WARNING: Markets Reaching Extreme Leverage

As investors’ bullish sentiment moves up to euphoric levels, the markets are reaching extreme leverage.  This is terrible news because a lot of people are going to lose one heck of a lot of money.  According to CNN Money’s Fear & Greed Index, the market is now at the “extreme greed” level and if we go by Yardeni Research on “Investor Intelligence Bull-Bear Ratio,” it’s also at the highest ratio in 30 years.

But, of course… this time is different.  Or is it?  I continue to receive emails and comments on my blog that the Fed will continue to prop up the markets forever.  Unfortunately, there is only so much the Fed can do to rig the markets.  Furthermore, the Fed can’t do much to mitigate investor insanity in record NYSE margin debt or the massive $2 trillion in the global short volatility trade.

The $600 billion in NYSE margin debt suggests traders have racked up a record amount of margin debt (33% more since 2007) and the largest short volatility trade in history.  By shorting volatility, investors are betting that the VIX Index (Volatility Index) will continue to move lower.  A falling volatility index suggests more calm and complacency in the markets.

So, the market will likely continue higher and higher, until it finally POPS.  And when it does, watch out.

I’ve put together some charts showing the extreme amount of leverage in the markets.  While this leverage may increase for a while, at some point the insanity will end in one hell of a market correction-crash.

The Commercial Banks Are Betting On Much Lower Oil Prices

As I mentioned in previous articles and my Youtube video, Coming Big Oil Price Drop & Market Crash, the Commercial banks have the highest net short positions in the oil market in over 20 years.  In the video, I explained how the Commercial net short position in oil increased from 648,000 to 678,000 contracts in just one week.  Well, according to the most recent COT Report (Commitment of Traders), the Commercials outdid themselves this week by adding an even larger amount of short contracts.

The Commercial net short position in the oil increased by a stunning 58,0000 contracts to another record high of 732,000:

If we look at the “Commercial” long and short positions at the bottom of the chart, we can see that the total short contracts increased to 1,486,922 while their longs fell to 755,208.  So, the Commercials added a 46,000 more shorts and reduced their longs by roughly 12,000 contracts.  Furthermore, the Commercials are only 34% Bullish about the current oil price while the Large Speculators are 85% Bullish.

When the Commercials hold a very large net short position in commodity, metal or asset, that normally indicates a correction will shortly take place.  Especially, when the Commercials hold the largest short position in oil, going back for more than 20 years:

The BLACK line represents the oil price, and the BLUE line is the Commercial net short positions.  Right before the oil price fell from $105 in mid-2014 to a low of $30 at the beginning of 2016, the Commercials held nearly 500,000 net short positions.  However, as the oil price increased from $42 at the end of September to $64 currently, the Commercials net short position increased from 350,000 to a massive 732,000 contracts:

In my video linked above, I mentioned that the technical analysis indicator of a shooting star suggested that the oil price may have peaked.  Well, it looks as if this may be true, but time will tell.  However, we can clearly see that the Commercials record net short positions provide us with evidence of extreme leverage against the oil price.  I would not be surprised to see a $20+ decline in the oil price as the Commercials liquidate their short positions back toward more normal levels.

A $40 oil price is not good for the U.S. Shale Oil Industry.  I will be publishing a new video shortly on the ongoing U.S. Shale Energy Ponzi Scheme and the financial disaster taking place in the U.S. shale oil and gas industry.

Regardless, if the leverage in the oil market is reaching record levels, you should see what is taking place in some of the Dow Jones Industrial stocks.

WARNING: EXTREME MARKET LEVERAGE, Dow Jones Stocks Are Well Beyond Bubble Territory

I get a laugh when I receive emails from individuals who write me stating, “This time is different” in the stock market.  They let me know that my calls for a bubble market and a crash have been overblown, severely overdue or simply, not true.  While I am quite surprised at the longevity of this present bull market, my warning remains the same… THE HIGHER IT GOES, THE BIGGER THE CRASH.

Let’s take a look at some of the Dow Jones Industrial stocks and their price changes in just the past two weeks.  As the overall market increased significantly since the beginning of the year, Caterpillar’s stock price increased from $161 to $170:

And if we remember my chart on Caterpillar from my first video, Stock Market Bubble vs. Gold & Silver, Caterpillar’s price was $137 on Nov 5th.  So, in just two and a half months, Caterpillar’s stock price is up a staggering 24%:

You will notice that Caterpillar’s stock price experienced several short-term peaks, but nothing quite like what is taking place now.  Another impressive mover in the Dow Jones Index is Home Depot.  While Home Depot’s stock price chart isn’t as remarkable as Caterpillar, it is also moving beyond bubble territory:

From 2000 to 2012, Home Depot’s share price averaged approximately $25 a share.  However, on Jan 5th it was trading nearly eight times higher at $192.  But, if we look at its current price, it is NOW trading more than eight times higher at $201:

Now, could have Home Depot’s revenues and profits increased tremendously since 2012 to suggest a price of $201?  According to Home Depot’s financial reports, their revenues grew from $70 billion in 2012 to over $100 billion in 2017.  Furthermore, Home Depot’s net income has increased from $3.8 billion in 2012 to $6.8 billion in the first three quarters of 2017.  But does a $30 billion increase in revenues and $6 billion increase in profits translate to a 700% increase in Home Depot’s stock price over the past five years?

