Even the doomers like Snyder get it wrong about the “soaring” stock market. Why do people believe false narratives rather than observe the pure, cold hard facts? The S&P 500 closed at 2,064 yesterday. It closed at 2,064 on November 21, 2014. The stock market hasn’t gone anywhere in 18 months. I don’t think that can be classified as “soaring”. It has gone nowhere since the Fed turned off the QE tap. As earnings continue to plunge, with no new QE in sight, and the economy in recession for the average person, the PE ratio of the market approaches unsustainable heights. I’m sure this will end well. Right?
Submitted by Michael Snyder via The Economic Collapse blog,
We have seen this story before, and it never ends well. From mid-March until early May 2008, a vigorous stock market rally convinced many investors that the market turmoil of late 2007 and early 2008 was over and that happy days were ahead for the U.S. economy. But of course we all know what happened. It turned out that the market downturns of late 2007 and early 2008 were just “foreshocks” of a much greater crash in late 2008. The market surge in the spring of 2008 was just a mirage, and it masked rapidly declining economic fundamentals. Well, the exact same thing is happening right now. The Dow rose another 222 points on Tuesday, but meanwhile virtually every number that we are getting is just screaming that the overall U.S. economy is steadily falling apart. So don’t be fooled by a rising stock market. Just like in the spring of 2008, all of the signs are pointing to an avalanche of bad economic news in the months ahead. The following are 11 signs that the U.S. economy is rapidly deteriorating…
#1 Total business sales have been declining for nearly two years, and they are now about 15 percent lower than they were in late 2014.
#2 The inventory to sales ratio is now back to near where it was during the depths of the last recession. This means that there is lots and lots of unsold stuff just sitting around out there, and that is a sign of a very unhealthy economy.
#3 Corporate earnings have declined for four consecutive quarters. This never happens outside of a recession.
#4 Profits for companies listed on the S&P 500 were down 7.1 percent during the first quarter of 2016 when compared to the same time period a year ago.
#5 In April, commercial bankruptcies were up 32 percent on a year over year basis, and Chapter 11 filings were up 67 percent on a year over year basis. This is exactly the kind of spike that we witnessed during the initial stages of the last major financial crisis as well.
#6 U.S. rail traffic was 11 percent lower last month than it was during the same month in 2015. Right now there are 292 Union Pacific engines sitting idle in the middle of the Arizona desert because there is literally nothing for them to do.
#7 The U.S. economy has lost an astounding 191,000 mining jobs since September 2014. For areas of the country that are heavily dependent on mining, this has been absolutely devastating.
#8 According to Challenger, Gray & Christmas, U.S. firms announced 35 percent more job cuts during April than they did in March. This indicates that our employment problems are accelerating.
#9 So far this year, job cut announcements are running 24 percent above the exact same period in 2015.
#10 U.S. GDP grew at just a 0.5 percent annual rate during the first quarter of 2016. This was the third time in a row that the GDP number has declined compared to the previous quarter, and let us not forget that the formula for calculating GDP was changed last year specifically to make the first quarter of each year look better. Without that “adjustment”, it is quite possible that we would have had a negative number for the first quarter.
#11 Barack Obama is poised to become the first president in U.S. history to never have a single year during his time in office when the economy grew by more than 3 percent.
But you never hear Obama talk about that statistic, do you?
And the mainstream media loves to point the blame at just about anyone else. In fact, the Washington Post just came out with an article that is claiming that the big problem with the economy is the fact that U.S. consumers are saving too much money…
The surge in saving is the real drag on the economy. It has many causes. “People got a cruel lesson about [the dangers] of debt,” says economist Matthew Shapiro of the University of Michigan. Households also save more to replace the losses suffered on homes and stocks. But much saving is precautionary: Having once assumed that a financial crisis of the 2008-2009 variety could never happen, people now save to protect themselves against the unknown. Research by economist Mark Zandi of Moody’s Analytics finds higher saving at all income levels.
So even though half the country is flat broke, I guess we are all supposed to do our patriotic duty by going out and running up huge balances on our credit cards.
What a joke.
Of course the U.S. economy is actually doing significantly better at the moment than almost everywhere else on the planet. Many areas of South America have already plunged into an economic depression, major banks all over Europe are in the process of completely melting down, Japanese GDP has gone negative again despite all of their emergency measures, and Chinese stocks are down more than 40 percent since the peak of the market.
This is a global economic slowdown, and just like in 2008 it is only a matter of time before the financial markets catch up with reality. I really like how Andrew Lapthorne put it recently…
On the more bearish slant is Andrew Lapthorne, head of quantitative strategy at Societe Generale. To him this profit downturn is a sign that stocks are far too overvalued and the economy is weaker than you think.
“MSCI World EPS is now declining at the fastest pace since 2009, losing 4% in the last couple of months alone (this despite stronger oil prices),” wrote Lapthorne in a note. For the S&P 500 specifically, the year on year drop in profit drop was the most since third quarter of 2009.
“Global earnings are now 14% off the peak set in August 2014 and back to where they stood five years ago. Equity prices on the other hand are 25% higher. Gravity beckons!”
I couldn’t have said it better myself.
Look, this is not a game.
So far in 2016, three members of my own extended family have lost their jobs. Businesses are going under at a pace that we haven’t seen since 2008, and this means that more mass layoffs are on the way.
We can certainly be happy that U.S. stocks are doing okay for the moment. May it stay that way for as long as possible. But anyone that believes that this state of affairs can last indefinitely is just being delusional.
Gravity beckons, and the crash that is to come is going to be a great sight to behold.
