Stock Market Crash 2018? – Predictions Signals Indicators Market Watch – 2018 2019 Forecast

Stock Market Correction or Crash?

Is what happened this week just a correction to a booming market with excessively high stock price valuations, or is it the beginning of a stock market crash?

Experts are scrambling to understand what’s happening but while we’re waiting why not jump in and analyze this while we’re waiting? Sound like a plan?

At this point, the depressing culprit seems to be the persistent announcement of the Fed interest rate hikes. It’s almost a papparazzi thing now.  However, when those comments are fed into AI trading bots algorithms, it might become contagion for other markets.

The market correction on the Dow, Nasdaq, S&P, FTSE and TSX isn’t over it seems.

Vix Chart Courtesy of Yahoo Finance

In early February, the US stock markets including the Dow Jones, NASDAQ, and the S&P fell 5% to 10%. The Dow plummeted 1600 on Monday the worst single day correction in its history.

Will this persistent volatility on the DOW, NASDAQ, S&P, FTSE, and TSX become a contagion that affects other markets such as the housing markets? People used the big loss day on Monday as a marker, but perhaps tomorrow will be a new marker?

As an investor, do you need to know the causes of the volatility and correction? Right now, the market has recovered and the US dollar is gaining strength. Yet trade deal turbulence could cause a wobble in global markets. The world is still dependent on the US economy.

Will there be a housing crash in 2018/2019?  Jobs are up, but consumer mood is at a 6 month low.

Investors are nervous.  Experts believe the stock correction was due to Fed Interest rate intentions (are they really fighting inflation?), or ETFs or AI guided trading bots. Since there was no emotion before the mini crash last Friday, it appears the slide was quietly caused by AI trading bots working for large funds.




This post delves briefly into the theory and factors involved in market crashes, corrections and selloffs including government meddling and AI systems (Note: even the people who make Artificial intelligence and self-learning algorithms have admitted they don’t understand how the AI systems make decisions. They learn and make decisions independent of human input and may not be  able to report to humans how and why they acted).

As time passes and bots do more of the trading, investors are left with fewer clues as to what is moving the markets and when it’s  time to get out. That fear could lead to panic selling next time.

Global stock markets were deeply impacted in the last few days, letting everyone know that markets are connected, even the housing market.

The TSX dropped another 271, and NASDAQ is down 273 points on the day. It’s been more than a correction or sell off, and looking more like a mini-crash is under way. CNBC’s Jim Cramer is calling it a “Flash Crash.”

Largest intraday point drop for Dow in history from CNBC.





The price of oil and CAD vs USD exchange rate has dropped significantly as well. It’s an interestign time for forex brokers and foreign exchange forecasts.

Housing is great too, although amid the housing market predictions is some worry of a serious housing crash.

Lately, the mood has been so positive that investors are gladly ponying up big money for stocks. It’s difficult for anyone to visualize the perils of an overly positive mindset — Euphoria.  Are we in the housing euphoria bubble?

Stock price rises will continue in 2018, however, when and how will this amazing bull market end? Lets take a good look at the issue without any counterbalancing rhetoric which prevents us from digging in and exploring the stock market crash mechanisms and theories.

The Dow, S&P and NasDaq all hit new record highs in 2017 and stock valuations are very high, perhaps too high to justify. The recent volatility of bitcoin might be worth mentioning because a few are suggesting it cause trouble for the stock markets. Many investors don’t seem to know what bitcoin is worth.

And given how complex markets, businesses, and computer trading is, investors really don’t know what could happen.

Will the Market Bubble Collapse?

Some experts suggest a stock market bubble is about to burst sometime between now and 2020. Other forecasters refer to government reactions and politicies as the key determinant or crash factor. You’ll hear them in the videos below.

Some even point to the fact that Warren Buffet is sitting on a mountain of cash rather than holding stock.  And his stock market indicator is pointing to a crash.




As you’ll see in Tony Robbins prediction video below, people will make money on the market crash (including those selling short). And others will lose everything. Let’s look at the prospect of a stock market crash and hear from experts.

Could we say this crash will be like a series of wobbly dominoes that begin falling, while overconfident officials feel they can reach out and stop the crashing tiles?

Some are looking at the housing market as ripe for a crash. There’s been persistent rumors of crashes in Miami, Denver, Seattle, New York, Los Angeles, San Francisco, Toronto and Vancouver up in Canada.  Yet none of these markets could crash easily. The economy is okay and there are too many people who need homes.




