This article was originally published by Michael Snyder at The Economic Collapse Blog.
Are we at the tail end of the stock market bubble to end all stock market bubbles? Wall Street was full of glee Monday when the Nasdaq closed above 5000 for the first time since the peak of the dotcom bubble in March 2000. And almost everyone in the financial world seems convinced that things are somehow “different” this time around. Even though by almost every objective measure stocks are wildly overpriced right now, and even though there are a whole host of signs that economic trouble is on the horizon, the overwhelming consensus is that this bull market is just going to keep charging ahead. But of course that is what they thought just before the last two stock market crashes in 2001 and 2008 as well. No matter how many times history repeats, we never seem to learn from it.
Back in October 2002, the Nasdaq hit a post-dotcom bubble low of 1108. From there, it went on an impressive run. In late 2007, it briefly moved above 2800 before losing more than half of its value during the stock market crash of 2008.
So the fact that the Nasdaq has now closed above 5000 is a really big deal. The following is how USA Today described what happened on Monday…
The Nasdaq Composite capped its long march back to 5000 Monday, eclipsing, then closing above the long-hallowed mark for the first time since March 2000.
The arduous climb came on the heels of a 10-day winning streak that ended last week, Nasdaq’s longest since July 2009. That helped fuel the technology-heavy market index to a 7% gain in February, the sixth-largest monthly climb since its 1971 launch.
The chart below shows how the Nasdaq has performed over the past decade. As you can see, we are coming dangerously close to doubling the peak that was hit just before the last stock market collapse…
By looking at that chart, you would be tempted to think that the overall U.S. economy must be doing great.
But of course that is not the case at all.
For example, just take a look at what has happened to the employment-population ratio over the past decade. The percentage of the working age U.S. population that is currently employed is actually far lower than it used to be…
So why is the stock market doing so well if the overall economy is not?
Well, the truth is that stocks have become completely divorced from economic reality at this point. Wall Street has been transformed into a giant casino, and trading stocks has been transformed into a high stakes poker game.
And one of the ways that we can tell that a stock market bubble has formed is when people start borrowing massive amounts of money to invest in stocks. As you can see from the commentary and chart from Doug Short below, margin debt is peaking again just like it did just prior to the last two stock market crashes…
Unfortunately, the NYSE margin debt data is a month old when it is published. Real (inflation-adjusted) debt hit its all-time high in February 2014, after which it margin declined sharply for two months, but by June it had risen to a level about two percent below its high and then oscillated in a relatively narrow range. The latest data point for January is four percent off its real high eleven month ago.
So why can’t more people see this?
We are in the midst of a monumental stock market bubble and most on Wall Street seem willingly blind to it.
Fortunately, there are a few sober voices in the crowd. One of them is John Hussman. He is warning that now is the time to get out of stocks…
Unless we observe a rather swift improvement in market internals and a further, material easing in credit spreads – neither which would relieve the present overvaluation of the market, but both which would defer our immediate concerns about downside risk – the present moment likely represents the best opportunity to reduce exposure to stock market risk that investors are likely to encounter in the coming 8 years.
Last week, the cyclically-adjusted P/E of the S&P 500 Index surpassed 27, versus a historical norm of just 15 prior to the late-1990’s market bubble. The S&P 500 price/revenue ratio surpassed 1.8, versus a pre-bubble norm of just 0.8. On a wide range of historically reliable measures (having a nearly 90% correlation with actual subsequent S&P 500 total returns), we estimate current valuations to be fully 118% above levels associated with historically normal subsequent returns in stocks. Advisory bullishness (Investors Intelligence) shot to 59.5%, compared with only 14.1% bears – one of the most lopsided sentiment extremes on record. The S&P 500 registered a record high after an advancing half-cycle since 2009 that is historically long-in-the-tooth and already exceeds the valuation peaks set at every cyclical extreme in history but 2000 on the S&P 500 (across all stocks, current median price/earnings, price/revenue and enterprise value/EBITDA multiples already exceed the 2000 extreme). Equally important, our measures of market internals and credit spreads, despite moderate improvement in recent weeks, continue to suggest a shift toward risk-aversion among investors. An environment of compressed risk premiums coupled with increasing risk-aversion is without question the most hostile set of features one can identify in the historical record.
