Mid-Week Macro
The stock market continues to hover near an ATH, without any correction in September. The longer it goes without a correction, the more nervous investors become. This is the worst bull market ever. Nothing is comparable, and everyone knows it. Everyone is asking why the stock market is so strong. The backdrop is clearly ugly. Consumers are broke because of inflation, with the average consumer unable to pay their bills. Tariffs are here, adding to inflationary pressure. The housing bubble is starting to pop, with high interest rates causing strain. The labor market is at recession levels. It’s a terrible time to look for a job. Yet, the stock market keeps making new ATHs. Lol.
It won’t be long now. A recession is coming. All of the bad news is mounting and not going away. A few rate cuts are not going to fix the myriad of problems. It is clearly getting worse and not better. Powell pivoted away from fighting inflation to rate cuts because the severity of economic slowing is becoming obvious. Powell even mentioned this week that the stock market is overvalued. Guess why he said that? Because it is obvious. The stock market is trading at 3.1 times sales. The previous high was 2.8 in 1999. The norm is around 1.5 sales. The stock market is around 2x its normal valuation. Now you know why Warren Buffett is holding $350B in cash.
Two things are about to happen. First, the stock market will begin to drop. Second, the recession will arrive. This might not happen for a few weeks or a few months, but it will happen. Once it does, the rise in the gold price will suddenly become obvious. No wonder gold is so high! When silver begins to act like a monetary metal, which started in August, you know we are close. I’ve always believed that it all begins when silver gets above $40. Silver has now joined the party. All that is left for the gold/silver/miners to roar to the front of the pack is for the stock market to stop rising. We are close.
So fair and relevant !