Tech Bubbles – Then and Now

Miles Franklin sponsored this article by Gary Christenson. The opinions are his and are not investment advice.

Breaking News: The NASDAQ 100 Index closed at 10,094 on June 10, 2020, an all-time high, and the Fed recently printed $3 trillion of fiat dollars. Fed “printing” levitated stock prices and increased the wealth of the financial and political elite. However, “currency printing” and QE4ever do not create prosperity, wealth, social contentment, jobs, gold, silver, sanity, or health.

The COVID-19 virus and the ongoing economic shutdown have increased suicides, unemployment (over 44 million have filed), drug abuse, alcoholism, child abuse, anger, riots, and bankruptcies. But the Fed is doing what it does best: creating dollars; transferring wealth from the many to the few; increasing consumer price inflation; and lying about their actions.

Our doctors and politicians demanded we drink the “mask and lockdown Kool-Aid”… Maybe they saved many lives… Above my paygrade…

Did the lives “saved” from COVID-19 infections justify other lives lost, bankruptcies, economic collapse, unemployment and so much more? That question is above my paygrade… and too late. The “shutdown train” ran down the tracks and created an economic reset.

The first and second-order consequences of the shutdown include:

a) A “tech bubble.” What and how and why? See below.

b) Massive deficits, more unpayable debt, and escalating fiscal and monetary insanity. What financial and political nonsense did the economic shutdown conceal? Also, above my paygrade…

c) Millions of unemployed workers, missed mortgage payments, overdue rents, late credit card payments, bankruptcies, and the list continues.

d) Combine with Fed “printing,” QE4ever, various lies and coverups, a hefty dose of media nonsense, and there you have it… a Tech Bubble.

WHAT TECH BUBBLE?

Tesla stock: $15 in July 2010, and $1,001 on June 19.

Apple stock: $8 in August 2006, and $349 on June 19.

Amazon stock: $26 in July 2006, and $2,675 on June 19.

The Fed inflated another Tech Bubble in 2019-2020, like in 1999–2000. Note: the stock market top in 2007 was a real estate bubble, not a tech bubble.

Reminder: After the 2000 tech bubble, many companies failed, and the NASDAQ 100 dropped over 80%.

Could a crash happen again? Yes, but perhaps not if the Fed is all-powerful and blows more “fiat air” into the tech bubble. At my paygrade, an all-powerful Fed and a continuously inflating bubble look unlikely.

The Fed can create currency units, but not prosperity, jobs, or wealth.

Place your bets: (Drink the Kool-Aid if necessary.)

a) The Fed will boost the NASDAQ until election day and new highs are coming. Many people believe this scenario.

b) Much of the U.S. economy is crashing and, regardless of QE4ever, the markets will acknowledge that reality. Did you buy enough gold this month?

BUT IS THE NASDAQ 100 IN A TECH BUBBLE?

Consider the NASDAQ 100 to Russell 2000 ratio. Yes, the NASDAQ is in a bubble.

Examine the NASDAQ 100 to S&P 500 Index ratio. Yes, the NASDAQ 100 is in a bubble.

QUESTION: WHAT HAPPENS TO ALL BUBBLES?

ANSWER: THEY IMPLODE!

The NASDAQ 100 is a bubble. Stock prices for Tesla, Apple, and Amazon agree. Tech stocks are priced too high, especially the big tech stocks favored by the political and financial elite and the Swiss Central Bank.

Yes, the Swiss Central Bank creates currency from nothing, buys dollars, and invests in tech stocks, which supports the tech stock mania. Add TINA, “There Is No Alternative,” and tech stocks rise higher. Force interest rates lower and stocks look attractive. Ordinary greed, momentum followers, Robinhood day traders, optimists who expect the NASDAQ to rise to 20,000, and media hype push the index ever higher.

But bubbles always implode! Take care! Maybe the NASDAQ can rise further, supported by Fed “printing.” Maybe not.

IS THERE AN ALTERNATIVE TO THE TECH STOCK BUBBLE?

Of course, there are choices. TINA is mostly nonsense. Consider:

After the tech stock crash in 2000—2002, silver rose from $4 to over $48, even though the Powers-That-Be (PTB) weren’t happy about the rally.

After the DOW all-time high in 1968 and another nominal high in 1973, gold rose from $40 to over $800 while the nation floundered in “stagflation”—a stagnant economy combined with inflation in consumer prices.

