Making Sense Of The Sudden Market Plunge
What this means is that the traditional summer lull in financial markets has turned August into an unusually active and interesting month. August, it appears, is the new October.
Markets are quite possibly in crash mode right now, although events are unfolding so quickly – currency spikes, equity sell offs, emerging market routs and dislocations, and commodity declines – that it’s hard to tell for sure. However, that’s usually the case right before and during big market declines.
Before you read any further, you probably should be made aware that, at Peak Prosperity, our market outlook has been one of extreme caution for several years. We never bought into so-called “recovery” because much of it was purely statistical in nature, and had to rely on heavily distorted and tortured ‘statistics’ to be believed. Okay, lies is probably a more accurate term in many cases.
Further, most of the gains in financial assets engineered by the central banks were false and destined to burstbecause they were based on bubble psychology, not actual returns.
Which bubbles you ask? There are almost too many to track. But here are the main ones:
- Corporate bond bubble
- Corporate earnings bubble
- Junk bond bubble
- Sovereign debt bubble
- Equity bubbles in various markets (US, China) and sectors (Tech, Biotech, Energy)
- Real estate bubbles, especially in the commodity exporting countries
- Central bank credibility bubble (perhaps the largest and most dangerous of them all)
What’s the one thing that binds all of these bubbles together? Central bank money printing.
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