Until recently, I have said we are not in a financial bubble; because unlike previous bubbles – as in 1929, 1987, 2000, and 2008 – public participation has decidedly NOT fueled it. In this case, government intervention has been entirely responsible until this point; first, in “bailing out” Wall Street; and second, “supporting” desirable financial markets like stocks, bonds, and real estate, both overtly and covertly. This, whilst suppressing “undesirable” markets like Precious Metals; which fortunately for their underlying physical nature, are responding – in the most “PiMBEEB” environment imaginable – with a combination of rising demand, plunging production, and vanishing above ground, available-for-sale inventories.
Generally speaking, said “bubble” has been created, like Frankenstein’s monster, in the economic vacuum of a “Great Depression” economic environment; which consequently, has catalyzed serial currency collapses; plunging commodities – aside from a handful of “bubble-ized” ones like base metals; and in turn, the most dramatic social unrest, political upheaval, and geopolitical tensions in decades. In fact, this bubble – yes, I’m not calling it a bubble – is unquestionably history’s largest, based on historically high valuation metrics, and the unprecedentedly low risk aversion caused by relentless “Central bank puts.” To wit, financial asset prices have become so unhinged from the (collapsing) economy, that hedge funds, or as I deemed them four years ago, “hedge bombs,” have underperformed the S&P 500 – dramatically so – for nine years running; including in the first quarter, when just one managed this “feat.”
The reason being, that the idiots running other people’s money are happy to believe Wall Street, Washington, and MSM propaganda about an “expanding” economy; “Trump-flation”; and any other false meme that helps them explain a rising stock market. The problem is, that Main Street has never been in worse shape, and the “expanding economy” – at less than 2% in 2016, and 1% in the first quarter of 2017 – is, in actuality, in recession. Thus, instead of simply buying the indices the PPT is supporting – and the handful of large cap stocks masking the losses of the vast majority – they continually attempt, disastrously so, to “stock pick,” setting new “negative alpha” records each year.
That said, the masses appear to have finally re-emerged from the sidelines, as evidenced by, all of a sudden, Charles Schwab opening retail brokerage accounts at a pace last seen at the dotcom peak. This, as regional real estate bubbles go parabolic, despite the lowest consumer spending growth since…drum roll please…the height of the Great Recession, in 2009. Which includes, I might add, the accelerating “retail Armageddon”; exploding subprime auto and student loan delinquencies; whilst credit card and total household debt just re-captured their all-time highs from…again, drum roll please…early 2008, just before the Great Recession. Throw in skyrocketing healthcare costs; the record-high rents catalyzed by the Fed-catalyzed real estate “echo-bubble” that has caused multi-decade lows in home ownership; and of course, record low savings; and we’re talking about the very real possibility of all that’s left of Americans’ cumulative balance sheet being vaporized, in short order.
I mean, we’re talking about the most overpriced financial assets ever – not just here, but in all Central bank bubble-ized markets; and conversely, the most underpriced Precious Metal markets in modern times – or as I deemed it last year, “history’s largest anti-bubble.” Heck, government manipulation has become so overwhelming – and self-destructive, given the dire, irreversible ramifications of what they are attempting, I almost wonder if they could get stocks to rise, and Precious Metals to fall, if the Fed announced it was unveiling a new strategy, of buying up all the world’s gold and silver, and shorting the “Dow Jones Propaganda Average.” Which, given that mere fact that I’m joking of such an absurdity, should tell you how far from economic reality today’s historically rigged markets have become. Let alone, how dangerous the ramifications are, given that, per last week’s Audioblog, said “dotcom valuations,” and the accompanying sentiment, have been created amidst a Great Depression economic environment, with nowhere to go but down.
With the specter of nuclear war as imminent as it’s ever been; and it’s economy flat lining, the South Korean stock index hit an all-time high yesterday! Heck, in Italy, where national airline Alitalia declared bankruptcy today, the stock market is up 33% in the past year. This, as its collapsing banking system was just bailed out, and its still-vacated leadership overthrown. Likewise in Greece, whose stock market has recovered 75% from last year’s lows – despite its economy sitting at lowest level since the first Troika “bailout” seven years ago (with GDP in nominal terms, at 2003 levels). Incredibly, another “tranche” of bailout funds were released today – again, against the will of the “OXI” voting people; under the comical premise that Greece’s government, which hasn’t acceded to any of the previous bailout conditions, will reduce pensions and other state costs in 2019 and 2020. Debt/GDP is currently at an all-time high of 177% – excluding €200 billion of “off balance sheet” debt – compared to 146% when the first “bailout” was administered in 2010; and according to the IMF, will reach nearly 300% if debt “relief” isn’t administered. Which of course, means a write-off; which in turn, would cause cascading sovereign, Central, and private bank defaults across the Western world. But don’t worry, soon the ECB will own all Greek debt – assuming it doesn’t disband, if Marine Le Pen wins this weekend. So, what could possibly go wrong?
