Britannia Radio

The Great American Liquidation Sale By Tom Dyson I look out my window and see a large bank, built of sandstone. They've carefully landscaped the forecourt and there's a big blue awning over the front door. This bank is four years old, but it looks newer. Inside, there's a neat row of teller stations set up behind glass windows that reach the ceiling. They have a flat-screen  television on the wall, tuned to the Bloomberg channel. There's space for 20 cars in the parking lot. If you don't feel  like getting out of your car, there's a four-lane "drive-thru" on one side. This bank must have cost $10 million to build and probably costs $1 million a year to operate, but it appears to serve  fewer than 50 customers a day. No one lives in the area. An airfield and three golf courses surround it. Plus, there's another  bank a few hundred yards away. The problem was, the bank was built when credit was easy and house prices were rising every month. The owners must have  made assumptions based on those favorable conditions, but conditions changed and their assumptions turned out to be wrong. Now the bank is costing the owners money every day... and needs to be closed. All over America, I see the same problem. Billions of dollars worth of bad investments litter the country. These investments  aren't generating returns for their owners, and they need to be liquidated. The liquidation process began in 2008, and it would have been near completion by now. Unfortunately, the government intervened and propped up these bad investments by making even more bad investments and encouraging everyone else to do the same. So here I sit, watching the bank out of my window, wondering when the great American liquidation sale will resume. It could have already started... The market is overvalued in every metric I follow. The S&P 500 has fallen six of the last eight sessions and is down 7% since  January 19. The major European bourses are all forming downtrends, too. Check out this chart of the Chinese stock market.  It looks like a burned out firework returning to Earth... If a new stage of liquidation is starting – and that's a big "if" – the companies that benefited most from the boom in consumer credit and consumer spending have the most to lose... like the owners of that bank. These companies based their business models on optimistic assumptions of the future. Conditions have changed, and now these businesses are basically giant portfolios of dud investments. They're going to have to liquidate these investments and  slash the scale of their businesses. I've advised my 12% Letter subscribers to hold a large cash position, and I've recommended they limit their stock-market exposure to only the safest income stocks and bonds. In the latest issue of his newsletter True Wealth, my DailyWealth coeditor, Steve Sjuggerud, recommended an investment that profits from a declining stock  market. But the most aggressive traders should consider short positions in companies like motorcycle maker Harley Davidson, upscale grocer Whole Foods, casino company Wynn Resorts, or mall operator Simon Properties. If this is truly the start of the liquidation sale, the market is going to slaughter these stocks.