{"id":1103796,"date":"2019-03-06T22:01:37","date_gmt":"2019-03-06T22:01:37","guid":{"rendered":"https:\/\/dailyreckoning.com\/?p=106874"},"modified":"2019-03-06T22:01:37","modified_gmt":"2019-03-06T22:01:37","slug":"the-worst-economy-ever","status":"publish","type":"post","link":"https:\/\/juniorminingnews.com\/?p=1103796","title":{"rendered":"The Worst Economy Ever?"},"content":{"rendered":"

This post The Worst Economy Ever?<\/a> appeared first on Daily Reckoning<\/a>.<\/p>\n

Like an army that has outdistanced its supply lines, the stock market runs far ahead of logistical support.<\/p>\n

Total market capitalization of U.S. stocks presently ranges to $40 trillion \u2014 or twice GDP.<\/p>\n

This 2-1 ratio is the highest in history\u2026 we might mention.<\/p>\n

Analyst John Hussman reminds us the ratio previously topped at 1.9 in 2000.<\/p>\n

That is, never before has Wall Street run so far ahead of Main Street.<\/p>\n

But like Napoleon racing for Moscow after Borodino, an overextended army is a vulnerable army.<\/p>\n

The Grande Arm\u00e9e <\/em>went into Russia some 450,000-strong in June 1812.<\/p>\n

Perhaps 22,000 sad caricatures of humanity staggered out later that year.<\/p>\n

We believe the stock market is marching toward its own Moscow\u2026 and a similar retreat.<\/p>\n

Soon or late it will come limping back \u2014 broken, bandaged… beaten.<\/p>\n

Main Street cannot maintain the pace of advance.<\/p>\n

The Economy Is Advancing in the Wrong Direction<\/strong><\/h2>\n

Reuters informs us that government bean counters will likely downgrade their initial 2.6% Q4 2018 GDP estimate.<\/p>\n

Falling construction spending is the central explanation on offer.<\/p>\n

The unhappy trend will likely continue into Q1 2019.<\/p>\n

Goldman now projects 0.9% Q1 GDP growth.<\/p>\n

The Federal Reserve\u2019s New York headquarters has it at 0.88%.<\/p>\n

And its Atlanta branch now estimates Q1 growth of merely 0.3%.<\/p>\n

The Atlanta outfit is known, incidentally, for its blue-sky, cockeyed optimism.<\/p>\n

Meantime the American consumer has reached his maximum endurance, and is falling out of rank… exhausted.<\/p>\n

In December U.S. credit card debt scaled $870 billion \u2014 its highest ever amount.<\/p>\n

Similarly, auto loan interest rates teeter at eight-year heights. And a record number of Americans are at least 90 days in arrears of payment.<\/p>\n

In all, aggregate household interest payments have spiked to a 15% year-over-year rate.<\/p>\n

As Zero Hedge reminds us, recession is on tap nearly every occasion when interest payments rise with such extravagance.<\/p>\n

All the while, retail stores are shuttering their doors at a record clip.<\/p>\n

We haven\u2019t the heart to continue.<\/p>\n

Michael Snyder of The Economic Collapse blog does:<\/p>\n

\n

Debt delinquencies are at unprecedented levels, bankruptcies are soaring, retail stores are closing at a record pace; this is the worst economy for farmers since the early 1980s, exports are plummeting and a brand-new real estate crisis has now begun.<\/em><\/p>\n<\/blockquote>\n

Then Why Are Stocks Still So Expensive?<\/strong><\/h2>\n

Yet stocks remain in what our old colleague David Stockman labels the \u201cnosebleed section of history.\u201d<\/p>\n

The Shiller P\/E ratio is a widely recognized barometer of stock market prices.<\/p>\n

Stretching through history, its mean score is 16.9.<\/p>\n

Even after last year\u2019s near-bear market, today it rises to 30.7 \u2014 81% above the mean.<\/p>\n

It is also within an ace of October 1929\u2019s 32.6.<\/p>\n

Only 1999\u2019s infinitely obscene 44 outpaces it.<\/p>\n

But do today\u2019s economic conditions justify an altitude-induced nosebleed?<\/p>\n

The evidence here assembled shouts no.<\/p>\n

Yet there they are.<\/p>\n

And so a rose blooms from a turnip seed.<\/p>\n

But let us take the longer view…<\/p>\n

The stock market has been on the march since 2009, with only occasional reversals.<\/p>\n

Have underlying economic conditions warranted the ground gained?<\/p>\n

\u201cThe Current Economy Has Underperformed the Worst Economy\u201d<\/strong><\/h2>\n

Jeffrey Snider of Alhambra Investments has compared and contrasted this past decade to decades past.<\/p>\n

He notes first that real GDP expanded at an 18.85% cumulative rate, 2007\u20132018.<\/p>\n

