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Generational Dynamics Web Log for 5-May-2013
5-May-13 World View -- Wall Street stock market continues dangerous parabolic bubble

Web Log - May, 2013

5-May-13 World View -- Wall Street stock market continues dangerous parabolic bubble

Libor banker fraud may be eclipsed by the ISDAfix fraud

This morning's key headlines from GenerationalDynamics.com

Wall Street stock market continues dangerous parabolic bubble
Libor banker fraud may be eclipsed by the ISDAfix fraud
Orthodox Jewish woman sues Lancome over makeup failure

Wall Street stock market continues dangerous parabolic bubble

Wall Street

Wall Street

Long-time readers are well aware of the Generational Dynamics prediction that the world is headed for a major global financial panic and crisis, causing all bubbles to implode, including the stock market, commodity and gold bubbles. It's impossible to predict when that will happen, or what event will trigger the panic, but every once in a while I try to point out a time when things look particularly dangerous.

One of those times is now. A couple of months ago, I warned that the stock market was rising rapidly and becoming dangerously parabolic. That parabolic rise is continuing. The S&P 500 Price/Earnings ratio (also called "valuations") was at 18.45 on Friday morning, according to the Wall Street Journal. Friday's huge stock market surge spiked the P/E ratio up to 18.63 by the end of the day -- above the extremely high levels that it reached during the massive real estate and credit bubble of the 2006-2007 time period. The S&P 500 P/E ratio has been above its historical average (14) continuously since 1995, and by the Law of Mean Reversion will crash to around 6 or lower, as it last did in 1982, and stock prices will fall proportionately.

According to my Dow Jones historical page, the market is now at 218% of its current long-term historical trend line value of 6838. This is an extremely high bubble level, though not as high as the 264% that it reached on the peak on October 8, 2007. However, this may indicate that the new parabolic bubble may surge even further before crashing.

To say that there is no rational explanation for this parabolic stock market spike is an understatement. China's economy is slowing, and Europe's economy is going down the tubes, while America's economy is about to be hit by the Obamacare train wreck and financial disaster.

The major factor causing the stock market spike is the Fed's "printing" of $85 billion per month of new liquidity for banks. According to mainstream "economists," that money should be going out as loans to individuals and small businesses, which it is not. Instead, that money is making its way to investment bankers and wealthy investors who are using the money to expand the stock market bubble. (See my report in 17-Apr-13 World View for how wealthy investors can borrow millions of dollars from Interactive Brokers at 1.3% interest and then invest the money in the stock market.)

A second reason why money is pouring into Wall Street is apparently that many investors are fleeing Europe. The Cyprus bailout, which confiscated 60% of the assets of wealthy investors, and the statements of European politicians that it could happen again, is frightening large investors into taking their money out of European banks, according to some reports, and some of this money is reaching Wall Street.

It used to be that I was advising (American) readers to keep their money in FDIC insured bank accounts, and that's probably still the best bet, though if you live in a house with a safe basement, you may wish to keep some cash hidden behind a loose brick. Some people suggest "investing" your money on self-defense and survival type items, everything from food to weapons.

The Cyprus bailout shows what happens when politicians become desperate. Three months ago, confiscating 60% of bank accounts was so completely unthinkable that the mere suggestion would have drawn contemptuous laughter. But now it's a fact. What will the politicians in the Obama administration do when they become desperate? It's impossible to predict, but it's certainly clear that nothing is off the table.

Libor banker fraud may be eclipsed by the ISDAfix fraud

I was amused by the beginning of Mike Taibbi's story in Rolling Stone:

"Conspiracy theorists of the world, believers in the hidden hands of the Rothschilds and the Masons and the Illuminati, we skeptics owe you an apology. You were right. The players may be a little different, but your basic premise is correct: The world is a rigged game. We found this out in recent months, when a series of related corruption stories spilled out of the financial sector, suggesting the world's largest banks may be fixing the prices of, well, just about everything."

Well, I'm certainly not a conspiracy theorist, nor have I ever blamed the Rothschilds, Masons or Illuminati, nor have I ever said that the world was a rigged game. What I HAVE said is that many Generation-Xers, united in their hatred of the Boomer generation of their parents, got masters degrees in "financial engineering" in the 1990s, and then went into the big banks and purposely created tens of trillions of dollars in fraudulent securities. And I've said that journalists like Taibbi paint these financial engineers as innocent victims, and that nobody in the Obama administration, which receives huge campaign contributions from the banksters, is willing to prosecute these criminals. And I've related this generational behavior to generational hatreds in other places and times. (See "The Legacy of World War I and the Holocaust".)

So now Taibbi is changing his mind and apologizing, as he comes to understand what I said years ago: That the same people are still in the same jobs in the same banks, looking for new ways to defraud people. He's just discovered a new form of fraud, many times larger than the Libor fraud. The Libor fraud affected possibly tens of trillions of dollars in loan agreements, as banksters manipulated the rates so that they could make as much money as possible. But the IDSAfix is a number computed by a similar process, but it affects HUNDREDS of trillions of dollars in interest rate swaps. The banksters manipulated IDSAfix rates fraudulently for their own financial gain.

The Commodity Futures Trading Commission is investigating ISDAfix rate fraud, but don't expect the Obama administration to prosecute anyone, no matter how massive the fraud. Campaign contributions from banks are just too lucrative. Rolling Stone / Mike Taibbi and Bloomberg

Orthodox Jewish woman sues Lancome over makeup failure

Orthodox Jewish women are not permitted to apply makeup on the Sabbath, and so they buy "24-hour" makeup and apply it the afternoon before, so they'll look fabulous all day. Rorie Weisberg, an Orthodox Jewish woman from Monsey, New York, is suing L'Oreal, claiming that the company's Lancome foundation Teint Idole Ultra 24H "faded significantly" overnight. Weisberg was testing out the makeup in preparation for her eldest son's bar mitzvah in June. Times of Israel

(Comments: For reader comments, questions and discussion, see the 5-May-13 World View -- Wall Street stock market continues dangerous parabolic bubble thread of the Generational Dynamics forum. Comments may be posted anonymously.) (5-May-2013) Permanent Link
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Generational Dynamics Web Log for 5-May-2013 5-May-13 World View -- Wall Street stock market continues dangerous parabolic bubble

Wall Street stock market continues dangerous parabolic bubble

Libor banker fraud may be eclipsed by the ISDAfix fraud

Orthodox Jewish woman sues Lancome over makeup failure

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Generational Dynamics Web Log for 5-May-2013
5-May-13 World View -- Wall Street stock market continues dangerous parabolic bubble