Part two:
It is said that Henry Ford was taking the elevator to his penthouse one day in 1929, and the operator said, "Mr. Ford, a friend of mine who knows a lot about stocks recommended that I buy shares in X, Y, and Z. You are a person with a lot of money. You should seize this opportunity." Ford thanked him, and as soon as he got into his penthouse, he called his broker, and told him to sell everything. He explained afterwards: "If the elevator operator recommends buying, you should have sold long ago." Euphoria leads to those unacquainted with financial markets to enter in the last leg of the boom. And that's where they lose everything. About 88% of all the money now in mutual funds has arrived there in the past 6 years. These new investors have never been through a correction of even 10%. Most new entrants into the stock market are totally inexperienced. Overconfidence, excessive optimism, and euphoria lead to overindebtedness, unwise investments, carelessness, fragility, and a final collapse. These investments appeared justified in a context in which everything is going up and every mistake can be corrected and any indebtedness can be subsequently handled with higher incomes and wealth. Often these expected increases are paper-wealth increases and are not realized before the crash--especially for the latecomers to the stock market who join when all prudence advises staying away.
Wall Street is today ending the last leg of the great bull market. The coming collapse will be worldwide, because most stock markets are synchronized with Wall Street. Even those markets in a different phase, such as the Japanese stock market, will experience a dramatic fall. On the other hand, many stock markets are situated, as Wall Street is, at the end of the last phase of the bull market. This is true for stock markets in Germany, the UK, France, Switzerland, the Netherlands, Spain, Canada, Mexico, Brazil, South Korea, Philippines, Australia, India, and many others. As these markets are synchronized in the same phase as New York's, they will soon begin to fall in a worldwide collapse of stock markets. This collapse will anticipate, as the 1929 crash did, a severe contraction and depression in the world economy.
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