Everyone knows that the stock market cannot stay detached from economic reality forever.
At some point the bubble is going to burst.
If you want to know what the real economy is like, just ask Alison Norris of Detroit, Michigan…
When Alison Norris couldn’t find work in Detroit, she searched past city limits, ending up with a part-time restaurant job 20 miles away, which takes at least two hours to get to using public transportation.
Norris has to take two buses to her job at a suburban mall in Troy, Michigan, using separate city and suburban bus systems.
For many city residents with limited skills and education, Detroit is an employment desert, having lost tens of thousands of blue-collar jobs in manufacturing cutbacks and service jobs as the population dwindled.
Sadly, her story is not an anomaly. I get emails from readers all the time that are out of work and just can’t seem to find a decent job no matter how hard they try.
It would be one thing if the stock market was soaring because the U.S. economy was thriving.
But we all know that is not true.
So that means the current stock market mania that we are witnessing is artificial.
How long will it last?
Give us your opinion by posting a comment below…
Michael T. Snyder is a graduate of the University of Florida law school and he worked as an attorney in the heart of Washington D.C. for a number of years.
Today, Michael is best known for his work as the publisher of The Economic Collapse Blog and The American Dream.
If you want to know what things in America are going to look like in a few years read his new book The Beginning of the End.
I’m so glad everything is going to be OK.
Oh, look at the pretty bubble. All the pretty colors…
Obama, doing what Hitler couldn’t.
oooooohh, I think I just felt a tingle go down my leg. Did you feel it? I felt it.
One of my most hated shitbag congressmen is Peter King, a Bolshevik from New York. He’s always quick to love the police state, and “save” Amerikkkans. What a fucking shitbag.
There aren’t ‘snakes in the grass anymore.’ The snakes ARE the grass…
Welcome to America Mr. Netanyahu! Your Loved by many, and hated by Muslims, Nazi’s and Obama Followers! Trekker Out. God Bless Israel!
You support ZOG AMERIKA?
Or is this sarcasm from you?
Not sarcasm. Clap your hands together for Nuttyyahoo real good, MT. You are clapping for your families demise.
Proof what Glen Beck brainwashing can do to even a patriotic American. Sad…..
Sadly, AmeriKan, it is not “sarcasm” at all from MT.
Clap your hands together for Nuttyyahoo real good, MT. You are clapping for your families early demise.
Proof what Glen Beck brainwashing can do to even a patriotic American. Sad…..
Sorry, original post showed hung up in moderation…..
No granny, you’re just sorry, period.
Like urine irritates the skin, words from a bitter heart lead to provoking hatred.
Bibi knows his shit. I will stand with Israel!
I think we’ve reached the ‘delusion’ portion of the QE equity bubble.
Bubbably Bubbably Bubbably POP!
Remember when you were a kid and you just started to chew that big wad of bubble gum. Boy I think I can blow one breath o make it big and the one more and one pop goes the bubble all over you your face, clothes and hair big mess so goes Wall-Street. People enjoy the mess and the clean up
I have given up on people here in the US. I have made my preparations. Let the games begin, LoL. “May the odds be ever in your favor”!
Sell now, hold, buy when it’s low. Assuming things don’t slide over the side.
Sell now……buy back later
when this goes TU
it ain’t going to be pretty
look for the stock guru’s to point fingers at any thing but their shitty predictions
get while the getting is good
Sell ? What do i sell ?
Why sell? These sheep should be buying more, and more, and more.
Let these fools fall and be destroyed by their own peril. It’s what they get for being manipulated into playing a rigged game that was never intended to better themselves down the road.
A couple of articles back I mentioned that the stock market does not reflect the true reality of the economy, imagine my surprise. No green thumbs at all and only a handful of red thumbs. The word Investment is not what it used to be when it comes to Stocks. It’s called Theft, and the reality of that will come soon enough to these sheep.
The market is as fake as US currency.
Boycott Wall Street
This Quote sums it up better than anything I have ever heard regarding the expansion of credit and Bublenomics! Ignore these words at your own peril.
