In 1929, America spiraled into a crash. It took several years before everyone knew they were affected too--not just those invested in the stock market. Banks didn't close until several years later; then, the depression hit hard.
Since then, however, laws and regulations were passed that affect how the financial system operates.
And, another distant drum has been beating on the horizon. Banks and financial institutions have gradually drifted into the 1929 way of doing business--they are back heavily into stocks and the stock market. And no one is calling them down for this! Think about it ... just think about it! ...in the light of what was just immediately given, you can now see why America is Picnicking on The Banks of Hell.
The people in the stock market think they are in a savings account. They think the institution is regulated ....'tisn't. They think their principal is safe ... no way! They've got their life-savings tied up in the market...they have borrowed to the max on their credit cards to invest money in the stock market...bad scene. All of this, folks, and more, spells d-i-s-a-s-t-e-r.
- Do not have the control over individuals' money, as do mutual funds.
- They are tightly regulated by the FDIC, the Federal Reserve Board, and the Controller of the Currency.
- They can lend only a percentage of their portfolio to a borrower.
- Loans are carefully scrutinized, monitored, and evaluated.
- They are regulated, have bank examinators, and are "under constant supervision."
"Yet, banks fail and fail big."-- WSU
(1) The Wall Street Underground, April 1998, Vol. 3, No. 11, 612-890-3553 for subscription.
(2) Total Collapse--The Financial Crash of the Millennium, by Steve Puetz, call Investment Rarities Incorporated, 1-800-328-1860, ask for James R. Cook, President...tell him we sent you.
(3) Michael W.Haga's After The Crash--Life in the New Great Depression, 1-800-323-3523.
(4) At The Crest of the Tidal Wave by Robert R. Prechter, Jr.; (770) 536-0309.
(5) America in Depression: The coming Economic Collapse by Dr. James R. von Feldt and Ronald S. von Feldt; (703) 922-9138.
(6) The Death of the Banker by Ron Chernow. Vintage Original, publisher; a division of Random House, Inc., New York., July 1997; Random House Web address: http://www.randomhouse.com/
Picnicking On The Banks of Hell
Most people do not know, and you may be one of them, that the mutual funds have no regulatory body over them. That should be scary to you if you are invested in the funds. The reason you don't know these things is because your mutual fund has been orchestrated to look like a savings account.
Instead of using the term "speculating" in the funds; you are "making deposits" in the fund. They're geared to look like what you are used to from your old bank savings statement: They allow withdrawals via check writing and credit cards. America is picnicking on the Banks of Hell and doesn't even know it.
The mutual funds have convinced the public that putting--not investing--money in the funds is savings. Ladies and gentlemen, this is a myth. They have further convinced the public, through clever, legal language (that protects them, not you) that:
- If you sustain losses, somehow those losses are insured.
- The Stock Market can only go up; not down. The world has changed and there are safeguards in place since the 1929 Crash.
- You will receive a 30% -- 35% compound--every year--interest return on your "savings."
Look at the latter this way. Wall Street is creating new millionaires on paper, everyday; somewhere around 60 million according to WSU. This is the problem:
- The share prices of the companies people are investing in doubles every two years; but,
- The companies are only making profits to "justify doubling every 30 years or more."
In the October 1997 issue, Vol. 3. No. 8, Nick Guarino, WSU editor, writes:
"Based on earnings, it should take 30 years to create this new stock market wealth. Wall street is magically doing it in one year. Think about it. Wall Street has priced 30 years of earnings into one year of stock market gains.
"Now you know the secret of why the stock market has to crash. The stock market has already factored in 30 years of perfect news. It has convinced desperate mutual funds buyers those profits will be realized in a year or two. But the [real] world just doesn't work that way."
Remember! It is better to be out of the stock market a year too early, than a day too late. According to our sources, most think they can get out in time when the crash starts. Many, if not all, may be in for a nasty surprise. In fact, very few realize that in order for them to "cash out," the redemptions they want, first the stock has to be sold for cash money. If all is crashing down around them, and no money is left in circulation to buy the funds/stocks/etc. by others; or investors won't risk buying in a major down-turning market, then you get NOTHING. This is what Fleet Street Letter (Investor's Forecast May 27, 1998) writes:
"Taking money out of a mutual fund is very different from taking money out of a savings account. The only way a mutual fund company can redeem shares is by selling stock. Mutual funds are the biggest owners of stock by far in this country. When they start selling, it's like a whale getting out of a wading pool. All of a sudden, the water level drops.
