Let's make fun of Trump, bash him, etc. while we can!

[David Horn]

(08-17-2016, 08:16 PM)Mikebert Wrote:

(08-17-2016, 04:31 PM)David Horn Wrote: Barring a worse crash than 2007-9 or a major war, I don't see it happening.

Yes.  You know I have been predicting a crash for some time now.  I am not alone:

Jon Hussman Wrote:Indeed, the most historically reliable measures of market valuation (those with a correlation of 90% or more with actual subsequent 10-12 year market returns) currently project a likely S&P 500 nominal annual total return averaging just 0.9% over the coming 12-year period, with negative total returns at shorter horizons. As I detailed last week in Morton’s Fork, this outcome is likely to emerge almost regardless of the rate of economic growth and the level of interest rates over the coming decade. On a cyclical horizon, we continue to expect the present market cycle to be completed by a 40-55% decline in the S&P 500 Index; an outcome that would be historically run-of-the-mill from current valuations.

Note Hussman's 55% decline is the 10000 point decline I forecast.  The difference is he uses the entire historical period (all turnings) as his database.  My methods allow me to go further back in history than Hussman, and so I draw my data exclusively from the secular bear markets (2Ts and 4T) because I assume we be 4T.
The other difference is Hussman believes the current valuations are part of normal fluctuations.  I see them a reflection of a drop in capital productivity that began in 2006. This makes the 55% decline that Hussman sees as a worst case actually a best case.  That is, if Congress does not act, as seems likely, the market will fall much further.  It seems such a large loss would have to be accompanied by another financial crisis, and voila, you have 2008 all over again--except worse.

This idea is easy to test.  If the decline has not begun by June 2018 (three years after the original prediction) it is invalid.  If the decline does begin,but it fails to be as large as forecast, it is invalid, and so on.  There are many ways for it to fail and only one way to succeed.  So if it does happen, that is highly significant. Obviously I don't know now that this hypothesis is valid, hence the need for an experimental trial

Looking at the current state of the economy, it's pretty easy to see overvaluation in stocks, driven by stock buy-backs and other financial wizardry.  The era of maximizing shareholder value has about run its course.  I'm sure all the toying with corporate operations has been a driver of efficiency declines and definitely a prime cause of stagnant wages.  How that plays-out is another issue entirely, but a major retrenchment in stock prices is certainly likely. 

What follows will be the 1T paradigm, and that's an unknown at this point.  We still have no idea, on a macro scale, how to address the transition to non-human labor -- especially at the rate we're making that change.  Most of the ideas I've seen fail to address the human problem of boredom, and that may be bigger than finding a way to keep us all fed, housed and clothed.  Nothing good emerges from having too many people with little to do.  Appalachian whites and inner-city minorities have already run this experiment, and it isn't pretty.