see a pundit on television this morning who characterized this market as a "once-in-a-lifetime opportunity for long-only investors," and this has caused us to rethink some of our initial assumptions. This new information, along with today's late-morning price action, has led us to alter our market posture. Going forward, our market posture is neutral for the short term, which is a big improvement on the bad-posture situation we were contemplating last night.
We make no apologies for our zealous response last night, and we feel we've been mostly right all along. No one could have really been expected to account for the reserve liquidity build-up that occurred in Asian markets earlier this morning. To say otherwise demonstrates a complete misunderstanding of the nature of global markets and strategic forecasting. What we were really trying to do is proactively provide certainty without, of course, being privy to all of the relevant info. But that's what leaders do in times of crisis. Followers, of course, do things differently.
So, yes, we're seeing a classic late-stage bubble reversal. Apart from that, everything we've said up until now still stands. In fact, we said all along there was a probability of a reversal. Once again, our analyst team nailed it.
UPDATE 16: Market Goggles™ PRODUCT RECALL ALERT
11:38 a.m. EDT -- Our updated late-stage bubble-reversal forecast has resulted in new price targets for 96% of the 4,000 publicly traded companies we track.
We have also changed our price target for the Dow.
Source: Analyst team calculations.
We're thrilled to have the opportunity to share the most up-to-the-minute price forecasts with all our members.
Obviously, in order to do so, The Motley Fool will need to issue a Class III general recall of all 2,412 Market Goggles™ shipped thus far for reprogramming.
We apologize for any inconvenience this may cause you.
Please make all shipments out to:
Circe, the beloved and tireless 3-D Printer on the 4th floor
The Motley Fool
2000 Duke Street
Alexandria, VA 22314
We're looking forward to sharing this new information with you.
The Motley Fool owns 10,000 cans of Spam®. The Motley Fool recommends Berkshire Hathaway, BlackRock, Facebook, Starbucks, and Netflix. The Motley Fool owns shares of Berkshire Hathaway, Facebook, Starbucks, and Netflix. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.