Source: Wikimedia
Dear Diary,
The Dow plunged 51 points yesterday. Gold surged $37.10 – or 3.1% – to settle at $1,232 an ounce.
The US stock market is “hideously expensive,” says value investor James Montier at Boston-based investment firm GMO.
He’s not wrong about that. But we have a feeling it’s going to be even more hideous before this story reaches its end.
When it is so hideous that to look upon it sends us running to a public toilet and retching, that is when it will be most loved by everyone.
This is the story of human hubris (a classic in Greek drama), wherein man oversteps his boundaries and brings down upon himself the fury of wrathful gods.
Yellen, Draghi, Kuroda, Carney, Zhou – the protagonists think they are “wiser than God.”
They think they know that people would be better off spending their money rather than saving it… that prices should be rising not falling… and that, by propping up the price of financial assets with credit easing, they will cause real growth and real prosperity.
A Central Bank “Near-Bubble”
“This is the first central bank sponsored near-bubble,” says Montier.
He calls it a “near bubble.” We don’t know if he anticipates another bigger, huger, gigantesque double bubble full of trouble.
But we do.
That’s what we’ll have when we get to the climax of this story. But not right away. We’ll have to wait for another crisis to spook the Fed into a new round of reckless and asinine activity.
Then… hold on to your hats!
In the meantime, around the world financial authorities are using the same duct tape and wads of cheesecloth to keep the crowds quiet.
Interest rates are suppressed. Stock and bond prices are distorted. And the world’s economy is perverted with trillions of dollars, yen, euro, pounds and renminbi – all created out of thin air.
