Mike Maloney believes there is much more to the recent meetings between FED Chair Yellen and President Obama than the media is leading us to believe. There is something going on that ranges from very ominous to very scary. The meeting yesterday was covered by the media with nearly identical fluff pieces with no substance about the meeting.
The meeting took place on Monday, April 11th and 11am. The White House simply released a one-page press release about the meeting and the economic topics they covered. Apparently, Obama gave her a pat on the back and said she was doing a great job. But one has to wonder if the “expedited rule, closed door” meetings held by the Fed this week were convened in order to discuss a western financial system that is beginning to collapse again.
There are at least eight separate meetings scheduled this month between the FED and White House. This is the most that Mike has seen going back decades and is certainly seems like something is afoot. These types of meetings tend to happen when there are serious underlying issues with the economy that the public cannot know about.
This is happening as Q1 GDP growth forecasts have dropped from 2% or higher towards zero. Mike shows us how GDPNow is no longer predicting GDP growth, but contraction for the first quarter. Even worse, the prediction has recently dropped from a decline of -0.4% to -0.7% as inventory levels rise by nobody is buying.
In the video below, Mike walks us through charts that show how the entire stock market rally since 2009 has been fueled by an expansion of the money supply. Past stock market recoveries had zero correlation to an expansion of the money supply, but the current increase is nearly perfectly correlated with an increase in base money. Following the FED tapering, the market has failed to make new higher highs or higher lows. Mike concludes that the stock market has topped again and we are due for a massive crash dead ahead.
The P/E ratio for stocks is in extreme bubble territory above the 26 level versus historic norms in the 13-15 level. The value of the stock market versus the GDP of the entire nation is another key metric to track. While fair value of this ratio is around 0.6, the current ratio is 1.2… DOUBLE fair value!
This is one of only a few times in history that the stock market has been this overvalued relative to total GDP. Put simply, the stock market is at insane levels and the bubble is due to pop as it once again reverts to equilibrium. We are in the for perhaps the biggest stock market crash in history!
Mike Maloney predicted the last housing market bubble and warned in 2005 that the housing market was due for a huge correction. He was correct then and he has a new warning about the housing market. Real estate is going to be crashing along with the stock market.
Mike presents an extremely negative outlook on the stock market and offers this warning to anyone that will listen. Unfortunately, I agree with his analysis and have also concluded that the stock market and housing market are due for a major correction. I believe it will happen within the next 12 months, but it is hard to put exact timing on these events as the FED is likely to try a number of different things to keep the market afloat.
This is especially true during an election year. I believe that the recent meeting between Obama and Yellen was likely set up so that Obama could make it clear to Yellen that she can not allow the stock market to crash until after the November election. And if things are starting to fall apart behind the scenes, the FED needs to prepare a plan to assure investors that it is safe to keep their money in the stock market and continue buying real estate at nosebleed prices.
And no matter what you do, silly dumbed down masses, do not take your money out of the banks and use it to buy a barbarous relic such as gold! The banks are as safe as ever and gold doesn’t pay interest, don’t you know? Don’t mind the fact that the share price of TBTF Deutsche Bank is down nearly 50% in the past six months and gold is up 20% since the start of the year. All is well here, carry on!
I believe that the bull market rally in gold, silver and mining stocks is just getting started. We have been adding new long PM positions to the GSB portfolio and have taken steps to hedge our portfolio and short the market. If the stock market rolls over as Mike is predicting and housing crashes, this is likely to generate fresh safe-haven buying and propel the gold price significantly higher. Investors still remember what happened in 2008 and they will be quick to pull their money out of stocks and seek the safety of precious metals. We will be using any short-term dips in the gold and silver price as buying opportunities. Buckle up and hold on tight!