Generational Dynamics World View

[Ragnarök_62]

John Wrote:*** 4-Mar-17 World View -- Champagne corks pop as a 'Trump rally' sends Wall Street stocks parabolic



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**** Champagne corks pop as a 'Trump rally' sends Wall Street stocks parabolic
****


S&P 500 Price/Earnings ratio at 24.90 on March 3, indicating a huge and growing stock market bubble (WSJ)

The Dow Jones Industrial Average has exploded upward some 2,000 points
since the November 8 election, leading analysts to refer to it as "the
Trump rally."  The increase was infectious, and stock markets in
Europe and Asia also surged.  President Donald Trump tweeted on
Thursday, "Since November 8th, Election Day, the stock market has
posted $3.2 trillion in gains."  It's believed that investors are
reacting to Trump's promises to promote job growth with huge
infrastructure spending and deep tax cuts to individuals and
corporations.

<snip>
The huge stock market rise over the past few years hasn't made much
sense from a fundamental point of view, in view of the meteoric S&P
500 price/earnings index, and the recent further parabolic climb makes
even less sense.  Even bullish analysts are saying that the stock
market is way overdue for a correction.  Whether the stock market
continues, its parabolic climb, or has a small correction, or finally
has its expected major stock market panic remains to be seen.
Nikkei and David Stockman interview

Yes, no kidding.  However... Ya know something?  I have a secret, yes a secret.  Here it is.  "That which is unsustainable , will at some point, quit. With that said,
how about a new investing idea?  I think this may be a winner, yes a winner, John. My idea is this.  Look for stocks which are more ridiculous that the market average.
Yes John.  Here's some stuff I did.  You see, let's take Sears Holdings, basically managed by a hedge fund. Yes, a hedge fund. Most hedge funds are stupid.
So , with Sears Holdings, we have Eddie Lampert who is CEO while Sears has crashed. Now, you see there's a valid reason behind said crash. Sears is losing money,
hands over fist. Yes it is John. Have a look at whatever stocky markety stuff you so desire. I bet they'll have a similar conclusion.   Sears Holdings should be worth about $0.0 , but just look and see it isn't.  See.... that's where opportunities lies. Yes, this is a wonderful example. So if a stock looks really, really overvalued, here's what you do.  You purchase PUT options, yes put options. This is how you have a good chance to beat the market. Yes, even so called rubes can make the money this way, instead of buying into an overvalued market. Yes, I completely agree with you, this market is insane, yes, it's insane.  So... you look for awesome bets for the downside, which is what the whole market should do, and it will, but most likely beyond when both of us think it should crash. Yes, it should crash tomorrow, next month of something sane like that. But JOHN, the market isn't sane and you can't just state the market is rationale. No, the market isn't rationale at all. Emotion runs the stupid thing. So the best thing to do is find favorable bets like Sears and find a way , like PUT options to get a high probability payoff. You see, this is playing the stocky market just like Texas Hold'em.   Pocket aces don't of course always win, but , I tell you, I'm perfectly willing to get the money in when I get that hand.  Selling Sears short is just like getting deald pocked aces in Hold'em.  Sears should be worth 0, but it isn't. That means there are suckers on the other side of that trade, just waiting to get fleeced.  I dare say, I deserve to get the wool , instead of Wall Street.


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Quote:****
**** End of debt ceiling suspension on March 15 signals new Washington fiscal crisis
****

A law passed in 1917 places a limit on the amount of money that the
United States government can borrow.  This amount is known as the
"debt ceiling" or "debt limit."  When government debt reaches the debt
ceiling, then it can no longer borrow money to spend, until Congress
passes a law raising the debt ceiling to a higher value.  In extreme
cases, the government has to shut down completely.

Every couple of years the debt ceiling has to be increased, and
there's a new political battle in Congress usually involving several
forms of extortion by both parties over what other spending programs
will be in the same bill as the debt ceiling increase.

Anyone who follows the political news will recall many well-publicized
debt ceiling crises, starting with the 28 day government shutdown in
1995.  Recently, there have been debt ceiling crises in August 2011,
and January 2013.

You may wonder, Dear Reader, why there have been no debt ceiling
crises since 2013.  The answer is that both parties decided in 2015 to
prevent a new debt crisis during the election campaign of 2016.  So in
October 2015, they passed a bill suspending the debt ceiling, allowing
the Obama administration to spend as much money as it wanted.

Well, that debt ceiling suspension had an end date: March 15, 2017.
On that date, whatever the current debt is of the government, that
will be the new debt ceiling.  That amount is approximately $20
trillion.  In other words, within two weeks, the government will no
longer be able to borrow money, until Congress passes a new bill to
raise the debt ceiling.

The government can take "extraordinary measures" to keep running
without borrowing more money: not make payments to states, not pay
contractors, not pay bondholders, not pay Social Security, not pay tax
refunds, and so forth.  This will cause a great deal of pain to the
people who don't get paid, but the government can keep running.  But
estimates are that even these measures will run out in October or
November.

So Congress's agenda for this summer will be: repeal and replace
Obamacare, costing hundreds of billions of dollars; past a $1 trillion
infrastructure bill; pass hundreds of billions of dollars in corporate
and individual tax cuts; and oh, by the way, increase the $20 trillion
debt ceiling to something a lot higher.  CNBC and CNN and
Washington Examiner

.... Republicans.  What a bunch of morons.

Quote:****
**** The velocity of money keeps plummeting, indicating no economic growth
****

Back in the 1980s and 1990s, politicians could always count on having
their debts and spending programs bailed out by economic growth.
Politicians are expecting the same thing today.  All they talk about
is how they will spend money to grow the economy, and the economic
growth will wipe out the debt.  It's a fairy tale that used to work at
the end of the last century, in a generational Unraveling era, but
stopped working about 13 years ago when we entered a generational
Crisis era.

What nobody wants to talk about is the velocity of money.  This
indicates the rate at which people are willing to spend money.  You
can't have economic growth if people aren't willing to spend money,
which means that the velocity of money would have to increase.
Instead, we have this:


Velocity of money, 1919 to 2017 (St. Louis Fed Fred Graph #366117)

When the real estate bubble burst in 2007, and the financial crisis
occurred, millions of people went bankrupt or lost their homes.  At
that point, people stopped spending money.  They used what money they
had to pay off their debts and save money.  As a result, the velocity
of money has continued to fall steadily since then, just as it did
during the Great Depression and World War II.

That's the reason why there's been on economic growth in over eight
years, and why there won't be any substantial economic growth for the
foreseeable future.

Investors who are pushing the stock market to new parabolic heights
are completely oblivious to the fall in the velocity of money, and in
fact have the vaguest clue what it means.  Similarly, they're
oblivious to the debt ceiling crisis that's approaching

And in news on Friday, Federal Reserve Chairman Janet Yellen indicated
that the Fed may increase interest rates on March 15.  It's the Fed's
easy money policy that has been funding the stock market surge, so
chalk this up as one more risk factor for the stock market as the
summer approaches.  Dow Jones

Related Articles

• Mainstream economists are oblivious to the velocity of money (30-Jan-2016)
  
  
• The bubble that broke the world (09-Oct-2007)
  

That's from, rising wealth inequality.  The only fixes I see are either a big huge crash that fixes wealth inequality or the fat cats wake up and realize that the stuff they're doing, ain't sustainable.  Like I said, it will stop, somehow....