"In plain words, the whole stock market collapses. First, prices for the most vulnerable stocks fall: the retailers, the casinos, the high-flyers. But soon, almost all stocks are spiraling downward."
Again, it is pointed out by The Fleet Street Letter:
"Mutual Funds Are Not Savings Accounts"
They continue by saying:
"As people cash out, funds have to unload a lot of stock to pay them off. The result? Stock prices fall down, down, down.
"Remember, we're not talking about investors who can sit back and wait a few years for stock prices to go back up. We're talking about ordinary Americans. They need their 'savings.'"
At this point, we wish to interject something for you to think about: The statement ... "Invest for the long haul." WSU (April 1998, Vol.3. No.11, 612-890-3553) and others have repeatedly pointed out:
"Folks, speculating in mutual funds in NOT the same as putting money in a savings account. The public does not realize they risk their principal in mutual funds; that there is no insurance; and that stock markets always suffer severe downturns [WebMasters Note: They are cyclic]. You may postpone the collapse, but you can never prevent it. Stock market mutual funds are speculation, not savings.
"Mutual funds counter this argument by saying 'invest for the long haul.' Those five words are the most successful advertising campaign in history. Reality is, investing for the long haul does not solve the grave problem that stock markets go down as well as up; they go down a hell of a lot faster; and they stay down a whole lot longer than anyone can afford to wait."
The WSU continues by writing:
"If you can wait 50 years, maybe you can get your money back. Even that is not guaranteed. Remember in real terms -- and that's what counts -- it took 65 years to break even after the 1929 crash. For most people, the long haul for a stock market, after a major collapse, is a lot longer than they will live."
At this point, note, that this will be the "Mother of All Crashes." Thus (50 -- 65 years later), most of the companies that issued the paper will be out of existence--even if you waited through the long haul, you'd still be holding worthless paper.
The Fleet Street Letter continues ...
"Mutual funds are required by law to give it (money) to them, but as the market drops, the value of their 'savings' falls. And here's where some frightening arithmetic comes into play: The average American family has only about $10,000 in net financial assets, mostly in stocks owned through mutual funds.
"They also have credit card bills and mortages to pay, kids to put through school, and all the other ongoing expenses of a family. When they sell mutual funds, it drives the market down dramatically.
The Anatomy of The Crash and Its Financial Wipeout
Most Americans have little or no savings in a bank... it's all in the markets, especially mutual funds. With what is coming, the "immediate financial effects will take most people by surprise, " writes The Fleet Street Letter (TFSL) Investor's Forcast of May 27, 1998. Other top financial letters echo the same sentiments, as well as your WebMasters.
What is occurring is that most Americans are, in effect, using their credit cards to finance their venture in the funds. They are buying things--lots of things--on credit cards. This is credit card debt used for consumption, whereas the money they have left over after taxes, etc. -- take home money -- is not used for items of consumption, nor is it going into a bank savings. That money is going into the mutual funds market. TFLSL says it this way:
"Credit card debt is used entirely for consumption, not at all for investment, and hence is completely non-productive. It is also among the most expensive, with interest rates 10 - 15 percentage points above the level of inflation.
This helps to explain why bankruptcies in America are now approaching 1.4 million--more than 5 times the level of 15 years ago.-- August 1998, Volume 61, Issue 8.
Years ago, it was ascertained by economists that the severity of recessions, depressions, layoffs, and the like, is a function of the amount of debt that is outstanding in individuals, corporations, and so forth, when those recessions... begin. On this basis, and what we have just written, you can immediately see this coming crash and its resultant financial wipeout will be the "mother of all wipeouts." It could precipatate a new dark ages for years and years; the end of the stock market, and/or be the stage for the New World Order to make its immediate appearance before things drop too far, too fast, from the lifestyle most in the world know.
When people start feeling the effects of a market downturn, they do what? They immediately cut back on spending, such that this is felt in the manufacturing world with its resultant problems ensuing. With a 10% downturn, it is not enough to cause a "run" for the funds, en masse.
However, they have to draw on their so-called savings in the mutual funds and this necessitates a call to their 800 number for redemptions of their shares to get needed money to live on. Or, since funds have been orchestrated to look like bank savings accounts, they can simply move the money--funds have to be sold to get this money-- to a money market fund and commence writing checks on it.
Well, this all sounds pretty good, but what follows is what you probably don't know and have not been told!
