What the Numbers Have to Say About Market Risk in 2020

You are receiving this as part of your free subscription to Tim Melvin's Max Wealth. To remove your email from this list, [unsubscribe here](. [Max Wealth]( [An Exponential Surge in a Matter of Days]( The situation unfolding here is nothing short of a global currency revolution. Most people are entirely unaware of this new and [mysterious market](... but it's gone from zero to $95 billion practically overnight. [See more](... --------------------------------------------------------------- January 4, 2019 What the Numbers Have to Say About Market Risk in 2020 By Tim Melvin Dear Max Wealth Member, We had ourselves quite a year in 2019. The stock market soared by almost 30%, and the good times just never seemed to end. Volatility was remarkably low for most of the year and is still low as we start the New Year. The index fund crowd is crowing away again as we look at the year ahead, and if you follow them, I think it will be one of the biggest mistakes you could make with your money. With valuations at current levels, long-term returns are going to be lower than most people expect. Don't get me wrong. I don't know what the market will do in 2020, and neither does anyone else. I have some things I would like to see happen, but that doesn't mean that they will. We could see gains again this year, and indeed some of the smartest people I know think that probability favors that path. Personally, I hope they're dead wrong. That might sound strange, but I have a good reason for that hope. It's because the single best way to get rich in a relatively short period of time is to be a bear market buyer of good companies at bargain prices. What Do the Numbers Say? Of course, that isn't the case for the here and now - the U.S. economy is chugging right along at the moment, albeit slower than most would like. I hear a lot of talk about a recession, but I sure don't see any signs of one when I examine the numbers being released by the Fed and the other agencies tracking the U.S. economy. Bond spreads show no signs of ticking up in a manner that would suggest the economy was running into bumps. The only genuinely worrisome sign I see is that bargain stocks are getting harder to find. The numbers there aren't quite down to the level that would suggest trouble is imminent, but we're not far away from it, either. The number of bargains dried up substantially in 2009 and again in 2006, so I watch the level of bargain inventory pretty closely. The average larger-cap company stock is on the verge of being grossly overvalued at current prices. You can probably trade them here since momentum is on your side, but I wouldn't put any longer-term capital in them at these prices, either. The fact remains that even buyers at the top of the financial food chain having a hard time finding bargains. Warren Buffett is sitting on over $100 billion in cash that he can't put to work on advantageous terms. Legendary investor Seth Klarman's Baupost fund is reported to have over 25% of its assets in cash right now as bargains remain hard to come by. These are the biggest and best investors on the planet, and they're pretty much handcuffed by these ridiculous valuations. So, What Could Cause the Markets to Crack in 2020? Jumping right to the top of the list after Thursday's action in the Middle East is a conflict with Iran. I have no idea how they will retaliate for the killing of Qasem Soleimani, a top Iranian military leader. I am, however, pretty sure they will respond in some manner. This could easily turn into a serious conflict that severely disrupts energy markets and results in dire consequences for the stock market. Of all the potential non-geopolitical triggers, private equity has to be the big one. There is way too much money chasing way too few deals. Deal multiples are well past 2007 levels, and to justify returns, many of the funds are using too much leverage. We've seen an eruption in leveraged lending since banks backed away from riskier lending following the credit crisis, and there are far too many lenders with no gray in their hair making the riskiest loans to the riskiest borrowers. Private equity firms are a victim of their own success in promoting funds, and way too much money has flowed into the game. Deals will get done that no one would have touched a few years ago, and the market is in need of a correction to bring things back closer to balance. As Peter Clemenza once advised Michael Corleone, "These things gotta happen every five years or so, ten years. Helps to get rid of the bad blood. Been ten years since the last one." Again I'm probably the only one who feels this way, but I hope it happens. [These billionaires seem to be prepared for a massive market crash (are you?)]( What Do We Do About It? When we see a correction, it will create large numbers of companies trading below liquidation value. More REITs will trade below their net asset value. Companies with a lot of debt will see the baby thrown out with the bathwater, and even [those with stable cash flows that are paying down debt]( will be priced at ridiculous levels that pretty much guarantee huge profits. I'm even willing to make a small Black Swan bet right now that it does happen ([like we discussed last month]() since no one else thinks that stocks can drop drastically, and volatility will remain muted. No matter what happens, I will follow the numbers where they take us this year. Along the way, I'll be here at Max Wealth to help you understand the numbers and use them to help guide you past all of the pitfalls and hazards the world puts in our way on the path to financial security. I've spent more than 30 years in this business, and I've seen my share of bad markets. Wealth is grown in good markets, but bad markets are [where fortunes can be made](. When that sell-off happens, know that I will recommend being aggressive buyers of businesses at [Heatseekers]( as their valuations return to reality while all of the brokers and know-it-alls heads are spinning. Have a good weekend, Tim Melvin --------------------------------------------------------------- [Caught on Camera: Shocking LIVE Footage from America's #1 Pattern Trader]( Don't be the last to see this jaw-dropping video. See for yourself how Tom Gentile's proprietary invention makes him $4,238 richer in under a minute. Count it up: $1,050 richer in 15 seconds... $940 richer in 11 seconds... $1,260 richer in 8 seconds... and $988 richer in 7 seconds! The discovery that makes this all possible has already helped Tom pinpoint eight trades that are fast approaching - moves that could make you $15,000. [Click here to see it in action](. --------------------------------------------------------------- You are receiving this e-mail at {EMAIL}, as a part of your free subscription to Tim Melvin's Max Wealth. To remove your email from this list: [Unsubscribe]( [Manage Your Email Preferences]( To cancel by mail or for any other subscription issues, write us at: Tim Melvin's Max Wealth | Attn: Member Services | 1125 N Charles Street | Baltimore, MD 21201 North America: 888.384.8339; International: 443.353.4519; Fax: 410.622.3050 [Contact Customer Service]( Website: [( © 2020 Tim Melvin's Max Wealth All Rights Reserved. Nothing in this email should be considered personalized financial advice. Although our employees may answer your general customer service questions, they are not licensed under securities laws to address your particular investment situation. No communication by our employees to you should be deemed as personalized financial advice. We expressly forbid our writers from having a financial interest in any security recommended to our readers. All of our employees and agents must wait 24 hours after on-line publication or 72 hours after the mailing of printed-only publication prior to following an initial recommendation. Any investments recommended in this letter should be made only after consulting with your investment advisor and only after reviewing the prospectus or financial statements of the company. Protected by copyright laws of the United States and international treaties. This Newsletter may only be used pursuant to the subscription agreement and any reproduction, copying, or redistribution (electronic or otherwise, including on the world wide web), in whole or in part, is strictly prohibited without the express written permission of: Tim Melvin's Max Wealth. 1125 N Charles Street, Baltimore MD 21201.