Dallas Fed president: Asset-price bubble “may result in tears” for investors
By Elliott Wave International
Editor’s note: You will find a text version of this story below the video.
Lehman Brothers, Washington Mutual, Bear Stearns and many smaller financial firms failed during the subprime mortgage meltdown.
The next financial flameout will likely be more destructive than what occurred between 2007 and 2009.
Granted, that is a dire forecast, given that the previous financial crisis was the most severe since the Great Depression.
But with the stock market rally near a five-year milestone, EWI’s indicators suggest even greater risks vs. what we saw at the 2007 market peak.
You’ll recall that the stock market topped in October 2007. But at the start of that year, most investors had the attitude of “full steam ahead.” Even so, the Elliott Wave Financial Forecast gave subscribers a warning. Here’s an excerpt from the January 2007 issue:
2007: THE YEAR OF FINANCIAL FLAMEOUT
When investors are optimistic, confidence remains high and liquidity expands … But they celebrate the condition and come to view it as a “self-sustaining” virtue only when it is nearly over.
Several sentiment measures say that today’s optimism is as high or higher. Even so, lopsided sentiment is just one red flag. The just-published March Financial Forecast warns of an even bigger financial flameout.
Even the head of a Federal Reserve Bank is talking about a bubble.
Dallas Fed President Richard Fisher amplified some lingering concerns that the central bank’s policy stimulus is stoking asset-price bubbles that “may result in tears” for investors acting on bad incentives…
“I fear that we are feeding imbalances similar to those that played a role in the run-up to the financial crisis,” he said.
Reuters, March 5
The just-published Financial Forecast gives you insight into the nation’s staggering credit expansion, and tells you about “a leading signal of an impending credit contraction,” which is flashing a bigger warning than it did in 2007!
Indeed, the first chart in the issue shows unequivocal evidence that the United States may face the biggest financial bubble in the country’s history.
Review that chart and the entire issue for free.
This article was syndicated by Elliott Wave International and was originally published under the headline Biggest Bubble Ever Marks 5th Year of Stock Rally. EWI is the world’s largest market forecasting firm. Its staff of full-time analysts led by Chartered Market Technician Robert Prechter provides 24-hour-a-day market analysis to institutional and private investors around the world.
