The Eurozone Debt Crisis: The next looming stock market crash!

Below you'll find the video for the week. I'm going to break it up into three parts because I think this is a very important issue to address about the world and what you can do with your portfolio.

And always remember, "Wisdom yields Wealth". 

Timon Rossolimos
Author:                 94 Top Trading Lessons of All Time
        

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“As a pensioner this scared the hell out of me”

"I received a mail from one of your advisors Timon Rossolimos advising that there is ABOUT TO BE A 41.9% DROP IN THE STOCK MARKET. As a pensioner this SCARED THE HELL out of me. I can not afford to lose 50% of my investments.

Does this also mean I need to quickly sell my unit trusts & put everything into cash before I lose 50% ?

Is this an advertising con (if so not appreciated ) or is this what FSP are predicting." - Anon
Last week I said the next crash is coming. However, I put more emphasis on the FTSE movement than our JSE All Share Index.

I have no intention to frighten people when it comes to probability predicting. I only intend to prepare them for when, or if, it comes.

Today I'm going to go into more detail about the charts. You're going to discover what happens when the FTSE collapses, how the JSE follows suit and what it will mean for you and your portfolio.

Please read this carefully so you can understand where I'm coming from.

Refer to the chart from last week!

The chart on top shows you the monthly Financial Times Stock Exchange index chart or the FTSE (Footsie). This shows you the 100 biggest companies on the London Stock Exchange.

The chart below is the Johannesburg Stock Exchange All Share Index. This shows the estimated 472 listed companies on one index (JSE-ALSH).

I’m going to zoom into each crash and how it affected the FTSE and the JSE-ALSH.

Crash #1: Dot com bubble and what the JSE did!

First let’s start out with what a bubble is. When investors put so much demand  and buy stocks, commodities or other instruments, it drives the price up. It takes up the price beyond any actual reflection of its true value.

Just like soap bubbles, it rises to a certain point until it pops.

And that’s what happened in the year 2000.

In March 2000, the NASDAQ peaked at 5,132. Investors were so confident that the internet and technology was the future, they kept buying more tech stocks.

And guess what followed? The FTSE! Around this time, the FTSE had already made its peak at 6,930. But it was short lived.

In the next three years, the FTSE fell to 3,321, which is a 52% crash.

Sounds frightening? Well let’s now look at what happened in the JSE at the same time.

The JSE-All Share Index (JSE-ALSH) in January peaked at 8,558. In the beginning of 2003, at the bottom of the crash the JSE-ALSH was sitting at around 7,322. This means the JSE only took a knock of 14.4%.

Next, the JSE went to all-time highs in 2004,2005, 2006, 2007 and 2008.

So even though there was a catastrophic collapse on the FTSE and the NASDAQ, the JSE kept on making new highs.

Next let’s look at the second crash 

Crash #2: Financial Crisis and how the JSE made new all-time highs

 


The financial crisis in short, was where the value of financial institutions and assets dropped at a rapid rate. This made people panic and withdraw their money from banks. A huge string of sell-offs kicked in around the world, which caused massive collapses on the stock markets.

Let’s see this in action.

Take a look at 2008 in the above charts of the FTSE and JSE-ALSH. The FTSE peaked at 6,730 (31 October 2007) and crashed down to 3,505 (31 March 2009). This was yet another big collapse for the FTSE, falling 47.9% from its highs previous highs.

And for the last six years, it’s just been floating around the all-time highs. So investing in the FTSE for the last six years was one long drag.

But now let’s compare it to what the JSE-ALSH did.

The JSE-ALSH in May 2008 peaked at 33,309. And in less than a year, it fell to 18,258 which was a 45,18% thunk…. This scared the living hell out of many investors, as they thought it was the end of the world.

But like all recessions, it was short-lived.

Two years later, the JSE-ALSH was at all-time highs at 32,914. And this was typical of the JSE.

And today? Well it’s around 51,806 level…

What does this mean for you and your portfolio?

First of all, what I predicted last week was based on a past probability prediction analysis. It doesn’t mean it’s going to play out exactly because I’m not Nostradamus.

But what you can clearly see is that these BIG corrections happen. No one can stop it because we all base our decisions on demand and supply factors.

But what I can safely say is that, every time we have a recession (correction), over the next few years the JSE-ALSH balances itself again and goes to all-time highs.

The best thing to do for your portfolio is take a look at the assets. Compare how the stocks correlated to the crashes we’ve had, and make decisions to choose safer stocks that continue to make new highs in dire straits.

