October 8, 2017 SnyderTalk: Get Ready for a Stock Market Melt Up and the Inevitable Meltdown

“Not by might nor by power, but by My Spirit,” says Yahweh Sabaoth. (Zechariah 4: 6)



Get Ready for a Stock Market Melt Up and the Inevitable Meltdown

An interesting confluence of developments is taking place right now that every person with money to invest needs to take into account:

  1. In the neighborhood of $50 trillion dollars is sitting on the sidelines in cash.
  2. U.S. corporations are hoarding trillions of dollars in cash overseas.
  3. Central banks are printing money and are using some of it to buy stocks.

What’s going on?

Despite things like North Korea developing intercontinental ballistic missiles (ICBMs), detonating a hydrogen bomb, and threatening to use them to attack the U.S. homeland or Guam, stock markets are behaving as though nothing significant is taking place. Over the past several months, many similar events that usually spook stock markets have taken place, but stock prices continue to climb.

That’s evidence that some of that cash on the sidelines is beginning to enter the stock market.  A lot more is on the way.

People are beginning to Invest in Stocks Again: Bump 1

Following the Great Recession of 2007-2009, many people decided not to invest in stocks.  They kept their cash in interest bearing accounts instead.  With stock prices at all-time highs and still rising and interest rates at or near all-time lows, some of those people are finally beginning to invest in stocks again.

Since the Great Recession ended, stock prices have more than tripled, but interest rates remain flat at abysmally low levels.  Who can blame anyone for rethinking the decision not to invest in stocks?

Interest rates are too low globally.  That’s the problem.  People holding cash are beginning to realize that they are missing out on great moneymaking opportunities.  They are beginning to see the risk associated with holding cash as greater than any other risk.

Cash Held by U.S. Corporations in Overseas Accounts is about to Come Home: Bump 2

U.S. tax policies are about to change.  When cash held overseas by U.S. corporations is allowed to reenter the U.S. at significantly lower tax rates, stock prices will rise significantly.  That’s natural. The money will be put to work and boost the U.S. economy.

Central Banks are Investing in Stocks: Bump 3

Since stock prices are based on supply and demand, new money entering the market raises stock prices. The money that central banks are investing in equities has been printed since the Great Recession, and the amount of currency they hold is huge. Investing some of those reserves in the stock market will put a lot of upward pressure on stock prices.

What does it mean?

In a nutshell, I think these 3 simultaneous developments mean that stock prices are about to skyrocket. As stock prices rise, even more money will enter the market faster.

That’s called a “melt up”.  It will pick up a head of steam, and I think it will be dramatic.

Stock prices could double or triple over the next 18 to 24 months.  As stock prices rise, people holding cash will use more of it to buy stocks because they don’t want to be left out of a great stock market run.  At some point, natural apprehensions about stock investing will be abandoned and economic logic will be jettisoned.

Eventually, cash reserves will dry up, and the stock market will peak. When too little new cash is available to sustain irrationally high stock prices, stock prices will drop even faster than they rose. That’s called a stock market “meltdown”.

Where are we now?

Right now, I think we are in the early stages of a stock market melt up.  It will pick up a head of steam as stock prices continue to rise.

Be alert.  Stock prices won’t rise forever.  Eventually, they will peak and a meltdown will follow.  The meltdown will affect prices in every asset class including real estate.

What about real estate?

I think that now is not a good time to buy real estate unless it is a real bargain. Real estate prices are too high.  That will become evident when the meltdown arrives.

Just like 2008, people are rushing to buy real estate because they think that if they wait they will be priced out of the market.  Recent mortgage rate increases help to fuel the real estate buying mania. Since real estate markets are much less liquid than stock markets, selling real estate during a meltdown at anything above distressed prices is very difficult.

I think real estate prices will drop more than stock prices during the stock market meltdown.  People need to pay attention.  The debt that comes with real estate purchases won’t disappear when real estate values plummet.  Locking yourself into a low interest rate mortgage at high real estate prices is a formula for insolvency when the bottom falls out of the real estate market.

Now is a good time to buy stocks, but….

Don’t be greedy during the melt up. If you miscalculate and miss the peak by a day or two, it could mean the difference between making money and losing money, a lot of money.

When the meltdown comes, most stock buyers will take a hiatus.  As the intensity of the meltdown increases, many people who own stocks will sell them at prices that are significantly below the prices they paid for them.


The cumulative effect of the three bumps to stock prices that I have mentioned is predictable. This kind of thing has happened many times before with one major difference. Central banks are buying stocks and contributing to the melt up.  They have lots of cash to invest because they print money.

These are my opinions.  I am not a financial advisor. Take it for what it is and nothing more.

