Markets are climbing the Jacob ladder

Could the bear become an endangered species on the financial markets? It would not be impossible if you look at the economic data and the arguments for the soaring increase that some are already evaluating. But beware, because the stock market always burns what it loved …

Thirteen years after the Fed launched America’s first quantitative easing (QE) in November 2008, that’s all, retail investors are there. As Bruno Bertez writes: “It is a sign that he has never deceived. When 20-year-old students trade on the advice of a 22-year-old friend, that’s it! “

Young teenagers presented as excellent financial analysts, taking out personal loans to invest in the stock market, meme actions, same anglesover-indebted government bonds at negative rates, initial public offerings at dizzying prices of loss-making companies, explosion of volumes on penny stock, advent of the SPACs: there is everything. Even a new trading strategy has emerged: hunt in packs via game forums in an atmosphere of generational warfare!

There is no lack of symptoms of collective hysteria caused by excess liquidity on the markets.

So far, the authorities don’t seem to care.

It is in the blue skies that thunderstorms break out

Irving Fisher said that nine days before the October 24, 1929 crash, stock prices had reached what appeared to be “a permanent plateau”. In the summer of 2007, Fed Chairman Ben Bernanke indicated that “the credits subprime they are contained”.

I would like to give you a statement from James Bullard to parallel. On February 16, the president of the Saint Louis Fed said that there were no clear signs of excess on the financial markets and that “he wasn’t really sure if it could be called a bubble. […] It’s just a normal investment, trying to get an idea of ​​what these companies are really worth. “

The discovery of the price would therefore take place in the most traditional way possible, the great monetary planners promise us. Still, here’s the relationship between the M1 (in green) and the S & P500 (in red) since April 2015, when James Bullard made this observation.

As you will notice, there is no relationship between the share price and the money supply: it is just a “normal” investment.

Coincidentally, around the same time a Bank of America (BofA) survey was released that stated that “the only reason to be bearish is … there is no reason to be bearish”.

Put simply, “BofA’s customers are not worried about the exuberance of the market. Only 13% of them believe that US equities are in a bubble, while 53% only see an advanced bull market ”.

Be careful if you type this expression into Google as you could easily confuse this 2021 survey with another survey dating back to … November 1999.

Repeat after me: “It’s just a normal investment. “

February 17, 2021: “None of our measurements show us that there is an elephant in the room, so there isn’t any. And if there is, we have the tools to make it disappear. “

In such circumstances, we also have the right to ask ourselves the following question: since everything goes up, why get complicated when you can make it very simple?

February 17, 2021: “A prominent JPMorgan banker tells his clients to forget about the bubbles and buy everything. “

Only here, at the risk of making a triviality, do I have to remember that the markets do not rise to heaven.

The last phase of the bubble?

As Ronald Stöferle and Mark Valek write in the latest edition of their report In gold we trust :

“We live in an age where people like Dave Portnoy, Michael Saylor and especially Elon Musk enjoy rock star status, even saint. Phenomena like Dogecoin […], GameStop’s community-initiated short sales of Reddit, the SPAC boom and wave of IPOs that set a new record high of $ 180 billion in volume indicate the markets are in full hysteria. It is a phase of euphoria fueled by ultra lax monetary and budgetary policies. The confidence of market participants seems as limitless as the high level of liquidity. ”

When we look at the price curves, we can only be struck by their verticalization.

November 4, 2021: The NASDAQ 100 9 months after Bullard’s statement: “Visualization of the hypothesis of market efficiency”

It seems difficult to say in this regard that the current period does not present the semblance of a manic phase.

However, we must not make a mistake: despite all the lights flashing scarlet red, it is obviously not a question of denying that the market remains bullish at the first low or, even more dangerously, of putting shorter.

When will the bubble burst?

Sure, I don’t know. I just know that any saver / investor (and also an economic and financial journalist) needs to keep in mind the fourth point of Bob Farell’s 10 investment rules, which is the fact that “exponential markets that rise or fall rapidly are usually farther than what you think, but they do not correct by moving to the side.

One of the information contained in this observation is that of the situations that seem to us first aberrant is likely to extend far beyond what our reason allows us to imagine.

There may be no bear market for years, as John Plassard wrote on February 23, 2021? Who knows…

The combined balance sheet of central banks continues to grow and the correlation with the more symbolic of equity markets is evident.

As Bruno Bertez wrote on January 31, 2021 at the end of the GameStop episode: “Things go crazy at the end of the credit cycle. Behaviors become chaotic, speculation no longer meets any limits. Since then, we have continued to climb the “ladder of madness”.

However, the longer we continue on the path of a parabolic bull market, the more likely it is to end and the lower the expectations for earnings.

And when prices start to fall, there will still be no lifeline for everyone, despite the stories the public authorities will tell us.

April 1912: “The Titanic is sinking, but no life is likely to be lost”

As Jeffrey Christian says:

“Prices cannot rise to unsustainable levels and remain there. Some investors take their profits, perform well, and reposition themselves once the price has fallen. And investors who don’t understand this will end up thinking, “I was once very rich.” “

Finally, this is what the CPM Group boss says about the yellow metal.

Given what I have presented to you in my recent articles, it is rather towards stocks that I would be very cautious, and it is on gold (and bitcoin) that I would be overweight.

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