When the market falls 20% - 25%, a mechanism kicks in that has never existed before. More people need money, and fast, thus, redemptions swell, so far, so good, mutual funds are now forced to sell. This means they must redeem, for their clients, more and more shares of the funds' backing, which is stocks. In order to do this, the funds now have to sell into a falling market! What happened in 1929 was not funds, it was trusts. Such a cascade of events has never happened in a mutual funds market. ...And remember, throughout all this, your MONEY is not insured, not even the principal.
Now, we're getting into the crux of things. "Remember, funds must honor redemptions with cash. At best, they have pennies on the dollar in reserves to do so: most funds are 100% or nearly 100% invested in the stock market. Mutual funds will have to sell stocks en masse, to meet their investors' demands for cash," writes Nick Guarino in WSU of April 1998, Vol. 3. No. 11 (For subscription: 612-890-3553).
Now, consider this: When no one can buy; or investors stop buying, while a market is falling quickly, implies you have a "Total Collapse" developing. If this be the case, and there is no extra money to be found by the market managers and/or buyers, then you stand to lose everything you have in the funds.
Guarino writes, in the same issue:
"Mutual fund investors, in essence, have already been wiped out. Now we're just waiting for the market to inform them of the tragedy that's already occurred. Their money is gone. When it comes time to cash in their worthless fund shares, they will lose everything."
The problem will go like this, he writes:
"Mutual funds know they have problem [sic]. They have set up huge lines of credit with the nations's major banks. As collateral, the funds put up their existing portfolio. This lets them borrow against their existing portfolio, to pay back investor withdrawals.
"Just two little problems. First, banks give credit as a percentage of the stock value the funds hold. In a major downturn, the value of those stocks keeps dropping [you see, the funds' mangers get less money to pay you for your redemptions]. The funds' line of credit shrinks, at the very time they need that money the most [This means, someone's going to get hurt and bad].
Now, the interesting thing Mr. Guarino points out, is that when the portfolios of the funds drop just a small amount, say 10% or even 15%, this borrowing mechanics of the banks lending a percentage of the funds portfolio is still operative; but, when the stock market spirals into a major downturn, then, "Katie, bar the door." A point of no return exists for the funds; their base, the stocks as collateral that the banks want to lend upon, now drops so far, so fast that the funds can't borrow enough to meet the cash-outs!
As the cash-outs get bigger and bigger--more people now wanting out of the market and now realizing that a "day too late" could occur at any moment--the lending institutions, namely the banks, begin demanding "the funds shore up their loans, because the value of the collateral is falling. So the funds not only have to sell stocks to pay off shareholders; they must sell stock to pay off the banks. This forces the funds to liquidate even more stock into the falling market [the market is now running out of control and spiriling downward]. This makes the downturn even worse."
Mutual funds have no cash reserves. Assumptions are made, optimistically, of course, on past experiences reflecting downturns that they should have 3% reserve in cash--the truth of the fact is: they have none.
WSU says to give the funds the benefit of the doubt, in that if the market drops to 8300, this uses all available cash they have. When the market reaches 7600, the credit lines from the banks, we spoke of earlier, are now being strained heavily. And this is where the rub starts:
"... redemptions come so fast -- the value of the stocks drops so quickly -- they have no choice but to sell huge blocks of stocks. Despite the funds' borrowing, their collateral base falls quicker than they can borrow money to pay back investors."
Get it: As the market falls, and its stocks in value too, the funds can only get less and less money because the basis (collateral) of the amount of money they receive from the banks drops too; thus, less money available to those wanting redemptions. This is why a year too early is better than a day too late. The WSU says it beautifully....
"This is where you achieve terminal velocity. Where mutual funds have no choice. They must do the most dreaded act of any fund manager. Something these guys wake up at night in a cold sweat over. That is forced liquidation of mutual fund holdings, to meet investor redemptions in a collapsing stock market."
Now, the problem exacerbates. Second, the banks start going under, then the insurance companies; next the pension funds; and finally the companies themselves that built the stocks, like GM, MicroSoft, and others.
You saw the first problem were the "cash-outs," in a major, downturning market. Remember! A boom market is always followed by a bust. It will operate something like this:
- In a market that has reached terminal velocity in its fall, then the "value of the banks' mutual fund loans plunges." Now, here is the second problem, "banks have staked a huge part of their business on these fund loans."
Without warning, the value of the stocks the banks are holding that backs them has suddenly become worth only "a fraction of the amount they loaned." And, if you recall, the banks are not supposed to be in the stock business as such. This was one of the checks and balances brought about after studying The Great Crash of the 30s. Recall from above, they have gradually gone back into stocks and the market. We now have a perfect recipe for the greatest crash of all times.
