This post Perfection For All Of Eternity appeared first on Daily Reckoning.
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There’s just no other way to say it: the market is insanely overvalued right now.
The so-called recovery has already lasted 96 months. It’s the longest recovery in history. It’s also the weakest. But you’d never know it from the stock market.
Right now the S&P is trading at something like 24 times trailing earnings. That is what I would call the nosebleed section of history. And it’s absolutely not justified by fundamental economics.
What the market is saying is we have reached the point of full employment forever. There will never be another recession or any kind of economic surprise or dislocation. There is no reason why the market should be even near today’s levels if markets were allowed to function normally.
The market is pricing itself for perfection for all of eternity.
Nonsense!
The fact is, the real economy apart from the canyons of Wall Street is in very poor shape. The Commerce Department recently reported that first quarter GDP growth came in at just 0.7%. The report also revealed the slowest first quarter for household spending since 2009.
Some economists call that “stall speed.” After 94 months of the weakest recovery in modern history, there is no other way to describe it.
Not exactly perfection.
We are at the end of a 20-year credit bubble that has basically inflated the world economy beyond any sustainable level. We’re now facing the day of reckoning in which we’re going to suffer from a huge deflation for years to come.
The global economy is in a place we’ve never been before. We have never experienced eight years of effectively zero money market rates, even during the lowest point of the Depression in the 1930s. And we’ve never had a credit bubble in the world economy anything close to what we have now.
In 20 years, central banks have taken their balance sheets from about $2 trillion in 1995 to $21 trillion today.
And the global economy is now buried under a $225 trillion mountain of debt, if you can imagine a number that large.
I recently came back from a 10-day trip to China and I can tell you that is the world’s greatest Ponzi scheme. It is going to collapse.
So put all of those things together and you have a market that’s waiting to roll over.
Bubbles are popping up in real estate again. We’re also seeing high levels of defaults in student loans and the auto industry.
And one subject I’ve been following lately is the collapse of the retail industry. I call it the “Retail Apocalypse.”
Even the Bureau of Labor Statistics (BLS) seems to have gotten the word …read more
Source:: Daily Reckoning feed
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