Stock Market Has Formally Went Into Crazytown Territory

Stocks simply keep going higher and better, and now what is happening in the stock market does not bear any resemblance to what is occurring in the overall economy whatever. Stocks travel up regardless of what happens.  If there is good news, stocks go up.  If there is bad news, stocks go up. If there is no news, stocks go up. 

It is time to crank up the Looney Tunes theme song because Wall Street has formally entered crazy town territory.  Stocks simply keep going higher and better, and now what is happening in the stock market does not bear any resemblance to what is occurring in the overall economy whatever. So how long will this irrational states of affairs probably continue?  Stocks travel up regardless of what happens.  If there is good news, stocks go up.  If there is bad news, stocks go up.  If there is no news, stocks go up.  On Thursday, the day after Christmas, the Dow was up another 122 points to a different new incomparable record high.

In fact, the Dow has had an astonishing 50 record high closes this year.  At the time, housing costs simply kept going higher and better and everybody rush to buy before they were “priced out of the market”. It is nearly as if Wall Street has not learned any lessons from the last two major stock market crashes at all. Simply look at Twitter.  At this value, Twitter is purportedly pricing 40.7 BILLION dollars. However, Twitter is not profitable.  Not one single dollar.

In fact, Twitter lost 64.6 million dollars last quarter alone.  Overall, the Dow is up over 25 percent thus far this year. It has been an exquisite run for Wall Street.  The median price-to-earnings ratio on the S&P 500 has reached an incomparable record high, and margin debt at the New York stock exchange has reached a level that we have never seen before.  In other words, stocks are massively overpriced and people have been borrowing huge amounts of cash to buy stocks.  We conjointly saw these behaviors just before the last two stock market bubbles burst.

After all the most troubling sign is that when the stock market soars to unprecedented heights, the state of the overall US economy is getting worse…

-The range of mortgage applications simply hit a brand-new 13-year low.

-The yield on ten year US Treasuries just hit 3 percent.

In addition, most Americans do not understand this, but the US financial system and the overall US economy are now in much weaker condition than they were the last time we had a serious financial crash back in 2008. Just before the last financial crash, the US national debt was sitting about 10 trillion dollars, but today it is up to more than 17.2 trillion dollars.

Since the fourth quarter of 2009, the US current account deficit has been over $100 billion per quarter. As a result, foreigners now own $4.2 trillion more US investment assets than we own do do abroad. That is $1.7 trillion more than when Buffet first warned about this huge problem in 2003. Said another way, the problem is 68% bigger now.

Since 2007, the total government debt in the US (federal, state, and local) has doubled from around $10 trillion to $20 trillion.

Meanwhile, the size of Fannie and Freddie’s mortgage book declined slightly since 2007, falling from $4.9 trillion to $4.6 trillion. The “other” federal mortgage bank, the Federal Housing Administration, now is originating 20% of all mortgages in the US, up from less than 5% in 2007.

Student debt, also spurred on by government guarantees, has also boomed, doubling since 2007 to over $1 trillion. So do not be fooled by this irrational stock market bubble.

Even big companies such as McDonald’s are urging their staff to return their Christmas gifts to bring in some much needed money…

In a stark reminder of how tough still are for low-income families in America, McDonalds has advised employees to dig themselves “out of holiday debt” by cashing in their Christmas haul.

This irrational stock market bubble is not aiming to last for too much longer.  In addition, several prime financial experts are now warning their clients to prepare for the worst. For instance, David John Marotta of Marotta Wealth Management recently told his clients that they should all have a” bug-out bag” that contains food, a gun and a few ammunition…

A top financial advisor, worried that Obamacare, the NSA spying scandal and spiraling national debt is increasing the chances for a fiscal and social disaster, is recommending that Americans prepare a “bug-out bag” that includes food, a gun and ammo to help them stay alive.

David John Marotta, a Wall Street expert and financial advisor and Forbes contributor, said in a note to investors, “Firearms are the last item on the list; however they are on the list.