“There is no means of avoiding the final collapse of a boom brought about by credit expansion. The alternative is only whether the crisis should come sooner as a result of a voluntary abandonment of further credit expansion, or later as a final and total catastrophe of the currency system involved.” – Ludwig von Mises
Hey Captain you have a chance to try some Dogfish Head IPA? The Imperial 90 min is great. The 120 is only available once or twice a year, but man if you can get some….. a good beer can help put things in perspective and if not….well you’re still drinking a good beer.
Have a good one.
Keep your head on a swivel people.
A market analyst is an expert who will know tomorrow why the things he predicted yesterday didn’t happen today.
Time to get out eppe. You too BJ. Take whatever gains or losses you may have and conserve your capital for a better opportunity. 🙂
DK, been cash for 2 years.
The eldest Rothchild was asked why he rarely lost money?
He stated he always got out early.
When your causing the crashes and booms sure helps your timing.
“Get out early”… Good advice for many situations imho.
Rothchilde said, only buy when there’s blood in the streets.
They’re all thinking they can call the top.
“Bulls make money, bears make money, and pigs get slaughtered”.
any child knows … all bubbles pop in the end!
it is not the fall that kills you once the bubble does pop, it’s the sudden stop at the bottom.
got water, food, lead and phyzzz?
as this only ends one way, global fiat currency collapse and WW3 as a cover up of the reset!
then the 100 year fiat money cycle begins again.
Maybe this is why O’zero is looking to write a new EO on corporate taxes.
Yes, he’s going to raise TAXES via EO. Why the fourth box isn’t open yet I’ll never know.
The African virus will most likely try to do a lot of things via EO now. Everyone keep prepping and get everything you can ASAP while you still can.
The bubble wont pop as long as the government keeps making the balloon bigger.
Just like a dying patient rallies so well to fool everyone into thinking they are really not going to die, so too, the dollar is rallying, but it is an illusion.
Very very soon the dollar and our economy will collapse. It’s been prepared for already– the government bought food, they bought bullets, and you know the rest.
Just don’t be anywhere around when they come for you. Do not engage. Avoid and elude them.
Christ told John Leary a Tsunami would hit the Eastern Coast of our country. Get prepared to bug out because it could be the pretense for Martial Law.
Above all, get right with God now, pay attention to Christ’s instructions during the Illumination of Conscience [www.thewarningsecondcoming.com] because it will save your life and save your soul.
– the Lone Ranger
Lone Ranger, your advise, “get right with God”, is always good advise.
With all the evil in the world today, I have to strive hard not to let it infect my heart. The more evil the world becomes, the more I need to look forward to the kingdom of heaven.
I don’t mean to get overly spiritual, but the news makes me angry and sad but being close to God gives me peace and serenity.
Justice that was very well said. My feelings exactly.. But you can’t fix stupid. God knows I’ve tried!!
At the risk of seeming presumptuous I took the liberty of skipping the article entirely and going straight to the comments to get the real scoop.
I regret nothing!
The dollar is at its highest in over a decade and gold and silver are dying a slow and anemic death.
At least on the surface of things.
I have a feeling that whatever happens to change this trend will come out of nowhere and be totally unexpected, catching almost everyone by total surprise by its timing if not its nature (like 9/11 did, but on a worldwide scale).
How long it will be till this happens I don’t know, but I’d say anywhere from now till the next ten years, no longer than ten years and it will be over.
AT least, that’s what I am expecting. Maybe ten years, maybe less, but no more.
In your mind decide whether you own yourself and your possessions. Are they yours?
I have decided that I belong to nobody but myself and that I own all of my labor as well. I am not a slave.
Having decided that, you must ask yourself what should I do now? While I don’t have the answer to that, I can assure you that I will never surrender or sacrifice any of my family to TPTB for any reason.
I don’t recognize anyone’s claim to one minute of my life. If you feel you own any portion of my life, for whatever reason, understand that I will NEVER agree. Income taxes are immoral for this reason.
You are free to disagree so long as you understand that I might shoot you if you threaten my life, liberty, or property if we disagree.
Wizard of Oz
Dorothy: You’re Glinda…and you arrived in a bubble…and you can take me back to Kansas?
Glinda: Burst my bubble and watch how fast I send you to Detroit.
Israeli soldiers tease and then Attack a Palestinian child with dogs
The old testament teaches an eye for an eye. So maybe the poor Palestinians should not have pocked them in the eye.
Boy do you have a one track mind. Them mean old Jews, it’s there fault for everything bad.
