Update Financial Crisis/Collapse Situation
Almost a month ago (11 July 2018) we posted a blog article discussing the effects and ways to mitigate a Financial Crisis/Collapse Scenario.
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We will help you prepare yourself so the impacts of such an event are less traumatic.
New Financial Crisis Article Posted 8 August 2018 by several news outlets
There is a news article posted yesterday (by Edward Morgan) and on several news outlets regarding Warren Buffet’s “favorite indicator” that indicates the market is “more primed for a crash that it has ever been before”.
A quick Google search returned 11 different news agencies carrying articles regarding the volatility and unsuitability of the stock market.
The “Buffet indicator” is the ratio between the total market value of all stocks divided by the GDP (Gross Domestic Product). When this ratio is over 100% indicates that stocks are high. If this ratio is under 80%-90% then stocks are inexpensive.
Before the “dot-com bubble burst” the Buffet Indicator was 145%. Before the financial crisis the Buffet Indicator was a 110%.
The Buffet Indicator is currently (as of the article cited in this blog post) at 149%. This is the highest it has ever been.
Market outlook is worsening
An article on http://www.marketwatch.com discusses the changes that are in place or taking place that will reduce the “floor” (the level the stock market can not drop below). This has been the safety net which helped to protect investors from large losses.
With the floor removed or lowered investors run the risk of losing a lot more.
When investors get “nervous” they tend to remove their money from the market. When they remove their money stock markets crash.
Okay, the stock market is over inflated – So What?
Even if you do not own stocks or a 401k volatility in the stock market can have a dramatic effect on you. When the stock market crashes companies cannot raise capital they need by selling their stocks.
When companies cannot raise money they have to cut back on the number of employees they employ. This means there will be more people out of work.
When the stock market crashes no one is immune.
Stock market crash impacts
When the stock market crashes the price of good and services also go up or are not available. If you are one of those that is unemployed then providing food, water, and shelter becomes a serious challenge.
What can you do to mitigate the effects of a stock market crash?
In our article Financial Crisis/Collapse Scenario we discuss ways you can mitigate the impacts to you and yours.
- First, as with all emergency scenarios, have a plan
- Maintain situational awareness
- Focus on the basics food, water, and shelter.
- Learn the skills necessary to live during a stock market crash
- Evaluate your current location to see if it is able to sustain you and those you care about
- Select an alternate site should your current location become untenable
- Stay balanced – calm
During any crisis situation you need to remain balanced – calm. When you are out of balance your prefrontal cortex (the higher reasoning portion of your brain) shuts down. When this shuts down decisions made are based on fear (fight, flight or freeze).
When a crisis is occurring these are not your best options! Having a plan will help to prevent this fear mode from engaging.
Learn now what to do during a stock market crash or any other emergency situation. The time to get ready is before an event occurs. Once the event occurs it is likely too late.