Ron Paul- Biggest Stock Market Bubble in History

 

Biggest Stock Market Bubble in History

Is This Going To Be The Biggest Stock Market Bubble in History

He has been making similar claims for some time. While he knows his stuff when it comes to hard money and politics, his knowledge of markets and mass psychology is limited at best.  Let’s examine his statements one at a time and determine if they hold any weight.

This market is in the “biggest bubble in the history of mankind,” and when it bursts, it could cut the stock market in half, he told CNBC’s “Futures Now” Thursday.

You know what they say tomorrow never comes, so waiting for an event that you have determined to be inevitable based on faulty data is a recipe for disaster. We already stated that one day this market is going to let out a massive dose of steam, but that is part of the investment cycle. An enormous run-up that last’s for a long time and then a very sharp correction which feels like the end of the world because most of the players jump in towards the end.  As long as FIAT money is in play, there will be boom and bust cycles.

“I see trouble ahead, and it originates with too much debt, too much spending,” Paul said.

That’s the same argument Gold bugs have been making since we got off the Gold standard, so the point is moot. One day the markets will correct, we use the word “correct” because what separates a crash from a stock market correction is one’s perspective.   For the record, he predicted that the Markets would shed 50% back in August of 2017; instead, the SPX has tacked over 15%. Logic does not drive the markets; emotions drive them, so the critical factor is to understand is that sentiment drives the market.

 “The Congress spending and the Federal Reserve manipulation of monetary policy and interest rates. Debt is too big, the current account is in bad shape, foreign debt is bad, and it’s not going to change,” he said.

 “We have a president who likes to spend. He is not concerned about the deficit,” said Paul.

The entire premise is wrong; if the debt were bad then the markets should have collapsed the moment we got of the Gold standard, but that has not come to pass. Debt is terrible; only when one is no longer able to service the debt, as long as you can service the debt, you can use it to generate copious amounts of money as long as the trend is on your side.  When the trend changes, businesses can move into other investments or pay off their debt.   This viewpoint applies to business and not individuals. Individuals, on the other hand, should think twice or thrice before taking on unnecessary debt.

 “The Fed will keep inflating, and that distorts things,” Paul continued. “Now they’re trying to unwind their balance sheet. I don’t think they’re going to get real far on that.”

Again, nothing new here, the Fed has been doing this from day one. Instead of creating a million dollars at a time, they have moved up to billions, and then they will move to trillions at a time and possibly quadrillions; as long as the masses accept fiat, this scheme can continue indefinitely.

 “The government will keep spending, and the Fed will keep inflating, and that distorts things,” said Paul. “When you get into a situation like this, the debt has to be eliminated. You have to liquidate the debt and the malinvestment.”

Maybe and then maybe not; the game has not changed since we got off the Gold standard, so the above premise is faulty and in need of improvement. He has failed to account for the masses, and the masses are the most essential part of the equation. Until the masses deem Fiat to be a problem, the Fed is going to be in a position to inflate the money supply to infinity if needed. Therefore it has been our take that every back-breaking correction should be viewed as an opportunity as long as Fiat is in play.   However, we prefer to fine tune our entry points. Hence we use our indicators to determine the optimum entry. For example, if the market crashed, we would use our indicators to determine at what point we should open long positions as opposed to jumping in immediately after the crash.

Finally, remember that the biggest stock market bubble in history will lead to the biggest bull of all time.  Every bear market to date had led to the birth of a new bull.

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