I Predicted the ’87 Crash, Now I’m Sounding the Alarm Again

I remember it to this day…

In my Long-Term Forecast 1985-1992, published in early 1985, I predicted that “in 1987, the stock market will enjoy its biggest rally in history.”

The Dow Jones opened the year at 1,927 points. At the peak, two months before the crash, it was at 2,722 points.

People often forget the tremendous stock market rally of 1987. They only remember the crash. As it happens, I predicted that, too.

In an interview on August 14, 1987, I told CNN (emphasis added):

What we think will happen is that we’ll get an important top somewhere around August 24 or 25. […]

If I had to guess the final top, it would be the first or second week of October. When I say, “the final top,” that would precede a correction of 15 to 20% “minimum” in the [Dow].

On August 20 of that year, I repeated my warning. When the New York Post interviewed me, I said:

We are seeing a top in the stock market in a generational sense.

As it happens, the Dow Jones topped out at 2,722 precisely on August 25 of that year. It was the all-time high for 1987. And it was a level that the Dow would not see again until two years later in August of 1989.

I’m sure many of us remember what happened next…

On Monday, October 19, the Dow Jones collapsed by 22.6%. It was, and remains, the worst one-day drop for the index in percentage terms. Black Monday had arrived.

Of course, it’s one thing to make a prediction. It’s something else to follow through and tell people exactly what to do.

That’s what I did.

On October 2, 1987, I advised clients of my Harmonic Research newsletter to “sell all stocks.” Six days later on FNN (the precursor to CNBC), I advised investors to “buy puts on the S&P index… short IBM, GM, PA, XON, and CHV.”

I don’t retell this story to bring up bad memories for those of us that were around for the crash.

But it’s important we understand what’s at stake…

Investors that were prepared for the crash could have made a fortune. In fact, I later had a client brag about how her traders had turned $100,000 into $13 million over the course of a few weeks by following my research.

But for those that were blindsided by the crash, it was devastating…

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Four Decades of Market Forecasting

My name is Mason Sexton. For the better part of four decades, I have made a career for myself forecasting the precise movements of the markets.

I began my career on Wall Street after graduating from Harvard Business School in 1972.

I spent three years in the Corporate Finance Department of Morgan Stanley. I did a stint with Salomon Brothers in M&A. Then, I headed the Sales and Research Department of Mabon, Nugent & Company.

In March of 1984, I founded Harmonic Research, a bi-monthly newsletter for institutional clients that specialized in making uncanny, specific predictions for the market. The story above was based on my research with Harmonic.

Earlier this year, I came forward and launched New Paradigm Research. My goal is to share my unique forecasts and trade recommendations with everyday investors.

And we’ve been off to a phenomenal start…

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Predicting the Top

In May of this year, I told my readers to prepare for a severe correction. I said:

Ninety days from the May 1 high puts us into late July. That would imply a trend change could well be underway by then. And it is highly likely that the first “warning signs” would begin to appear earlier that month. This suggests the beginning of a possible severe correction ahead that should be evident by no later than mid-July, 2023.

Were we to pick a precise date, we would select July 12 as the most likely “kickoff” for this decline. At first, there will be much “rationalizing” of the downturn. But by July 17–18, the coming correction will be more difficult to ignore. And by the end of that month, it will be impossible to ignore.

When that research was published in late May, it must have seemed contrarian, even a bit crazy. Not anymore…

The broader indices did peak in mid-July. Interestingly, the Nasdaq peaked precisely on July 18. From the July peak to the end of October, the Dow Jones declined by as much as 8.8%. The S&P fell by as much as 10.3%. And the Nasdaq was down by as much as 12.3%.

The most popular stocks of 2023 have fared even worse since the July trend change. Below, you’ll see some of the peak-to-trough losses.

• Nvidia (NVDA): -17.3%
• Advanced Micro Devices (AMD): -26.24%
• Tesla (TSLA): -32.3%

It’s also not a coincidence that some of the biggest losers since the July peak have been among our favorites to short, which we have done successfully, and repeatedly, in recent months.

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And our readers have had consistent opportunities to profit. These are some of the letters we’ve gotten…

Mr. Sexton, what you do is IMPOSSIBLE. I am just glad that nobody ever told you that. I have profited greatly from your recommendations. In just two months, this is beyond believable. I pray that you live long and prosper!!!

– Pete B.

Mason, you are far better than AI. I started last month following your suggestions gingerly and most or all seemed to hit it on the nose. Recently, I have been betting more heavily on your suggestions.

In the last month, I have benefitted from your research to the extent of about $30,000 in a portfolio of just $180,000. You have me for life. I can’t wait for each missive from you.

– Ted B.

I share all this simply to show you that incredible returns are possible even in the most unforgiving of markets. But you must have an insight into what’s coming down the line.

That’s why I’m hosting a special event tonight at 8 p.m. ET. During the event, I will share my next prediction. I’ll also detail precisely when I believe it will start and what investors can do to prepare.

If you are at all curious, then I would ask you to join me tonight: November 14 at 8 p.m. ET. You can reserve your seat with one click right here.

Regards,

Mason Sexton
Editor, New Paradigm Research

Like what you’re reading? Send your thoughts to feedback@rogueeconomics.com.

In Friday’s mailbag edition, Nomi discussed the Federal Reserve’s harmful obsession with 2% target inflation. Today, a reader argues that 2% is an unrealistic goal for the Fed and government… and wonders if the national debt may soon reach a breaking point…

The 2% goal is a target that enforces a sane level of inflation and establishes discipline, something the federal government sorely lacks. After 33 days of the new fiscal year 2024, the debt increased over $500 billion to over $33.5 TRILLION!

If that burn rate continues through September 30, 2024… even if quantitative tightening continues at $85 billion per month, merely observing the market continue to drive rates… will the dollar crash and inflation soar to double digits? Scary if the Fed disappeared and there was no buyer of last resort for the Treasury. We may find out soon the breaking point… $36 trillion… $40 trillion. Start a lottery.

– Dana G.

Then, a reader asserts that the national debt needs to be substantially reduced… and that the Fed should allow interest rates to fluctuate by the open market rather than manipulate them…

I got married in 1967 when I was 29 and my wife 25. In 1969, we bought a new home (new construction) for 134% of our annual income. She was a junior high school teacher and I was an accountant. We paid $7,500 down on a home that cost $29,500 (most expensive model) with the balance of $22,000 mortgaged at 7 7/8% for 25 years. You can’t do that today. Why? Because Congress, both Republicans and Democrats, have raised our government debt to $33 trillion, thus devaluing the dollar.

Until that debt is substantially reduced, there will be problems and those most hurt will be renters. The Fed is of no help and actually is part of the problem. By manipulating interest rates, it creates problems for everyone and in fact, raising interest rates is inflationary as the government has higher and higher debt, thus further devaluing the dollar.

The Fed should allow rates to fluctuate by the open market and stay out of it. Increased debt and higher rates make it more difficult for our government to borrow money. If this keeps up, there will be hell to pay in the economy.

– Ted C.

Will you be joining Mason as he reveals his next big prediction? Do you agree with Ted that the Fed should allow rates to fluctuate by the open market? Write them at feedback@rogueeconomics.com.