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Economist Says Stock Crash Imminent in 2016

Economist James Dale Davidson believes that the stock market crash is already happening.

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Economist James Dale Davidson — who correctly predicted the collapse of 1999 and 2007 — is once again sounding alarm bells on what he says is an inevitable stock market crash this year.

Davidson has recently published his book, The Age of Deception: Decoding the Truths About the U.S. Economy, has said, “Yes, the stock market is near all-time highs. In fact, it is up 200% since its low in 2009.That is an historic rally. But this rally is coming to an end. The writing is on the wall.”

Alarming Indicators

In a feature on The Sovereign Society website, Davidson enumerated several indicators to back up his stock crash pronouncement. For starters, he pointed out, “Since it is clear that the stock market is going up because so many people are gambling with margin — with debt — when the market starts to pull back, it will be fast. Real fast. As stocks go down, investors will get margin calls and they will be forced to sell their positions immediately…which will accelerate the markets sell-off.”

stock market runup

You can see the above chart to understand what Davidson is talking about with the stock market running up and now….going sideways.

Davidson identified the low stock market participation rate as the next indicator, noting that it’s “at astonishingly low levels for a market selling at such high valuations.”

“You see, after the last crash of 2008, many people have resisted getting back in the market. So essentially, although the market has hit all-time highs, there aren’t a lot of people investing. Never before in history has there been a sustainable market rally on low volume,” Davidson explained.

Next, Davidson highlighted the price-to-earnings (P/E) ratio of the stock market, which is “hitting all-time highs.” The P/E ratio measures the price of the stock versus how long it will take for the stock to be worth that price.

Davidson noted, “In a healthy, normal stock market, the Shiller price to earnings ratio is about 16. That means it will take 16 years for a stock’s earnings to equal its price. But right now, the average stock in the S&P 500 is sitting at a Shiller P/E ratio of 27. That’s nearly 50 percent higher than the normal ratio.”

pe ratio

Davidson further added, “The only other times we have seen the price to earnings ratio this high was in 1999 and 2007. Again, both times this happened, stocks dropped by 50 percent and 55 percent. So we know that we have fewer people trading, but they are using more margin, and they are pushing the PE ratios to dangerous new highs.”

Worst Case Scenario

Davidson has said that he expects the massive collapse that’s “coming very soon” to “blindside most investors.” He disclosed, “To be frank, a 50-percent correction in the stock market is actually a conservative estimate. If the market drops to its 2009 lows, we’ll actually see a 70-percent correction.”

Davidson then uses some staggering percentages to illustrate the worst case scenario: “Real estate will plummet over 40 percent, savings accounts will lose 30 percent of their value, and unemployment will triple,” he said.

Similar Predictions

There are others who share Davidson’s view. Among them is American business magnate Carl Icahn who — in his guest appearance on CNBC’s Power Lunch last month — said, “I do believe in general that there will be a day of reckoning unless we get fiscal stimulus.”

Icahn cited the Federal Reserve’s decision to maintain low interest rates, which would potentially create “tremendous bubbles.”

For the record, Icahn had already sounded the alarm on the potential stock crash back in 2015. Back then, he expressed his belief that the market is “extremely overheated—especially high-yield bonds.”

Icahn had told CNBC’s Fast Money Halftime Report: “I think the public is walking into a trap again as they did in 2007. I think it’s almost the duty of well-respected investors, like myself I hope, to warn people, to tell people, that really you are making errors.”

In a Profit Confidential article, Jing Pan — a research analyst and editor at Lombardi Financial — explained,  “Icahn thinks that a large part of the growth in the real economy we see today comes from the artificially low interest rates. His rationale is that businesses have been getting access to cheap money, and by using that money, they were able to expand their operations; creating jobs and generating revenue. However, once the Federal Reserve raises interest rates, businesses will no longer have access to that cheap money.”

Aside from Icahn, a report in The Sovereign Investor, cited economist Andrew Smithers, who warned, “U.S. stocks are now about 80% overvalued.” The report explained, “Smithers backs up his prediction using a ratio which proves that the only time in history stocks were this risky was 1929 and 1999. And we all know what happened next. Stocks fell by 89 percent and 50 percent, respectively.”

The Sovereign Investor likewise highlighted the fact that “the Royal Bank of Scotland says the markets are flashing stress alerts akin to the 2008 crisis.” the said bank has reportedly told its clients to “sell everything.”

