GFC 2? No; Meltdown2014

[Logen Ninefingers]

The current governmental crisis in the USA will eventually peter out.....I think we all know a deal on raising the debt ceiling will be done, and this will have the psychological effect of calming the global markets & letting everyone know that the equities party can continue, that the US dollar is still 'strong', that the US will pay it's bills. This is all just an illusion. A run-away stock market that is the only game in town as far as getting a return on money - because interest rates are being artificially suppressed - is now divorced from the under-lying ecomony of the US. The US underlying US economy is a basket case and just hanging on...whatever official figures come out of the USA are about as accurate as the figures out of China. True unemployment - counting the 'long-term discouraged' et al - is around 23 - 25% , with growth stagnant.....everything is being propped up by record low interest rates & a huge stock market bubble. This is a record bubble that the Fed have pumped-up and now cannot burst. Put simply, the Fed won't / can't allow interest rates to rise or the equities bubble to burst (and the two go hand and hand), so they can't taper.....they 'talked about' tapering and look what happened. They have to keep 'printing' $85 billion per month....

......which makes the problem worse - the bubble gets blown up even higher, which makes the illusory ecomonic strength - all based on a stock market charge to the stratosphere - even more fragile, which makes stimulus more necessary......this is a catch 22 situation, a vicious cycle. The USA ecomony - stock market false economy - is in a zombified gorge, it is an animated frankenstein on crack-cocaine. Meanwhile the real economy is either stagnant or atrophying. The gold market has been killed / died for 3 entirely logical reasons: 1/ Why keep your funds in gold when you can join the gorging of the equities party? 2/ The US dollar must kill off alternatives to sustain it's gravity defying high-wire act 3/ To provide buying opportunities at the right time for the 'big boys' - who will need 'insurance policies for when the equities bubble bursts.

When will this house of cards fall over? I've seen Bernacke's body language at the press conference after the last Fed meeting....and I was appalled at what I saw. He looks like a broken man.....now wonder he is trying to get out of the Fed. He's like the Enron boys trying to scarper just before the whole thing collapsed.

What I can't understand is why there isn't more panic about the impending disaster. I guess it's the way the world works: we only concentrate on what's right in front of us, and try to ignore what's down the track. Should we all just go back to sleep and ignore the fact that the writing is on the wall???? You cannot print your way out of this; you cannot double your money supply within 5 years - the Fed doesn't even believe this will work, this is all being done to sustain the party for as long as possible because there are now no alternatives.

[BIRMANBOY]

If you keep gnawing at your fingernails like this you'll be down to Logen Eightfingers in no time.

The current governmental crisis in the USA will eventually peter out.....I think we all know a deal on raising the debt ceiling will be done, and this will have the psychological effect of calming the global markets & letting everyone know that the equities party can continue, that the US dollar is still 'strong', that the US will pay it's bills. This is all just an illusion. A run-away stock market that is the only game in town as far as getting a return on money - because interest rates are being artificially suppressed - is now divorced from the under-lying ecomony of the US. The US underlying US economy is a basket case and just hanging on...whatever official figures come out of the USA are about as accurate as the figures out of China. True unemployment - counting the 'long-term discouraged' et al - is around 23 - 25% , with growth stagnant.....everything is being propped up by record low interest rates & a huge stock market bubble. This is a record bubble that the Fed have pumped-up and now cannot burst. Put simply, the Fed won't / can't allow interest rates to rise or the equities bubble to burst (and the two go hand and hand), so they can't taper.....they 'talked about' tapering and look what happened. They have to keep 'printing' $85 billion per month....

......which makes the problem worse - the bubble gets blown up even higher, which makes the illusory ecomonic strength - all based on a stock market charge to the stratosphere - even more fragile, which makes stimulus more necessary......this is a catch 22 situation, a vicious cycle. The USA ecomony - stock market false economy - is in a zombified gorge, it is an animated frankenstein on crack-cocaine. Meanwhile the real economy is either stagnant or atrophying. The gold market has been killed / died for 3 entirely logical reasons: 1/ Why keep your funds in gold when you can join the gorging of the equities party? 2/ The US dollar must kill off alternatives to sustain it's gravity defying high-wire act 3/ To provide buying opportunities at the right time for the 'big boys' - who will need 'insurance policies for when the equities bubble bursts.

When will this house of cards fall over? I've seen Bernacke's body language at the press conference after the last Fed meeting....and I was appalled at what I saw. He looks like a broken man.....now wonder he is trying to get out of the Fed. He's like the Enron boys trying to scarper just before the whole thing collapsed.

What I can't understand is why there isn't more panic about the impending disaster. I guess it's the way the world works: we only concentrate on what's right in front of us, and try to ignore what's down the track. Should we all just go back to sleep and ignore the fact that the writing is on the wall???? You cannot print your way out of this; you cannot double your money supply within 5 years - the Fed doesn't even believe this will work, this is all being done to sustain the party for as long as possible because there are now no alternatives.

[Logen Ninefingers]

Laugh it up!!! It would be great for someone to say "you are wrong & these are the reasons why". But unfortunately anyone looking at the fundamentals will reach the same conclusions I have. You can't point to a hugely inflated share-market bubble as evidence that everything is fine. Everything is the opposite of fine.

