Economic Crisis News 2015-04-24
First let’s look at what’s likely in a bubble. The US Stock Market. The Nasdaq just broke its all-time high previously from march 2000. The S&P 500 is just points away from its all-time high and the Dow Jones is a few hundred points away from the march all-time high of 18,300. There’s plenty of room to grow as long as the ponzi scheme goes on, meaning we could see the Dow get to 20,000 and up, but this year is the 7th year of what has been a very aggressive bull market. The last 7 year bull market was from 2001 to 2008 and we all know how that turned out.
Not to mention the potential global shift to add the Chinese Yuan into the IMF SDR basket by October this year. What’s more interesting is the high US dollar index, which is also in a bubble. With the US having such a high and unmanageable debt, the US dollar should not be up 23% in 8 months time. If this were to fall in the short-term however it could mean higher stock market valuations. On a side, note a short-term lowering of the US dollar index is one cause for the short term increase in oil price over 57 dollars per barrel for WTI.
The housing Market in North America is still in an extreme bubble. A recent Economist magazine analysis concluded that Canada’s market is overvalued by 35 percent. When US Housing had a massive correction, Canada’s kept on rising. The US is still in a bubble in many areas as well; as evident by the home ownership rate still declining and is now back to 1995 levels; though this is also a sign of the overall depression, either way, homes are not affordable for Americans and prices do need to come down.
US Bonds are also likely in a bubble. Bond yields have lowered since 2007 even though we cannot realistically pay back all our debt without severely inflating the US Dollar.
And on to what’s not in a bubble. Cryptocurrencies, like bitcoin, are severely depressed compared to 16 months ago. Despite increasing mainstream adoption, Bitcoin and total cryptocurrency market cap is down 76%. Perhaps we’ll see a reversal when Final regulations are released by the end of May from New York’s Department of Financial Services.
Also not in a bubble are Gold at 1,190 per ounce and Silver at 16 dollars per ounce. These prices are at or below the cost of production. With Eastern nations buying up gold as insurance to mitigate a potential financial disaster and increasing use of technology requiring silver, these levels feel like bottoms. Keep in mind, if we do see a market crash a flight to cash could temporarily bring down precious metals prices before they go higher.