Okay, let’s look at Boeing Airlines.  What’s going on with Boeing’s share price?  On Jan 5th, Boeing was trading at $308… nearly three times higher than what it was trading at $112 at the beginning of 2016:

As we can see, Boeing’s share price is up 9,200+% over the past 34 years.  If we go by Boeing’s 2007 peak of $80, it’s up nearly four times.  However, if we check the trading activity over the past two weeks, Boeing’s stock price is moving well beyond bubble territory to a new record high of $337:

Gosh, Boeing’s severely pointy price chart resembles the antenna on the Empire State Building in New York City.  Good heavens, Boeing’s stock has gone up 10% in just two weeks.  If investors don’t see anything wrong with this chart, you probably have been hanging around too many “Cryptocurrency Aficionados.”   People, if you think the only direction is UP with stocks or cryptocurrencies, you need to get your head examined.

Here’s another chart worthy to compete with the tremendous gains in Bitcoin, Ethereum, and Ripple.  However, this is one those industries that should NOT BEHAVE like a high-flying tech stock or cryptocurrency.  Why, because it’s a healthcare stock.  United HealthCare’s stock has surged from $53 in 2012 to $223 on Jan 5th:

If you were clever and started buying United HealthCare’s stock in 1990, you would be enjoying cryptocurrency type gains of nearly 43,000%.  But that is all history now.  United HealthCare’s price is up another 6% to $243 in just the past two weeks.  If you look at the chart below carefully, you will see that its current two-week trend is virtually a STRAIGHT LINE higher:

United HealthCare and Boeing’s stocks represent a market that has gone completely insane.  Unfortunately, the leverage in the market will likely increase from the current extreme levels to “outrageously” extreme… if there is such a term… LOL.

Investors need to understand that the Fed and Central Banks realize by rigging the market higher, it can only go in that direction.  Ever since the 2008 U.S. Housing and Banking Market collapse, the world has been living on borrowed time, money and a massive amount of debt.  By increasing the value of Stocks, Bonds, and Real Estate, the Fed and Central Banks not only give investors the impression that they are wealthier, so they spend more, it also allows governments to collect more taxes.

While inflated asset values allow governments to collect more taxes, they still aren’t enough to keep the economic and financial systems from collapsing.  Yes, I know I am a broken record, but the FUNDAMENTALS DON’T LIE…. only humans do.  So, a lie or a Ponzi Scheme can continue for quite a while.  A perfect example is the Bernie Madoff 20-year Ponzi Scheme that defrauded investors by $65 billion.

If the Fed and Central Banks lose control over the markets (Yes, they will), then the ensuing collapse will make 1930’s Depression and the 2008 economic meltdown look quite tame indeed.  As I have mentioned in several interviews, when the markets were crashing in 2008, the U.S. Oil Industry was still in relatively good shape.  However, today the shale energy industry has debt up to its eyeballs and two-thirds to three-quarters of the shale energy companies are losing money:

The chart above by energy analyst, Art Berman, shows that the majority of U.S. shale energy companies lost money in the first three quarters of 2017.  While Chevron, ConocoPhillips, and Statoil made money, they are not heavily invested in shale oil or gas as are the companies are shown in the RED.

Lastly, the oil price is getting ready to experience one hell of a correction-crash as the Commercials hold the largest number of net short positions in history.  Furthermore, the NYSE margin debt and the Volatility Index are at extreme levels.  This has allowed the stock prices of many companies to surge to completely insane prices.

While the leverage in the market will move from extreme to outrageously extreme before it crashes, the timing of this event is not years or decades away as some more WISHFULL thinking investors have deluded themselves into believing.  Huge market corrections are normal, and stock market crashes have occurred many times in the past.

However, the present leverage in the market is now beyond bubble territory.  When the markets finally crack, if you own some physical gold and silver, you will be one of the few 1% that will have protected your wealth as most individuals watch their investment bubbles pop.

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68 Comments on "WARNING: Markets Reaching Extreme Leverage"

  1. Thank you, SteveR. I do not see any chart of Bitcoin here. I hope there will not be any other chart of any cryptocurrency price here.

    • Bukharin,

      I don’t know if I can keep from posting Bitcoin or Cryptocurrency charts. Unfortunately, I believe we are going to see much lower Crypto prices. When Bitcoin falls below $6,000, I will most certainly post some Bitcoin charts… SORRY.

      steve

      • The best estimate is not weeks nor days. Like that passenger side mirror: “Objects in mirror are closer than they appear”. It looks like this week, Wednesday, when markets wobble — 26,000 was benchmark. Even Karl Wallenda knew that risk will eventually overtake reward: http://www.cbc.ca/player/play/2245786488

  2. Steve,
    Very well written and indeed bubbles as far the eyes can see except in the most commodities and pm. I believe when all the money is finally in the markets they will
    just freeze the markets and all the money could be captured for years. Nobody will take losses or gains on paper you just have to wait for years to materialise your losses or gains. That is how a reset could look like. Ludwig von Mises wrote about this and he called it Katastrophe Hausse. As the central banks are so deep into their
    insane, satanic, diabolic and criminal money game their is no way back. War will be
    one of the first casualty of these banksters!

