Executive Summary

• The latest outlook from our endorsed financial advisor, New Harbor Financial
• My recent portfolio changes & the rationale behind them
• 6 strategies for positioning your portfolio for the next market downturn
• Deciding which strategies are most appropriate for you

If you have not yet read Part 1: Hair-Trigger Markets, available free to all readers, please click here to read it first.

As we take close note of the "coiling" of the markets, we supplement our own analysis with that of other experts we respect. Are they seeing similar signs of mounting risk?

New Harbor Financial is an independent financial advisory firm that manages investor capital using a philosphy that takes many of the key trends within The Crash Course into account. We asked them for an update on their current market outlook, and here's their response:

"The stock market, particularly in the US, is completely disconnected from reality.  It’s clear to us that the global economy has been slowing, and various data series point to a deceleration of global demand, starting in late 2018. For many years central banks have been able to create the illusion of growth by creating trillions of dollars out of thin air and throwing the money into the financial markets, with the primary objective of pushing asset prices higher.  It is becoming clear that not only did central banks fail to create sustainable growth, but by stealing growth from the future, they likely have made the situation even worse.

The recent sharp rally of approximately 20% from the December low is not unusual in the context of early bear markets.  In fact, a “last gasp” rally often occurs in the early stages of stock market declines.  This rally often lures unwitting investors in due to their fear of “being left behind”, and keeps complacent participants fully invested.

Stock valuations remain near the highest levels in all of history. Returns from these levels, particularly in the US markets, are likely to be pitiful, perhaps even negative, over the next decade.  Of course, market retreats to more reasonable levels make all the difference in reestablishing valuations that can support healthy subsequent returns.  At New Harbor, our portfolio for most clients has minimal net exposure to the stock market and a healtthy percentage of short-term Treasury bills. While we can’t predict the exact path of stock market returns in the future, we believe it is imperative to hold a significant amount of cash to be able to take advantage of lower prices ahead.

Based on the data, we can’t stress enough how historically overvalued these markets are. While many professional investors acknowledge the data, and how extreme it is, all too often many of these investors will..."

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