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Guest Post: The Stock Market Has Officially Entered Crazytown Territory

Tyler Durden's picture




 

Submitted by Michael Snyder of The Economic Collapse blog,

It is time to crank up the Looney Tunes theme song because Wall Street has officially entered crazytown territory.  Stocks just keep going higher and higher, and at this point what is happening in the stock market does not bear any resemblance to what is going on in the overall economy whatsoever.  So how long can this irrational state of affairs possibly continue?  Stocks seem to go up no matter what happens.  If there is good news, stocks go up.  If there is bad news, stocks go up.  If there is no news, stocks go up.  On Thursday, the day after Christmas, the Dow was up another 122 points to another new all-time record high.  In fact, the Dow has had an astonishing 50 record high closes this year.  This reminds me of the kind of euphoria that we witnessed during the peak of the housing bubble.  At the time, housing prices just kept going higher and higher and everyone rushed to buy before they were "priced out of the market".  But we all know how that ended, and this stock market bubble is headed for a similar ending.

It is almost as if Wall Street has not learned any lessons from the last two major stock market crashes at all.  Just look at Twitter.  At the current price, Twitter is supposedly worth 40.7 BILLION dollars.  But Twitter is not profitable.  It is a seven-year-old company that has never made a single dollar of profit.

Not one single dollar.

In fact, Twitter actually lost 64.6 million dollars last quarter alone.  And Twitter is expected to continue losing money for all of 2015 as well.

But Twitter stock is up 82 percent over the last 30 days, and nobody can really give a rational reason for why this is happening.

Overall, the Dow is up more than 25 percent so far this year.  Unless something really weird happens over the next few days, it will be the best year for the Dow since 1996.

It has been a wonderful run for Wall Street.  Unfortunately, there are a whole host of signs that we have entered very dangerous territory.

The median price-to-earnings ratio on the S&P 500 has reached an all-time record high, and margin debt at the New York Stock Exchange has reached a level that we have never seen before.  In other words, stocks are massively overpriced and people have been borrowing huge amounts of money to buy stocks.  These are behaviors that we also saw just before the last two stock market bubbles burst.

And of course the most troubling sign is that even as the stock market soars to unprecedented heights, the state of the overall U.S. economy is actually getting worse...

-During the last full week before Christmas, U.S. store visits were 21 percent lower than a year earlier and retail sales were 3.1 percent lower than a year earlier.

-The number of mortgage applications just hit a new 13 year low.

-The yield on 10 year U.S. Treasuries just hit 3 percent.

For many more signs like this, please see my previous article entitled "37 Reasons Why 'The Economic Recovery Of 2013' Is A Giant Lie".

And most Americans don't realize this, but the U.S. financial system and the overall U.S. economy are now in much weaker condition than they were the last time we had a major financial crash back in 2008.  Employment is at a much lower level than it was back then and our banking system is much more vulnerable than it was back then.  Just before the last financial crash, the U.S. national debt was sitting at about 10 trillion dollars, but today it has risen to more than 17.2 trillion dollars.  The following excerpt from a recent article posted on thedailycrux.com contains even more facts and figures which show how our "balance sheet numbers" continue to get even worse...

Since the fourth quarter of 2009, the U.S. current account deficit has been more than $100 billion per quarter. As a result, foreigners now own $4.2 trillion more U.S. investment assets than we own abroad. That's $1.7 trillion more than when Buffett first warned about this huge problem in 2003. Said another way, the problem is 68% bigger now.

 

And here's a number no one else will tell you – not even Buffett. Foreigners now own $25 trillion in U.S. assets. And yet… we continue to consume far more than we produce, and we borrow massively to finance our deficits.

 

Since 2007, the total government debt in the U.S. (federal, state, and local) has doubled from around $10 trillion to $20 trillion.

 

Meanwhile, the size of Fannie and Freddie's mortgage book declined slightly since 2007, falling from $4.9 trillion to $4.6 trillion. That's some good news, right?

