Road Map For How the Crash Will Play Out

Because of this, when crises do actually happen, it takes considerable time for investor psychology to shift from the euphoria associated with financial bubbles to initial concern, then from initial concern to outright worried, and from outright worried to panic.

By way of example let us consider the details surrounding the Tech Bubble: the single largest stock market bubble of the last 100 years.

Do you agree with the analysis related to the above statement by Graham Summers?

A: This article is definitely worth reading. It makes some very insightful observations. On balance, I do not believe that we, as speculators, need to know now what is likely to happen a year later. There are two things we can be certain of: the market will do whatever is needed to make the majority wrong and the political class’s intervention in the market economy will have predictable results.

Economic law will not be repealed. A few additional comments may be helpful.

The writer observes that financial collapses take a long time to playout. With regard to the market collapse in 2,000:

“When you extend the collapse from peak to trough, the whole collapse took nearly three years. And this process was actually accelerated by the Fed actively cutting interest rates and flooding the financial system with liquidity.”

My understanding of economic law leads me to the conclusion that the Fed’s intervention has extended the time required for the collapse to play out, not accelerated it. The biggest bubble is not now in the USA stock market. It is in bonds. It is possible that we may be heading for a crackup boom where all real assets raise in nominal value against currencies that fall in real value. Stocks are calls on the real assets owned by the companies. This could also happen in a sever stagflation. The bubble is in bonds. As Martin Armstrong has pointed out, we are at a 5,000 year low in interest rates. I will wait for the market to tell me.

Market Commentary (above) by Arthur Fixed