I don’t mean to go off topic but I’ll give you an example:

The JSE-Gold index has been in a sideways trend for the last 13 years. This isn't a great investment if you put your money in gold stocks.

I’d rather look for the safer alternatives such as, insurance companies, retailers and telecommunications.

Why? People will always need food, clothing, insurance, communication devices and safety.

I trust this brings a new outlook on how recessions play out with the FTSE and the JSE-ALSH. And how you don’t have much to worry about because of how the other crashes played out in the past.

But if I see that things will continue downhill or that we could enter the next Great Depression, I’ll let you know immediately.

So keep reading Trading Tips, and I’ll keep you up to date on the big bad profitable stock market. 


And always remember, "Wisdom yields Wealth". 

Timon Rossolimos
Author:                 94 Top Trading Lessons of All Time
        

Don't forget to like these two pages on Facebook for awesome trading tips and Facts about everything!

Attention: This chart is showing the next 41.9% stock market crash!

I'm about to show you a chart that predicted two of the biggest crashes of the century:

Crash #1: The Dot Com bubble (2000 - 2003)
Crash #2: The Financial Crisis (2007 - 2008)

And now it's predicting the next possible crash. What I like to call “The Debt Crisis”.
In 2007 we had banks collapsing and now we have countries collapsing.

And so we're talking about a crash on a much larger scale! This crash won't only affect South Africa, but the entire world.

Let's go through the signs one by one, so I can show you how it could signal the next looming stock market crash and what it means for your wealth!

Stock market crash sign #1: Interest rates are set to rise very soon!

For the last five years, interest rates have been at ridiculously low levels the UK and the US.

But now with all of the debt problems in the world - Greece, Portugal, Italy and Spain, it looks like there needs to be intervention.

The US is expected to raise their interest rates from 0 up to 0.25pc around the middle of 2015. So that could happen any month now!

You’ve also seen the rand weaken to a ridiculous low of R12.39. And so the US Dollar has been strengthening against many of the emerging markets, as people are piling their money into US Dollars.

The weakening of the rand will continue for some time to come. 

 

Stock market crash sign #2: The volatility index is causing a lot of panic!

The Volatility Index or the VIX is what you can call an emotional barometer. It basically measures the investor’s sentiment about the current volatility in the market.

For now all you need to know is that when the Vix shows a measure of anything higher than 30, volatility is sky high.

And anything less than 20, shows you low volatility. Today the Vix is sitting at 14.21, which tells you that the Index isn’t too excited about the upside that’s come in the last couple of years.

So when the Vix index is way below 20, you can expect a reversal in the market. And so, downside is expected to come.

In the next few days, I’m going to specifically show you why this index is so important to look at. So keep reading Trading Tips in the next few days, it’s crucial to understand this index!

Stock market crash sign #3: The FTSE predicted two of the biggest crashes of the century and could predict the third one

Take a look here:
 

This is the Financial Times Stock Exchange Index chart or the FTSE (Footsie). Basically this index is made of 100 of the biggest companies on the London Stock Exchange.

And over 8 shares alone are duel listed on our JSE stock exchange.

So when the FTSE crashes, it’s safe to say that the JSE follows suit.

During the years of 1991 and 2003 we had the Dot Com Bubble. The FTSE crashed 52% from 6,930 (31 Jan 2000) down to 3,321 (31 march 2003).

From 2007 to 2009, the FTSE crashed an insane 47.9% from 6,730 (31 October 2007)  down to 3,505 (31 march 2009).

And now just six years later, we have the FTSE lingering around the all-time highs just looking like it’s ready to collapse again.

And the funny thing is that the FTSE has really battled to break above its psychological level (7,000).

As long as the index level stays under 7,000, without a strong break to the upside, you can expect huge downside to come.

In 2007 – 2008 we had banks collapsing and in 2014 -2015, we now have countries collapsing.
Just ask yourself, will South Africa, Greece, Portugal, Italy and Spain, to name a few, ever pay off their debt?

My opinion? Not as long as the failed monetary system is around.

So, with all of the chaos brewing world-wide economically, politically, socially and financially, we could expect the FTSE index to fall back down to 4,000 in the next couple of months.

That could be another 41.9% collapse on the FTSE which the JSE will follow.

But don’t worry, I’ll keep you updated with what’s going on and how you can profit from it.

Keep reading your Trading Tips daily mails, because the next few days are going to be crucial for you and your money.

And always remember, "Wisdom yields Wealth". 