 

Nope. The excesses just moved to a new agency. The "other" federal mortgage bank, the Federal Housing Administration, now is originating 20% of all mortgages in the U.S., up from less than 5% in 2007.

 

Student debt, also spurred on by government guarantees, has also boomed, doubling since 2007 to more than $1 trillion. Altogether, total debt in our economy has grown from around $50 trillion to more than $60 trillion since 2007.

So don't be fooled by this irrational stock market bubble.

Just because a bunch of half-crazed investors are going into massive amounts of debt in a desperate attempt to make a quick buck does not mean that the overall economy is in good shape.

In fact, much of the country is in such rough shape that "reverse shopping" has become a huge trend.  Even big corporations such as McDonald's are urging their employees to return their Christmas gifts in order to bring in some much needed money...

In a stark reminder of how tough things still are for low-income families in America, McDonalds has advised workers to dig themselves "out of holiday debt" by cashing in their Christmas haul.

 

"You may want to consider returning some of your unopened purchases that may not seem as appealing as they did," said a website set up for employees.

 

"Selling some of your unwanted possessions on eBay or Craigslist could bring in some quick cash."

This irrational stock market bubble is not going to last for too much longer.  And a lot of top financial experts are now warning their clients to prepare for the worst.  For example, David John Marotta of Marotta Wealth Management recently told his clients that they should all have a "bug-out bag" that contains food, a gun and some ammunition...

A top financial advisor, worried that Obamacare, the NSA spying scandal and spiraling national debt is increasing the chances for a fiscal and social disaster, is recommending that Americans prepare a “bug-out bag” that includes food, a gun and ammo to help them stay alive.

 

David John Marotta, a Wall Street expert and financial advisor and Forbes contributor, said in a note to investors, “Firearms are the last item on the list, but they are on the list. There are some terrible people in this world. And you are safer when your trusted neighbors have firearms.”

 

His memo is part of a series addressing the potential for a “financial apocalypse.” His view, however, is that the problems plaguing the country won't result in armageddon. “There is the possibility of a precipitous decline, although a long and drawn out malaise is much more likely,” said the Charlottesville, Va.-based president of Marotta Wealth Management.

So what do you think is coming in 2014?

 

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Fri, 12/27/2013 - 16:46 | 4279987 hedgeless_horseman
hedgeless_horseman's picture

 

 

Everything seems to be going super.  Bat-Suit Bernanke has pulled us out of a nosedive, and the markets are soaring...


DISCLOSURE STATEMENT: LONG ACME

Fri, 12/27/2013 - 16:49 | 4280023 MsCreant
MsCreant's picture

Are you looking forward to seeing Janet in her "Fiat Woman" suit? 

Fri, 12/27/2013 - 16:53 | 4280038 hedgeless_horseman
hedgeless_horseman's picture

 

 

Janet and the Fed Balance Sheet have achieved escape velocity...

... $4,074,916,000,000 and gravity has been conquered!

Fri, 12/27/2013 - 16:54 | 4280052 Chris Jusset
Chris Jusset's picture

To quote from above:

Stocks are massively overpriced and people have been borrowing huge amounts of money to buy stocks.  These are behaviors that we also saw just before the last two stock market bubbles burst.  ... Don't be fooled by this irrational stock market bubble.

The Fed is extremely desperate to maintain the house-of-cards at any cost, even if this means deliberately blowing bubbles.

Fri, 12/27/2013 - 16:59 | 4280078 El Vaquero
El Vaquero's picture

Yeah, but who is this "Bubbles" character, and why would he/she want Ben's lips, then Janet's lips all over his/her junk?

Fri, 12/27/2013 - 17:48 | 4280208 negative rates
negative rates's picture

It's time to tap the non-linear A students and say it was one big mistake, or a cruel joke played by, you guessed it, a big player.

Fri, 12/27/2013 - 18:26 | 4280311 Boris Alatovkrap
Boris Alatovkrap's picture

Always there is greater fool... until is not. Behold, human waste enter proximity of rotational planar apparatus.