[Kaspar]

Laugh it up!!! It would be great for someone to say "you are wrong & these are the reasons why". But unfortunately anyone looking at the fundamentals will reach the same conclusions I have. You can't point to a hugely inflated share-market bubble as evidence that everything is fine. Everything is the opposite of fine.

According to http://www.multpl.com/ the S&P500 PE is approx 19.31, which compared to the historic mean of 15.50 doesn't seem like 'meltdown' territory. It seems there is room for the bull market to go much, much higher.

[Hoop]

According to http://www.multpl.com/ the S&P500 PE is approx 19.31, which compared to the historic mean of 15.50 doesn't seem like 'meltdown' territory. It seems there is room for the bull market to go much, much higher.

Kaspar...be careful when dealing with PE Ratios...reported earnings can be distorted to create lower equity valued mirages ....To try and create a better gauge through PE normalisation, Shiller is the most famous producing his Annualised PE Ratio which is at a high 24.6 now...this is at the top of Crestmonts Research scale of fair value and is reaching the area where crazy things start to happen....very low inflation is the factor (driver) that is still making that 24 look fairly valued...any rise in inflation or Equity prices and Wall St becomes a red alert area.

Quote Crestmont Research in their 30th June report
"...P/E based upon reported earnings is near 18; it remains distorted below the normalized P/E of 23 due to currently high profit margins....."

High Profit margins is the other main worry John Hussman from Hussman Funds in his weekly newsletter outlines this problem...... quote ..."....that profit margins are about 70% above their historical norms, making raw P/E ratios (particularly those based on “forward operating earnings”) seem fairly reasonable. Understand that the use of raw forward operating P/E ratios implicitly assumes that these profit margins will remain at the most extreme levels in history forever...."


Not mentioned is the fact that the the S&P500 has been in a Secular Bear market Cycle (down trending normalised PE ratio period cycle) for 13 years now....with the current normalised PE Ratio figure of 24.6 (normally seen at the start of the Secular bear cycle) this would be considered as unusually very high

[Logen Ninefingers]

I would equate the Fed 'strategy' to driving down a highway and your wheels are falling off? How do you fix the problem and ensure a safe outcome for you and your fellow road users? Step harder on the gas!! Get that baby up to 220 mph!!!!

[noodles]

Kaspar...be careful when dealing with PE Ratios...reported earnings can be distorted to create lower equity valued mirages ....To try and create a better gauge through PE normalisation, Shiller is the most famous producing his Annualised PE Ratio which is at a high 24.6 now...this is at the top of Crestmonts Research scale of fair value and is reaching the area where crazy things start to happen....very low inflation is the factor (driver) that is still making that 24 look fairly valued...any rise in inflation or Equity prices and Wall St becomes a red alert area.

Quote Crestmont Research in their 30th June report
"...P/E based upon reported earnings is near 18; it remains distorted below the normalized P/E of 23 due to currently high profit margins....."

High Profit margins is the other main worry John Hussman from Hussman Funds in his weekly newsletter outlines this problem...... quote ..."....that profit margins are about 70% above their historical norms, making raw P/E ratios (particularly those based on “forward operating earnings”) seem fairly reasonable. Understand that the use of raw forward operating P/E ratios implicitly assumes that these profit margins will remain at the most extreme levels in history forever...."


Not mentioned is the fact that the the S&P500 has been in a Secular Bear market Cycle (down trending normalised PE ratio period cycle) for 13 years now....with the current normalised PE Ratio figure of 24.6 (normally seen at the start of the Secular bear cycle) this would be considered as unusually very high

I also read Hussman. It is very sobering.

I have brought put options to protect my portfolio (they are cheap ATM as volatility is still quite low). I hope they expire out of the money.

[BIRMANBOY]

Its immaterial what I think....the question one should ask when presented with such a dilemma is ok.....now what can I (you) do about it. Unfortunately the answer(s) such as EG (1) cash everything up and buy a rifle and ammunition and 300 cases of baked beans (2) cash up and turn into gold and revert to #1 (3) etc etc etc. are all trotted out regularly and tiresomely too frequently by countless others over the last several centuries. The problem is 999,999 times out of a 1,000,000 it doesnt eventuate and one (not you of course) is diverted into fruitless and un-neccessary stress and worry...not to mention getting rid of the baked beans. But if it makes you feel better and in control of your life then by all means go for it.

[Logen Ninefingers]

We had GFC 1 in 2008 and we almost had the China-syndrome with the global financial system. What is happening now has everything to do with how the Fed responded to that.

It's ridiculous to say that this is some sort of reaction to rampant paranoia about a situation that "999,999 times out of a 1,000,000 doesnt eventuate" : I am talking about this specific situation: 17.66 or something trillion of US govt debt, Fed reserve 'money printing' of 85 billion a month, Fed balance sheet of 3.5 trillion, 23% real unemployment in the US, an enormous US stock market bubble.
There is no manufactured paranoia here.

[janner]

23% real unemployment in the US,

Not just the US. if the truth be told.

Get used to it..

As technology takes over from the " Manual " jobs i.e. Car Manufacturing.. Electronic assembly. Packaging. Warehousing. Medical procedures.. Even Piloting Aircraft.. as examples..

What can these millions upon millions of educated skilled people do ??
When they are no longer needed in the not to distant future ??

Push pens for a Government department ??..

Re-educate them into WHAT ???..

Even here we do not have enough fish for them all to go fishing..