Too Much Overvaluation, Optimism and Growth?

Some experts cite the euphoria of stock markets during their bull runs. They suggest the heightened unrealistic expectations create a platform for disaster and when reality strikes, truth launches panicked sell offs. Some say the overvalued stocks, economy, and general optimism present right is a sure predecessor of a crash. It may have been that way in 1987.

Stock values have reached levels not seen since those two disasters and a correction would throw the world economy – currently seeing an ongoing boom period – into disarray — news report.

Stock prices and housing prices have ridden on a tide of low interest rates, demographic changes, government stimulation, foreign trade, technology, and more. At the end of a long business cycle, consumers are satiated. But do consumers have all they want? Are investors ready to leave US stock markets for gold and currency?

What do the Historical Stock Timeline Charts Say?

This chart of the S&P index shows market crashes are uncommon.

Chart courtesy of http://directorblue.blogspot.ca

Economic indicators are traditionally used to identify potential crashes. Check out these top 6.  Are investors so optimistic that economic data can be disregarded?

Graphic courtesy of Yahoo Finance – DJI up to 2018 Graphic courtesy of Yahoo Finance – NASDAQ up to 2018




Is What Happened in Previous Market Collapses Relevant?

Bearish experts will rely on history, and history likely will side with a crash outcome between 2018 and 2020.

The following day, Black Tuesday, was a day of chaos. Forced to liquidate their stocks because of margin calls, overextended investors flooded the exchange with sell orders. The Dow fell 30.57 points to close at 230.07 on that day. The glamour stocks of the age saw their values plummet. Across the two days, the Dow Jones Industrial Average fell 23% – from Wikipedia

Panic – Where Reasoning Disappears

Panic emotions of investors and government leaders is the X Factor. Today, markets are driven by computer algorithms that act faster, and still ultimately controlled by emotional humans. If you’ve ever seen a stampede, you probably can visualize the events in 1929. Some are thinking that computer aided panic is what might happen.


Thursday marks the 30th anniversary of ‘Black Monday’ market crash from CNBC.

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Make sure your friends and family have a good lock on the economy and markets. These are scary times ahead.

AI Systems may Panic without Emotion

Artificial intelligence systems, trading algorithms, or AI predictive programs may even be more prone to panic because their actions are actually irrational. They’ll sell lightning fast without any reference to long term value.

When panic hits, the AI systems may become almost useless, other than predicting which stocks will crash slower.
In fact, such AI algorithms are so complex, the programmers can’t figure out how the AI systems are making their decisions. AI systems can’t describe why they make their decisions either.

The AI systems are increasingly autonomous, taking cues from market activity yet not really knowing what the activity means on a human emotional level. AI systems don’t really understand the human element of international trade and politics.  Geopolitical risk is a major factor today.





If thinking about a US stock market crash is too difficult to visualize, you might consider selling soon. Getting greedy is one additional sign of irrational thinking that’s driving stock markets and housing markets currently.

Housing markets are key because real estate has been driving the economy for awhile. A bursting housing bubble could launch the landslide that takes down the stock markets.

Seriously, Could US Stock Markets Crash?

All positive economic cycles generally end with some sort of rapid descent, just like a roller coaster. That descent at the end is the rush out just like a stampede. It’s completely desperate and irrational.

Long term, everything returns to the equilibrium point. The stock market crash is the point where investors lose all confidence and decide to pull their money out pronto. Sell, Sell, Sell.

As a million dollar home owner or prospective buyer, you’re wondering when this record long economic boom will end.

An important signal is desperate buyers jumping into the housing market at excessively inflated prices, overly indebted and leveraged, they fall hard when the panic button gets pushed.

Cheap Financing Overcomes a Blocking of Housing Supply

When governments prohibit land development, it makes home prices rocket. More millennials wanting/needing homes, high immigration, rising income, low interest rates, cheap mortgages all together create the drive to buy a home.

Big money chases few homes, and when governments persist in stopping or not supporting land development, speculators become more confident prices will rise further.

Then a politician steps in with their solution, at the end of the business cycle where employent and profits will begin to drop. Speculators/investors pull out fast, and the slide begins.




Will the Housing Market Collapse Too?

Home prices are now around record levels, but there is low unemployment, low mortgage rates, and a huge population hoping to own. That’s desperation. Enter cheap financing companies giving buyers a hope at ownership, just like 2007, and a housing market collapse.