Flip Side

Davidson’s doom-and-gloom pronouncements, which he backed with 20 compelling charts, has definitely gotten everyone’s attention. However, it’s worth looking at it from a different perspective.

In a Motley Fool Funds feature earlier this year, Nate Weisshaar wrote, “Even if Davidson is correct that the market will get clobbered in 2016, it doesn’t mean we should be running for the hills. Keep in mind that during the market collapse caused by the financial crisis, the S&P 500 dropped over 50% between October 2007 and March 2009. Then it almost doubled by the end of 2010.”

Weisshaar explained, “Doom and gloom is a story that sells quite well and has apparently been doing well for Davidson for years (although not so well that he doesn’t need to still sell it).” He then said, “Let’s check back in with Davidson’s prediction in 12 months. I’ve placed a reminder on my calendar for Jan 2, 2017.”

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Business

21 Stocks Everyone Should be Watching in 2020

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Best Stocks in 2019

Interested in what stocks to look out for this year? Then you’ll love this list of the best stocks in 2019.

But before we get started, remember the most important advice when it comes to investing in stocks: the wisest way to invest is to use a stock index fund.

These funds purchase multiple stocks and spread risk appropriately across the top companies. This is the advice of Warren Buffett, who once said,

“By periodically investing in an index fund, for example, the know-nothing investor can actually outperform most investment professionals.”

If you’re looking for a stock index fund, check out Vanguard’s 500 Index Fund.

With that aside, here are the most promising stocks in 2019:

1. Chipotle Mexican Grill

Chipotle is an international chain of restaurants specializing in tacos, burritos, and other Mexican style cuisines. They have establishments all over the world from the United States to Germany and France.

This beloved food joint performed very well in the first two quarters of 2019 and are expected to continue to grow.

P/E ratio as of August 2019: 87.81

2. Constellation Brands, Inc.

Constellation is an international beer and wine producer. They are the largest importer of beer in the United States and command 7.4% of the market share.

P/E ratio as of August 2019: 17.00

3. Lululemon Athletica

Lululemon Athletica creates athletic apparel such as performance shirts, shorts, and pants, as well as yoga accessories. They’ve built a brand over the years that millions recognize and love.

P/E ratio as of August 2019: 47.51

4. Coty Inc.

Coty Incorporated is a multinational company that specializes in beauty products and services such as cosmetics, fragrances, skincare, and nail care.

Coty owns over 70 brands, such as CoverGirl, Clairol, and Bourjois. In 2018, the company’s revenue was over $9.4 billion.

As of August 2019, Coty Inc. stock is valued at 10.42 USD. Their P/E ratio is not yet available.

5. Anadarko Petroleum Corporation

Anadarko is in the natural gas and petroleum industry. This entails everything from gathering resources to treating and transporting gas. The company is also in the hard mineral business.

In early 2019, Anadarko had an estimated 1.47 billion barrels of oil in reserve, making it one of the biggest players in the industry.

As of August 2019, Anadarko’s stock is valued at 73.48 USD. Their P/E ratio is not available yet.

6. Brookfield Infrastructure Partners L.P.

Brookfield Infrastructure Partners acquires and manages infrastructure assets all over the world. They specialize in utilities, energy, and transportation infrastructure.

The company invests in ports, toll roads, pipelines, and telecommunication lines. In other words, things that people will always need and use.

P/E ratio as of August 2019: 75.27

7. ONEOK Inc.

ONEOK (pronounced “one – oak”) Incorporated is in the natural gas industry and is a key leader in the gathering, storing, processing, and transporting natural gas in the United States.

P/E ratio as of August 2019: 22.62
TerraForm Power Inc.
TerraForm Power specializes in renewable energy, particularly solar and wind power. There is an ever-growing trend that demands less damage to the environment.

As the world values green innovations, companies like TerraForm are expected to be favored in the coming years.

P/E ratio as of August 2019: 227.44

8. Netflix

Netflix is a service provider and production company with their main product being a subscription-based streaming service.

Streaming TV and movies have largely replaced traditional television. With no commercials and instant access to thousands of products, Netflix is suspected to continue to grow.

P/E ratio as of August 2019: 120.23

9. iRobot

iRobot is an advanced technology company that specializes in military and domestic robots. They designed the Roomba, which is an autonomous vacuum cleaner.

The U.S. military has purchased and uses thousands of robots from iRobot and are contracted to make more.

P/E ratio as of August 2019: 22.24

10. Amazon

Amazon is a multinational company that specializes in e-commerce and cloud computing. It’s considered one of the big four technology companies along with Apple, Google (Alphabet, Inc.), and Facebook.

