The market and where the economy is going.

[Pat Mustard]

The Dow is down big over the last week.  Over 600 an hour and a half into today's trading.

Where do you think the market is going in 2019.

I think the stock market has a lot to lose - before its over I expect a 20%+ haircut within 2 years.  2019 will not be a good year.

We will be in a recession within 30 months.  Interest rates are past neutral at this point and short term capital is going to be very expensive compared to the past decade.  The bond market reversal in the 3 and 5 year T bills is a bad sign, and the 2/10 are looking to invert.

Real estate is looking like conditions that existed in 2017.  We're putting our house on the market in May and taking profit.  It was a short term investment and we want to wait for the inevitable buyer's market.  We bought in May 2016 on a private contract.  It went from essentially zero equity to around 35%.

The problem is that too many analysts and economists think that the stock market = the economy. It does not, especially in these days where short term metrics (over less than a year and often not spanning to three months) decide on share options and bonuses for directors and executives. That fosters a culture of now over the future health of companies, hence you see them shedding the 20% most experienced and productive of their staff, simply because they're paid higher wages and you see early booking of possible future revenue streams to pump up current performance metrics and you see things like massively leveraged buyouts of other companies which doesn't make strategic or long term sense simply because that other company is seeing as being something new and the buyout gives a massive but very temporary boost to the buying company's shares.

In essence none of the lessons of the dot com crash or the far east crash or the Russian crash or even 2008 have been learnt, and we are due set for another financial meltdown. This time governments will not be able to cope or bail out the problems, they've been hollowed out too much by a culture of privatisation and an allied culture of "well if the rich are going to evade their taxes contrary to the law we must change the law to let them off".

I'm not going to predict what'll happen next year, but in the medium term (5-10 years) I am very pessimistic and in the longer term beyond that, with global warming bearing down on us, I frankly cannot see how we'll manage to avoid an extinction event.