So, not only do the investors lose, the banks too. Why? In addition to what was just given, the mutual funds can't pay back the bank loans (or quickly enough) to save the banks. The largest banks in America will tumble also, and this crashes the total system of banking. But, to make matters even worse....
- Not only are banks into mutual funds, insurance companies are too. And they sell enormous amounts of mutuals. And, as the old adage says, "What's good for the goose, is good for the gander," Their mutual funds are tied to retirement plans and annuities. Those are guaranteed instruments. But when the market goes, so go the guarantees, along with the insurance companies.
- Now are you seeing why we have said your pension plans, retirement funds, 401Ks, and IRAs are going too. Because whether they are from the banks, government sources, or insurances companies, or wherever, they are heavily, "almost exclusively" invested in stocks. When the terminal velocity starts, they get wiped out too. At this point you may need a breather to digest the seriousness of all this; go get a cold drink and when you finish this page, you'd better go to our "Gold" page from Menu, then our "Survival," and "Total Collapse" pages too.
The Wall Street brokers, in this market, have committed practically everything. "They will be ruined in a flash," says WSU. You will see them jumping out of windows or committing suicide as they have recently in Japan.
We recommend Investment Rarities Incorporated at 1-800- 328-1860. Ask for gold/silver specialist (broker) Ellen Petty. She knows the protocol we are recommending for the coming Total Collapse. This will save you from having to do a lot of talking and explaining. No high pressure. Tell her Charles and Kathryn sent you.
Through all this, you will see the companies that make up the stocks and the market, slip into oblivion. So much for the long haul. The April, 1998 issue says:
"Right now, they are enjoying virtually unlimited stock market capital. They use that capital to buy companies; to puff up their asset base and earnings; as compensation for their employees. The crashing stock market will change all that."
Incidently, we suggest you not take stock options, but take the cash and turn some of it into Gold and Silver, and Platinum.
With stock options, you are only a paper millionaire; CNBC regularly points this out that "the number of Dell Computer employees who are millionaires on paper because of stock options." ...when the truth finally arrives, it will be most painful, "especially for the Dellionaires," as they are called. Source: The Fleet Street Letter, August, 1998.
Once the stock market (DOW) reaches 20% to 25%, a wipeout plunge will begin to 40% - to- 50%. This would take the DOW below 7000, more like to 5000 to 5500. Everything starts coming apart here. But first, let's give a quick, immediate review for this understanding of a total wipeout.
We shall use Nick Guarino's, The Wall Street Underground, April 1998, issue, Vol. 3. No. 11. (For subscription: 612-890-3553), as resource material, as well as numerous others--see above, because he brings it all together nicely. We highly recommend him and these sources in these last days for advisement prior to the next, great crash.
Quick, Immediate Review
In a bear market correction, the effects of a populace that has panicked is not calculated into the sell orders (liquidation). The devastation is not figured into its calculation. This will result in trillions of dollars lost by the big "boys,"--investors, as well as banks, insurance companies, and any other institution that has delved into the folly of derivatives--a tricky thing, at best for the experts. Those trillion dollar derivatives are held by mutual funds, not to mention other institutions too, in their own deals, yet, all intertwined. One goes down, they all start downhill.
Compared to the 1929 Crash, the stock market lost 90% of its value. In parlance to today's market, the DOW would plummet to below 900! WSU says that in a normal bear market, stocks would fall to less than 5 times earnings. This would take the DOW to something like 1500! Well...Life in the U.S. as you have come to know it would totally cease because the U.S. economy and most of the major players, if not all, of the market would be long gone, way before the DOW sinks that low.
The funds have had great luck in several things: (1) convincing you there are no real downturns anymore. Markets only climb, generally at the 30% per year rate we spoke of earlier that would make you an eventual millionaire.
Hence, you don't need protection from the market; (2) enormous success at getting most of the nation's money into the mutual funds. Why, they have even convinced children it is child's play and have them playing the market with the help of their school teachers. What most people don't know is that it takes years of study and expertise to understand the market and play it intelligently. But, most have been convinced to get in for the long haul and not worry; it will take care of itself, and some have made paper profits.
Guarino writes, now get this,
"Until now, less than 10% of the country's wealth was invested in the stock market. A stock market downturn, bad as it might be, affected only about 10% of the economy.
