Stock Market Bubbles and Rallies

I have a theory that the rich milk the middle class like cows by deliberately driving up the prices of stocks and skimming the cream off by selling before the market goes down, as described in Matt Taibbi’s The Great American Bubble Machine and books Lefèvre’s Reminiscences of a Stock Operator: With New Commentary and Insights on the Life and Times of Jesse Livermore and Bonner’s Mobs, Messiahs, & Markets: Surviving the Public Spectacle in Finance & Politics

I predict that despite the stock market rally now that in the end we are destined for a far grimmer version of the Nikkei index, which is still 50% below the level peak despite 10 rallies the of over 30% gains since 1990.  During each of these bear market rallies, investors invariably believed that the worst was over and that recovery lay just ahead.

With world wide oil production having peaked in 2005, and every single aspect of material goods depending on energy at all points in its life cycle, there can’t possibly be any more growth to fuel stock markets back to the days of cheap oil.

nikkei 225 index 1984-2014

Japan’s Nikkei 225 Index grew over 30% ten times between 1990 and 2009

Start Date End Date Index Starting Level % Gain Duration in days
1-Oct-90 18-Mar-91 18,781 37.9 168
19-Aug-92 10-Sep-92 14,194 35.9 22
17-Nov-92 11-May-93 15,941 33.1 175
29-Nov-93 17-Jun-94 15,671 37.7 201
3-Jul-95 26-Jun-96 14,296 59.1 358
9-Oct-98 12-Apr-00 12,787 62.9 550
28-Apr-03 26-Apr-04 7,604 60.4 363
17-May-04 7-Apr-06 10,788 62.8 709
9-Mar-09 8-Jun-09 7,028 41.1 91

Every time you think Happy Days Are Here Again because your stocks have recovered so much since 2008, look at the chart above to remind yourself that these rallies are how the 1% skim your hard-earned dollars to buy private jets and yachts with.

My best friend’s mother, seeing everyone making enormous amounts of money in the bubble, put all of her retirement savings into dot-com stocks in January of 2000 and lost most of it in the crash a few months later.  My mom is proud of how well her stocks have recovered from 2008 right now.

But will she sell and take profits?  Heck no.  It must be time for another crash.





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