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Written by: Mike Simonato, Ontario Presenter: “Investing for the Long Term, presented to the Feb. 6, 2021 International Online Forum, you can watch by CLICKING HERE. 

How Greed and Stupidity affect Market Cycles:

Back in the 2008 Financial Crisis, Greed and Stupidity caused a major market crash.

Greed:  Changing the Mortgage Industry by bundling and re branding Mortgages and then offering high-risk mortgages (Sub Prime Mortgages) This has been happening in Canada as well.

Stupid:  Thinking you can afford a million dollar home when you only make $20,000 a year.

Needless to say, it all blew up and we know the result. Many lost a lot of money.

NOTE:  There always is Greed and Stupidity but it is when it hits extreme levels we as traders need to be concerned.

Since 2010, the truly wise traders have made a considerable amount of money riding the bull but at some point the bull gets angry and says enough is enough.

Where are we now:  Let’s look and see if there are any warning signs:

  1. Certain used vehicles cost more than new (if you can even find one)  USA is buying everything up as they are making a killing on the insane prices and the exchange rate.
  2. Bidding wars continue even though home sales are dropping. Toronto this week a house sold $420,000 over asking.
  3. There are now bidding wars over Rentals.  Even those in the industry say they’ve never experienced this level of stupid.
  4. I have said repeatedly that I will not work on a home that is 5 years old or newer because they are garbage. (Just did a $3 Million glass house and got to tell them all the windows were made backwards among a host of other issues. A Tornado hit Barrie this week and left a trail of destruction. The inspector was on the news last night and said many houses were not built to code. If they were, a lot of this damage wouldn’t have happened. Of course the door-to-door scammers are already in Barrie looking to hurt people even more.
  5. Food Inflation is insane. I compared some prices this week and the lowest increase was 30% and it went up to 100% price jump.
  6. I talked to a Coke rep and grocery rep this week and both said Coke and Pepsi are in trouble. They can’t get anybody to make the product thus a lot of flavours have changed and some no longer offered.
  7. People are quitting their jobs in record numbers. A McDonalds closed, couldn’t get staff, The entire staff at a Burger King quit and even staff in high-end jobs are leaving in droves.
  8. Covid numbers are soaring again leading to lockdowns and wearing of masks again etc
  9. Every day you hear of Heat Domes,(808 died in BC alone) flooding, wild fires etc costing the govts and insurance companies billions.

When you add it all up:  GREED + STUPIDITY + NUMEROUS THINGS NOT IN OUR CONTROL = I’m nervous we could get a serious pullback.

The IMPORTANCE of BEING INFORMED:  VectorVest is outstanding at helping us in this regard.  Here are just 2 examples:

  1. STAN’S VIEWS.  If you’re not reading these every week you are really missing out. (I highly rec you print this week’s out) I really don’t know how he does this week after week.
  2. INTERNATIONAL VIEWS.  In my Forum presentation, I mentioned Mastercard as one to buy. However if you Read The AUSTRALIAN VIEWS this week you will find the game has changed. Still makes my Apple and Amazon look good but this could really hurt Mastercard and Visa.

By staying informed, we can avoid major catastrophes and make wise investment decisions going forward.

As always. nothing more than my 2 cents and I hope it’s of value and interest

Now for the Markets:

USA  BSR 30 MTI 85 RT 89  C/DN Tues

DOW JONES:         Huge down candle Friday but not scarey yet. Normal volume on all markets. Next week may be key

NASDAQ:                Bad week  Closed below the 20 sma Friday

S&P 500:                Similar to the Nasdaq but stronger Closed above the 20 SMA

MKT TIMING:         Everything is falling. Price stopped right at the 79 SMA  Watch next week closely

READ Views and Strategy

CANADA  BSR 32 MTI 94  RT 90

PTSE:                    Last 2 months failed at resistance.  Friday stopped at support for the last 2 months  RT well below it’s channel  Normal volume

VENTURE:            Really bad week.  If it continues to fall watch out

MKT TIMING:        Price fell but 3 Indicators really fell

READ Views (Print Out) and Strategy

BRITAIN: Read Views and Strategy   Could get a C/DN on Monday

AUSTRAILIA:  Read Views and Strategy

EUROPE wasn’t available last night.

Now I get to tell another person they got screwed by their painter and they get to pay me for fixing his garbage job.

Have a good weekend everyone and stay safe