Market Insanity Reaches Record Highs As Investors Flock Into The Biggest Bubble In History

Investors have forsaken all reason, logic and wisdom by rushing into the biggest stock and financial bubble in history.  Even some precious metals investors are selling their gold and jumping into the markets hoping to make big profits as President Trump takes over the White house in six weeks.

Unfortunately, the worst time to jump into a market is when everyone else is doing the same thing.  Of course, this doesn’t mean the Dow Jones Index won’t continue higher for some time, but the fundamentals of the economy continue to rot from the inside out.

No one really notices this as automobile dealers are now selling cars with zero interest rates, nothing down and no payment for 6 months.  If this is the sort of business model the automobile industry has to resort to in order to continue sales, we are in big trouble.

Then we have these few headlines pointing to a worsening U.S. economy:

Restaurant Industry, Leading Indicator of US Economy Sours, Bankruptcies Pile up

ESPN Loses A Record 621,000 Subscribers In One Month

Greenspan: Western World Headed for a State of Disaster

The Housing Market Is Waving A Red Flag

These are just some of the many headlines pointing to an economy and stock market that is not heading towards better times.  It was interesting to read that ESPN lost 621,000 subscribers in one month.  However, ESPN has lost over 15 million subscribers in the past five years.

Market Insanity Pushes The Dow Jones Up To Tulip Mania Heights

I wrote about the 17th century Holland Tulip Bubble in a previous article:

Nothing has changed since the 17th century Tulip Bubble that also destroyed the ability of people to act rationally.  At the peak during the Holland Tulip Mania, some tulips were selling for 10 times the annual income of a skilled craftsman (Source: wikipedia)

According to Wikipedia about the Tulip Mania:

…. the growing popularity of tulips in the early 17th century caught the attention of the entire nation; “the population, even to its lowest dregs, embarked in the tulip trade”.[6] By 1635, a sale of 40 bulbs for 100,000 florins (also known as Dutch guilders) was recorded. By way of comparison, a ton of butter cost around 100 florins, a skilled laborer might earn 150 florins a year, and “eight fat swine” cost 240 florins.[6] (According to the International Institute of Social History, one florin had the purchasing power of €10.28 in 2002.[35])

tulip-bulbs-bubble

As we can see from the chart, investors lose all economic and financial sense when asset prices start to go insane.  Instead of using some restraint and wisdom, they drop all reason and jump in on the rising bandwagon.

Again, the worst time to get into a market is when everyone else is jumping in with both feet.  I have updated my chart showing the increase in U.S. Debt vs the Dow Jones Index since the first quarter of 1980:

dow-jones-vs-us-debt-1980-today

In 36 years, the Dow Jones Index and the U.S. Debt have increased at the same exact ratio… 23 TIMES.  This is no mere coincidence.  Investors who have parked their hard-earned money into market have placed their bet on stocks that are backed by nearly $20 trillion in U.S. debt.

So, there is a race for either the Dow Jones or U.S. Debt to reach the 20,000 mark first.  I put my money on the U.S. Debt, which is only $100 billion away from that goal.

NOTE:  The U.S. Debt chart is shown in billions.

Furthermore, the U.S. Retirement Market is up 24 TIMES since 1980, and the S&P 500 is up nearly 21 TIMES.  So, we can clearly see that the massive increase in debt has provided the HOT AIR that has pushed the stock market up to Tulip Mania heights.

Now, if we go back to 1929 when the U.S. was in another huge financial and economic bubble, the situation wasn’t as INSANE as it is today:

u-s-debt-vs-u-s-growth-domestic-product

In 1929, right before the Great Depression hit, the U.S. debt was $17 billion versus a $105 billion Gross Domestic Product (GDP).  Thus, the U.S. debt accounted for 17% of the U.S. GDP.  If we fast forward to today, it is a much different picture.

The U.S. Debt is now 105% of the U.S. GDP.  Basically, the U.S. economy is powered debt… and a lot of it.  President Elect Trump may have grand ideas for the U.S. economy, however his hands will be tied by the massive debt and terrible energy predicament overhanging the country.