"Now, one way or another, 60% - to - 70% of the country's wealth is tied up in stocks. 30% of individuals' wealth alone is in the stock market. Stocks make up the largest single investment for the average American. They represent close to 100% of his liquidity." Even if you're not in the stock market, you are going to be affected, as we will point out from Michael Haga later.
The problem intensifies because the overall percentage of wealth in America of the average individual, even if he is not in the stock market, is still affected in this manner. His retirements, pension plans, bonuses, and his future income are tied to the stock and stock options of the market.
Even the raises you get from your company, more often than not are tied in there--they are invested there, to pay bonuses; even your medical plans and incentive programs, most, if not all are based on the activity of the stock market. Now do you see, you are INVOLVED, and heavily so. And what affects the market is going to effect the average citizen whether he is in or not in, physically, the market.
Oh, you're not in the stock market, and you own your own business. Well, most of your customers are, as well as your suppliers. What affects them is going to affect you; there is no way around this.
Nick Guarino continues by referencing the banks next. "Insurance companies, and annuities," he points out, are tied to the market. As their value in stocks goes up, this gives them the needed capital to work. If that appreciation goes down, then the capital that the stock market is providing, disappears too.
At one time, in the past, practically no banks got money from the stock market; it came from deposits, loan interest, and things of that nature. Now, most of their working capital comes directly from the stock market to do what they do; especially leveraged money and derivatives. If this dries up, they go bust, and fast. Regardless of regulatory boards, FDIC, and so forth, they can do everything right and still make you a pauper along with them.
If a business or corporation needs money, big money for big things, they get it from the market. At one time, all of it came from bank loans. But now, it is raised in the stock market...and when the market goes, so goes the source of capital, and the corporations.
It is interesting, at this point to recall, in our third book, The Two-Fold Chastisement: Visions of The Coming Earth Changes, numerous holy saints over 1400 years ago were given a peek into future events by Christ, and they said, "In the latter part of the twentieth century, there will be a world-wide financial crisis!"
Reading Michael Haga, 14 centuries later, we find he describes almost the same things and events these saints saw, at a time when they could barely think about what they were going to eat the next day or where the next meal was coming from, but they clearly saw our time.
The Gross Domestic Product (GDP) replaces the Gross National Product (GNP), which was the total national output of goods and services valued at market prices. GNP consists of purchases of goods and services by consumers and government, gross private domestic investment, and net exports of goods and services. It measures the output of labor and property supplied by U.S. residents.
In, America In Depression, The Coming Economic Collapse, referenced earlier, the GDP is essentially the same as GNP except for one variable. It does not include exports of goods and services. Therefore, it is slightly lower than the GNP. They are almost idential.
Now, bear this in mind: All markets always have volatility; they are beset with major downturns eventually. This is important, what follows, because it affects the whole of America.
"Every 10% drop in the U.S. stock market will take close to 1% off U.S. GDP. So a 20% drop will send the country into its worst recession of this decade. A 30% drop plunges the economy into a depression," the WSU says in its April, 1998 issue.
"A 40% drop (just a small correction compared to the rally we've had) brings on a depression, the likes of which America has never seen. A 50% or more drop in the DOW wipes out the U.S. economy. It topples most financial institutions and banks.
"That kind of drop wipes out the dollar. Banks close faster than the Fed or U.S. government can keep them open. America as you know it grinds to a cruel, screeching halt." [At this point, we'd like to point out that most, if not all of our sources, public and private, contend a new dark ages may be ushered in with this coming Great New Depression, for a time]
"The WSU finishes this topic by saying, "All because at one time the stock market represented just 10% of the economy, and now has swollen to 70%."
The Market of '29 Compared to The Market of Today
Three things, in essence, brought down the 1929 market:
- Tremendous Over-speculation.
- Vast Over-investment.
- Vast Over-valuation (shares, real estate, etc.)
With these three things, the market could not sustain itself. People did dumb things and they lost sight of value and "sense" of balance.
The following is what Forbes magazine wrote, just four months before the 1929 Stock Market crash:
"For the last five years we have been in a new industrial era in this country. We are making progress industrially and economically not even by leaps and bounds, but on a perfectly heroic scale.
Again, Forbes wrote in October 1968, the following just before a six-year slump began that saw share prices shoot down by 60% in actual terms.
"As the result of all that has been happening in the economy ... during the last decade, we are in a different - if not a new-era and traditional thinking, the standard approach to the market, is no longer in synchronization with the real world."
... have you noticed similar in the media recently ....
