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The United States is in an asset price bubble. Asset Price Bubble Checklist 1. Rapid Acceleration of Asset Prices 2. Overheated Economic Activity 3. An Uncontrolled Money Supply 4. Uncontrolled Credit Expansion The United States meets all the criteria, being flagrant offenders of 3 and 4. The economic situation in the US mirrors the Japanese Asset Price Bubble (wiki link) to an alarming extent. Years before the economic decline started, the Japanese government implemented aggressive fiscal policy (increased public investment) and expansionary monetary policy (dropped their interest rate). The US has the same fiscal/monetary policy stances. From 1989 to 1994 the NIKKEI 225 Index grew from $10000 to $38916 (231%). Economic deflation started draining the economy in 1991 and lead Japan into economic struggles for nearly 20 years (1991-2010). The first ten are commonly known as the lost decade, the full time period known as the lost score. The S&P 500 keeps setting new all-time records, the price is the highest it has ever been in history. All Time High - $2175 - 7/22/2016 Why are interest rates still close to 0%?
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If anymore of the EU's big supporters drop out, the probability that the EU falls apart completely rises dramatically. That's why your eye as an investor should be on the Netherlands, Germany, Spain, and France; as they are the four biggest constituents of the Euro Zone, each with proportionately distributed fee's / immigrants / risk, all three of which are discussed in the Brexit Prediction Blog .
(JB3 Investments first online blog post, 6/20/2016). I've come to multiple conclusions after consulting the reputable European data set, the "STANDARD EUROBAROMETER 77 PUBLIC OPINION IN THE EU – SPRING 2012 ". (available online with free download). Irrefutable Connections show a very similar political/social situation in the UK in 2016, based on trend's reflected in data from 2012. These same trends appear to be influential in Germany, the Netherlands, Spain, and France. Based on 2012 public sentiment, and data made available in hindsight, Spain and the Netherlands are decidedly more likely than France or Germany to leave the European Union. Euro Barometer Link Per predictions made in our last post, the initially high levels of market volatility the Brexit forced upon the UK economy have seen significant short term decreases. This is due to Investors calming considerably from the Brexit referendum of June 24th. This increase/decrease in volatility reflects strongly upon the highly elastic relationship between investor's market sentiment and the price level of the $VIX. On 6/24 the S&P500 VIX saw a 49% Increase; only to lose more than they had gained over the course of the following week. This suggests the Brexit was an economic non-factor to S&P 500 volatility overall, which is a preposterous notion, and the volatility index should still be near the mid $20's. This is where I disagree. If share prices only reflect the direct (short-term) Brexit implications; than the June 24th global correction may have been an overreaction. However, the long term implications on global trade are not only complex and difficult to predict, but largely unaccounted for by the global economy.  |
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