The Buffett Indicator stands at 237.8, suggesting that the stock market is significantly overvalued. Eventually, it could return to fair value. Imagine this bubble bursting. Even if the indicator falls by half from its peak, it could drop to around 100.
If it falls to 100, what period would that correspond to? Around 2013.
That is exactly why I have been talking about the Nasdaq potentially falling to 4,000 or even 3,000. Keep that in mind and make your own judgment.
Now, let’s look at the Shiller P/E ratio. Why is the Shiller P/E ratio so important? Because we have seen a similar stock market bubble in the past.
However, the level of debt back then was nothing compared with today’s debt. Considering the current economic environment and the possibility of a broader systemic collapse, I am paying particular attention to this historical period.
The year 1929. There is an enormous difference between understanding these historical patterns and being completely unaware of them.
The historical peak was in August, and the indicator has now declined. It has fallen from 240.3 to 237.8.
Another indicator has fallen from 42.3 to 40.9. Since August, it has repeatedly failed to break above its previous peak. What does that tell us? It has been declining.
Meanwhile, what is happening with physical precious metals? Gold is holding around $4,100. Silver is trading near $59, and the gold-to-silver ratio is approximately 69.
The Dow-to-gold ratio stands at approximately 12.3. And since the yield spread exceeded 1% on September 24, an enormous amount of concerning information has been emerging.
The semiconductor index. It was at 14,643.
But now it has fallen to around 12,000. That is a massive decline.
It’s over. I believe we are approaching a second major collapse in semiconductor stocks, so the time has come to prepare for the worst.
It is extremely important. This is exactly why I keep presenting these indicators.
The Fear and Greed Index has also returned to the fear zone. Ultimately, the market is breaking down, even though some indicators still classify overall sentiment as neutral.
Now, let’s look at Ethereum.
It has started to decline. After a 70% crash and a subsequent rebound, it appears to be entering a second major decline. Look at the RSI signal. The daily chart shows a breakdown. The breakdown began yesterday. Can you see it? These are the signals I consider evidence of the deterioration.
Now, let’s look at ARK.
It suffered a sharp decline on October 6 and has continued moving lower. This is the daily chart. Let me explain why I am showing you this.
The KBWB banking ETF has also suffered a major breakdown. I believe serious problems could emerge in the banking sector.
Regional banks are showing similar weakness. I believe this situation could soon develop into a much bigger problem.
Investors should prepare for the possibility of a decline of around 30%.
Keep a close eye on ARK and similar assets.
Ultimately, if a banking crisis erupts, the Federal Reserve will have no choice but to cut interest rates aggressively and inject liquidity into the financial system. Keep that possibility in mind.
I already mentioned Nvidia. October 6 was the peak.
The decline has begun. A three-star candlestick pattern appeared, and the stock fell 3%.
Apple is also struggling to hold its ground.
Here is Google. The downward trend is continuing.
Microsoft has now started falling. There is a major double-top formation.
Amazon has finally begun breaking down.
Look at TSMC as well.
The semiconductor sector is now reaching the end of its upward trend.
Here is Meta. Its trend has already deteriorated significantly, but the stock is still hanging on.
Broadcom is in a downtrend.
Tesla is also in a downtrend.
Look at Super Micro Computer as well.
Palantir is struggling to hold its ground.
And Oracle’s trend has already broken down.
Let me say this again: if news of an Oracle default ever emerges, the AI industry could come crashing down that very day.
OpenAI-related companies and CoreWeave are also weakening. CoreWeave fell 7%.
And SoftBank declined 4.28% yesterday. SoftBank has gone almost all-in on OpenAI and is investing heavily with borrowed money.
But if the financial results fail to meet expectations, the consequences could be disastrous. Watch SoftBank very carefully.
How much did Micron fall? About 5%. I believe the second major decline has now begun.
SanDisk fell even more. We saw an initial collapse followed by a rebound, and now the second decline has begun.
That means South Korea, particularly Samsung Electronics, SK Hynix, and the KOSPI, could also be affected.
These markets are closely interconnected, so we need to prepare. Be mentally prepared and watch carefully.
Next is real estate. I believe a major real estate crisis has begun.
The broader bubble is collapsing, and the high-yield bond market is also experiencing significant stress.
Let’s examine the 10-year Treasury yield and the dollar together. It has come down to 5.23.
