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
Ravencoin RVN About to EXPLODE to NEW HIGHS! Last Chance to Buy Before it goes to the MOON! - 21st Oct 21
Stock Market Animal Spirits Returning - 21st Oct 21
Inflation Advances, and So Does Gold — Except That It Doesn’t - 21st Oct 21
Why A.I. Is About To Trigger The Next Great Medical Breakthrough - 21st Oct 21
Gold Price Slowly Going Nowhere - 20th Oct 21
Shocking Numbers Show Government Crowding Out Real Economy - 20th Oct 21
Crude Oil Is in the Fast Lane, But Where Is It Going? - 20th Oct 21
3 Tech Stocks That Could Change The World - 20th Oct 21
Best AI Tech Stocks ETF and Investment Trusts - 19th Oct 21
Gold Mining Stocks: Will Investors Dump the Laggards? - 19th Oct 21
The Most Exciting Medical Breakthrough Of The Decade? - 19th Oct 21
Prices Rising as New Dangers Point to Hard Assets - 19th Oct 21
It’s not just Copper; GYX indicated cyclical the whole time - 19th Oct 21
Chinese Tech Stocks CCP Paranoia, VIES - Variable Interest Entities - 19th Oct 21
Inflation Peaked Again, Right? - 19th Oct 21
Gold Stocks Bouncing Hard - 19th Oct 21
Stock Market New Intermediate Bottom Forming? - 19th Oct 21
Beware, Gold Bulls — That’s the Beginning of the End - 18th Oct 21
Gold Price Flag Suggests A Big Rally May Start Soon - 18th Oct 21
Inflation Or Deflation – End Result Is Still Depression - 18th Oct 21
A.I. Breakthrough Could Disrupt the $11 Trillion Medical Sector - 18th Oct 21
US Economy and Stock Market Addicted to Deficit Spending - 17th Oct 21
The Gold Price And Inflation - 17th Oct 21
Went Long the Crude Oil? Beware of the Headwinds Ahead… - 17th Oct 21
Watch These Next-gen Cloud Computing Stocks - 17th Oct 21
Overclockers UK Custom Built PC 1 YEAR Use Review Verdict - Does it Still Work? - 16th Oct 21
Altonville Mine Tours Maze at Alton Towers Scarefest 2021 - 16th Oct 21
How to Protect Your Self From a Stock Market CRASH / Bear Market? - 14th Oct 21
The Only way to Crush Inflation (not stocks) - 14th Oct 21
Why "Losses Are the Norm" in the Stock Market - 14th Oct 21
Sub Species Castle Maze at Alton Towers Scarefest 2021 - 14th Oct 21
Which Wallet is Best for Storing NFTs? - 14th Oct 21
Ailing UK Pound Has Global Effects - 14th Oct 21
How to Get 6 Years Life Out of Your Overclocked PC System, Optimum GPU, CPU and MB Performance - 13th Oct 21
The Demand Shock of 2022 - 12th Oct 21
4 Reasons Why NFTs Could Be The Future - 12th Oct 21
Crimex Silver: Murder Most Foul - 12th Oct 21
Bitcoin Rockets In Preparation For Liftoff To $100,000 - 12th Oct 21
INTEL Tech Stock to the MOON! INTC 2000 vs 2021 Market Bubble WARNING - 11th Oct 21
AI Stocks Portfolio Buying and Selling Levels Going Into Market Correction - 11th Oct 21
Stock Market Wall of Worry Meets NFPs - 11th Oct 21
Stock Market Intermediate Correction Continues - 11th Oct 21
China / US Stock Markets Divergence - 10th Oct 21
Can US Save Taiwan From China? Taiwan Strait Naval Battle - PLA vs 7th Fleet War Game Simulation - 10th Oct 21
Gold Price Outlook: The Inflation Chasm Between Europe and the US - 10th Oct 21
US Real Estate ETFs React To Rising Housing Market Mortgage Interest Rates - 10th Oct 21
US China War over Taiwan Simulation 2021, Invasion Forecast - Who Will Win? - 9th Oct 21
When Will the Fed Taper? - 9th Oct 21
Dancing with Ghouls and Ghosts at Alton Towers Scarefest 2021 - 9th Oct 21
Stock Market FOMO Going into Crash Season - 8th Oct 21
Scan Computers - Custom Build PC 6 Months Later, Reliability, Issues, Quality of Tech Support Review - 8th Oct 21
Gold and Silver: Your Financial Main Battle Tanks - 8th Oct 21
How to handle the “Twin Crises” Evergrande and Debt Ceiling Threatening Stocks - 8th Oct 21
Why a Peak in US Home Prices May Be Approaching - 8th Oct 21
Alton Towers Scarefest is BACK! Post Pandemic Frights Begin, What it's Like to Enter Scarefest 2021 - 8th Oct 21
AJ Bell vs II Interactive Investor - Which Platform is Best for Buying US FAANG Stocks UK Investing - 7th Oct 21
Gold: Evergrande Investors' Savior - 7th Oct 21
Here's What Really Sets Interest Rates (Not Central Banks) - 7th Oct 21

Market Oracle FREE Newsletter

How to Protect your Wealth by Investing in AI Tech Stocks

Financial Markets Bubble Watching

Stock-Markets / Liquidity Bubble Feb 10, 2018 - 03:56 AM GMT

By: The_Gold_Report

Stock-Markets

Rudi Fronk and Jim Anthony, cofounders of Seabridge Gold, explain why they believe financial markets have generated the biggest bubble in history.

