The Phaserl


Irrational Exuberance During Trump Rally Exceeded All Records! We’re Sailing into a Massive Stock-Market Crash.

by David Haggith, The Great Recession Blog:

If I can show you that economists, central bankers and stock analysts are blind in the area of their expertise to the most obvious setup for disaster ever, then you’ll realize we are perfectly poised for potentially the greatest stock market crash in history. Many times in the past few months, I’ve heard these people say that the present bull market cannot crash spectacularly yet because we have not seen the kind of irrational exuberance that is required to set things up for such a crash. I shake my head in amazed disbelief as I listen to the most irrational nonsense about a stock market rally that was by far the most exuberant we have ever seen!

When the end of the financial world comes, it comes quickly. Because of the irrationality that allows such events to build up, it also comes unexpectedly to the majority of people in the financial world (and to others). The one essential ingredient for a truly massive financial crash is that almost no one sees it coming.

Simply put, the higher and steeper the rise, the more spectacular the fall; but the market and the economy it is operating in have to be rickety in order for things to go down like a house of cards. For that kind of situation to develop, market analysts have to be blind to the flaws around them (which looks completely irruption to those who can see). Otherwise, they’d be counseling everyone to get out of the market, not to keep bidding it up into the stratosphere, and so the market would never rise to such absurd heights in such a perilous situation.

Trump Rally displayed irrational exuberance with the worst possible timing

We are now exiting the longest period of central bank stimulus in the history of mankind. As that time dragged on, central banksters began to see nothing but diminishing returns for all their extravagant money printing, known as quantitative easing coupled to the lowest interest in the history of the modern world. So, the Trump Rally happened just as we are exiting a time when even central bankers know their ability to save a falling market or a failing economy is more limited than ever before. Their old tricks for recovery are ceasing to work because they are played out, and the banksters know it.

The knowledge that their usual tricks have lost potency is pressuring the governors of the Federal Reserve to get out of stimulus mode quickly now so that they have something they can throw at the next downturn that is not already in play and completely exhausted. The economy needs a rest from stimulus if the next round of stimulus is to have any shock value. It doesn’t do any good to just hold the shock paddles of the defibrillator on the patient’s chest and administer a continual shock. The defibrillator needs to recharge and then hit suddenly in order to have any shock value to a dying heart.

The law of diminishing returns, like entropy, trumps everything — even Donald Trump — and the Trump Rally has exhausted itself just as the Federal Reserve has determined that it has to remove the shock paddles and give the defibrillator time to recharge. So, stimulus is coming off just as the stock market fades out.

Not only has the rally ended, but the Federal Reserve’s recovery is going into cardiac arrest just as the board of governors are putting the defibrillator away. Figuring out whether the currently now unfolding collapse of the Federal Reserve’s “recovery” is due to the stupidity of central bankers (to have ever thought money printing would work in a world rife with examples of its catastrophic failure)) or is due to a bankster conspiracy that is plotting to force a new monetary paradigm on the world, doesn’t matter for our understanding of what is about to happen. The only difference that conspiracy adds is that it means people need to go to jail at the end of all of this. I’ll leave that for others to decide when the dust settles.

What matters right now is that I convince my readers how extraordinarily exuberant and remarkably irrational the present bull run in the stock market became during the Trump Rally. Because, if you can see that, you’ll recognize the end is here, and you might be able to exit before the rush when the exits become so jammed that no one else can get out.

Those who understand basic economics (such as diminishing returns) and who can learn from stock market history will be able to see that the Trump Rally ends in disaster and that it’s not Trump’s fault. (Though the globalists will certainly capitalize on the opportunity to say that this completely foreseeable disaster was due to Trump and his supporters.)

The truth is that the disaster was baked in long ago; that’s why I can tell you it is coming and have been saying for many months that it would show up in June or July. Whether by the sheer stupidity of banksters who have ascribed to fantasy economics or by nefarious design, the Fed’s phantom recovery is fading right as the Fed ends the life support that created the appearance of recovery. That is characteristic form for the Fed.

My position for the past decade has been that this patient (the economy) was only kept alive after the official part of the Great Recession by artificial life support and that it would die when support was removed. Clearly, the doctors of disaster are now stripping that life support away, even as the patient goes into his final paroxysms.

The Trump Rally displayed the most exuberant irrational exuberance ever seen in the stock market

That’s the amazing part that leaves me standing in utter bewilderment as the economic gurus of our time say the stock market cannot crash because we have not seen the kind of irrational exuberance that precedes such an end. The rise in the stock market that happened during the Trump Rally was far greater and far faster than any seen in history! And it is so easy to see and to prove on an historic graph.

Of course, the rise in cash (liquidity) that the Federal Reserve is determined to remove was also far greater and far faster than at any time, which is why the market has been so irrationally exuberant. The market has never been this juiced for this long, and it was all built on the Fed’s free money, now quickly fading away. Look at the worst market crashes and the bull runs that preceded them, and you’ll never see a sharper, more exuberant upturn at the end of those runs than the Trump Rally. NEVER! I’ll prove it below.

Please show me a time on any graph of the stock market where we have EVER seen an exponential rise as steep and prolonged as the Trump rally. I repeat myself because it amazes me that people can be so blind in the area of their overrated expertise. How much more euphoria can you possibly expect than what we just had, given that it exceeds ANYTHING in the history of the stock market?

Now the market is flatlining, the euphoria has ended, but that, too, is typical of all major tops before major crashes. None of them instantly blew off and crashed. The fall of the cliff has ALWAYS come after a short term of a few months during with the top flattened out, usually followed by a choppy downward turn, and FINALLY the market suddenly leaped off the cliff a few months later later. We’ve had three months now of such a top. So, the end is fully poised to happen.

Let’s prove it now. Look at the last last thirty years of the Dow in the graph below and particularly at the run-ups to the two greatest crashes during that time — the dot-com crash that unfolded slowly at the change of the millennium and the Great Recession that began at the start of 2007. They both show “exuberance,” which means the steepness of the bull market suddenly increases in a sustained manner, and they both flatten out at the top for a time after that exuberance and then tilt downward before the big crash comes. Here are the three periods of greatest irrational exuberance in history:

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