    • Pieter,

      I couldn’t agree with you more. The Markets have become totally INSANE now. I suggest that we grab a Cherry Coke and a Bag of Popcorn and get ready for the FIREWORKS.

      steve

  3. Yep. Those stock prices sure do look like bubbles. And when the bubble pops it won’t last 2 weeks the way crypto bubbles pop. It will drag out over years and years, into the mid to late 2020’s.

    • Eric Bauer,

      So, you believe the Stock Market Bubble will take a decade to POP. Interesting. I gather you don’t look at EXPONENTIALLY RISING CHART FUNCTIONS all that much. Nothing that goes up exponentially, or similar to the exponential trend, takes a long time to come down.

      But, if we believe, THIS TIME IS DIFFERENT, then anything is possible.

      steve

      • I don’t think it will take a decade to pop. I think it will pop soon (next 2 to 3 years max) and the deflating will drag out over years into the mid to late 2020’s. Another Great Depression, but entirely global. After that, another great war in the west.

    • R.M,

      Thanks. Chris Martenson knows exactly what’s going on. I would be quite surprised if the markets don’t crack in 2018.

      steve

    • SkeptiSchism | January 21, 2018 at 1:38 pm |

      Check this out I sorted that database by P/Es and went to the first page of maximum values

      No. Ticker P/E
      1 LYV 21850
      2 CRM 13991.25
      3 EOG 8169.29
      4 AMH 2551.25
      5 BEP 2075.62
      6 CVLT 1695.16
      7 PTC 1588
      8 Y 1457.54
      9 LOGM 1138.57
      10 LBRDK 932.9
      11 HAE 894.31
      12 EPC 869.4
      13 HLT 863.54
      14 CLH 823.43
      15 ENLC 551.47
      16 PEGI 485.91
      17 NAV 483.78
      18 WTM 465.3
      19 PEN 439.18
      20 PE 405.56

      Holy skyrocketing insanity batman

  4. You ever think this time they will drive it clear past belief just so they can crash it the last time. It’s moving East after it’s done. The sheep are all headed West because it’s safe and that’s where the rush is. Think robbers and the set is greater than you ever dreamed.
    Lol good luck because it never ever ever never goes down especially this time ???????

  5. OutLookingIn | January 20, 2018 at 1:57 pm |

    The “Everything Bubble”.

    Not only stocks, but the very foundation of the fiat system – credit.
    Since 2008 Fed intervention of $33 trillion has resulted in cumulative economic growth of $2.64 trillion or 16.7% since beginning of 2009. This equates to $12.50 of intervention for every $1.00 of economic growth.
    Consumers do not have discretionary income at previous levels. They now rely upon debt to maintain their life styles. The economy is dependent on debt and the bigger the accumulated debt is when compared to GDP, the more likely a reduction in credit will cause an economic crisis.
    A huge fly in the ointment no one can see: HELOC’s. Home Equity Line Of Credit.
    The majority of HELOC’s issued prior to the 2008 financial crisis, have ten year draw periods, many with interest only payment requirements. At which time the HELOC principle amount is due, either as a lump sum balloon payment, or according to the loan amortization schedule. Many are recourse debt for which the borrower is personally liable even after a property is foreclosed. When a government must print money in order to make the interest and principal payments on its debt, this is a de facto default. This price discovery event has occurred with the ten year Treasury now threatening to move above three percent. The value of all bond funds will crash.

  6. Who cares. So, some people will lose money. I bet they won’t lose any more money than you all have by stacking gold and silver.

    • Why are you here dolph? Seriously? Other sites too, eg SD. Surely if you are out of PMs then you just leave these sites…??? Stop following and visiting on a daily basis. It’s obvious you have a vested interest in talking down gold and silver, rather than just being a disgruntled investor who lost $. (Note: you did not lose a single ounce, and THAT is the most important thing right now, if of course you are genuine…)

      • Transparent,

        You make a great deal of LOGICAL SENSE. However, I don’t believe DOLPH looks at things logically. But, there’s nothing wrong having a GADFLY in the blog to stimulate the debate.

        steve

      • Transaparent, we need to respect all views. It is not cool to do personal attacks if they do not agree with you. Other sites they would have deleted your message, but not Transparent’s comment. In regards to the discussion, one day it will all end bad, but this bubble may continue for years.

        • Andro Meda,

          While I agree with you on respecting all views, a few individuals come in here and say the same thing over and over. They really don’t add anything in the way of DEBATE, but mostly regurgitated pablum. However, I am not going to moderate or censor anyone unless they use too many vulgarities, hate or racial speech.

          So, these few individuals are more than welcome to leave comments, but I have no issue with Transparent for stating the obvious either.

          It’s A OPEN BLOG and you REAP what you SOW.

          steve

          • Andro, did you just use the “play the victim” card here? That’s a common strategy. I see all the subtle manipulation techniques like that all the time.

            I see no personal attack there. I just questioned why someone who hates PMs so much (whatever the real reason might be) visits such sites on a daily basis to hammer the “gold n silver are worthless” narrative.

    • Gee! You had me so worried that I ran to inventory my PM stash. It is all there. Nope I haven’t lost a thing. You have probably sold all of your stock holdings and made a killing. Congratulations. Don’t tell me what you have done with the proceeds. I don’t think I wanna know.

