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Bubble, Trouble, it’s all very Subtle!

November 30, 2013

Discerning the times within a Business Cycle is not a perfect science. Those who have been following the markets, however, tend to agree that the Cycle for stocks could change soon! A change in direction is likely within days, weeks, or months (at the most). The Dow has increased some 22.8% since the beginning of the year. The S & P 500 index has increased some 28% and the Russell 2000 has increased some 34%. Do these increases suggest that a Bubble is developing? The market pundits on CNBC and the Kudlow Show seem to think that this market is poised for much more in the coming months. Who understands what is happening in today’s markets?

This index suggests that stocks are entering the Bubble Phase. The stocks in this index have increased some 34% in 2013 and over 40% in the past year. Can the Bubble continue much longer?

Business Cycles are representative of change over time. The emotions within the investment and finance community desires the positive over the negative. This means that the UP cycle can continue until a change in Confidence develops. As of this writing, the Confidence factor is still quite strong. Investor emotions desire to push and pump the numbers UP for the time being. We could witness the biggest Bubble in all of history before this Cycle is complete. When the Cycle ends, however, we could also witness the Biggest Decline in all of history. Extremes seem to be in vogue as of now.

The Biotech index is up some 47% in 2013. Is this a Bubble? Who can discern when this cycle ends?

The one asset which has NOT experienced a Bubble in 2013 is Gold and also Silver. Historically, these metals tend to increase in price during Bubble phases. This reality, however, has not developed in 2013. Both Gold and Silver are DOWN substantially. Gold is DOWN some 27% so far in 2013 and Silver is DOWN some 42% in 2013. Does this make any sense based on history or prior business cycles? Why would gold and silver be down during this Bubble Phase within the stock indices? Could it be that these prices are manipulated down for a reason? Who would desire that this occur?

This chart provides an image of what has happened in the silver/gold markets in 2013. Down, Down, Down!

In conclusion, we can now discern that our Stock Index Markets are entering their BUBBLE phase. The trend in motion will end at some point. My personal sense is that the END could develop later in 2013 or early in 2014. I realize that no one can predict a major change in a cycle that has been pumped up with QE money for so long. Bernanke and his Fed have desired that investors seek risk assets in 2013. Will the Fed attempt to push up this BUBBLE to historic levels (say 20,000 on the Dow)?

Ben and his QE program has certainly influenced all the markets…especially the Stock Markets!

The Dow is now at 16,000 and heading for 17,000. Could our central Authorities (our Fed) keep this trend going for another year? Personally, I doubt it! My sense is that some Black Swan event will occur within the next few weeks or months (at the most). This means that the biggest CRASH in history could start quite soon! Watch the markets and witness this coming event! Enjoy! I am:

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