Best of the Week
Most Popular
1. US Housing Market Real Estate Crash The Next Shoe To Drop – Part II - Chris_Vermeulen
2.The Coronavirus Greatest Economic Depression in History? - Nadeem_Walayat
3.US Real Estate Housing Market Crash Is The Next Shoe To Drop - Chris_Vermeulen
4.Coronavirus Stock Market Trend Implications and AI Mega-trend Stocks Buying Levels - Nadeem_Walayat
5. Are Coronavirus Death Statistics Exaggerated? Worse than Seasonal Flu or Not?- Nadeem_Walayat
6.Coronavirus Stock Market Trend Implications, Global Recession and AI Stocks Buying Levels - Nadeem_Walayat
7.US Fourth Turning Accelerating Towards Debt Climax - James_Quinn
8.Dow Stock Market Trend Analysis and Forecast - Nadeem_Walayat
9.Britain's FAKE Coronavirus Death Statistics Exposed - Nadeem_Walayat
10.Commodity Markets Crash Catastrophe Charts - Rambus_Chartology
Last 7 days
Has the Fed Let the Inflation Genie Out of the Bottle? - 10th Aug 20
The Strange Food Trend That’s Making Investors Rich - 10th Aug 20
Supply & Demand For Money – The End of Inflation? - 10th Aug 20
Revisiting Our Silver and Gold Predictions – Get Ready For Higher Prices - 10th Aug 20
Storm Clouds Are Gathering for a Major Stock and Commodity Markets Downturn - 10th Aug 20
A 90-Year-Old Stock Market Investment Insight That's Relevant in 2020 - 10th Aug 20
Debt and Dollar Collapse Leading to Potential Stock Market Melt-Up, - 10th Aug 20
Coronavirus: UK Parents Demand ALL Schools OPEN September, 7 Million Children Abandoned by Teachers - 9th Aug 20
Computer GPU Fans Not Spinning Quick FIX - Sticky Fans Solution - 9th Aug 20
Find the Best Speech Converter for You - 9th Aug 20
Silver Bull Market Update - 7th Aug 20
This Inflation-Adjusted Silver Chart Tells An Interesting Story - 7th Aug 20
The Great American Housing Boom Has Begun - 7th Aug 20
NATURAL GAS BEGINS UPSIDE BREAKOUT MOVE - 7th Aug 20
Know About Lotteries With The Best Odds Of Winning - 7th Aug 20
Could Gold Price Reach $7,000 by 2030? - 6th Aug 20
Bananas for All! Keep Dancing… FOMC - 6th Aug 20
How to Do Bets During This Time - 6th Aug 20
How to develop your stock trading strategy - 6th Aug 20
Stock Investors What to do if Trump Bans TikTok - 5th Aug 20
Gold Trifecta of Key Signals for Gold Mining Stocks - 5th Aug 20
ARE YOU LOVING YOUR SERVITUDE? - 5th Aug 20
Stock Market Uptrend Continues? - 4th Aug 20
The Dimensions of Covid-19: The Hong Kong Flu Redux - 4th Aug 20
High Yield Junk Bonds Are Hot Again -- Despite Warning Signs - 4th Aug 20
Gold Stocks Autumn Rally - 4th Aug 20
“Government Sachs” Is Worried About the Federal Reserve Note - 4th Aug 20
Gold Miners Still Pushing That Cart of Rocks Up Hill - 4th Aug 20
UK Government to Cancel Christmas - Crazy Covid Eid 2020! - 4th Aug 20
Covid-19 Exposes NHS Institutional Racism Against Black and Asian Staff and Patients - 4th Aug 20
How Sony Is Fueling the Computer Vision Boom - 3rd Aug 20
Computer Gaming System Rig Top Tips For 6 Years Future Proofing Build Spec - 3rd Aug 20
Cornwwall Bude Caravan Park Holidays 2020 - Look Inside Holiday Resort Caravan - 3rd Aug 20
