I have written twice this year about the ever growing stock market bubble, providing ample warning that all good things in economics come to an end, just as all bad things do. The current bull stock market cycle, now one of the longest on record, is no exception.
Now I don’t pretend to have the crystal ball to tell everyone exactly when the party will end, but all signs are pointing to a larger probability of a lower stock market in the future, instead of an ever-rising one.
This morning, CNBC published the following article about the current state of “stock market exuberance”, and the fact that it now sits at a 40-year high.
Most people know that when everyone is excited about stocks, that’s the time to sell. The market has nearly peaked, and exuberance is more than stretched. Well, clearly, we are there!
As I have written before, I am also particularly concerned about the debt levels in our economy. The credit/bond markets are over 100x the size of the stock market, and when the credit markets “sneeze”, the stock markets get violently ill. The credit markets are at their highest levels going all the way back to the year 1800, and it won’t take much to get bond investors running for the exits! Never before have interest rates been this low, and bond prices this high.
If one or the other of these two markets begins to crack (stocks or bonds), they will BOTH come down hard, and for a very long time. After all, these bubbles took many years to build. They will take years to unwind.
As I have stated before, I think gold a good place to be right now.