      • That comment was for Dolph.
        Gee! You had me so worried that I ran to inventory my PM stash. It is all there. Nope I haven’t lost a thing. You have probably sold all of your stock holdings and made a killing. Congratulations. Don’t tell me what you have done with the proceeds. I don’t think I wanna know.

  7. Steve you have just shown where the present day inflation is lurking, but I don’t think any bubbles will burst until there are no buyers.
    The lack of buyers signal mkt tops and as long as all countries keep their printing presses well oiled, there will be fuel for the only culturally accepted mkt on town.
    However it could very get to where it takes one share of catapillar to buy a dozen eggs.

  8. The World Bank believes the biggest risk comes in financial markets, where share price valuations are at levels not seen before except in 2000 and in 1929 – the dotcom bubble and the Wall Street Crash
    https://imgur.com/a/JeURO#wQeyqh0

    Financial markets at risk from bubble, IMF warns
    http://www.telegraph.co.uk/business/2018/01/15/financial-markets-risk-bubble-imf-warns/

    Crash fears escalate as markets hit highs not seen since Black Tuesday and dotcom disaster
    http://www.telegraph.co.uk/business/2017/11/05/markets-lookout-shock-crash-us-stocks-record-highs/

    Markets are ignoring ‘major risk’ of rising interest rates and end of QE, warns Citigroup
    http://www.telegraph.co.uk/business/2018/01/08/markets-ignore-danger-central-banks-reverse-qe-warns-citigroup/

    Global economic growth has peaked, says World Bank
    https://www.ft.com/content/4b9e6190-f55e-11e7-88f7-5465a6ce1a00

    Global Economic Growth GDP Per Capita (1.3%)
    https://data.worldbank.org/indicator/NY.GDP.PCAP.KD.ZG

    World Governments Gross Debt to GDP (330%)
    https://imgur.com/a/3usX7

    Global economy set for decade of gloom as World Bank predicts recovery will fizzle out
    http://www.telegraph.co.uk/business/2018/01/09/global-economy-set-decade-gloom-world-bank-predicts-recovery/

    US companies spent $4T buying back their own stock since 08
    https://nypost.com/2017/08/19/us-companies-spent-4t-buying-back-their-own-stock/

    ‘WORSE THAN 2007’: Top Central Banker warns of looming wave of worldwide bankruptcies
    http://www.telegraph.co.uk/finance/financetopics/davos/12108569/World-faces-wave-of-epic-debt-defaults-fears-central-bank-veteran.html

    The world is drowning in debt, warns Goldman Sachs
    http://www.telegraph.co.uk/finance/economics/11625406/The-world-is-drowning-in-debt-warns-Goldman-Sachs.html

    A Nation of Broke People Are Killing Retail More Than Amazon: Top Expert
    https://www.thestreet.com/story/14277483/1/a-nation-of-broke-people-are-killing-retail-more-than-amazon-peter-schiff-says.html

    50 Percent of all Malls in America will be out of business in the next five years
    https://www.theguardian.com/us-news/2017/jul/22/mall-of-america-minnesota-retail-anniversary

    Our Broken Economy, in One Simple Chart
    https://www.nytimes.com/interactive/2017/08/07/opinion/leonhardt-income-inequality.html?smid=fb-share

  9. Here are five peer reviewed scientific studies authored by top experts that prove beyond any reasonable doubt that global civilization will collapse within the next decade. Simple really….when the World Economy Collapses everything shuts down…the end… We’re talking about grids down all over the world and 7.5B people dropping like f*** flies in short order. The collapse will be absolutely horrible..There is no collapse or horror movie ever produced that has even come close to imagining what the collapse of BAU might look like. I’m talking about every corporation and every social program going bankrupt at once.I’m talking about people eating people. I’m talking about the Worst Catastrophe to ever happen in the history of mankind. Nothing has ever, or will ever come close….

    http://www.sciencedirect.com/science/article/pii/S0921800914000615
    http://www.sciencedirect.com/science/article/pii/S0959652617304225?via%3Dihub
    https://www.ncbi.nlm.nih.gov/pmc/articles/PMC3574335/
    http://sustainable.unimelb.edu.au/sites/default/files/docs/MSSI-ResearchPaper-4_Turner_2014.pdf
    http://www.feasta.org/2012/06/17/trade-off-financial-system-supply-chain-cross-contagion-a-study-in-global-systemic-collapse/

    • Gosh, thanks for the happy thoughts 😀. Probably Planet X or the coming ice age will get here first. The great dieoff reset.

  10. I follow all those sort of numbers Steve… They are good numbers; like Exxon Mobile 48,000% in 44 years. Notice it has been going sideways now since 2014. I often read how intelligent the people running the show are. You read about how high their IQ’s and their prestige qualifications are. If you were having a drink with any of them down the pub they would be labelled as educated dopes.

