Wednesday, February 7, 2018

Jim Rickards Renews Warning on Potential for Bubbles to Pop

In our recent article covering the sharp drop in the stock market, one of the scenarios we mentioned we should watch for is the view that central bank policies in recent years may have led to bubbles forming in various markets including the US stock market. 

In this new article Jim Rickards renews his warning on this potential scenario. Below are some excerpts from the article.


"Barely a week after it set another record high, the Dow just suffered its worst one-day loss in its entire history.

Warnings about an imminent collapse of developed economy stock markets, especially the U.S. markets, have been everywhere."

. . . . .

"Anyone can sound warnings about doom and gloom or stock market crashes. But those Cassandras are not worth listening to unless they offer facts and analysis to support their views. Opinions without something solid to back them up are just that — opinions. The warnings I pay most attention to are those from establishment insiders."

. . . . .

"William White is such an individual. He was former head of the OECD review board and former chief-economist for the BIS, the “central bankers central bank” based in Basel, Switzerland.

In a recent interview, White flatly declared, “All the market indicators right now look very similar to what we saw before the Lehman crisis, but the lesson has somehow been forgotten.”

You can’t get much more of a blinking red light than that."


My added comments: One thing I would add here is that if the worst case scenario on markets that Jim Rickards and others talk about does come to pass, you cannot ignore the highly charge political atmosphere that exists right now that would surround such an event. 

If we do get a major stock market (and bond market) selloff for any reason, the blame game is going to ramp up even higher with the stakes being very high. In such an environment, not only is it less likely that our leaders would come together to try and solve the problem, the infighting and dysfunction would more than likely make the problem worse. 

This is a situation that we will need to watch carefully during this highly charged political environment and election year.

Added news note 2-8-18 at market close: Looking at the chart below after the over 1,000 point drop in the Dow today, it looks like this market needs to hold at the 200 day moving average around 22,778. If that does not hold, we may have something significant going on here to keep an eye on.

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