Without letting the stock market naturally correct, we’re setting ourselves up for another crash.

Very quickly, let’s define the difference in a mere stock market dip, a correction and a full-on crash.

Dips happen quite frequently. It’s like taking three steps forward and one step back, which still leaves you ahead and also provides good buying opportunities. Maybe the market advances 5, 6, 7 percent and then takes a two or three-point dip. No big deal.

A stock market correction is defined as a drop of at least 10 percent from a recent high. Drops of that magnitude can be scary, but a stock market correction isn’t necessarily a bad thing, depending on the context you view the correction from. These occurrences are quite healthy for the market when it becomes what’s considered overbought and overvalued.

After the correction comes a slow progression back up to well beyond its previous highs.

The stock market is going to do what the market has done since its inception – ebb and flow – advance and correct. This is the natural order of things.

But the governmental wizards of smart, who think they can control everything, can’t seem to grasp that there is no controlling the market. Because of the arrogance and lack of historical context, they invariably set us up for another stock market crash.

In 1929, the market shed 48 percent in less than two months. Thanks to the efforts of the governmental wizards of smart, this kicked off America’s Great Depression. In the crash of 1987, the market tallied its biggest point loss ever to date, declining 23 percent in a single day.

Then came the predicable crash of 2008. In October 2007, the Dow hit its pre-recession high, closing at 14,164.43. Thanks to decades of governmental meddling, by March 2009, it had dropped more than 50 percent to 6,594.44.

But since then it’s mostly been up, up and away, thanks again to governmental manipulation. In other words, we’ve had a decade of investor prosperity. Relatively new investors have known nothing but the good times.

Brent Smith 12-29-18 graph 1

Years of steady stock market gains cause investors to become over exuberant and complacent. Investors are human, and as such, tend to forget the bad times (if they ever knew them) and concentrate only on the good.

Supposed experts begin talk of the possibility and even probability of astronomic new highs, never seen before. Bold talk just this past summer of the Dow hitting 30, 40, 50,000 had become common.

This is when the market becomes dangerous for many investors. If there is even a hint of a market stumble to disrupt the “good times,” the governmental wizards of smart must jump in to protect us from ourselves.

The world economy is slowing down and current administration wizard of smart, Treasury Secretary Steven Mnuchin, simply can’t have that. How dare the markets react naturally to an economic slowdown. So he called the heads of the six largest banks this past Monday to try to calm a jittery market. It didn’t work. It never does for long.

And this is where politics intersects with the markets. No administration wants to be at the helm during a major correction, much less a crash. That’s understandable. So they do exactly what has been done in the past to artificially prop up the markets, somehow expecting a different result – the classic definition of insanity.

The wizards of smart never seem to learn a lesson and just allow the market to do what it does naturally. So investors beware. We’re overdue for a major shake-up in the market and the government is about out of ideas and ammunition. It’s not a matter of if, just a matter of when and how severe.

The longer the governmental wizards of smart attempt to artificially stave off a major correction, the deeper and more sustained it will be – likely leading to another crash. And it may happen in 2019.

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