President Trump’s recent tax revamp is going to extend the cycle for sure. Yet that provides more time for the “crash factors” to form like clouds on a beautiful sunny day.

Business cycles form just like cold weather fronts over the prairies. They end in storms.

Have a read of Wikipedia’s description of market cycles and the various theories of why markets collapse and you’ll be more certain that they could indeed happen. From MIT’s inverse cubic power law, to chaos theory, researchers focus on the mathematical and technical elements.




The research on investor/debtor mimicry  is worth a read too.

People follow each other blindly like they were tailgating each other on a high speed highway. If anything happens, there’s going to be a chain reaction crash.

The way the expert describe mimicry however makes it look like everyone abandoning ship so are they mimicking others, or just jumping off the ship at the same time? However, the fact investors simply copy others buying and investing behaviors makes the abandonment more likely.

The research suggests mimicry was present in most stock market crashes and housing crashes. The predictive behavior is nervousness about the market, followed by mimicry, followed by panic. That panic could be set off by anything because of investor/owner anxiety.




Let’s say Warren Buffet sells a huge array of stocks suddenly. That combined with news about an impending war, poor jobs report, and fast rising interest rates, could be all it takes.

None of the research however, seems to be applied to human expectations, human happiness, and human panic. Human’s don’t pay attention to historical trends and data, nor what AI systems advise. They generally pay attention to now just like herding animals before a stampede. The signal that sets the herd off, could be one or two animals stumbling over a pothole.

The final analysis would reveal that people sell stocks and housing when they believe strongly the market is heading down. That’s when the wealthy and speculative investors check out en masse.

With stock market prices and housing prices at record highs, even uneducated investors and home owners would be vulnerable to bad news and false outlooks.

Tony Robbins Predictions on the Market

Tony Robbins explains why this Stock market crash could be the single best opportunity of your lifetime.

The major media networks might exaggerate some financial, political and consumer facts an launch a slide. The general consensus of Internet users driven by a Facebook/Twitter/Instagram mentality could easily exaggerate threats.



Major geopolitical actions might actually mean nothing materially for the markets, but if interpreted otherwise, it could start a slide that governments couldn’t stop.

In this video, Peter Schiff talks about government action being the key thing to predict a stock market slide.

The latest theory of RR Reversal has it that all markets suffer a pullback of 10 to 40%. So empirical data and events are the basis of future action.

Given the success of political correctness, fake news, and social media pressure, it’s not hard to see a big pull back driven by emotional investors and buyers. That could launch political reaction which magnifies the issue.

As good as prognosis the US economy has, there are a lot of human emotional factors that could launch a recession.
Let’s not forget that we’re a long way into this business cycle. The end is surely in sight. While not everyone is satiated and ready to stop spending, many wealthy people are.

The wealthy have unusually powerful vote about trends. When they pull out of the economy, that news will be heard by AI systems and human investment advisors.
When the panic button gets pushed this time, it will be the shock wave before the tsunami.



Even if we turn everything over to artificial intelligence systems, our global economy is new. The AI systems are seeing a new environment with new players. Chinese buyers and investors think differently than US bankers or European politicians. And a herd of 1.5 billion panickers is a scary thought.

Given the battle between Trump and his enemies, it’s an emotional environment that fuels income for news media. As you know, they need sensationalism to pay their bills. That smoke screen is enough to keep people off balance and insensitive to the real investment issues. At some point, in emotional confusion, the stampede could take place.

Most forecasting models don’t go beyond 2020 or 2024, and that in itself might give you pause for thought. The fact that investors, homebuyers, and corporations can’t visualize 2 years ahead is worrisome, especially since experts have access to all the data.

Too many forecasters, economists, and business people look at data, but is data just a false cue and where everyone reacts too late?

Screen capture courtesy of CNBC

Robert Shiller himself isn’t alarmed at the CASE ratio. He suggests that investors diversify their investments. That would help allay panic type behavior.



The Stock Market Crash Acelerators and Signals

Paying attention to economic changes and other signals could give you forewarning of what could happen from 2018 to 2020. If relying solely on professional stock market experts and news stories would not be wise. As the overall indicators move relentlessly high, it might provide a clear signal that market is cresting, and will head back down to equilibrium.

One clear signal might be excess in demand which draws money and government reaction.