Dear "Abby," Abby Cohen, the darling of Wall Street, says the American market isn't really going to be bothered by the Asian crisis; we may suffer a minor correction, but, in effect, the market will go up...up...up.
On July 28th and on the 30th, The Wall Street Journal reported on two editorials. The first article reported what the director of economic studies at the Brookings Institution, co-authored with a professor of finance, who is the director of the Financial Institutions Center at the Wharton School. They feel, and remember, these are two of the "nation's leading academic scholars," that "sources of structural fragility [the stock market] have been substantially, if not totally corrected, [this makes] a repeat of the hair-raising events of 1987 highly unlikely." See, they don't recognize the possibility of a market collapse now.
The second article, quotes an MIT professor of economics as saying, "The expansion will run forever. The U.S. economy likely will not see a recession for years to come." He says the reason is "We don't want one, we don't need one, and as we have the tools to keep the current expansion going, we won't have one ... [the] policy team will keep it from happening ... The market won't melt down... Just-in-time policy levers give the present expansion years of life. A recession would be an unforgivable mistake." WOW! Is all we can say to that one.
In the Japanese market, they did so well with vast over-valuations, speculations, and investments, it brought them down. They came over here, bought real estate, the same in Japan, and elsewhere, at many, many times its value. Empty buildings are sitting, newly built, just waiting for tenants all over the Asian markets, that will never be filled--they too, lost sight of value and "sense" of balance.
In 1929, practically everyone was playing the market, from flappers to gin mills to "knowledgeable" investors. The same thing is occurring now. Taxi cab drivers are giving "savvy" investment protocols, as well as high school students, on to the "knowledgeable" Wall Street investors.
Investment clubs have sprung up all over the place with suddenly .... suddenly, housewives, firemen, and police officers "knowing" all the ins and outs of strategic investments. We are picnicking on the banks of hell and don't even know it.
What has this done to the current market: It has driven it higher, out-of-proportion. In 1929, they paid a terrible price for decades for their folly; we are about to experience the same here. Nothing has changed this time, only the players.
Overvalued markets do one thing--they eventually crash! This crash will be bigger and worse, and last long, because it is "Mother of Over-valuations."
A stock market must be priced in real valuations. But, in this market, it is run by trillions of dollars by various entities that use this money to "buy the market ever-higher," reports the WSU.
Martin Weiss, editor of Safe Money newsletter points out:
The Japanese stock market has already fallen 67% measured in yen. It's down 83% measured in dollars. This is one of the great stock market crashes of all time, and it's happening right in front of your eyes.
The last time we had this situation was in '29. Only then, the stock market crash began in January, in London. The crash quickly spread to British real estate, and their banks started to go south.
For nine months, London stocks and real estate continued to plunge -- while the DOW continued to soar to new highs. Then, in October, when the British banks began to sell their US assets, the US stock market began to stutter and stumble. And of course, on October 21, the party came to an end. That was Black Tuesday, the day the great crash finally rolled across the ocean and reached New York City.
Unfortunately, that is what's coming again, today, when Japan's failing banks begin to sell their one great asset that is still ripe for profit taking -- US securities.
No Amount of Money Exists To Bail Out the Mutual Funds
The reason is simple: The higher the market rallies; the more money it takes to keep it there, and you now understand the bank's role in bankrolling the funds--the collateral situation as a function of the existing portfolio. Remember, the loan is based on a percentage of the stock's value in the borrowing entities' portfolio. Well 'n good, as long as no downturns occur. But, downturns are inevitable in markets, as you now see. And, WSU clearly points out that, "For stocks to go up by the same percentage amount, they need twice as much money flowing into them."
So, somewhere in between those percentage points, as the market goes up, it demands "more money to sustain itself. When the collapse commences, an even greater mount of cash will be demanded to uphold the market---it doesn't exist, recall the banker's call to the mutual funds to shore up their loans. Where are they going to get the money from? Not the banks or other lending institutions, they're in trouble too, by now. Hence, we're picnicking on the banks of hell with no where to go but straight down.
You now see the precarious situation the U.S. is in with regard to the mutual funds and consequently, the stock market. This extreme amount of capital flowing into the market funds has resulted in this working capital driving the shares of funds, stocks, and real estate, up and up, beyond the real value of their worth. Without real value, as Robert R. Prechter, Jr, of The Elliott Wave Theorist [$233/yr.; 800-336-1618] is fond of saying, this "house of cards" will soon tumble into a morass of ill-liquidity, wiping out the market as it does, and sending our economy, and taking the world's with it, into the mother of all depressions.