Having pointed out before how absurd asset valuations have become in recent years (for instance HERE) it has been astonishing to see many just get ever more absurd by any rational metric, often based on deluded notions like the Trump reflation narrative (called for what it was bound to be in detail HERE, written one week after his election).
Now there are a number of factors behind this, although the ones you will read about in the mainstream press or financial news are generally either plain factually wrong, or logically only valid to the mind of a 5 year old, however this has not stopped the army of, deeply partisan, investment company marketing departments finding reasons to ignore the fundamentals with some talent.
However this may be becoming harder after the heads of both Deutsche Bank and Goldman Sachs made some pretty clear pronouncements about asset bubbles and market risk, oddly only days after the Central Bankers at Jackson Hole planted a few “I told you so” bombs for posterity.
First up was Deutsche CEO John Cryan:
“We are now seeing signs of bubbles in more and more parts of the capital markets where we wouldn’t have expected them”
Now you’re seeing signs of bubbles?………Just now?…….I mean not before, but just now? …….Really?
Oh well, better late than never, although it is disturbing that someone could climb the greasy pole to the top of a vampire bank (a skill set that precludes imagination, open mindedness, humility and to large degrees, rationality…….although it does embrace sociopathy with welcoming arms) and be so late to understand rudimentary mathematical relationships, such as asset valuation metrics.
Anyway, moving on to Lloyd Blankfein of Goldman Sachs:
“Things have been going up for too long” and that some market behaviour “unnerves me”.
From Goldman Sachs that’s almost terrifyingly Bearish, however we should temper this by pointing out he also said that:
“it doesn’t feel like tulip-bulb-mania”, which too be fair in most assets it doesn’t.
After all if you start stretching logic to breaking point, squint at prices with just one eye, while holding your nose and humming loudly you can just make a (very weak) case for some market levels which isn’t simply that investors have lost their senses.
I mean your explanation will be nonsense and the reality is that in many cases senses have clearly been lost, but you can pretend otherwise. This really wasn’t the case with Tulipomania, when in 1636/7 single Tulip bulbs became worth more than up-market houses in Amsterdam (and most bizarrely this first well reported financial bubble occurred while Holland was being ravaged by the Plague).
However within markets there are intense signs of speculative excess in many areas, non-more so than the world of BlockChain based crypto-currencies like Bitcoin, whose price performance (for a medium of exchange remember) shows speculative excess of Tulip proportions as this Bank of America chart comparing the Bitcoin mania with other bubbles:
Click/Tap to Enlarge Source: ZeroHedge, BoA
You may see the next most extreme line is “Inverse VIX” a risky technical strategy we discussed back in 2014 (HERE) while the extreme idiocy of the 99/2000 Tech Boom is virtually a flat line by comparison.
And it’s not just Bitcoin but a range of crypto-currencies that have gone made, with nothing exemplifying the madness as the currency named “F*:%Chain”, trading symbol: F*:% (really, really not making that up) which after languishing unloved as the joke it clearly was for some time is now soaring in value too.
We will be doing some detailed work on disturbing breadth and intensity of market insanity shortly, but while we believe it can go on for possibly years more, the fact that now the really guilty parties in our onrushing problems, specifically the Central and Vampire Bankers, are putting markers in the sand we are definitely becoming more short term Bearish for the coming Autumn.