The levitating stock markets continue to seductively entrance traders, powering to new nominal record highs day after day after day.  No one believes a meaningful sell-off is even possible anymore, thanks to the vast deluge of central-bank monetary inflation.  Sheer euphoria has set in as all perception of risk has vanished.  This makes these stock markets extraordinarily dangerous, they are truly at topping extremes.

This move, particularly the one-sided 22.6% melt-up in the last 6 months, has bred unmistakable euphoria.  Wall Street vehemently tries to deny this truth, but the definition of euphoria is “a feeling of great happiness or well-being, a feeling of great elation”.  Does that not describe the outlook for the stock markets today?  There are no bears left, everyone is incredibly bullish and expects no material selloffs.

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Despite bulls’ assertions otherwise, stocks are very expensive today.  In fact, the elite component companies of the flagship S&P 500 stock index now have average valuations matching the ones seen in October 2007 when the last cyclical bull topped.  That led to a brutal cyclical bear that slaughtered the naive investors who chose to blindly believe Wall Street’s stocks-are-cheap claims then.
The general stock markets are now trading at valuations triple what we need to see before the past decade’s secular bear can end.  This makes buying high into today’s widespread complacency and euphoria extraordinarily risky.  It guarantees big losses as these overbought stock markets correct sharply at best, or roll over into a dangerous new cyclical bear market at worst.  Buying into toppings is foolish. [Read more...]

Submitted by Adam Hamilton, Zeal

Wall Street has always hated gold, so there has never been adequate or fair coverage of the secular gold bull or the resulting secular gold-stock bull.  When gold stocks are strong, they are ignored.  CNBC might spend a few minutes a day on them even if their gains trounce every other sector’s.  And when they are weak, they are mocked.  What kind of fools would want to grow their capital 18x in a secular stock bear? [Read more...]

Submitted by Adam Hamilton, Zeal

Gold got crushed this week in what can only be described as a capitulation.  Cascading selling took on a life of its own as the yellow metal knifed through multiple key support lines.  Newsflow exacerbated gold’s free fall, as extreme fear tainted everything with a heavy pall of bearishness.  Gold bears were euphoric, coming out in droves to pronounce doom on the metal.  But capitulations are actually very bullish events. [Read more...]

Submitted by Adam Hamilton, Zeal:

With gold stocks languishing near lows in a desolate sentiment wasteland, investors are wondering why this sector has fallen so deeply out of favor.  One theory is capital that would have traditionally flowed into major gold producers has been diverted into the GLD gold ETF instead.  Taken to extremes, this logically leads to the conclusion gold stocks will never thrive as long as GLD exists.  Is GLD cannibalizing the gold miners? [Read more...]