UK Caravan Park Holidays 2020 Review - Hoseasons Cayton Bay North East England - 3rd Aug 20
Best Travel Bags for 2020 Summer Holidays , Back Sling packs, water proof, money belt and tactical - 3rd Aug 20
Precious Metals Warn Of Increased Volatility Ahead - 2nd Aug 20
The Key USDX Sign for Gold and Silver - 2nd Aug 20
Corona Crisis Will Have Lasting Impact on Gold Market - 2nd Aug 20
Gold & Silver: Two Pictures - 1st Aug 20
The Bullish Case for Stocks Isn't Over Yet - 1st Aug 20
Is Gold Price Action Warning Of Imminent Monetary Collapse - Part 2? - 1st Aug 20
Will America Accept the World's Worst Pandemic Response Government - 1st Aug 20
Stock Market Technical Patterns, Future Expectations and More – Part II - 1st Aug 20
Trump White House Accelerating Toward a US Dollar Crisis - 31st Jul 20
Why US Commercial Real Estate is Set to Get Slammed - 31st Jul 20
Gold Price Blows Through Upside Resistance - The Chase Is On - 31st Jul 20
Is Crude Oil Price Setting Up for a Waterfall Decline? - 31st Jul 20
Stock Market Technical Patterns, Future Expectations and More - 30th Jul 20
Why Big Money Is Already Pouring Into Edge Computing Tech Stocks - 30th Jul 20
Economic and Geopolitical Worries Fuel Gold’s Rally - 30th Jul 20
How to Finance an Investment Property - 30th Jul 20
I Hate Banks - Including Goldman Sachs - 29th Jul 20
NASDAQ Stock Market Double Top & Price Channels Suggest Pending Price Correction - 29th Jul 20
Silver Price Surge Leaves Naysayers in the Dust - 29th Jul 20
UK Supermarket Covid-19 Shop - Few Masks, Lack of Social Distancing (Tesco) - 29th Jul 20
Budgie Clipped Wings, How Long Before it Can Fly Again? - 29th Jul 20
How To Take Advantage Of Tesla's 400% Stock Surge - 29th Jul 20
Gold Makes Record High and Targets $6,000 in New Bull Cycle - 28th Jul 20
Gold Strong Signal For A Secular Bull Market - 28th Jul 20
Anatomy of a Gold and Silver Precious Metals Bull Market - 28th Jul 20
Shopify Is Seizing an $80 Billion Pot of Gold - 28th Jul 20
Stock Market Minor Correction Underway - 28th Jul 20
Why College Is Never Coming Back - 27th Jul 20
Stocks Disconnect from Economy, Gold Responds - 27th Jul 20
Silver Begins Big Upside Rally Attempt - 27th Jul 20
The Gold and Silver Markets Have Changed… What About You? - 27th Jul 20
Google, Apple And Amazon Are Leading A $30 Trillion Assault On Wall Street - 27th Jul 20
This Stock Market Indicator Reaches "Lowest Level in Nearly 20 Years" - 26th Jul 20
New Wave of Economic Stimulus Lifts Gold Price - 26th Jul 20
Stock Market Slow Grind Higher Above the Early June Stock Highs - 26th Jul 20
How High Will Silver Go? - 25th Jul 20
If You Own Gold, Look Out Below - 25th Jul 20
Crude Oil and Energy Sets Up Near Major Resistance – Breakdown Pending - 25th Jul 20
FREE Access to Premium Market Forecasts by Elliott Wave International - 25th Jul 20
The Promise of Silver as August Approaches: Accumulation and Conversation - 25th Jul 20
The Silver Bull Gateway is at Hand - 24th Jul 20
The Prospects of S&P 500 Above the Early June Highs - 24th Jul 20
How Silver Could Surpass Its All-Time High - 24th Jul 20