Sat, 12/28/2013 - 12:16 | 4281646 Town Crier
Town Crier's picture

And now, the excited southerner gives his economic forecast.  "Market... over-bought... government... QE... not reliable... housing bubble... Lehman Brothers... 10 year Treasury... going to end badly... dead cat bounce.  Hooooooooooo!"

Fri, 12/27/2013 - 17:19 | 4280129 nightshiftsucks
nightshiftsucks's picture

Exactly,and they will not sit idily by while it collapses.

Fri, 12/27/2013 - 18:29 | 4280321 Boris Alatovkrap
Boris Alatovkrap's picture

Uber rich class is isolate behind gated community, luxury yacht, country side villa, bullet proof limo. After careful calculation zombie class is kill other zombie for scrap of meat, hand full of bean. Uber rich is sit and watch chaos reign over close circuit television feed.

Fri, 12/27/2013 - 19:55 | 4280481 Savyindallas
Savyindallas's picture

maybe in New York   -In texas the zombies have AR-15s and much more. Once they scale the fences, the uber rich better have some very fast bullet proof helicopters to escape to New York.  

Fri, 12/27/2013 - 19:57 | 4280490 Scarlett
Scarlett's picture

Boris, sad to agree with you.  

Dangerously Rich Billionaire Super Security 2012 (Part 1/2)

https://www.youtube.com/watch?v=HquUL5twUQA

Sat, 12/28/2013 - 12:24 | 4281654 Crash Overide
Crash Overide's picture

"After careful calculation zombie class is kill other zombie for scrap of meat, hand full of bean. Uber rich is sit and watch chaos reign over close circuit television feed."

 

Like a game for the hungry?

Sat, 12/28/2013 - 06:39 | 4281373 caShOnlY
caShOnlY's picture

The Fed is extremely desperate to maintain the house-of-cards at any cost, even if this means deliberately blowing bubbles.

The cost is the next bubble must be bigger.  Once a bubble is blown they cannot stop.  This is why the FED WILL NOT TAPER!!!  it can't! 

In the 1990s we had a credit bubble that resulted in the crash of 2001.  In 2002 the housing bubble started.  In 2008 the final bubble was starting to inflate - government bubble.   There is no bubble to inflate after this one collapses as it takes the currency out with it.   What were the seeds of each bubble? "LIQUIDITY" or CREDIT.  CREDIT blown from the abuse of FIAT.   If you really can't see what is coming, you are FUCKED!! 

Fri, 12/27/2013 - 17:08 | 4280101 wisehiney
wisehiney's picture

Mr Spock requests that you send that Klingon skank biotch back where she came from!

Fri, 12/27/2013 - 17:13 | 4280109 wisehiney
wisehiney's picture

And all this science, I don't understand
It's just my job five days a week
A rocket man, a rocket man!

 

 

Fri, 12/27/2013 - 18:20 | 4280285 yogibear
yogibear's picture

And the Fed's mark to fantasy accounting.

Plenty of off-balance sheet garbage.

Fri, 12/27/2013 - 16:54 | 4280040 Chris Jusset
Chris Jusset's picture

Janet the master bubble blower.

Fri, 12/27/2013 - 16:52 | 4280043 Xanadu_doo
Xanadu_doo's picture

2014?

 

Let's just say "long vasaline" and leave it at that.

Fri, 12/27/2013 - 16:42 | 4279999 dobermangang
dobermangang's picture

Stocking up on food, guns and ammo is good advice. 

Fri, 12/27/2013 - 16:49 | 4280024 Jannn
Fri, 12/27/2013 - 17:13 | 4280108 texas sandman
texas sandman's picture

Just place that cursor on the BTFATH icon on you e*trade screen and commence to clicking.  

 

Fri, 12/27/2013 - 17:54 | 4280224 Pure Evil
Pure Evil's picture

I know, I know................why does Michael Snyder have to be such a Debbie Downer when its the end of the year and we're coming up on New Years Eve.

Everybody should just party likes it 1929.........oops, typo, 1999.

Fri, 12/27/2013 - 16:40 | 4280000 wisehiney
wisehiney's picture

Was that the french youtube tax collector? 

