Everybody knows that the 2008 financial crisis was caused by “deregulation” and “greed,” right?
Except that it wasn’t.
A film titled The Bubble offers a non-partisan, critical examination of the policies and events that led to the biggest crash since World War II. Produced by Jimmy Morrison and co-written by Tom Woods, the film features a who’s-who of economic and financial experts including Jim Rogers, Jim Grant, Marc Farber, Doug Casey, Gene Epstein, David Stockman, Robert Murphy and Peter Schiff.
After the New York premiere of the film, Fox Business’ Liz Claman moderated a discussion with Gene Epstein, Jim Grant, Peter Schiff, David Tice, and Tom Woods. They talk about how they knew the crisis was coming and how it applies to today.
During a recent interview, President Donald Trump lamented the fact that we don’t have a bigger bubble and blamed Federal Reserve Chair Jerome Powell. Trump said that even though Powell was his pick, he “disagrees with him entirely.” He said that if it weren’t for the Fed, we’d have even stronger GDP growth.
Frankly, if we had a different person in the Federal Reserve that wouldn’t have raised interest rates so much, we would have been at least a point and a half higher. I’m not happy with what he’s done.”
As Peter Schiff pointed out in his podcast, this is the exact opposite of Trump’s position when he was campaigning. Now that he’s in the White House, Trump has turned into a Keynesian on steroids.
A rally in the last two days of the month was the lone bright spot in an abysmal October. It was the worst month for global equities in more than six years. Globally, stock markets lost 7.5%, their worst month since May 2012. Even with the late rally, it was the biggest monthly decline in the NASDAQ since ’08.
US stock markets closed up for the second straight day on the final day of the month. It was the first back-to-back days of gains in October. As Peter Schiff put it in his most recent podcast, it may have been Halloween, but the bulls had no fear.
Earlier this month, Peter Schiff wondered out loud if the twin deficits of government budget and trade could spark an October surprise. The month isn’t over yet, but it certainly hasn’t been a good one for stock markets.
The Dow is down 3.8% in October. And it’s the best performing of the stock indexes. The S&P 500 is down about 4.7% on the month. The NASDAQ has dropped 7.4%. Dow Transports have plummeted 8.3%. And the Russell 2000 has suffered a 9.2% decline. Now, if you want some good news, look at gold. It’s up about 3% this month. But all in all, there is a lot of gloomy news on Wall Street.
All of this doom and gloom led Peter to ask an important question in his latest podcast. How many canaries have to die in the coal mine before the mainstream wakes up?
The mainstream is giddy about the “booming economy.” We have rising stock markets, continued job creation and solid GDP growth. But Ron Paul recently appeared on CNBC Futures Now and threw a big bucket of cold water on the mainstream narrative. He said we are barreling toward a recession.
The bulls are running down Wall Street, but are bears lurking just around the corner? The mainstream doesn’t think so, but Peter Schiff does.
The Dow Jones climbed nearly 400 points Thursday after the Chinese announced a willingness to resume trade talks with the United States. No agenda was set, but the mere prospect of progress injected a shot of optimism in the market. Walmart also helped drive the surge, rising 10% after it beat earnings expectations.
In his most recent podcast, Peter asked the obvious question: why did the slimmest hope that we could see some resolution in the trade war give the stock market such a big bounce? It’s not like the market tanked because of the trade spat. In fact, everybody expects America to win. It’s the Chinese market that has been killed because of the trade war. It didn’t rally at all based on the prospect of talks
As Ron pointed out, it’s hard to keep up with all of the distortions in the marketplace thanks to a decade of Federal Reserve easy money.
How do you cover all the bubbles? The nature of what the Fed does by manipulating interest rates to lower than the market rate, everything has to be affected to some degree by a bubble and a distortion and a malinvestment, and excessive debt.”
We’ve written extensively about the stock market bubble blown up by artificially low interest rates and Federal Reserve quantitative easing. But stocks aren’t the only asset bubble out there. In fact, 2017 may go down as the year of the bubbles. And the new housing bubble is one that seems to be floating under the radar.
Financial manager James Stack has noticed it. He predicted the housing crash in 2005, and he told Bloomberg the housing market is flashing red again.
It is 2005 all over again in terms of the valuation extreme, the psychological excess and the denial. People don’t believe housing is in a bubble and don’t want to hear talk about prices being a little bit bubblish.”
Last Friday, all three major stock markets hit new record highs ignoring the storm clouds on the horizon. In his latest podcast, Peter Schiff said this reminds him of 1987.
The stock market is rising despite the fact that there are very, very negative factors that are building, that are hiding in plain sight, that everybody is ignoring.”
When it comes to the economy, most people aren’t worried about anything when there is everything to worry about.
Last month, we reported on a Bank of America survey that indicated the mainstream has started to acknowledge that the stock market is a big, fat, ugly bubble.
The latest fund-manager survey by Bank of America Merrill Lynch found that a record 48% of investors say the US stock market is overvalued. Meanwhile, 16% of investors say they are taking on above-normal risk. BoA chief investment strategist Michael Hartnett called this “an indicator of irrational exuberance.”
Now, even the government has taken notice, acknowledging asset prices are floating in dangerous bubble territory.