Market Oracle FREE Newsletter

How to Get Rich Investing in Stocks by Riding the Electron Wave

Asset Bubbles Tend to Crash with a Vengeance

Stock-Markets / Liquidity Bubble Jul 29, 2016 - 10:33 PM GMT

By: Dr_Jeff_Lewis

Stock-Markets

Despite short-term memory loss affecting most investors, asset bubbles tend to crash with a vengeance. From over-valuation, risk ignorance, and reactionary sentiment, the current bubble-trifecta shows signs of turning over.

The monetary powers that be have succeeded in creating serial asset bubbles. Each is extending from the great expansion of credit pivoting on the last official dollar default in 1971.

And yet once, again we are bombarded with the mantra: “This time it’s different”.


Partly, it is true. From a monetary standpoint, we’ve been spiraling from one overextended extreme to another for the last 100 years.

Of course, it is difficult to compare this period with the last – just before the crash.

The latest cliff involves three enormous bubbles, not just one.

Equities ($18 trillion market cap) have risen to all-time nominal highs despite a weakening economy.

The $40 trillion (total outstanding) U.S. bond market has been in a bubble for so long that it has become the fabric of everyday macro-investing life.

Considering the ongoing and overt manipulation of interest rates to unnatural levels, an emergency waiting to happen.

There is no comparison to bubbles past.  The consensus reports what is best for its own interest.

Two tiers of justice to match the propaganda machine of two tiers of information.

Some of the most entertaining content in the aftermath of the financial crisis came from the ludicrous attacks against those who saw what was coming. Peter Schiff was right – phenomenon permeated the interwebs.

Sadly, few have learned.

Despite clear and overt manipulation of key interest rates and obvious headline data adjustment, the cheerleaders are back in full force again.

Just in time for the next crisis.

Each successive bubble is further out of the realm. But   a long enough time line, you will have new generations that replace the old and forgotten mistakes.

The main drivers of these markets are not valuation, or even fundamentals, but perception.

Risk moderation is a joke. Portfolios are balanced by how much leverage they can get away with. Not on the potential losses.

Don’t fight the Fed; the belief that the Fed is omnipotent is a strongly held belief.

Who can blame them? If your job and bonuses depend on it, and these (zero rate borrowing) gifts keeping coming, it is like manna from heaven or the most powerful force in nature...

How We Got Here…

Old habits reappear

Fighting the fear of fear

Growing conspiracy

Myself is after me

Frayed ends of sanity

Hear them calling

Frayed ends of sanity

Hear them calling

Hear them calling me

- Metallica - "Frayed Ends of Sanity"

The Fed and its low interest policies have distorted asset markets beyond recognition.

Purchases of Treasuries and MBS created false liquidity that flowed direct to securities.

This reverberated into world equities and throughout the corporate bond markets.

Runaway corporate debt has triggered a safe haven-fueled run toward Treasuries, further inciting an already extreme bubble.

The perception of the firms that the Fed will provide unlimited support for these paper securities.

It is the impact on the traditionally higher risk segment of the exotic world of corporate “structured finance” that sharpens the needle.

The premium placed on risk has collapsed. This creates by far the greatest distortion, matched only by the height of subprime housing lending between 2005 and 2007 in addition to the equivalent in sub-prime auto lending and student loan debt we see now.

We are beyond fixing. The only solution would be for the Fed to step away. Good luck with that.

The Equity Bubble

The main drivers of these markets are not valuation, or even fundamentals, but perception.

The perception is that somehow the Federal Reserve has the power to keep the stock market suspended.

The Fed has now created $Trillions of currency and bank reserves that must be held by someone and because of this faulty perception of risk, investors are willing to hold them as they search for near term returns.

The Fed may be able to postpone the eventual collapse, but each moment we continue on this path makes the aftermath that much worse.

Each time we go here, it is the same. From 1929 to 2000 and 2007, all peaks shared the same extremes.

Overvalued, overbought, over-bullish.

The polar opposite of the least favored asset class – precious metals – and especially silver.

In the end, these speculative experiments never unwind slowly.

All it takes is a change in perception. When risk comes crashing into the excel spreadsheets.

That shift in risk mirrors the organic market turmoil.

Often, the cost of credit widens before the equity fall.

Black swans may induce this. But not always.

The music stops, and markets go bidless when institutions see risky assets for what they are.

Yield becomes a secondary concern as the ‘return of’ takes precedence.

Trend followers take on the most losses, unable to imagine selling just below the highs and addicted to dip buying.

But once they start selling, it all happens overnight.

Things become truly out of control when all sides and observers seemingly forget what they are fighting over – when the source of conflict becomes so far buried that it’s meaningless and pure emotion.

This parallels the financial system.

While no one can say when the levy will break, we need not look too far back in time to know that’s arrival is unmistakable.

The frayed ends of market sanity coalesce into raw fear.

Abject fear amongst already bullish prospects for precious metals has a tendency to break the bonds of manipulation.

While most of you reading this understand that physical assets cannot go to zero, paper assets can – and do.

1. To receive early notification for new articles, click here. 

2. Or to view all of our products and services, click here. 

3. Or...support the cause, and buy me a cold one! 

By Dr. Jeff Lewis

    Dr. Jeffrey Lewis, in addition to running a busy medical practice, is the editor of Silver-Coin-Investor.com

    Copyright © 2015 Dr. Jeff Lewis- All Rights Reserved Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors.

Dr. Jeff Lewis Archive

© 2005-2019 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in

6 Critical Money Making Rules