Fri, 12/27/2013 - 17:56 | 4280231 Pure Evil
Pure Evil's picture

Naw........that's the french lube-tube tax collector.

 

Get ready for the fist fucking in 2014.

Fri, 12/27/2013 - 16:45 | 4280006 666
666's picture

"So what do you think is coming in 2014?"

 

I unfortunately think more of 2013, that's what; however, I hope I am dead wrong and the crash comes instead.

Fri, 12/27/2013 - 16:44 | 4280013 MsCreant
MsCreant's picture

The more of these articles I see, the more I think this crap is going to be propped up for a while. When we don't see them any more, then...

Fri, 12/27/2013 - 17:04 | 4280085 Skateboarder
Skateboarder's picture

I think we can expect companies with negative income to saturate the market before anyone gets their head out of their ass enough to notice something has happened.

Not enough leverage yet. This is just the baby stage.

Fri, 12/27/2013 - 18:32 | 4280320 Panafrican Funk...
Panafrican Funktron Robot's picture

Yes, I think people are misunderstanding what the taper meant.  Here is what was said:

1.  We'll probably start tapering in January.  Unless "the data" (read: the S&P 500) says otherwise.

2.  In the event of a taper, we'll still be pumping 75 billion dollars into the markets.  That's 900 billion a year.  If that's as small as the "Bernakayellen" put is going to get, good luck being short.

Fri, 12/27/2013 - 17:30 | 4280160 Rafferty
Rafferty's picture

The fat lady is clearing her throat but isn't yet ready to sing.  Just watch, this LSD trip has enough momentum to go on for quite a while.  But when it does blow it'll be epic.

Fri, 12/27/2013 - 16:45 | 4280015 Save_America1st
Save_America1st's picture

If you like your bat suit...you can keep your bat suit.  Until you crash and burn, that is...

Fri, 12/27/2013 - 17:12 | 4280027 akak
akak's picture

I can just picture RobotTrader out there somewhere, engaged in autoerotic asphyxiation while watching "Fast Money" on CNBC.

Fri, 12/27/2013 - 16:50 | 4280045 Peter Pan
Peter Pan's picture

This tower of Babel still has a few floors to go.
In fact it will shoot higher ss we enter into fantasy world.

Sat, 12/28/2013 - 05:27 | 4281336 Drifter
Drifter's picture

Thanks for posting the charts proving what I've been saying all along, we're headed for hyperinflation then currency collapse.

$80 billion of money printing every month to keep juicing the worldwide bond market.  Probably more like $200 billion in reality, most of it "off the books".

But let's go with the $80 billion they acknowledge.  How long can Fed do that before the rest of the world says "enough of this nonsense" and walks away from the US dollar?

I think it won't be much longer, and when it does happen it will be suddenly, like overnight or within a week, which means it's a coordinated action by multiple nations, which the US military won't be able to stop.

So I wouldn't short stocks.  I believe we'll  see 20,000 dow then 25,000 then 30,000 and so on, right on thru worldwide rejection of USD, loss of reserve status, then hyperinflation as $80 billion goes to $800 billion and higher.

 

Sat, 12/28/2013 - 12:28 | 4281669 Crash Overide
Crash Overide's picture

The FED, banking criminals control everything, they will crash it when they are ready, until then... get your scraps and get ready!

Fri, 12/27/2013 - 16:55 | 4280053 insanelysane
insanelysane's picture

Is a crash inevitable?  Why??  I believe that fiat currency will crash long before fiat stocks.  Stocks only needed to be relative to some value in a rational, open market.  In a closed market, the value of a stock can be what ever the co-conspirators make it.  Think about it.

When the dot com market crashed and when the credit default swap market crashed, retail investors were a big part of the volume.  Retail panicked and the prices plummeted.

However, with retail gone, the big players controlling the market can control the price of stocks, at least the indice stocks.  Just like with libor and gold and what ever else, you just need a few people on the phone each day, exchanging price information and then trading stocks back and forth at those prices.  Hell, you can program algos to not let prices go down, in the case of stocks, or up in the case of gold.  You just buy or sell volume at the right price point to drive the price to where you and your friends want it.  Trivial, actually.

