Is the Stock Market Ready to Collapse

With the stock market at all time highs in a weak economy, is the stock market fixing to collapse?

Podcast Summary

0:00-4:14 Introduction

The Housing Market is Dead.

4:14-11:49 Even though interest rates are low and the weather is fine, the housing market is not improving. House prices are too expensive, sales volume is down and the labor market is poor.

The housing “recovery’ has been a media event ever since it never happened.

Janet Yellen on housing:

“The housing sector, however, has shown little recent progress. While this sector has recovered notably from its earlier trough, housing activity leveled off in the wake of last year’s increase in mortgage rates, and readings this year have, overall, continued to be disappointing.” “The recent flattening out in housing activity could prove more protracted than currently expected rather than resuming its earlier pace of recovery.”

Two Charts that Show the Housing “Recovery is a Farce

Attentions of the economic recovery cheerleaders have shifted from housing to the labor market.

There is not much good in the economy but the media still touts a recovery in the labor market.

Initial jobless claims -fewer people left to fire.

The Producer Price Index was up yet the Fed is complaining that we don’t have enough inflation. More inflation just means prices go higher and doesn’t lead to more economic activity. Indeed, higher prices leads to less.

If prices rise, people spend and consume less and since the U.S. economy’s GDP is 70% consumer spending, rising prices will make the GDP worse. Housing is too expensive. Non farm payroll numbers were touted as success even though 500K+ full time jobs were lost.

Discussion of how the Fed and media brush aside negative economic news and insist the economy will accelerate in the coming months.

Janet Yellen and the Fed on Bubbles

11:49-13:56- discussion of Janet Yellen’s view on the Fed’s role in bursting bubble. None. They can only inflate them. Yellen mentioned, however, that there may be bubbles in bio tech and social media stocks. This was Yellen’s Greenspan (“irrational exuberance”) moment of questioning asset values. Discussion of the price/earnings of the Russell Index.

Is the Stock Market Ready to Collapse?

13:56-18:26 discussion of the tenuous position of the stock market with sky high valuations and no underlying fundamentals to support them.

How a Stock Market Crash Will End The Economic Recovery

What Happens after the Next Stock Market Crash?

The stock market could do down on a moment’s notice and stay down because the companies are not doing that well and will do worse after a stock market crash, so a swift rebound may not happen even if the Fed attempts to reflate. The Fed appears to be trying to talk down the market a little perhaps to avoid a larger correction or crash.

Discussion of the many ways the Fed manipulates markets. The Fed creates confidence in the market by constantly supporting it.

Ukraine Plane Crash, U.S. Sanctions on Russia and Their Impact

BRICS vs. the Dollar

18:26 -23:25 Discussion of how the U.S. is trying to protect the dollar by cutting out QE and threatening to raise interest rates. The U.S. has also fined France for dealing with Iran a country that does not use the dollar. The U.S. is making it difficult and expensive to deal in the dollar which may backfire. FACTA is also a burden for banks. Discussion of the creation of a BRICS bank to compete with the dollar.

The United States’ rift with Russia has pushed them away from the dollar and towards the Chinese. Discussion of the U.S. frayed relations with Saudi Arabia who provides the underpinning for the U.S. Dollar. Printing $4 trillion under QE further antagonized dollar users. The dollar demise won’t be a collapse but a slow decline.

Downplaying Events in Ukraine Portugal and Bulgaria

23:25-25:00 Discussion how the State Department did not include the Ukraine plane crash in its daily press briefings. The Fed generally gives an accurate depiction of the state of the economy but too often gives overly optimistic projections; the media claims the current economy is wonderful and will get even better!
Discussion of how the press downplayed the default of the holding company of the largest Portuguese bank and the collapse of the fourth largest Bulgarian bank.

Effect of the Default of the Holding Company of the Largest Portuguese Bank

25:00-26:45 there will be cascading effects from this default. Reuters reported that Portugal Telecom is out $1 billion because of the default and lost a large stake in a merger as a result. There will be more effects to come. One default leads to many defaults.
The media is reluctant to give a realistic assessment of the state of things.

The Media’s Hate Relationship With Gold

26:45-30:20 Discussion of the incessant negative gold media coverage. Why those in power do not want gold or silver to rise, especially in light of geo political risk as it is a threat to the dollar.

Reuters reported on gold just prior to time the Malaysian plane was shot out of the sky over Ukraine:

“Overall physical demand is rather low and the actual environment has not changed significantly,” Heraeus trader Alexander Zumpfe said. “Interest rates in the U.S. are still expected to rise in the foreseeable future, inflation is not in sight, southern European banking jitters are calming down and geopolitical tensions are not looking as if they would spread.”

They removed it after the plane went down and replaced it with this:

“These events are very fast moving. If it I doesn’t escalate further, we could conceivably see prices fall back down. ”

The story of the day HAD to be about weakness in gold.

GOLD!

@DoubleEagle49 inflation is not in sight, southern European banking jitters are calming down and geopolitical tensions are not LOLOLOL

— Smaulgld (@Smaulgld) July 17, 2014

Ron Paul and Elizabeth Warren vs. The Fed

30:20-35:48 discussion of what the Fed sees as risks to their growth forecast. Discussion of Elizabeth Warren’s “grilling” of Janet Yellen. Discussion of the difference between REAL questioning of the Fed, like Ron Paul vs the faux populism fake theater questioning of Elizabeth Warren. See Ms. Warren and Janet yuck it up after the hearing. Discussion of the Fed’s phony transparency exemplified by their new press conference format. They voluntarily tell the truth when they feel like it which is like lying.

Whither Housing? and Inflation?

35:48-41:22 Discussion of the housing “recovery” being removed from the overall economic “recovery” talking points – even though housing was supposed to be the basis of the economic recovery.

The Fed still denies inflation exists with Yellen calling it “noisy” and insisting that the Fed maintain “hoily accalmaudaytif paulicy”.

Discussion of inflation- only salt hasn’t gone up. Discussion of “averaging” inflation targets and how traders parrot the Fed’s talking points.

Breaking Point for the Stock Market

41:22-46:10 Market participants certainly know they are participating in a farce. When does the market stop playing along. When is “dot bomb!” called? What happens to the economy when the market crashes? Will investors dive back in expecting a quick rebound?

What Happens after the Next Stock Market Crash?

The stock market is at an all time high but the US economy is nowhere near its all time peak. Sales are down and its not the weather.

Earnings Season/Merger Activity

46:10- 51:00 banks show strong earnings on investment banking and casino rigging. Earnings offset by legal costs. Increased merger activity is not a sign of a healthy economy, jobs are lost and most the money made goes to bankers, lawyers, accountants and company executives and most mergers fail.

Massive Stock Market Collapse?

51:00 prospects for a market collapse are discussed. Bubble companies with no earnings can not be blown back up especially in a post crash economy. Companies will fall to fair value and drift lower as their prospects decline. The Fed would like to ease some froth out of the market to avoid a larger crash. Discussion of central planning and their involvement in the stock market which is close to price fixing.

Is the Stock Market Ready To Collapse?