STOCKS, BONDS AND METALS WILL SHOCK MARKETS IN 2017

Thursday, December 29, 2016
By Paul Martin

By Egon von Greyerz
DailyCoin.org
December 29, 2016

We are now approaching the final mania in markets. The Dow seems to be on its last swansong. Investors have been determined to take it up to 20,000. So far, the market has been twelve points from this magic level. At the same time treasury bonds are crashing. The 10-year yield has gone from a 1.4% a low 1 ½ years ago, to 2.5% now. Normally stock market investors would worry about higher interest rates but currently the market is in a euphoric mode so any bad news is ignored in this final crescendo. Memories are very short in markets. A few weeks ago, everyone was forecasting that a Trump win would be a disaster for stocks and for the world but now he is clearly a godsend. A market that has gone up 3X since March 2009 is clearly no concern. A risky Shiller p/e of 27, and 56% above the average, is totally ignored by this exuberant market.

Also, the market is taking in its stride that Trump will take debt levels up by a minimum of $10 trillion or 50% in the next few years. Higher spending and lower taxes seem to be the perfect recipe for a higher stock market.

INTEREST RATES TO REACH 1970 LEVELS OF ABOVE 15%
In recent articles I have discussed the 35 year interest cycle turning and this is clearly happening with a vengeance. Higher interest rates will lead to higher deficits and still higher borrowings. And so we have the perfect vicious circle that leads to the whole caboodle collapsing. But before we will have interest rates as high as in the 1970s to 1980 when we saw rates in the high teens in many countries including the US. This will of course mean that no one will afford the interest costs on their house, car or credit card. And no government can pay the interest on their surging debt. But that won’t be a problem either because all they need to do is to print more money to cover the interest. This would be the perfect perpetual motion financing model. However, the consequences are clear – collapsing currencies and inflation leading to hyperinflation.

GLOBAL STOCK MARKETS DIVERGING – A MAJOR WARNING SIGNAL

The Rest…HERE

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