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My explanation is that gold has become relatively expensive compared to other assets. And secondly, the reason for the fall in gold is similar. Bitcoin and cryptocurrencies have also declined. Now they are recovering again. We started this interview with your question, why is the S&P making new highs?
And I replied that we still have a lot of liquidity, but in my opinion it is relatively shrinking. So, not all assets are making new highs. Do you understand? After all, for one asset to grow, others must fall or remain at the same level. Global stock indices continue to set new records, but deep divergences indicate serious structural exhaustion in the market.
Liquidity dynamics are becoming increasingly selective, creating artificial gains in core stocks while important tangible assets lag behind. Marc Faber, the iconic Swiss contrarian investor and editor of the Gloom, Boom, and Doom Report, notes that relative market liquidity is actively shrinking behind the scenes.
The S&P's recent record highs hide a narrow speculative mania fueled by retail momentum , not fundamental strength. After May, broad stock market performance is expected to deteriorate sharply in line with seasonal historical patterns. Whereas physical gold and silver are likely to consolidate sideways without any upward momentum over the next 3 months.
Smart investors should use short-term stock spikes to close positions and build protective cash reserves. If you found this analysis helpful, be sure to like it , share it with . You ask a very good question, and the only explanation I have is that precious metals have risen sharply before. And when war broke out in Iran, precious metals seemed to predict this war.
Mhm. And then they started to fall, and I must say that the dynamics of the shares of mining companies are very bad. My explanation is that gold has become relatively expensive compared to other assets. And secondly, the reason for the fall in gold is similar. Bitcoin and cryptocurrencies have also declined.
Now they are recovering again. Mhm. But we started this interview with your question about why the S&P is making new highs. And I replied that we still have a lot of liquidity, but in my opinion it is relatively shrinking. So, not all assets are making new highs. Do you understand? After all, for one asset to grow, others must fall or remain at the same level.
For example, if we look at the period up to 2018, stocks were growing, real estate was growing , both commercial and residential. But lately everything has been growing: stocks are rising, and commercial real estate has fallen by something like 70%. Some properties will never be sold for more than the value of the land itself.
So, in my opinion, answering your question: why is the S&P making new highs? The S&P is making new highs because we are in a speculative environment and investors are reading Reddit, the Wall Street Journal or something like that, watching CNBC, getting advice and investing in one sector. But if you look at the entire market and at equilibrium stocks, the market is not doing very well.
I mean, my portfolios, I can tell you, I have diversified portfolios and some European views, or of course Mike invests like he did a hundred years ago. It may be true that I'm not the biggest tech fan, but I have diversified portfolios, but they all peaked around late February, late March, around that time.
M-hm. I'm still in the black for the year since then, but not by much. In an election year, you know, like this year after May, the stock market does n't do very well. In general, there is usually a spring rally in stock markets. We had a spring rally until today, but usually the market does n't do very well from the beginning of May.
And yet the public is rushing into action without any caution. I would remind your audience that, of course, you will say, or your audience will say, " Warren Buffett is an old-fashioned guy. He doesn't know anything." But interestingly, Berkshire Hathaway, an investment vehicle, has more cash today than at any time in its history.
And I'm not saying he's right, but I'm saying that in recent weeks I've studied the technical picture of the market in detail and written a report about it. The technical picture is bad, not good. The geopolitical situation is also not the best. The inflation forecast is also unfavorable. So I'm a little surprised that people are jumping into stocks without any fear.
I would reduce, I would use the current strength to reduce positions. That's what I would do, and the gold and silver—I like gold and silver, and I'm not going to sell my gold and silver. I don't think they will grow in the next 3 months. Excessive money creation continues to inflate asset valuations, disconnecting stock multiples from the realities of corporate earnings.
While the major indexes create the illusion of stability, market breadth is rapidly declining as fewer individual stocks reach new highs. Commercial real estate is experiencing huge depreciation, with some luxury properties losing 70% of their secondary value. At the same time, high crude oil prices act as an aggressive economic brake, increasing business costs and intensifying inflationary pressures.
