Over time I have learned that as events play out most people think linearly. This means that they imagine in their minds that the current trend will continue indefinitely into the future. I believe that this thinking at this time is one of the most dangerous threats to our future financial security that has ever existed.

Stock “markets” have NEVER been as overvalued as they are today. The Buffett indicator sits at 237. That is the price of the “market” is 237% higher than our national output. This could explain why Mr. Buffett’s company is holding record amounts of cash and T Bills at this time. The Schiller CAPE ratio which measures what you are paying now for the average of the past 10 years of earnings is at another nosebleed record level of 42. This means that you are paying $42.00 for every $1.00 of the average annual earnings for the past 10 years.

The main drivers of this overvaluation have been low interest rates, leverage and a few companies that have driven most of the returns in the overall “market.” This is known as concentration and could lead to massive losses if these few companies start to falter.

Most of the hype has been in the AI space. I have written in the past about the shady funding that takes place here. An example would be Nvidia making microchips. They then invest in AI startups that use Nvidia’s investment to buy Nvidia chips. Microsoft invests billions into Open AI, and they send the money back to Microsoft. Google and Amazon have invested hundreds of billions into Anthropic and Anthropic invests into Google’s AI infrastructure and Amazon’s cloud services.

The scheme makes for some great numbers and the appearance of massive growth BUT what happens if the AI story is just that- a story that gets exposed just like in the dot-com bubble where even great companies like Cisco got their share prices decimated after pulling the same type of scheme- selling routers to dot com startups that were funded by venture capital companies that were funded by Cisco?

Cisco survived. Many others did not and the NASDAQ collapsed by 80%. It took 15 years to get back to the all-time high. Many gave up and missed the rally, and others did not have the time horizon to wait for a recovery.

Another major factor is the loss of purchasing power of the dollar which gives the illusion of larger gains. This is likely to accelerate but will not help if many companies go bankrupt because of an anemic economy, rising interest rates and the inability to service crushing debts.

The main risks I see right now are:

Rising interest rates and expenses. Inflation, slowing economy and a debt-buildup that is unprecedented. Just this week Wisconsin made Oracle post a $7 BILLION bond to back up its promises for their AI datacenters. This could add hundreds of millions in extra expenses going forward. Why did they do that? Oracle’s debt is growing exponentially, and their bonds are just one tick above JUNK status. This could add $140 MILLION in unexpected expenses at 2% and up to $350 MILLION at 5% PER YEAR.

The bond “markets” are already signaling a problem ahead. If it were not for the Fed buying tens of billions per month that they admit to- and likely FAR more that they are hiding rates could have already exploded higher.

It appears that there are two paths. Keep “printing” and keep rates artificially low which will accelerate inflation and hurt main street or stop and let bonds find their true price which would also crush main street. The difference is that “printing” allows those “in charge” to get richer and kick the can down the road while stopping would also have a far greater impact on their holdings and the natives would get restless.

While the numbers suggest that MANY, if not most “promises to repay” will not be kept with the currencies maintaining anywhere near their current purchasing power, the central banks and foreign governments- along with in-the know billionaires are quietly building stockpiles of ASSETS rather than promises.

In China- come Friday July 24th. The paper games end in China. Gold will be physically settled. While this may not result in an immediate spike- although it could- it will reduce the leverage that paper trading has used to keep the gold price suppressed.

This recent pullback- likely engineered by China and the major banks has allowed China and others to stock up at a lower dollar price. This is a gift for anyone who wants to add to positions or start a position. Of course, this action is meant to scare the general public out of the market so they (those “in charge”) can benefit from the next rally. Buy low- Sell high.

It is obvious to anyone who has studied economics that supply and demand SHOULD produce a fair price. However, when paper shenanigans and spoofing take place the price may not have very much in common with VALUE.

Currently, my opinion is that gold, silver, and most hard assets are priced LOW in relation to their actual VALUE. Stocks, bonds, and real estate are being artificially propped up and are EXTREMELY HIGH in relation to the VALUE you are getting.

Price is what you pay. Value is what you get. -Warren Buffett

War, which is causing all sorts of impediments to world trade and transit, shows no signs of ending anytime soon. While our president is demanding gas stations lower their prices-or else- he fails to understand that the oil price is only one piece of the puzzle. Prices Will continue to rise because shipping costs and insurance for the tankers are skyrocketing. This is NOT just an oil story. Do not expect the Fed to help us either. They are already plotting how to make the inflation numbers LOOK better. The level of manipulation has been off the charts for years, but they likely know what is coming and are looking for ways to keep the public calm and clueless as long as they can by making even more “adjustments” to make their fake numbers look better.

They can change the way they report but is that going to help your grocery bills or at the gas pump?

They are not looking for a solution- they are looking to delay while they prepare.

Remember- do not listen to what they say- watch what they do!

Be Prepared!

Any opinions are those of Mike Savage and not necessarily of those of RJFS or Raymond James. Expressions of opinion are as of this date and are subject to change without notice. The information in this report does not prove to be a complete description of securities, markets or developments referred to in this material. The information has been obtained from sources deemed to be dependable, but we do not guarantee that the foregoing material is accurate or complete. Any information is not a complete summary or statement of all available data necessary for making an investment decision and does not constitute a recommendation. There is no guarantee that these statements, opinions, or forecasts provided herein will prove to be correct.

Commodities are generally considered speculative because of the significant potential for investment loss. Commodities are volatile investments and should only be a small part of a diversified portfolio. There may be sharp price fluctuations even during periods when prices are rising overall.

Precious Metals, including gold, are subject to special risks including but not limited to price may be subject to wide fluctuation, the market is relatively limited, the sources are concentrated in countries that have the potential for instability and the market is unregulated.

Diversification does not ensure gains nor protect against loss. Companies mentioned are being provided for information purposes only and is not a complete description, nor is it a recommendation. Investing involves risk regardless of strategy.