Timon Rossolimos
Senior Editor: Trading Tips 
Head Analyst: Red Hot Storm Trader
Author:             94 Top Trading Lessons of All Time

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I quit!

Yep, that’s right! The two little words you say when you throw in the towel, say uncle and move on to greater things.

Two words which emphasise a whole change to your life and what you pursue in.

It may be better for the future or for the worse. You’ll hear it in every business and every industry you work in.

It’s been a difficult two months with trading and the market environment is not very conducive for traders.

I quit - two powerful words that can stop you from achieving what you want to and deserve to reach

The market moves in three direction - up, down and sideways.

But if you acknowledge that the market does move like this at times, you should know not to give up.

This is a very common mistake traders make. When good times roll, they bank their profits and feel like the king of the markets.

But when market moves in squonky directions, you might think the market is out to get you and so, you move on to better things.

But if trading was only about banking winners and making money, EVERYONE would be doing it with ease and making fortunes.

But that’s not the case, when you look at the reality of trading.

Just like any business you run. You get good times and you get not so good times. At the end of the day, it’s how you manage your positions that’s key to stay in the game.

Don’t be a quitter! Learn from these market environments and keep strict to your money management rules.

Psychology is key to stay ahead of the trading game.

And always remember, "Wisdom yields Wealth".

Timon Rossolimos

Managing Editor: Trading Tips

Do you have a question of your own? Ask me on the InvestorsClub.co.za and 

you could be featured in the next Trading Tips mail bag.

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Trading riddle time: What goes up, down and doesn't move?

If you think the answer is a staircase, you're very clever.

However with this riddle, I was referring to the stock market.

To think that on the 24th April, the JSE was making all-time highs! And in the last 30 days, we had 12 down days in a row!

Last time this happened was pretty much when I was in diapers in 1988.

In less than two months, the JSE has gone from 55,355 down to 51,990.  That's 3,365 points gone, taking the ALSI back to February’s levels.

So to go back to the riddle, what goes up, down and doesn’t move?

The answer is: The JSE! Because for the last five months it’s back to where it started.

But now you should turn the bad news into profitable news. And to do this, we need to look at all of the current aspects.

Things are looking abysmal at the moment with the markets and I’m sure you, as a South African consumer, can relate 100%.

The government is still keeping the e-toll system in operation, making it compulsory the next time you renew your driver’s licence. But I guess the tiny glimmer of relief is the fact that the monthly cap on the E-tolls reduced and set to R225 per month.

Last week we had the new fuel price increase kick in on all grades. So now you can expect to pay 47c extra a litre in Gauteng.

The rand is hovering in the R12.28 level again, and looks like the weakening has just begun again. And so has the bond market. South African government bonds have weakened with the rand so ‘great news’ all around.

And while the market is coming down, I’ve had questions all around the world asking what they can do as a South African trader. 

If you have any trading questions of your own that will help you achieve even greater trading success, register and log onto the investorsclub.co.za… It’s free and ready for you right now!
And always remember, "Wisdom yields Wealth".

Timon Rossolimos
Managing Editor: Trading Tips

Do you have a question of your own? Ask me on the InvestorsClub.co.za and you could be featured in the nextTrading Tips mail bag.

Ps if you missed this week's Trading Tips TV video for the week,click on the video to watch below!  

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Those darn Greeks are ending our week down again!

This situation is one big labyrinth. Greece implemented its 7th austerity plan in five years. So just when its found a solution to the debt-maze, it just reaches another dead end.
So the poor Greeks have to pay even more taxes and cut their spending down.

In Greek we say “Ti krima” which means, what a shame. It’s actually getting so ridiculous that they’ve even created a Wikipedia page on the issue called “Greek-government-debt-crisis- countermeasures”.

But here’s where it gets interesting. Greece’s economy is not even make up 2% of the Euro zone’s economy. But the world is still up in arms about whether Greece will ever pay their debt in the medium run. And so, the Greek-debt crisis is playing an important role in the confidence of the world. 

With the lack of confidence worldwide about the countries in Europe not being able to pay their debt, we’ve seen many stock exchanges sell off this week alone. And this includes the JSE falling 2% from its highs.

But I think things will get better now that they have a Finance minister who acknowledges that the Austerity plans just don’t work. 

Let me quote Yanis Varoufakis who called the austerity plan a “deal-breaker”:

“Our government – and will not – accept a cure that has proven itself over five long years to be worse than the disease.” 

"Wisdom yields Wealth"

Timon Rossolimos

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