According to the sources I have read, nearly 10% of U.S. oil production is being produced by either bankrupt or financial challenged energy companies.  I also mentioned in a prior article that the largest oil company in the U.S., ExxonMobil, had to borrow $8 billion in 2015 to pay dividends or CAPEX.  Number two Chevron had to borrow even more at $18 billion to pay dividends and CAPEX in 2015.

This is not a good sign for a healthy market to invest in.

Unfortunately, this will not stop more precious metals investors from selling their gold to play in the Dow Jones Casino.  The reason to hold onto precious metals is to protect oneself when the FAN FINALLY HITS THE COW EXCREMENT.

Who sells their homeowner or automobile insurance to play in the stock market?  This is how insane the mentally of investors has become.

While I have no idea of the timing of the U.S. Financial and Economic Crash, the wise thing to do is to make sure one holds onto their “Precious Metals Insurance.”

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27 Comments on "Market Insanity Reaches Record Highs As Investors Flock Into The Biggest Bubble In History"

  1. For now PM holders look like the biggest fools as this debt economoponzi continues to “grow”. The music still plays louder and harder than ever, while the iceberg has long been hit. Dow 30k, bring it on, but I will have none of it. A lot of people will get the shocks of their lives and all weak hands are washed out to $ea. The spread to spot price over in Shanghai seems once again somewhat “stretched”… http://didthesystemcollapse.com

  2. like you say it is a good idea to hold some precious metals. But the truth is it even more prudent to invest in various different kinds of risk averse assets. This includes gold, silver, bitcoin, Vix shares and even yes I said it U.S dollars. With so much volatility in the markets and such wild swings that will continue, there is a good chance at any given time at least one or all of these things will be preforming quite well. When one reaches an intermediate high, such as the USD right now, then it is a good time to spend some of it, or reinvest it in a another asset class.

  3. Martin Keller | December 9, 2016 at 10:19 am |

    Question is whether this market is really driven by “investors” or whether just the FED, ECB, BoE…..are the only buying entities?!

    • The ecs and the cbs lead the way and algos follow. They slam gold keep eveyrone in the game. TUNNEL VISION crime of the last 100 uyears

      • should read ESF

        • There are probably, next to no, investors and theres probably no unallocated pms.
          The banks have all been caught out, for rigging, and its still going on and thats because they’re told to. If they dont, the system crashes. They need a third party to blame or a new pearl harbour.
          None of this is real as steves chart shows debt = dollars. Take away the debt and there is no economy and no dollar. The debts owners have all of the money, for next to nothing, and the rest of us have whats left over, NEXT to nothing. Zero interest rates are the end when all assets including the stock market rise to infinity (mises theory of interest). Well! infinity. here it comes.

  4. Pumping stocks is stealth QE. Why would the FED print more currency when the ppt can prop up stocks ? There’s your extra currency, through the stockmarket. As soon as it fades they will throw in some QE rumors and up we go again. The stock markets will blow up together with the currency, not before.

    It will be fun watching billions run for the exit when the time comes and the doors to hard assets will be closed.

    • Stealth QE:

      http://www.zerohedge.com/news/2016-12-09/company-issues-press-release-report-its-market-cap-hits-1-billion

      One of the comments: Only 9 billion in assets, earning a measly 100 million in annual revenue, and profits of only $20 million per year.

      $20 million in profit does not deserve a one billion dollar cap.

      There’s your ‘wealth’; ever rising market cap. Enjoy.

    • The banks pretty much do qe everytime they lend. They lend say a million or a billion dollars and the loan is created from a zero balence, the thing or things bought (ie shares?) become the collateral and the loan costs zero per cent. . PLANET PONZE. Because they are buying the shares from zero cost their value or price rises. So what are they worth? This game can be played for some time and the stock market could rise to infinity, until everybody wakes up. What happens then?
      Watch this, this is what they dont want you to see https://youtu.be/Z4OP–ZXOjc

      • Adding debt into the game was a wrong decision. Through greed it fucked up consumption in a big way. Now we have to go back to sustenance, with 7 billion plus inhabitants and a dying system.