    I am reading “Putin’s Praetorians” at the moment. what a great read.

    https://www.amazon.com/s/ref=nb_sb_ss_i_10_7/140-9306361-9705742?url=search-alias%3Dstripbooks&field-keywords=putins+praetorians&sprefix=putins+%2Caps%2C399&crid=32LQ5Q8882W2K

    I booked in and watched Chris Martenson Webinar (there were two) with Mark Rees (from Bitcoin Magazine)about crypto currencies early January 2018. Did anyone else watch? I enjoyed both and learned a lot as well. Mark Rees reckons 95% of the Crypto’s will fail over time and the banks are in trouble, they just don’t know it yet.

  11. Steve
    What makes you think these markets are going crash anytime soon. The world central banks can print unlimited quantities of money. They are using it to buy stocks and bonds. On the flip side they sell off commodity markets to keep the money out of the real economy. Until the money escapes into the real economy, they can do this forever. I don’t see an immediate end to it.

    These ridiculous prices are not the product of investors. If that were the case it would have ended already. It is government buying. Period. The Japanese the swiss, etc.

    Once inflation gets roaring, interest rates will have to raised, and the party is over. When this happens is anyone’s guess. I think the market will drop at least 75 percent over time after a crash.

    A rising oil price will create inflation. However, I think the commercials will skin the traders. And force the price down. Unless the price spikes really high, and crashes, wLower oil will keep the stock bubble inflated.

  12. Andre Schneider | January 20, 2018 at 8:03 pm |

    although i think almost everything is accurate, i do believe that maybe oil will head lower but only for a little while, eventually because of the dollar it could go up in dollar terms. who knows, and about bitcoin i don’t think its a bubble, in reality it seems expensive only because theres a very small amount of them. bitcoin will keep going up in my opinion and it most likely will hit 50k this year

  13. i’ve read that the stock markets in wiemar germany,zimbabwe,and currently venezuela went up significantly during their hyperinflation. apparently one of the few ways of maintaining buying power.
    according to shadowstats our inflation rate is more like 10%
    than 2%.current interest rates lose buying power.i see my
    pension plan is about 50% into stocks.probably the only way they
    can keep up.

    didn’t greenspan say …we can guarantee your cash but not your buying power….?

    maybe we have seen this movie before

  14. Hi Steve . regards from Australia , keep getting e mails from a Dr Kent Moors about the great future of U.S.A. oil A debate between the two of you on your U Tube channel could offer more fireworks than the 4 th of July , Keep up the good work.

  15. Steve,
    Good work, thanks.
    Pardon silly question – is a short squeeze on oil an cards or it is not how it works with commercials being short? Art Berman talks about moonshot – can’t wait…
    How do you play the crash? OK, obviously PM (one you can touch). But last time gold went down with the market as margin calls started – do you envision entry opportunity there?
    If you short – puts or outright? ETFs or individual overbought stocks? Would financial institutions still be there to honor it?
    Thanks again!
    Regards,
    Daniel

  16. According to Steve Sjuggerud and Stansberry Research this baby is going to keep going up to the year 2020

  17. When stock price (or any other) from, let say 1982 is compared with stock price from 2018 is it correct to adjust it for inflation before comparison is made. $10 in the 80s id not same as $10 now.

    • Marijan,

      While you bring up an excellent point about inflation in 1982 versus today, I would kindly like to remind you that Gold & Silver being up 100-150% since 1982 compared to the 4,000-40,000+% increase in many Dow Jones stocks is the correct comparison.

      steve

      • That is correct, but I was referring to price of stock before for example 30 years and now. United health care stock price of $0.53 should be adjusted for inflation before comparing with price of $228. Same goes for all prices.
        This does not undermind point of the article which is spot on, just wanted to raise this inflation thing to have correct figures and graphs.

        • And THAT is exactly how the financial system will blow up. More and more fiat-voodoo until you can’t buy an egg for $110,-

          And please don’t start crypto. Buy physical gold & silver.

  18. What if I told you there were 21 billion bitcoins and they were priced at only $12 each. Is it still a bubble? People see the $12,000 price and say it is in a bubble because of the USD price. But my first statement is accurate… if you change the word bitcoin to milliBits (1/1000th) of a bitcoin.

    Stocks are in a huge bubble, thanks to fiat $$$ printing. Nobody is loyal to stocks (except maybe the board of directors). If price crashes 60% there is no reason I philosophically need to continue to hold Home Depot or CAT. Those rich in bitcoin are completely different. If price crashes to $2,000 they are NOT selling. Now the traders will sell, but that does not reflect the vast majority of holders. We got into this not for stock market USD profits. We acquired bitcoin because it is an alternative to the fiat con-game that is actually a solution that could be used in a modern digital economy (unlike gold).

    What we don’t know yet is how the crypto markets will react to a 50% stock market crash. What would happen if stocks crash and crypto stays flat, or even has gains. Where do you think that stock market money will go? All t-bills? I think not. But I really don’t care. The vast majority of scammy alt-coins can bite the dust and it doesn’t matter. Bitcoin will still be here in 10 years and its value will not be anywhere near today’s $12k USD price.

    If your user base really believes the correct bitcoin exposure is 0% of their portfolio, they have nobody to blame but themselves if/when guys like Clif High & John McAfee are proven correct. Look up Metcalfe’s law.