Fri, 12/27/2013 - 16:57 | 4280055 seek
seek's picture

I think 2014 is the year that the guys with balls of steel will actually make money on shorts, especially shit like Twitter.

Fri, 12/27/2013 - 16:55 | 4280060 chunga
chunga's picture

.

This reminds me of the kind of euphoria that we witnessed during the peak of the housing bubble.....But we all know how that ended, and this stock market bubble is headed for a similar ending.

Yeah, a small handful of cronies ended up with all the money. Most everybody else got fucked and/or foreclosed.

Fri, 12/27/2013 - 16:58 | 4280064 webspin
webspin's picture

It's only crazy if you have a childs view of maket valuations. I've been trading since 1981 and following the market since 1974 as a 14 year old. The market's always right.

Fri, 12/27/2013 - 17:04 | 4280090 ebworthen
ebworthen's picture

Thanks for giving me a Friday afternoon giggle.

Fri, 12/27/2013 - 17:37 | 4280174 Rafferty
Rafferty's picture

The market is rigged, both actively (cf. The Squid) and passively (i.e. insider trading).  The small private investor is like a shrimp in a pool of piranhas.

Fri, 12/27/2013 - 22:38 | 4280834 webspin
webspin's picture

The paranoid delusional. Claims the markets Rigged but illogically bets against the "all powerfull" Riggers. Perfectly sane, perfectly normal...

 

"Hey that rotette table is rigged to come up black!"

    "Those bastards! Now I know my bets on red will all loose"

"Don't worry, we'll outfox them and bet on green"

Fri, 12/27/2013 - 17:43 | 4280191 NidStyles
NidStyles's picture

Sure it is always right... Especially when it crashes... There are so many fallacies in that statement that I would not have the time to post them all before I die of old age.

Sat, 12/28/2013 - 12:39 | 4281693 Crash Overide
Crash Overide's picture

"I've been trading since 1981 and following the market since 1974 as a 14 year old. The market's always right."

 

Really?

Fri, 12/27/2013 - 17:01 | 4280083 ebworthen
ebworthen's picture

"I am Elmer J. Fudd, I own a mansion and a yacht."

http://www.dailymotion.com/video/xc94j_elmer-j-fudd-millionaire_news

(00:55 seconds, link opens in new window/tab)

Fri, 12/27/2013 - 17:48 | 4280213 negative rates
negative rates's picture

But not an oil rig.

Fri, 12/27/2013 - 17:06 | 4280092 MrBoompi
MrBoompi's picture

Why are you blaming ordinary investors?  We aren't the ones pumping newly created currency into the stock market.  In fact, we aren't the ones who decide anything as it pertains the the cost of commodities, stocks, housing, food, or energy.  We used to, back when supply and demand meant something.  But not any more.  Don't blame us for trying to eke out a little gain because we can't make anything in a goddamned savings account.

 

 

Fri, 12/27/2013 - 17:16 | 4280120 ebworthen
ebworthen's picture

Exactly.

Most Americans who have anything in stocks have it trapped in a 401K or I.R.A., being used as leverage by the "investment firms" supposedly helping them to "save for retirement" (they're all blood sucking leeches if you ask me).

Fri, 12/27/2013 - 17:07 | 4280097 crazytown
crazytown's picture

They said my name! Woo hoo!

Fri, 12/27/2013 - 17:08 | 4280102 TheRideNeverEnds
TheRideNeverEnds's picture

It is almost as if Wall Street has not learned any lessons from the last two major stock market crashes at all.

 

To the contrary, they learned the lesson all too well.  If they lose we the taxpayers will just bail them out and if they win they get to keep it all.    

Fri, 12/27/2013 - 17:36 | 4280176 Rafferty
Rafferty's picture

Exactly.