Here’s a BIG list of housing market crash factors to look for:

  • stock prices at record levels
  • government passes complicated new tax bills that confuse and make investors uncertain
  • geopolitical events disturb international trade relationships and flow of goods/money
  • inflation and wages rise faster
  • housing prices peak
  • consumer product surpluses
  • natural end of a long business cycle
  • stock price to earnings ration too high (Shiller Pace is above 30)
  • misery index rises (unemployent rate + inflation rate)
  • the NAAIM index is too high (professional investors optimism)
  • growing market fear that may induce panic (investment advisors, market experts, bloggers)
  • assets have peaked in profit performance and wealthy begin to unload
  • too much consumer debt combined with risky investments (housing) and rising unemployment
  • corporate-Equities-to-GDP Ratio
  • accidental or emotional timing of government fiscal events (China preventing funds exodus)
  • key corporate failures in financial sector (bank, mortgage company, investment firm)

When do you think this current bull run in the markets will end? Will it be soft or a loud crash?

Note:  The statements and information presented in this post is not intended as professional investment advice. It is solely an exploration of stock investing and the risks, perils, and behavior of stock markets and the economy. No one should rely on a single source of information or a single stock market and investing professional’s advice.  The overall message of the post might be to diversify stock, real estate, and cash/gold holdings as a hedge against stock market crashes.  Investors should look into hedging strategies but be aware that even hedging may provide limited protection from a crash.

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When Should I Sell My Home?

Should I Sell My House to Avoid the Coming Market Crash?

Timing is everything. Buy low, sell high and right now, the housing market is high. But the question a lot of homeowners are asking is “When will the real estate market crash?”

The Toronto housing market does have all the earmarks of a soon to crash market. And we know from viewing the historic charts that Toronto doesn’t recover well from these events. After the big crash or burst bubble event, housing prices stayed low.

Selling with experts means you may get an over asking price which is still common now.

Yet, today’s market is fed by International money — buyers from China, Russia, and the Middle East. And they can’t buy in the US because of wicked prices there.  So they’re coming here where their kids can get a first rate education and get citizenship in Canada. They definitely see a home as an investment and their money will continue to fuel the Toronto market.




So the “should I sell my home question” doesn’t have a certain answer, but the time is coming soon. The Toronto real estate market crash could happen late this year or may not happen for several years yet. We’ve all been expecting a Toronto market collapse for some time now, but it just hasn’t happened. We haven’t been finding and examining the real underlying factors.

Looking at the price charts alone isn’t sufficient. First we’ve just come away from the worst financial and housing recession ever in the US, and now the US is getting its financial act together. That fuels strength for a long time.

Screen Capture courtesy of Toronto Real Estate Board

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Why Wait for the Last Minute to Sell?

Quite a few homeowners are selling already and choosing to rent. Yet, finding a rental in the GTA for a decent price is very difficult. There is a rental crisis going on right now too. If you can find a rental, it’s a good time to sell your home.

The more sensible choice is to sell and move to parts of Florida, Costa Rica, Belize, Panama, or even Nicaragua. The cost of living is way less and you can get a lot for your $800,000 plus investment. You can rent an apartment in the Dominican Republic for $1000 month and live very well too. The health benefits of moving are something to consider.

Should you sell your house so you can travel? This could be your travel time, before you’re too old to travel.

Should you sell your home because your neighborhood isn’t what it used to be? All neighborhoods deteriorate over time.

Should you sell to move closer to your kids? Prices are really low across Canada.

 

 




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Toronto Housing Market Crash Getting Closer?

When Will Toronto’s Real Estate Market Crash?

The experts have been calling for a Toronto Housing Crash for several years now, but it never happened. But is time finally running out?

What happens before a Housing Crash? This is the question more people are asking.  If Toronto’s economy is strong, could a crash possibly occur? Do we need to know the factors? If housing does crash, that doesn’t mean the economy would crash would it?

Canada is now a real estate nation, with little else to keep the economy from sinking into an even deeper funk — in the Globe and Mail.

Every month in 2017, brings a new context with new threats. And when prices are this high, perhaps down is the only direction? Some writers in the media including Gordon Pape the finance guru, and Douglas Porter of BMO are hinting about a housing crash.

What are the current issues people are discussing?

  • first time buyers – are they over-leveraged, seriously in debt and able to pay higher mortgage payments?
  • are homeowners exposed to higher mortgage rates?
  • is the renegotiation of NAFTA going to create a wave of mortgage defaults and business failures?
  • fast rise of home prices – going vertical on charts can’t continue
  • what are speculators and the media saying about the market?
  • will Chinese buyers disappear from the market?

