Breaking news: The DOW rose 846 for the week ending February
7. This week included more of the same – new index highs, political nonsense, more
QE, and desperate central banks levitating markets to prevent bubble implosions.
coronavirus expanded into a bubble of illness and deaths. Like all bubbles,
financial or otherwise, this one will expand, burst, collapse and cause
collateral damage. When will the “everything” bubble collapse? When will the
coronavirus be contained? How much damage will these bubbles inflict upon the
economy, people and personal savings? We don’t know. Stay tuned.
BUBBLES IN THE
PAST—WHAT HAPPENED? (weekly data)
Market Low Date High Date Subsequent Loss
100 956 Jan.
1998 4,691 Mar. 2000 82%
Silver 6 Jan. 1979 50* Jan. 1980 89%
Bitcoin 30 June 2011 19,343 Dec. 2017 69%
Bank 25 Mar.
2003 111 May 2007 84%
Microsoft 10 Dec.
1997 37 Dec. 1999 62%
in 1929 137 Apr. 1926 380 Aug. 1929 89%
Oil 53 Jan. 2007 145 July. 2008 75%
Palladium 180 Feb.
2005 572 Feb. 2008 71%
JDSU 70 Oct. 1998 1,200 Mar. 2000 100%
Apple 0.41 Dec. 1997 4.30 Mar. 2000 79%
GRAPHS –EXAMPLES OF PAST BUBBLES AND COLLAPSES
GRAPHS –EXAMPLES OF CURRENT BUBBLES AND COMING COLLAPSES
WHY DO BUBBLES
Bubbles expand for many reasons, but they always include:
a. TOO MUCH EASY CREDIT. Examples: Central bank levitations via massive QE, fractional reserve commercial banking, leverage in futures markets, and margin loans for stocks.
b. COMPELLING STORIES WE WANT TO BELIEVE. Examples: House prices always go up, the Fed has our back, the Greenspan put, the Powell put, a strong economy, we owe the debt to ourselves, unlimited potential with internet stocks, more eyeballs mean huge profits, tax the rich, global warming, lots of cash on the sidelines, fear of missing out (FOMO), low interest rates forever, government stimulus, shovel ready projects, necessary wars, anonymous crypto currencies, the damage will be contained, the virus will not spread… and the beat goes on, but it’s mostly false.
“Find the Trend Whose Premise is False and Bet Against
- Continual growth on a finite planet. Obviously
false. Trouble coming.
- Debt and deficits don’t matter – they can always
grow larger. Clearly false. Hyperinflation anyone?
- The Fed will digitally create trillions of currency
units with minimal long-term consequences. Not true.
- The shale oil boom produces no profits while
creating massive and expanding debt. What could go wrong?
Hugh Smith “The
Pandemic Isn’t Ending”
more authorities try to mask reality to maintain confidence, the more they
destroy credibility, confidence, trust and faith. Once these intangibles are
lost, the loss of confidence is self-reinforcing.
isn’t just an economic number. It’s a self-reinforcing loss of confidence. Do
you really think quarantining 400 million people will stop the pandemic?”
- Bubbles always implode. Many bubbles
exist now in early 2020. Expect implosions. There will be collateral damage.
- The Fed and other central banks blow bubbles by
creating excessive credit—new currency units—and manipulating interest rates
too low via their central planning. When has central planning by a team of
bureaucrats (or economists) worked well for anyone but the political and
- The coronavirus pandemic will have direct and
secondary consequences for individuals, countries, markets and economies. The
risk of bubble implosions will increase. Coronavirus consequences could be the
“pin” that pops many bubbles. The virus will be used as a believable
scapegoat for a stock market crash, currency weakness and failing central bank
- Ayn Rand: “We can ignore reality, but we can’t
ignore the consequences of ignoring reality.”
We can ignore bubbles and pandemics, but we can’t ignore the consequences
of bubbles and pandemics.
- Gold will be the “last man standing.”
Central banks, “inflate or die” policies, and their fake currencies cannot
protect markets from a spreading virus, shale oil depletion rates, overwhelming
debt, ever-increasing losses, diminishing solar output, unwise governments,
failed banking policies, environmental destruction, and expensive wars.
will sell gold and silver in exchange for fiat currency units that devalue
every year. Bubble implosions will increase global demand for real money—gold
and silver. Protect your savings and net worth with real money.
The Deviant Investor
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