    • SD: What we don’t know yet is how the crypto markets will react to a 50% stock market crash.
      IMO the cryptos will react much as PMs have in past crashes.
      The mkt goes down a bit, many get margin calls, some pay but some sell forcing the mkt lower. More margin calls, some sell stocks but must still meet margin calls so they sell PMs to pay margin calls. This puts down pressure on PMs as we see historically during past crashes.
      But some move funds to safe haven PMs.
      I can see cryptos reacting to crash much the same as PMs have. But I also see more millennials looking to cryptos than to PMs as safe haven.
      We should also consider that at present it is much easier to convert large amounts of USD to cryptos than cryptos to USD.
      IMO cryptos compared to tulips does not consider the present or future utility of cryptos which are already now being used for commerce in many parts of the world.
      Many who make this comparison are being a bit short sighted in that they only see what is around them. Because of the Internet we live in a world society when it comes to economics.

      But if Steve’s analysts of the energy situation is correct, then all bets are off. No energy, no internet, no world wide commerce. Only water, food, shelter, PMs, and lead.
      The Bible says things come and go, but there is nothing new under the sun.
      The only true security for man in this world is faith in the Lord Jesus Christ.

      • Wholeheartedly agree with your last 2 sentences.

      • DisappearingCulture | January 21, 2018 at 4:26 pm |

        “The mkt goes down a bit, many get margin calls, some pay but some sell forcing the mkt lower. More margin calls, some sell stocks but must still meet margin calls so they sell PMs to pay margin calls. This puts down pressure on PMs as we see historically during past crashes.”

        First of all, how about margin calls on crypto purchases? How much is or has been purchased with debt? I have no idea.
        Second, most stock holders that have purchased on margin…what % of them are PM holders? I suspect very few, and if that is true they wouldn’t sell PM’s they don’t have to pay their bills.

        • DC you very well may be correct. I suspect any margin in cryptos is buying them with credit card. Who knows what the cc cos. will do in a crash but they cannot sell ones position to pay margin like trading firms can.
          I suspect a crash today will be nothing like previous crashes if for no other reason the speed of trading. When the comp algorithms turn, they’ll turn on a dime.

  19. A few months ago I sent a ‘not to worry’ message. I said the market would pass 25K in 2017 and to 35K within about 10 years later. Later has arrived 30K before the end of 2018. Then–the universe is going to experience another ‘big-bang’ as the stock market implodes then bursts out as violently as the mother of all atomic explosions Get out before November 2018. May all your physical PM’s hold you firmly in place.

  20. I know it’s coming when our downtown city area has more skyscraper type of cranes going up. This is the ultimate spending projects where big financing deals are being made. Banks are fat and happy again, all these big loans will be spread out to average joe so they can make more money on the front end of these loans. It’s no secret many even Warren Buffet bought up some Realtors so he can be ready to load and load fast when it all comes down again. It’s a little ways out yet, I can only guess more near or right after next presidential election. Trump has the control to keep rates low now, whether he will bring them up at the end of his reign we will see. Auto industry is maxed and bouncing off a top, CC’s are maxing up, but RE is still in a bit of a growth phase, banks are making to much money off this to let it come down anytime real soon. With lower rates they need more loans and credit extensions only larger debt piles can bring them. All these high flying stocks are at risk, many are very dependent on income growth, disposable income, and credit, all of which will top or falter. Between now and then, we may just see mini-crashes in equities. Commodities seem to be a huge hedge play right now, volatility is seasonal as well. I don’t see these bigger shorts as anything more than over speculation moves as financial industry is given to much free reign. Another sign of impending pullbacks in the future, we are back to where large vehicles are dominating the auto industry because of cheap oil prices. I’ve got a neighbor that just bought an infiniti something or another with 22 inch tires and the guy is single, doesn’t haul anything, etc. Upside?, people will be able to live in these behemoth vehicles when they can’t pay the rent, etc.

  21. You might want to stop looking for a market crash. It’s not going to happen. The stock market might have a correction here and there once the next crisis gets rolling, but since that crisis is going to be in the currency, stocks will not drop in price all that much even though the currency they’re being priced in will. Stocks will have a “crash” if you price them in gold.

    • Neil,

      The Markets will crash. Whether that occurs in DOLLAR or GOLD terms, I don’t care. However, we must understand the OBVIOUS. The Fed cannot rig the market from the insanity of the $2 trillion Global Short Vix Trade, the $600 Billion in NYSE Margin Debt and the massive amount of debt that is destroying the financial system and economy due to the increasing amount of INTEREST that has to be serviced in all PUBLIC & PRIVATE DEBT.

      If we assume that the Global Debt is now at $233 Trillion and if we assume a conservative 2% interest rate on all debt, that is $4.7 trillion a year just to pay the interest expense. The world isn’t adding enough energy supply to cover the GLOBAL INTEREST EXPENSE. Which is precisely why they Central Banks are lowering rates.

      However, this won’t be a LONG-LASTING POLICY.

      steve

  22. One way to look at rising stock prices is that it is costing more and more to make a meager return (dividends). In other words the stratospheric prices indicate that real growth and returns are less and less possible / available or are in fact dead and that money is less and less able to generate a return on itself. In other words, if you look past the money illusion of ever increasing prices, the stock market is signaling that the dream of living the rentier life is dead, because the only “growth” left is bidding up the prices of financial assets by those owning them selling them to one another. In other words, better find a way to support yourself outside of the rentier model.

