This story was originally published here.
The Asian financial crisis was exceptional. Not just because it was my first financial crisis… and not just because I experienced it firsthand.
It was exceptional because of the way things played out.
It started as a country-specific problem, then quickly engulfed an entire region. What seemed like a strong economy was quickly turned on its head… And then more dominoes fell. The devastation was immense.
In many ways, the market “contagion” we experienced back then reminds me of what's happening in stocks today.
Fortunately for us as investors, those similarities mean we can learn a lot from what happened back then. We can use the past to build a blueprint for today's crisis.
Let me explain…
This chart of Asian stocks (excluding Japan) during the Asian crisis gives a decent summary of what we can expect today…
It's not a perfect example. Things will certainly be different this time. But overall, it's a powerful guide.
Asian stocks fell from about 400 points in 1997 to about 150 points in 1998. Said another way, if you had $400,000 invested at the peak in 1997, you were left with just $150,000 at the bottom in 1998. Take a look…
I see two things here…
- The downturn can take longer than you can imagine, with stocks falling farther than you can imagine.
- Recovery is not only possible – it can be relatively large, and relatively swift.
This is the kind of pattern I believe we'll see this time around. One important point here, though…
I don't want you to start expecting the recovery yet.
We are more likely in the start of the downtrend now, for the reasons I outlined yesterday. The crisis is still the only thing on investors' minds… And as long as that's true, the selling can continue.
I am not predicting a fall as severe as what Asia experienced, or for it to last as long. But the reality is that I don't know how it'll play out this time. No one can know for sure. We are truly living in unprecedented times. Chances are, things will get worse before they get better.
What we do know is that the crisis won't last forever. And if we combine this with the script I laid out yesterday for finding market bottoms, we know where to look for signs of the turnaround.
So, our blueprint is this…
First it's in the news. Then it isn't. Then people give up. Then it bottoms… And then it roars back.
In the case of the Asian crisis, the bust lasted more than a year. That's not long in the grand scheme of things. But when you're living it, day by day, it's an eternity.
Consider that the coronavirus worries only began dominating the news in the U.S. about a month ago… And the U.S. stock market peaked just six weeks ago. Six weeks!
I don't know about you, but it feels like much longer than that to me. And in the last two weeks, there have been no other news stories. Everything is framed around the virus and its disastrous impact… on people, the economy, and the markets.
So, if you look at our blueprint, we're clearly in the first stage, where investors can't stop talking about what's happening on Wall Street. That's not how bottoms form.
It could take a few weeks – or a few months – for people to stop talking about Wall Street. Only then can the market finally bottom.
We're not there yet.
In fact, things could get even worse…
This bankruptcy could affect 10 million Americans
No one believed Porter Stansberry years ago when he said the world's largest mortgage bankers (Fannie Mae and Freddie Mac) would soon go bankrupt.
And no one believed him when he said GM would fall apart… or that the same would happen to General Growth Properties (America's biggest mall owner)… or that oil would fall from over $100 per barrel to less than $40 a barrel.
But in each case, that's exactly what happened.
And now, Stansberry says something new and even bigger is quietly unfolding in America (watch his video clip here):
In short: A terrifying new trend is creating thousands of new millionaires (Barron's estimates 20,000 to 200,000 so far) while at the same time destroying the financial future for many others.Porter Stansberry
Stansberry says this new trend is going to cause tens of millions of people to lose their jobs… it will also cause many major bankruptcies… yet at the same time it will make millions of others, incredibly rich.
Don't get left behind. Get the facts for yourself here.
Porter Stansberry went on camera for 10 minutes from his corporate headquarters to explain the full story. You can watch it free of charge here…