US Stock Bubble Bursting As The US Fed Begins To Shrink Its Balance Sheet

By IM Vronsky – Re-Blogged From http://www.Gold-Eagle.com

All serious students of economics well know there are several factors that can inflate stock values…and even cause them to soar beyond common sense and corresponding fundamentals. However, there is one factor that dwarfs all others in its disproportionate material effect on pumping up stock prices beyond all historical and reasonable metrics:  AND THAT IS EXCESSIVE GROWTH IN THE FED’S BALANCE SHEET. 

One must recall that the S&P500 Stock Index suffered a bear market loss from 2007-2008…including the first two months of 2009.  During this bear market the S&P500 plunged well more than 55% by the time it finally bottomed in first week of March 2009.  Subsequently, the Fed relentlessly pumped up its Balance Sheet…with a view to stem the horrific two year rout in US stock prices.

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List of IMF and BIS Systemic Risk Warnings

Re-Blogged From http://lonestarwhitehouse.blogspot.com

Over the past year we have documented numerous warnings which the IMF and the Bank for International Settlements (BIS) have issued in regards to risks that exist to the stability of the global financial system. Some of the warnings come directly from IMF and BIS officials and publications. One comes from a speech by BIS General Manager Jaime Caruana. Others come from articles appearing on the IMF Direct blog. One is a link to former IMF Peter Doyle who says despite issuing risk warnings, the IMF has failed in providing early warnings for systemic crisis.

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A 30-50% Stock Plunge ‘Would Not Be A Surprise’

By HENRY BLODGET – Re-Blogged From http://davidstockmanscontracorner.com

As regular readers know, for the past ~21 months I have been worrying out loud about US stock prices. Specifically, I have suggested that a decline of 30% to 50% would not be a surprise.

I haven’t predicted a crash. But I have said clearly that I think stocks will deliver returns that are way below average for the next seven to 10 years. And I certainly won’t be surprised to see stocks crash. So don’t say no one warned you!

So far, these concerns have just made me sound like Chicken Little. The S&P 500 is up strongly from where I first sounded the alarm.

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China’s Stock-Bubble Burst

By Adam Hamilton – Re-Blogged From http://www.Gold-Eagle.com

China’s stock bubble has burst, with its stock markets utterly collapsing after rocketing parabolic.  The failure of this popular speculative mania has grave implications for the global stock markets.  It shatters the universally-believed myth that central banks can nullify normal market cycles.  No government has more power over its stock markets than China’s, yet not even it could magically eradicate greed and fear.

Even before their recent calamity, the Chinese stock markets had been the most-interesting financial story of 2015.  Having the world’s second-largest economy, China is immensely important in global markets.  And its stock markets were soaring, as evidenced by China’s flagship benchmark stock index.  It is the Shanghai Stock Exchange Composite Index (SSEC), the local equivalent of the US S&P 500.

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Why The Fed Is Afraid To Raise Interest Rates

By Michael Pento – Re-Blogged From http://www.Silver-Phoenix500.com

Even though the major stock market averages are flat for the first six months of the year, by nearly every measure the stock market is still extremely overvalued. This point is not lost on Ms. Yellen and company, as the Fed Chair herself has recently assented that the current value of stocks are “quite high”. Given this, the Fed must privately be afraid that even a small change in the Fed Funds Rate could serve as the needle that pops the massive bubble in the stock market.

Exactly How Overvalued Is This Market?

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The Punch Bowl Stays

By Peter Schiff – Re-Blogged From http://www.Gold-Eagle.com

It is well known that I don’t think much of the ability of government officials to correctly forecast much of anything. Alan Greenspan and Ben Bernanke have made famously clueless predictions with respect to stock and housing bubbles, and rank and file Fed economists have consistently overestimated the strength of the economy ever since their forecasts became public in 2008 (see my previous article on the subject). But there is one former Fed and White House economist who has a slightly better track record…which is really not saying much. Over his public and private career, former Fed Governor and Bush-era White House Chief Economist Larry Lindsey actually got a few things right.

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Shiller And Goldman Say US Stocks Are Overvalued

Goldman Sachs’ chief equity strategist, David Kostin, said that “by almost any measure, US equity valuations look expensive”, which echoed Robert Shiller’s earlier opinion. Is the U.S. stock bubble finally going to burst? How will it affect the gold market?

More and more analysts are warning against a U.S. stock market bubble. Last weekend, Yale professor and Nobel Prize winner Robert Shiller said that in his opinion U.S. stocks were overvalued. Although he is not sure that the current situation is a classic bubble, he clearly sees the bubble element. For example, Shiller pointed out that the CAPE (cyclically adjusted P/E) ratio has been recently around 27, which is high by U.S. historical standards (the only other times it was that high or higher were in 1929, 2000, and 2007 – all moments before market crashes).

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