  23. D. Bruce Turton | January 21, 2018 at 9:59 am |

    Two things: 1). Fundamentals (and Technical Analyses) are also human inventions based on human valuations. 2). What are the so-called “insiders” doing with their trading now? How can we find out, or can we do so?

  24. Two questions that need comments;
    1 ) in the recession 2008 gold was falling 30% plus in a few months. What safety is that ?
    2) Looking at the technical situation, gold price today looks very much as in February 1983. in april 1984 gold price was 30 % lower .
    Comments ?
    Best regards
    Chris

    • Christer,

      Thanks for stopping by and offering your opinion. However, let me provide a bit of information as to why the current setup in the market will not allow your two points to occur.

      1) The Gold and Silver price was falling along with EVERYTHING in 2008. However, since 2013, the Central Bank money printing has gone into STOCKS, BONDS, & REAL ESTATE. Thus, the value of gold and silver are now close to their cost of production. So, when the markets crack this time around, GOLD & SILVER have already sold off over the past 4-5 years, while the Dow Jones and markets have continued higher. Thus, when the markets crack, even though we may see a selloff in the precious metals initially, they will likely move up much higher as the markets crash. This already took place in Q1 2016 when the Dow Jones fell a mere 2,000 points.

      2) Gold’s value was and is tied to the cost of energy and the COST OF PRODUCTION. With the cost to produce gold now about $1,150-$1,200… I don’t see it falling much below that. However, the AMOUNT OF LEVERAGE in the STOCK, BOND, & REAL ESTATE MARKET is likely 50-75%

      steve

      • Steve,
        what gives you confidence to assume that none of $600B margin debt holders are playing GLD and SLV and will be forced to liquidate? Or do you anticipate paper gold market will go bust with surge for physical demand? Thanks already.

  25. Think the same.Maybe a short drop.We already are at the bottom.

  26. Hey Steve,

    Excellent article. Long time reader.

    Best,
    Jimbo

  27. Hello Steve

    Well , speaking of cost of production. 2014 gold price was at about the same level as today but since then the oil prices has fallen a lot. So can we not assume that these lower energy costs lowers the cost of gold mining companies production ?
    oil was at least 50 % higher 2014 than at present

  28. Leverage is not very high, can go higher without any real issues.

  29. Would you agree with these predictions for 2018?

    http://thegreatrecession.info/blog/2018-economic-predictions/

  30. It’s a fools game to try to predict when the laws of thermodynamics will take control of the Precious metals manipulation. The “exerts” have tried for years and end result has been to take their followers to the financial wood shed. Thanks for nothing. Cryptos are the reset not the Mad Max scenario. I just bought another monster box of 10 oz silver bars with Bitcoin. I also keep fully engaged in the crypto sphere. Why waste my effort on the PM stocks when the price is under control of TPTB crushing the foolish miners who continue to sell their valuable product at the manipulated price. What choice do they have I guess. My prediction by the end of the year? The crypto sector at 2 Trillion plus and the metals just above the mining cost. Another monster box please.

  31. DisappearingCulture | January 21, 2018 at 4:42 pm |

    “When the Commercials hold a very large net short position in commodity, metal or asset, that normally indicates a correction will shortly take place.”

    The commercials either know in advance a price drop is coming in that commodity, or more likely, they along with their fellow financial elites [Fed, Treasury, etc.] are about to make it happen.

  32. Thank you, Steve, for some truly terrifying charts. I think we are already over the edge, just spinning our wheels in midair like Willie E. Coyote. Things I look at like increase in homeless population and socionomic indicators of anger and divided population and popularity of horror flicks, tells me we are already in a recession if not worse. Will this be the first recession with a rising stock market? Everything is going upside down. Got metals and a few bits BTC and it’s snowing again.

  33. It has been predicted that the overseas corporation money returning due to tax breaks will mainly be used for stock buy backs, boosting the market. Will be buying at high prices. I did some historical research on Goldman Sachs years ago. Seems they sold stock in the rise into 1929 peak. Amassed a war chest. Then at the market bottom in 1932, bought back their stock for pennies. Went private for some sixty years. When they came public again in the 1990s, made me pay attention, wondering what was planned. Just some thoughts.

  34. Chris in Arkansas | January 21, 2018 at 6:50 pm |

    I don’t think we’ve had enough time to see exactly how companies will optimize tax savings under the new plan. Sky high market valuations and common sense are going to need to take a back seat to euphoria for a while yet. Can this market keep up the momentum we’ve seen over the past several months? Yes.

