by Charles Hugh Smith
Of Two Minds
Bubbles always burst, and the confidence that “this isn’t a bubble” and “the Fed has our back” are counter-indicators.
Here we go again: stocks have once again reached nosebleed valuations completely disconnected from reality–in other words a repeat of the speculative-frenzy bubble that reached its peak on February 19. Once again, stocks are sporting delusional GDP-to-valuation and P-E (price-earnings) ratios, all based (again) on the belief that nothing–certainly not revenues, profits, debt levels, etc.–matters; the only thing that matters is the Fed pimping stocks.
What might observant punters have learned from the February 19 bubble popping? For one thing, the complacent belief that every technician’s target is guaranteed is suspect: at this writing, the vast majority of technical-analysis targets are much higher.
What’s the basis for these higher targets? Nothing but the implicit quasi-religious faith in the Fed.