Fri, 12/27/2013 - 17:13 | 4280110 webspin
webspin's picture

To the crazy, everyone else seems insane. I'd say that anyone wasting the last 5 years complaining about how the market won't conform to their demands it collaps are the crazy ones.

Fri, 12/27/2013 - 19:44 | 4280468 Savyindallas
Savyindallas's picture

Right  -the next crash may not occur for another month or 2-maybe six  -you'd be a fool to get out now.  Even when it starts, there will be one or more BTFD's before it all collapses- I'm sure you'll have time. Just listen to Cramer. He's been spot on the last 5 years.  

Fri, 12/27/2013 - 17:31 | 4280154 MopWater
MopWater's picture

My biggest problem is trying to decide if I should spring for the semi-auto shotgun verus a pump.

Fri, 12/27/2013 - 17:41 | 4280189 10mm
10mm's picture

Get both. With the semi get mag feed so you will reloaad and back in fight. Pump as a back up. Vepr 12 very reliable.

Fri, 12/27/2013 - 18:20 | 4280281 MsCreant
MsCreant's picture

Edit: Misread gave bad feedback.

I do love the sound of racking it to greet a burglar up close and friendly.

Fri, 12/27/2013 - 17:46 | 4280210 hairball48
hairball48's picture

I like a pump gun...like I'm holding here.

A pump action is more reliable than a semiauto. Why do you think the vast majority of law enforcement as well as military units use pump guns?

Fri, 12/27/2013 - 18:01 | 4280245 10mm
10mm's picture

I would tend to agree with you, however the semi vepr is much improved over the saiga 12. And the cost is reflected.

Fri, 12/27/2013 - 18:59 | 4280380 chunga
chunga's picture

Letting the charge handle fly on the VEPR is not a very inviting sound either.

It's best to just buy both.

Fri, 12/27/2013 - 23:28 | 4280947 hairball48
hairball48's picture

Sure thing on the semi's.

It's really personal choice at the end of the day. I'm old. I've used pump guns for 50+ years...so I keep on keepin' on.

Fri, 12/27/2013 - 17:50 | 4280220 Jack Burton
Jack Burton's picture

The explaination is found in the money printing frenzy of the federal reserve. Does anyone believe stocks could soar like this without the backing of the 80-100 billion dollars a month the Fed prints and gets into the hands of bankers and hedge funders and wall-street trading firms? No secret here at all. Bernanke has said on any number of occasions that he seeks to create a wealth effect for the 1% so that theri wealth explosion will trickle down to the real economy in the form of butler, cleaner, dog walker, car washer, yard keeper, horse trainer, dish washer and doorman jobs. Bernanke has never lied, he has alwys said that wealth effect via a stock market bubble was his goal, and that those long the market are his target group for wealth transfer. Remember, Bernanke has stolen every dime of savers interest for 5 years now, those hundreds of billions of dollars savers would have gotten have instead been handed to bankers and market makers. It is simple, wealth transfer.

Fri, 12/27/2013 - 18:30 | 4280316 F22
F22's picture

I'm very happy with my Benelli M2 semi-auto 12 gauge....

Very reliable...5 rounds in the tube and one in the chamber...watch a youtube video on "binelli 3 gun competition" to see it preform..

Fri, 12/27/2013 - 19:46 | 4280466 El Vaquero
El Vaquero's picture

I've had an 11-87 since I was a kid.  The problems that I have had with it stem from one particular brand of shells:  Estate.  They work fine in a pump, but they are bad news for many semi autos. 

Fri, 12/27/2013 - 21:09 | 4280636 algol_dog
algol_dog's picture

The author would do well to save this article for next year, as well, for the same scenario will be playing out then, only with everything higher ...

Sat, 12/28/2013 - 03:15 | 4281260 wisehiney
wisehiney's picture

Magnificent old architect/builder Jacob Holt. No one ever built that Italianate/Greek Revival like the old master. You don't have to look at a book. Let's ride the "high" road, and I will show some of them to you in the last 2013 sunsets. If I get wobbly, please take the wheel before these arsinine fokkers on the local patrol gets me.

Do NOT follow this link or you will be banned from the site!