  35. Another great article by the Master!~

  36. The largest consulting firm on the planet, Armstrong Economics, has computer models that track both domestic and international capital flows. Back in 2009 the models forecast that the Dow would hit 22,000, then 23,000 and then eventually to around 40,000 all due to the capital flight out of Europe as it has been collapsing since 2011. The first two targets have been hit. 2018 forecast are 25,000 then over 28,000. The first target has been hit and last week the Dow went over 26,000.
    Corporations, many banks and countries are cut off from capital markets there and the only thing propping it up is the ECB creating 60 billion euros a month out of thin air and buying the toxic sovereign and corporate debt from banks. Now as the ECB will be forced to taper who is going to buy the new debt? The private sector and they will demand much higher rates in line with risks. What do you think this will do to the economies in Europe? They will collapse faster as the “smart ” has not only been moving capital out but this will accelerate into the dollars and US equities. Countries in the EU are broke and running out of capital. The EU, euro, many banks and countries will not survive. Would you park capital there?
    The tax plan will be a big boost for the economy. Trillions are getting ready to move to the US by multinationals and this will flow into increasing dividend yields and share buybacks helping to push equities higher. Forget the nonsense that deficits will rise sharply due to tax cuts. Currently these firms pay no income tax on foreign earnings and is parked in offshore accounts. With the new low rate capital will continue to flow back now into the US. Large domestic corps. will also do the same with their tax savings also helping to move US equities higher. In addition people will have more disposable income and most will flow into the real economy and increase GDP. Small and medium sized businesses will also have more disposable income and will see demand increase and create jobs also increasing GDP, tax revenues and also helping to move equities higher. Who benefits? Ordinary Americans who have most of their shares in managed accounts. As many get ready to retire this capital will also flow into the real economy.
    All of the above is why equities will move higher and has been moving higher since 2011. For the last 3 or 4 years the net has been full of people claiming the dollar and the Dow will collapse. They haven’t and won’t. The 87 crash, the dot com bust and the 2008/9 crisis were all caused when there is a high concentration of retail directly in markets and they get spooked with prices falling to a point triggering the HFT algo sell orders and off we go. Direct retail is still under 50% from its peak as most have bought into the collapse bullshit.
    A shit storm is going to hit Europe as we move into the middle of 2018 to 2021. Capital flight will again accelerate out and move into dollars and US equities.

    • DisappearingCulture | January 22, 2018 at 9:13 am |

      “Back in 2009 the models forecast that the Dow would hit 22,000, then 23,000 and then eventually to around 40,000 all due to the capital flight out of Europe as it has been collapsing since 2011. The first two targets have been hit. 2018 forecast are 25,000 then over 28,000. The first target has been hit and last week the Dow went over 26,000.”

      Where was this written? Any online articles from the past predicting this to read? If this is true [and written/published] in the past I would look at it.
      It wouldn’t matter to me the size of a consulting firm, but somehow I doubt Armstrong Economics is the largest.

    • Jim,

      The firm was called Princeton Economics International and it was a very large advisory in the 90s. It certainly was not the largest one globally.

      Martin Armstrong, the boss of the advisory firm, was then charged and convicted of fraud and spent 11 years in jail. He played nice with goldbugs from behind the bars, producing bullish reports on gold. This has helped him gain some powerful friends and ultimately his case ended up before the Supreme Court. At that point the prosecutors gave him an option to either admit to some of the fraud charges and be released, or spend life in prison. He took the plea and admitted to the charges.

      After his release, he made a 180 on his bullish gold stance and started producing bullish Dow reports. He set up a new company and website, called Armstrong Economics. However, this is absolutely not a major player today. It’s basically a website with a few employees and a way for Armstrong to publish his $500 PDF reports.

      Armstrong did say that the Dow would go to 32,000. It was his extreme projection for October 2015. His normal price projection for that date was Dow 20,000. He made these calls publicly in mid- to late 2013 when the Dow was at 15-16,000. By the way, the Dow did not reach the 20,000 level in October 2015, but rather much later in January 2017. In October 2015, it stood at 17,600, then fell to 16,500 the next month…

      In the meantime he adjusted his numbers, as is often the case with these market forecasters, and now he claims that the Dow will reach 32,000 or even 40,000 by 2032. That’s 14 years from now. Nowhere does he publicly claim that the Dow will reach 40,000 within the next three years.

      True, the EU is a basket case and capital does move from there to the Dow. The question is whether that’s smart money or dumb money. US retail investors can’t participate in the Dow today, because they have been wiped out in the last two bubbles the Fed created and now they are working at McDonald’s or in Walmart. The millennials are fully invested in the crypto bubble. I guess there are too many bubbles nowadays and not enough people with free cash to throw at them. However, I think that the EU money coming in takes up their part just as well.

      I agree that the Dow can reach 40,000, heck, it can reach 100,000 or even a million. A loaf of bread will cost $100 but y’all be rich on paper (or on the computer screen). The same goes for cryptos. The question is timing. The Dow can go to 40,000 eventually, as you have nicely put it, but it can first go to 10,000… Armstrong will be right. But Steve will be right, too.

      Here are some of Armstrong’s other predictions:
      • November 2009 – Armstrong: Gold Headed To $5,000 And Beyond!
      • December 2012 – The metals will be taking off during 2013, Martin believes after the summer, going all the way to 2016. Major support is at 1570.
      • October 2013 – Gold’s going to drop below $1,000.
      • 2014 – Armstrong stated that $100+ crude oil was here to stay.

      You could go ahead and find a ton of other failed predictions from him. He is about as good a forecaster as anyone else with his experience in the financial markets.

      So, Jim, my advice is – don’t rely on others’ estimations of what’s going to happen. Use your own brain when investing. If you can’t do that, don’t invest – you’ll probably end up very poor and very angry.

  37. Steve,

    lastest analyse by Grant Williams intresting as well about gold

    https://stansberrystreaming.com/presentations/grant-williams.html

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