Rising Interest Rates Start Popping Bubbles

By John Rubino – Re-Blogged From Dollar Collapse

Towards the end of economic expansions, interest rates usually start to rise as strong loan demand bumps up against central bank tightening.

At first the effect on the broader economy is minimal, so consumers, companies and governments don’t let a slight uptick in financing costs interfere with their borrowing and spending. But eventually rising rates begin to bite and borrowers get skittish, throwing the leverage machine into reverse and producing an equities bear market and Main Street recession.

We are there. After a year of gradual increases, interest rates are finally high enough to start popping bubbles. Consider housing and autos:

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Inflation Target Regrets

By Michael Pento – Re-Blogged From Silver Phoenix

Beginning this fall, and continuing throughout 2019, the stock market’s performance should be vastly different from what has occurred during the prior few years. Indeed, the huge reconciliation of stock prices is arriving now.

The primary reason behind this is the watershed change in global central banks’ monetary policies. For years central banks had been keeping rates near 0%, or below, and at the same time printing over a hundred billion dollars’ worth of fiat currencies each and every month to purchase bonds and stocks. That is all changing now. According to Capital Economics, fourteen major global central banks are either in the process right now, or have indicated that they be will next year, in the process of raising interest rates. At the same time, QE on a global net basis will plunge from $180 billion per month at its peak during 2017, to $0 by December…and will then go negative in 2019.

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Scary US & Foreign Market Chrts

By Clive Maund – Re-Blogged From Gold Eagle

There are times in life when being alarmed is actually a healthy defense mechanism that gives you an advantage over the many for whom “ignorance is bliss.” This is one of those times.

The U.S. stock market is now at a dangerous unprecedented overbought extreme, as the charts that we will look at in this update make abundantly clear, after years of being wafted higher by a combination of QE, ZIRP and stock buybacks, and latterly Trump’s tax bonanza, which has kept the party going by making windfall cash available for still more buybacks. However, with QE having already reversed into QT (Quantitative Tightening) and rates rising, the tide has already turned, and the vice is closing inexorably on the market, which will soon buckle and collapse back into an overdue and very necessary bear market that will serve to at least partially flush out the monstrous excesses of the past decade, before they come riding to the rescue with QE4. The magnitude of these excesses means that the bear market is likely to be anything but orderly, and it should be characterized by at least one big crash phase.

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Global Central Banks Enter the Danger Zone

By Michael Pento – Re-Blogged From Pento Portfolios

Investors are experiencing huge moves in commodities, currencies, equities and in sovereign debt across the globe. And now the fall has arrived. Expect the volatility currently witnessed in markets to only surge.

This is because global central banks have overwhelmingly turned hawkish in a vain attempt to gradually let the air out of the massive bubbles they have spent the last decade recreating. Unfortunately, that is not the nature of asset bubbles—they don’t end with a whimper–and they are about to burst in violent fashion.

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Reality Check Now In Progress

By Michael Pento – Re-Blogged From Gold Eagle

The long-awaited dose of reality from the massive and unprecedented financialization of the global economy has finally begun.

Of course, those of us who understood from the start how healthy economies and markets naturally function, knew that a viable recovery from the fiscal and monetary excesses–which caused the great recession and financial crisis of 2008–was never underway. This is because central banks manipulated interest rates to zero percent and below and kept them at that level for a decade. Then, those same low rates engendered a humongous amount of new debt to be incurred, leading to the rebuilding of the current stock and real estate bubbles. And, it also created a tremendous and unprecedented bubble in the global fixed income market. This entire artificial construct, which was built upon bigger asset bubbles and greater debt loads, is now being tenuously held together by that very same government-engineered bond bubble.

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Stock Market Signals Are Flashing Red

By Michael Snyder – Re-Blogged From Freedom Outpost

So many top professionals in the financial industry are sounding the alarm about a coming stock market crash right now.  And there certainly have been rumblings in 2018 – not too long ago we had a three-day stretch that was called “the tech bloodbath”, and during that time Facebook had the worst day for a single company in stock market history.  But we haven’t seen the really big “crash” yet.  Many have been waiting for it to happen for several years, and some people out there are convinced that it is never going to come at all.  Of course, the truth is that we are in perhaps the largest stock market bubble that our nation has ever seen, and all other large stock market bubbles have always ended with a major price collapse.  So whether it happens immediately or it takes a little while longer, it is inevitable that stock prices will eventually return to their long-term averages.

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Big US Stocks’ Q2’18 Fundamentals

By Adam Hamilton – Re-Blogged From Silver Phoenix

The mega-cap stocks that dominate the US markets are just finishing another monster earnings season. It wasn’t just profits that soared under Republicans’ big corporate tax cuts, but sales surged too. That’s no mean feat for massive mature companies, but sustained growth at this torrid pace is impossible. So peak-earnings fears continue to mount while valuations shoot even higher into dangerous bubble territory.

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