Best of the Week
Most Popular
1. Investing in a Bubble Mania Stock Market Trending Towards Financial Crisis 2.0 CRASH! - 9th Sep 21
2.Tech Stocks Bubble Valuations 2000 vs 2021 - 25th Sep 21
3.Stock Market FOMO Going into Crash Season - 8th Oct 21
4.Stock Market FOMO Hits September Brick Wall - Evergrande China's Lehman's Moment - 22nd Sep 21
5.Crypto Bubble BURSTS! BTC, ETH, XRP CRASH! NiceHash Seizes Funds on Account Halting ALL Withdrawals! - 19th May 21
6.How to Protect Your Self From a Stock Market CRASH / Bear Market? - 14th Oct 21
7.AI Stocks Portfolio Buying and Selling Levels Going Into Market Correction - 11th Oct 21
8.Why Silver Price Could Crash by 20%! - 5th Oct 21
9.Powell: Inflation Might Not Be Transitory, After All - 3rd Oct 21
10.Global Stock Markets Topped 60 Days Before the US Stocks Peaked - 23rd Sep 21
Last 7 days
Bitcoin Price TRIGGER for Accumulating Into Alt Coins for 2022 Price Explosion - 30th Nov 21
Omicron Covid Wave 4 Impact on Financial Markets - 30th Nov 21
Can You Hear It? That’s the Crowd Booing Gold’s Downturn - 30th Nov 21
Economic and Market Impacts of Omicron Strain Covid 4th Wave - 30th Nov 21
Stock Market Historical Trends Suggest A Strengthening Bullish Trend In December - 30th Nov 21
Crypto Market Analysis: What Trading Will Look Like in 2022 for Novice and Veteran Traders? - 30th Nov 21
Best Stocks for Investing to Profit form the Metaverse and Get Rich - 29th Nov 21
Should You Invest In Real Estate In 2021? - 29th Nov 21
Silver Long-term Trend Analysis - 28th Nov 21
Silver Mining Stocks Fundamentals - 28th Nov 21
Crude Oil Didn’t Like Thanksgiving Turkey This Year - 28th Nov 21
Sheffield First Snow Winter 2021 - Snowballs and Snowmen Fun - 28th Nov 21
Stock Market Investing LESSON - Buying Value - 27th Nov 21
Corsair MP600 NVME M.2 SSD 66% Performance Loss After 6 Months of Use - Benchmark Tests - 27th Nov 21
Stock Maket Trading Lesson - How to REALLY Trade Markets - 26th Nov 21
SILVER Price Trend Analysis - 26th Nov 21
Federal Reserve Asks Americans to Eat Soy “Meat” for Thanksgiving - 26th Nov 21
Is the S&P 500 Topping or Just Consolidating? - 26th Nov 21
Is a Bigger Drop in Gold Price Just Around the Corner? - 26th Nov 21
Financial Stocks ETF Sector XLF Pullback Sets Up A New $43.60 Upside Target - 26th Nov 21
A Couple of Things to Think About Before Buying Shares - 25th Nov 21
UK Best Fixed Rate Tariff Deal is to NOT FIX Gas and Electric Energy Tariffs During Winter 2021-22 - 25th Nov 21
Stock Market Begins it's Year End Seasonal Santa Rally - 24th Nov 21
How Silver Can Conquer $50+ in 2022 - 24th Nov 21
Stock Market Betting on Hawkish Fed - 24th Nov 21
Stock Market Elliott Wave Trend Forecast - 24th Nov 21
Your once-a-year All-Access Financial Markets Analysis Pass - 24th Nov 21
Did Zillow’s $300 million flop prove me wrong? - 24th Nov 21
Now Malaysian Drivers Renew Their Kurnia Car Insurance Online With Fincrew.my - 24th Nov 21
Gold / Silver Ratio - 23rd Nov 21
Stock Market Sentiment Speaks: Can We Get To 5500SPX In 2022? But 4440SPX Comes First - 23rd Nov 21
A Month-to-month breakdown of how Much Money Individuals are Spending on Stocks - 23rd Nov 21
S&P 500: Rallying Tech Stocks vs. Plummeting Oil Stocks - 23rd Nov 21
Like the Latest Bond Flick, the US Dollar Has No Time to Die - 23rd Nov 21
Why BITCOIN NEW ALL TIME HIGH Changes EVERYTHING! - 22nd Nov 21
Cannabis ETF MJ Basing & Volatility Patterns - 22nd Nov 21
The Most Important Lesson Learned from this COVID Pandemic - 22nd Nov 21
Dow Stock Market Trend Analysis - 22nd Nov 21

Market Oracle FREE Newsletter

How to Protect your Wealth by Investing in AI Tech Stocks

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