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How Will History’s Largest Bubble, And Anti-Bubble, End?

by Andy Hoffman, Miles Franklin:

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!

Read More @ MilesFranklin.com

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