Wednesday , 24 May 2017


Today’s Financial Entertainment: What Irrational Market Heights Mean For Gold

The ultra-wealthy are able to stay ultra-wealthy for a reason, and they are usually adollar bubbles step or two ahead of most of the rest of us, so do they know something that we don’t? Yes, like any rational person should be able to see, they realize this financial bubble is going to end very, very badly and are making moves to protect themselves from the inevitable chaos that is coming.

The above introductory comments are edited excerpts from an article* by Michael Snyder (theeconomiccollapseblog.com) entitled The Dow And S&P 500 Soar To Irrational Heights – Meanwhile The Ultra-Wealthy Rush To Buy Gold Bars.

Snyder goes on to say in further edited excerpts:

The ultra-wealthy are making moves to protect themselves from the inevitable chaos that is coming…[by] buying record numbers of “Italian job” style gold bars (so named after the 12.5kg bars as seen in the film ‘The Italian Job’) – up 243% so far this year compared to the same period a year ago – according to bullion experts.

...The Dow Jones Industrial Average and the S&P 500 continue to close at record highs.  It is a party that never seems to end, and there are a lot of really happy people on Wall Street these days, but those that are discerning realize that we witnessed the exact same kind of bubble behavior during the dotcom boom and during the run up to the last financial crash in 2007

The irrational exuberance that we are witnessing right now cannot go on forever – and the bigger that this bubble gets, the more painful that it is going to be when it finally bursts.  Those that get out at the peaks of the market are the ones that usually end up making lots of money.  Those that ride stocks all the way up and all the way down are the ones that usually end up getting totally wiped out…

Fueled by the quantitative easing policies of the Federal Reserve, U.S. stocks have enjoyed an unprecedented joy ride. However, as David Stockman recently told Yahoo Finance, the subsequent crash is likely to be enormously painful:

I think what the Fed is doing is so unprecedented, what is happening in the markets is so unnatural. This is dangerous, combustible stuff, and I don’t know when the explosion occurs – when the collapse suddenly is upon us – but when it happens, people will be happy that they got out of the way if they did.

The behavior that we are observing in the stock market simply does not reflect what is happening in the economy overall whatsoever. In many ways, U.S. economic fundamentals just continue to get even worse:

  • small business ownership in the United States is at an all-time low,
  • the labor force participation rate is the lowest that it has been in 36 years, and
  • the U.S. national debt has grown by more than a trillion dollars over the past 12 months

but on Wall Street right now, there is very little fear that the party is going to end any time soon.

The following is how Seth Klarman recently described the market complacency that he is seeing at the moment…

“[W]riter and investor John Mauldin is right when he says that there is “a bubble in complacency.” Fear has effectively been banished. The members of the Fed know it. Stock traders who chase the market to new highs almost daily know it:

  • Implied volatilities (and realized volatilities) are historically low (the VIX Index recently hit a seven-year low), and falling,
  • the Bank for International Settlements recently cautioned that financial markets are euphoric and in the grip of an aggressive search for yield,
  • the S&P has gone over 1,000 days without a 10% decline,
  • Dutch and French 10-year government bond yields are at 500 and 250 year lows, respectively; Spain, 225 years. Spanish debt yields were recently inside of U.S. levels.

but, as Klarman also observed, just because “investors have been seduced into feeling good” does not mean that this current bubble is any different from what we witnessed back in 2007 going on to state that:

“It’s not hard to reach the conclusion that so many investors feel good not because things are good but because investors have been seduced into feeling good—otherwise known as “the wealth effect.” We really are far along in re-creating the markets of 2007, which felt great but were deeply unstable when shocks started to pile up. Even Janet Yellen sees “pockets of increasing risk-taking” in the markets…”

Any rational person should be able to see that this financial bubble is going to end very, very badly.

Editor’s Note: The author’s views and conclusions in the above article are unaltered and no personal comments have been included to maintain the integrity of the original post. Furthermore, the views, conclusions and any recommendations offered in this article are not to be construed as an endorsement of such by the editor.

*http://theeconomiccollapseblog.com/archives/the-dow-and-sp-500-soar-to-irrational-heights-while-the-ultra-wealthy-rush-to-buy-gold-bars (Copyright © 2014 The Economic Collapse)

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