Nothing, perhaps, to pound a kettle drum about \u2014 but growth it is.<\/p>\n

Maybe you are of an age to recall the ghastly stagflation of the 1970s.<\/p>\n

At least this past decade has turned in real growth, you say \u2014 unlike the inflation-hobbled decade of bell-bottomed trousers and gasoline lines.<\/p>\n

You are forgiven for thinking it. But you are far off the facts…<\/p>\n

Real GDP expanded 38% between 1969 and 1980 \u2014 over double<\/em> the past 11 years\u2019 18.85%.<\/p>\n

Again, we refer to real GDP. Unlike nominal GDP, it accounts for inflation\u2019s false fireworks.<\/p>\n

Just so, you argue.<\/p>\n

But the past decade is still miles better, for example, than the locust years of the Great Depression.<\/p>\n

Unemployment scaled a hellish 25%. Unemployment never exceeded 10% during the Great Recession.<\/p>\n

All comparisons fall short, you continue.<\/p>\n

Ah, but once again, have another guess\u2026<\/p>\n

Snider reminds us that real GDP 1929\u20131940 expanded at a cumulative 19.89%<\/em> rate \u2014 outstripping the most recent 11 years\u2019 18.85%.<\/p>\n

Impossible! You howl.<\/p>\n

But the facts are the facts.<\/p>\n

The Great Depression\u2019s valleys may have been steeper, the winds icier, the hunger more acute.<\/p>\n

But it had its years of 12.9% growth\u2026 10.8%… 8.8%… and 8.0%.<\/p>\n

Though excluded from our sample, 1941 GDP expanded a sky-shooting 17.7%.<\/p>\n

Meantime, not a single one of these past 11 years can crack 3%.<\/p>\n

The United States economy appears to be down with a wasting disease.<\/p>\n

This, despite maximum efforts of the Federal Reserve and its trillions of dollars of assistance.<\/p>\n

Snider:<\/p>\n

\n

What is now established, though, is a mathematical fact. The last 11 years have been worse than the Great Depression. According to the updated estimates, using 2012 dollars as a reference, the current economy has underperformed the worst economy.<\/em><\/p>\n<\/blockquote>\n

Mr. Stockman phrases it in terms harsher yet:<\/p>\n

\n

After one decade of the most massive combined monetary and fiscal stimulus in U.S. history, the real growth rate at 1.5% per annum is lower than it\u2019s ever been, even during the 1930s!<\/em><\/p>\n<\/blockquote>\n

Something is not right.<\/p>\n

Today\u2019s Stock Market vs. Previous Stock Markets<\/strong><\/h2>\n

Economically, we have stacked the past 11 years alongside the 11 years 1969\u20131980 and 1929\u20131940.<\/p>\n

And we have found them wanting sorely in comparison.<\/p>\n

Meantime, the S&P has gained over 300% since bottoming 10 years ago this very day \u2014 March 6, 2009.<\/p>\n

Shall we compare today\u2019s stock market performance with the Great Depression and 1970s?<\/p>\n

The stock market was a seesaw affair for much of the 1930s.<\/p>\n

But in nominal terms, it required 25 years of hard labor to recover from the shock of \u201929.<\/p>\n

Not until 1954 did it recapture its 1929 heights.<\/p>\n

Meantime, the present stock market required only six years to reclaim its 2007 highs.<\/p>\n

But we cannot asribe this pleasant fact to the economy.<\/p>\n

GDP growth averaged 1.14% between 2009 and 2013.<\/p>\n

What about the \u201clost\u201d decade of the 1970s?<\/p>\n

Recall that real GDP gains 1969\u20131980 more than doubled real GDP 2007\u20132018.<\/p>\n

The Dow Jones opened 1969 at roughly 6,500. It opened 1980 near 2,850.<\/p>\n

The S&P plunged from 740 to 360 across the same space.<\/p>\n

For the stock market, the decade was well and truly lost.<\/p>\n

So lost was it that Business Week <\/em>ran a 1979 cover story pronouncing \u201cThe Death of Equities.\u201d<\/p>\n

In a peanut shell:<\/p>\n

Real GDP 1969\u20131980 more than doubled real GDP 2007\u20132018.<\/p>\n

But the stock market 2007\u20132018 at least tripled the stock market 1969\u20131980.<\/p>\n

Should not the opposite be true?<\/p>\n

Perhaps this curious fact owes to the multiple rounds of quantitative easing that vastly inflated the stock market post-2008?<\/p>\n

Those same multiple rounds of quantitative easing yielded bits… scraps… leavings for the Main Street economy.<\/p>\n

