Markets ‘Radically Overbought’ And Setup Mirrors 1987 Crash, Says David Rosenberg

Silver's vertical chart mirrors 1987 pre-crash pattern

Rosenberg compares silver's current vertical price line to the Dow/NASDAQ/S&P charts in the fall of 1987 that preceded the 23% single-day crash, warning of a dangerous near-term setup.

Central bank buying sustains gold's structural bull

Unlike the 2011 peak when central banks sold gold, they have been net buyers since 2010 with annual demand growth of 2.5% against stable 1-1.5% supply growth, driving the secular uptrend.

Trump uncertainty acts as gold valuation support

Rosenberg defines gold's valuation metric as 'one divided by certainty,' noting that Trump's chaotic policy environment and potential Fed interference provide fundamental support through 2028.

CAPE ratio at 40 creates negative equity risk premium

The Shiller PE of 40 implies a 2.5% earnings yield, below the 30-year TIPS real yield of 2.65%, meaning stocks currently trade at a -5 basis point risk premium—pricing equities as riskless assets.

Passive dominance eliminated price discovery

With 90% of market activity now passive index buying rather than stock picking, traditional valuation extremes at two standard deviations (the official definition of a bubble) persist without correction.

Japan's yield spike signals inflation revival

Japanese yields surged because nominal GDP ballooned from escaped deflation, reducing debt-to-GDP dramatically and signaling the Bank of Japan is radically behind the curve, not from fiscal crisis.

Trump Fed fears deter duration exposure

Investors avoid long-term Treasuries due to fears Trump will appoint a Fed chair who cuts rates to 1% and unleashes inflation, making long duration the primary portfolio risk.

Failed auction risks eventual forced austerity

Rosenberg cites Canada's 1994 'Red Book' experience where markets forced budget restraint through failed bond auctions, warning the U.S. faces similar market-imposed fiscal discipline despite reserve currency status.