I may be wrong.  Whether I am or not, it pays to be cautious when investing in stocks and real estate.  Do your homework and talk with a financial advisor you trust.




“The glory which You have given Me I have given to them, that they may be one, just as We are one; I in them and You in Me, that they may be perfected in unity, so that the world may know that You sent Me, and loved them, even as You have loved Me. Father, I desire that they also, whom You have given Me, be with Me where I am, so that they may see My glory which You have given Me, for You loved Me before the foundation of the world.” (John 17: 22-24)

See “His Name is Yahweh”.

5 thoughts on “October 8, 2017 SnyderTalk: Get Ready for a Stock Market Melt Up and the Inevitable Meltdown

  1. I wrote this editorial earlier this month. I’m commenting because I think we are much closer to the melt up now than we were then. In fact, it may be getting underway.

    I think October 26th’s stock market activity was a signal that the beginning has arrived. All the talk about tax reform and the trillions of dollars held by U.S. companies overseas finally coming home will help to fuel the melt up. There may be $4-$5 trillion in that category. It could be much more. If tax reform passes, and I think it will pass, the stock market with fly.

    Add to that the dollars held overseas by U.S. citizens who won’t bring it home for the same reason that U.S. companies won’t, and you have a much bigger number. There may be as much as $4 trillion in that category.

    Add to that number another $4-$5 trillion held by U.S. citizens in interest bearing accounts. They have been afraid to invest in the stock market since 2008 because they got clobbered. For almost a decade they have watched while their money produced virtually nothing and their friends’ money more than doubled. They are getting antsy now, and they want in. When they come into the market in large numbers, the stock market will fly.

    Add to that number the money that central banks around the world are investing in the stock market, and we are on the verge something that no one alive today has ever witnessed. Think of it as the 1990s stock market compressed and on steroids. Or think of it as the 2008 real estate market with even more stupidity.

    How many dollars might central bankers invest? I don’t know, but it could be huge–at least another $4-$5 trillion. Maybe more. In total, from all categories there may be as much as $50 trillion dollars looking for a home, and the stock market will get a big share of the pie.

    I think this is the perfect storm. I’ve never seen one, but I can see it developing. As it develops, the fundamentals of investing will become irrelevant. People will want into the market, and they will pay whatever the market will bear to get in. That’s why it’s called a melt up. It will be fast and furious.

    I’m not a financial advisor, so don’t rely on me. Talk to financial advisors that you know, but don’t wait too long to do it. Be aware that financial advisors have been taught to think a particular way. They have a fiduciary obligation to protect their clients’ assets, so listen to them. Even so, they may not see this coming because it’s foreign to them. Some will see it. Others won’t.

    At the end of the day, the price of a stock is determined by one and only one thing: the amount of money that someone is willing to sell it for and the amount of money that someone is willing to pay for it. As the melt up picks up steam, people will do crazy things. I’m betting on people paying ridiculously high prices for stocks especially as the market nears the peak.

    In the editorial, I said that it will happen in the next 18 to 24 months. Now, I think it will happen sooner than that. By this time next year, it should be well-underway.

    The market will peak and crash when the last dollars enter the market. It will be worse than 2000 and worse than 2008. It could me much worse. Lots of people are going to lose lots of money, but by the same token, a lot of people are going to make a lot of money.

    If I had my rathers, I would rather make a lot of money than lose a lot of money. Before the market peaks, I plan to get out of the market completely. I’ll go 100% cash.

    Actually, that’s not entirely true, but I’ll wait until later to explain why. At this point, I don’t know how much I should say about what to do with cash in preparation for what I think will be an inevitable stock market crash in less than 2 years.

    People who hang on too long as the melt up develops will lose big time. Don’t be greedy. I have a hunch that a 90% haircut is in the stock market’s future. By that I mean that I think the value of stocks will decline by 90% or more during the meltdown.

    As I said, we’ve never seen anything like this before. It could be much worse than I’m suggesting. Buying manias breed selling manias. The worse the mania is going up, the worse it will be coming down. Keep a close eye on the movement up.

    As always, I will keep my eye on fundamentals, but I think the increasing flow of dollars into the stock market is the most important thing to watch.

    As I said, when the flow of dollars dries up, the market will crash.

    I haven’t said a word about nuclear war, presidential impeachment, natural disasters, or other things that might happen that would affect the market. Some of those things would cause me to change my thinking. What I have told you is what I think right now.

  2. See https://finance.yahoo.com/news/market-nearing-crucial-turning-point-142900712.html

    Higher interests rates will put negative pressure on the stock market, but how much I don’t know.

    Higher interest rates also signal a strong economy. That is an inducement to invest in stocks.