Amazon is well known for distributing goods through technological innovation and on a massive scale. Some estimate that Amazon commands 50% of all goods sold online.

P/E ratio as of August 2019: 73.65

11. Apple Inc.

Apple is a multinational tech company that develops and sells computer software, electronics, and online services. They designed some of the world’s greatest tech products including the iPhone and Apple Watch.

Being a leader in tech devices, many analysts believe Apple is one of the most promising stocks to invest in.

P/E ratio as of August 2019: 16.61

12. Alphabet Inc.

Alphabet Inc. is a multinational conglomerate founded in 2015. It’s the parent company of Google, which is the dominating search engine on the internet.

Google performs 90% of all searches on the internet. Alphabet has additional subsidiaries such as Calico, Capital G, and Deep Mind.

These subsidiaries have their hands in industries such as autonomous cars, biotechnology, video game software, and internet tech.

P/E ratio as of August 2019: 23.87

13. Facebook Inc.

Facebook is the popular American social media site founded by Mark Zuckerberg. In 2018, Facebook had a net income of $22.11 billion and its total assets were $97.33 billion.

Facebook has subsidiaries such as Instagram and WhatsApp, which are also very popular social media outlets.

P/E ratio as of August 2019: 31.00

14. MarketAxess Holdings Inc.

MarketAxess is an international company that specializes in financial technology, also known as fintech.

They operate an electronic trading platform for various credit markets such as corporate bonds and income products.

P/E ratio as of August 2019: 70.82

15. AT&T Inc.

AT&T is a multinational conglomerate holding company and is the world’s largest company in telecommunications.

AT&T is the parent company of Warren Media, which makes it the largest entertainment company in the world in terms of revenue.

P/E ratio as of August 2019: 14.17

16. Verizon Communications Inc.

Verizon is a multinational telecommunications conglomerate. They are well known for their subsidiary Verizon Wireless, which is its mobile network.

Together with AT&T, these two companies dominate the mobile and landline market. Since our needs for communications will develop, these two stocks are poised to grow.

P/E ratio as of August 2019: 14.49

17. Axon Enterprise Inc.

Axon Enterprise Inc. is a U.S.-based company that develops weapon products and technology for civilians and law enforcement. This company developed the Taser, a line of electric shock weapons.

Since then, Axon developed other technologies including body cameras and a cloud-based management system that empowers police departments to manage and review evidence.

P/E ratio as of August 2019: 129.55

18. Intuitive Surgical Inc.

Intuitive Surgical Inc. develops and manufactures surgical equipment to make surgeries less invasive. As of 2017, they had 4,271 bases worldwide.

P/E ratio as of August 2019: 48.51

19. Ford Motor Company

Despite the localized recession in Detroit, the automotive giant is doing very well.

The market continues to demand their SUVs and commercial vehicles, not to mention their luxury vehicles, which are usually created under their Lincoln brand.

P/E ratio as of August 2019: 16.90

20. General Motors Company

General Motors is a multinational manufacturer of vehicles and own automotive brands like Buick, GMC, Cadillac, and Chevrolet. They have nearly 400 facilities on six different continents.

P/E ratio as of August 2019: 6.19

Conclusion

Let’s point out two trends from this list:

  • Tech and software companies are dominating
  • Utility-related companies are tried and true

About half of the world still doesn’t have internet access. And a large portion still doesn’t have access to common devices like cell phones and laptops. That means these industries are set up to grow significantly for years to come.

Of course, that doesn’t mean other industries will simply disappear. As you’ve seen in the list, there are still key industries that our society relies on, such as energy and infrastructure companies.

Some of the most promising stocks are in tech and software, such as Apple, Facebook, Google, and Amazon.

Nevertheless, the wisest investment is still a stock index fund, which bets on the collective market rather than individual companies.

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Investments

Verizon Announces Unlimited Data for Californians Impacted by Wildfires

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For Verizon’s consumers and small business customers impacted by the Tick and Kincade wildfires in California, beginning October 28 through November 3, the company is providing unlimited calling, texting and data to affected communities in the following counties:

  • Los Angeles
  • Marin
  • Napa
  • Sonoma

“Our Verizon Response Team is available 24/7 to coordinate with first responders. We are mobilizing charging stations, devices, special equipment, emergency vehicles and more to support local, state and federal agencies. First responder customers with wireless priority service should utilize *272 when placing calls.”

