The S&P 500 charted its best August since 1986. Both the Nasdaq and the S&P 500 made new highs last month. Peter talked about the surging stock market in his podcast, saying that it is the biggest bubble ever. And despite what people seem to think, there will be consequences.
September is historically the weakest month for US stocks, but Peter said he thinks this year might be an exception to the rule.
It seems at this point there’s no reason to believe that this inflation-driven rally is going to peter out any time soon. Now, I wouldn’t be surprised if it did, but I’m just not willing to be that it will.”
Peter noted two stocks in particular that exemplify the surging stock market – Apple and Tesla. Apple is the most valuable company in the world based on market cap. Meanwhile, Tesla is the most valuable car company. Its market cap exceeds Toyota, Honda, Nissan, Daimler, BMW, GM and Ford combined. Peter said he doesn’t think anybody buying Tesla stock is really concerned about whether the company’s sales warrant that kind of stock valuation.
I don’t think anybody who’s buying Tesla stock even thinks about that, even cares about that. I mean, I don’t even know if they care that its an auto company. As far as I’m concerned, Tesla’s just a symbol. It’s just four letters. That’s all it is. It’s just numbers and letters. The letters are the symbol and the number is the price, and it’s a game and everybody keeps buying. And no one really cares about the underlying company or whether or not it can possibly be this profitable.”
This is indicative of the entire stock market right now. It’s not about actual companies or the economy. It’s being driven by Federal Reserve stimulus.
Look, this is the biggest bubble that we’ve ever seen. We have the most reckless Federal Reserve that there’s ever been. And so, you get stuff like that.”
Zoom’s stock shot up 40% in a single day with its strong revenue report. The stock is now trading at $457 a share. It has a 52-week low under $61. This reveals the incongruency in the way the mainstream is looking at the market. Zoom has no doubt benefited from the COVID-19 lockdowns. But in order to justify the surge in its stock price, you have to assume the shift from in-person to Zoom meetings is permanent. But isn’t the broader stock market going up because everybody assumes the economy will quickly recover when the coronavirus is dealt with? There are two mutually exclusive assumptions in play here.
Peter said all of this insanity is because of the Fed. And we’ve seen this kind of hysteria in the past. It isn’t new.
I think what’s new is the extent to which the Fed is engaging in this reckless monetary policy.”
In the ’80s the Japanese central bank blew up twin bubbles in the stock market and real estate market. As all bubbles do, they popped. To this day, the Japanese economy still hasn’t fully recovered. The NIKKEI sill hasn’t climbed back above its record in December 1989.
The Japanese economy is still suffering the consequences of that bad monetary policy. Not just the bad policy that inflated the bubble, but the bad policy that has existed ever since the bubble popped. Because the Japanese government and the Bank of Japan has not been willing to allow the markets to fully rectify the enormity of the mistakes that took place during that bubble. And so, as a result, Japan did not have nearly a healthy an economic recovery as might have otherwise been the case.”
The Fed is engaging in the same policy. But people don’t seem to care or even realize its a problem.
People are wildly optimistic on the stock market. We rarely get a down day. The market just goes higher and higher and higher. No one cares about valuations. Nobody even cares that the fed is the reason that the market is going up. Nobody wants to fight the Fed. And people assume that you’re going to have the Fed on your side the entire time. And nobody even believes that there’s any adverse consequences that the Fed is printing all this money, we’re getting all this stimulus, the stock market is going up — but that there’s nothing bad that’s going to happen, that there are no negative consequences for this policy.”
If this was the path to prosperity, why did the Fed wait until COVID-19?
The reason is there is a consequence. It’s just that no one gives a damn about the consequences right now.”
Peter went on to talk about gold stocks, the dollar, and Brett Johnson’s assertion that there really isn’t any inflation because the money created by the Fed is being loaned, not spent.
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