Here in North America, Canada’s stock market is at an all-time high, whilst its largest industry – energy production – collapses; its largest trading partner – the U.S. – has declared economic war; and the world’s ugliest real estate bubble is collapsing – as evidenced by this week’s collapse of the nation’s largest mortgage lender. Heck, even the Mexican stock market is at an all-time high. This, as its largest business, crude oil production, is not only being besieged by plunging prices, but catastrophic depletion. Meanwhile, the Peso is at an all-time low, and Trump’s is not only proposing draconian economic sanctions, but a wall to keep Mexicans out!
And then there’s the United States of Lies, where even the world’s best economic data cookers haven’t been able to whitewash the biggest economic plunge – and debt surge – since the 2008 financial crisis. Barely positive GDP growth – if you believe the rigged government data; collapsing hard and soft data; six quarters of declining corporate earnings – which would be much worse if GAAP accounting was utilized; and a permanently declining labor force participation rate – care of a hopelessly uncompetitive economy, and equally hopelessly bearish demographic trends. Not to mention, the world’s largest debt edifice; with a government who – like all governments before it – believes the “cure” is more debt and deficit spending. And yet, the “data dependent” Fed, one month after the worst jobs report in years; and one day after its favorite (rigged) inflation indicator, the core PCE, fell below its arbitrary 2% target; wants us to believe it aims to tighten monetary policy into the foreseeable future? Even if, of course, such “tightening” is pathetically meek.
Mark St. Cyr couldn’t have put “history’s largest bubble” into perspective better, in asking the following questions yesterday.
- How does a GDP report of less than 1% allow any sane person to state, “improving economy?” Trick question, it doesn’t unless you work on, or report on/for Wall Street.
- How does the “Trump-flation” trade transfer into a better economic outlook, when all the proposals so far have resulted in DOA status?
- Explain the reasoning why U.S. “markets” rally off the news of a French primary, as its own Navy has sent an armada to the Korean peninsula threatening a nuclear standoff? “Bueller?”
- What data (or better yet – logic) is the Federal Reserve using that warrants hiking rates twice in 90 days into an abysmal GDP report, when its main reasoning for any/all monetary policy protocols is supposedly “data dependent?”
- If one of the reasoning’s behind the Fed hiking rates is to allow for the cutting if (or when) there’s another emergency: How does that happen when the $Dollar is currently going in the exact opposite direction than it should as it hikes?
In other words, the powers that be have temporarily created an Alice in Wonderland “counter-logic loop” – held aloft only by the most insanely oppressive, relentless market manipulation in history. I mean, last month we were told gold was falling due to a rising dollar index – which, per my five “if a nuclear bomb destroyed Europe” articles, has ZERO relationship with gold. Yet now that the dollar index is freefalling – entirely due to “relief” that Marine Le Pen’s victory odds have subsided – we’re told gold’s down due to a “strengthening economy,” and “rising rates” – even though first quarter GDP was reported to be barely positive, whilst interest rates are no higher today than at any time in the past three months. Not to mention, the worst geopolitical tensions in decades, and countless other near-term risk factors.
Heck, yesterday’s 12:00 “cap of last resort” PM raid – following those at all other key attack times; was, I kid you not, “attributed” to Steve Mnuchin claiming the government is considering the issuance of 50-plus year Treasury bonds. This, mere hours after a massive “four-for-four” miss of U.S. economic data, both “hard” and “soft.” Not to mention, today’s massive auto industry sales “misses.” In the spirit of Mark St. Cyr’s questions above, exactly how is that “bad” for Precious Metal prices? The answer, of course, being as “bad” as Osama bin Laden being captured ten years after 9/11 – “body” of evidence or not.
And yet, gold is still well above the 200-week moving average – currently, at $1,239/oz – the Cartel has been fighting tooth and nail for the past month; whilst silver has become more oversold than at any time since the ultimate bottom in December 2015. This, as the COMEX “commercials” started covering their historic short position en masse last week; and oh yeah, the supply/demand fundamentals of history’s largest-ever “anti-bubble”; amidst history’s most explosive Central bank money printing spree; have never been more bullish!
Obviously, only you can decide if history’s largest financial bubbles – amidst the weakest economic conditions in generations – are sustainable; much less, for any material period. And conversely, if the largest “anti-bubble” – of Precious Metal prices, amidst historically bullish fundamentals – are any more “sustainable.” As for me, I’ll stick to the lessons of history, logic, and common sense; which cumulatively, tell me that never has the opportunity to purchase history’s most time-honored financial insurance – physical gold and silver – been this timely, or inexpensive.