Verizon customers are encouraged to help the American Red Cross in their disaster relief efforts by texting the word REDCROSS to 90999 and $10 will be added to their Verizon Wireless bill. Anyone looking to help a Verizon team member impacted by the wildfires can donate to the V2V Fund by texting 501501 with “VtoV” to donate $10 or “PLEDGE” to donate $25.

Customers can verify eligibility for call/text/data relief by entering their zip code here: https://www.verizonwireless.com/featured/relief/.

“We live, work, and play in the same areas impacted by these devastating wildfires and as members of the community, we want folks to know we’re looking out for them,” said Jonathan LeCompte, Verizon Consumer Group West Area President. “Part of that means doing everything we can to ensure our cell sites stay online throughout this disaster. And the other is ensuring those who need to connect with family, friends and emergency services can do so without worry.”

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auto

Volkswagen Goes Electric, Are you Missing Out?

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Volkswagen Goes Electric

Volkswagen plans to be the leader of electric cars by 2025.

They announced a new vision called TOGETHER 2025+, which promises electric cars and a digital network by 2025. Their stated goal is to make automobiles that are “clean, quiet, intelligent, and safe.” And ultimately be “part of the solution when it comes to climate and environmental protection.”

This massive project tells us a lot about the future of the auto industry.

What Are Electric Cars?

As their name suggests, electric cars are automobiles that run on electricity, rather than gasoline. They use an electric motor, which is powered by rechargeable batteries.

Some cars use both sources of power, which are called hybrids.

To manufacture electric cars, Volkswagen will have to repurpose their factories, implement new technologies, and use different designs.

Emissions-Cheating Scandal

A few factors prompted Volkswagen to take this direction, but their emissions-cheating scandal was probably the biggest influence.

In 2015, The United States Environmental Protection Agency (EPA) accused Volkswagen of creating cars that cheated emission standards.

Specifically, Volkswagen created software that detected when their cars were analyzed by emissions testing. The software would enable emission controls to “pass” the testing.

But during normal driving conditions, the software would shut off. This gave cars more power and fuel economy, but resulted in more pollution than the law allowed.

Since then, Volkswagen admitted to installing the software in about 11 million cars and publicly apologized for the practice. However, the day after the news broke, their stock price declined 20%, then fell another 17% the following day.

In 2017, Volkswagen pleaded guilty and agreed to pay $4.3 billion in penalties. A week later, executives were charged.

In response to their scandal, Volkswagen changed their logo to a white variation on June 5, 2019. In a TV commercial, Volkswagen acknowledged their mistake and announced their launch into electric vehicles.

Their PR strategy is to demonstrate a dramatic change for the good, using the tagline “In the darkness, we found the light.”

Volkswagen’s Announces the I.D. Series

In 2016, brand chief Herbert Diess said, “By 2025, we plan to sell 1 million electric cars per year, and by then we also want to be the global market leader in electromobility. Going forward, our electric cars will be the hallmark of Volkswagen.”

Volkswagen announced their plans to launch a generation of electric cars beginning in 2020. They call this series of cars the I.D. family. This line of cars will reinvent their previous vehicles as electric versions.

The first models, debuting in 2020, will be the I.D. and the I.D. Crozz. In 2021, the ID. Roomzz model will be released, which will be a zero-emission SUV.

By 2022, the public can buy the I.D. Buzz, the I.D. Buzz Cargo, and the I.D. Vizzion. However, some models will be restricted to Europe. In addition to cars, Volkswagen also plans to create a charging network.

In a press release on August 8, 2019, Volkswagen announced plans to install 4,000 charging stations at their German sites by 2025. Beyond Germany, Volkswagen Group is working to provide over 36,000 charging points throughout Europe. The project cost is estimated at 250 million Euros.

The Future of Volkswagen

Analysts believe it’s only a matter of time before automakers ditch petrol cars in favor of electric cars, which many consider the next technological step for the auto industry. However, there are still challenges companies like Volkswagen face.

As mentioned earlier, electric cars require charging stations. Not only does Volkswagen have to create a new generation of cars, but they also have to update infrastructure. To make electric cars a reality, drivers need a network of charging points.

Nevertheless, Volkswagen is moving forward with their initiative. With auto giants like Volkswagen going electric, it’s only a matter of time before other car companies follow suit.

As the world demands higher environmental standards, companies are responding with greener initiatives. Volkswagen’s TOGETHER 2025+ project indicates that electric cars will be commonplace in the future.

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