As we have noted here before, we believe that financial markets have generated the biggest bubble in history. There are many supporting facts for this view, from extreme measures of market sentiment to prolonged record low volatility, unprecedented low interest rates, record levels of leverage and historic over-valuation.


The bulls will try to tell you that earnings, economic growth and low interest rates justify record stock market performance. But a little thought brings these assumptions into question.

S&P 500 earnings have only recently managed to climb above the 2014 high water mark but the index has jumped 40% higher; the run in stocks is due to P/E expansion, not earnings growth.

The economic recovery since 2008 has been the weakest on record, with shockingly poor performance in key parameters such as productivity, wages and capital investment.

Interest rates have gone to 5,000-year lows, which have made dividend-paying stocks look attractive but the same factor cannot continue to drive stocks higher, especially as interest rates have now begun to rise.

Earlier this week, we had the first real warning that the financial asset bubble is beginning to burst. . .an 1178 point one day drop in the Dow Jones Industrial Index. Yesterday, we had another 1000 point drop. Some analysts are blaming the small number of funds who shorted volatility and have since blown up as volatility has increased. That may be a short-term factor contributing to market declines but we think the real problem is that we are in a bubble that is supported by nothing more than speculative momentum.

Bob Hoye of Institutional Advisors, a market historian, has studied bubbles for many years. He writes that there have been five Great Bubbles since the invention of the stock market. These bubbles peaked in 1720, 1772, 1825, 1873, and 1929. Each was a mania that took years to develop and then crashed. Every great speculation runs until it climaxes. Throughout history, climaxes have had much in common, as have the consequent contractions. It's the "up" that causes the "down."

Hoye notes that each mania climaxed in the ninth year following the collapse of a great inflation in commodities. A financial boom followed the commodity boom. The commodity boom that peaked in 1920 was immense, as was its collapse. The South Sea Bubble topped in 1720, nine years after a commodities boom had climaxed in 1711. The same holds for the three bubbles in between. We also witnessed the collapse of a commodity boom that peaked and collapsed in late 2008, and here we are, about nine years later.

The financial bubbles that popped in 2000 and 2007 were not preceded by a commodity collapse nine years earlier. They also were not allowed to complete; the Federal Reserve and other central banks prevented the normal collapse by reflating the bubble with enormous monetary stimulus, first in real estate and then in the bond market. Quantitative Easing (QE) and Zero Interest Rate Policy (ZIRP) delayed the day of reckoning but the commodity bubble did not return. Do we therefore remain on the nine year clock? Is the current bubble following the classic model of Hoye's five Great Bubbles?

In the historical model, the high-flyers (Bitcoin?) crash first. Interest rates begin to rise. Note that the stock market rollover began immediately after long rates broke to new highs late in December. The psychology of the mania is replaced by risk aversion, credit spreads widen and the bubble pops. Today, spreads suddenly widened significantly. The unwinding process usually takes months to play out and more than a year to reach the bottom.

In the aftermath of a classic bubble, historically, gold and gold miners have been top performers. Will that happen again this time? We shall see. As investors start to realize that the Fed is now trapped, that it won't be able to respond to rising inflation by tightening aggressively due to a bear market in stocks, could we see gold explode to the upside?

We believe there is much to be learned from history. As students of the markets, we are also wise enough to know that anyone's thinking may prove to be wrong, including ours. We therefore present these ideas to stimulate questions; each of us must find our own answers.

This article is the collaboration of Rudi Fronk and Jim Anthony, cofounders of Seabridge Gold, and reflects the thinking that has helped make them successful gold investors. Rudi is the current Chairman and CEO of Seabridge and Jim is one of its largest shareholders. Disclaimer: The authors are not registered or accredited as investment advisors. Information contained herein has been obtained from sources believed reliable but is not necessarily complete and accuracy is not guaranteed. Any securities mentioned on this site are not to be construed as investment or trading recommendations specifically for you. You must consult your own advisor for investment or trading advice. This article is for informational purposes only.

Disclosures:
1) Statements and opinions expressed are the opinions of Rudi Fronk and Jim Anthony and not of Streetwise Reports or its officers. The authors are wholly responsible for the validity of the statements. Streetwise Reports was not involved in any aspect of the content preparation. The authors were not paid by Streetwise Reports LLC for this article. Streetwise Reports was not paid by the authors to publish or syndicate this article.
2) Rudi Fronk and Jim Anthony: we, or members of our immediate household or family, own shares of the following companies mentioned in this article: Seabridge Gold. We personally are, or members of our immediate household or family are, paid by the following companies mentioned in this article: Seabridge Gold.
3) Seabridge Gold is a billboard sponsor of Streetwise Reports. Streetwise Reports does not accept stock in exchange for its services. Click here for important disclosures about sponsor fees. The information provided above is for informational purposes only and is not a recommendation to buy or sell any security.
4) This article does not constitute investment advice. Each reader is encouraged to consult with his or her individual financial professional and any action a reader takes as a result of information presented here is his or her own responsibility. By opening this page, each reader accepts and agrees to Streetwise Reports' terms of use and full legal disclaimer. This article is not a solicitation for investment. Streetwise Reports does not render general or specific investment advice and the information on Streetwise Reports should not be considered a recommendation to buy or sell any security. Streetwise Reports does not endorse or recommend the business, products, services or securities of any company mentioned on Streetwise Reports.
5) From time to time, Streetwise Reports LLC and its directors, officers, employees or members of their families, as well as persons interviewed for articles and interviews on the site, may have a long or short position in securities mentioned. Directors, officers, employees or members of their immediate families are prohibited from making purchases and/or sales of those securities in the open market or otherwise from the time of the interview or the decision to write an article, until one week after the publication of the interview or article.


© 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