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A specialist in technical analysis, Kee is also the founder of one of the leading, longer-term fundamental economic and stock market indicators in history, The Investment Rate. This proprietary tool, which is available to clients, too, predicts major economic cycles well in advance, and has been accurate since Using his broader observations of the economy to define disciplines, Kee has been able to accurately predict market cycles in advance using his multi-tiered technical indicators, and that combination has kept him ahead of the curve since starting Stock Traders Daily in January Is the stock market in a bubble?
The answer is yes, absolutely, you bet it is. The interesting part is that it is not the only asset class that is in a bubble. In addition to the stock market, real estate is also in a bubble, and these prices have absolutely been influenced by FOMC policy. Although I'm not making observations outside of the United States, the policy of central banks to inflate asset prices using a tool invented, it seems, by Ben Bernanke certainly has reshaped economic conditions, and thus far, they have prevented a Greater Depression.
But before the stimulus packages were enacted, back when the credit crisis made everyone concerned about the economy, I was warning about something that no one wanted to hear. I pounded the table in and before suggesting that in December of that year, the beginning of the third major down period in us history would become official.
My findings using my macroeconomic tool The Investment Rate suggested that the economy would continue to weaken naturally, based on the societal norms that govern investment and spending patterns of individual investors.
Digging a little deeper, these observations suggested that although the market and economy had overshot to the downside late in and earlythe bounce back that would occur would also be short-lived and eventually the natural weakness in our economy would put pressure on asset prices again. Interestingly, and although weakness started to happen inthe policy of the FOMC to inflate asset prices the wealth effect prevented that dire prediction from becoming a reality. To my chagrin, the policy of the FOMC to inflate asset prices made my macroeconomic model appear less than accurate after Because my model is based on natural investment inflows into the economy, something I have calculated beyondand because the capital being injected into the economy over the past couple of years was not natural, the direction of the economy diverged from what my analysis suggested.
It is important to note here that my macroeconomic tool is a demographic analysis using societal norms and lifetime investment patterns to identify longer-term economic cycles.
Riding The Market Bubble: Don't Try This At Home
Over the years, it identified strength in the economy by seeing that more and more new money was naturally available to invest in the economy, and conversely times in which fewer and fewer new investment dollars were available to invest naturally. That is, as of Decemberwhere we exist on a naturalized stock market asset bubble in today's economy.
Stock market asset bubble twist is that FOMC policy has caused us to diverge from that natural condition. According to the FOMC, they will officially end their bond-buying program in the next meeting unless extraordinary circumstances arise. My analysis to best way to make money in free world runescape suggests that the net real stimulus in the financial system is already negative when the operations of the U.
Treasury are included, but everyone can see that the stimulus program is ending, and as it comes to an end, the economy is again allowed to operate on a more natural basis.
The question I pose to you is if the economy actually would have been weakening over the past few years on a naturalized basis as my analysis suggests, but instead it has been supported by capital injected by the FOMC to inflate asset prices, what do you think will happen when the money flows stop?
My answer to clients, and now in this public forum, is that the economy will revert back to its naturalized condition, which is much weaker than it is today, suggesting that both the stock market and real-estate prices will contract, and according to the differential I have provided to clients, that means a crash is looming.
We are absolutely in an asset bubble today, there is no question about it in my mind, and it is the result of FOMC policy. The only way to avoid a crash is to continue to pump money into the system and support an economy that is, in every sense of the word, addicted to stimulus.23 TIP: Stock Market Bubbles and Asset Allocation
After last week's FOMC-induced rally in the Dow Jones Industrial Average DJIA, The Russell RUT, Importantly, the Dow would need to break down, too, in order for there to be even a meaningful amount of concern out there, but if it does, the Russell and the Nasdaq may already be much lower.
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