Right now, Mr. Market is giving you a variety of warning signs. You don’t get market volatility like we’ve seen over the past couple weeks unless there’s something very, very wrong with stocks.
You also don’t get Italy, Spain, and the United States’ debt all downgraded unless there’s something wrong in the sovereign debt world.
Gold and silver don’t go on decade-long bull market tears unless there’s something very wrong with the dollar.
I hope you’re paying attention.
The market rarely gives these types of strong warnings all at once.
Because if you talk to the average person, or even the above-average investor or business-person, they might be a little concerned – but they’re slowly becoming inured to crisis.
Crisis is now the new normal.
At any other point during the last 40 years, the markets would be in tumult and the newspapers would be printing big bold headlines talking about any one of these crises.
France getting threatened with a downgrade would be terrible, earth-shaking news.
You’d see President Obama scrambling to get on TV to tell us all that the United States will stand behind France in its time of need and make sure that its debt contagion does not threaten the rest of Europe and the West.
Of course, we’ve been inoculated from crisis in the headlines since the crash of 2008. Since that time, ever greater crises have come down the pike, only to be increasingly shrugged off by the markets.
No news is good news. Good news is good news. And bad news is good news.
When the Federal Reserve announced its first Quantitative Easing program, the amount of money was so huge ($700 billion) that almost anything that followed it seems unimportant in comparison.
But make no mistake: these crises are serious. And if you’ve been paying attention, you know they’re getting more serious, not less.
Do not take your guard down. I strongly recommend putting in a mental trailing stop on all of your long stock positions.
I also recommend continuing to average into your gold and silver positions. Look for value in mid-tier gold producers.
But perhaps most importantly: keep your head on straight. There’s nothing normal about this stock market. Sovereign debt issues are getting worse.
You’ve probably heard the metaphor that the dollar is the tallest midget in the room. Meaning that yes, the dollar is weak and in trouble, but it’s better than the competition. Well, I’d like to introduce a new metaphor. The dollar is the least drunk pilot on the Exxon Valdez as it enters a sea filled with razor sharp icebergs.
The world’s paper currency system hangs by a thread, and while it has been unraveling slowly, there’s no telling when it will begin to completely unwind in rapid fashion.
So pay attention. Be prepared. There will be great values on the other side of this crisis.