    Will the positive pressure on the stock market from the widely-held belief that the economy is doing well be greater than the negative pressure from higher-yielding interest bearing accounts and bonds?

    I think the positive pressure will be greater than the negative pressure.

    Here’s why.

    People holding large amounts of cash have been waiting for a long time to earn a decent return. The fear that the stock market might collapse again motivated them to stay away from the market. As the level of fear is reduced, the incentive to invest in stocks increases.

    Keep in mind that central banks are investing in stocks. That fact has not been factored into the thinking of many economists, and it has the potential to be a game-changer.

  3. See https://finance.yahoo.com/news/wall-streets-stock-market-forecasters-agree-2018-will-great-113450224.html

    At the end of 2016, Wall Street stock market forecasters told us to expect modest single-digit gains in 2017. They were wrong. 2017 has turned out to be a great growth year.

    Now they are telling us to expect bullish double-digit gains in 2018. I think they are right. 2018 may turn out to be very bullish.

    I think the melt-up is just beginning. When it runs its course, I think there will be an economic crash. It will affect every asset class including stocks and real estate.

  4. See “Bank of America sees end of bull market coming in 2018: Here’s how it will happen”.


    This analysis is like mine but with one major difference.

    The BOA folks don’t deal with central bank purchases of equities. That’s a big deal because central banks have printed mountains of currency and countries are in debt big time.

    What better way to reduce debt than to take advantage of “easy money opportunities” in the stock market?

    Sound scary?

    It is scary.

    When the last individual investors finally get back into stocks, the market usually corrects. That means stock prices fall back to normal. Stated another way, there is a major correction. We haven’t seen one for a while.

    If central banks keep buying equities when individual invertors run out of cash, the market will rise to dangerously high levels. It will be unprecedented. No one knows exactly what will happen, but it won’t be good for people who base their purchasing decisions on stock market wealth.

    The correction coming our way could set records. If it does, people will cut back significantly on all purchases. That will slow the economy down dramatically and cause a recession—a big one.

    This is a rule of thumb: the higher and more rapid the rise, the lower and more dramatic the fall.

    You can bet that central banks won’t be the last to sell stocks. I think they will be among the first to lock in their gains. The losers will be individual investors who didn’t see it coming. They will be fleeced like sheep, again.

    This is another rule of thumb: when people you hardly know who have no knowledge about economics or the stock market start volunteering investment advice, the top is near. When it starts happening a lot, get out of the market. You’ll recognize it if you pay attention.

    Over time, the stock market moves back to normal, but that could take a long time. If you are 22-years-old, it won’t matter too much. If you are older and/or retired, it may take more time than you have left, so be careful.

    Take it for what it’s worth.

  5. See “Why this is the worst time for deficit-financed tax cuts”:


    Mark Zandi, chief economist at Moody’s Analytics, believes the proposed tax cuts have two primary problems:

    1. The tax cuts will cause housing prices to decline across the country but he thinks the northeast corridor from Washington, D.C. to Boston, the west coast corridor from San Diego to San Francisco, the corridor from Portland to Seattle, South Florida hotspots, and Chicago and Minneapolis will be especially hard hit. The reason is that only half of mortgage interest payments will be tax deductible.

    The tax bill isn’t final yet, so Zandi is just guessing, but it’s a reasonable guess.

    2. Low unemployment rates and the growing economy will put upward pressure on inflation and interest rates.

    Zandi ignores the fact that about 95 million Americans who could be working are not looking for a job. A growing economy and the higher wages that come along with it may be enough to draw them back in. If that happens, it will mitigate the inflation effect, but most likely inflation will rise. Since the current inflation rate is stubbornly low, too low, rising inflation may be just what the doctor ordered.

    Although Zandi did not address this issue, the growing economy will cause stock prices to rise dramatically, and the faster stock prices rise, the more incentive there will be to buy stocks. I think panic buying will set in.

    In other words, the tax cuts being discussed may cause the melt up leading to the meltdown that I have been writing about. I think that is what will happen.

    If we get tax reform soon, and I think we will, 2018 should turn out to be a spectacular year for stock investors. If central banks keep buying stocks, and I think they will, the stock market could rise to unprecedented heights on a price to earnings basis. That’s when investors need to be very careful. It can all happen in a matter of months: 12 to 18 months to be more precise.

    Don’t be complacent. As I have said before, the higher and more rapid the rise in stock prices, the faster and more dramatic the decline. For older Americans, that’s a big deal. It’s less important for young Americans because they have time to recover.

    You can follow my analysis any time by going to my October 8, 2017 SnyderTalk editorial titled “Get Ready for a Stock Market Melt Up and the Inevitable Meltdown”. Be sure to read the comments at the bottom of the page. I update the analysis in the comments. The URL is below:


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