Jeffrey Snider at Real Clear Markets writes a Friday column I recommend. Here drills down into the data that CNBC and the rest of the financial media just ignore. That total labor hours are only 2 percent greater today than in 2000 despite the labor force having grown by 16 million! That US imports are at 2007 levels and, to Chinese eyes, the U.S. Economy has remained mired in recession. The GIGO diffusion indices, GDP numbers, employment data are simply manipulated data cooked up to put a happy face on an economy running on the fumes of central bank QE and happy talk,
My mother used to work in the ‘fashion’ world. Fairly high position. At one time Lord & Taylor, Sak’s, etc were exclusive stores, that offered something unique.
Now everything is just a knock off from China, Malaysia, etc.
Today, retail (like Macy’s, and the rest of them – all owned by holding companies such as Federated and the Hudson Bay Company) is just a line of credit. They buy shit, put it in a store, mark it up 500%, and hopefully sell it – discounted – for a profit. That’s all it is.
Some folks are identifying the decline.
Brutal First Quarters From Kohl’s and Macy’s Suggest Department Store Model Has Collapsed
Kohl’s reported Thursday that first-quarter earnings fell a disturbing 50% year over year to 31 cents a share, badly missing forecasts for 37 cents. Total revenue dropped 3.7% from the prior year to $3.97 billion compared to Wall Street estimates for $4.13 billion. Kohl’s same-store sales, or sales from stores open longer than a year, nosedived 3.9%.
http://www.thestreet.com/story/13568571/1/brutal-first-quarters-from-kohl-s-and-macy-s-suggest-department-store-model-has-collapsed.html
Dutchman
Even that headline about Kohl’s is a lie. Their profit dropped by 87%, not 50%. The Wall Street scumbags ignore their “one time” costs for closing stores and firing people.
The fourth turning is definitely swinging into full motion now… Pew reports that more people are now in favor of spending more on defense given rising threats around the world.
http://www.people-press.org/2016/05/05/public-uncertain-divided-over-americas-place-in-the-world
While the issues still break down along partisan lines (Dems believe that global warming is more of / as much of a threat as Islam), we know that all it will take is one more major event to make everyone coalesce in agreement around something. What that is, remains to be seen.
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Milton Berg: “We Are On The Cusp Of A 30 Year Bear Market”
Submitted by Tyler Durden on 05/12/2016 14:39 -0400
At the SALT conference, MB Advisors founder and CEO Milton Berg gave an epic interview with Erik Schatzker in which Berg predicted that we are on the verge of a 30 year bear market in both equity and fixed income, and he also gave some sage advice to the average retail investor on what to do with their money at this point.
This is how Milton Berg explains his prediction
“I think we’re at the cusp of a bear market in both stocks and bonds that will last up to thirty years. This is on a real basis, not on a nominal basis, inflation adjusted basis.”
Here is the reason why Berg believes you can invest in the market today, go to sleep, wake up thirty years later and have made no money…
“Well, it is not unheard of in history. As you know there was a bear market in bonds lasting maybe forty years that began in the mid-40’s and ended in 1980. We’ve had a twenty, twenty five year bear market in Japan going back to 1989. We’re the most overvalued market in history, there’s more leverage throughout the world than there’s ever been in history, central banks have lost all their ammunition, basically because there is so much credit outstanding throughout the world. It’s not unheard of to have a long-term bear market. There will be a lot of money to be made both on the downside and the upside within the bear market.”
Milton then explains that world-wide, this is currently the most over valued equity market in history
“World-wide, looking at all the equity markets we’re definitely at the most over-valued. P/E ratios on the New York Stock Exchange are just above the P/E ratio at the trough of 2009, the median P/E ratio. Markets are way over valued. If you look at where yields were thirty, fourty years ago when you got five, six, seven percent and now you’re getting one percent, one and a half percent yield, way over valued.”
When asked what would happen if central bankers were to follow through on their whatever it takes promises, Berg gave the most rational response, which is that everything is relative.
“If whatever it takes means Zimbabwe, or hyperinflation Germany, stocks will do well, but not relative to the inflation rate.”
Furthering his comments around central banks, Berg delivered some truthiness to the fact that creating more debt won’t fix anything in the system, and as a matter of fact, will simply make the outcome worse once the bubble pops.
“They’re doing something that makes no sense with negative rates, but there’s so much credit in the system that just allowing people to borrow more money doesn’t really help the system. It just causes a greater bubble, which ultimately will deflate. It’s one big world-wide bubble, the central banks are all acting in unison, so once this bubble pricks it’s going to be pretty terrible.”
Milton finishes by giving the average retail investor some sage advice:
“The typical investor should be out of stocks and out of bonds, wait for a crisis, and buy during the crisis. Put your money under the pillow and wait until the next crisis.”
Me thinks Milton Berg is in the club so he should know, buy low sell high right Milton?
Thirty year Doom Porn, ya gotta love it.
Looks like the Berg is at it again with his “30-year bear market” pitch. Just imagine if you had taken his “sage” advice in May 2016 when he first made it? Cash under the mattress, wait for the huge drop then buy. Wow. I personally would be out many six figures if I had. In fact, I did the opposite of what the Berg said and will do the opposite now. Any drop in equity valuation will just bring another QE, then another, and another – for the next 30 years. Why fight the gov’t when they are handing you money? Unbelievable. Here is Berg’s Aug 30, 2017 toupee-adjusted prediction:
https://www.bloomberg.com/news/articles/2017-08-30/from-stocks-to-bonds-the-bear-market-signals-are-multiplying