Ted Bauman: Different Equity Crash Scenarios

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The bull market in US stocks remains intact, although there have been a few times where it seemed as though it may be coming to an end. The current bull market is one of the longest in history and it is beginning to worry some on Wall Street. One economist Ted Bauman, feels that the stock market may continue to climb higher, but that it could just as easily crash. Mr. Bauman spent much of his career living in South Africa. He worked for many years taking on leadership roles in housing projects aimed at helping those in need. When he returned to the United States, he was hired to be an editor for Banyan Hill Publishing. One of the topics he loves to write about is low-risk investing strategies. He feels that investors who adopt this unique investment style will make more money in the long-run.

Ted Bauman feels that a potential stock market crash in the US could happen really soon and he provides some scenarios of what could cause a crash.One factor that could cause US stocks to fall is that it is one of the most overvalued stock markets in US history. Ted Bauman favors the CAPE ratio to determine if assets are undervalued or overvalued. The ratio is currently as overvalued as the period in the late 1990’s with the crazy speculation in tech stocks. This was also the most overvalued that US stocks had ever been. Mr. Bauman sees a scenario where more and more the financial experts will all start to come to the same conclusion about stocks. Eventually, investors would all begin to dump shares as fast as possible.

According to Bauman, he also feels that the stock market may crash suddenly and jump right back in a short period of time. This took place in October 1987. The stock market had its largest ever percent decline in a single day. With all the programmed trading that takes place today, investors following the same moving averages and indicators would all act in unison, all selling at once and causing a crash. Mr. Bauman reminds investors that those who did not panic back in 1987 actually made money amidst the market turmoil because it did not take long before the stock market bounced back.