Time, the Great Equalizer<\/strong><\/h2>\n

But time equalizes as nothing else.<\/p>\n

Scales balance, what goes up comes down, what goes down comes up…<\/p>\n

The mighty fall, mountains crumble, the meek inherit the earth.<\/p>\n

We suspect stock market and economy will meet again on fair ground.<\/p>\n

Stock market will likely fall to the level of economy before economy rises to the level of stock market.<\/p>\n

But if the gods are kind, no time soon…<\/p>\n

Regards,<\/p>\n

Brian Maher
\nManaging editor, The Daily Reckoning<\/em><\/p>\n

The post The Worst Economy Ever?<\/a> appeared first on Daily Reckoning<\/a>.<\/p>\n","protected":false},"excerpt":{"rendered":"

This post The Worst Economy Ever?<\/a> appeared first on Daily Reckoning<\/a>.<\/p>\n

What Napoleon can tell us about today’s stock market…  “The current economy has underperformed the worst economy”… How stock markets from the Great Depression and 1970s compare with today’s…<\/p>\n

The post The Worst Economy Ever?<\/a> appeared first on Daily Reckoning<\/a>.<\/p>\n","protected":false},"author":16,"featured_media":0,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"site-sidebar-layout":"default","site-content-layout":"","ast-site-content-layout":"","site-content-style":"default","site-sidebar-style":"default","ast-global-header-display":"","ast-banner-title-visibility":"","ast-main-header-display":"","ast-hfb-above-header-display":"","ast-hfb-below-header-display":"","ast-hfb-mobile-header-display":"","site-post-title":"","ast-breadcrumbs-content":"","ast-featured-img":"","footer-sml-layout":"","theme-transparent-header-meta":"","adv-header-id-meta":"","stick-header-meta":"","header-above-stick-meta":"","header-main-stick-meta":"","header-below-stick-meta":"","astra-migrate-meta-layouts":"default","ast-page-background-enabled":"default","ast-page-background-meta":{"desktop":{"background-color":"","background-image":"","background-repeat":"repeat","background-position":"center center","background-size":"auto","background-attachment":"scroll","background-type":"","background-media":"","overlay-type":"","overlay-color":"","overlay-gradient":""},"tablet":{"background-color":"","background-image":"","background-repeat":"repeat","background-position":"center center","background-size":"auto","background-attachment":"scroll","background-type":"","background-media":"","overlay-type":"","overlay-color":"","overlay-gradient":""},"mobile":{"background-color":"","background-image":"","background-repeat":"repeat","background-position":"center center","background-size":"auto","background-attachment":"scroll","background-type":"","background-media":"","overlay-type":"","overlay-color":"","overlay-gradient":""}},"ast-content-background-meta":{"desktop":{"background-color":"var(--ast-global-color-5)","background-image":"","background-repeat":"repeat","background-position":"center center","background-size":"auto","background-attachment":"scroll","background-type":"","background-media":"","overlay-type":"","overlay-color":"","overlay-gradient":""},"tablet":{"background-color":"var(--ast-global-color-5)","background-image":"","background-repeat":"repeat","background-position":"center center","background-size":"auto","background-attachment":"scroll","background-type":"","background-media":"","overlay-type":"","overlay-color":"","overlay-gradient":""},"mobile":{"background-color":"var(--ast-global-color-5)","background-image":"","background-repeat":"repeat","background-position":"center center","background-size":"auto","background-attachment":"scroll","background-type":"","background-media":"","overlay-type":"","overlay-color":"","overlay-gradient":""}},"footnotes":""},"categories":[484,366,656,463],"tags":[],"_links":{"self":[{"href":"https:\/\/juniorminingnews.com\/index.php?rest_route=\/wp\/v2\/posts\/1103796"}],"collection":[{"href":"https:\/\/juniorminingnews.com\/index.php?rest_route=\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/juniorminingnews.com\/index.php?rest_route=\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/juniorminingnews.com\/index.php?rest_route=\/wp\/v2\/users\/16"}],"replies":[{"embeddable":true,"href":"https:\/\/juniorminingnews.com\/index.php?rest_route=%2Fwp%2Fv2%2Fcomments&post=1103796"}],"version-history":[{"count":1,"href":"https:\/\/juniorminingnews.com\/index.php?rest_route=\/wp\/v2\/posts\/1103796\/revisions"}],"predecessor-version":[{"id":1103797,"href":"https:\/\/juniorminingnews.com\/index.php?rest_route=\/wp\/v2\/posts\/1103796\/revisions\/1103797"}],"wp:attachment":[{"href":"https:\/\/juniorminingnews.com\/index.php?rest_route=%2Fwp%2Fv2%2Fmedia&parent=1103796"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/juniorminingnews.com\/index.php?rest_route=%2Fwp%2Fv2%2Fcategories&post=1103796"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/juniorminingnews.com\/index.php?rest_route=%2Fwp%2Fv2%2Ftags&post=1103796"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}