Bubble Keeps Getting Bigger; Wall Street Unfazed by August CPI Inflation Reading; Silver Tops All Assets, up 45% Year-to-Date

As usual, Wall Street simply ignored the August CPI reading released Thursday morning and moved higher.

Inflation was shown by the report to be higher than expected, with food and energy main contributors to higher prices. The annual rate of consumer inflation was shown to be 2.9%, nearly one full percentage point higher than the Fed's so-called "price stability" level of two percent. That reading may have put the kibosh on a half percent cut to the federal funds target rate at next week's FOMC meeting, a condition that would arguably be bad news for stocks.

Unfazed, Wall Street continued to believe the Fed would at least cut by 25 basis points, which was good enough to send the major indices to all-time highs. Wall Street doesn't care if a dozen eggs are $6.00, or if the median price of an existing residential home is upwards of $400,000 and unaffordable for most Americans. They don't care about the deteriorating conditions in most U.S. cities, homelessness, immigration, Ukraine, Gaza, assassinations of popular right-wing speakers, or the fact that unemployment is reaching critical levels. In fact, high unemployment, as is becoming apparent due to false reporting by the BLS and subsequent revisions, is actually cheered on by the trading cabal of brokerages and big banks.

The Federal Reserve, which has a dual mandate of stable prices and high levels of employment, is failing on both fronts. They are a complete failure, and Wall Street, enamored by the economists which set monetary policy at the Fed are completely OK with that. Wall Street cares about one thing and one thing only: making money on stocks. They could care less if people make or lose millions, so long as their internal trading units are profitable and they're perfectly willing to sell short while advising clients to buy.

While it's a nasty game, playing along with Wall Street can be very financially rewarding if one is aware of the conditions and capable of moving money from sectors to sector, stock to stock, and timing the market well. That's all well and good. It's just that the continued gains on stocks is getting a wee bit ridiculous.

The Shiller PE, or CAPE, stands at 39.58, the second highest ever, and will soon proceed past 40, heading for the record of 44.19 (Dec 1999) that was set at the height of the dotcom bubble. Since today's bubble is bigger, encompassing the financialization of tech, real estate, and the continuance of dollar debasement, it's likely to exceed that 199 level, and possibly by a lot. Clearly, there is no good reason to short this market. That would be tantamount to committing financial suicide.

The only thing to do is play along, reap profits and hope for the best. It's a self-reinforcing feedback loop, leading stocks to ever more extreme valuations. There's nothing to stop the parade higher. Someday, there will be a correction or a crash, but until then, everybody might as well party like it's 1999 because, in an economic sense, it is 1999, only to a greater degree.

So far this week, stocks have done well. Thursday's thrust on the Dow put it up solidly for the week, by 707 points. The NASDAQ is looking at another nice weekly performance. Through Thursday's close, the NASDAQ is up 342 points and the S&P is ahead by 106.

Futures are moderating, with the Dow futures down about 100 points, NASDAQ futures up 20 and S&P futures down four points.

Gold is maintaining a positive posture near record highs, hitting $3,695 overnight. Silver test $43 an ounce and is holding in the mid-$42 range. Silver is up a remarkable 45% year-to-date, so, obviously, stocks aren't the only game in town.

Party on!

At the Close, Thursday, September 11, 2024:
Dow: 46,108.00, +617.08 (+1.36%)
NASDAQ: 22,043.07, +157.01 (+0.72%)
S&P 500: 6,587.47, +55.43 (+0.85%)
NYSE Composite: 21,533.64, +239.07 (+1.12%)