Sound familiar? Yes, but 2020–2025 will be worse and include:

a) Crashing economy, caused by crushing debt, pervasive financialization, and the COVID shutdowns.

b) Huge inflation in commodity prices, created by QE4ever, Fed printing, and low or zero interest rates.

c) Social unrest, income inequality, racial tensions, wealth inequity, unemployment, a long hot election year summer, New World Order agenda, riots, planned violence and more.

OUR NEWER NORMAL WILL BE SUPER STAGFLATION.

But silver and gold prices are several times higher than in 2001. Are they in a bubble, like tech stocks?

Since 2010, Tesla stock is up a factor of 66. Really?

Since 2006, Apple stock is up a factor of 44.

Since 2006, Amazon stock is up a factor of 103.

Since 2001, silver is up a factor of 4.5. (Devaluing the dollar.)

Since 2001, gold is up a factor of 6.8.

THE NASDAQ is the BUBBLE, NOT SILVER OR GOLD.

Look at the NASDAQ 100 to silver ratio. Yes, the NASDAQ 100 is in a bubble when measured in ounces of silver. Expect a correction lower in the NASDAQ and higher silver prices in coming years.

WHAT ABOUT THE GOLD TO SILVER RATIO?

The gold to silver ratio, or its inverse, the silver to gold ratio, are important.

When the gold to silver ratio is high, it indicates a bottom in prices for both. When the ratio declines, silver prices advance faster than gold prices.

When the (100 times) silver to gold ratio is low, that suggests a buy zone for silver, such as 2003, 2008, 2016, and 2020.  Prices (weekly data) when the ratio hit bottoms were:

Date             Ratio      Silver Price     Lowest Nearby Silver Price

May 2003       1.24           $4.53              $4.34

Oct. 2008       1.19           $9.33              $8.53

Feb. 2016       1.20           $14.69         $13.61

March 2020    0.83           $12.39         $11.77

WE HOPE THEY ARE WRONG DEPARTMENT:

Sven Henrich:

“There’ve only been two periods in history where the markets have disconnected so far from the economy that it’s reached levels of 150% or higher. One of those eras was the Nasdaq bubble in 2000 and the other one, ironically, was the February 2020 top.”

Alasdair Macleod:

“But an imminent banking crisis is now a near certainty, with most global systemically important banks in a weaker position than at the time of the Lehman crisis.”

“It will then become obvious to everyone that the Fed is sacrificing the dollar in order to fund the government, keep the banking system going and to support the economy by attempting to provide the liquidity to defray supply chain failures.”

“The escalation of bankruptcies and of nonperforming loans worldwide will almost certainly take the banking system down.”

Brandon Smith:

“The truth is, the Fed is not a bumbling maintenance man. The Fed is a saboteur, a suicide bomber that is willing to destroy even itself as an institution in order to explode the US economy and clear the path for a new globally centralized one world system.”

CONCLUSIONS:

• Central bank “printing” and QE4ever boosted the NASDAQ for years. As the advance proceeded, fewer stocks participated in the mania. The recent tech bubble favored the FAANG stocks plus Tesla and a few others.

• Based on ratios to the Russell 2000, silver, the S&P 500 Index and others, the NASDAQ 100 is in a bubble.

• The tech stocks are in a bubble. Bubbles ALWAYS implode. Perhaps soon, and maybe not until after November 2020, but bubbles always implode. Watch out below!

• The silver to NASDAQ ratio shows that silver prices can rally by a large factor in the next five years. NASDAQ prices can fall a long way.

• The silver to gold ratio hit a new low and probably has bottomed. Higher silver and gold prices lie ahead.

• Charles Nenner says that gold will be in a bull market until 2026. Silver prices should lead gold prices.

• Is it reasonable to expect that 44,000,000 unemployed Americans, crashing GDP, riots, depression era number of bankruptcies, and crushing debt will be neutralized by QE4ever?

• Is it reasonable to expect that QE4ever will levitate the NASDAQ for another five years without a major correction/crash?

• A risk/reward analysis favors silver and gold over high-flying bubblicious NASDAQ stocks.

You can trust the multi-thousand-year history of silver and gold as real money, or the truth-challenged statements from the Fed and our politicians. At my paygrade, silver looks safe, sane, and real. The NASDAQ looks over-valued and vulnerable to a large decline. Look out below!

Miles Franklin will recycle dollars from high-flying tech stocks into real money—silver and gold. Call 1-800-822-8080.

Gary Christenson