I suspect the Federal Reserve may have intervened. I believe there are teams within the Federal Reserve that can inject liquidity into the financial system and help push interest rates lower. By supplying liquidity, they can bring yields down.
Let’s look at the two-year Treasury yield. It has fallen as well. That is one reason gold is not declining.
Next, let’s examine the yield spread (US10Y – US03MY)
The yield spread has narrowed, but it is still around 1%. I believe something serious is beginning to unfold.
Remember how I emphasized 764 days of yield curve inversion? The corresponding period around the Great Depression was 701 days. I believe major problems are now beginning to emerge.
I believe the conditions are lining up for a real estate collapse, a stock market crash, and bank failures to occur together.
Here is the dollar. Do you think the dollar will strengthen or weaken from here? I believe it has no choice but to weaken.
Because the authorities will eventually have no choice but to print more money. So what should we prepare? Gold. Gold is holding up remarkably well, isn’t it? And there is a reason.
The dollar’s upward momentum has stalled, and the two-year Treasury yield has also stabilized.
The gold-to-silver ratio is around 69.
The Dow-to-gold ratio. It is not rising yet. As I explained earlier, a decline in this ratio is favorable for gold.
Oil is around $90. Watch oil prices, inflation, and interest rates together. This is a serious situation.
Look at the VXN, the Nasdaq volatility index. It appears ready to rise.
Now, let’s examine the VIX as well.
The volatility indices appear to be preparing for an upward move. That could signal the beginning of a crisis. You really need to watch these indicators carefully.
The IPO market has also fallen about 2.3%. Liquidity is not flowing in. Since when? Since June.
Look at mid-cap stocks (D.R. Horton) as well. I believe there is a possibility of a prolonged decline through 2028.
The NDQ/RUT has finally started falling, and I believe OpenAI’s financial performance is one of the reasons.
Keep watching carefully. The Russell 2000 has also broken down. Can you see it? When was its peak? It was in August. And it has continued declining ever since.
That means money is leaving the market. You can see it in the trading volume. Yet people ignore these signals and focus only on the Nasdaq.
It is incredibly frustrating. But the important point is that these underlying market developments matter enormously. Why?
Because the Russell 2000 is falling and the broader stock market is weakening, yet some people keep insisting that the market is healthy. I believe that assessment is completely wrong.
The market fell on heavy trading volume. This is the opening warning shot. A three-star candlestick pattern has appeared, and the previous low has been broken. I believe this signals that the upward trend may be coming to an end.
The Nasdaq has been distorting the picture of the overall market.
Now, let’s look at semiconductors. Prices are falling on heavy trading volume.
There was a major decline, followed by a 30% rebound. Now that rebound is starting to reverse. I believe the disaster has finally begun. That is why my blog emphasizes survival.
Look carefully. The S&P 500 appears to be holding up reasonably well, doesn’t it?
But in reality, it is not doing well. Look at the equal-weighted index. It tells a very different story. Problems have already begun beneath the surface of the market.
Stocks are falling across the board. I believe this is the beginning of a major market disaster.
Do you know what the biggest problem is? I believe a historical pattern that has held for 120 years is now breaking down. We are talking about 120 years of history.
If that is the case, we could see a situation like this. Look at the chart from the Great Depression. Can you see it?
This pattern began on September 3, 1929. At that time, the market declined, rebounded by 16%, and then suffered a collapse of nearly 50%.
If a similar pattern develops today, the market could fall 16%, experience a rebound, and then suffer another major decline.
That is because I believe a historical pattern spanning 120 years has broken down.
Make your own judgment carefully. We are now at October 6. Actually, on this chart, the peak was August 5.
In 1929, the market peaked on September 3. It then declined, rebounded, and eventually experienced a devastating crash. That was the period when events such as Black Thursday occurred.
At that time, stock indices experienced extraordinary declines, sometimes reaching 10% or 20%. I believe similar extreme market moves are possible today.
That is why you need to prepare. Our approach is to get ready to accumulate small amounts of physical gold.
Ultimately, the United States will have no choice but to print more dollars. And continued money creation ultimately means, I believe it creates conditions in which gold prices will inevitably rise. So what should we do? Accumulate physical gold gradually, treating it as a form of financial insurance.
I had expected gold to fall to around $3,800, but it has not dropped that far. It came close to that level before moving higher again.
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