Read your history or not, but the Germans used them for fire wood and death camps. so if they don’t take any crap from anyone now I understand why.
So all Jews are bad is that what you are saying?
If so you are telling me that Jesus Christ was also bad.
S.T.S.F.P. N.R. N.S. N.Reb
Ps. I have a lot of Native American blood running through my vanes, so pale face poke me with a stick and I’ll shove a log back at you. N. Reb
your proudly self publicized ignorance of ‘true american history’ as a self pro-claimed ‘part native american’ is disappointing.
i can only hope your level of ignorance is not the norm, but the exception of once pure blood now water-downed mutt native americans.
i suggest you pick up a ‘real’ history book of the world READ IT THIS TIME and socialize with some real indians before you decide to pick up that shield and sword of stupidity again.
your ignorance of the truth makes you weak.
Nreb, you just flunked history class, back to the books for you.
The bubble will go pop in 3 to 6 months then it’s WW3
I hope you are wrong, but I would not bet against you.
I think there is real trouble down the road, that bubble can only last for so long and POP!!!
Good luck, keep prepping, keep your powder dry.
S.T.S.F.P. N.R. N.S. N.Reb
If you all look at all charts, when the market is riding high it will spike (like its last breath) before it plunges, I believe that is what we are seeing at this time, maybe I’m wrong, I hope I am but history repeats itself and I think that when this happens we will likely see hyper-inflation I’m not sure I have a friend that says we will see deflation
Israehell Zio-jews only wage War on Children
Israeli Military Torturing Palestinian Children
Your spelled “head” wrong in your moniker.
and you spelled COACH wrong – it’s DOUCHE.
TRIBULATIONS BEGINS: MARCH 22ND 2015
It’s beginning to look a lot like nuclear winter actually. I never thought ‘d say this a few years back, but hen I never thought 2001 would happen either.
We are moving troops into Ukraine, are we not?
LE MONT-SAINT-MICHEL, France, Feb 22 — France kicked off nearly a month of exceptionally large spring tides yesterday, as tourists flocked to coastal areas to witness spectacularly high water levels ahead of the so-called “tide of the century” on March 21. – See more at: http://www.themalaymailonline.com/travel/article/spring-tides-a-tourist-phenomenon-on-french-atlantic-coast#sthash.CM03pgVU.EaqMu1U1.dpuf
The end is near? That’s why I woke up this morning and got myself a beer..Just a little joke hope ya’ll smiled..
Anytime someone mentions beer, I smile. As long as it’s good beer.
Have a good one.
Keep your head on a swivel people.
What comes up must go down. Snyder hit this one on the head, borrowing money to make phony high values on stocks. That happened in the housing market in 2008–values of houses skyrocketed because borrowing money was easy and cheap.
I saw one stock gained a 1,400% and others were less, around 300 to 400% gains on the Nasdaq. The chart always shows the rhythm of booms and busts, and a bust is coming, a big selloff.
The fact there are millions who lost jobs and they never recovered, people are more in debt than ever, and banks put trillions of $$ in derivatives too risky to hold, the bust will hit hard. The Dotcom and 2008 bubble was nothing compared to what is coming, and the wall street people are celebrating. Does Nero ring a bell?
“Does Nero ring a bell?”
No, he plays a fiddle…
One need only check dailyjobcuts.com to get a partial look at the jobs being slashed. What the blind fail to realize is that there are no chains adding stores, only closing them. We never hear of Sears opening up ten new stores, or Walgreens adding five more stores, etc. It’s always stores closing. My Radio Shack of 34+ years finally closed. I hated to see it go.
Keep saving the cash, keep stocking the food.
The Christians back the Zionist corrupt state of Israel no matter what death and destruction is dealt out to it’s neighbors and to the American citizenry, such as involvement in 9-11 and control of repressive agencies in America such as DHS and the NSA. As far as a blown up stock market, can I buy into the action with a credit card? Oh, that’s right I’ve never had one or the income necessary to obtain one. Lucky me!
Well I believe with the derivative issue building and unfunded liabilities growing…ah screw this crap, let’s get the ugliness underway. The sooner the better. After we can have a TRUE reset.
Its “Big Bird” pulling levers behind the scene…I always knew Big Bird was a Blue Avian….