If you’re a longtime reader of Wealthy Retirement, you probably know that I am a fan of the CBOE Volatility Index (VIX).
It’s a measure of how many put or call options are trading on the stocks that make up the S&P 500. When the VIX is high, it means more people are buying puts, which protect from further downside, than they are calls, which anticipate further upside.
More commonly, the VIX is referred to as the “panic index.” But since 2009, there hasn’t been much panic to speak of other than a couple of short-lived spikes. It’s been clear sailing until last fall – then the proverbial bottom dropped out.
First there was the escalation of the trade war with China. Then there were the midterm elections, which handed the House of Representatives to the Democrats, effectively creating a major issue for the current administration.
Then we had an escalation in the Mueller probe, with major figures receiving convictions. Headlines emerged regarding immigration and a government shutdown over the issue.
Finally came the straw the broke the camel’s back… It happened in early winter.
The Federal Reserve announced a rate hike, followed by commentary that all was well and there were more hikes to come. The comments were taken like a gallon of cough medicine by the market. The president chimed in, threatening to fire the Fed chief. Ill-advised moves played out across the board.
As you can see from the chart below, the VIX spiked from around 20 in mid-December to more than 36 on Christmas Eve, when the market had its worst one-day sell-off since February 2018 and the worst Christmas Eve ever.
This move in the VIX equates to an 80% increase in volatility in less than two weeks. That was reflected by the market’s insane moves over that time frame.
But that’s not what you should be paying attention to…
The same chart shows that in a short-term panic (unlike the one in 2008 to 2009, which was a panic accompanied by a massive recession), the VIX will change direction in a hurry.
When the VIX trades between 10 and 15, it means that investors are complacent and you should reduce exposure to stocks. When the VIX is between 15 and 20, you have a normal trading range. Between 20 and 25 – where the VIX is now – investors are jittery.
When the VIX trades at more than 25, I start lining up companies I would like to buy in the event that we are in the very early stages of a correction. Confirmation will occur once we jump above 30 and enter correction territory.
Once the VIX passes 40, you are in a panic. Between 30 and 40 – like we were on Christmas Eve – I am steadily deploying cash on companies on my wish list. Full story at Wealthy Retirement
70% Stock Market Crash to Strike February 1, Economist Warns
Several noted economists and distinguished investors are now warning of a stock market crash.
But there is one distinct warning that should send chills down your spine… that of famed economist Ted Bauman. Bauman and his team correctly predicted the collapse of 1999 and 2007.
Bauman now warns: “There are three key economic indicators screaming SELL. They don’t imply that a 70% collapse is looming, it’s already at our doorstep.”
And if Bauman calls for a 70% market correction, one should pay heed.
Indeed, over the last three decades he accurately predicted the financial crisis of 2008, the dot.com crash of 2000, the recession of the early 1990s and the 1987 crash.
And when Bauman makes a prediction, he backs it up. True to form, in a new controversial video, Bauman uses over a dozen indisputable charts to prove his point that a 70% stock market crash is here.
Most alarming of all, is what Bauman says will cause the collapse. It has nothing to do with interest rates, government debt, tariffs, China or North Korea. Instead, it is linked back to a little-known scheme that was deemed illegal for triggering the 1929 market crash … a scheme that was made legal again.
And although our future may seem bleak, as Bauman says: “There is no need to fall victim to the future. If you are on the right side of what’s ahead, you could seize opportunities that come along once, maybe twice, in a lifetime.”
Perhaps most importantly, in this new video presentation, Bauman reveals what he and his family are doing to prepare right now. (It’s unconventional and even controversial, but proven to work.)
While Bauman intended the video for a private audience only, original viewers leaked it out and now tens of thousands are downloading the video every day.
One anonymous viewer wrote: “Bauman uses clear evidence that spells out the looming collapse, and he does it in a simple language that anyone can understand.” [Indeed, Bauman uses a lamb analogy to prove his points.]
With his permission, I reposted the video on a private website. Click here to watch it now.