In the first 2 months of 2017 have prices in Toronto have been rocketing. March to June, prices will launch into the stratosphere.

According to the Toronto Real Estate Board, active listings in the GTA were down by 50.5 per cent in February compared with the same period last year.  “Inventory hasn’t been this low in 15 years.” from a news post in the Globe and Mail.

Chart courtesy of Trebhome.com

What Causes a Real Estate Bubble and Housing Market Crash?

A Real Estate bubble happens when prices become inflated well beyond their apparent or historical value. Reality may be ready to snap them back to normal. The excessively high prices mean some buyers are likely over leveraged or in financial risk. If the market plummets they will be holding an “underwater mortgage” where they owe much more than the home is worth. They could decide to abandon the home as was evident in past recessions.

There are so many housing crash indicators to consider that even experts and mortgage corporation CEOs can’t provide a very good forecast. And past crashes may not give us any clues. But one insidious factor might be most telling even more than prices — that the economy can’t support it and wage performance in Toronto isn’t good — homeowners really are overleveraged. CMHC has sounded the warning, doing what they can to stop first time buyers from being future victims. Homeowner’s financial position is likely worsening and they’re increasingly in danger of default.

I’m not a qualified housing market economist but who is? You can read forecasts from 4 years ago from the experts who got demand wrong, bubble forecasts wrong, and made other embarassing statements such as “Toronto’s condo glut.” It’s a lot of guesswork. If you’re well to do, the price crash might not mean much, but a housing crash could bring the Ontario economy and indebted Ontario government crashing down. That’s when all hell breaks loose.


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When Will the Housing Crash Happen?

A housing crash occurs when housing prices plummet, due to economic failure, or to a wave of sellers who dump their properties onto the market in desperation to sell them. As in 2007 in the US, if defaults occur, it could bring down the market including mortgage lenders, sending it spiralling downward for years. The US housing crash brought the whole economy down and the damage spread internationally due to economic integration and capital flight.

Canadians, including Torontonians are deep in personal debt and first time buyers may have big student loan debt. Wealthy people would be quick to sell to protect their own fortunes. Once the fuse is lit, we can expect terrible consequences.

What do The Home Builders Think of the Toronto Market?

Are builders jumping into the Toronto market with both feet? That’s a good sign of market direction, because new home development builders have a lot on the line if the Toronto economy should tank. They’d be exposed for hundreds of millions of dollars.

Yet if you look up in Vaughan, Newmarket, Aurora and especially Bradford West Gwillimbury, you’d see massive developments going full steam ahead. In East Gwillimbury, one development just north of Green Lane in Sharon, will have 9000 new homes. Builders seem pretty confident they’re going to sell them all. And generally, they’re sold quick and at very high prices. Chinese buyers are still supporting the market however, buyers from the Toronto area are keenly interested in York Region.

Selling Your Home in 2017

I’m getting more frequent inquiries from Toronto area home buyers and I expect that to grow. They can sense the possibility of the Toronto housing bubble bursting, and that now is the right time to sell their Toronto or Mississauga home and make the migration north. It is a wise time to sell your home anywhere in the Toronto region and settle into something cheaper. We will never see the winfall homeowners are getting now from selling, again in our lifetime.

If you are ready to sell, why not contact me to help you get the best price for your Toronto or Mississauga home? You’ll get an experienced and helpful Realtor to get it sold fast, but for a fanastic price. You won’t be even thinking about their commission.

When the next recession happens, all those who didn’t sell will look back with regrets. The opportunity to benefit by hundreds of thousands of dollars is no laughing matter. You can sell now and move to Costa Rica, Palm Beach Florida, Kelowna BC, Arizona, or Belize and live a wondrously happy existence.

The Kids Will Be Happy and So Will You

Some don’t sell their house because they don’t want to uproot their kids. But kids are resilient, and 100s of thousands of dollars buys a lot of health, high quality education and other youth development benefits. Think how nice that could be?

It may take another year or two before the bubble bursts, buy why wait? You have the big winfall now. If you’re a babyboomer, did you work hard all those years to sit in a house that needs constant repair? Come on, you deserve better than that.

Contact me and I’ll help you get launched on the whole process and get you moving onto a better life. My Realtor associates in your town will do a market valuation and then help you optimize your property for sale. This is an exciting time for you, your spouse and family. Suddenly, you have options you never dreamed of. Be happy and let’s get started!  — Gord

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