The 2020 stock bubble is in trouble. Here are several telltale signs:
(1) The CBOE’s VIX Volatility Index recently rocketed in ways that few could have imagined.
(2) A zero-percent yielding precious metal has broken out to multi-year highs.
(3) Due in large part to excessive junk bond exposure as well as exposure to negative yielding bonds, stock shares of foreign banks have fallen to levels not seen since 2008-2009’s systemic collapse.
(4) Safe haven seekers haven been tripping over themselves to acquire U.S. Treasuries, pushing yields clear across the curve to all-time lows. Even more amazing? There had never been a time in history when 10-year yield levels moved 50% over a two-week window, until now. From 1.5% to 0.75%.
(5) In a slowing global economy, industrial demand for energy, minerals and other commodities wanes. Prices of those commodities fall. Yet they can fall even further when commodity suppliers are unable to provide anything in a timely fashion.
Supply chain disruptions lead to difficulties in building as well as acquiring consumer goods (e.g., iPhones, Ford Explorers, etc.). If companies cannot sell the cars or phones or widgets, cash flow dries up. Debts become difficult to pay back; layoffs occur. In other words, multi-decade commodity price lows could take a bite out of the 2020 stock bubble.
