By Pam Martens and Russ Martens: December 7, 2021 ~
Last Friday, December 3, 2021, the Nasdaq stock market recorded 12 stocks setting new 52-week highs in contrast to 585 stocks setting new 52-week lows. Let that sink in for a moment. There were 48.75 times more stocks setting new 52-week lows than were reaching new 52-week highs. That extremely negative reading of market breadth came on a day when the Nasdaq closed down just 1.9 percent. Imagine what the breadth would have looked like if the percentage decline on the overall market had been worse.
Yesterday, Monday, December 6, with the Nasdaq closing up 139.6 points, the new 52-week lows still swamped highs, with 137 new lows and only 53 new highs.
Unfortunately, Americans never see headlines in their newspapers about the deterioration in the stock market’s underpinnings. What they do see on a regular basis are headlines about the market setting a new high. This has the intended effect for Wall Street manipulators of sucking the little guy in at market tops as the smart guys “distribute” their inflated shares to the less informed.
The one thing that will be different when this giant bubble finally pops, is that Fed Chair Jerome Powell, unlike former Fed Chair Alan Greenspan, will not be able to tell Congress that nobody could have seen this market crash coming. There is now a loud chorus of veteran Wall Street investors who are calling this the biggest bubble of all time, or words to that effect.
Just last week, Charlie Munger, the 97-year old Vice Chairman of Warren Buffett’s Berkshire Hathaway, stated at an Australian investment conference that he considers “this era even crazier than the dotcom era.”
In a “Wall Street Week” interview on November 12, 83-year-old Jeremy Grantham, co-founder and Investment Strategist of the investment firm Grantham Mayo van Otterloo & Co. (GMO), stated that “This is more extreme in scale and size of market cap than anything that occurred in 1929, even adjusted for the size of the economy.” Grantham expanded as follows:
“The thing about the great bubbles – 1929, Japan – no one knows after all these years exactly why the bubble peaked. You can say with hindsight it peaked at the point, of course, of maximum euphoria. So there was no hint of darkness at the end of the tunnel. Everything looked absolutely splendid as the market peaked. And, of course, as long as it looks absolutely splendid, everybody is happy. The thing about the great bubbles is how intensely do people buy into the idea that it can never break; that prices will never decline.
“The housing bubble of 2005-2006 in America was a brilliant bubble in that description. You had people going out and buying a second house to rent because house prices never declined. Indeed, [former Fed Chairman] Ben Bernanke said U.S. house prices have never declined. Of course, then they promptly did. But that is par for the course for the Federal Reserve.
“In 1929 there was a terrific buy-in and you could read articles in the Ladies Home Journal saying all you had to do to get rich was to buy stocks and hold on to them. And the same thing occurred in 2000 in the tech bubble. And the same thing occurred in the biggest bubble of all, which was Japan in 1989, when the Japanese market went to 65 times earnings.
“But in U.S. history, I would say there is a bigger buy-in this time to the idea that prices never decline and that all you have to do is buy them, than there has ever been. Which suggests that when the decline comes, it will be perhaps bigger and better than anything previously in U.S. history.”
When asked about the Fed pumping liquidity into a market bubble and today’s soaring inflation numbers, Grantham had this to say:
“Markets peak when inflation is low and profit margins are high. It’s not about growth. They like GDP to be very stable. They hate it bouncing around. It makes portfolio managers nervous. And our model that goes back to 1925 explains almost all the ebbing and flowing of market bull markets and bear markets, until June of last year.
“Starting in June of last year is the first time that inflation, the number one predictor since 1925, is ignored. If you want to explain today’s market level, yes, you have handsome profit margins. Every bull market has a wonderful economy. Every bull market has a plentiful supply of liquidity. But every bull market before this one had low inflation.
“In order to explain today’s market, you have to assume 100 percent ignoring of the rising inflation. Which is quite remarkable. We’ve never seen anything like this.”
You can watch the full Grantham interview in the YouTube video clip below.
One thing that separates the 1929 market crash from the 2008 market crash is the brazenness of the Federal Reserve to give itself unlegislated powers to rescue the stock market and some of Wall Street’s worst actors. After the 1929 stock market crash, the market did not regain the highs it set in 1929 until 1954 – a quarter of a century later. But after the 2008 stock market crash, the Fed – with no authority from Congress – created $29 trillion in cumulative bailouts to mega Wall Street banks, their New York and London trading houses, hedge funds, foreign banks and foreign central banks. That got the market roaring again in just a few years.
Instead of reining in this hubris and abuse at the Fed, Congress passed the 2010 Dodd-Frank financial “reform” legislation which granted the Fed the ability to keep the details of its bailout programs a secret for two years – by which time the issues become blurred in the minds of Americans.
And as we recently learned, even when the Fed does begin to reveal its bailout secrets, mainstream media may censor that news from the American people. See our October 19, 2021 report: The Wall Street Journal and New York Times Censor Yet Another Major News Story on the Fed and the Mega Banks It Supervises.