  5. remember when GLD was $1947 and SLV was $45?

    yeah the economy’s fundamental problems are still there, and yeah the run for the stock market is not “rational” in any (healthy) market sense, but none of that matters. at all. in the least little bit. see, for those who obtain their living not by productive labor but by “buy low and sell high”, there is nowhere else to go. nowhere else at all.

    the stock market is in a bubble? oh it’s just getting started.

  6. Many people are expecting deflation. I think we will get inflation first which will cause interest rates to rise which will cause deflation.
    The action in the stock and bond markets is exactly what I expected to see.
    We are a car (the economy) that has run out of gas (EROI) which is rolling down a hill (debt) which has a cliff at the bottom (deflation).
    This is not a good time to be young.

  7. Great article thanks steve. As you are already aware, debt is merely the transfer of energy from savings to debtors. This bubble is being pumped by spending other peoples money.

    So the question is, how much stored savings/energy is left in the global economic system to keep transferring into this bubble? As long as there are savings to raid, the bubble will continue and oil will continue to be extracted.

    That is the key.

    • The dollar is borrowed into existence, so it is all debt and its costs the issuers 3 cents max, in the dollar to issue, and its all owed back to them. There is no money and its an illusion, people are robbing each other for the crumbs.
      A quote from “the law” by Frederick basiat:
      The law has placed the collective force at the disposal of the unscrupulous who wish, without risk, to exploit the person, liberty, and property of others. It has converted plunder into a right, in order to protect plunder. And it has converted lawful defense into a crime, in order to punish lawful defense.
      How has this perversion of the law been accomplished? And what have been the results?
      The law has been perverted by the influence of two entirely different causes: stupid greed and false philanthropy..

  8. Michael Ponzani | December 9, 2016 at 6:38 pm |

    Another “hidden” leading economic indicator are box factories. Many of the people working there can tell if the economy is booming, stable, slowing down, and all the permutations in between. Why? Almost everything is packed in boxes. Plant managers, purchasing agents and salesmen are probably the first to notice this.

    • How are they doing? because i reckon, that as people stop buying quality goods from quality shops, they will switch to cheap crap from china over amazon or whoever and this all comes in a van, in a box. Chrismas is here UPS should be booming along with box manufacturers and importers of pulp for paper boxes wrapping etc Its only a theory?

  9. I just read that 1.6 biilion Muslims, as of December 6, 2016, are permitted by Sharia Law to own gold and silver. Should we expect significant demand for pms in 2017?

    • DisappearingCulture | December 10, 2016 at 7:38 am |

      That is a very good question. As you have pointed out consumer demand is the only thing that will make prices break out of the rut they are in.

    • Gold will be destroyed as long as yen is crashing.

  10. The right trigger to instant DEPRESSION is just there in the future cards….It is just a matter of time as all things are….Either you are wise enough to prepare for what is to come or you are ignorant of the effects a DEPRESSION will bring….The most astounding chart is the 1929 chart…Man oh man..IS THE SHIT GOING TO HIT THE FAN…HEY SPICK AND SPAN…WHERE WERE YOU WHEN THE SHIT HIT THE FAN????? I have always loved that phrase…Ever since my Vietnam combat days…..It always seemed to fit the devastation after a battle..When the guys who had lived threw it looked so spik and span and super clean of battle wounds …Like they had all the right moves to come out clean….Yeah…If you do not prepare This economy is going to lift your hair…And you will be left with a scalp striped bare…So..If you hold onto your metal backup…and indeed endeavor to gain more…so much the better to have something of real worth you can live on..Barter with…Thus survive 9I HOPE) the time of the worst of the reset to come….Because it is COMING…..

  11. 600 000 barrels/day reduction output, oïl will rise and not crash as stated again so many times.
    And paper assets will rise and rise again…

    • It may rise..but then demand will decline. Then there will be an over abundance of oil again..then price will fall. The consumer cannot afford higher oil prices. The cost of everything goes up when gas prices increase. The consumer cuts back and then the depression gets stronger.

  12. Thanks Steve, regards

  13. Why is volume down in the equity markets? The retail investor is not in the markets like the dot.com. era. This market is driven by companies buying there own stock

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