Fixed income dynamics are exposing critical vulnerabilities as rising Treasury yields are driving down bond prices despite federal policy intervention . The failure of recent rate cuts to spark a sustained bond rally proves that the structural limits of debt manipulation have been reached. Now let's get back to the interview.
I'm not entirely sure . You can never be 100% sure in the stock market, but I assume there is a lot of liquidity in the system , which is why people invest in stocks. And in America, part of the reason for strong earnings growth is excessive liquidity. The government essentially creates this liquidity by printing money, and then it goes somewhere, right now it's stocks, and the American media is masterfully justifying why stocks deserve such a high valuation premium.
So we have a new high for the S&P, which I personally didn't expect, but it happened. It didn't hurt me. Mm. In the sense that I am not playing bearish, although I think there will be opportunities to short semiconductor stocks soon . I believe that there are prospects there. But overall the market has grown if you look at its breadth, how many stocks are rising, how many are falling, and especially how many stocks are making new highs.
The technical picture looks very bad. The market is making new highs, but fewer and fewer stocks are doing so. Yes, that is definitely true. But one thing that has also supported stocks is energy companies, which are clearly benefiting from rising oil prices. However, I think it would be a mistake to conclude that rising oil prices are good for anything.
Basically, this is a negative for the economy and corporate profits in general, as it puts pressure on business spending and... So, go ahead. Continue. I mean, we'll see the effects of rising oil prices in 6 months, when it all goes through the system. But it is clear that rising oil prices have never been good for financial assets in the past.
And it seems to me, if you look at the bond market, it becomes clear that some damage will be done due to rising bond yields . For example, I follow the TLT ETF. ETFs. And profitability continues to grow. In other words, prices are falling, as you can see on your chart. In my view, it is a combination of rising oil prices, which is putting pressure on inflation, and increasing yields on Treasury bonds and other fixed-coupon securities.
In my opinion, this combination would result in huge costs for the US government, as it should benefit from lower interest rates. But that's not happening now; They do not benefit from lower rates, but rather from their rise, which increases the US budget deficit, which could grow significantly and, ultimately, in the long run, become unmanageable.
So the government will have to print money to finance this growing deficit and the increase in interest payments on the national debt. And this will lead to a complete disaster. Because you raised a very important issue. As you know, the Fed, the US central bank, began cutting rates in October 2024 , almost two years ago.
Typically, the idea is that lowering rates stimulates the bond market, their price rises, and interest rates fall. But that didn't happen. They lowered the Fed rate and bonds fell, in other words, interest rates rose, which, in my opinion, proves the limits of central bank power and manipulation . I would say that the central bank has now lost control of interest rates.
They lost—maybe they will recover someday, but not now, because investors no longer trust them. And secondly, the size of the financial market is so large that people no longer trust it, because it significantly exceeds the real economy, as in other Asian countries. Mhm. But something is up, and I'm not quite sure what.
If you look, for example, at China's behavior up to this point, they have been surprisingly quiet. And I'll tell you: if not a single drop of oil gets out of the Middle East to China, they will collapse in 3 months. They have reserves for about the next 3 months. But you understand that they can't deplete reserves to zero and then suddenly go to full capacity.
Mhm. So, in my opinion, the Chinese should take some measures within a month. And it will be. In my opinion, they will do it. But so far they have been surprisingly quiet. You know , you haven't read statements that say, "Oh, if the Americans don't let our tankers go from Iran to China, we'll destroy the American fleet in the Middle East." Which, I think, would occur to everyone.
If a country like China depended on oil from the Middle East. Uncontrolled budget deficits are pushing public finances into a spiral of debt growth, threatening the stability of international currencies. Rising interest costs on public debt will inevitably require aggressive liquidity injections, undermining long-term confidence in the West's fiscal management.
At the same time, the geopolitical situation surrounding the distribution of Middle Eastern oil creates risks of immediate disruptions in East Asian industrial supply chains. Strategic oil reserves provide only a narrow operational buffer for large import-dependent economies facing logistical difficulties.
Since the central government cannot afford to completely exhaust its strategic reserves, defensive economic measures become mandatory. Central banks have largely lost control of market interest rates as investor confidence in overblown financial systems has collapsed. releas. Mhm.
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