 Good day fellow investors. Put on your seat belt because we are going to witness the biggest stock market crash of your lifetime. Today we're going to discuss whether a stock market crash can happen in 2018. We're going to compare macroeconomic facts, what happened in 2000 and in 2007 to see whether we can find the same pattern today. What could trigger a stock market crash and how bad it can be. So the last two times the stock market crashed, it crashed 50%. The market peaked on March 10, 2000 when it became obvious that the extremely high valuations were impossible to justify and that the internet won't be profitable as hoped for. So if we look at SAP 500 valuations, those were above 45 in the 2000s. So extremely high crazy levels. The current SAP 500 price to earnings ratio is at 25, which might seem relatively low, but from an absolute perspective, both levels are extremely high. To add fuel to the fire in 2002, the economy entered into a recession and the market, the SAP 500 hit bottom in September 2002 and then really bottomed out let's say in March 2003. So the stock market started crashing in 2000 and was falling continuously up till 2003 and lost 50% of its value. The reason at one point it was clear that those valuations to those internet stocks were too high that there were no profits and therefore the stock market crashed alongside the recession that deepened the crash. Nothing unusual for a stock market in a bubble. In 2007, there was a shift in the risk perception of debt where suddenly housing debt, housing crisis triggered a chain reaction all over the world and debt suddenly became more risky. A lot of companies defaulted insurance, reinsurance, it was a whole chain that created turmoil in the whole financial industry. Again, the SAP 500 dropped 50% to a low of 676 points on March 9, 2009. So in both cases, the reason behind the crash was excessive leverage in the form of equity in the dotcom bubble and in the form of housing leverage in the 2007-2008-2009 financial crisis. So again, it was over-expanding and then of course the system, the house of cards crashes. Let's see if the situation is better now that we have learned that leverage is not good in the long term. Unfortunately, nobody learned anything since 2009. The total public US debt as a percentage of gross domestic product almost doubled. It was 60% in 2009 and now it is 103%. A huge increase. Just to mention 1982, the debt to GDP ratio was just 40%. Something similar is going on in Europe. Everybody's piling debt, Japan piling debt, piling government deficits, and that is something that sooner or later will crash. However, the funny thing is that when debt crashes and when the house of cards falls, in retrospect, if everybody will be saying, oh yes, governments had too large debts, impossible to sustain, it was not normal, interest rates were distorted. But now that we look at the situation as is, nobody's saying that because it's easy to be general after the war. Try to be general before the war and everybody will spit on you. That's a given. Something that will push the stock market crash even lower is margin depth. If you look at the level of the New York Stock Exchange margin depth, it is at historical highs, which means that a lot of stocks are currently bought on margin. And that margin depth has even been diverging lately from the SAP 500, which means that when there is a correction, all those margin depths will be called upon. And then if people don't have collateral, if people don't have liquidity, which is often the case with margins, then there will be four cells and that will push the market even lower. Now before digging into the potential triggers of a stock market crash, it is important to understand that the global economy is intertwined in incredible ways. If something drops in China, it has an effect in the US, in Australia, in Europe. If something happens in Europe, it has an effect all over the world, because that's how the world is now interconnected. Let's see the first risk. If you look at the aggregate assets of global central banks, in comparison to their global GDPs, in this case the Fed, Europe, Bank of Japan, Bank of England, it has been growing extremely in the last eight years, from almost zero to the current thirty-six, seven percent. This means that central banks created thirty-seven percent of GDP growth in the last years, divided by eight, forty-seven by eight, almost five percent of GDP growth per year was pumped in by central banks. If central banks start tightening, if central banks are forced to start tightening because of inflation, the house of cards falls, this IP500 goes down the drain, mark my words. That in combination with a recession, which would mean inflation, higher interest rates and the recession, where central banks lose control of the monetary environment, which is something very possible, and you don't even have to go back to the Weimar Republic to see how a central bank can lose control. You just go to 1970s and the US. This is the US inflation rate in the 1970s, 1974, 7 percent, 1975. Similarly, 1980 went up to 12.4 percent, 1982 it was again 7.4 percent. If you look at the GDP levels for the same years, decline 1974, 1975, 1980 and 1982, especially big decline there. So if we see a step inflation, that would tie the hands of central banks and then disaster could happen. Then we would have to invent something new to save the environment. In 2009, there was plenty of liquidity that saved the environment. In 2018, 19, 20, what will save the environment? I don't know yet, but keep watching because we will get there. What is funny is that in most of the 1970s, the SAP 500 price earnings ratio was below 10. It also went below 7 in May 1982. At current SAP 500 earnings of 104 points, with a price earnings ratio of 7, the SAP 500 would be at 700 points. So that implies a 74 percent decline from current levels. That's the potential for the next market crash, or even more perhaps. You think it's impossible that the SAP 500 crashes to 700 points next year in the next two years? Well, we don't have to go to 1982 to see that levels. You just go back to March 2009 and the SAP 500 was at a low of 666 points that closed at 676 points on March 9, 2009. Huge potential for a crash, huge downside. Be prepared. Another trigger is potential turmoil in Europe. As I keep saying, Europe is a ticking bomb. Let's see why. DCB is continuing to protect Italy as it did with France. It gave them plenty of money so that Marcon would win in France. In Italy, in May 2018, there will be elections. Therefore, DCB is keeping the two-year bond negative so that Italy has plenty of money. Italy is making money when it borrows to DCB, thus saving Italy so that the situation is good and that there is no political turmoil in Italy. If Italy's interest rate rises, Italy defaults. And if Italy defaults, then all hell would break loose. Because Italy would leave the EU, let's say, go back to the lira to save itself, as the populist politicians say, and then we have a chain effect all over the world. And that's a huge crisis that would happen. And that's not just me saying. Let's see who is betting 1.1 billion against what's going on in Italy. Bridgewater, Ray Dalio, 1.1 billion against Italian companies. They are short. Of course, it's cheap now to be short Italy, and they are going short against Italian banks. I will be making a video, the big short, the next big short, and how to take advantage of such cheap hedges. And we'll see what Ray Dalio is doing. And if it is smart to invest 1, 2, 3, 5% of the portfolio into shorting Italian stocks, very, very interesting situation has to be analyzed deeply. The third trigger is just global inflation. Commodities rising because of demand from China, from emerging markets. And that inflation triggers higher interest rates. And then we have, again, this scenario that I already mentioned. The fourth trigger, and the most likely trigger, is a black swan. Because nobody can see it now, because what you can see, you can prevent and you can protect yourself from that. But if something happens that nobody can see, that is the real trigger, because that catches everybody by surprise. So I don't know what a black swan could be. I have mentioned something that might be mentioned as a black swan in the aftermath, but who knows? So a black swan, I'll leave you with a black swan. I'll be making in a few days a video on how to protect and how to take advantage of what might happen. Will we see a stock market crash in 2018? The problem is that now the stock market investors are looking at what will happen in 2018 and projecting that into the price. In 2018 they will look at what will happen in 2019 and project that into stock market prices in 2019. If there is turmoil, this is all a house of cards, don't forget that, and it could crash like that. So be prepared, be hedged, so that you can sleep well whatever happens. I think that's really extremely important in this market. That's it for me today. Look at other videos, looking forward to your comments. Click like, subscribe if you haven't, and I'll see you in the next video.