E Asset Price Crash Dead Ahead?

An All-Asset Price Crash (AAPC) might be the next "Wow! Can you believe it?"

In the meantime, whether it be stocks, bonds, gold, or oil, investors are licking their chops and counting their profits before they are booked. And, they have reason to gloat. Let's see what all the noise is about.

STOCKS

Since the stock market lows less than five months ago, the Nasdaq Composite Index is up 66 percent. At its most recent intraday high of 11,126, it is nearly twelve percent higher than it was before falling by one-third this past March.

Any fears from investors about "technical damage" created by the previous price collapse have been swallowed up by the recent huge gains in the index. Here is what it looks like on a 5-year chart...

(source)

The broader market as represented by the S&P 500 Index is up fifty-two percent. It has not broken through its previous high of just under 3400 prior to its March price collapse, but is knocking at the door right now. Stocks have regained all of their recent losses and, in some cases, more. At this writing, they appear on the verge of moving much higher for quite some time. Maybe.

BONDS

In the short space of ten days in March, bond prices (TLT - 20+ year Treasury Bond ETF) dropped by 22 percent. This was followed by an almost immediate, identical 22 percent increase, which brought bond prices back to within five percent of their former high point. Below is a five-year chart (source) of TLT...

OIL

During the February-March selling spree, oil dropped from a high of $63.00 per barrel to a low of $11.00; a decline of more than eighty percent. Ever so briefly, the spot price for crude oil even approached zero. Currently, oil is at $41.00, an increase of two-hundred seventy-two percent from its low of $11.00 a few months ago. The chart (source) below tells the story...

Oil prices dropped much further than stocks. The percentage decline was more than twice as much for oil and, if we use the brief intraday low of $0, then oil's decline was three times greater than stocks.

Oil has out performed stocks on the upside by more than four-fold since the lows in late March, but it is currently thirty-five percent below its previous high.

GOLD

As for gold, its price dropped along with everything else, although not as sharply. After  declines of nearly fifteen percent, gold has rebounded almost forty percent to new all-time highs in nominal terms. Below is the five-year chart (source) of GLD - Gold ETF...

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Kelsey Williams is the author of two books: Inflation, What it is, What It Isn't, And Who's Responsible For It and  more

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Comments

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William K. 6 months ago Member's comment

This article is rather disturbing and seems to paint a rather bleak future. And unfortunately indeed it certainly seems correct. THAT is rather unfortunate. One possibe step in the right direction might be to terminate every person in the federal reserve system WITH EXTREME PREJUDICE, so that it would be known to all that it was the long string of wrong choices that caused the problem, AND that others making the same wrong choices would quickly be quickly ejected out the same door. Helping one's friends is OK if it is only one's personal wealth being used, but to saddle unborn generations to a crushing level of debt indicated willful abuse of power. (I stop my rant here, not done, just stopped)

Robert Durant 6 months ago Member's comment

Very disturbing indeed!

Laurent Eliane 6 months ago Member's comment

A collapse of the capitalism structure based on credit for everything will affect assets and currencies. Does the fed have a margin before the collapse of dollars?

No, except selling gold which will have, like we can see, a fundamental to go up.

The last drop of gold was may be the first mark of high move from fed for not letting gold reflecting the distrust in the system.

Gold is the last one to die on the battlefield.

Paul McGee 6 months ago Member's comment

Good point.

Gary Anderson 6 months ago Contributor's comment

Deflation can impact gold too. And deflation is difficult for homeowners and those with installment contracts. Wages could decline, as happened in the Great Depression. It probably won't happen but it could. And the contracts remain unchanged, and difficult to repay.

Laurent Eliane 2 months ago Member's comment

Central banks or i would say gov. rely on inflation in order to "repay" their debt on the long run. Deflation is a failure of the capitalism but printing like they do and the dollar loosing its international appeal will be more likely on inflation side. I don t exclude a huge crash over the bill of morphine injected into the patient..overdose!!!

Gary Anderson 2 months ago Contributor's comment

Too many have been brainwashed by austerity peddler Mitch McConnell. Jmo.

Thomas Mitchell 6 months ago Member's comment

All things in the financial markets tend to revert to the mean. So it would be no surprise to have deflation in the near future to offset the years of inflation we have had over the past 20+ years.

Ron AF Greve 6 months ago Member's comment

Does that take into account the money printing? I don't think you can use the 'revert to the mean' if you keep adding an asset to an ever growing pool of the same. Would be nice though, then we could print ourselves into wealth.

Alpha Stockman 6 months ago Member's comment

Yes, good point.

Ron AF Greve 6 months ago Member's comment

"Why would you want to own stocks and bonds that only go up because the Fed is expected to come to the rescue if something goes wrong?"

Let me fix that:

I want to own stocks and bonds (and gold) because they go up because the fed comes to the rescue when something goes wrong.

:-)