Is this the market’s breaking point?
I admit: I’m a permabear.
This is no surprise to those who know and have followed me over the years. But I’m publicly proclaiming my ‘bearishness’ because doing so might open up a needed and long overdue dialog.
Here’s my fundamental position: Infinite growth on a finite planet is impossible.
Cutting to the chase, this is why I predict a major crash/collapse across stocks, bonds and real estate is on the way.
The recent market weakness seen over the past two weeks is nothing compared to what’s in store. As we’ve been carefully chronicling, bubbles burst from ‘the outside in’, starting at the weaker places at the periphery before progressing to the center.
Emerging market equities are now down -26% from their January highs and -18% year-to-date. China’s stocks market is down -32%, even with substantial intervention by the government to prop things up.
The periphery has been weakening all year, and the contagion has now spead worldwide.
Taken as a whole, global equities have shed some $13 trillion of market capitalization for a -15% decline:
The rot has spread to the core with surprising speed. Now even the formerly bullet-proof US equity markets are stumbling.
US Stocks are now negative on the year:
It’s been obvious for a long time to those who have watched The Crash Course that endless growth is simply not possible. Not for a bacteria colony in a petrie dish, not for an economy, not for any species on the planet. Eventually, when finite resources are involved, limits matter.
But the vast majority of society pretends as if this isn’t true.
The US government is (and has been for decades) adding to its massive pile of debt at a rate far faster than it’s income (GDP) is growing. Pension managers have a horizon measued in decades, and yet they buy stocks and bonds that can only pay off if endless growth occurs (e.g., 100+ P/E ratios). Much of today’s buildings and public works will need to be rebuilt/replaced within the next 50 years, yet no one is certain whether we’ll have enough affordable energy to do so.
In regards to the financial markets specifically, history has given us clear lessons to heed. 1929, 1987, 2001 and 2008 each showed us that when the world gets so manic that investors must believe in perpetual perfection/endless growth to justify current asset prices, a painful correction ensues as the limits of reality re-assert themselves.
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SOURCE: Peak Prosperity, Chris Martenson