Robert Shiller, not always our favorite economist here, is warning that the stock market is looking particularly bubbly. This isn’t a huge story except that talk of a bubble is now coming from one of the accepted shamans of Keynesianism. Shiller also called the tech bubble and housing bubbles accurately. His book Irrational Exuberance is a classic.
Not sure when this screen shot was taken today but you get the point.
A few posts ago we made the point that we should all count our lucky stars that we were not some newly middle class guy in China who leveraged his home to play the stock market.
If however you are that guy and you are reading this know that at the very least you have our sincerest sympathies. Though that doesn’t pay the margin call we understand.
The interviewer rightly points out that Stockman has been calling for a crash for a long time. In March he announced to the world that a crash was imminent and that he was entirely in cash. The market has been up dramatically since that call.
But fundamentally Stockman is right. All the money created by the world’s central banks is floating around out there in financeland (it might not have found its way into YOUR pockets but many Wall Street pockets are full) and that money is tinder just waiting to catch fire.
Sadly it probably is the most important factor. Stocks used to reflect the health or lack of health of commerce. Now though, more than ever, the market flexes on the whims of the central planners in Washington and that is a shame.
Professor Jeremy Siegel thinks it is.
It’s been an interesting if not fun ride up in the markets. Through a 6-year economic slowdown stock markets have rallied and rallied and rallied. Everyone assumes that the Fed is backstopping the market, that it has to for political reasons. So people have piled in even though earnings and economic indicators have been generally lackluster. Sounds almost like “house prices never go down.”
But not quite.
Interesting things happening in the markets. We’ve had a dozen or so of these flare ups over the last few years so we’ll see how this one goes. But it’s definitely one of those times where brokers aren’t going on vacation.
Some of the secret history anyway.
Take this with a grain of salt, but it is an interesting chart for sure.
The economic tide has been going out for quite a while, but the pace has just quickened in emerging markets – big time. Things have become quite unsteady and no one knows whether the current instability will trigger something broader in the developed economies. China is slowing. Japan has horns locked with China economically and increasingly politically. Europe is catching its breath before another wave rolls through.
Oh the horror, the Fed is only dumping $65 billion into markets next month. Boo hoo. We want our free money!
In an earlier post we mentioned how Washington DC has thrown in with Wall Street. And why not? That’s where the money is, where it continues to flow, and through our current system of crony capitalism will continue to flow until people say “enough.”
All waves fall on themselves. Some peter out slowly and evenly over soft sand. Others crash down in violence and fury over fire coral reefs. But every wave ends and the wave in the stock market will end too.